released January 29, 2021

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CANBERRA -- The Naval Shipbuilding Advisory Board (NSAB) urged the Defence Department to withdraw its major French submarine deal, which is already nine months behind the schedule, according to an audit released by the Australian National Audit Office (ANAO) on Tuesday.
The NSAB urged the department to consider walking away from the 80-billion-Australian dollar (55.1-billion-US dollar) deal signed with French company Naval Group to build 12 new Attack-class submarines.
According to Auditor-General Grant Hehir in Tuesday's report, the NSAB advised the Defence Department in September 2018 to assess whether the program risks outweighed the benefits of proceeding.
The NSAB, which consists of three retired senior navy officers, was established by the government to advise it on its shipbuilding program.
The ANAO warned that the design phase of the future submarines program is already nine months behind the schedule. It questioned whether the 396 million Australian dollars (273.1 million US dollars) spent so far has been "fully effective."
It said that in order to be successful, the defence department should establish a long-term effective partnership with Naval Group.
"This key relationship is at a relatively early stage and the parties' active management of both specific issues and the partnership is essential for effective risk management and program success," the report said.
The government and Naval Group signed an agreement in February 2019 after the prolonged negotiations, with the government at the time dismissing reports of delays and a budget blowout.
However, the Defence Department told a Senate hearing in November 2019 that the cost to build and maintain all 12 submarines would reach 225 billion Australian dollars (155.1 billion US dollars) over their 50-year lifespan.
The head of the submarine program Greg Sammut said in November that the cost of building the submarines was now estimated to be 80 billion AUD while maintenance until their expected retirement in 2080 would cost 145 billion AUD (100 billion US dollars).
The deal between the government and the Naval Group included a provision for Australia to break the contract in case of delays but Defence Minister Linda Reynolds said that the nine-month delay was important to ensure a suitable design.
"Doing so will reduce costly changes and uncertainties while the Attack-class submarines are built, and will reduce the need for larger construction contingencies," she said, according to the Australian report on Tuesday night.
Reynolds maintained that the first submarine would still be delivered to the navy in 2035.
Richard Marles, the deputy leader of the Opposition Labor Party and its defence spokesman, said the government's "mishandling" of the major project posed major risks.
"On all three measures of this program -- on time of delivery, on the cost of the project, and on the amount of the Australian content -- the numbers are all going the wrong way," he said.

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