Rex Patrick (SA, Centre Alliance) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answer given by the Minister for Defence (Senator Payne) to a question without notice asked by Senator Patrick today relating to the Future Submarine project.

The Royal Australian Navy Future Submarine project will be a critical part of Australia's defence capability through much of this century. It is a project of huge budget significance. On 20 May, Defence gave evidence at estimates that the Future Submarine design and build cost would be $50 billion in constant dollars and, additionally, sustainment costs would also be of the order of $50 billion through to 2080. The Australian Strategic Policy Institute have calculated the estimates figures used by Defence and basically state that they equate to a design and build cost of $79 billion and a sustainment cost of $124 billion in out-turn dollars. These are very large numbers. In fact, they are bigger numbers than the three-stage tax cuts that are being talked about today. Yet we have the whole parliament focused on that, and almost nothing is happening in relation to this project in terms of transparency.

This huge defence project has been determined through very opaque decision-making and with barely a fraction of the scrutiny it deserves. The competitive evaluation process was conducted under a high degree of security, leading to the government's April 2016 decision to select France's Naval Group as the designer of Australia's 12 submarines. What I reveal today is that the bid of the German submarine builder TKMS, which was rejected by government, was very much lower than the $50 billion accepted by government. TKMS's offer was not $50 billion but $20 billion for 12 submarines built here in Australia. On 29 February 2016, TKMS wrote to the defence minister reaffirming their offer, and I quote, 'for a fixed maximum cost of no more than $20 billion for the project'. They had first made that $20 billion offer to Prime Minister Abbott in 2014 and reaffirmed it at the end of the competitive evaluation process when they were fully aware of the requirements for Australia's Future Submarine capabilities. The German government offered to allow an open-book audit of TKMS's price. I don't know whether the government took up that offer. Of course, the government chose to go another way. They may have been well advised to do so, but the reason for the government's Future Submarine decision remains secret. There has been media reporting that Defence officials considered the German submarines to be unsuitable for a range of technical reasons. It has also been speculated that Defence favoured the Naval Group submarine because there remains a long-term interest in the possible acquisition of nuclear-powered submarines sometime in the future.

What is now clear, however, is that the government selected one option, Naval Group, that was $30 billion more expensive than another—that of TKMS. I'm sure that other senators in this place could offer suggestions about what to do with $30 billion. It could have been committed to other defence capabilities. You could almost double the Joint Strike Fighter fleet—in fact, you can double it for that $30 billion difference. It could well be spent on civil infrastructure, health, education services, investment in science and technology or other political focuses—tax cuts, for example. Whether rightly or wrongly, the government secretly accepted a very large opportunity cost. An extra $30 billion cost requires rigorous scrutiny and a great deal more transparency than has been forthcoming from the government or the defence department so far. Unless the Senate takes scrutiny of defence expenditure much more seriously, especially regarding these very large projects—for example, the Future Submarine and Future Frigates projects—then we will have failed in our duty and taxpayers will have been sold short.

Question agreed to.