Three reports over the past two months are required reading for anyone involved in or scrutinising the Australian Government’s work on AUKUS. Two are US reports and one is from the UK.
None are from the Pentagon or the UK Ministry of Defence, instead each is from an independent government oversight agency with responsibility for objective assessment of their country’s military plans.
Put together, the three reports show an alarming and growing set of challenges in front of Australia’s AUKUS partners when it comes to meeting their own submarine needs. AUKUS adds additional demands on top of this, and additional complexity by introducing a third nation, its government, laws, budget and acquisition processes.
The US Navy is required by law to provide to Congress its long-term shipbuilding plan every year (it’s a striking contrast to our situation where Defence has not released a public version of its acquisition plan for nearly three and a half years). The US Congressional Budget Office (CBO) has released its assessment of that plan in October. The US Navy has set out three options for its future surface and undersea fleets, with slightly different numbers and mixes of ships and submarines in each.
But each option has the same basic flaw: it is unaffordable without massive growth in US shipbuilding budgets. The options require ongoing annual increases to the amount the Pentagon currently spends on building ships and submarines of between 31 and 40 per cent per annum for decades if the US Navy is to look at all like its plans and not shrink substantially. The problem behind these numbers is that the US Navy continues to aspire to larger, more complex and more expensive ships and submarines than it has now, with the costs for even producing similar vessels to those being built now spiralling.
This was followed by the US Congressional Research Service’s 13 November 2023 report titled the ‘US Navy’s Virginia Class submarine program and the AUKUS Submarine Proposal’. The CRS is required to provide independent advice to the Congress on the legislation it will consider. In this case that legislation includes funding for submarines and authorising the President to transfer nuclear-powered submarines to Australia. The CRS report is consistent with the CBO report in its understanding of the challenges to US submarine building and maintenance, but goes deeper on the submarine industrial base challenges.
Its analysis shows that the US is currently producing Virginia Class submarines at the rate of about 1.4 boats a year, which is a shortfall against the targeted rate of 2 boats a year. This is despite years of focused investment into the industrial base and supplier network that builds these boats. But much more significantly, the CRS assessment, which is accepted by the US Navy, shows that the rate of submarine product has to grow not just to 2 boats a year but to the equivalent of five ‘standard’ Virginia Class boats a year by 2028. That’s because by then, the US needs to be building the larger Block V Virginia-class submarines with the missile payload insert along with the much larger and more complex Columbia-class ballistic missile submarines. Each Columbia takes 2.5 times the industrial base capacity that it takes to build a ‘standard’ Virginia class boat.
So, not only does the US have to invest between 31 and 40 per cent more per annum into its programs, it needs to lift production capacity to over 3.5 times the current rate of 1.4 boats a year. That’s without counting the even greater industrial capacity required on top of this to meet the AUKUS demand of producing 3-5 extra Virginia subs for Australia (backfilling ones provided out of the existing US Navy fleet and building new ones sold to Australia before SSN AUKUS (Snorkus) arrives.
The numbers understate the difficulty of doing this. It’s not just running a production line faster or replicating the existing production line with a new one. Nuclear submarine building relies on highly skilled shipyard workers that are hard to recruit and retain, and the builders depend on 100s – 1000s – of small suppliers for all the components and subsystems that go into each boat. Expanding the capacity or variety of this supply chain is harder than growing the skilled submarine construction workforce. So, the CBO and CRS reports, in their measured, quiet but authoritative way raise real doubts about the US capacity to do what it needs to do – for itself – and on top of this deliver for AUKUS.
In June 2023, a US Government Accountability Office report had already told us that, because Virginia Class sub construction continued to degrade, it looked like each Block V submarine would take an average of over 2 years longer than reported last year.
Shifting from the US situation, we now have recent news on nuclear sub challenges from across the Atlantic. The most recent report is from the UK’s National Audit Office – the equivalent of Australia’s ANAO, which brought us bad news on Defence’s Hunter frigate program.
It has assessed the UK Ministry of Defence’s 10-year Equipment Plan2023-2033 and found that it is unaffordable, with costs for key programs growing rapidly because of inflation and a better understanding by the UK defence ministry of the actual costs involved. Two of the largest cost increases are in the UK’s Defence Nuclear Enterprise (that builds the UK’s nuclear submarines and nuclear missiles) and the Royal Navy (which is acquiring the BAE Type 26 frigate that is the basis for our Navy’s ‘Hunter’).
The UK’s defence nuclear program has had a 62 per cent increase from the costs forecast in last year’s version of the Equipment Plan. That’s a £38.2 billion increase (equivalent to $A73 billion). And the Royal Navy’s non-nuclear acquisition program has had a 41 per cent cost increase between the 2022 and the 2023 10-year plan – that’s an increase of £16.4 billion (equivalent to $A31 billion).
The UK NAO notes that the Equipment Plan is unaffordable, and has yet to include ‘must have’ capabilities for the UK military identified from studying the lessons of the Ukraine war – integrated air-missile defence, cruise missiles and ballistic missiles, long-range surface-to-surface missiles to strike deep into an enemy’s rear areas, unmanned aerial systems and electronic warfare’. These make the UK plan’s unaffordability problem worse, requiring either large cancellations or large budget increases.
Action by the UK government to make the military’s plans fit its budget won’t affect the nuclear enterprise, because that has been ‘ringfenced’, but as the NAO says, will ‘put greater pressure on programmes not included in [the ringfence]’ – including the Royal Navy’s surface fleet.
The net result is that both nations were challenged meeting their own surface ship and submarine needs before AUKUS came along, and those challenges are growing because the consequences of many years of low investment are now inescapable.
They also show that both the US and UK face cost spirals in their submarine programs, with forecast costs rising owing to inflation and supply chain troubles that are making everything more expensive. Those costs have not stabilised. This experience means that Australia’s stated cost of $268-368 billion for the eight AUKUS submarines now must be considered to be understated—or at the very least fall at the upper end of that band–as it will be affected by the rising costs faced by the UK and US.
AUKUS helps in one way – Australia is bringing a bag of gold to the effort. But overall, AUKUS makes the total program harder – there’s more to be done and it needs to be done across three different governments, economies and defence industries.
So, while much of the domestic discussion and debate on AUKUS has been on Australia’s readiness to produce, operate and maintain eight nuclear submarines, the greater challenges to AUKUS come from the ‘home games’ that the UK and US must play to meet their own needs. These face deep, long term underlying problems. They won’t be solved by the US Congress passing AUKUS-related legislation this year. US investment into its submarine base has increased in recent years, and Congress supports more of it, which is good but insufficient.
Almost 2.5 years since the September 2021 announcement, it’s becoming increasingly clear that delivering the ‘optimal pathway’ requires some more than heroic efforts in both the UK and the US across very broad fronts of activity, all of which must succeed. And that’s while both nations help Australia get its training wheels on and shift rapidly from a toddler learning to walk when it comes to nuclear submarines to a mature, high performer in one of the most demanding areas of human endeavour.
Asking for plans or mentioning real world challenges is received here as bordering on un-Australian. That’s odd, because the US Congressional Research Service points out, almost every US military acquisition program that hasn’t had a proper business case engaging with the real risks and industrial environment it has to operate in has failed. The now cancelled multi-billion dollar Littoral Combat Ship program is just the most recent example.
Public understanding and support is critical to the sustainability and delivery of AUKUS. That begins with openness about the eyewatering challenges faced by each nation in the partnership – and credible plans that match the scale of the challenges, starting now.