The Australian National Audit Office (ANAO) has found significant deficiencies in Navy management of sustainment of their two largest vessels which have operated with ongoing deficiencies and experienced critical failures during operations.
In a new report, the ANAO found sustainment of the two Landing Helicopter Dock (LHD) vessels, HMAS Canberra and HMAS Adelaide, to be the fourth highest expenditure across all maritime domain sustainment products.
ANAO forecast ongoing high costs - $1.9 billion estimated cost of LHD sustainment for the decade to 2033–34. There were 223 open urgent defects reported for the LHDs in June 2025.
These aren’t old vessels - HMAS Canberra was commissioned in November 2014 and HMAS Adelaide in December 2015. The hulls of both were constructed at the Navantia yard in Ferrol, Spain, with the superstructure and combat system installed by BAE Systems in Australia.
At 27,000 tonnes, the LHDs are the Navy’s largest vessels, each able to transport landing craft, tanks, vehicles, helicopters and troops.
The Navy plans for another 30 years of use, with life-of-type out to around 2055.
The ANAO report outlined an array of issues with support of these vessels, a key component of the Australian Defence Force (ADF) force structure, delivering capabilities for amphibious warfare, humanitarian assistance, disaster relief and sealift.
“Defence’s sustainment arrangements for Navy’s LHDs have been partly effective,” it found.
“Risks arising from an accumulation of defects and maintenance backlogs over several years have materialised. The substandard condition of the vessels, and personnel workforce shortages, have resulted in instances of critical failure and impacts to the Navy’s delivery of operational outcomes.”
The ANAO also found Defence did not implement fit-for-purpose planning and value for money procurement arrangements to support LHD sustainment.
Defence’s remediation activities did not achieve the required outcomes, resulting in additional work being transferred to the sustainment phase or managed as part of capability improvement projects.
ANAO said performance was improving with Defence establishing partly appropriate performance monitoring and reporting arrangements, with sustainment outcomes largely meeting Navy’s requirements for the operational use of the platforms.
However, long-term availability and reliability of the LHDs was at risk primarily due to the accumulation of urgent defects, maintenance backlogs and shortfalls in personnel to undertake organic level maintenance.
“As a result, the LHDs have experienced critical failures, impacting on Navy operations.”
ANAO said the LHDs had fallen short of meeting availability targets since 2020–21. Among the fails were total power failures in 2022 and 2023, making the LHDs temporarily unavailable while providing humanitarian assistance and disaster relief support in Tonga and Vanuatu.
Both entered service with a substantial number of defects and shortcomings – Canberra with 6,640 and Adelaide with 2240.
Since entry to service in 2014, Defence has contracted core LHD sustainment to industry. That’s now the LHD Enterprise, a collaboration including NSM, KBR, Navantia and Thales.
Since 2022, Defence’s Naval Shipbuilding and Sustainment Group has been responsible for management of sustainment. In July 2024, Defence transitioned to the Maritime Sustainment Model, which involved the procurement and contracting of new commercial arrangements.
ANAO made nine recommendations to improve sustainment performance.
Among them: To support the future requirements for the LHDs, the Department of Defence develops and maintains class-specific lifecycle sustainment plans for the Navy fleet, including funding requirements for the planned life of type, to ensure that the required capability is maintained across the classes’ whole of life, at a rate of agreed availability.
Defence agreed to all nine.
“Defence supports the recommendations. Defence is committed to ensuring the through-life sustainment of the Canberra Class amphibious assault ships deliver the best possible capability outcomes for the Australian Government and the Australian Public,” it said.
In its inquiry, ANAO heard allegations including ‘favouritism towards certain sub-contractors’, ‘sub-standard work practices’, ‘blacklisting of suppliers’ and payment of bribes or kick-backs.
ANAO said Defence conducted its own investigation, with allegations referred to NSM. In August 2024, Defence advised the ANAO that NSM had not provided further information or updates on the matter, and no further action had been taken.
In a statement, a BAE Systems Australia spokesperson said: “BAE Systems Australia has delivered on its contractual obligations under both Acquisition and Transition In-Service Support Contracts.
“We have addressed all concerns raised by the Commonwealth, with all matters resolved in 2021.”
A KBR spokesperson said: “KBR acknowledges the report published by ANAO and remains committed to working with Defence in a collaborative and open manner to support availability of the LHD.”