Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

My question is to the Minister for Defence. The minister may be aware of a front page report in today's Adelaide Advertiser that Rossi Boots, an Adelaide based bootmaker since 1910, has lost a tender for the supply of up to 100,000 pairs of boots for the ADF over the next five years. In a briefing from the Defence Materiel Organisation last week, Rossi Boots was advised that the boots would be imported because the imports represent 'better value for money'. Can the minister advise whether the DMO considered the social and economic benefits of having these boots—up to 100,000 pairs of boots—being made in Australia, including the benefits of local jobs, personal local taxes paid and the attendant multiplier effects on the local economy? If not, will the minister seek to reopen the tender process?

David Johnston (WA, Liberal Party, Minister for Defence) Share this | Link to this | Hansard source

I thank the senator for his question. To a degree I share much of his concern about government contracting going to Australian manufacturers. There are many commercial-in-confidence matters that I am about to talk about, so bear with me.

This was a tender released on 27 June 2013 for the supply of three types of boots: fireman safety boots, faun coloured safety boots and black coloured safety boots. At the time the tender was released, there was no expressed requirement for Australian content in the tender. The tender was conducted as a routine procurement that did not exceed the threshold requirements that necessitated notifying the minister's office. So all of what has happened with respect to this particular tender was without my knowledge or the knowledge of any other member of the government.

The previous safety boot requirement was established on 19 July 2011 for two years with Lymington Pacific who manufactured the boots in China. We all know that there have been some serious issues with respect to soles coming off parade boots.

Ten tenderers replied with 14 offers for three types of boots. Regarding the particular boots tendered from Rossi, I confirm what you said to be correct, and that is that value for money was one of the principal considerations. The procurement rules that Defence was complying with are those that have been supported by the previous Labor government and the coalition. Indeed, they do not, pursuant to rule 5.3, discriminate by way of country with respect to the running of the tender. There is a balance to be struck. I am concerned that the amount of money involved is such that this, as you have seen me argue with DPCU, might well have gone to an Australian manufacturer. (Time expired)

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Can the minister guarantee that the imported boots will be as durable and well made as the Rossi Boots? Further, what tests and measures are carried out to ensure the comparative durability and whole-of-life costs for such a procurement? Does the minister consider that rule 5.3 needs to be reconsidered? Can the minister advise in percentage terms, even if it is a range of percentages, how much cheaper the imports were compared to any unsuccessful local manufacturers who tendered?

David Johnston (WA, Liberal Party, Minister for Defence) Share this | Link to this | Hansard source

Senator, if I am going to look at this and oversight what intervention I might be able to conduct, I do not want to get into the commercial-in-confidence aspects of percentages and what have you. Rule 5.3 is potentially a problem for Australian manufacturers. That is why we are bringing down a white paper that deals with industry policy, and these matters will be considered in the broader context of the way we do our business in Defence.

In terms of the quality, I think you have answered that question yourself, because you said it was a matter of value for money. If there had been a deficiency in any great and measurable degree in terms of quality, I think your constituent would well have been told precisely that. This was about the differential between manufacturing here and manufacturing overseas. Given the high dollar and all of the other issues, I am very concerned about this particular aspect. (Time expired)

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Mr President, I ask a further supplementary question. Will any reconsideration of Commonwealth procurement rules take into account the economic and social benefits of goods paid for by taxpayers being made here? Does the minister consider that what happened to Rossi Boots is just not good enough? Does he understand the anger of many Australians over this very issue?

David Johnston (WA, Liberal Party, Minister for Defence) Share this | Link to this | Hansard source

Let me say, I certainly understand the anger of many Australians over this issue. Indeed, I have taken Defence to task at Senate estimates, while in opposition, on the defence combat disruptive pattern uniform. We manufacture that in Wangaratta and Bendigo and we are competing with Chinese manufacturers where the cost is less than one quarter of manufacturing that particular product here. So I am concerned. I will investigate this for you, Senator. I want to see the basis upon which we have discriminated in terms of the ultimate winner of the tender. If it is a matter of price and if I can do anything, I will come back to you with what can be done. But, can I say, this is below the radar. They appear to have complied with all the rules. The rules are there for good reason. We do not discriminate by way of country. I want to positively look at how we can help Australian manufacturers going forward. That is the issue for us in Defence and, of course, there is a balance to be struck between value for money and how we support Australian manufacturers. (Time expired)