Michael Sainsbury
November 13, 2017

Australia’s $200b defence bonanza

Capability

Australia’s $200b defence bonanza

Christopher Pyne: The Defence minister is building an industry through procurement

It’s a sign of the times that the two most expensive government projects in Australian history are squarely in the technology sector.

Hot on the heels of the $50 billion (give or take another $10 billion or so) National Broadband Network comes a triumvirate of defence projects that, put together, are known as the Naval Shipbuilding Plan and best described as a massive technology upgrade for Australia’s navy, according to Defence Industry Minister Christopher Pyne.

“The Government’s investment in these new capabilities will provide some of the most technologically advanced, potent and capable vessels ever delivered into the Australian Defence Force’s arsenal,” the plan states.

“This investment will also support improved integration of combat and supporting systems across Defence.”

It’s a rolled gold bonanza for the Australian marine construction and technology sectors worth as much as $200 billion, according to a recent report by PwC.

The numbers multiply when the decades-long maintenance contracts are added in, which will themselves include significant technology upgrades.

“This is the biggest single government project in Australia’s history and technology underpins the entire undertaking. Over the past 12 months, as part of the project we have launched technology funds and centres worth a total of $1.6 billion,” Mr Pyne told InnovationAus.com ahead of the annual Submarine Institute of Australia’s Submarine Science, Technology and Engineering Conference 2017, known as SubSTEC4, in Adelaide this week.

These include several investment funds injecting hundreds of millions of dollars into industry, and an Adelaide Defence Innovation Hub.

The Department of Defence has opened a Defence Industry Portal where it “welcomes your innovative ideas, no matter how big or small.

“You don’t have to represent a multinational firm. If you have your own business, belong to a think-tank, or anything in-between, Defence wants to hear from you,” the department says, declaring itself open to proposals.

‘The benefits will be felt not just in Adelaide and South Australia but across the whole country; the technology expertise that Australia develops as part of this project and which is in fact, already underway with the commissioning of the HMAS Hobart, the first of three ships being built under the $9.1 billion Air Warfare Destroyer project,” Mr Pyne said.

He noted that as part of the plan, in addition to the $50 billion Future Submarines project, the Defence Industry portfolio will be supervising the $35 billion Future Frigate project, which will be undertaken in South Australia and Western Australia and which is due to start in 2020,

In March three firms were shortlisted to refine their designs part of a 13-month request for tender process.

The submarine contract was handed to French company now known as Naval Group last September in something of a surprise move, beating out a German company and Japanese firm, who were the others on the short list.

Prior to the change of Prime Ministers in late 2015, the Tony Abbott government appeared to be favoring the Japanese solution.

“This will all supercharge the emerging defence materiel industry sector in Australia, one that has enormous potential,” Mr Pyne said, summing up the projects.

In the past month, Mr Pyne has visited London, Paris, Riyadh and Warsaw to meet with governments who are interested in technology that will flow from the project.

“Early in the new year I intend to visit a number of countries in Asia,” he said. InnovationAus.com understands that Singapore and India are amongst the destinations being considered.

Certainly in the short term, it’s South Australia that wins.

PwC estimated that based on the Australian Government’s expectation of at least 60 per cent South Australian industry content for the $90 billion naval shipbuilding program, this would boost South Australia’s GDP by an extra $134.4 billion over the life of the construction program, resulting in an average increase of $6,300 per household per year.

Mr Pyne said the defence program focused on maximising the upside for South Australian industry and economic benefit.

Further benefits would be realised as the Defence Industry looks to expand beyond meeting the capacity and requirements of the Naval Shipbuilding Plan into exporting into global supply chains.

It aimed to produce flow-ons for the civilian sectors, concluding that the foundation of a continuous shipbuilding program allows for this to be achieved.

“People are beginning to understand that, as a technology project, this is a much bigger deal than the National Broadband Network,” Mr Pyne said.

Still, it has not been all plain sailing for the contract, with Naval Group admitting last month it was having trouble identifying enough skilled workers to complete the design phase of the project now flying around the sector.

There are also question marks over the commitment to build 12 new submarines, when underwater drone technology known as Marine Automated Systems (MAS) and Unmanned Underwater Vehicles (UUV) are advancing rapidly.

There are also some concerns that the Australian component would be more focused on the build and move parts of the project, and less on the smart fighting systems.

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