Joel Fitzgibbon (Hunter, Australian Labor Party, Minister for Defence) Share this | Hansard source

It was signed by the government just preceding this government, which was led by Mr Howard. They are the facts, and the member opposite knows it. The result was that more than $1 billion worth of taxpayers money was flushed down the drain and, of course, a further $1 billion has to be found—or maybe more than $1 billion—to replace that capability with an alternative capability.

Another troubled project was the upgrade of six, now reduced to four, Adelaide class guided missile frigates. They are old platforms and, again, the former government underestimated the complexities involved in conducting a major systems and weapons upgrade on this platform. The result? Over $150 million cost variation, 4½ years late and only after significant effort and the attention of this government—in particular that of the Parliamentary Secretary for Defence Procurement, Mr Combet—are we now starting to feel confident we can recover that program which we inherited.

Another example is Project Wedgetail, the acquisition of six airborne early warning and control aircraft. Again, the complexities of the project were massively underestimated. It was assumed that brand-new, leading-edge capability could be delivered within the time and budget promised. Unfortunately, that is not going to be the case. The result? Currently 38 months behind schedule, hundreds of millions of dollars lost by Boeing alone, and it is still uncertain what capability we are going to get from the aircraft and in what time frame.

The litany continues: armed reconnaissance helicopters delivered two years late, a network of high-frequency radio stations 4½ years late and still not delivered, antisubmarine torpedoes three years late, upgraded armoured personnel carriers 12 months late and so on. The list is long indeed.

The Australian taxpayer expects and deserves better. The men and women of the Australian Defence Force expect and deserve better and this government is determined to meet their collective expectations. The Australian Defence Force, the Department of Defence and the Defence Materiel Organisation have a wealth of highly skilled, dedicated and experienced people. In the large, it is not the people letting us down but the systems government provides to facilitate their very important work.

That is what the Mortimer review is about—addressing the architecture of the Defence Materiel Organisation and the capabilities assessment and approval processes. The Parliamentary Secretary for Defence Procurement, Mr Combet, played a key role in tasking this review, selecting Mr Mortimer and in determining the review’s terms of reference. The report  of Mr Mortimer’s defence procurement and sustainment review, boldly entitled Going to the next level, constitutes a far-reaching and in-depth examination of the often complex and bewildering processes, practices and acronyms that comprise Defence’s procurement system. A key focus of Mr Mortimer’s review was examining the implementation and effectiveness of the ongoing reforms to the Defence Materiel Organisation following the 2003 Kinnaird review of defence procurement. The Kinnaird review investigated systemic failures that had caused delays and cost increases to a number of earlier Defence acquisition projects and made 10 major and 12 minor recommendations for potential reform across the whole procurement cycle.

Mr Mortimer was also asked to examine financial, staffing and governance arrangements for the Defence Materiel Organisation, potential for further utilisation of private sector expertise and involvement in Defence projects, the advantages and disadvantages of greater utilisation of off-the-shelf products, and options to optimise the involvement of Australian defence industry in Defence acquisition and sustainment.

A major review of our defence policy is also currently underway as part of this government’s defence white paper. This will focus on key examinations of our future strategic environment and the capabilities needed by the Australian Defence Force to best address the challenges of the future. As Mr Mortimer recognises, if Australia is to maintain or, indeed, improve its ‘strategic weight’, we must seek to ensure our procurement processes are as efficient and as effective as possible. This is essential if the Australian Defence Force is to achieve the capability when and where it is required and if we are to ensure the maximum return from the Defence budget.

Mr Mortimer’s review has made a total of 46 recommendations covering five principal areas of concern:

• the strategy and needs analysis of capability planning;
• defining the requirements of capability;
• the capability acquisition process;
• sustaining and disposing of capability; and
• driving cultural change in the Defence Materiel Organisation.

An important component of the Mortimer review was the public consultation process. The review received 59 written submissions and held consultations with over 40 stakeholders. The views and input received from these contributors and stakeholders have helped to shape Mr Mortimer’s report and its recommendations—and I thank those people. There are several key recommendations made by Mr Mortimer. The review sensibly suggests Defence should increase the rigour with which projects are assessed for entry to the Defence Capability Plan. Central to this is achieving a more disciplined understanding of the cost, schedule and risk information for a project to allow government to make an informed decision on a project’s suitability for entering the Defence Capability Plan. Commercial acquisition strategies for projects should begin to be developed from the outset, and Defence should continue to monitor projects closely following their entry into the Defence Capability Plan and advise government of any changes to a project’s justification, scope, cost, schedule or risk that might warrant a review of the sustainability of the project.

This would assist in ensuring projects like the air warfare destroyer project, for example, are delivered on time and on budget with all the capability that was promised. Under the previous government, problems on the AWD project were already evident with a $3 billion cost gap between first and second pass. This increase was caused not by massive scope changes but by poor cost assessments. Capability procurement involves trade-offs between capability, risk and opportunity costs. Government cannot make informed decisions without accurate cost assessments.

Mr Mortimer also suggests that a more tailored application of the two-pass process introduced under the Kinnaird reforms should be considered. While an in-depth, multilayered approval process by the National Security Committee of Cabinet might be appropriate for particularly complex projects such as the air warfare destroyer project, more simple projects, such as those focusing purely on off-the-shelf technology, or ‘repeat’ purchases of previously acquired equipment could potentially be more efficiently examined and approved by government. This could include a single-pass approval, particularly where a more rigorous approach is taken for entry to the Defence Capability Plan. Another option could include establishing a subcommittee of the National Security Committee. This would have the effect of potentially speeding up the less complicated acquisition decisions, whilst allowing the NSC to better focus on the more complex projects. All of these options will need to be closely examined by the government ahead of our response.

Another key recommendation from the review is a greater focus on the provision to government of off-the-shelf capability solutions. This is aimed at strengthening the requirements introduced by the Kinnaird review, in particular by introducing a clear definition of what constitutes ‘off the shelf’, to avoid repetitions of the post-Kinnaird project failures such as the trucks offered under LAND 121 or the Tactical Unmanned Aerial Vehicle in JP 129, where off-the-shelf solutions turned out to be anything but off-the-shelf solutions.

The review also recommends that alternative contracting methods, in particular public-private partnerships, should be applied to defence procurement projects where appropriate.

Undoubtedly, one of the more contentious aspects of the review is the recommendation that the Defence Materiel Organisation become an executive agency, while also retaining its current prescribed agency status. This was a recommendation of the Kinnaird review that the previous government chose not to implement. It is a concept which appealed to me when I was the opposition spokesman of defence matters and one which should be further canvassed and considered. I said both in opposition and since the election, that I want the DMO to run more like a business and less like a bureaucracy. This imperative will apply whichever approach the government takes.

I have touched on a number of Mr Mortimer’s key findings and recommendations but the review makes a number of additional helpful observations which, along with the key recommendations, will be considered by the government ahead of the white paper process to ensure the correct procurement architecture is in place to drive our other defence reform projects.

I would like to take this opportunity to express my sincere gratitude to Mr Mortimer for the time and effort he has invested in developing this thorough and comprehensive review into what is undoubtedly one of the most complex and important areas facing Defence, underpinning as it does our national security. Of course, I would also like to thank my Parliamentary Secretary for Defence Procurement, the Hon. Greg Combet, for his ongoing effort, dedication and commitment to reforming Defence’s acquisition and sustainment processes. I would like to thank the review team from within Defence who supported Mr Mortimer throughout the project. That Defence team was headed by Major General Tony Fraser.

For the benefit of the House, I table the report for the information of members and senators and indeed the broader Australian community.

I have advised the opposition that I will take a few moments to update the House on the welfare of the nine Australian special forces soldiers who were injured in Afghanistan on 2 September. I am very pleased to advise that the soldier most critically injured—that was the soldier who you will recall was evacuated to Germany—has arrived back home in Australia. He is under the very best of care. I can also report that he is in good spirits and we are hopeful of a full recovery. Two other wounded Australian soldiers also returned home earlier. Again, I take the opportunity while reflecting on their courage to pay tribute to all those putting their life on the line in Afghanistan in the interest of not only Australia’s security but, indeed, global security and, of course, in the interest of the Afghan people. I also take this opportunity, as the Prime Minister has done directly to President Karzai and I have done to the defence minister through the Afghan ambassador to Australia, to again express regret over the incident that occurred in Afghanistan last week which involved the death of some Afghan police and a well-known and respected district chief, Rozi Khan. I again commit the government to fully participating in the various investigations being undertaken into that incident so that we can fully understand its cause, and to best ensure that if mistakes have been made that those mistakes are not repeated in the future.

I ask leave of the House to move a motion to enable the member for Paterson to speak for no longer than 20 minutes.

Leave granted.

I move:

That so much of the standing and sessional orders be suspended as would prevent Mr Baldwin speaking for a period not exceeding twenty minutes.

Question agreed to.

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