This is an HTML version of an attachment to the Freedom of Information request 'Competitive evaluation process'.

FOI 043/15/16
What does the government mean by this statement? 
“What we have always intended to have is a competitive evaluation 
process [for selection of the Future Submarine]” 
Headline Statement 

  The Australian Government is determined to get the best value for 
money and the best submarine capability available. 
Key Points 

    The Government’s policy is to ensure that Australia obtains 
regionally superior conventional submarines while avoiding a 
capability gap. 
  The number of Future Submarines to be acquired is being 
considered through the Force Structure Review. 
  As I have said, decisions on the submarines will be based on a 
competitive evaluation process managed by the Department of 
Defence that considers fully the unique requirements of our 
Future Submarine capability. 
    This will take place within a thorough ‘two pass’ Cabinet process, 
and we will receive professional advice from Defence to ensure 
we get the best capability. 
    The Department has a rigorous process for determining the 
acquisition strategies to be used for acquiring any major 
capability.  Key factors such as the capability required, the 
available options and strategic requirements are all considered in 
the development of the strategy. 
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  The acquisition strategy may determine that a tender process that 
is either fully open or limited may provide the best approach. 
    Defence commonly undertakes the procurement of major capital 
equipment without undertaking an open tender process.  
    The selection of the designer and builder for the Collins class 
submarines was not undertaken through an open tender process. 
Instead, a limited request for tender was issued to seven 
submarine designers and builders for a submarine platform 
system design proposal (the limited tender was issued in May 
    The  Defence Materiel Organisation has a standard tender process 
based on a suite of templates termed the ASDEFCON 
[pronounced  “As-Def-Con”] suite and guidance set out in the 
Defence Procurement Policy Manual (DPPM). 
    In the case of a Request for Tender being responded to by 
multiple tenderers, the process culminates in a competitive 
evaluation of the tenders. (DPPM Chapter 5.6) 
     Equally there are other circumstances that mean the best 
outcomes can be achieved by another competitive approach. 
    There are cases where Defence needs to compare offers and 
determine value for money outcomes based on a range of sources 
of information, not just from a tender. 
    A good example is where one offering is through the United 
States Foreign Military Sales (FMS) system.  The US 
Government will not respond to a standard request for tender for 
FMS products.  Therefore, it becomes necessary to conduct a 
competitive evaluation using an FMS offer compared to other 
information which may include a tender response. 
    Two recent examples are the procurements of the C-27J airlift 
aircraft and MH-60R helicopter acquisitions. 
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  In the case of the C-27 acquisition, although there was some 
criticism of the process undertaken, the ANAO audit in 2013 on 
this project found that overall: 
  Defence’s processes to select the US variant C-27J met 
relevant Commonwealth legislative and procurement 
requirements applicable at the time; and  
  that there was a reasonable basis for government to select the 
US variant C-27J as a better value for money option than the 
commercial version of the C-27J, and the Airbus C-295. 
  An open tender involves publishing an open approach to the 
market and inviting submissions (see Commonwealth 
Procurement Rules, paragraph 9.8).  
    A limited tender involves a relevant entity approaching one or 
more suppliers to make submissions, when the process does not 
meet the rules for open tender or prequalified tender (see 
Commonwealth Procurement Rules, paragraph 9.10). 
    The competitive evaluation process managed by the Department 
of Defence will take into account capability requirements, cost, 
schedule, technical risk and value for money considerations. 
    As was the case with the Collins class submarine, it is expected 
that international involvement will be required in this project. 
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If asked: about calls to develop a Submarine Construction 
Authority to oversee the Future Submarine project 
    Shipbuilding requirements will be guided by the Defence White 
Paper and the Australian Naval Shipbuilding Plan. 
   No decisions have been made on the design or construction of the 
next generation of Australian submarines. 
If asked: 
about the number of submarine sustainment jobs 
expected in Adelaide 
   Approximately 1000 people are currently employed in South 
Australia to sustain the Collins submarines.  Around 400 people 
are also employed in Collins sustainment activities in Western 
  Australian industry will continue to have a vital role in sustaining 
the next generation of Australian submarines. 
If asked: Is ASC’s estimate of $18-24 billion to build 12 future 
submarines in Australia accurate? 
    Until our requirements are properly considered by any submarine 
designer and builder, cost proposals for the future submarine 
cannot be predicted with certainty. 
  At this stage of the program, cost proposals should be treated with 
a high degree of caution. 
    Importantly, the cost of the future submarine program will need to 
cover design, infrastructure, combat system, and broader project 
expenses, as well as construction costs. 
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If asked: Will the Government accept the recommendations of the 
Senate Inquiry into the Future of the Australian Naval 
    No decision has been made on the recommendations made by the 
Committee in their report tabled on 17 November 2014. 
  The Committee’s recommendations will help inform the 
Government’s decisions on Australia’s future submarine. 
If asked: about submarine cooperation with Japan 
    Australia is discussing issues relating to submarines with a 
number of countries, including Japan. 
   There has been no decision on any specific areas of cooperation 
with any country. 
If asked: about the C-27J acquisition 
  In seeking to procure a replacement for the Caribou aircraft 
Defence concluded there were three viable options:  An FMS 
procurement of the C-27J in a configuration specific to the US 
Government; a direct commercial sale from the US supplier of 
the C-27J; or the C-295 built by Airbus Military. 
    In October 2011 Defence approached the commercial suppliers of 
the C-27J and the C-295 to obtain price, availability and 
capability data to compare against information sought from the 
US Government via FMS on the US variant C-27J option.  
Defence evaluated the industry responses and compared them to 
the US offer. 
    The competitive evaluation concluded that: 
  the Airbus Military C-295 did not meet several essential 
capability requirements, including interoperability 
requirements with other ADF aircraft logistics systems14; 
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  the US variant C-27J was the only Military Off The Shelf 
(MOTS) option available, incorporating ballistic protection, 
electronic warfare protection, and communications systems 
that provided battlefield survivability and interoperability with 
other ADF platforms and the US16; and 
  the commercial C-27J option offered by Raytheon could not 
offer substantial benefits over and above those offered by the 
US variant available under FMS arrangements. 
    The cost to industry of participating in a full tender process was 
high and Defence assessed (based on previous research and the 
most recent information received from commercial sources) that 
the commercial suppliers could not compete with the FMS offer 
in any case. Defence further considered that conducting a tender 
would have taken several months and resulted in the loss of the 
competitive aircraft price available through FMS until 30 June 
  If asked: about the MH-60R helicopter procurement 
    AIR 9000 Phase 8 is delivering a new maritime combat helicopter 
capability as a matter of urgency for Navy. The project was 
predicated on the selection of a capability solution that was 
already an established military-off-the-shelf (MOTS) system. 
Only two MOTS options showed the potential to meet this 
capability requirement. They were the NATO Helicopter 
Industries NH90 NATO Frigate Helicopter (NFH) and the 
Sikorsky/Lockheed Martin MH-60R Seahawk Romeo. 
    The NH90 NFH was available through a commercial arrangement 
with Australian Aerospace (now Airbus Group Australia Pacific). 
The MH-60R Seahawk Romeo is only available from the United 
States Government through their Foreign Military Sales (FMS) 
    Defence sought to obtain best value for money in the selection of 
a supplier for the maritime combat helicopter capability through a 
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  a sole source Request For Tender (RFT) for the Acquisition 
and Sustainment of the NH90 NFH Mission and Support 
Systems released to Australian Aerospace; and 
    two Letters of Request (LOR) released to the United States 
Navy for the Acquisition and Sustainment of the MH-60R 
Mission and Support Systems through the United States' FMS 
    The Defence competitive evaluation process compared the FMS 
Letters of Offer and Acceptance (LOAs) received from the 
United States Navy in response to the LOR with a tender received 
in response to the commercial RFT from Australian Aerospace. A 
Value for Money (VFM) determination was made during the 
evaluation process to determine the preferred solution and to 
structure the preferred contractual arrangements subsequently 
negotiated by Defence. 
    The VFM determination considered cost (an assessment of the 
total capability acquisition and whole of life sustainment costs), 
schedule, capability, commercial and Australian industry aspects, 
performance history, intellectual property, compliance and risks. 
    AIR 9000 Phase 8 received First Pass approval in February 2010 
and Second Pass approval just 16 months later in June 2011.  The 
MH-60R Seahawk Romeo was selected after being recommended 
by Defence as the best VFM and the lowest risk. The project will 
deliver 24 aircraft, two mission simulators and a range of other 
training and support elements. The approved budget is $3.202 
billion. The project remains on schedule and under budget. 
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On 17 Novem ber 2014, the Senate Econom ics Re ferences Comm ittee tabled Part II of its  
Report into  the Future of
 the Australian Naval Shipbuilding In
dustry, in which it 
recommended an imm ediate competitive tender  for the Future Subm arine Program to build, 
maintain and sustain Australia’s future submarines in Australia. On 22 October 2014, Defence 
appeared at the Senate Supplementary Budget Estimates hearing, where the Future Submarine 
Program fe atured prom inently in discussion s on capability and proj
ects. Mo st of the  
discussion centred on the status of the program , the schedule for a decision and the evidence  
heard by the Senate Econom ics Reference Comm ittee (S ERC) Inquiry into the Future of 
Australia’s Naval Shipbuilding. Mr John W hite, who conducted the review into the Air 
Warfare Destroyer program on behalf of the Government, provided a submission to the SERC 
Inquiry into shipbuilding. Mr White appeared at a public hearing of the Inquiry in Melbourne, 
on Monday 13 October 2014. 
On 30  September 2014, Defence appeared at  the Senate Econom ics Reference Comm ittee 
Inquiry into the Futu re of Australia’s Naval Shipbuild ing Industry. On 10  September 2014, 
then-Minister Johnston said, “We haven’t made any decision with respect to submarines. This 
is a very com plex issue – we’re  looking to m ake a firm  deci sion next year in the W hite 
Paper”. The SEA 1000 Future Su bmarine Program  is developing  o ptions to replace the 
Collins class submarines. Program resources have been f ocused on p rogressing an ‘evolve d 
Collins’ option (Option  3) and ne w design o ption (Op tion 4). Austr alia is also  explor ing 
submarine cooperation with a number of countri es, including Japan. No decision has been 
made on cooperation with any country. 
In April 2014, the P rime Minister and the Minister for Defe nce announced the developm ent 
of the 2015 Defence White Paper. The W hite Pape r will provide a costed plan to achieve 
Australia’s defence objectiv es and an affordab le Australian  Defence Force s tructure. This  
plan will align Defence’s strategy and capabil ity aspirations with agreed funding. There will 
be a com prehensive consultation process with  Australian industry and  the Australian public, 
our allies and regional partners. A Defence Issues Paper, largely prepared by the Expert Panel, 
has been produced to support the public cons ultation program. A call  for public submissions 
closed on 29  October 2014. Follow ing the re lease of the 2015 Defence W hite Paper, a 
ten-year Defence Capability Plan and a Defence Industry Policy Statement will be published. 
Media Attention 
On 11 February 2015, there continued to be extensive coverage of statements by Government, 
confirming that a com petitive evalu ation p rocess would be used for the Future Subm arine 
Program. Coverage focussed on what a com petitive evaluation process would entail and the 
difference between this approach and an open tender. 
On 10 Febr uary 2015, there was ongoing comm entary in most m ajor publications regarding 
comments by the P rime Minister and Minister  for Defence confirm ing that the Future 
Submarine Program would follow a competitive evaluation process, and speculating what this 
means for Australian shipbuilder ASC. 
On 9 February 2015,  The Austra lian and the  Adelaide Advertiser  each contained articles  
reporting on statements by the Prime Minis ter that there would be a com petitive evaluation 
process conducted for the Future Submarine. 
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On 6 February 2015, the  Australian Financial Review published a story claim ing that during 
discussions with German Chancellor Merkel at  the G20, Prime Minister Abbot agreed that if 
Australia progressed acquisition of  a Japanese s ubmarine, that it  could increase tension with 
On 4 February 2015,  The Australian ran an article stating th at the Government had shelved a 
planned announcement on the Future Subm arine Program in Decem ber, just days before the 
Cabinet reshuffle which saw a ch ange in Defence Minister.  The article f urther states that the 
announcement was to in clude detail on the creati on of a “national defence industry entity to  
work with an experienced international submarine designer and builder”. 
On 8 February, you indicated publicly that the  Government had always intended to have a 
“competitive evaluation process” in  relation to  the Future S ubmarine Programme (an extrac t 
of the transcript is at Attachment A). 
Media reports are claiming that  the Governm ent will now se ek a commercial “open  tender 
process” to select the Future Submarine.  
Point of Contact 
RADM Greg Sammut, Head Future Submarines Program, (w) 6265 2251 
David Gould, General Manager Submarines, (w) 6266 7756 
Departmental information valid as at: 11 February 2015 
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