The Australian government’s view that the Aukus nuclear-powered submarine project is “too big to fail” could heighten the risk of cost blowouts, a US congress research report has warned.
The Congressional Research Service also cast doubt on whether any rigorous cost-benefit analysis was done prior to the project’s announcement by Australia, the US and the UK in 2021.
The CRS has published an updated version of its previous report examining plans for the US to sell Australia at least three Virginia class submarines in the 2030s, prior to Australian-built nuclear-powered submarines entering service in the 2040s.
The report specifically cited comments by the Australian defence minister, Richard Marles, in an interview with Guardian Australia’s politics podcast last year.
Marles said at that time that Australia, the US and the UK were “deeply committed to each other’s success in this project” and it “puts all three countries in a position where it’s too big for it to fail on the part of any of those countries”.
But the CRS report warned that such an attitude could fuel budget blowouts: “Some observers argue that acquisition projects viewed as too big to fail can be at elevated risk of cost growth that can reduce their achieved cost effectiveness.”
The report cited a 2020 paper as saying managers tend to allocate more funds to complete a big project when there is a perception “that, once started, a megaproject is too big to fail and too costly to stop”.
It highlighted congressional testimony in 2018 by the then Nasa inspector general, who said a “too big to fail” mentality “pervades agency thinking when it comes to Nasa’s larger and most important missions”, with cost overruns resulting in delays to other projects.
The CRS also pointed to a parliamentary submission from a retired Royal Australian Air Force air commodore, E J Bushell, critiquing the management of the Australian program to acquire F-35 joint strike fighter aircraft.
“Despite a series of increasingly critical reports coming from various US governance authorities … both US and Australian defence and military bureaucrats have retreated to the defence of ‘The project is too big to fail’, and ‘There is no alternative’, neither of which is true,” Bushell wrote in a 2012 submission.
The CRS is an independent service that provides policy briefings to the US congress, without making firm policy recommendations.
In its updated paper, the CRS revived discussion of a controversial policy option that it had previously floated as an alternative to the US proceeding with the sale of three to five Virginia class submarines to Australia.
The option, called “division of labour”, would see the US navy retain ownership of all Virginia class submarines but operate some of them from an Australian naval base.
The CRS explained that US-owned submarines would perform both US and Australian missions, while Australia would redirect its Aukus submarine-specific funding to building up other military capabilities “such as, for example, long-range anti-ship missiles, drones, loitering munitions, B-21 long-range bombers, or other long-range strike aircraft”.
The idea would be attractive from a US perspective but would have profound implications for Australian sovereign control of the submarines. There is no indication that the Australian government is open to such an option.
The Greens’ defence spokesperson, David Shoebridge, wrote on X that a division of labour “looks more like a strategic surrender than a partnership” from an Australian point of view.
The CRS pointed once again to Marles’s comments that Australia had not given any pre-commitment to join the US in a war against China over Taiwan as part of the Aukus deal.
The report said: “Australia would thus convert those [submarines] from boats that would be available for use in a U.S.-China crisis or conflict into boats that might not be available for use in a U.S.-China crisis or conflict.”
The US president, Joe Biden, announced the Aukus security partnership in a video call with the then prime ministers of Australia and the UK, Scott Morrison and Boris Johnson, in September 2021.
But the CRS said there was “little indication” that prior to this announcement any “rigorous comparative analysis was conducted to examine whether Pillar 1 would be a more cost-effective way to spend defence resources for generating deterrence and warfighting capability than potential alternative courses of action, such as a U.S.-Australian division of labour”.
