February 17, 2015

Costs for the Soryu - As there is no Competition

Pricing is a major part of selection. But what if there is no competition to the Soryu? Diagram courtesy of The Australian.

INFORMATION

When researching the Saab-Damen submarine development  agreement two interesting bits of information on Australia future submarine selection came to light. Marc Brandt, a Brussels-based industry analyst made two significant comments, probably in late January 2015 -  http://www.defensenews.com/story/defense/naval/submarines/2015/02/01/damen-saab-sweden-subs-deal/22535665/ : 

1.  "…I understand that there is a general acceptance within Saab, and government circles in Sweden, that Australia's preference for the Japanese Soryu-class sub has put this program effectively out of reach..."

2.  "...the AUS $17 billion (US $13.7 billion) Collins-class submarine replacement program..." .

COMMENT

The first statement supports the increasing belief that Australia's Federal (Abbott) Government has chosen Japan's Soryu. If Saab believes the Soryu is a done deal then the Australian Government's claim that there is genuine "Competitive Evaluation Process" is not being accepted by key players.

The second statement supports indications that Australia is no longer after 12 submarines - just 6, 7 or 8. Choosing as little as 6 submarines is a wise move considering the serious limitations of available Australian funds. Six is also a recognition that Australia has only been able to crew about 2.5 existing Collins at most.

Australia's previous submarine purchases also show a steady reduction in numbers. The numbers of UK built Oberon class submarines (in the Australian Navy 1967-1999) proposed for Australia shrank from 8 to 6 The proposed number of the Collins (operating 1996 – present) went from 10, to 8, to 6). 

The cost of 6, 7 or 8 may be for a "discount" of around US $14 Billion, ie. "discounted" from the original figures of US$20 to 30 Billion. Of course figures are academic until the last submarine has been launched, commissioned and paid for.

Japan's pricing for Australia, which will be Japan's first major defence customer in 77 years, will be a highly political matter. Japan sold 4 Matchanu class submarines to Thailand in 1938 http://en.wikipedia.org/wiki/Matchanu-class_submarine .

Part of Japan's estimate might take into account:

1. how much is Australia (as a new junior ally to Japan) prepared to pay? and

2. how much of the cost of Japan's decade's old submarine development program, including the new  Lithium-ion battery (LIB) Soryu, can be transferred to Australia?

Japan, can only transfer some of its submarines development costs to one country, Australia. This is unlike Germany's TKMS which can, and has, spread the development cost load among 17 customer countries.

Pete

12 comments:

Anonymous said...

Australia is never our junior ally, but equal partner. We respect Australia as one of the most reliable friend of Japan.

Vigilis said...

Hi Pete
Another informative summary of the ever-evolving drive to specify and source the msst suitable Collins-class replacements.

As you must be aware, the U.S. has often encountered similar political and design issues in development of our navy's follow-on submarine classes. For instance, during the Cold War it had been customary for no two subs of the same class to be totally identical. Successful modifications were considered for inclusion in design of successor subs.

After the individualistic Seawolfs (SSN-21, 22, 23) came the cookie-cutter Virginia-class designed to facilidate the changeout of even large packages of more advantageous machinery and/or equipment, and conforming alterations within successive "blocks" updated over a longer class-life.

It would not surprise me if flexibility to quickly changeout installed M&E is not as important to the Collins-class replacement decisions. Admittedly, shipyard access is normally required for such repairs/improvements.

Once, only only Virginias and Kockums (since Gotland) used a modular construction concept.

Now, many of the world's submarine manufacturers employ modular sub construction, and Australia certainly could. Do Japan's Soryus, as well?

Regards,
Vigilis

Peter Coates said...

Hi Anonymous

Yes I hope Japan and Australia are equal partners - despite Japan having a much larger military.

Regards

Pete

Peter Coates said...

Hi Vigilis

I would say that its likely that Japan's MHI and KHI (see http://homepage2.nifty.com/nishidah/e/dtc0212.htm and websites below) practice modular construction. This is in part because of the alternating (as with the Virginias) build of the Soryu from their shipyards. The MHI and KHI shipyards would be near each other in Kobe.

Japanese readers could confirm that MHI would specialise in some modules as would KHI. They might even transport the modules by barge?

The close proximity and experience of MHI and KHI in offering an in-production sub to Australia would no doubt make them more competitive than competing vapor-ware (drawing board) European subs.

The following websites reflect the small amount of official detail on Soryu building.

http://www.mhi-global.com/products/detail/submarine_hakuryu.html

http://www.khi.co.jp/ship/product/submarine/index.html

Regards

Pete

Anonymous said...

Dear Vigilis,

the first modular build submarine was the German Type VII submarine.

Do you really think TKMS lost this concept?

You should also look on the variants build of the Type 209 submarines. Looks quite like a modular design.

Regards,
MHalblaub

Peter Coates said...

I'm wondering how TKMS could quote a price to Australia for the whole bid when no HDW 216s have been built?

Pete

Anonymous said...

BTW:
http://youtu.be/UUGvt0ULzrk
LOL!

Regards,
MHalblaub

Anonymous said...

According to TKMS pricing:
Just multiply the price for a 2,000 t submarine by two and add something for unneccesarry Australien features.

12 x $0.5 billion x 2 are just $12 billions.

So $20 billions is a very reasonable price for 12 Type 216 submarines.

Regards,
MHalblaub

Peter Coates said...

Hi MHalblaub

I hope the mathematics of TKMS pricing is indeed that simple.

Kockums got in all soughts of trouble thinking it could simply scale up an existing Swedish design. And a Baltic sub for Australian conditions.

Of course I'm confident that all TKMS experience designing subs for Indian Ocean-Pacific Ocean conditions will put TKMS in a better position.

Regards

Pete

Peter Coates said...

Hi MHalblaub

http://youtu.be/UUGvt0ULzrk is indeed a worry.

How can such a mistake be made with all the RAN's and DMO's knowledge?

Bureaucracies having too many cooks do this sort of thing. But hopefully not in a war!

Regards

Pete

Anonymous said...

Dear Pete,

the problem for Kockums was not upscaling a submarine but license building it somewhere in the world. HDW or TKMS did this for a long time.

Therefor the Japanese attidute not to license built the Soryu-class is very reasonable.

Regards,
MHalblaub

Peter Coates said...

Hi MHalblaub

Yes as Soryus-to-Australia would be Japan's first major defence export, licencing to a foreign labour force is too much of a business risk.

That is a risk for Japan, of course. DCNS and HDW have already traveled the experience curve - for example by having Brazil build 209s under licence (decades ago) and Brazil building Scorpenes now.

Regards

Pete