Nick Xenophon (SA, Independent) Share this | Hansard source

I endorse the remarks of Senator Carr in relation to this matter concerning Australian manufacturing and what occurred in respect of Rossi Boots was nothing short of a disgrace. Rossi is a very great Australian company, based in South Australia, and has been making boots for 100 years and for our troops since World War I, World War II and for other conflicts since that time. It missed out on a contract with the Australian Defence Force. Why? Because of this narrow procurement process, which has been the subject of a recent Senate inquiry report and which clearly needs to be fundamentally reformed. The process is too narrow.

It does not take into account the whole-of-life costs. It does not take into account the multiplier effect of having something made locally, made by Australians being paid award or above- award wages, of the highest quality. Instead, Rossi missed out. Interestingly—and I want to make this point clear—I think the defence minister was genuinely concerned when he heard about this. He was not aware of it until it was raised publicly. I think his answer in the chamber expressed that surprise in respect of that. I do not want to single him out; I single out a flawed system that has been in place for many years.

Interestingly, with respect to the documents we got from the defence minister, the offers for part B of the tender by the manufacturer, one offer was 10 to 20 per cent and others ranged from 20 per cent to 30 per cent more expensive than the winning bid. Let us put that figure in perspective.

Studies have been done overseas and work has been done here about spending locally in respect of defence procurement. The Royal United Services Institute in the United Kingdom undertook a study and found a benefit of some 37 per cent in terms of taxes collected by the United Kingdom Exchequer—the Treasury—because that money is actually spent there.

I expect that there would be a similar benefit here in Australia in terms of local taxes, state and federal, that would be collected by virtue of people working and paying their taxes, let alone the multiplier effect of someone being in the community working, earning a wage and spending that money locally. I do not get it. And when you consider the benefit of those jobs and the multiplier effect, then this is a gobsmackingly silly decision.

I commend the work of Victorian DLP senator, John Madigan, who has been passionate about this issue. He was with me on 14 July when we had a press conference with Neville Hayward, CEO of Rossi Boots. These issues will not go away. It is not just about South Australian companies; it is about every Australian company. It is emblematic of a malaise, I think, within the Defence Materiel Organisation in dealing with these issues. In my view, the DMO does not get that whole-of-life cost or the benefit of having something built here. A Senate committee has been looking at the decision by the Australian government to exclude Australian companies in respect of the building of two naval supply ships, worth in the order of $1.5 billion. A restricted tender has been put in place restricting it to Spain and South Korea. I find it extraordinary that Australian companies would be excluded, even from the tendering process.

The lesson to be learnt from the Rossi boots saga is that the procurement process we have in place needs to be fundamentally reformed. It needs to take into account the benefit of local manufacturing. It needs to take into account the whole-of-life cost that Senator Carr was referring to and also the information that I have obtained, that the DMO, as I understand it, has not been to the Indonesian factory where the boots are to be made. They have not followed up the claims made about the manufacturing process and conditions there. These are matters that ought to be undertaken.

I also wish to acknowledge that the CEO of Rossi Boots, Neville Hayward, is very grateful for the interest that Senator Kim Carr has shown in relation to this matter and his very hard work. He also acknowledges the work of a local member of parliament, Matt Williams, for the interest he has shown in this matter. Something has seriously gone wrong here, but it is emblematic of a bigger problem in Defence and a bigger problem with government procurement. There are not too many bootmakers left in this country and decisions like this will force more and more manufacturers to the wall.

Fortunately, the postscript to this story is that, whilst Rossi Boots would have been much better off had they won this contract, this tender, there has been a lot of strong community support. I have bought two extra pairs of Rossi shoes and boots, in addition to my steel-capped Rossi boots that I have had for a few years. A lot of people are giving support. Local businesses and consumers are out there across the country and that indicates that a bit of people power has helped Rossi Boots and other Australian companies. But the Australian government, with its deep budget in procurement, needs to do much better.

Question agreed to.