Decision on $27b armoured vehicle contract in government’s sights 9 Mar 2022
A German defence contractor is in the box seat to win a contract worth up to $27 billion to build hundreds of new armoured vehicles for the army, as the Morrison government seeks a fresh conduit into Europe following the rupture of relations with France over the axed submarine project.
We understand the government could announce the winner of the contract as early as next week.Hanwha’s Redback and Rheinmetall’s Lynx are going head-to-head to be selected as the army’s next infantry fighting vehicle.
Defence Department multiple sources said cabinet’s national security committee was expected to sign off on the decision at its meeting on March 15, with the announcement soon after. Rheinmetall has been competing against South Korean defence company Hanwha for the lucrative contract, the largest in the army’s history. The infantry fighting vehicles carry troops into battle, with plans for up to 450 tracked vehicles to replace the army’s Vietnam War-era armoured personnel carriers.
After Mr Morrison this week said the government would not pick what nuclear submarine to buy until after the next election, the infantry fighting vehicle contract is one of the final big-ticket defence decisions that can be made this term as the Coalition ramps up its national security credentials.
The government is also expected to make an announcement about its plans to establish a local guided-weapons industry. That project is taking on fresh impetus, with Australia’s stocks of shoulder-mounted anti-tank weapons reduced after being donated to Ukraine.
While sources said there had been strong support within sections of the army for Hanwha’s Redback vehicle after it performed more strongly than expected in testing, the Defence Department has told ministers both designs met the criteria. Despite the Redback reputedly being cheaper, Rheinmetall’s Lynx offering has several additional factors in its favour. The company can tap into an existing supply chain and workforce that is building the armoured Boxer combat reconnaissance vehicle for the army at Rheinmetall’s factory near Ipswich.
Defence industry sources said the government would also hope to reap a bigger political dividend by creating jobs in Queensland than by awarding the contract to Victoria, where Hanwha is proposing to build vehicles at a factory at Avalon Airport near Geelong. But awarding such a large contract to a German company would also help build ties with a major European power, at a time when Australia’s previous key ally France remains angry with the Morrison government over its “betrayal” by cancelling the $90 billion future submarine program.
Mr Morrison spoke to Germany’s new Chancellor Olaf Scholz as recently as last week. While the ramifications of Russia’s invasion of Ukraine dominated the conversation, Mr Morrison said they also spoke about “our common interests in the Indo-Pacific”. A German frigate last year visited Perth, the first time since 1988 that a German warship has stopped over at an Australian port, and Canberra and Berlin upgraded the status of the bilateral relationship to the level of an enhanced strategic partnership. While the European Union has expressed support for France in the dispute, privately some European nations believe Paris needs to move on and are keen to bolster ties with Canberra as the threat posed by Russia and China to the global order grows.
Several European nations were instrumental in ensuring Australia was invited by France to the EU’s recent Indo-Pacific summit in Paris. Sources said Mr Morrison and Defence Minister Peter Dutton were both understood to be supportive of the Rheinmetall bid. However, other ministers can see merit in Hanwha’s offering. As well as its lower price, partnering with Hanwha would deepen ties with one of the Indo-Pacific’s major economies and democracies.
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