Australia said on Friday it selected Britain’s BAE Systems to build its nine next-generation anti-submarine frigates in its SEA 5000 program, a program worth up to $26 billion to design, build, and support the ships.

BAE offered a variant of the Type 26 Global Combat Ship, the Global Combat Ship-Australia, to be the new frigates and Australia said they will be designated the the Hunter-class FFG. It beat fellow ship designers Fincantieri of Italy with its FREMM frigate and Navantia of Spain offering a redesigned F100 frigate.

The Type 26 is a new vessel being built for the U.K.’s Royal Navy, with British construction started in 2017. The Royal Australian Navy variant will include modifications that Australia has specified like a Lockheed Martin [LMT] Aegis combat system, CEA phased-array radar, and Saab tactical interface.

Australia's new Hunter-class anti-submarine frigate, to be built by BAE Systems. (Graphic: Royal Australian Navy)
Australia’s new Hunter-class anti-submarine frigate, to be built by BAE Systems. (Graphic: Royal Australian Navy)

Relatedly, on Wednesday the State Department approved a $185 million deal to integrate the CEAFAR 2 Phased Array Radar System with the Aegis combat system on the new frigates (Defense Daily, June 27).

The Australian government said these new frigates “will provide our nation with one of the most advanced anti-submarine warships in the world – a maritime combat capability that will underpin our security for decades to come.”

Australia intends to start building the vessels in 2020 near Adelaide, South Australia through state-owned enterprise ASC Shipbuilding. The ships are planned to start entering into service in the late 2020s. The new frigates will replace the current fleet of eight Anzac-class frigates.

The next step for the new ship will be BAE starting negotiations with Australia’s Department of Defence on the contract’s initial design, expected to be ready by the end of the year. Initial production of the Hunter is expected to start in 2020.

Under this decision, ASC Shipbuilding will temporarily become a subsidiary of BAE while the ships are being made. The government argued “this ensures BAE Systems is fully responsible and accountable for the delivery of the frigates and ensures the work will be carried out by Australian workers and create Australian jobs.”

Australia will retain a sovereign share in ASC while BAE manages the program and upon program completion the government will continue full ownership of the shipbuilder.

The government said this program will not just add new ships but provide the country with an opportunity to guarantee the Australian shipbuilding sovereignty because the intellectual property, a skilled workforce, and associated equipment will stay in-country.

“By the conclusion of the frigate build, ASC Shipbuilding will be a strategic national asset capable of independently designing, developing and leading the construction of complex, large naval warships,” the government said in a statement.

The government noted this agreement will not affect other vessels and does not preclude ASC Group from pursuing other shipbuilding opportunities.

The government said BAE prequalified more than 500 Australian businesses to work in the Hunter supply chain and it expects the Australian industry content for the ship to be in the 65 to 70 percent range. BAE said it expects this effort to create at least 5,000 jobs domestically.

Rendering of the huture Hunter-class frigate, based on BAE's Type 26 Global Combat Ship. (Image: Australian Ministry of Defence)
Rendering of the huture Hunter-class frigate, based on BAE’s Type 26 Global Combat Ship. (Image: Royal Australian Navy)

“BAE Systems’ selection as preferred tenderer for SEA 5000 reinforces our position as a leading designer and builder of complex maritime platforms. I am proud that our world class anti-submarine warfare design and our approach to transferring technology and skills to the nations in which we work is expected to contribute to the development of an enduring world-class naval shipbuilding industry in Australia,” Charles Woodburn, CEO of BAE Systems, said in a statement.

Byron Callan, an analyst at Capital Alpha, said this “is a positive for BAE because it’s the first international order for the Type 26 and it may help position that ship type for Canada’s Surface Combatant program that should be decided in late 2018.”

He also noted the $26 billion figure is over the ship’s lifetime and Capital Alpha presumes each unit costs in the $850 million to $1 billion range.

Fincantieri and Navantia were hoping a win would help bolster their competition for the U.S. Navy’s future frigate (FFG(X)) competition, which is only looking at proven and operational ship designs. The U.S. Navy plans to buy 20 new frigates.

The Navy has already chosen five designs and BAE’s Type 26 is not one of them. They include Fincantieri’s FREMM with the Marinette Marine shipyard in Wisconsin, Navantia and General Dynamics [GD] with a design based on the F100, Lockheed Martin [LMT] with a design based on its Freedom-variant Littoral Combat Ship (LCS), Austal USA with a design based on its Independence-variant LCS, and Huntington Ingalls Industries [HII], which has not announced its design.

The Australian decision in favor of the Type 26 may also impact Canada’s competition for 15 Canadian Surface Combatants (CSC), a vessel similar to these frigates.

Canada closed its bids for the CSC last November and previously said there were 12 eligible bidders. Canada’s procurement agency rejected a last-minute bid by Fincantieri and France’s Naval Group with the FREMM because it was outside the established competitive process. The two companies reportedly thought the Canadian process is biased in favor of a Lockheed Martin-BAE team offering the Type 26 (Defense Daily, Dec. 6, 2017).

Construction on the CSC is planned to start in the early 2020s and has a budget of $19 billion (Defense Daily, Nov. 29, 2017).