Figures for large complex projects are always fuzzy - pleasing no one.
In response to Submarine
Matters’ article "Pricing SSNs for a FOREIGN Customer is UNPRECEDENTED"
of February 2022 Anonymous made interesting comments on Feb 4, 2022, 1:17:00 PM, Feb 4, 2022, 8:02:00 PM and Feb 5, 2022, 10:07:00
PM.
Pete Comment: We need not
get too hung up on $figures, as they are only very approximate. Many costs will be
un-accounted for. No one can predict how much of a profit margin (as Anonymous
points out) the UK and US will extract from Australia. Adjusting for inflation and whole of 80 year Program costs (including personnel and operations) might yield a Total Cost of more than AU$200 Billion.
Anonymous indicates (along
the lines):
Regarding pricing - with AUKUS
being the first SSN export pricing case. Obviously the US/UK SSN program has
valuable intellectual property (IP) which was developed over decades and
costing the UK Royal Navy and USN many billions to learn. This cost could be
spread over 200 or so SSNs and SSBNs built to date. What margin might they
charge the RAN for SSN technology IP? I don't know.
I would suggest that the
best approach for the RAN is simply to acknowledge the value and offer what it
has of value in return. In this case I think that is basing. If facilities at Australia’s
submarine base at Fleet Base West/HMAS Stirling and Fleet Base East in Sydney Harbour are upgraded to support UK and US SSNs, that is of real
value to the RN and USN.[Pete Comment: However nuclear safety and environmental public/political
sensitivities may prevent nuclear submarines from ever being permitted in Sydney
Harbour].
On current unit prices for the SSNs (Astute-class and Virginia-class) currently being sold to the UK RN and
USN, those prices appear to be comparable to the project budget already
described for the Attack Class, ignoring the premium for local manufacturing
cost.
All the prices I quoted
were in current dollars, or the year I quoted them for. I converted to
Australian dollars on current exchange rates. Ignoring the cost of sustainment
and nuclear fuel cores (so SSN capital expenditure only) I would still say
current quoted prices (to their own governments) of SSNs as at 2020/21 USN
advise to the US Congress https://news.usni.org/2021/06/24/report-on-virginia-class-attack-submarine-program-3
are as follows:
French Barracuda (Suffren) SSN = 1.7 billion Euros = AU$2.8 billion A$
(AU$ are Australian dollars)
UK Astute (program average)
SSN = 1.6 billion UK pounds = AU$3.1 billion
US Virginia (Block 4) SSN =
US$2.8 billion = AU$3.9 billion
US Virginia (Block 5) SSN =
US$3.5 billion = AU$4.8 billion
The cost of the
Australian nuclear safety regulatory regime will be additional. I don't
know what it will cost but I note: the Australian Radiation Protection and
Nuclear Safety Agency (ARPANSA) https://www.arpansa.gov.au/
has 140 staff overseeing 47,000 workers in Australia’s radiology industry now
[much of it being X-rays other medical imagery and anti-cancer isotopes] with
an annual budget of $30 million in 2020. If we assume ARPANSA had to be doubled
in size to oversee another 2,500 SSN sailors plus 5,000 SSN construction workforce,
that is another $30 million per annum, or $1 billion over 30 years, less than
the cost of running a single SSK per annum. [Pete Comment – this figure might
become much higher.]
On timing, we know that France’s
Naval Group was 3 years late getting the Barracuda Suffren first of class
launched, with another 5 to go plus Frances future 4 x SSBNs. I agree that,
assuming that the RAN was Naval Group's third priority - see https://gentleseas.blogspot.com/2021/02/frances-new-ssbn-aus-attack-class-2nd.html
, they are not in a position to build SSNs for the RAN in a timely manner.
One of the biggest costs in
getting SSNs operational in the past was obtaining the necessary amount of highly
enriched uranium (HEU) to build reactor cores. This problem has largely
passed [resolved?]. HEU from removed from surplus nuclear bombs since the end
of the Cold War [resulting is a 1990s HEU glut https://www.armscontrol.org/act/2013-12/looking-back-us-russian-uranium-deal-results-lessons
] is sufficient to build reactor cores for new SSNs for the USN and RN. This
saves a lot of cost.
Stewardship of the US
nuclear stockpile costs US$4.5 billion (AU$6.3 billion) per year. That supports 80
nuclear ships and subs or US$200 million per year per SSN. Australia’s proportionate
share might be a tenth, or US$600 million per annum (AU$800 million). This is a
high cost, AU$25 billion over 30 years, but within the proposed AU$90 billion
delivery cost of the Attack Class program over 30 years. Including the ARPANSA’s
nuclear stewardship for 8 RAN SSNs would be AU$25 billion over 30 years for
nuclear stewardship and regulation. [Pete Comment: also there may be an onshore training reactor at Lucas
Heights, Sydney, to administer.]
The Brookings Institutes
1998 study https://www.brookings.edu/the-hidden-costs-of-our-nuclear-arsenal-overview-of-project-findings/
might be helpful
These are only assumptions
based on comparable current Australian and US costs, but I think are realistic
to get an idea of Operational Expenditure Costs for SSNs for the RAN. Crew will
be extra.
A final comment on the cost
of establishing support infrastructure for SSNs. [After training, building
the SSNs, including cost of the reactors, and regular major overhauls] The
largest cost will obviously be establishing the institutions, staffing them and
infrastructure. [Pete comment: Major physical infrastructure costs for the large,
sensitive nuclear propelled SSNs, will be high. This is at Fleet Base West near
Perth, maybe a Dedicated East Coast SSN Base (if Sydney residents don’t want
SSNs in their midst) and at ASC’s https://www.asc.com.au/
submarine building yard in Adelaide, South Australia.] A useful guide to
the cost of the latter can be obtained from looking at the cost of recent
comparable projects.
In the UK Devonport https://en.wikipedia.org/wiki/HMNB_Devonport
Dockyard no.10 dock is being upgraded to
nuclear standards to enable the sustainment of future Dreadnought class SSBNs
there. This is reportedly costing approximately £1 billion or $2 billion A$. https://www.navylookout.com/upgrading-the-royal-navys-nuclear-submarine-support-facilities/
By comparison, the upgrading of the ASC submarine shipyard was contracted for $1.2 billion in 2018 for the Attack Class build. This suggest another billion $ or so may need to be spent to bring it up to a nuclear engineering standard.
The Fleet Base West/HMAS Stirling
and ultimately Fleet Base East [or even a dedicated SSN Base on the East
Coast] facilities will also need upgrading. So the RAN might be up for $3
to $4 billion [or even AU$15 Billion in 2040 dollars] in total for this.
Not cheap, but this will give Australia the capability to build, maintain and
sustain SSNs. Once this work is completed RAN and USN SSNs could be based in
Australia, and RAN crews and support personnel could start gaining experience
operating and sustaining SSNs. The Perth work (at least) should begin
immediately.
Pete Comment
The Australian Nuclear Submarine Taskforce might want to report to Parliament, around April 2023, first.
2 comments:
Pete
Of course I agree the AUKUS submarine task force should report first, before major construction decisions. However I would say that some items that will be required under AUKUS regardless of the way forward (e.g. naval base upgrades to support UK or US SSNs based in Australia) should proceed immediately. It would be prudent to design these to support a nominal choice of SSN (e.g. Virginia Block 5) that would encompass all likely future possibilities for the RAN.
I agree that the costings are "fuzzy", and also had the same difficulty trying to get to the bottom of the previous Attack Class submarine costs as well. Defence was extremely reluctant to supply any cost breakdown to better understand the Attack program before its demise. The switching from current to out-turn dollars precluded analysis due to a shifting comparison basis.
In my view that is not satisfactory behaviour by Defence. We must trust the military professionals judgement on the details of purchase choices. Yet they still have a responsibility as public servants to spend taxpayers' money wisely and be accountable for it. It is hard to see a national security-based argument for keeping details of program costs secret. After all, we are not asking them to reveal sonar performance, only costs so we can measure and compare delivery progress. Slow progress and cost overruns have bedeviled many Defence projects in recent years, highlighting the need for scrutiny.
In this respect Australian Defence compares poorly to its peers. I have found it easier to find cost details of French, RN and USN submarine projects published online than for the Australian navy. For example, the US Navy reports in detail to congress on the cost and progress of their state-of-the-art Virginia Class SSN program to the US Congress every year.
https://sgp.fas.org/crs/weapons/RL32418.pdf
The excessive secrecy over costs also carries a risk of backfiring on projects. The Attack Class SSK budget was shrouded in secrecy. That did not stop organisations like ASPI comparing costs with other nations' submarine projects. This often resulted in very damaging publicity. In the end, the perception of being late and expensive killed the Attack Class contract. Was this fair? We don't know. But the damage was self-inflicted. It would be a tragic own goal if this same reluctance to submit to public accountability damaged the public perception of the AUKUS SSN program.
Hi Anonymous [at Feb 7, 2022, 3:17:00 PM]
Thanks for your comments.
Yes Australia's Ministers, DoD Heads and Admirals/Generals/Air Marshals are notorious for saying the MINIMUM about $Multi Billion MAXIMUMS of Taxpayers' money. As with the Attack-class fuzzy-figure-furthering served to expedite BLAME ON THE FRENCH.
Though it has to be said that 80 year Australian SSN Program Budgeting is difficult to cost in simple terms, this side of 2025.
We have no Congrssional Research Service (CRS) tradition to generate regular, detailed costings updates like the report you provide https://sgp.fas.org/crs/weapons/RL32418.pdf
"Navy Virginia (SSN-774) Class Attack
Submarine Procurement: Background and
Issues for Congress
January 10, 2022"
and our Audit Office https://en.wikipedia.org/wiki/Australian_National_Audit_Office or
Parliamentary Library researchers https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs
are not assigned a sufficient Budget or Standing for regular CRS like updates.
So I'm keenly awaiting the Australian Nuclear...Submarine Taskforce https://www.defence.gov.au/about/taskforces/nuclear-powered-submarine-task-force Report
(out first half of 2023) and subsequent official Defence budgets for the Australian SSN Program.
Regards
Pete
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