Never ever ever forget who signed this deal.
We have been sucked in big time.
What a bloody disaster.
French negotiators misled Australia on submarines contractRobert GottliebsenFollow @BGottliebsen
Australia may not have new submarines to replace the existing Collins class vessels until 2030. Picture: Supplied
French sub contract negotiators had their Australian counterparts for breakfast. Step by step, this is how they did it.
The French have developed their negotiating skills for centuries. They used every skill they learned to get what they wanted in the Australian submarine contract. Now retired defence minister Christopher Pyne can see yet another French negotiating victory over Australia. In frustration last week he cried out to his successors to be tough with the French and “hold their feet to the fire”. My advice to Christopher is to forget it: the French are too clever.
Today’s commentary is not about the virtues or hazards of the submarine technology, the deal with the US or the future directions of submarine warfare. It’s about what Australians in both the private and government sector can learn from the brilliance the French showed in the submarine deal negotiation.
French lesson 1: Find out what your customer wants and offer it to them
Jean-Yves Le Drian is now France’s foreign minister but in 2014 he was minister for defence. He came to Brisbane in November 2014 with the then French President, Francois Hollande, for the G20 meeting and a head of state visit. Le Drian believed that the best submarine for Australia’s needs was nuclear and he planned to offer France’s Barracuda nuclear submarine and to offer a link with the French nuclear industry, including fuel rod production, a nuclear energy reactor, and a desalinisation plant in Australia.
Le Drian was probably right and a nuclear submarine was the correct solution for Australia, but we wanted a diesel electric submarine. We also wanted substantial industry around the submarine development and close involvement in whole process. Le Drian vowed that the French tender would meet what the Australians thought they wanted even though that was not what the French submarine people wanted to deliver.
Le Drian realised that the legendary head of the French Naval industrial operation Hervé Guillou was the wrong person to push the deal through the Australian defence decision-making system and in any event he did not want to build the early submarines in Australia and set up an industrial network. In a brilliant move Le Drian appointed Marie-Pierre de Bailliencourt as effectively Guillou’s second in command. She brought a team together, including highly skilled Australians, for the bid. Hervé Guillou was sidelined while the negotiations took place.
French lesson 3: Take advantage of lucky breaks
The brilliant Mme de Bailliencourt was well aware that the tender process came out of a “nodding deal” between Australian Prime Minister Tony Abbott and Japanese Prime Minister Shinzo Abe with the backing of Americans. But in September 2015 Abbott was overthrown by Malcolm Turnbull.
There was a mutual dislike between the two Australian Prime Ministers so the Japanese no longer had the inside running. And then the French found out that the middle managers drafting the Japanese tender did not want to win so were likely to submit a bad tender. de Bailliencourt took full advantage of this luck and concentrated on beating the Germans who thought they were the logical winners.
Pictured in 2016 are (left to right) then Minister for Defence Industry Christopher Pyne, former French Defence Minister Jean-Yves Le Drian, former Australian Prime Minister Malcolm Turnbull, Naval Group chairman and CEO Herve Guillou, and then DCNS Australia CEO Sean Costello. Picture: Kelly Barnes French lesson 4: Go to the top
There was an elaborate tender decision-making process, but de Bailliencourt made sure our PM was well aware of the excitement and potential of her French bid. She made sure the Australian PM did not get wind of the agenda of Francois Hollande and Hervé Guillou.
French lesson 5: Price is not everything
The German tender was for a project a valued between $US20bn and $25bn and included a detailed plan to involve Australian industry. While de Bailliencourt’s bid was about twice the German’s bid (later to be amended to at least three times the German bid), it was so much more exciting. Australia would be a regional submarine developer in partnership with the French and our industry would be deeply involved. The fact that Hervé Guillou’s people might not have the capacity to fulfil the Australian industrial development part of the dream was a detail for the future.
French lesson 6: Get the truth out quickly
When the winning French tender was announced the then defence minister Marise Payne was part of the announcement, but Malcolm Turnbull put his stamp on what he genuinely believed would be a great deal for Australia.
But as Turnbull was an announcing that all the submarines would be built in Australia (the de Bailliencourt proposal) Francois Hollande’s office declared in the newspaper Le Monde that €8bn, would be spent in France and some 3000 to 4000 people would be mobilised to build the first two in France, in keeping with Guillou’s plan. I alerted the nation to the difference, but it was swamped by press statements.
French lesson 7: Quickly remove your negotiator from the implementation
Guillou wasted no time in dumping de Bailliencourt as his deputy.
Fast forward and in 2018-19 and new defence minister Christopher Pyne had the task of trying to put together a Strategic Partnering Agreement that got somewhere near matching the proposals the Australians had agreed to. He ignored the warnings the of his Naval Board .
Then last week came the shocker statement from France’s Naval Group Australia chief executive John Davis conceding that his company was still working to bridge cultural problems that had set back its relationship with Defence, predicting “difficult and hard conversations” as the project ramped up.
To which my response would be: you conned us, that’s why it’s hard.
Davis said the 12 attack-class boats would be the world’s most expensive conventionally powered submarines, but they would also be the world’s most capable diesel-electric subs and would deliver on Defence’s “very specific and unique requirements”. Remember, those “requirements” were what the French offered.
Mr Davis was unable to say whether the boats’ Australian industry content would reach French promise of 50 per cent. He said the company, which is set to begin construction in 2022, was encountering “specific challenges” regarding Australian industry that were “new to Naval Group”.
I’d say it’s more a case that the French don’t have and never did have the talent to perform what de Bailliencourt promised. And they want to develop that talent in France not Australia. Pyne should have recognised this and listened to his Naval Board.
Robert Gottliebsen
Business Columnist
Robert Gottliebsen has spent more than 50 years writing and commentating about business and investment in Australia. He has won the Walkley award and Australian Journalist of the Year award. He has a place in t... Read more
Robert GottliebsenFollow @BGottliebsen
