December 26, 2015

Japan, France and Germany offer lower cost bids for Australia's 12 submarine order

Confidential bids lodged with the Australian government last month by Germany, France and Japan each offer a dramatically lower cost of building an eight-submarine fleet in Adelaide than was ­anticipated, in the range of A$10 billion-A$12 billion. It was previously expected that the project would cost about A$20 billion, based on a 12-boat fleet.

Even if the government decides to restore its original promise of building 12 submarines rather than eight, the bidders estimate the construction cost will reach only about A$15 billion, a little more than A$1 billion a boat, amounting to a potential $5 billion saving for taxpayers.

The lower cost estimates reflect the robust competition between the three international bidders to secure the submarine deal, which will be the most lucrative defence contract in the ­nation’s history.

The cheaper than expected estimates for building the new fleet may tempt the government to try to keep its original promise of building 12 submarines, rather than the revised figure of eight submarines with an option for four more that was in Tony Abbott’s draft defence white paper before he was deposed by Malcolm Turnbull in September.

The Australian government wants the largest and most sophisticated conventional submarine ever built, a 4000-plus tonne boat with a US combat system and the ability to fire cruise missiles and deploy special forces.

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