Submarine contract Ineptitude, Fear, But Defence To The Rescue

27 April 2016

The three-year process of deciding the future of Australia’s biggest defence contract has been plagued by political ineptitude, fear and distortion, which have created confusion, conflict and craven populism.

The saving grace of this period of politicking that helped remove two defence ministers and a prime minister and undermined a vital regional strategic alliance was the integrity of the Defence Department’s competitive evaluation process.

After parochial political fears, crass electioneering, old-fashioned manufacturing protectionism and straight-out xenophobia, the Defence declaration of a “clear winner” on technical grounds restored faith in the process.

The “unequivocal” and “unambiguous” recommendation to the government of the French bid enabled Malcolm Turnbull to deny any political influence and explain why Japan’s strategic relationship did not trump capability.

But, standing in Adelaide with Defence Minister Marise Payne and senior South Australian cabinet minister Christopher Pyne, there was no pretence as to the political importance of the decision to the Coalition’s political fortunes in its most hostile state where the end of corporate welfare helped see off the car industry.

It was really about being built in South Australia, creating South Australian jobs using South Australian steel (if technically possible) and the fears of South Australian Liberal MPs losing their safe seats or Senate spots if the Coalition couldn’t formally implement the promise it made before the 2013 election that 12 subs would be built in Adelaide.

This visceral fear was part of the politicking that knocked off former prime minister Tony Abbott’s first defence minister, David Johnston, who suggested the Adelaide-based submarine company couldn’t “build a canoe”, and was part of the campaign launched against Abbott in February last year.

Overenthusiastically, Abbott had committed himself to assist Japanese Prime Minister Shinzo Abe’s defence repositioning of Japan. As PM, Abbott wanted the best sub for the best price but gave the impression he had done a “secret deal” with Abe.

Bill Shorten used the “secret deal” to accuse Abbott of confusion and collusion on the subs, while conducting his own shameful attack on Japan from the back of a flat-bed truck to workers afraid of losing their jobs.

The likelihood the Japanese would build the submarines in Japan infuriated Abbott’s South Australian colleagues and calls for an “open tender” became entwined in the assault on his leadership.

The next defence minister, Kevin Andrews, established the competitive evaluation process in February last year while South Australians continued to press for all-Australian submarines.

The contractors were required to offer three options: a foreign build; a hybrid of foreign and Australian construction; and a wholly Australian-built boat.

This was where the big political decision was made — not in the final choice but in the demand that a hybrid build was preferred, and then effectively that all 12 submarines had to be made in Australia. This decision was about creating Australian jobs, largely in Adelaide, and will add a $7 billion to the final bill.

Fortunately for Turnbull, Payne and Pyne the competitive evaluation process was required to be finished by the first half of this year and Defence did not have to rush to give the National Security Committee of cabinet a recommendation two weeks ago.

What’s more, Defence provided a clear winner that did not require a prime ministerial judgment on strategic grounds.

Few contracts have been so mired in messy politicking. But in the end, it was the Abbott process conducted in discretion and secrecy by Defence that provided an apolitical, surprise solution.


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