Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

I present documents listed on today’s Order of Business at item 14 which were presented to the President and temporary chairs of committees after the Senate adjourned on 23 August 2012. In accordance with the terms of the standing orders, the publication of the documents was authorised.

Documents presented out of sitting

Committee reports

1.   Foreign Affairs, Defence and Trade References Committee––Final report, together with the Hansard record of proceedings and documents presented to the committee–– Procurement procedures for Defence capital works (received 30 August 2012)

2.   Legal and Constitutional Affairs Legislation Committee––Report––Passenger Movement Charge Amendment Bill 2012 [Provisions]––Correction (received 3 September 2012)

Government documents

1.   Gene Technology Regulator—Quarterly report for the period 1 April to 30 June 2012 (received 28 August 2012)

2.   Military Superannuation and Benefits Scheme (MSBS), Defence Force Retirement and Death Benefits Scheme (DFRDB) and Defence Forces Retirement Benefits Scheme (DFRB)––Report on long-term costs prepared by the Australian Government Actuary using data to 30 June 2012 (received 29 August 2012)

3.  Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Act (No. 2) 2008––Report on the operation of the Act––Review of the impact of the new Medicare Levy Surcharge thresholds on public hospitals––Third year review (received 30 August 2012)

Report of the Auditor-General

Report no. 2 of 2012-13––Performance audit––Administration of the Regional Backbone Blackspots Program: Department of Broadband, Communications and the Digital Economy works (received 30 August 2012)

Statements of compliance and Letters of advice relating to Senate orders

1.   Statements of compliance relating to indexed lists of files:

(received 28 August 2012)

(received 28 August 2012)

2.   Letters of advice relating to lists of contracts:

(received 28 August 2012)

(received 28 August 2012)

(received 28 August 2012)

(received 28 August 2012)

(received 29 August 2012)

(received 30 August 2012)

(received 30 August 2012)

(received 5 September 2012)

(received 5 September 2012)

(received 6 September 2012)

(received 6 September 2012)

Mark Furner (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I move:

That the committee documents be printed.

Question agreed to.

I move:

That consideration of the committee documents be listed on the Notice Paper as separate orders of the day.

Question agreed to.

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

by leave—I move:

That the Senate take note of the report.

Defence procurement is perhaps the most complex and unproductive sector of government anywhere in this country. By my reckoning, there are more than 8,000 employees in Defence and DMO currently engaged in procurement matters and roughly another 26,000 in industry—all feeding off an annual government budget of over $9 billion, supplying consumables, equipment, weaponry and ordnance to almost 58,000 serving personnel. This is a massive part of the government and the economy without which we have, it is clear to say, no defence at all.

The tragedy is it is being managed so badly and, despite numerous reviews over the last 12 years, it has not improved. That is the essence of the report before the chamber. The committee has now run out of patience with the Defence bureaucracy. Indeed, it can be said that of all the mountains of evidence taken by the committee, every person or entity who gave that evidence thinks Defence is failing; that is, of course, with the exception of Defence itself. That is the nub of the problem. In the face of all the evidence and despite all the reviews, Defence keeps putting up the same old 'work in progress'—a mantra of reform and change, with lots of good intentions; honestly motivated, but with no effect.

As the committee has noted, that is not to say all those working in this area of Defence are in any way incapable. It is simply that the organisation has so many layers of complexity, choking on ever-changing processes and coordinated by a plethora of committees. But those committees are not the cause of the problem, as many experts would have us believe. They are simply symptomatic of an organisation made so complex that it has effectively become a Sargasso Sea. What is worse, no-one—from the top down—seems capable of asking the hard questions, let alone providing the necessary remedies. That is what the committee has, in this case, tried to do.

For the record, the parts of this bureaucratic monster which have a direct role in procurement are as follows: the Defence Strategic Group, the DSG; the Capability Development Group, the CDG; each of the services—Army, Air Force and Navy; the Defence Materiel Organisation, the DMO; the Defence Science and Technology Organisation, the DSTO; and the Australian Submarine Corporation, the ASC, which is owned by the Department of Finance and Deregulation. I cannot describe how all this works simply because it does not; it is just a potpourri of people in stovepipes whose roles are confused by the poor communication between them and who have no accountability whatsoever.

I want to address the organisational reform which the committee has recommended. Put simply, the committee wants the whole shooting match simplified by removing layers of bureaucracy. It wants full and clearly identifiable accountability. It wants clear role definitions and the removal of duplication. As indicated in the committee's interim report, the current matrix model is a complete failure. In short, the proposal is that service chiefs should have full control of all major single-service projects, such as ships and aircraft. After all, they have to operate and maintain this equipment with full budgetary responsibility. By this means we will have a hierarchy of responsibility sheeted home, without qualification, to the service chief. This will in itself remove several layers of bureaucracy.

First, the role of the DMO in such projects will be reduced to a specialised source of tendering, contracting and project management expertise. This will allow the consolidation of current technical expertise, shared between the forces and DMO, into one area under the management of the relevant service chief. That centre of technical expertise should also be responsible for project development, in association with the Defence Strategy Group, prior to government approval. They will be responsible for the procurement contract, all liaison with suppliers and all maintenance through to disposal—that is, the complete integration of this post-decision procurement process into one task. DMO will remain as an agency for the great raft of procurement tasks which are cross service and less technically complex—that is, boots, uniforms, land transport, ordnance, fuel et cetera—and in my view this should include logistics. I base this on the recent experience of the failed RAAF procurement of aircraft services for supplies to the Middle East.

The current capability group should also see its role and resources reduced. The role of the CDG should be to monitor and report to government on the implementation of white paper policies and the agreed capability plan. Instead of being the main player prior to and after second-pass approval, they should be the coordinator sitting between technical and operational expertise, the service chiefs and the strategic group responsible for capability plan prescription. Their job is to report on accountability, not to be responsible for it. It is for that reason I believe the new project monitoring office established in DMO should be relocated to the CDG. As for DSTO, it should remain independent, advising government and its minister directly; that minister should be the minister responsible for procurement.

The committee believes this simplified model will significantly streamline the current archaic mess of the matrix model. It potentially removes duplication, second-guessing, endless circles of process and committees. It forces the services to reskill and take charge of the equipment they use. It removes the waste of skills through short rotations of staff and the repetitive and time-consuming processes which seemingly continue to increase. There should not be any more denial, buck-passing or hand-washing and no more assurances that all is well, that reforms are being made and that a new leaf has been turned. The committee has not bought any of this rhetoric—that is all it is, rhetoric. However, there is no radical change; it is simply streamlining through clear role clarity and improved, complementary relationships.

I have no doubt at all that it will have its sceptics. The military no doubt will endorse it simply because it shifts power away from the centre and the bureaucrats, who have grown in numbers like Topsy, into their hands as operators. The bureaucracy, however, will be completely sceptical—but that unfortunately is the very nature of the problem we face in defence. Neither side trusts one another, and that is endemic around the world. More detached civilians with a sharper eye for strategy, policy and budget management have long tried to contain the wish lists and materiel ambitions of the military. Conversely, the military believe in their war-fighting training and expertise on such matters. They are continually suspicious and untrusting of civilians whom they believe lack such knowledge and experience. Of course, in between are ministers and governments who must be able to arbitrate and bring it all into some sort of a whole. Is it any wonder that ministers and governments struggle simply because the advice to them may be incomplete, compromised and often wrong?

I do not quite know the answer to this particular dilemma, but it has to get better than it currently is. What is needed, the critics say, is genuine contestability. This can only be achieved with full engagement of industry, rigorous assurance on the scientific practicality, and a discussion based on complete evidence and information. Contestability is the facility whereby the notorious group-think of defence can be counteracted by separate and independent challenge in the current model that is asserted as being the role of CDG, plus the DMO, plus DSTO and industry. Of course, industry are often ignored as being a vested interest, supported by another asserted risk—that of probity. It is clear though that the current form of contestability does not work. It does not even work anywhere near as it should. The final outcome is an old-fashioned power play whereby those with the power ignore the internal critics and hence we have this continuing mantra of a one defence view or a one defence family which puts a uniform recommendation to ministers who may or may not be adequately informed and who are developing an increased degree of scepticism.

I want to make some final remarks that go to the Secretary of the Senate Standing Committees on Foreign Affairs, Defence and Trade, Dr Kathleen Dermody, and her staff. There was a mountain of evidence and it was quite complex and there were hearings all around Australia and events that occurred overseas. All of that impacted on the quality of the report that is before the chair and it goes without saying that her effort in bringing it all together into a coherent whole is simply a major feat which should be acknowledged on the record.

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern and Remote Australia) Share this | Link to this | Hansard source

I want to make a few remarks on this report and note with interest the words of the chairman of the committee. I particularly liked his comment about the number of bureaucrats growing like Topsy and I hope that he will have a bit of a chat to Senator Furner about the expansion of the bureaucracy. I know that Senator Humphries, who is the coalition's spokesman on the Defence Materiel Organisation, will want to contribute to this debate but unfortunately he is in a committee hearing at the moment and so he will do that at another time this week when this matter is called on again.

I simply say that Labor's mismanagement of defence procurement mirrors their mismanagement of the green loans, the pink batts, the mining tax and the carbon tax. Everything that the Labor Party touch seems to turn to lead. As Tony Abbott often famously says, it is the Midas touch in reverse. The same applies in the defence area. Do you know, Mr Acting Deputy President Ludlam, that more than half of our armoured personnel vehicles are now in mothballs—cannot be used, no petrol or other fuel for them—because of the Labor government's mismanagement of the financing? The Labor government have asked Defence to bear a cut of $5.2 billion and, accordingly, Defence cannot do the things that Defence should be doing. A great percentage of our Abrams tanks are now also in mothballs. They cannot be used because there is no money for fuel, there is no money for ammunition and there is no money for training.

I have raised a number of times how there is a shortage even of blank ammunition—not live ammunition but blank ammunition—for training. Take the 51st Far North Queensland Regiment, which does the surveillance work up around Cape York and the Torres Strait into the Gulf of Carpentaria, which is then taken over by NORFORCE going around to the Northern Territory and the Pilbara region and the north-west of Western Australia. Their training days are being cut back because there is no money. If you are asked to prop up this government's illusionary wafer thin $1.5 billion surplus that even they have now stopped talking about—but they pretended at the last budget that there would be some sort of a surplus—you know where it has come from: the $5.2 billion that Defence is being asked to give up to provide the $1.5 billion surplus that Mr Swan talks about. So whilst this report on the DMO is very interesting and I congratulate the chairman on a rather refreshing commentary on the report and on the evidence, and on some of the administration of procurement in Australia, it will be interesting to see just how this report from the committee is dealt with.

The fleet auxiliary vessel HMAS Choules was purchased by the Labor government with great fanfare. All of their other supply ships had broken down because of mismanagement, lack of maintenance, lack of money and lack of planning under the Labor Party's watch, so they got HMAS ChoulesHMS Largs Bay, it was called at the time—brought it to Australia and changed the name, but the ship broke down. It is now out of operation for what is it: three, four or five months? We paid $100 million for it. The Minister for Defence thought he was getting a real bargain. I happened to be over in the United Kingdom at the time when the announcement was made, and you could see the smirks behind the hands—$100 million for this ship! You can now tell why they were smirking.

You always hear the Labor Party talk about looking after the workers in Australia and helping the shipbuilding yards in Australia, but of course the landing helicopter decks are being constructed in Spain in Spanish shipyards and are coming out to Australia to have the fine bits done, if I can call them that; the top bits are supposed to be constructed in Adelaide and Melbourne. There is complete mismanagement there at the present time as well, and because of cost overruns there will be delays.

We only have to look at the Submarine Corporation and the poor old Collins class. I am told—and I had a look at it and it was explained to me—it is a pretty good submarine; it is just that it has not been well managed or well maintained. I raised the question of why the submarine is sitting there, ready for maintenance, but there is no work being done on it. Without giving away too many secrets, it was indicated to me that the reason there was no work being done on it is that the client—the Department of Defence; the Gillard government—could not pay for the work to start. It had to be delayed for six months until after 30 June next year so that Mr Swan could pretend that he had a surplus in his budget.

As the chairman, in his presentation of this report, has indicated, there are a lot of things that need to be looked at in relation to the subject of this committee report. I certainly look forward to reading the report in more detail, and I know that Senator Humphries will want to have some words on that. With that, I will conclude.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

I rise to make a couple of comments on the report of the Senate Standing Committee on Foreign Affairs, Defence and Trade's inquiry into procurement procedures for Defence capital projects, which has been underway for a long period of time, and to acknowledge the comments of Senator Bishop, who is the in chair now. He obviously has a long interest in these matters. Senators will notice the surprising degree of alignment and the total absence of the kind of partisan spite and bickering that sometimes creeps its way into reports such as this one—after the secretaries have drafted the report, I must add. I think the additional comments by Senator David Fawcett add value to the report.

The report itself is a credit to the secretariat and the staff but also, I should say, to the members and senators involved, who applied themselves to a task that is inordinately complex and actually quite fraught. What we did not want to do was simply produce another report that wound up on the shelf, adding to the pile of reports on Defence procurement that now stretch back literally decades, without any evident change to the situation apart from an increase in the complexity of the bowl of org chart spaghetti and alphabet soup that now characterises the institutional arrangements around Defence procurement.

This inquiry was initiated by the Australian Greens. It was one that, by agreement with other parties and with the committee, amended the terms of reference, but we ended up agreeing to it. I hope that that spirit was carried through—and I believe it was—into the report that we are very fortunate and proud to be tabling today. I will speak briefly as to our reasons for initiating the inquiry in the first place and also on why we believe it matters. The most proximate and obvious reason is that the Australian taxpayer spends something in the order of $66,167,000 or thereabouts on the Defence budget every single day, according to an analysis by ASPI of the last Defence budget. That is, I think, our foremost responsibility.

That is a great responsibility upon us to ensure that that is spent as effectively as possible, because the buck stops here. The extraordinary complexity of the organisational chart of the institutional arrangements that go from a decision to an outcome and to a piece of equipment at the end of the line starts with us. We are the ones upstream of that entire process. The responsibility, for example, when the Super Seasprite costs $1.4 billion and delivers nothing is ultimately here. I think it is a credit to the senators who worked on this report that there is an acknowledgement—I think Senator Bishop spoke of this very sharply, as a government senator—that the responsibility has been on governments of both sides. We approve the defence budget here in this place, we critique it during budget estimates, and the responsibility lies with us.

Some of the examples that are canvassed in the report are the 68-month delay of the Wedgetail project that cost us about US$1.5 million a month and submarines that cannot be put to sea because they are too dangerous to crew and, even if we could, we would find it difficult to find the crews to put these vessels to sea. This report is an effort to be honest, to learn lessons and to apply the reforms recommended by numerous reviews that came before us. It does recognise that these projects are complex. In engineering and technical terms, they do push the boundaries, and it is hardly surprising that, from time to time, we see cost, budget and timing overruns, because things occur that are very difficult to predict and some of these projects push the boundaries of what is technically possible.

So this report has not taken the easy way out. As I admit—Senator Macdonald, who had very little to do with this inquiry, sought to blame it all on the Labor Party—it is nonsensical for a party that held government for 12 or 13 years to then say that this is all the Labor Party's fault. This report, I think, is much more even-handed in the degree to which it apportions blame—although, as Senator Bishop himself has identified, it should be apportioned all over the place. We recognise that it is not simple. Reading this report, other senators and the public will, too.

We provided some additional comments to the report to emphasise the need for transparency, and it is these remarks on which I will dwell, partly as an explanation for why we moved this inquiry in the first place. While this parliament is responsible for approving the defence budget and it is the responsibility of parliamentarians to understand it, we cannot do that if information is being withheld from the public domain. Obviously, national security requires a degree of secrecy. There are also, as this report identifies, some commercial-in-confidence concerns. But I think these excuses are far too entrenched. They are invoked reflexively, and that, I think, is something that really needs to change.

What the report does not do, and what I want to direct some remarks to now, is to examine the most crucial step upstream, and that is us—the point that we make in our additional comments; the process by which we decide what our actual security threats are in the strategic environment. That is what we do in the process of drafting a defence white paper. The last defence white paper ignored the warnings, in my view, of major think-tanks, including Lowy and ASPI, on the climate-security nexus and concluded, baselessly—on the basis of no evidence or, in fact, in the face of evidence strikingly to the contrary—that the security impacts of climate change would not be felt before 2030. This is wrong. There is no way to be subtle about it; this is absolutely wrong. That is not the conclusion of the Australian Greens. It is the conclusion of the United Nations Security Council; it is the conclusion of the US Centre for Naval Analyses; it is the conclusion of the European Union.

It is essential that the impacts of climate change be systematically built into security and defence planning because climate change is a driver of conflict—not in 2030; now! It is shaping our security environment now. And the kinds of decisions we make as we draw up a white paper will directly guide the kinds of procurement decisions and the materials and the kinds of forces that we are able to put into the field for two or three decades.

We understand the very long lead times involved in procuring equipment as complex as submarines, for example, or advanced air-warfare capabilities. The decisions that we make now flow downstream, through this tangled mess and the charts of acronym-laden institutions and agencies that Senator Bishop described so adeptly.

Entities such as the United States Navy and the various other entities that I mentioned earlier are facing up to the facts around resource wars—to what happens with fragile or failed states when water tables change, when food-growing areas move, when forces are completely reliant on fossil fuels for power generation and battle readiness. So it is not just that military technology has to change; it is that the security environment itself has to change. You could be forgiven for thinking that, in precluding any form of public input—which is what, I believe, this government has done, from the drafting of this defence white paper—we are potentially primed to make a series of extremely expensive and unfortunate mistakes in not having our eyes open to what the genuine security environment for which we are making these procurement decisions will look like.

We cannot afford to face backwards in the 21st century, buying equipment and attempting to sustain equipment and capabilities that are effectively about fighting the Second World War. When we look at who our first responders are when environmental disasters occur, whether they are here or overseas, we see they tend to be the Australian Defence Force. They are the ones who are the first responders. For example, we saw that in the impact of the disasters that befell Queensland last year—they were the first people we put into the field, as they were on the beaches in Aceh after the tsunami, and so on.

We need to be thinking very carefully about the kinds of security threats that we face, because they then guide the decisions that this report documents, I think, so effectively. If we get it wrong at this end of things and are building a defence force, effectively, around fighting the Second World War—which I believe is the kind of intention betrayed by the 2009 white paper—then everything that flows from that will be flawed. We are in a tight budgetary environment—and, honestly, when are we not? There will always be budgetary balancing acts that are required when some sectors are calling for the upgrading of military technology to withstand the impacts of climate change and others are stating that mitigating the effects of climate change will prevent resource wars and security risks in the first place. We think there is room in the context of the development of the next white paper—which will then directly feed the procurement processes that we have identified here—for facing forward into this century and being brutally honest with ourselves, as others around the world are trying to do, about the kinds of security threats that we face.

What shines through here is that there seems to be an obsession with acquiring the latest, the shiniest, military technology. In a climate-constrained world, do we really need submarines that will allow us to prowl around in the South China Sea? Do we really need to be able to put cruise missiles into East Asia capitals, or maintain platoons of battle tanks—presumably for fighting the Second World War over again? Or do we need to equip our forces with different categories of technology and pay attention, for a change, to sustainment and how we maintain the capabilities that we put together for dealing with the conflicts and the security challenges of the 21st century? So I thank the committee and its secretariat, and I thank the chamber.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

I seek leave to speak to the motion and, if there is nobody else wishing to speak, seek leave to continue my remarks later.

Leave granted; debate adjourned.