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

My question is to the Minister for Finance and Administration, Senator Minchin. I refer the minister to the government’s decision to implement Kinnaird’s two-pass approval system by exposing Defence proposals to scrutiny from other departments, such as the minister’s department, before they are considered by cabinet. Wasn’t this system intended to stop the poor decision making that had occurred? For example, the failed Seasprites have suffered a cost blow-out, from $400 million to $1.1 billion, and still not one of the 11 helicopters is operational. Would the minister confirm that the decisions taken to spend $6 billion on 24 Super Hornets, $2.2 billion on C17 heavy-lift transport aircraft and almost $600 million on Abrams tanks—a total of nearly $9 billion—were all approved outside Kinnaird’s two-pass approval system? Minister, haven’t you ignored your own rules which were designed to protect taxpayers from further disastrous Defence procurement decisions?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

In relation to the Seasprites, the early work on this project was of course established under the previous Labor government. The requirement for the aircraft was established when the tender for this project was released in 1995 by the previous Labor government, so let us not have any hearsay on that matter.

The Kinnaird review, established by former defence minister Senator Robert Hill, was an outstanding piece of work. The Kinnaird review has introduced for the first time a very strict and proper approach to the DMO’s work. The Defence Materiel Organisation has been restructured to ensure that it really does approach defence contracts in a professional way and that it has the people, the facilities, the capacity and the procedures to ensure rigorous assessment of defence projects when they come before the government. I am pleased to advise that currently 146 acquisition projects, or 72 per cent, are progressing on schedule. Fifty-seven projects are behind schedule. I want to applaud what DMO has done. DMO, which is under enormous pressure, has adapted to the Kinnaird process that we put in place. The NSC now has the benefit of input from my own department when it comes to consider defence projects of this kind.

Because of the government’s very good economic management, our generation of surpluses and our paying off of Labor’s debt we are able to make significant defence acquisitions. We are in a position where we can make a decision to acquire Abrams tanks and additional aircraft for the Air Force to make sure there is no capability gap. So we are not going to be lectured to by the Labor Party on this matter. They presided over a disaster in relation to defence matters. They know full well that the Collins class submarine project, while having now produced world-class submarines, was a disaster in terms of its management. The management of the project under the Labor Party was appalling, so we are not going to be lectured by Labor. We are proud of the way in which we have reformed the acquisition processes adopted by this government, the projects that we have been able to agree on and the funding that we are able to provide for defence while ensuring that this country remains in sound financial health.

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

Mr President, I ask a supplementary question. Firstly, I want to correct the minister. For the record, the Seasprite project was approved by the current government in 1997. But allow me to cut to the chase. Minister, did the government go through the two-stage process or not in respect of those major procurements that I outlined in my question?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

The government’s policy is to put defence projects through the Kinnaird review. All of those projects were put through a rigorous system of assessment. The government does not make decisions lightly. We are probably the most economically responsible government this country has ever had. We put all these sorts of defence projects through rigorous treatment. In relation to the Seasprites, which are topical today, I confirm that the requirement for the aircraft was established in 1995, but of course it is true that the contract with the chosen supplier, Kaman, was signed in 1997. But I should say for the record that, because of the notoriety that attaches to that contract, the government has not made any decision to cancel or terminate the contract. There is a review of the project. There is no doubt that it is suffering delays, but it is a fixed-price contract. The contractor is not being paid any more than the agreed contract price. We regret the delay in the delivery of those helicopters. We welcome Senator Bishop’s interest in this project. One of the useful things oppositions can do is ensure that the DMO and Defence are on top of their projects.

Mr President, I ask that further questions be placed on the Notice Paper.