On 11 February, Naval Group (ex-DCNS) sealed the deal to build the Royal Australian Navy’s next-generation submarines by signing a Strategic Partnering Agreement in Canberra with the Commonwealth of Australia. When the initial design contract was announced in April 2016, it was quickly dubbed ‘the contract of the century’.

The agreement, which will govern relations between the parties for the duration of the Future Submarine program, was signed in the presence of prime minister Scott Morrison, minister for defence Christopher Pyne, and Florence Parly, the French minister for the armed forces.

“The signing marks the completion of 18 months of negotiations and the start of a commitment to work together over the next 50 years. Multiple firsts are noteworthy. This is the biggest contract ever signed by the Commonwealth of Australia by overall budget and the biggest defence contract ever awarded to a European contractor,” says Jean-Michel Billig, executive vice president of the Future Submarine program and a member of Naval Group’s executive board.

Officials at signing (© Naval Group)

Group [photo] at signing of SPA for Australia’s Future Submarine program (© Naval Group)

12 submarines based on the French Barracuda

Australia requires a fleet of 12 regionally superior ocean-going submarines to be known as the Attack class. These boats will replace the Royal Australian Navy’s current fleet of six Collins-class submarines (78 metres in length for a surface displacement of 3,350 tonnes) which entered service between 1996 and 2003. The larger and distinctly more capable Attack-class boats will be about 100 metres in length for a surface displacement of around 4,500 tonnes. The design will be based on the France’s six new Barracuda-type nuclear-powered attack submarines now under construction at Naval Group’s Cherbourg yard where the first-of-class Suffren is scheduled to be floated out later this year. The Attack class will not, however, be nuclear powered like the Barracudas, but use conventional diesel-electric propulsion. The design will be tailored to meet other RAN requirements, beginning with a combat system developed by Lockheed-Martin. A sub based on a French design but equipped with a US-designed combat system is another big first.

A €30bn program

The overall budget for the design and construction of the 12 Attack-class subs and the yard where they will be built plus the combat system, weapons and maintenance contracts represents A$50 billion, or over €30bn, a significant slice of which will go to Naval Group.

Going back to the bid stage, the short list included both Naval Group and its long-standing competitor TKMS of Germany. Three years ago, when Australia chose Naval Group, the main challenge was to demonstrate the feasibility of the program concept. “This work, now completed, demonstrated that the RAN’s needs could be met by tailoring the Barracuda. Naval Group also had to define the requirements for the Future Submarine construction yard at Osborne near Adelaide and map Australia’s industrial and technological capabilities before going on to identify suppliers with the skills and resources to contribute to the program,” says Jean-Michel Billig.

A rulebook for the long haul

The next step was the Strategic Partnering Agreement signed in Canberra on 11 February. This document sets out the principles of cooperation between Naval Group and the Commonwealth of Australia for several decades. “The aim is to deliver 12 regionally superior subs and ensure national sovereignty by developing the capabilities to build, operate and maintain the new fleet. The SPA will serve as the rulebook. It defines how the parties will work together over the next 40 to 50 years to achieve this aim, along with their commitments regarding intellectual property, technology transfers, scheduling, and Australian manufacturing capabilities, among other matters. Building on the SPA, the next step will be to draft so-called ‘program contracts’ for the different work packages, each complete with technical and financial specifications,” says Jean-Michel.

Design contract soon and construction in 2023

The first program contract, for the Attack-class design phase, is expected to be signed in a few weeks. It will cover a period of four years and be worth €1.5bn. This will be followed, in 2023, by the program contract for the detailed design and outfitting of the first of class, along with its construction and trials. This ten-year contract will be worth several billion euros. Delivery of HMS Attack to the RAN is anticipated in the early 2030s after which the production rate will ramp up to one boat every two years.

Sub design in France and yard development in Australia from scratch

The Attack class design effort will be conducted by Naval Group in France. “The technology transfer focuses on submarine construction and maintenance, but does not cover the design process per se. The boats will also be wholly built in Australia,” says Jean-Michel. The program resembles Naval Group’s Brazilian program in that the group will contribute expertise to the design and outfitting of the Adelaide construction yard. “Starting with a green field site, we will assist and support the RAN in its roles as program and site owner to develop a state-of-the-art construction yard.” While not the owner of the site or infrastructure, Naval Group will nevertheless act as the yard operator. This arrangement will allow the Group to manage submarine construction while simplifying decision-making and avoiding the dilution of responsibilities.

Schematic of the Attack class construction yard (© Naval Group)

Suppliers

Naval Group’s responsibilities include the development of a complete Australian industrial fabric supporting submarine construction on the understanding that the group retains the freedom to take any decisions it sees fit to ensure the complete success of this complex and costly program. “Contrary to certain statements and reports, we have not committed to a specific industrial or economic return to Australian companies, nor to the coerced selection of specific suppliers. Our commitment is to maximise Australian content wherever possible, provided that this in no way compromises submarine performance or dive safety. It is therefore up to us to select our suppliers and to explain our choices to the Australian public and make clear why we have chosen, or not chosen, any given supplier. These decisions will be taken in close cooperation with the client.

The diesel-alternator sets will, for instance, be supplied by a German group on the understanding that it will source whatever it can in Australia and that support and part of the production will be undertaken locally.” The list of suppliers will also include French companies, but no contracts have been signed at this stage. Similarly, Lockheed Martin will select the combat system weapons and sensors, including the sonars, in much the same way. Note in passing that Lockheed Martin has signed a separate contract, similar to the SPA, with the Australian government. The cooperation agreements between Naval Group and Lockheed Martin only concern the interfaces between the platform and the combat system. “They don’t see what we’re doing, and we don’t see what they’re doing.”

After mapping Australia’s industrial and engineering fabric, Naval Group and its top-tier suppliers will consult local companies where feasible and help them, where necessary, to develop their skills through training and technology transfers.

150+ Australian engineers to be trained in France

A first group of Australian engineers is already receiving training in France. While Naval Group retains full control over the design process, the Australians obviously need to know how to build their submarines. “While we will not be transferring the design process per se, we have accepted close cooperation covering the detailed ‘know-how’ and ‘know-why’ aspects of the construction and maintenance of this type of submarine. To this end, we have already welcomed the first group of Australian engineers under the knowledge transfer subprogram. These eight will be followed by 15 more later this year. More than 150 Australian engineers will receive training over the five years to 2023, with most spending three years in Cherbourg,” says Jean-Michel. The Cherbourg submarine design and construction centre will lead Naval Group’s contributions to the Australian program. Other group centres will also welcome Australian engineers, notably Nantes-Indret for propulsion and Ruelle near Angoulême for onboard equipment.

Thousands of jobs in Australia and plenty in France too

The Attack class program will create thousands of direct and indirect jobs in Australia, primarily in Adelaide and environs, a region that suffered badly in the Australian manufacturing crisis, particularly in the automotive industry. “Our subsidiary, Naval Group Australia, set up three years ago, currently employs around 100 people. Over the next eight to nine years, this figure will rise to between 1,500 and 1,600. If one includes local suppliers, the total number of jobs created will be more than double that figure.”

While the boats will be built in Australia, the program will nevertheless result in a significant number of jobs in France. “Some 350 people at the Cherbourg yard are currently assigned to the program and this number is expected to double over the next five years. The number will then fall to a steady 200 to 250 as production ramps up in Australia. Again, if one includes subcontractors, the total number of jobs in France will be double that figure.” Jean-Michel went on to say that the program will generate a great deal of work for Naval Group’s design teams and French engineering in general. “The Australian program will allow us to build our expertise and leadership with obvious ongoing benefits for our own submarine programs.” The Attack-class program will slot in nicely between France’s Barracuda program to build nuclear-powered attack submarines, or SSNs, and the SNLE-3G program to build third-generation nuclear-powered ballistic missile submarines, or SSBNs.

Measures to avoid the slippery slope

Given the cost overruns and delivery date slippage encountered by various major international technology transfer programs in Australia and elsewhere – including Australia’s program to build three Hobart-class air warfare destroyers based on a Spanish design – multiple safeguards have been included in the Attack-class program. “In cooperation with the Australians, we have adopted measures to avoid corner cutting when problems arise. Should this occur, the aim will be to analyse and understand the underlying causes. We have committed to cost transparency and, should justified overruns arise, to having them taken into account. This explains why we do not sign fixed-price contracts.”

“A demanding but fair and balanced contract”

The lengthy negotiations between France and Australia has sometimes been presented as revealing difficulties that Jean-Michel Billig insists must be examined in their proper context: “It is perfectly normal that it should take quite a long time to draw up a rulebook for submarine construction when the parties are 20,000km apart. Recall too that submarines are the most sophisticated products ever designed by humankind. Agreement had to be reached on how the parties would work together while anticipating the challenges, issues and options likely to emerge over the coming 40 to 50 years. This was inevitably a drawn-out process. Given that the parties had never worked together at this level, it also took a while to get to know each other. And because each side brings its own culture and experience to the table, it also took some time before our viewpoints began to converge.” While it is true that the Australian media reported that the negotiations were not going well, one wonders if this could have been calculated to thwart the discussions, or even to call into question the contract being awarded to Naval Group.

In any case, the program executive vice president who participated in the negotiations swears that the atmosphere was nothing like that portrayed in the media. “The atmosphere was at all times positive and our opposite numbers were consistently irritated by the media reporting. The truth of the matter is that we discussed every aspect of every issue and each side stated its views frankly when we failed to agree. The resulting long-term agreement is a genuine partnership. Let me add that it would be wonderful if all defence contracts could be negotiated this way.” And to those who have suggested that the French side was prepared to sell at a loss in order to win the contract, Jean-Michel is adamant that Naval Group will “most definitely” come out ahead.

Forthcoming elections not a cause for concern

While a federal election is expected later this year and a change of government is on the cards, neither the French government nor Naval Group has expressed concern. “In Australia, the government in power and the shadow cabinet in opposition exchange views on matters of strategic importance. Also, the shadow minister for defence is a strong supporter of the submarine program. There is in fact wide consensus in favour throughout Australia given the jobs, industrial footprint and advanced technologies at stake, not to mention the sovereignty issues, none of which is seriously contested in the national debate. We are thus confident that the contract will go ahead and that it will run for the anticipated 40 to 50 years.”

A powerful endorsement for future sales

For Naval Group, the go-ahead for Australia’s Future Submarine program is a powerful endorsement for future sales to international clients. In the wake of contracts for Scorpène submarines awarded by Chile, Malaysia, India and Brazil – and technical assistance with the development of the non-nuclear portions of Brazil’s first nuclear-powered submarine – the Australian contract marks a major milestone. “The signing of the SPA takes Naval Group to the next level as it makes us the world leader in high-performance ocean-going subs. Other companies know how to build them, but Australia chose Naval Group first because our products offer exceptional performance, particularly as regards stealth; second because we don’t just build them, we also design and develop the facilities clients need to integrate and maintain their boats. This last point sets us apart.”

The Australian program puts Naval Group in a strong position to win major new contracts: “Some countries are watching developments in Australia very closely and directing enquiries our way…”

Jean-Michel wasn’t prepared to say which countries he had in mind, but we know that Naval Group is actively prospecting clients and preparing bids for international competitions. In the case of the Netherlands, Naval Group may well propose a conventional-propulsion version of the Barracuda as it did in Australia.

Original (in French) by Vincent Groizeleau published online on 11 February 2019

Translated and adapted by Steve Dyson