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

As one with a long interest in defence matters, I wish to speak about procurement. In particular, I want to give credit where it is due for changes implemented in the last two years. There have been, as we all know, few areas of government with as much wastage over the last few years as defence procurement. The sagas dragging from one estimates to another are still so fresh in our minds. How good it is to no longer hear about the failed Seasprite helicopters, the M113 Army transports and the upgrades to the FFG ships. The M113s are rolling out of the workshops at a rate of knots and the FFGs are at sea at last. That is not to say that everything has been fixed. The Collins class submarines continue, as we know, to be plagued. Furthermore, the multitude of caustic reports by ANAO is much reduced. It has been a long time since we have seen reports about improper advance payments, abuse of trust funds, inadequate specification, delays and cost overruns. In other words, the litany of mismanagement and financial malpractice seems to have been addressed. Let us, indeed, hope there has been serious and permanent improvement.

It is instructive to look back in this way and compare current circumstances with past experience. Perhaps the worst feature of past military procurement policy was the dysfunctional relationship between the military and DMO. This relationship is critical to procurement. There is also the gulf between what is desirable technologically—the ‘starry-eyed wish list’, if you like—and what is actually possible. Failure of technical specification seemed to be the perpetual shortcoming. The ideal and the most advanced technology was invariably specified. There is no point chasing yesterday’s technology, except that the time line always seemed to guarantee that outcome anyway, hence the need to upgrade specifications even as projects were in production.

Regardless of whether it was a first purchase or an in-service upgrade, there was a continuing inability to integrate systems. This is not a phenomenon restricted to defence industries, I might add. The need for systems integration is almost always the result of expensive technology and capital equipment being overtaken by the new. It is inevitable, it is predictable and it needs to be provided for realistically—that is, by the ability of computerised weapons systems to work with computerised navigational, communications and propulsion systems.

Different systems, from different suppliers, in different nations, with varying technologies have proven to be a disaster in many, many areas of defence procurement. We need to be more realistic in our ambitions, with the emphasis on off-the-shelf products which are tried and proven—less cutting edge and less bleeding edge—although we need confidence that our total strategic planning will be sufficient not to allow such compromises to be disadvantageous in the long run. This is a simple pragmatic view, one derived from experience that often shows that the latest and greatest is not always the cheapest nor the most reliable in the context of the real needs to be satisfied. Add to the risk of bleeding edge the rivalries between suppliers and indeed between parent nations, as well as the security and industrial intelligence factors.

Complexity is perhaps inevitable, but it is often not sufficiently obvious to those procuring the equipment. It is an enormous risk. Although foreseen, it is too often ignored. How many times have we seen projects stumble because of failure in systems integration? How often have costs blown out simply because of the assumption that things could be worked out after the contract was signed? We remember the pattern clearly—delay begets extra costs, which leads to denial, fresh starts, failed rescues, procrastination and dissembling, not to mention the variables of exchange rates, budget updates, inflation and changes to project specification.

It was impossible to account for the real cost of any one project. As opposition spokesman, this was certainly my experience. Time and again at estimates the sand had shifted on project updates. As we know, few of us, in opposition, enjoyed continuity or the resources to persist. However, we had some success, and opposition criticism made procurement an issue of embarrassment—so much so that reform became a core commitment of this government. And we have made a very, very good start. I congratulate my colleagues who have begun to reform this area of Defence from top to bottom.

Having painted the grim picture of what the Rudd government inherited, let me summarise the changes now being made. Central to the increasing success of reform is the acceptance of the majority of recommendations of the Mortimer report. This failure was due largely to the inertia of the Defence organisation and lack of discipline at the time by the Howard government. It proved incapable of challenging the vested interests in the bureaucracy and the military. Mr Mortimer made 46 recommendations. The majority have been accepted by the government and supplemented by a 20-point implementation plan. I will not detail all of them, but I will select some important areas of reform, free from bureaucratese.

At the heart of Mortimer was an insistence that the relationship between the military and the DMO be repaired. It is a business relationship entailing clear role definitions and accountabilities. Role clarity is paramount, as is clear and unambiguous process with individual accountability. Healthy cooperative relationships can coexist while a strong purchaser-provider model is maintained. It should not be so delineated that DMO management is powerless to the point of being unaccountable.

I should mention here that it is equally imperative the government’s own decision-making process is regular and disciplined. There should be no room for decisions to get through by the back door or by winks and nods. Clearly that was the way in the past, the Howard government way. The key by which this will be achieved is through materiel acquisition agreements, binding cabinet decisions directly to capability managers in the military and the DMO. This will include accountability for the CEO of the DMO to the minister but with managerial freedom within the budget to manage the DMO. There should not be wiggle room for ad hoc discretionary changes. Nothing should escape the strict procedural approval net. Proper project costing with upfront investment in development and costing, we are now told, and we believe, is the norm—no more wish lists. At all stages of project design and development, transparency is mandatory. Project management has to be dramatically improved and, for that, particular skills are vital. Procurement is no longer a term appointment; it is a career for experts.

Importantly, accountability is now to be attributable between the two organisations and to individuals—no more buck passing. At every stage there needs to be a clear process of approval, fully costed and designed in detail—right up to cabinet level. The strategic policy as set out in the white paper remains the guiding light. DSTO will be fully involved in technical analysis with real engagement rather than their traditional, historical isolation from Defence. The new Project Performance Office will be critically placed to oversee the whole as well as the particular. It is the new gateway, applying rigorous business analysis and the discipline necessary. Hopefully the ANAO should no longer have to perform this function by default as it has in the past.

The DCP will be under constant review as to timeliness and cost, with rigorous and independent checks. The DMO will enjoy more management freedom. The status of the CEO will be enhanced such that his independence as an adviser to government will be assured. Off-the-shelf purchases are expected to be the starting point, with strict minimisation of changes without sufficient justification. Importantly, there will be more regular and complete reporting of all aspects of every procurement project over its lifespan. Additionally, there will be separate management of sustainment, with similar reporting discipline. These are the mort of our changes in a nutshell, forming a very new and different culture in both the military and the DMO. Put simply, the old regime could no longer be tolerated. The Rudd government, more than any before it, has determined that what it saw in opposition would not be tolerated in government. It is not just about money and waste; it is about professionalism.