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

by leave—In May of this year the government fulfilled yet another key election commitment by commissioning an independent review of the Defence Materiel Organisation and the effectiveness of Australia’s defence procurement systems. We made this commitment when in opposition in response to broad industry and community concern over the poor performance of the previous government in delivering the capability that the men and women of the Australian Defence Force need to do their job effectively, efficiently and as safely as is possible while also delivering value for the investment of Australian taxpayers.

In recent years, public confidence in the ability of the Australian government to provide the Australian Defence Force with critical defence capability has been severely undermined. Projects like the Seasprite helicopter, Wedgetail and the Adelaide class frigates have combined to trigger significant widespread community concern about the waste and mismanagement that too often seem synonymous with expensive defence projects. We honoured our pre-election commitment by commissioning well-known businessman David Mortimer to undertake a review of the DMO and defence procurement more generally. Mr Mortimer was a good choice. He is well suited to this task, having been the chairman of the Defence Procurement Advisory Board since 2004. He is also the current chairman of Leighton Holdings and Australia Post. Mr Mortimer delivered his report to the Parliamentary Secretary for Defence Procurement, the Hon. Greg Combet MP and me last Friday. In all, he has made 46 recommendations, the contents of which the government will consider in the lead-up to the release of the defence white paper.

In opposition, I said that I wanted the DMO to run more like a business and less like a bureaucracy. The government’s response to Mr Mortimer’s report will be largely guided by the likelihood that the suggested changes will give effect to that aspiration. This is so critical, given the budget challenge we face. This year and in the coming years the government will spend more money on defence than at any other time in the history of the Federation. Indeed, in three years time we will be spending $6 billion more annually on defence than the Howard government spent in its last year in office. We will need this funding growth to deliver all the capability and people we need to secure the nation. But to achieve these goals we will also need to better prioritise defence spending to get better value for taxpayers’ dollars and to ensure the defence budget is sustainable into the future.

Making the challenge greater is the huge defence funding black hole we have inherited from the previous government—a black hole with a value of up to $15 billion. This is why I have directed Defence to undertake a savings drive which will deliver $10 billion of savings over the course of the next decade. That is $10 billion which will be reinvested into defence to bolster higher priorities. Not one cent of those savings will leak out of Defence; all of those savings will be reinvested in the broader defence project.

The deeper reforms delivered by the white paper and its associated companion reviews will further drive savings and efficiencies. The Mortimer review is an important precursor to these broad reform projects. It will be important to have procurement reforms in place to ensure we can deliver on the list of capabilities that the white paper will define.

With a cash budget of more than $9 billion each year, the Defence Materiel Organisation manages over 230 major capital equipment projects and over 180 minor projects. It also maintains thousands of vehicles and items of equipment in an inventory valued at more than $36 billion. Over the next decade, the DMO will manage $100 billion worth of acquisition in sustainment projects. Yet, despite this massive commitment of Australian taxpayers’ dollars, I was deeply concerned while in opposition that Defence faced serious challenges in its procurement of new equipment and its upgrading and sustainment of existing equipment. A significant number of defence projects faced serious delays in terms of their delivery. Each dollar wasted is a dollar of taxpayers’ money not available to be invested elsewhere. Just as concerning, each project delayed means that the men and women of the ADF go without much-needed equipment whilst trying to do the task the government expects of them. To this end, Labor committed that if elected we would conduct a formal evaluation of the effectiveness of reforms to the Defence Materiel Organisation that were implemented for the 2003 review of defence procurement by Mr Malcolm Kinnaird.

Despite the concerns I held while in opposition, I have to say that upon coming to government I was shocked at just how badly a number of projects had performed under the custodianship of the Howard government. While it is fair to say that a large number of projects in defence are executed as planned, the seriousness of the issues facing key projects that are central to the war-fighting capability of the ADF over the coming years was staggering. Many of these are now common knowledge to the broader Australian public and have combined seriously to damage the public’s confidence in the Australian government’s ability to provide the ADF with critical defence capability.

The examples of Defence project nightmares that we inherited from the previous government are all too well known to the members of this House and to Australian taxpayers. Probably the most infamous of all was the Sea Sprite helicopter project. When we were elected, the project was seven years late and $100 million over budget, and there seemed to be no prospect whatsoever that the capability would ever be delivered. Consequently, the new government was left with no choice but to cancel the project. The former government was trying to develop a 21st century helicopter out of a 1960s air frame—

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