PARIS: DCNS of France has beaten competitors from Japan and Germany to win a A$50bn contract to build a new fleet of 12 submarines for the Australian navy.
Tuesday’s announcement of DCNS as preferred bidder deals a blow to Shinzo Abe, Japan’s prime minister, who lobbied hard for a contract that would have boosted defence ties with Canberra and bolstered plans to build an arms export industry.
Insiders in the bidding process believe Japan’s bid failed mainly due to concerns over the ability of Mitsubishi Heavy Industries and Kawasaki Heavy Industries to transfer technology to Australia, where the submarines will be built, and its lack of a record on delivering big defence export projects.
Malcolm Turnbull, Australia’s prime minister, said the decision to build a new fleet of submarines in partnership with DCNS represented “a momentous national endeavour”.
“The recommendation of our competitive evaluation process . . . was unequivocal that the French offer represented the capabilities best able to meet Australia’s unique needs,” he added.
The French presidency described the contract win as “historic”.
“France is grateful for the confidence that Australia has shown in it, and is proud of the technological excellence of which its companies have proved themselves,” it said.
Mr Turnbull said the submarines would be built in Adelaide in a move that would sustain about 2,800 jobs in Australian shipbuilding and the manufacturing supply chain. The announcement delivers a welcome political boost to the federal government in South Australia — a key state for the Liberal party ahead of a July 2 general election.
Australia’s replacement of its existing submarine fleet is part of an arms race in the Asia-Pacific region led by China, which is expanding its capability across the region. Defence spending in Asia in 2014 was A$439bn (US$338bn), surpassing spending in Europe, according to Australia’s defence white paper released this year. Canberra says half of the world’s submarines and at least half of advanced combat aircraft will operate in the Indo-Pacific region within two decades.
Under the winning French bid, DCNS will build 12 Shortfin Barracuda submarines for the Australian navy and help maintain them over half a century.
The new vessel, a conventional diesel-powered submarine using a pump-jet propulsion system, draws on the design of France’s existing Barracuda-class nuclear submarine. It represents the first time Paris will share this stealth technology (which is quieter than a traditional propeller) for submarines with another country, said DCNS.
The deal follows an unprecedented lobbying campaign involving the bidding companies and the political leaders of all three countries. Mr Turnbull telephoned François Hollande on Monday night to inform him of DCNS’s success.
On Tuesday he thanked Germany’s ThyssenKrupp Marine Systems and the government of Japan for their bids and stressed that both he and Mr Abe remained committed to their countries’ special strategic partnership.
Japan had been in pole position to win the submarine contract before Tony Abbott was ousted as prime minister by Malcolm Turnbull in September. Mr Abbott had envisaged Australia buying Japan’s Soryu class submarine in a bid to deepen strategic and defence ties with Tokyo at a politically tense time in the Asia-Pacific region.
The proposal won the backing of Mr Abe, who overturned Japan’s decades-long ban on arms exports in 2014 as part of a loosening of military restrictions put in place after second world war. It was also supported by some in the US defence establishment. But it proved politically toxic in Australia, where members of Mr Abbott’s own party favoured building submarines in Australia to save local jobs.
“It will take a fair amount of effort for Australia to soothe some unhappiness on Japan’s side on this,” said Peter Jennings, executive director of the Australian Strategic Policy Institute. “Japan embarked on a journey to do this with Canberra and I think they will be disappointed by the Australian decision.”
It will take a fair amount of effort for Australia to soothe some unhappiness on Japan’s side on this
People close to Japan’s bid said failure after spending so long as apparent frontrunner would be a source of “considerable personal embarrassment” to Prime Minister Shinzo Abe, and that Tokyo and the companies involved would now enter a period of “blame and recrimination” as each party sought to evade culpability.
The Australian government has called on Washington to “help manage the Japanese reaction” to losing the bid, according to people close to the situation.
People on both the Australian and Japanese sides of the bidding process told the Financial Times that Japan’s proposal had been the weakest in commercial terms, with the country’s inexperience obvious throughout.
The Japanese did not establish until well into the bidding process that Mitsubishi Heavy Industries would take the lead, the documents were presented in a way that caused the Australians to demand substantial revisions, and the teams that travelled to Canberra were an unwieldy mix of bureaucrats and business executives who had not worked together before.
The loss of the Australian contract leaves a deep dent in Mr Abe’s ambitions of propelling Japan from non-participant to major contractor in the arms export trade. On the naval side, where Japan’s products are potentially most competitive, there are no big international contracts coming up for at least three years.
A decision between Lockheed Martin and Raytheon on who will build the submarines’ weapons system has yet to be announced.