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

On behalf of the Joint Committee of Public Accounts and Audit, I present two reports: the 411th report, Progress on equipment acquisition and financial reporting in Defence, and the 412th report, Audit reports reviewed during the 41st Parliament. I seek leave to move a motion in relation to the reports.

Leave granted.

I move:

That the Senate take note of the 411th report.

Defence is a large and complex portfolio. Over the last 15 years it has been the subject of a great deal of public and ongoing detailed parliamentary scrutiny. There has of course been good reason for this ongoing scrutiny. At the same time, defence was the beneficiary under the previous government of ongoing generous funding—real increases of some three per cent per annum—as it will be under this government. In that context, it is common knowledge that defence has suffered from some very public deficiencies in its financial reporting and in its capacity to acquire and use major equipment both on time and within budget. Defence has been under pressure to reform and to make changes. Indeed, in the lead-up to last year’s election there were significant policy commitments put out by the Australian Labor Party, in terms of its platform, about reform of defence. The current Minister for Defence has made a series of speeches advocating reform and indicating that significant cost savings will be found from particular areas of defence.

In 2003 two significant defence related reports were published. The first, the Report on the inquiry into materiel acquisition and management in Defence by the Senate Standing Committee on Foreign Affairs, Defence and Trade, provided a then relevant snapshot of progress since the earlier restructure of the Defence Materiel Organisation. The second, the Defence procurement review, or what has become known as the Kinnaird review, recommended a number of important reforms to processes around developing and maintaining capability—perhaps the most important arm of Defence. The year 2003 also saw the initiation of a comprehensive financial remediation program to address Defence’s financial management challenges. Significant aspects of that Defence financial remediation program are still underway.

In March 2006 the Joint Committee of Public Accounts and Audit decided it was time to take stock of the progress that had been made by Defence since those reviews. To that end, it resolved to conduct an inquiry into financial reporting and equipment acquisition at the Department of Defence and within the Defence Materiel Organisation. The committee received some 20 detailed and lengthy written submissions. Submitters included the Department of Defence, defence industry representatives and companies, and private individuals with an ongoing interest in a range of matters associated with defence. The committee also heard a large amount of oral evidence through public hearings in 2006 and in the early part of 2007. Two inspections were also conducted in Sydney at Qantas Airways Ltd.

On the basis of what it heard, it was evident to the committee that Defence had undertaken a substantial amount of work to remediate its financial management practices. Likewise, both Defence and the Defence Materiel Organisation had worked hard to implement the recommendations of the Kinnaird review. The committee commends Defence’s senior leadership team and their commitment to driving these reforms through the department. Having said that, of course there is still a significant amount of work to be done and it is my view that that ongoing work is going to take the best part of another decade.

At the conclusion of the inquiry, the committee found that three key areas were left wanting and are worthy of further ongoing serious attention by the powers that be in Defence. Firstly, whilst it is clear the Kinnaird review recommendations have been implemented, it remains to be seen how effective these reforms will ultimately be. The intent of the Kinnaird reforms was to make the DMO a more businesslike, outcomes focused organisation. The extent to which this has occurred can of course only be determined through careful monitoring of lengthy acquisition projects’ outcomes.

This brings me to the second area of the committee’s concern. Given the significant investment the department has made in reforming its processes and its practices, in the committee’s view it is imperative that the department start to develop techniques to evaluate the outcomes of its reform agenda. These techniques should include creating metrics to gauge the impact of the Kinnaird reforms on cultural change across the department. Linking these first two elements is the final area of concern. The link that will improve transparency and accountability across the department is the major projects report, a fairly exciting plan that has been some two years in gestation and that will hopefully have come to final fruition after November this year.

An absence of clear, consistent information from which to assess the progress of Defence’s major acquisition projects has been a major concern for many years to this committee, the joint Defence committee and the Senate foreign affairs, defence and trade committee. This deficiency has led the Public Accounts and Audit Committee to unanimously recommend that the Auditor-General receive funding to produce the annual major projects report. This report will represent a significant step forward for Defence. It is a vehicle by which project outcomes can be monitored, noted and, more importantly, tracked in a systemic and holistic manner, producing over time a comprehensive understanding of where projects succeed, where they fail and how to take the appropriate remedial action, particularly where they fail, to make sure that does not occur ad nauseam, as has been the case for many, many years.

The committee firmly believes that, while the major projects report is not a panacea for all Defence’s acquisition difficulties, it will go a long way towards providing a significant degree of transparency and accountability, which Australian taxpayers deserve and want. The committee’s role does not end with the tabling of this report. It has recommended the Department of Defence address the committee’s findings and provide it with an update in 12 months time, and the committee expects Defence will carry out these recommendations. Additionally, the committee remains steadfast in its commitment to monitor and review the major projects report on an annual basis. To that end the committee keenly awaits the pilot report, which is anticipated to reach parliament in November this year.

The net finding of the committee’s report under discussion is this major projects review. As I say, it has been in gestation for the best part of two years—under the previous government, where there was active and ongoing support from the previous Prime Minister, and indeed with the active and ongoing support of the Minister for Finance and Deregulation and the current Prime Minister. We are spending tens of billions of dollars on defence. It is about acquiring and using capability that suits the strategic interests of this country in both the near future and the long term. The purchase package is often in the realms of tens of billions of dollars. The time lines involved can be up to a decade or a decade and a half. Having signed a contract, made the arrangements to purchase, and awaiting delivery on the capability sought—having bought the tanks, planes or submarines, whatever the particular piece of equipment and whatever time it comes—for it not to deliver the capability that is sought and for bureaucrats and for departments not to be aware of potential shortcomings and deficiencies in capability of delivery early on in the process has been a most alarming error. One hopes that the attention that has been provided by a range of committees of this parliament—certainly by this committee and I am sure by other committees into the future—and a range of members of parliament for the last five to 10 years is finally going to bear fruit in terms of the major projects review as it comes to be the subject of particular scrutiny.

At this point I would also like to acknowledge the organisations and individuals who prepared written submissions and gave up their time to appear before the committee. I would like to also acknowledge the invaluable work of the committee secretary, Mr Russell Chafer, the inquiry secretary, Dr Kris Veenstra, and other members of the committee secretariat. The committee is grateful for these contributions. I commend the report to the Senate. I seek leave to continue my remarks later.

Leave granted; debate adjourned.