Royal Australian Navy submarine HMAS Collins. Adelaide-based firm ASC wants to keep the project here.
THE Federal Government has 18 months to decide whether to build its new $36 billion submarine fleet in Australia or source it from overseas.
Defence Minister Stephen Smith said yesterday he would take a proposal to Cabinet within weeks seeking funds for a serious examination of the options, ranging from 12 locally built subs to 12 "off-the-shelf" boats from an overseas company.
A final decision will be needed within the next 18 months if the 2025 target for a new boat is to be met.
The vessels could cost taxpayers up to $2 billion each, plus sustainment costs, and Mr Smith said the Government was determined to avoid the mistakes that had been made in the past with the Adelaide-based Collins-class submarine project.
"We are going to get it right from the start," Mr Smith told the navy's 2012 Seapower Conference in Sydney.
He said the biggest mistake with Collins was not having understood from the outset the level of resources required to sustain a submarine fleet.
"The project is a major national undertaking and is of a scale, complexity and duration never before experienced within Defence."
Stephen Ludlam, head of the partly taxpayer-owned builder of the Collins boats, Adelaide-based firm ASC, pleaded with the Government for a local solution for the submarine replacement.
Mr Ludlam warned that if the boats were not built in Adelaide, 30 years of industrial expertise could be lost.
He said that before the Collins, Australia had no submarine-building skills and had developed a first of class and highly effective vessel from scratch in just 16 years with 73 per cent Australian content.
"Building subs is hard, really hard," he said.
Each boat has more than 500,000 parts and more lines of software than the space shuttle.
"Australia should not give opportunities away to other countries," he said.
ASC is up against several overseas sub builders who will offer a much smaller and lower-range boat than the evolved Collins vessel, that will be the world's biggest conventional (air-independent) powered submarine.
Submarine Institute of Australia executive director and former navy submarine chief Steve Davies said the nation could not afford to lose the skills to build a unique class of submarines.
He said there were a lot of skilled people at ASC and it was crucial to maintain that base to build, and equally importantly, to sustain the future submarines.
"There is no off-the-shelf option that is suitable for us," Mr Davies said.
But a paper released yesterday by the Australian Strategic Policy Institute included a blunt warning: "Unless credible offsetting benefits can be identified . . , the case for continuing ... domestic production is very weak indeed."
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