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Austal, awarded new $779 million US Navy contract

Perth-based international shipbuilder Austal has been awarded a significant $779 million (US$516 million) contract modification from the US Navy for the construction of the lead ship in the T-AGOS (ocean surveillance) programme, designated T-AGOS 25.

Austal, the largest Australian-owned and controlled prime defense contractor, announced that this contract modification includes an option for ordering long lead time materials to continue and complete the design and construction of the new class’s lead ship.

Operating from its shipyard in Mobile, Alabama, Austal specializes in building aluminum and steel naval vessels. However, the company is currently facing a takeover bid from the South Korean conglomerate Hanwha, raising concerns about the potential loss of sovereign control over a critical defense industry asset. The Australian government has not yet indicated opposition to this takeover, despite its frequent assertions of commitment to maintaining sovereign defense capabilities.

The recent contract award highlights the value of Austal’s intellectual property and the potential risks of foreign acquisition, especially given the government’s professed support for sovereign defense enterprises.

Austal was awarded a US$113,906,029 fixed-price contract for the detailed design of the Auxiliary General Ocean Surveillance Ship T-AGOS 25 Class for the US Navy. This contract included options for the detailed design and construction of up to seven T-AGOS 25 class vessels.

Austal stated, “If all options are exercised, the cumulative value of the contract is US$3,195,396,097.”

T-AGOS ships, operated by the United States Military Sealift Command (MSC), play a crucial role in supporting the anti-submarine warfare (ASW) missions of the commanders of the Atlantic and Pacific Fleets by providing platforms capable of passive and active anti-submarine acoustic surveillance.

The prospect of Austal being taken over for the relatively low valuation of $797 million on the ASX, as per Hanwha’s bid, is concerning. It has taken decades for Austal to develop its capabilities to the point where it can secure contracts worth $4.8 billion for a single class of ship, in addition to numerous other classes of vessels it builds for the US Navy.

Allowing key defense companies to fall into foreign hands undermines the goal of having a sovereign defense sector, reducing it to a mere component supply network rather than a fully autonomous defense industry

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