The Weekend Australian: High cost of heavy metal

Handicappers are pegging Adelaide and the government-owned ACS outfit as the probable winners of the upcoming bid – due just prior to Christmas – for Australia’s largest and most complicated engineering and manufacturing assignment in decades. The $6 billion dollar ten-year contract will determine what region of the country inherits the ship building trade expertise and the new infrastructure it will require. The decision will likely shift that center west from Melbourne. The Air Warfare Destroyer (AWD) contract will be conducted in a novel way for Australia, combining the forces of competing companies into an alliance contract, replacing the fixed price arrangements that seemed to go sour on previous Australian projects, including the most recent submarine and frigate projects. A division of French defense giant Thales has reportedly been boxed out of bid consideration due to Australian government annoyance with France’s foreign policy. More…

Australia announced that the ships will deploy the Lockheed Martin AEGIS system, although the general design contractor will be chosen after the shipbuilder competition. The three contenders for that prize will be U.S. firm Gibbs and Cox with a light version of the Arleigh Burke destroyer, Germany’s Blohm and Voss with the F124 frigate and Spain’s Izar with its F100 frigate. Analysts have made the American firm the short odds choice because of Australia’s continued efforts to make its military more interoperable with that of the U.S.

Some skeptics have expressed worry that ACS’s continuing to be in control of the Australian government could lead to big cost over-run temptations if it is chosen as the main contractor, as expected. The project would lack a private group of shareholders keen to keep potential liabilities at a minimum, a role in which government bureaucracies haven’t in the past excelled.