Tense negotiations between Canberra and French Shipbuilder Naval Group over future costs and the percentage of local industry content in Australia’s AUD90 billion (USD70 billion) Future Submarine Program have concluded with agreements on both issues, Janes has learnt.

According to informed sources, the overarching Strategic Partnering Agreement underpinning the project will now be amended to include a commitment by Naval Group to spend a minimum of 60% of the contract value in Australia over the life of the programme.

This will formalise an earlier undertaking by French Armed Forces Minister Florence Parly that has subsequently been the subject of lengthy negotiations and Australian frustration.

Following reports that Canberra was considering walking away from the contract, under which Naval Group is to design and build 12 Attack-class conventionally powered submarines for the Royal Australian Navy (RAN), breakthroughs were reached during a visit by the company’s global chief executive officer, Pierre Éric Pommellet.

Pommellet left Australia on 28 February after spending two weeks in mandatory Covid-19-related quarantine, and a third in discussions with defence and industry leaders and senior ministers.

The recent in-principle agreement will require Australian content to be agreed for each stage of work, the sources disclosed.

Should this fall below the agreed band in any phase, Naval Group would be liable for penalties. Should the level of Australian work exceed the agreed band, Naval Group would qualify for incentives.

Formal signature awaits legal reviews and sign-off by Defence Minister Linda Reynolds, who has been on medical leave since 24 February.

Date: 04.03.2021

Source: Janes