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

My question is to the Minister for Defence and concerns the nationally important Future Submarine project. Is it not the case that, at estimates, your department testified that the design and build of 12 submarines by Naval Group will cost the taxpayer $50 billion on a constant price basis? What assurances can the minister give to the Senate that the acquisition cost of the Future Submarines will be no more than $50 billion? And what measures are in place to try to reduce the cost of that figure if possible?

Marise Payne (NSW, Liberal Party, Minister for Defence) Share this | Link to this | Hansard source

I thank Senator Patrick for his question and some broad advance notice of the interest. We did discuss at estimates the Future Submarine program, in broad terms, and some commentary around that. I note that we are doubling the size of Australia's submarine fleet, and I do refute much of the commentary that has been made on this matter. When we explained it at Senate estimates we talked about the 2016 Integrated Investment Program, which the Prime Minister and I released in February of that year, which stated that the acquisition cost of the Future Submarine capability is estimated at greater than $50 billion out turned. As has been explained, the current estimate is $50 billion in constant dollars. Self-evidently, particularly given the strength of the Australian dollar, of the Australian economy, if you out-turn $50 billion in today's dollars it will be greater than $50 billion.

I also want to note that the acquisition costs for the Future Submarine include much more than the design and construction of the submarine itself. As well as the design and construction of a fleet of 12 submarines, doubling the size, it includes the cost of designing and integrating the combat system into the 12 submarines, the investment in science and technology that will be required, the delivery of logistics support that will be required, and the design and construction of the submarine yard and the other land based facilities that will be required to support it, which I note are at Osborne in South Australia, which one presumes Senator Patrick welcomes. The initial estimate of the costs as set out in the IIP I have explained to the chamber, and I'm of course happy to take Senator Patrick's further questions.

Scott Ryan (President) Share this | Link to this | Hansard source

Senator Patrick, a supplementary question.

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

Is it not the case that on 29 February 2016, after the CP had closed but before any decision had been made, the German submarine builder ThyssenKrupp wrote to you reaffirming their offer for the design and construction of 12 one-hundred-per-cent-Australian-built Future Submarines? And is it not the case that their offer was—and I quote from the letter—'a fixed maximum cost of no more than $20 billion for the project'?

Marise Payne (NSW, Liberal Party, Minister for Defence) Share this | Link to this | Hansard source

I'm not going to go into the details of correspondence between me as Minister for Defence and defence contractors of that nature, because the costs that were offered in the competitive evaluation process are commercially sensitive. I don't intend to release them publicly. I don't intend to undermine our own reputation as a credible and trustworthy customer. In any case, both the acquisition and sustainment cost estimates for the Future Submarine program will, of course, continue to be refined as the design of the Future Submarine continues. It's the case that more accurate estimates will become available after the critical design review, and that is scheduled to take place in 2022.

It is important to note that, given we are making a very significant investment in defence capability over the next decade, business needs to be confident that as government ensures it gets the best deal for taxpayers— (Time expired)

Scott Ryan (President) Share this | Link to this | Hansard source

Senator Patrick, a final supplementary question.

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

The difference between $20 billion and $50 billion is not completely explained by the additional items that you added. Indeed, the weapons systems have an extra $5 billion to $6 billion line item in the integrated investment plan. So I'm just wondering if you could give us some idea of what capability difference you got for the extra $30 billion, or thereabouts, and, indeed, how you went about considering the opportunity cost to other elements of the defence budget or the budget in general of $30 billion— (Time expired)

Marise Payne (NSW, Liberal Party, Minister for Defence) Share this | Link to this | Hansard source

I thank Senator Patrick for his question. As we indicated in the defence white paper and as we set out in the Integrated Investment Program, we made a very careful assessment through a force structure review process and the preparation of the defence white paper of the capability that needed to be acquired to ensure the Australian Defence Force is equipped to do the job we ask them to do. In naval capability there was a significant challenge, as Senator Patrick will be aware, because no work had been done on that. Not one single order had been placed and not one single vessel had been commissioned for the entire term of the previous Labor government. So we had a very significant task ahead of us.

In terms of the acquisition of the Future Submarine, all of the decision-making in that process—through the competitive evaluation process and through the analysis done by defence and by government—was based on the capability that Australia needs to deliver a regionally superior submarine that will respond to the threats that we see in our region in the coming decades, all of which are set out in the defence white paper.