Australia’s Military Shipbuilders Need Overhaul, Defence Minister Says

Photo: Royal Australian Navy

By Jason Scott

(Bloomberg) — Australia’s military shipbuilding industry needs to cut costs and become more productive to win contracts as the government seeks to buy 40 ships and submarines over the next two decades, Defence Minister Kevin Andrews said.

Australia pays about 40 percent more for domestic-built vessels over U.S. benchmarks due to inefficiencies in the industry, Andrews told a conference in Canberra on Tuesday.

“The industry currently isn’t internationally competitive in terms of productivity and if not changed, it will not be sustainable,” Andrews said. “The only way Australia can continue to have a naval shipbuilding industry is if industry is properly structured to drive efficiencies and improve productivity.”

Australia’s so-called continuous build program will include frigates and submarines and help avoid what Andrews calls a “valley of death” scenario, when domestic shipbuilding becomes temporarily moribund due to a lack of orders.

The industry faces such a scenario for a period in the 2020s after new Air Warfare Destroyers are constructed and before a frigate program commences, Andrews said.

“I would like to see Navy, Defence and industry move to a better asset-management model to maximize availability,” Chief of Navy Vice Admiral Tim Barrett told the conference. “Navy needs a strong, viable shipbuilding industry.”

Prime Minister Tony Abbott’s government last month invited Japan, Germany and France to bid to helm a A$50 billion ($38.3 billion) submarine construction program, the largest defense procurement program in the nation’s history.

©2015 Bloomberg News

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