Mark Bishop (WA, Australian Labor Party, Shadow Minister for Defence Industry, Procurement and Personnel) Share this | Link to this | Hansard source

I have spoken a number of times about the record of the current government in the area of defence procurement activities. Through the work of the ANAO, we have a detailed record of a large number of exercises which have repeatedly gone off the rails. Moreover, by looking at each of these exercises individually, we see that a clear pattern of failure emerges. The French have a saying which, translated, says that the more things change, the more they remain the same. The matching of defence capability with budget is a perennial debate but one that we must have if we are to improve the current circumstances.

The first issue is the gap between government policy and the delivery of the Defence Capability Plan, or the DCP, as it is known. The second issue is the budgetary gap between funds available and the DCP. These are separate issues which emphasise a critical failure to spend and a failure to deliver. This is the hallmark of Defence procurement, and the consequence is failed capability every time delivery is delayed. The second circumstance is really one of government confidence that Defence can actually spend on time what it is granted. By its actions, it has little confidence, despite the ongoing rhetoric. The record of procurement is as bad as ever, if not worse.

The road to hell is paved with good intentions. This comes at a time when the environment for fixing these gaps has never been better. The government in Australia is awash with money and, perhaps for the first time since the end of the Cold War, we have a real new global defence policy debate. The vacuum of the last 20 years has now been filled by terrorism. Terrorism has galvanised governments around the world into serious reconsideration of defence policy and national preparedness. It is more than defence in traditional terms; it is the totality of national security. Add to this the issue of regional security created by the threatened failure of small democracies amongst our neighbours. There can be no excuse for government procrastination on defence investment decisions.

Since September 11, there has probably been more decisive decision making on national security than since the end of WWII. Decisions have been called for and made. Whether you agree with those decisions is another matter. Those decisions involve a number of interlocking, large new platforms. Army, Navy and Air Force each have major investment decisions for new ships, aircraft, land transport and supporting systems.

The question, however, that remains is not whether we can afford it but whether it can be delivered, whether it can be done. The government’s actions clearly identify their attitude. Decisions are taken swiftly where purchases can be made of proven technology and equipment from proven and established suppliers—for example, the purchase of the AWACs, the air-refuelling aircraft, the new heavy-lift air cargo planes and even the new second-hand Abrams tanks. We can be fairly certain that all of these purchases will proceed relatively smoothly. No doubt that is why the money was found so readily in each case. Indeed, it is a good argument for those who assert an off-the-shelf process each and every time. In each of these off-the-shelf buys, the strategy and policy pursued by the government were clear: supply, delivery and cost were all predictable and assured. So fiscal concerns are not always the problem. Both the elements of capability planning and fiscal reality can be easily aligned.

Given that the policy climate has been decisive, given that funds are freely available and given that there are few harmful economic consequences of spending more on defence, what then is the problem that we seem to face? Why does this issue of defence spending get so much airplay? What really prompted the secretary of the Treasury to warn Defence that the salad days cannot go on forever? The budget is in hefty surplus and will remain so for a while yet. Defence spending is flexible. It does not entail generational budgetary commitments. It supports a necessary but struggling manufacturing industry. It is leading-edge technology, which is where we need to be. There may even be, in due course, some export potential.

The evidence is clear: the government will be decisive when it is confident that the products of those decisions will be delivered on cost and on time. Money then is found without question. Global budgets, real-term increases and share of GDP are quite academic matters. I would suggest the government might commit more if it had the same guarantees on delivery each and every time, but it cannot. I would suggest that is also the public perception. I have never heard any serious grumbling about the money spent on defence when it is spent well. The costs might be awesome, but public interest always prevails: their safety and security drive the outcome. What the public object to is waste and incompetence.

So this is not really a debate about fiscal policy and competing priorities; it is about total lack of confidence in Defence to get procurement and budget management correct. I would suggest that many in Canberra have become impatient with the waste from failed procurement within Defence. Most other departments properly acquit their budgets. Few are guilty of financial mismanagement. Few get the sort of audit qualification that Defence regularly does. Yet year after year, week after week, Defence is up there in the headlines because of some scandal about waste, time over-runs, failed delivery or massive cost increases.

Even budget management itself becomes a major controversy. This is the bread-and-butter stuff which belies significant mismanagement, over the last 10 years in particular, closely followed by a comprehensive failure to account for what has been spent, what exists in stock and what future commitments there are against future budgets. On both those counts the government have failed to act, although we are now being sent a new message. We are being told they are on the job. We have all read Kinnaird. We continue to hear protestations that we have a new DMO; we have a new broom in there, there are new tough processes et cetera. The proof of the pudding, though, as always, will be in the eating.

It is certainly true that most of the existing sagas of waste and mismanagement have their origins in the recent past. I do not really need to remind listeners of them, but I will—firstly, FFGs reduced from six to four and still not one has been accepted into service, two years late; secondly, the Seasprite helicopters; thirdly, armoured personnel carriers; and, finally, others on which the ANAO will dutifully update us, with episodes sounding like Blue Hills.

I also predict that some new projects are going to have similar if not the same outcomes. The new joint headquarters at Bungendore is a project that will need greater scrutiny. Downsizing is helping to keep it within budget. But there is a familiar ring to the joint headquarters, like ANAO findings on other projects: changes to the initial specs after the initial tender was called; the government’s failure to meet its own time frames; and the jury still out on the wisdom of Defence engaging in a public-private partnership for the project. Planned efficiencies for the operation of Defence might not be realised. Defence will continue to maintain headquarters for each of the services in Sydney and the Blue Mountains as well as the new structure. The project has not even started and it already has the same smell as many others.

That is why there is no confidence in Defence. That is why any government would be silly to make grandiose commitments to future spending; such statements in the past have all come unstuck. It is not the amount of money committed in a press release that is important; it is about what is being delivered and on time. That is the fiscal reality. ‘Why is it like this,’ we constantly ask. Every Senate estimates we hear a constant refrain: Defence is different to everyone else; Defence is very big; Defence has important operational priorities which interfere with normal management; defence forces around the world are all the same; you are exaggerating, Senator; et cetera. I am afraid none of this washes.

From my perspective, one of the great strengths of a good democracy is that the government is accountable to its people for everything it chooses to do. The government is accountable for the taxes it collects and how it spends those taxes. The parliament is the means by which that accountability is achieved. Yet I find with Defence a constant unwillingness to be either accountable or responsible. The ANAO frequently tells us the same thing. Accounting for contracts let in the Commonwealth Gazette is always incomplete, likewise reports on consultancies in the annual report and likewise contracts over $100,000, reportable to the Senate. Frequently, perfectly reasonable and relevant questions on the Notice Paper are fudged with weasel words or lame excuses about an inability or unwillingness to prepare the answers.

All of that denies accountability to the parliament. It is almost as if it were a game. At the heart of it, though, is attitude—bad attitude; poor attitude. No doubt, at times that is politically inspired as probing gets a bit close to the bone. But, overall, it is a very infectious and destructive attitude. That is because the basic ethos is one of being beyond accountability, beyond responsibility. Evidence the whole sad and sorry saga of military justice—denial, cover-up and persecution. Evidence the malpractice and failure of due process in procurement, with investigations into allegations of individual corruption. They are all symptoms of an ongoing corrupted attitude. I give credit to CDF and to Dr Gumley for their commitment to rooting this out but, as they say, it is a big organisation. No doubt it will take some time. But it is those same attitudes which go to capability planning and fiscal responsibility.

I was recently admonished at estimates because I dared to suggest that the FFG project was way over original cost. I was told the increase in cost from the original estimate of around $900 million to something in the order of $1.4 billion was solely due to inflation and exchange rates. It was a case of: ‘Sorry, Senator, you’re wrong. We’re on budget.’ There was nothing said about the project being two years late already and the project being cut by one-third. I mention that simply because it is indicative of the attitude that money will always flow because it always has, and it needs to. Hence my concern that speculation is already rife that the planned air warfare destroyers will cost double the current estimate. Would that decision have been made if the cost were double? Indeed, would the FFGs ever have been upgraded if the full current cost of around $2 billion had been understood?

I regret labouring this point but, as a parliamentary representative in this democracy of ours, I am duty bound to so do. It is a real task to ensure accountability, and Defence constantly fails. Were it not for the independence and persistence of the ANAO, the parliament might never find out. That prompts me to raise the British experience of regular annual reporting against all defence capital works. Just as the Defence practice on reporting contracts is defective, so is its reporting on capital works projects. I defy anyone to produce an accurate account of what is spent on the DCP in continuity—year in, year out. At no stage is it possible to say what any particular platform is costing, either operationally or for all changes and upgrades. Projects may be reported on, depending on whether they exceed the threshold, yet in aggregate they can exceed it, and regularly do so. For example, many capital works in Army fall below the reporting threshold, but in aggregate are very large and impact directly on capability. No assessment of that kind is ever made. The government certainly would not know it, and I doubt Defence does either.

Until these issues are properly addressed, little will change. That is why I suggest we will inevitably have this very same debate five years hence. I hear the protestations, and I acknowledge a series of commitments. But I am afraid that much more needs to be spent on basic administrative systems before anything will get better. These systems need to be fixed, and it may take another five years. Until attitudes change, the more things will stay the same. This requires leadership and discipline. We are coming to the end point, where there cannot continue to be excuses for continuing failure in this area of administration.