A new report from the US Congressional Research Service (CRS) has sounded the alarm over potential cost blowouts in Australia’s ambitious plan to acquire nuclear-powered submarines under the Aukus security pact with the United States and the United Kingdom. The report suggests that the Australian government’s view of the project as “too big to fail” could actually heighten the risk of budget overruns.
Doubts Over Cost-Benefit Analysis
The CRS report also casts doubt on whether any rigorous cost-benefit analysis was conducted prior to the announcement of the Aukus partnership in September 2021. According to a source familiar with the matter, there is “little indication” that a comparative analysis was done to examine if the submarine program would be the most cost-effective way to boost deterrence and warfighting capabilities compared to alternative options.
Australia’s “Too Big to Fail” Mindset
The report specifically cites comments made by Australian Defence Minister Richard Marles in an interview last year, where he stated that the three Aukus countries were “deeply committed to each other’s success” and that the project was “too big for it to fail on the part of any of those countries”. However, the CRS warns that this attitude could actually 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.”
– Congressional Research Service report
Lessons from Past Megaprojects
The report points to past examples where a “too big to fail” mentality has led to cost overruns in major acquisition projects. It cites a 2020 paper suggesting that managers tend to allocate more funds to complete big projects when there is a perception that they are too costly to stop once started. The CRS also highlights congressional testimony from 2018 about how this mindset has affected NASA’s larger missions.
Controversial “Division of Labour” Option
In the updated report, the CRS revives discussion of a controversial policy option it had previously floated as an alternative to the US proceeding with the sale of Virginia-class submarines to Australia. Under this “division of labour” approach, the US Navy would retain ownership of the submarines but operate some of them from an Australian naval base.
Australia would then redirect its Aukus-specific funding to building up other military capabilities such as long-range missiles, drones, or bombers. While this idea may be attractive from a US perspective, it would have profound implications for Australian sovereignty over the submarines. There are no indications that the Australian government is open to such an arrangement.
Implications for US-China Conflict
The report also points once again to Minister Marles’ comments that Australia has not given any pre-commitment to join the US in a war against China over Taiwan as part of the Aukus deal. This raises questions about the availability of the submarines for use in a potential US-China crisis or conflict.
As the Aukus submarine program moves forward, the CRS report serves as a timely warning about the risks of cost blowouts and the need for rigorous cost-benefit analysis. It also highlights the complex strategic considerations at play as Australia seeks to bolster its defence capabilities in an increasingly uncertain geopolitical environment. Careful management and clear-eyed assessment of the challenges ahead will be crucial to ensuring the success of this ambitious undertaking.
