Submarines for Australia made a detailed Submission to the Australian National Audit Office to inform its review of the SEA 1000 future submarine program.
The Submission states that the government decision to eliminate competition while no more than an early concept design of the Attack class submarines existed had gifted a valuable monopoly position to the French government owned company, Naval Group. Our understanding of the economics of monopoly power and industrial organisation suggests that this advantage held by Naval Group was likely to manifest itself in a number of areas, including:
We consider that in the absence of competition, Defence will have little negotiating power in seeking to derive outcomes in these areas that are in Australia’s national interest. Indeed, we also suggest that some of these chickens are already coming home to roost.
In our Submission, Submarines for Australia puts forward a proposal to introduce competition into the process. At an estimated cost of around $50 million, the benefits of this would be much greater and the introduction of competition need not cause any delay in the program.