The two bidders – Mitsubishi Heavy Industries (MHI) from Japan and Thyssen Krupp Marine Systems (TKMS) from Germany – are believed to be finalising their offers, with responses due on March 31. More formally known as risk reduction studies, these are in seven discrete packages, including areas such as Australian build strategy; financials; and propulsion systems.
All Australian taxpayers should be terrified by the obscene level of government secrecy blanketing this project. The bidders – particularly TKMS – are also understood to be unhappy because they have been blocked from any public discussion about what they are offering. The position of MHI is slightly easier because it can discuss the Mogami frigates it is delivering to the Japanese Maritime Self Defence Force without breaching the SEA 3000 guidelines – which involve threats of jail for anyone daring to speak about the project.
The baseline offer from TKMS – as we have discussed in previous articles – is the MEKO 200 design being produced for the Egyptian Navy. Unlike the Japanese government, that of Egypt has no particular interest in helping the Australian media with their inquiries. TKMS have had to sit back and watch Japan run a highly successful effort based on a desire to increase security cooperation with Australia.
The German government is certainly supportive of TKMS and also has a positive relationship with Canberra but lacks the sheer horsepower of the effort coming from Tokyo. This is creating the public impression – to the extent that there is one – of a very lopsided competition. The government is indifferent to what is taking place and shows not the slightest interest in levelling the playing field by giving TKMS the right to speak.
People are entitled to conclude that a decision in favour of Japan has already been taken. This impression is worsened by the fact that Defence is allowing Mitsubishi to offer an upgraded version of the Mogami – strictly speaking, it is the only one available for sale – but are rumoured to have blocked TKMS from offering an upgraded MEKO known as the A210.
Until SEA 3000 came along, all other major naval acquisitions were carried out in public view. As far back as the mid 2000s, both the Air Warfare Destroyer projects and the Canberra class LHDs were in the open, with competing bids from the US, Spain and France. The disaster of SEA 1000 submarines was an open process with highly visible activities involving France, Germany and Japan. Even the equally disastrous SEA 1180 offshore patrol vessel project was a public process with two designs from Germany and one from the Netherlands being very actively marketed.
In all cases, bidders were free to promote their products and explain the benefits of their offers, usually with an emphasis on work to be performed in Australia. It has been suggested that suppressing all information about SEA 3000 is “normal” and due to “commercial confidentiality” reasons. These are both lies. There is nothing normal about what is going on and commercial matters are normally confined to sensitive matters such as competitive pricing.
For SEA 3000, both bidders are probably very concerned about being compelled by the government to use WA shipbuilder Austal for the local build part of the process, due to start in the late 2020s. No one can understand how it is that Austal have been gifted not one but two precursor contracts – and look set to be handed up to eight General Purpose Frigates with no scrutiny. The earlier contracts are for medium and heavy landing landing craft. In addition, Austal has been selected as Defence’s “strategic partner” for work in WA, with little known about the selection parameters.
To be sure, publicly traded Austal is an excellent company with a proven track record – their US subsidiary is doing especially well at the moment – but they are not the only competent heavy engineering company in WA, let alone in the entire country. At the time of writing, it has not yet signed any of the contracts mentioned – and hence the “strategic partner” agreement is not yet in effect – and in industry there is widespread bemusement about the Svengali-like effect of the company on the current government.
The contracts in question are worth close to a total of $20 billion – great work, if you can get it.
If they are chosen to be the nominated local entity for SEA 3000, the Henderson yard will need significant investment of up to $1 billion for new facilities. The medium-term ownership of Austal is also the subject of much speculation – the Korean firm Hanwha Ocean has already made one acquisition attempt (subsequently withdrawn) and it is believed that a number of institutional investors, including from the US, are also interested.
These types of government-directed contracts are usually disasters, and both MHI and TKMS are likely to be wary of being forced into some sort of artificial deal that probably relates to a plan to hold onto a few Federal and/or State seats. Not the least of future difficulties is that both MHI and TKMS will have an easy contractual “out” in the event of major problems because they did not choose Austal but the selection will have been forced on them.
Another reason for the North Korea style of public relations is that the government also does not want Australians to wake up to the fact that because of massive official bungling, for the first time since 1976 we will need to import at least the first three frigates from Germany – or far more likely, Japan. This is because it has been apparent since 2020 that there was a looming capability gap caused by slow progress on the Hunter class frigate program and the faster than expected retirement of the Anzac class, which have been worked to a premature death.
This capability gap has been ignored by the Coalition, the ALP, Defence and the RAN until there is now little choice but to do something about it in a mad, desperate, secret rush. Hardly the sort of thing that would inspire public confidence in the lead up to what is expected to be a tight Federal election due to be held before May 27.
The root cause is that neither Labor nor the Coalition seem to understand what continuous naval shipbuilding looks like, let alone award contracts to make it happen. With a further reduction in numbers of the Hunters from the original nine to the current six and probably three, there will also no longer be the slightest possibility of continuity of work in South Australia either. Mysteriously, this project is now also shrouded in official secrecy.
Looking at this utterly dismal picture, one wonders why bother building any of the General Purpose Frigates in Australia at all. It’s hardly as if there’s a thriving naval shipbuilding sector in WA, especially with the cancellation of the SEA 1180 Arafura offshore patrol vessels – originally for around 20 capable ships but now a mere six platforms, deliberately down-designed by the RAN to make them as ineffective as possible. The former prime contractor Luerssen – one of the world’s most experienced shipbuilders – has been run out of the country.
It is the same institutions – the Coalition, the current Labor government, Defence and the RAN – that are in the process of transferring $4.6 billion to US submarine building companies. A transfer of a similar amount to the UK is also underway. Neither of these huge gifts has a refund clause – something that is likely to make President Donald Trump laugh out aloud the moment he learns of it.
No wonder the government doesn’t want the public hearing the truth about SEA 3000 and the future of naval shipbuilding.
(Disclaimer: neither MHI or TKMS supplied any information about SEA 3000 for this article).
