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Thursday, 2 April 1987
Page: 1963

Mr ALDRED(1.05) —I wish to take the opportunity in this grievance debate to raise a number of grievances in relation to the conduct and implementation of Australia's new sub- marine project. I particularly wish to express concern about the way in which I believe the request for tender document issued originally by the former Department of Defence Support has in certain major respects been violated in the conduct of the program.

I point out at the outset that the request for tender document relating to the new submarine project, as I said, issued by the Major Contracts Branch in the Department of Defence Support, clearly stated, on page 2-15, in relation to the construction of the submarine:

The submarine to be selected should preferably have been built and introduced into service, or there should be good evidence of a sponsoring government's intention that it should enter service by 1986 and it can be assessed from trial results before a Submarine Contract is entered into, that the technical production risks are low. A minimum requirement shall be that the design shall be a derivative of a proven in-service design of demonstrable performance and reliability.

That is a fairly fundamental and very clear statement. As we are aware, the two submarines that have been selected for the project definition study, the HDW-IKL type 2000 and the Kockums type 471, are in fact not in service and exist on paper only. That is no doubt the reason why in many respects we are already starting to run into very serious difficulties with this project.

The request for tender document I referred to required that tenders be submitted by 10 November 1983 and they were accordingly submitted on that date. Six contenders actually put in by 10 November 1983 and at the time tenders closed on that occasion it was estimated the project was going to incur a total cost of $1.3 billion. However, on 21 May 1985, when we finally got around to the award of the project definition study, announced by the Minister for Defence, to the two short-listed contenders-that is to HDW-IKL for its type 2000 and Kockums for its type 471-we found that the cost had moved to $2.6 billion. So already we find that the project has doubled in cost from the time that tenders were first called for.

In the current circumstances of early 1987, we find on the most recent reports that the project cost has been mooted in the vicinity of $3.5 billion to $4 billion. In fact, there is a very real concern, given the fact that neither of these designs is proven or in service anywhere and that we are dealing with a very open ended situation, that the whole project may blow out even further. We see a very real possibility that by the 1990s this project, if it continues on its current course, will blow out to such a degree that it may seriously jeopardise the defence budget and overall Federal Budgets.

If we turn to the specific contender HDW-IKL we see that the request for tender document has been violated in certain other respects. There is a lot of concern about the German company HDW-IKL in a number of respects including the fact that many of its so-called technological breakthroughs which assisted it in being awarded the project definition study on that earlier occasion, have now been withdrawn, in particular the escapesphere and the air independent propulsion system. So the so-called technological breakthroughs that existed at an earlier stage no longer apply. Also if we look at the general history of HDW-IKL we find that most of its submarine construction work, albeit that it has built about 50 per cent of the conventional submarines constructed since 1945, has been concentrated on building for its own navy and for South American navies.

Of more recent concern is the fact that it appears fairly clear in the eyes of many people that plans for the type 2000 have in fact been passed to South Africa, which is also in violation of the request for tender document. I quote from an article in Der Spiegel of December of last year, headed `Arms Exports-the Row Continues'. The article opens:

It is obvious that work has already begun in South Africa to build submarines to the drawings which were illegally sold to them. Did Kohl make promises to Premier Botha?

After going through a number of matters that relate to this problem, the article concludes:

In the meantime, South Africa is obviously already working on the Lubeck and Kiel drawings. At the beginning of this year, much to the amazement of his colleagues, Gerd Rademann, senior engineer at Kiel, quit his job at HDW. It has now been discovered that Rademann went to Durban in South Africa where the large renamed shipyard `Dorman Long Vanderbyl Corporation Ltd' is sited. According to his colleagues, the engineer is the ideal man to provide qualified aid for submarine building and or submarine refits. His excolleagues at Kiel are saying `he takes the drawing and then off he goes!'

If we look again at the request for the tender document we find the second violation of that document in relation to secrecy and security. That document very clearly states the requirements in this area. It says on page 6-12:

All matter of a classified nature passing between the parties overseas whether generated in Australia or overseas, shall be subject to the provisions of the laws of the overseas country regarding the custody and protection of classified matter and to the Security Agreement, Arrangement, or Assurance existing between Australia and the overseas country.

That requirement has been violated, as has also, as I understand it, West German law. There is some further elaboration on that matter further to the considerations of secrecy and security. In fact, one of those further provisions provides that the Commonwealth can dispense with a contract or an arrangement with an overseas supplier if that secrecy and security provision has been violated. Much of the evidence so far would appear to indicate that that has happened.

I turn now to Kockums, the other contender which was short-listed. Again, we see a whole range of problems here, not only in relation to Kockums itself but also in relation to the request for tender document. We have very real problems in relation to whether Sweden, which is not part of the North Atlantic Treaty Organisation or any Western alliance, can produce a boat which is compatible with Western navies. Another problem is whether over a period Sweden will be able to guarantee support by way of spare parts and other requirements in times of conflict, because we have certainly had experience of the Swedes having reneged on us in terms of providing spare parts and other requirements when we have been in a time of conflict. We have a further problem with the Swedes in that, like the Germans, they do not have experience in building large, deep water, long-range boats. When we add to that the possibility that the type 471 has been penetrated by Czech intelligence, there seems little doubt that Kockums itself has certainly been penetrated by Eastern bloc intelligence, as has much of Swedish industry elsewhere. That must be a further area for concern.

But, in relation to the request for tender document, the most grievous area for concern has to be the warranty provisions. We see on page 6-3 the warranty provisions of the document. It states:

The Contractor understands that the Submarine Contractor will be required, pursuant to the terms of the Submarine Contract, to furnish the Commonwealth with warranties of design and performance for the complete submarine claimed and the deliverables including those elements provided by sub-contract.

We know that Kockums has very serious financial problems at the moment. It stays in existence only through massive Swedish Government subsidies. Its work force of over 6,000 just under a decade ago is now down to 700, and further cuts to 600 employees are being mooted at the moment. In fact, it is very doubtful that Kockums will even exist in a short period because back in Sweden it has been suggested that it may shortly merge with Karlskronaveru, a subsidiary of Swedeyards at Karlskrona. It may completely disappear, when the warranty provisions will not be able to be upheld in the request for tender.

To me the only commonsense course of action for the Government now is to extend the life of the Oberons from 25 years to 30 years, as the British have already done with five of their Oberons, and to send this project back to the drawing board and look at it again. I suggest that we push ahead with more urgent projects such as the patrol frigate program and devote our limited financial resources to more urgent priorities. We should get ourselves out of the debacle of this particular project.