The Future Frigate tender has been put out to replace Navy's current Anzac-class frigates © PA Images
The Future Frigate tender has been put out to replace Navy's current Anzac-class frigates © PA Images

Government urged to increase local content in defence contract

12 February 2018

Australian senators have joined together to urge the government to amend its frigate tender to include more Australian small businesses and shipbuilders.

In January, the Department of Defence (DoD) released its SEA 5000 Future Frigate tender documents. Former senator Nick Xenophon obtained them under the Freedom of Information Act after the DoD refused to produce them in May last year.

The documents said that the tendered proposal must "contribute to developing and sustaining shipbuilding capability in Australia and maximise Australian industry capability during the build and sustainment of the vessels".

However the document added that Australian industry participation for the project set by the government had only been set at 50% – a stark contrast to the 90% figure set out by defence minister Christopher Pyne.

“The Air Warfare Destroyer Program (AWDP) has achieved Australian contract expenditure in the order of 50% across the whole program,” it said.

“While the Commonwealth acknowledges there are significant differences between the AWDP and this project [SEA 5000 Future Frigate], the Commonwealth expects that this project will achieve the same or higher level of Australian contract expenditure.”

Senator Rex Patrick, former submariner and defence industry project manager, said the 50% figure represented a “massive policy failure”.

“It seems minister Pyne has gone from ‘90% man’ down to ‘50% man’ – it’s an assault on Australian companies and jobs,” he said. 

Alex Gallacher, South Australian Labor senator, said businesses in South Australia are concerned by the target and accused the government of abandoning local manufacturing.

“There should be scrutiny of that level of expenditure and there is concern in South Australia amongst small to medium enterprises, larger enterprises about the government’s bona fides in respect to Australian content and rightly so – this is the government that walked away from motor vehicle manufacturing in our state,” he said. 

“I can speak for South Australia – the maximum amount of Australian content is a burning issue given the treatment of the manufacturing industry in that state. We have a once-in-a-generation opportunity to rebuild out of the destruction you caused in the destruction of manufacturing motor vehicles and the demise of that.”

Louise Pratt, Western Australia Labor senator, said echoed Gallacher’s concerns and accused the government of lacking transparency in defence procurement projects. 

“I rise to share the concerns of Western Australia industry in relation to the complete lack of transparency provided by the government in relation to local content,” she said.

“There are grave fears that Western Australia could be missing out on billions of dollars of work under this significant contract and that is because foreign bidders have not been required to partner with Australian industry.”

She added that because the government has not required the bidders to use Australian shipbuilders, two Australian firms Austral and ASC had been excluded. 

“As Austral chief executive David Singleton said, when the request for tender came out, he expressed concern that ‘that was the end of engagement between us and the companies bidding on the tender’. He said at the time there was something about the request for tender that seemed to draw foreign shipbuilders away from continuing dialogue,” she said.

In September Singleton told a Senate committee there was an abrupt change in his firm's engagement with international bidders after they received the government’s request for tender, which did not require the use of an Australian shipbuilder. 

“Prior to the release of the tender we, Austal, were heavily involved with all three of the foreign design companies to provide an Australian shipbuilding solution to their offer to the government,” Singleton told the committee. 

“When the tender came out that was really the end of that engagement between us and those companies.” 

Pratt said the government needed to be more focused on choosing home grown steel shipbuilding industries in Australia. 

“As well as South Australia, I contend that Western Australia will get a raw deal if the federal government is not fair and transparent and makes good on its local content provisions,” she said. 

South Australia is the build site of nine future frigates, 12 future submarines and two offshore patrol vessels, while Western Australia will house the construction of 10 offshore patrol vessels. 

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