AUKUS submarine cost includes 50pct fund for unexpected overruns

Australia's defence minister said today the government was being "upfront and transparent" about the cost of its AUKUS nuclear submarine programme, after an analysis showed the forecast A$368 billion (about RM1.1 trillion) cost included a 50 percent contingency fund.

The Greens party, which commissioned the analysis by the Parliamentary Budget Office, said it showed the "huge" uncertainty over the project.

US President Joe Biden, Australian Prime Minister Anthony Albanese and British Prime Minister Rishi Sunak unveiled details in March of a plan to provide Australia with nuclear-powered attack submarines, a major step to counter China's ambitions in the Indo-Pacific.

Under the deal, the United States intends to sell Australia three US Virginia class nuclear-powered submarines, which are built by General Dynamics, in the early 2030s, with an option for two more.

In a second phase, Australia and Britain will build an AUKUS class submarine, with Australia receiving its first submarine in the early 2040s. The vessels will be built by BAE Systems and Rolls-Royce.

‘Huge level of uncertainty’

Australia's Parliamentary Budget Office has reported the cost estimate over three decades includes a contingency of A$123 billion. A contingency is a future cost not currently known due to delays, budget overruns and other factors.

Greens Senator David Shoebridge said in a statement the scale of the contingency fund was "unprecedented" and highlighted "the huge level of uncertainty in the AUKUS submarine deal".

Defence Minister Richard Marles said the plan to build a nuclear-powered submarine in Australia by the early 2040s was a "massive challenge for the country" and the government was "prudently budgeting here for the unexpected".

"We have sought to be as upfront and transparent as we possibly can be," he told ABC radio.

The Department of Defence did not release the sale price of the US Virginia Class submarines that Australia will initially purchase, the budget office said.

The report showed most of the cost of the submarine programme will be incurred in the two decades from 2033.

- Reuters