Exclusive: French group asked attorney general to use extraordinary powers to black out sections of report that criticised the deal

The Coalition suppressed the auditor general’s finding that Australia could have paid half the amount for its new $1.3bn combat vehicle fleet after pressure from a multinational arms manufacturer, documents reveal.

Documents obtained by Guardian Australia reveal that Thales, a French multinational arms company, was “aggrieved” at auditor general Grant Hehir’s finding that Australia could have saved hundreds of millions of dollars had it gone to the United States to buy its new fleet of light protected army vehicles, instead of buying 1,100 of Thales’s locally built Hawkeis.

Thales approached the attorney general, Christian Porter, in January and asked him to use extraordinary and largely unprecedented powers to black out sections of the auditor general’s report.

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The arms manufacturer wanted six paragraphs in particular struck from the report, according to court documents it filed in a separate federal court action to block the report’s release.

Those six paragraphs found that Australia could have got a similar vehicle for half the price through the US joint light tactical vehicle (JLTV) program, according to Thales’ court documents. Australia had considered joining the JLTV program but pulled out and decided on a locally built option after what the auditor general described as “extensive lobbying” from Thales and the defence industry.

Thales wanted the six-paragraph cost-comparison between its Hawkei vehicle and the JLTV stripped from the report because it would impact its “marketability”.

“The vehicle cost-comparison in the impugned paragraphs purports to benchmark the cost and capability of the Hawkei and JLTV, in a way that implies that the JLTV is comparable and commensurable to the Hawkei, but approximately half the price,” Thales argued in court documents.

“This would prejudice Thales, the Commonwealth of Australia and Australian entities in the supply chain for the production of the Hawkei because it would detrimentally impact the marketability, and therefore the export prospects, of the Hawkei.”

Porter acceded to the request six months later and blacked out parts of the report, including the six paragraphs, on the grounds that they unfairly prejudiced Thales’ commercial interests and threatened Australia’s national security and defence.

Thales dropped its separate federal court case shortly after Porter intervened.

The documents lodged by Thales show the company raised no national security concerns about the auditor general’s report.

Hehir, the auditor general, has already told a parliamentary inquiry that he had worked through his report with the department of defence to ensure it contained no information that could jeopardise national security.

Facebook Twitter Pinterest Christian Porter acceded to Thales’ request and blacked out parts of the auditor general’s report, on the grounds that they unfairly prejudiced Thales’ commercial interests and threatened Australia’s national security and defence. Photograph: Mick Tsikas/AAP

Hehir said he remained “unaware as to why” national security grounds were used to justify the suppression of parts of his report.

National security was raised as an issue after Porter consulted with the defence and defence industry ministers.

A spokesman for the attorney general said the decision to intervene and suppress parts of the report was made “pursuant to the act based on all of the information before him”.

“This deliberative process and the information was separate and distinct from the proceedings in the federal court,” the spokesman said. “The decision was made based on multiple grounds, namely that the information would have unfairly prejudiced commercial interests and prejudiced the security, defence or international relations of the commonwealth so obviously the commercial grounds were ones argued by Thales and the other grounds were raised by other ministers who made submissions.”

Australia had initially planned to buy the new vehicles through the US JLTV program, an option defence then saw as less risky and far cheaper. Internal defence records show Thales lobbied federal and Victorian governments extensively between 2008 and early 2009, according to the auditor general. In late 2008, the defence procurement parliamentary secretary wrote to the defence department and asked whether it had considered using a locally-built option to source the new fleet.

Thales was approached for comment. It directed Guardian Australia to its formal response to the auditor general’s report. That response said the auditor’s analysis was deeply flawed, and that it used incomplete data, made inappropriate comparisons and did not take into account the value of export sales, the benefit to the local economy and defence’s stated preference for locally produced equipment.

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The Hawkei is built out of Bendigo, and Thales said it had created more than 400 jobs. The rival JLTV had experienced significant delays and problems, it added.

“The ANAO report takes no account of the value of export sales and the report’s flawed analysis is likely to be extremely damaging to export prospects,” the response said.

“Hawkei provides life-saving capability to the ADF in a vehicle designed and manufactured in Australia. It is disappointing that the ANAO places zero value on the maintenance of a life-saving defence industry capability in Australia, zero value on Australian content and zero value on Australian jobs.”

Australia budgeted $2.2bn for the Hawkei project. That budget included the $1.3bn contract with Thales. The auditor general was critical of Australia’s decision to withdraw from the JLTV program because it left Thales as the sole bidder for the work, removing competitive pressure and any benchmark for the government.

His redacted report also found the government had not been made aware of a Monash University study commissioned by defence, which found the local benefits of the Hawkei were limited. The study found Thales would send most of its profits offshore in the long term, the job multiplier effect was relatively small and that the government faced a $452m premium for building the vehicles in Australia.

The powers to suppress an auditor general’s report have been used only once before in 1987, but that occurred under the old legislation.

Hehir told an inquiry on Friday that other agencies – outside of the defence department – were now pointing to similar interventions with his office since the Thales case.

• This reporting is supported by the Susan McKinnon Foundation through the Guardian Civic Journalism Trust