Defence correspondent Andrew Greene for
Australian Government owned ABC News has written
an excellent article of May 6, 2020 https://www.abc.net.au/news/2020-05-06/french-submarine-builders-get-taxpayer-bonuses-despite-delays/12217534
"Submarine
builder Naval Group Australia hands out taxpayer-funded bonuses despite being
behind schedule"
"The French-owned company building Australia's
future submarine fleet has granted employees taxpayer-funded pay rises despite
fears the project is already billions of dollars over budget and years behind
schedule.
Key points:
- * Naval Group Australia [website] has given staff early financial bonuses to "support them
- during the unprecedented COVID-19 period"
* In January [2020 the Australian] the auditor-general concluded Naval Group's design was running
nine months behind schedule- * A senator says paying the bonuses at a time when other Australians are losing jobs is
- offensive"
In 2016 Naval Group, then known as DCNS, won a lucrative
international competition to design and build 12 new submarines to
replace Australia's ageing Collins Class fleet.
The massive defence project, which is expected to
cost at least $90 billion, has faced
regular criticism including from the auditor-general who
concluded in January the design was running nine months behind schedule.
In a statement, Naval Group Australia confirmed its
recent cash windfall for staff was approved by the Defence Department and
awarded on an "individual performance basis" while taking into
account "external market remuneration conditions".
"Naval Group Australia recently completed its
annual remuneration review in line with our remuneration policy," a
company spokesperson told the ABC.
"Bonuses paid were linked to the 2019
performance year and were brought forward by three weeks to support our
workforce during the unprecedented COVID-19 period."
"Our first priority during this period has
always been the safety and wellbeing of our people, clients, suppliers and
their families. Nothing is more important to us today and always," the
spokesperson added.
It is not known what proportion of Naval Group's
future submarine workforce received pay rises and bonuses, and the company has
declined to reveal what the increases were worth.
Defence has refused to reveal who in the department
approved the remuneration changes and referred all questions on Naval Group's
employment conditions and pay to the company.
"The Strategic Partnering Agreement outlines
that Naval Group Australia employee salaries and bonuses reimbursed by the
Commonwealth in aggregate are appropriate and in line with market conditions
and industry benchmarks," a Defence spokesperson said.
Senator calls for examination of
'offensive' bonuses
South Australian crossbench Senator Rex Patrick
labelled the pay rises and bonuses granted during the coronavirus pandemic
"offensive".
"Ultimately
it is the Australian taxpayer that pays Naval Group's employees working on the
Future Submarine project," the long-time critic of the French company told
the ABC.
"In an environment where businesses are
shutting their doors and people are signing up for unemployment benefits en
masse, and even corporate executives are trimming their own salaries, some
would consider this insensitive".
"Noting the auditor-general found that [Naval Goup Australia] have missed deliveries and critical milestones, I think it's offensive".
Senator Patrick stressed his criticism was directed
at Naval Group management, not workers, and suggested the Defence Department
should examine the recent pay increases.
"Defence have the ability to examine Naval
Group's books and it might be worthwhile them taking a look to see whether or
not this is appropriate," he said.
Former Defence official Andrew Davies, now a senior
fellow at the Australian Strategic Policy Institute, said the payment of
bonuses on a troubled project during the COVID-19 economic downturn was
questionable.
"Normally when you're managing a major
project, bonuses in particular would typically be tied to increased
productivity or meeting project milestones, so it's a bit surprising to see
bonuses being given out at the moment," he said.”
22 comments:
French bashing is always on !!!
Hi Anonymous
You willfully oversimplify.
Is Aus a competent buyer ?
This is a Swedish based reflection....
Always blame the foreign supplier. Wy build in Aus? When you can buy from a real naval warf, and have competence and good submarine engineers in Germany Sweden or France.....
Why buy a big nuclear sized sub and have the wrong propulsion? Buy of the shelf and have a product that works.
Hi Anonymous
Taking your points:
1. "Why build in Aus?"
Australia prefers to build its submarines in Australia for the same reason that other high-tech middle sized powers, such as Sweden, build locally. [Note UK, France, India on up, can be classed as "great powers"]
The answer includes providing Australians with jobs, increasing Australia's high tech knowledge, Federal government money for South Australian (Adelaide) regional devlopment, to gain votes. Strategic independence. Greater ability to maintain, upgrade and repair submarines in Adelaide and Perth (places that are too far from Europe and Japan in times of conflict)
--------------------------------
2. "Why buy a big nuclear sized sub and have the wrong propulsion?"
No middle power (not even Brazil) has managed to build nuclear submarines because they are too expensive and this cost, and poisonous fission, is unpopular with the public.
Australia needs very long range (hence tailor-made) submarines for existing missions and such long range Future missions as monitoring Chinese submarines near Chinese mainland/Hainan bases, with the Australian option of using the torpedo or land attack missile in times of conflict.
Remember Aus subs may seem expensive but look at the economic and political benefits for the Federal Government in Canberra and State Governments in South Australia (Adelaide) and Western Australia (Perth).
SIGNIFICANTLY
Australia's Defence Minister https://en.wikipedia.org/wiki/Linda_Reynolds and Minister for Defence Industry https://en.wikipedia.org/wiki/Melissa_Price_(politician) both come from Western Australia.
Cheers
Pete
Hi Anonymous
Dont want to poke but NG entered into contractual agreement. Yes, you are right Aus should bought it off the shelf. But that is about national interests.
If the demands of Aus was wrong, then why NG entered into a contract? And if they do entered into it after knowing all problems, then legally they are bound to fulfill it. Crying about it now the capability of Australia not going to solve the problem.
NG must had done there assessments about Aus and her capabilities before entering into the agreement. Now there is no point in crying about it.
The budget of Attack class submarines was 50 billion AUD in 2016, but now it is 90 billion AUD. Why?
Midway price escalation is usually a combination of the following
1. Price increases owing to unavoidable components costs, design finessing etc. (acceptable)
2. Over promised specs coming up against reality necessitating major price revisions ---> Considering the serial bungles with the Barracuda, this is 100% a factor for Australia
3. Smiley Face extortion: Once the client has no recourse post-contract, jack prices up over the barrel (a favorite Russian trick with India, a 'free' Admiral Gorshkov ended up costing nearly US$ 4 billion in refits alone and is a white elephant to maintain)
I think it is reasonable to wager it is mostly 2 and 3 in the case of NG/DCNS. while not egregiously at fault, Australia misjudged the difficulties in designing a new 4000 t ocean going SSK...
Abbott (even hell will shudder to admit him) bungled the Japanese Soryu offer. I would have ordered the first 6 off the shelf from Japan and left in an option for 6 more to be assembled at ASC once RAN got hands on experience with the Soryus. The serial production method employed by Japan would have allowed for Aussies specific modifications on the fly as feedbacks came in from the RAN over time. This is much better than the French batch production cluster eff...
Yes bonuses are poorly timed and show tone deafness ala AIG 2009, but all this brouhaha is unlikely to make DCNS rescind bonuses to local Aussie staff...No politician is going to complain potential injection of funds into citizens hands at a time like this
Egypt just took delivery of a submarine that has a range of 11,000 km for about $400mln-- would'nt this meet Australian requirements ?
https://www.egypttoday.com/Article/2/86502/What-you-need-to-know-about-German-S-43-submarine
Hi Unknown [at May 9, 2020 at 10:57 AM]
For Austrralia's Future Attack-class range requirements see right sidebar at https://en.wikipedia.org/wiki/Attack-class_submarine which indicates:
"Range: 18,000 nautical miles (33,000 km)"
Cheers
Pete
Hi Arpit Kanodia [at May 7, 2020 at 6:30 PM]
Major design changes that Australia asked for after the contract and design were agreed with Naval Group may have blown out the budget and deadlines significantly.
See "Major Attack-class submarine bow redesign will add to over budget, deadlines missed" of March 16, 2020 at https://gentleseas.blogspot.com/2020/03/major-attack-class-bow-redesign-reports.html
Where Australia asked for a unique horizontally arranged 6 torpedo tube configuration (as with the Collins) instead 2 on 2 configuration on the baseline Barracuda design.
Regards
Pete
Hi Anonymous [at May 7, 2020 at 10:05 PM]
You ask "The budget of Attack class submarines was 50 billion AUD in 2016, but now it is 90 billion AUD. Why?"
As well as GhalibKabir's response to you of May 8, 2020 at 6:31 PM dollar estimates differ and increase because 50 billion AUD was based on 2016 dollar value while 80 to 90 billion AUD includes estimates of inflated "outturned" dollars year on year for the duration of the project.
See https://www.aspistrategist.org.au/has-the-cost-of-australias-future-submarines-gone-up-part-2/
That major torpedo tube configuration change I mentioned at May 9, 2020 at 12:38 PM above would also tend to be a price riser that Australia and Naval Group (then DCNS) may not have factored in, in 2016.
Cheers
Pete
Hi GhalibKabir [at May 8, 2020 at 6:31 PM]
I agree with all your points except:
"I would have ordered the first 6 off the shelf from Japan and left in an option for 6 more to be assembled at ASC once RAN got hands on experience with the Soryus. The serial production method employed by Japan would have allowed for Aussies specific modifications on the fly as feedbacks came in from the RAN over time. This is much better than the French batch production cluster eff..."
Japan wanted all 12 built in Japan and offered a low-ball price accordingly.
There was some Aus-Japanese discussion that the first modified Soryu and maybe the second should be built in Japan. But that would have raised Japanese hopes all 12 would be built there.
And, most importantly, almost all Australian interest groups wanted all 12 built in Australia - that included unions, South Australia (Adelaide) State Government, ASC, other contractors, probably the RAN and most importantly VOTERS in the 2016 Federal Election.
Only Abbott and his self-isolatedsmall office in Canberra seriously hoped all 12 would be built in Japan to further his strategic friendship with Prime Minister Abe.
Once Abbott was replaced by Prime Minister Turnbull the Japnese offer was rejected in favour of France in April 2016.
Whatever Australian Defence Ministers and the RAN say now the RAN quietly wants the 2nd and/or 3rd batches of 4 Attack class subs from 2040 to be nuclear SSNs (ie. Barracudas).
Only France can offer that propulsion upgrade making Australian subs truly trans-oceanic in speed/range. Germany and Japan losing WWII have made them near-permanent non-nuclear submarine powers (until 2050?).
Cheers
Pete
"unique horizontally arranged 6 torpedo tube configuration (as with the Collins)"
If AUS wanted an enhanced Collins {which makes sense} why did they rule it out so early ?
I'm pretty sure the Germans or Brits could've come up with a solid design to be built in Oz.
$90bln for a dozen ships is simply mind boggling. Regards...
Good evening, Mr. Pete.
I'm Japanese.
I don't mean to interfere with the decision of the Australian people, but even if the contract with France falls apart in the future.
I would like to ask for consultations with countries other than Japan.
Japan has had enough of being involved in this issue.
Hi Unknown [at May 9, 2020 at 10:18 PM]
In 2014 when Australia was narrowing the shortlist to Japan, France and Germany Kockums was in the hands of Germany's TKMS https://gentleseas.blogspot.com/2014/05/more-detail-swedish-raid-on-kockums.html .
Basically Sweden could not offer a submarine design because Sweden's submarine expertise (contained in Kockums) was in German hands from 1999 until July 2014 https://en.wikipedia.org/wiki/Saab_Kockums#History
Also not even the Swedish Government was ready to buy A26's when Australia wanted to buy. Note "On 27 February 2014 the Swedish Defence Materiel Administration (FMV) cancelled its plans for ordering the A26 submarine from Kockums." https://en.wikipedia.org/wiki/Blekinge-class_submarine#Order_cancelled_and_alternatives
Australia also had bad times with the Collins program - making another purchase from Sweden politically risky and unpopular in Australia.
See https://en.wikipedia.org/wiki/Collins-class_submarine#Problems_during_construction_and_trials
"However, problems with the combat system, excessive noise, and engine breakdowns were recurring and appeared across the entire class.[72] These and other shortcomings were often made harder to solve by disagreements between Kockums, ASC, Rockwell, the RAN, and the Australian Government over the nature of problems, their causes, and who was responsible for solving them.[73] Media reporting of the problems during the mid-1990s was often negative and exaggerated, creating poor public perception.[74] This was aided by politicians, who used the shortcomings to politically attack the Labor Party and Kim Beazley, particularly after Labor was defeated by the Liberal-National Coalition in the 1996 federal election, and Beazley became Leader of the Opposition.[75][76]
During the mid-1990s, it was recommended on several occasions that the submarine project be abandoned, and the completed submarines and incomplete hulls be broken up for scrap.[77]"
Regards
Pete
Hi Anonymous from Japan [May 10, 2020 at 11:04 PM]
Yes. I understand.
After Australia's Prime Minister Abbott all but publically invited Prime Minister Abe to provide Soryus for Australia AND then Australia broke its word this was very humiliating for Abe and Japan.
See https://www.smh.com.au/opinion/abbott-blunder-on-submarine-promise-goes-unnoticed-20160505-gonbz1.html of May 6, 2016:
"In all the discussions about the decision to award France the contract to build Australia's 12 new submarines, a monumental blunder by former prime minister Tony Abbott has gone almost unremarked.
We don't have a first-hand account of the conversations Tony Abbott had with Japanese Prime Minister Shinzo Abe in December 2014, but from the accounts we do have it is safe to say that Abbott asked Abe to build eight submarines in Japan.
Abbott's request was made without knowing which proposal would be the best submarine for Australia, which the best value-for-money or the most technologically appropriate.
Abbott's long-time friend Greg Sheridan, writing in The Australian a week ago, said: "Japanese Prime Minister Shinzo Abe and his government only ever got involved in our submarines because an Australian prime minister, Tony Abbott, asked them to do so."
Emeritus Professor Paul Dibbs, writing in the same newspaper said: "It is well known in Canberra that in December 2014 prime minister Tony Abbott asked Japanese Prime Minister Shinzo Abe to build eight submarines in Japan and sail them ready-built to Australia."..."
Regards
Pete
French bashing is going strong.
One can always spin anything in a negative way. "MP spends taxpayers money wasting is time criticizing an industrial programme he understands nothing about."
Next month, French engineers will be criticized for their accent.
Meanwhile, the Barracuda has made its first autonomous dive. I'm curious to see what this blog has to say about it.
A little bit of reality. One of the reasons Abbot is no longer Prime Minister is his ‘Captain calls’, whereby he made decisions without referring to the Cabinet. Under the Australian system, the Prime Minister is more like the chairman of the board. The board can, if it want’s, override the chairman. An Australian Prime Minister is not a President. Abbot was a serious loose cannon. Thankfully, under the Australian system, we can get rid of a Prime Minister by not much more than a show of hands. To get rid of a US President, is a long winded legal process.
The Soryu submarine was never remotely suitable for Australia.. It is far too short ranged (it needed a 6 meter plug just to be competitive). Even the Japanese found it ‘squishy’ & the average Australian is some what bigger. It was also no further advanced than Collins (which was leading edge at the time it was built) & in some ways behind. The object is to get better than Collins otherwise just build more Collins (with different engines).The nearest submarine in existence otherwise is the Dutch. However the company that built the Dutch subs no longer exists. Hence SAAB (who now owns Kockums), are bidding what is a combination of their new A26 & Collins as its replacement. They have even contracted ASC to help in the design (ASC & the two Japanese companies are still the only existing companies with any experience with building such large D/E subs). The German sub was just a paper design. They have never built anything even close to a Collins class size. Naval Group have also never built a D/E sub that size, however they have built far bigger nuclear subs & are currently building a nuclear sub of comparable size & they also build D/E subs, so they do have some idea of what it takes. Personally I would have gone with ASC on an updated Collins, but it is what it is. Abbot was not the only fool in the Australian parliament.
Hi Pete
Bad performance (delayed schedule, over budget, less local subcontrator, issue
of pump jet propullsion, etc) of Naval Group will affect on the tender of Walrus-class submarine replacement program in Netherlands. SAAB-DAMEN gets advantage over Naval Group.
Regards
As Soryu could not satisfy the requirements of SEA1000 by RAN, Japan proposed different submarine (SEA1000 Concept) to asatisfy the requirements. Criticism of SEA1000 Concept by using specifications of Soryu is neither adeqaute nor logical.
Hi Anonymous [at May 15, 2020 at 7:53 PM]
Re "French bashing is going strong."
Look at it this way - French Government owned Naval Group can take as long as it likes and ask for unbudgeted price increases because it has no competition over the 60 year life of th Attack class project.
Australia unconsciously may even be cross subsidising Naval Group's lowball bid (for a smaller Shortfin) in the Netherland's Walrus Replacement competition.
Its not Australian "French bashing" its a write-your-own-cheque protected Naval Group monopoly for 60 years :)
Profitez de vos vacances à Adélaïde.
Pete
Hi Anonymous [at May 16, 2020 at 11:47 PM]
In addition to Abbott's royal tugging and other "Captain calls" he also floated the idea of Australia unilaterally deploying a brigade+ in civil-warring-Iran-threatened-Iraq and a battalion+ in Russian tank backed separatist eastern Ukraine.
I won't even bring up his alleged over the top reliance on some chief o staff https://www.smh.com.au/politics/federal/control-freak-peta-credlin-accused-of-pulling-coalition-strings-20131204-2yqte.html over and above the heads of his democratically elected Cabinet Ministers.
Japan has efficiently and effectively increased the size of its submarines (about 7 classes from 1959 https://gentleseas.blogspot.com/2015/01/history-of-japanese-submarine-after-wwii.html ) In the 1930s Japan was even building submarines with the size, speed and range requirements of the Attack class. See specs for https://en.wikipedia.org/wiki/Type_AM_submarine though they (and the even larger I-400 class) were not used to their proper potential.
Slightly enlarged (by about 15%) Soryus were/are much more easily achievable than 70% reinvented/gutted Shortfin "Barracudas" and 65% enlarged German Type 209s or 214s (called 216s)
The Collins had been long discredited (particularly its performance limiting unreliable diesels and its over-complex rusting fuel tank system). When Australia was culling its SEA 1000 shortlist not even the Swedish Navy had ordered the then on-paper-only A26s which in any case would need to be 60% enlarged for Australian requirements
The idea that Naval Group and Saab Kockums could now (or in several years) have a 2 competitor runoff forgets that Germany's TKMS and Japan came 2nd and 3rd (in unknown order) and their bids deserve to be revisited - meaning a 4 horse race.
Cheers
Pete
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