The Turnbull government has picked a German firm to design its new $3.5 billion fleet of naval patrol ships but, in an unusual move, will split the building of the vessels between three companies across Adelaide and Fremantle.
The move feeds work to two shipyards in a bid to bolster the nation's naval industry but could, according to some industry sources, raise the risk of delays and cost overruns.
The 80-metre, steel-hulled "offshore patrol vessels" will replace the current Armidale Class boats and will do much of the navy's heavy work cruising waters near Australia for asylum-seeker ships, drug smuggling consignments and illegal fishing.
Defence Industry Minister Christopher Pyne said the split build of the ships would partially fill what is known as the "valley of death" - when shipbuilding work dries up, stripping the yard of workers and skills - in Adelaide between the construction of the previous Air Warfare Destroyers and the future fleet of naval frigates. It would then help build up Henderson yards in WA.
Denying that the complex arrangement would add cost, time and risk to the program, Mr Pyne said the government was "using all the resources that are available to us, which is an intelligent way to ??? build a sovereign Australian shipbuilding industry".
"Rather than simply picking a design and saying, 'We don't care where you build it, we want it off the shelf, at best value and highest capability', we are saying ??? we do care about growing our sovereign Australian shipbuilding industry," he said.
Western Australian firm Austal has prevailed in a hard-fought campaign to win what is expected to be a large slice of the building work but the overseas designer it chose to partner with, German firm Fassmer, has missed out.
Instead the design work and the role of prime contractor has been awarded to German rival Luerssen. The first two ships of the 12-strong fleet will be built in Adelaide by the government-owned ASC and WA-based firm Civmec and the remaining 10 in Fremantle by Austal and Civmec.
The new ships will be much bigger and tougher than the Armidale Class and will be able to launch air or marine drones to dramatically improve their surveillance capabilities.
Prime Minister Malcolm Turnbull said construction of the ships would begin in Adelaide in the second half of next year before shifting to Fremantle in 2020.
Austal chief executive David Singleton acknowledged the arrangement "sounds like a hotchpotch" but said it was actually "smart procurement".
He said having to work with the German designer that Austal had not originally chosen as a partner would not set the project back because they would have time to plan before the project moved west in 2020.
The program would create export opportunities because offshore patrol vessels of this kind were "one of the fastest growing military markets in the world at the moment", he said.
"Everyone's got problems with people smuggling, illegal fishing, drug smuggling."
He said the firm had had "tremendous support from from the Prime Minister on down".
