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Austal Limited (Austal) (ASX:ASB) is pleased to announce it has been awarded preferred tenderer status by the Commonwealth of Australia for the Pacific Patrol Boats Replacement (PPBR) Project.

The PPBR project involves the construction of up to 21 steel-hulled patrol vessels and through life sustainment over 30 years in a total Government expenditure of up to $900 million. Austal’s share of the PPBR program will include the construction of the vessels and short to medium term maintenance components of the project.

via www.austal.com

So, Australia has a vast, vast set of seas to its north. And patrolling those waters is a prime mission of the Royal Australian Navy. The mission is not just a strictly military one, but also includes enforcing its Exclusive Economic Zone, and interdictnig illegal immigration (unlike the US, Australia has a zero tolerance policy).

Now, there are scads of small island nations to the north as well. And Australia has an interest in seeing them enforce the territorial integrity of their own waters and EEZs.

And so, a couple decades ago, Australia came up with the Pacific Patrol Boat program, wherein they would build a series of patrol boats, and give them to friendly neighbors. Those island nations are responsible for crewing and operating the vessels, while Australia provides a measure of ongoing support and maintenance for the fleet.

The initial tranche of patrol boats are reaching the end of their service lives, and so, Australia has decided to build a second fleet of patrol boats.

The program has been seen as generally a success, though some issues have arisen, primarily poor availability and boats suffering from poor day to day maintenance, which is a host nation responsibility. Further, some nations, being very, very small, have had trouble finding competent crews.

Opponents of the program charge that it is primarily intended to keep Austal busy building something, anything, until the next Australian shipbuilding program comes online. And the proponents of the program admit that there is a bit of truth in that. And that spending almost a billion Australian dollars is probably cheaper than having to rebuild Austal's capability in a couple years when it does come time to build more ships for Australia.