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Early cost blow-out on new navy ships.

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Joel Fitzgibbon MP

Shadow Minister for Defence Member for Hunter

20 June 2007


Labor supports the Government’s plan to provide the Royal Australian Navy with three new Air Warfare Destroyers and two amphibious vessels.

We are justifiably concerned that the cost of both ship projects has already risen considerably over the original estimate. From a total of $8billion for both projects to a massive $11 billion.

The cost blow-out represents an increase of almost 38 per cent and is consistent with the Government’s form in defence procurement projects in recent years - the M113s, the Wedgetail early warning aircraft, the Joint Strike Fighter, the Seasprite and Tiger Helicopters, and the Frigate upgrade to name just a few.

Labor notes that only one quarter of the amphibious ship project funding will be spent in Australia.

Labor also notes that the choice of the Spanish Air Warfare Destroyer was made contrary to the Chief of Navy’s advice.

We hope that both ship designs can be brought into service meeting the full capability requirements Navy on time and on budget.

See attachment for further comment.

Contact: Daniel Cotterill 0417 140 933




Project costs

The 38 per cent blow-out in the cost of the two Navy ship projects raises new concerns about the sustainability of the Defence budget.

The Prime Minister acknowledged this morning that the cost of Defence projects is growing strongly.

Weight is given to concerns over Defence budget sustainability by the fact that the ABS Implicit Defence GDP Deflator is running at 6.3%, well above the Implicit Non-Farm GDP Deflator which is running at 4.75%,

This of course undermines the Government’s claim that it is growing Defence spending at 3% real.

Air Warfare Destroyer

Given the Government’s choice was contrary to the Chief of Navy’s advice, Labor trusts that due consideration has been given to the Navy’s long term needs and capability requirements, and that there is sufficient space and weight margins available for enhancement and upgrades over the 30 year service life of these vessels.

A “novel” feature of the Air Warfare Destroyer project is the alliance arrangement where two companies and the Commonwealth are involved but no one is actually in charge. This alliance contract is seen by many industry experts as the greatest risk facing the project and will need to be very carefully monitored by a Government whose military procurement record does not inspire confidence.

Amphibious ships,

Labor hopes that sufficient thought has been given to the protection of two such large and valuable vessels. This is an issue of prime concern given that 1000 or

so ADF personnel could be embarked on one of these ships and sent into a potentially hostile area of operation.