Mark Bishop (WA, Australian Labor Party) Share this | Hansard source

Senator Johnston says, ‘That’s good.’ I am not criticising that; I am just drawing attention to some other shortcomings that have existed as part of the total project. The cost breakdown of that $118.7 million was $45.5 million for the Delos and an extra $76 million for modifications.

But we note that that efficiency and economy has been compromised by the way the government handled leasing arrangements for this vessel. The lease was certainly a good idea in theory. It was to be leased to a private company for $8.22 million for the year 2004-05. That is fine. But Defence failed to collect the rent from the lease until one full year after it had expired. When we are talking about an income for a year of about $8 million, you do not have to be Einstein to work out the interest forgone, and the opportunity costs lost in not ensuring systems were adequate to receive the lease payments on a regular basis. Indeed, in that light, Defence was criticised by the auditor for administrative weaknesses, which included insufficient diligence in banking public funds, no authority for the withdrawal of those public funds and lack of adherence to GST legislation, and that can be found at paragraph 18 of the report.

The ANAO also noted that, while this procurement project has been largely well managed and has achieved a good result, it was not required at any time to pass the Kinnaird two-pass approval system—the reason this project fell behind the 2005-06 framework for its implementation. That does raise an interesting issue, because it is increasingly becoming the norm that a range of strategic decisions to purchase major advanced platforms and weapons systems involving multibillions of dollars in payments over decades are being unilaterally determined by either the Prime Minister or the minister without cabinet knowledge or approval.

After the decision has been made to buy a particular platform, a particular set of ships or a particular weapons system, the cost-benefit analysis and the strategic rationale for that decision are flicked to the relevant department or departments for analysis and later report. It strikes me as being an odd way to do business when Defence has a white paper which is amended from time to time. There is a Defence capability plan that sets out our strategic needs until the end of the second decade of this century and there is a system established for regular cabinet briefing, review, understanding and decision making on a range of major strategic purposes.

Yet, increasingly of late, we wake up on a Friday or a Saturday morning and read in the papers that we are going to be spending $4 billion on Super Hornets—which has not been approved by Defence and has not gone to cabinet or the appropriate subcommittee, yet we are going to whack off this $4 billion without any strategic rationale apart from the fact that we think we might have some sort of air capability gap some time between 2010 and 2015. That is apparently sufficient to spend $4 billion on Super Hornets. They might be fine planes in themselves and they might be entirely justified and it might be an entirely proper decision in terms of a strategic rationale, but we do not know that because there has not been any planning, investigation, report, analysis or review by the national security subcommittee. All we have is a decision because of a fear of a gap—a funny way to do business, but increasingly it appears to be the norm, as I say, in major procurement projects.

But I depart from my text because of my interest in the material. I should return to this Audit Office report, relating to the purchase, chartering and modification of a new fleet oiler because it is the reason for my contribution to this discussion today. Having made other comments which were critical not of Defence but of the decision makers in this debate—that is, government and the appropriate ministerial level people in cabinet—it is fair to say that this is the second report I have discussed this week.

Again, it suggests that a lot of the problems that have been occurring on the procurement side within Defence and DMO are being attended to and some solutions that are clearly right are being found. As a general proposition, the fact that this purchase of the fleet oiler and its structural modification came in ahead of time, below budget and consistent with the contract specifications is a welcome development and it appears to suggest that things are improving within the relevant procurement agency. One does note that the ANAO thought it worth while to identify a range of deficiencies. They are quite right to point out problems on the safety side. The last thing we want in a replacement vessel is to have the same problem in the new vessel simply because some people did not think it sufficiently important that clauses in the contract requiring adherence to particular safety regimes or particular safety practices were adhered to. With those comments, I surrender the floor.