Why was Australia willing to pay $3.0 B/unit for the French diesel-electric submarines?

Question

Note: All dollar values are USD.

One of the great advantages of diesel-electric attack submarines over nuclear-powered versions is that the former typically cost far less, so countries can purchase many more of them (There's a Case for Diesels).

Japan's latest diesel-electric attack submarines, the Taigei class, cost $639M/unit (Taigei-class submarine). And Germany's latest version of their Type 212 diesel electric submarine costs $1.3B/unit (Norway's new subs especially designed for covert, shallow water operations).

By contrast, the US's most advanced nuclear attack submarine, the Virginia class, costs $2.8B–$3.4B/unit (Virginia-class submarine).

The latest unit cost of the 12 Shortfin Barracuda Block 1A diesel submarines in Australia's now-scrapped deal with France was $66B/12 submarines = $5.5B/unit. Granted, that's a result of cost overruns. But even if we consider the initial projected cost when the deal was inked in 2015, that's still $36B/12 submarines = $3.0B/unit (Attack-class submarine: Construction). And that's just for the submarines themselves—it doesn't include maintenance (Why Australia wanted out of its French submarine deal).

So why was Australia willing to enter into a deal that required them to pay nuclear-submarine unit prices for mere diesel-electric submarines?

The only explanation I've been able to find for why they chose the vastly more expensive Barracuda over the less-expensive competing Japanese and German designs is that they really wanted nuclear propulsion, but it wasn't politically palatable at the time. And the Barracuda, unlike the Japanese and German offerings, was based on a nuclear attack submarine design, and thus could be retrofitted with nuclear propulsion when the political climate changed:

On Sunday, a report in the Australian Financial Review noted that while nuclear marine propulsion for Australian attack submarines is a politically untenable position for the government in Canberra today, the Turnbull government wants to keep its options open...should an SSN become politically viable for Australian needs in the future, converting the Shortfin Barracuda‘s propulsion system back would be viable. With the diesel-electric Soryu and Type 216, this is option is effectively closed off without significant research and development.(The Deceptively Simple Reason Australia Picked the Shortfin Barracuda)

Answer 1

I don't have all the accounting details, but one reason supposedly was that 60% of the money was earmarked to go to the local Australian suppliers.

Unlike many of the other examples you gave, which were built in foreign docks, these French-tech subs were supposed to be built in Australia.

Apparently that also involved building an entirely new construction facility in Osborne, albeit next to some existing ones where older Australian subs had been built; the shiplifting facility was apparently going to be reused though.

Located at the Osborne Techport facility in Adelaide, South Australia, the Submarine Construction Yard (SCY) will be the home of the Future Submarine Program, alongside other maritime defence programs, including the Hunter Class SEA 5000 and Collins Class submarine sustainment programs. The location of the SCY is adjacent to the ANI-operated Common User Facility (CUF) in Osborne, which includes a Shiplift facility which will be used to launch the submarines when they’re completed. [...]

The SCY facility is being designed and built by the managing contractor, Laing O’Rourke, to the specifications developed by Naval Group based on extensive experience in submarine design and build.

Somewhat of an aside: it does look like Australian sub projects have a high cost recently, e.g. the overhauls of the existing 6 Collins class subs (that Australia presently posseses) was put at 6 bn AUD (that's about 4.35bn USD) according to a June 2021 statement of the defense minister Peter Dutton.

One would have to factor in inflation for a better comparison, but in nominal terms that's actually more than what it cost to build those 6 subs in the first place (5.1 billion AUD), according to Wikipedia. The planned Collins refurbishments look pretty extensive though as each sub was slated to spend two years in dry dock. This is also fairly similar to the original build time, approximately 26 months on average for a Collins. It is certainly a lot less than e.g. a Virginia class, which takes some 6-7 years, albeit that is slated to be reduced to 5 as more get produced. The Barracuda/Suffren do seem to exceed the Virginia class in this regard though, seemingly taking 7-12 years. (One would probably also have to consider that the US plans to have 66 Virginias, while France only ordered 6 Barracudas, so there are more incentives and opportunities to speed up production of the former.)

A more recent Sep 2021 press article has put the refurbishment cost of the Collins boats at AUD 9 bn, but it's not too clear what the source of this latter figure is.

So, just as a ballpark estimation, if we consider a triple building time, and twice the number of boats (12 vs 6) compared to the Collins, we'd expect the [cancelled] Attack programme to have cost around 36-54bn AUD. The difference to AUD 90 bn probably were technological premiums etc.

---

I know this isn't exactly what the question ask, but I found it intersting how the jump from the 50 to 80/90 billion public estimate happened.

Around 2018 when the Australian subsidiary of the French manufacturer ordered the first (test) batches of steel from Australian manufacturers, the cost of the project was still being quoted by the press at around 50 bn AUD.

According to a 2020 news piece, apparently the public was mislead by being told of the lower bound of the goverment's estimates rather than what they really thought it might cost:

it has now been revealed the government budgeted for the project to cost $78.9 billion as far back as October 2015. This was the same month Defence officials told a Senate estimates hearing the out-turn cost was $50 billion.

The disclosure was made by the Department of Finance in response to a question on notice from a parliamentary inquiry into Australia's shipbuilding program.

Opposition defence spokesman Richard Marles said the revelation showed the government had "refused to be upfront about the true cost of the program".

The official response from a Defence spokeswoman was simply that... the 50 bn was a lower bound.

"In the 2016 Defence white paper, the government publicly advised the Future Submarine program would involve an investment of greater than $50 billion. Similarly for the Future Frigate program, the 2017 Naval Shipbuilding Plan outlined its plan would involve an investment of greater than $35 billion, noting for both programs the need at the time to protect the commercial position of the Commonwealth during negotiations."

(Emphasis mine. The cost of the frigates was mentioned because that also went up, albeit in less dramatic fashion only to $45.6 billion by 2018.)

Marcus Hellyer, a senior analyst at the Australian Strategic Policy Institute, said the revelations suggested the estimates were "deliberately sanitised to take the sting out of it".

"One would suspect if they did give a band, the submarines would be $50 billion to $100 billion, and it would be such a huge number it would terrify the Australian public into not wanting to go down that path," he said.

Answer 2

I agree with @Fizz's answer, but there is an important detail to add. Australia was buying secret military technology. The project includes a Pump-jet drive that the French claim is more silent than American and Russian similar propulsion. Plus there are all the electronics and control systems. Given how advanced the project was it is possible that some technologies were already disclosed to the Australian subcontractors, in this case the new submarines may end up having a mix of the best French and American military technologies.

Answer 3

The estimates of the per-unit costs of the original bids seem widely off. They refer to off-the-shelf submarines delivered to other navies, not any of the options Australia had on the table when they awarded the contract. There are at least three factors that can account for the cost difference between those and what Australia was loooking for: design changes (to accommodate special requirements regarding the combat and weapon system, autonomy, discretion, etc.), local content, and technology transfer.

For example, this article from 2016 provides a contemporary view of what happened during the last phase of the bidding. Importantly, it doesn't suggest the price was that different. Japan was hoping for a $40B deal, even before factoring the local work aspect. That's in the same order of magnitude than the last projected cost of the programme that was called off and very similar to the original DCNS bid.

Earlier in the process, there were people in Australia who recommended selecting an off-the-shelf design, whether from Japan, Germany, or Sweden (who made Australia's current Collins-class submarines) and that would perhaps have avoided all these problems. This 2021 article also mentions German-designed submarines as costing “half as much”. That's a significant difference but not as big as that betweeen off-the-shelf options like the Type 212 or Type 214 mentioned in your question and a bespoke design like the Type 216 (and that doesn't take into account predictable cost overruns, especially if built locally).

On the other hand, if you add specific requirements and want the submarines to be built locally, costs are going to be much higher and more difficult to control. That was true of the 2015 bids and will in fact almost certainly be true of the solution Australia is exploring now.

Answer 4

They weren't, period.

The initial cost estimate was MUCH lower, but over time crept up and up to the point where it became an utter joke. Remember this program started in 2009 and by 2021 not a single sheet of steel had been cut.

There are strong suspicions (and that's putting it mildly) of large scale corruption and fraud in the program (just google it, I've seen multiple youtube videos and other claims by independent sources about it (so people outside of either Australia or France with no interest in the program except an interest in submarines or defense in general).

The main reason the Australians didn't abandon the program earlier seems to have been clauses in the contracts that made it next to impossible for them to back out even if the French never delivered anything. That and not really having an alternative that seemed to be able to deliver more quickly than the ever creeping French promises.