Jess Walsh (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

I present a dissenting report relating to the inquiry by the Foreign Affairs, Defence and Trade Legislation Committee into the Defence Capability Assurance and Oversight Bill 2023.

David Fawcett (SA, Liberal Party) Share this | Link to this | Hansard source

I seek leave to take note of the report.

Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Leave is granted for five minutes.

David Fawcett (SA, Liberal Party) Share this | Link to this | Hansard source

I thank the Senate for leave to take note of this report. It's important because Australia has a problem with our defence procurement. The problem is that too many decisions are being made around procurement and upgrades without key questions being answered. For the young men and women who operate equipment on our behalf, the questions are: will it achieve the mission, and will it be safe while I'm operating the equipment? For the government, the question is: will it give us military response options which come with an acceptable level of project risk and cost? For the taxpayer, the question is: is it a good use of money?

This doesn't apply to every procurement or upgrade. Many go well, but there are enough significant failures—and you can think back through history to things like the Seasprite debacle—where we see that it is not done well. This report highlights that the things that we saw 20 years ago, with Seasprite, have not been remediated in terms of defence's ability to consistently answer these questions. Now, more than ever, with the strategic circumstances we see, with the strategic update of 2020 and the Defence Strategic Review, where we have a requirement to buy a bigger scope and more complex equipment across cyber, land, space, air and sea domains, it's more important than ever that we can answer these questions as part of making these decisions.

Why is this the case? It comes down to the fact that we need people who have the right skills, the task-specific competence, to make those assessments. Task specific means that people are the right fit for the job. Say you had two surgeons, a neurosurgeon and an orthopaedic surgeon, and both were very competent. If you had a brain problem, the orthopaedic surgeon is not the person you would want to do the work. What we see in defence, and it came out clearly in this report, is that often that distinction is not made, and people without the requisite skills, qualifications or relevant experience are tasked to provide assessments which they are not qualified to do.

We see a lack of independence where people who are concerned about the cost or delays to a program schedule get to make decisions about how much risk assessment will be done and who will do it. Often that drives programs into a direction of failure, not being good value for money, not meeting the mission outcomes or, in some cases, not being safe.

We also see a failure in transparency. We don't see that, when information is provided to capability managers or to projects, that is consistently passed up the chain to senior decision-makers. And there is a lack of accountability for people in the system when they do not do the right thing and apply the voluminous defence policy that exists in this area. There are no consequences for people who don't apply that. In fact, there is so much policy because every time this has been highlighted—and the ANAO highlighted these problems back in 2002 and again in 2015, and this same committee in 2012 highlighted concerns—there has been a flurry of activity, but it's led to more process, as opposed to outcomes.

What we see, consistently, is that people who have the right qualifications, who are competent, with the task-specific competence, are either not tasked or not listened to. In some cases, we actually see capability managers on projects seeking to substitute the informed, objective advice of trained test organisations with the subjective opinion of operators or others, and the Defence system not recognising that those are two quite different sets of information and making decisions which are to the detriment of the young men and women who operate the equipment, to the government and to the taxpayer.

We look at civil industry and we see similar patterns in things like the Boeing MAX aircraft. We were all horrified at the decisions that were made there to prioritise market access and sales ahead of safety. Yet we see schedule and a mission focus—ahead of safety—often being the drivers of some of the groups within Defence.

What has the US done? They established, about 10 years ago, the department of operational test and evaluation, which actually provides that independence, the task-specific competence, the transparency and the accountability. And this bill, the Defence Capability Assurance and Oversight Bill 2023, to establish the Defence Capability Assurance Agency, seeks to provide those same things. It provides assurance to the mums and dads, the war-fighters, the government and the taxpayer that our defence decisions are based on accurate assessments of risk on a consistent basis. I recommend that the bill be passed.

David Shoebridge (NSW, Australian Greens) Share this | Link to this | Hansard source

I seek leave to make a contribution of no more than five minutes on this matter.

Leave granted.

I rise to indicate that, as the Greens' defence spokesperson, I did not support, on behalf of my party, the majority report into the Defence Capability Assurance and Oversight Bill. I did that in circumstances where the evidence that was presented to the committee clearly established the need for far greater independent and transparent scrutiny of defence procurement. You could not sit through the evidence that we had the benefit of hearing, both in camera and in public, and you couldn't read the submissions that we had received in that inquiry, and not be deeply, deeply concerned about the lack of independence, the lack of rigour and, ultimately, the lack of value for money in the defence procurement system in this country.

If you think, 'Well, that might be a marginal issue for federal politics,' then take the data that we had, for example, as of March 2021, where Defence reported that it had 16,000 active contracts, with a total value of over $200 billion. Just one Defence contract, for the Hunter frigates project, is valued with a lifetime contract in the order of some $45 billion. That project alone is, far and away, the largest single Commonwealth procurement project on the books. The only thing that may come to trouble it at some point, if it ever comes to pass, is the AUKUS submarine contract, which has not been entered into and which obviously would be greater than that.

Imagine having $200 billion or more of procurement contracts on the go and not having rigorous, early, independent testing. Imagine that. Surely that couldn't happen. Yet that's exactly what we have in defence. Rather remarkably, that's been permitted to just roll on, year after year after year.

If you wanted a clear case study in what can go wrong when you don't have an independent, rigorous test of the procurement process, look no further than the recent six-page mea culpa from Defence secretary Greg Moriarty in relation to the Hunter class procurement project. It is an extraordinary read. But perhaps one of the most extraordinary parts of that advice from the Defence secretary Moriarty, who has been the secretary since 2016 and was intimately involved in the second half of the Hunter procurement process, is a remarkable passage in that document in relation to the advice given to government on the procurement of the Hunter frigate project. Did I mention it was a $45 billion procurement, the single-largest Commonwealth procurement project? Mr Moriarty said, 'The process was appropriately planned and conducted but for completing a comparative evaluation and ranking of the tenders in a manner consistent with Defence procurement policy.' So it was appropriately planned and conducted except for the procurement assessment itself, except for the comparative evaluation and the ranking of the tenders in a manner consistent with the Defence procurement policy. What else is there in a Defence procurement policy apart from the comparative evaluation of the tenderers in accordance with policy? What else is there in a procurement process? You couldn't make this up.

Worse still, when we tested what actually happens, time after time it appears that one element in Defence seeks to have a particular outcome and then when it gets independently evaluated by the incredibly competent people inside Defence whose job it is to independently evaluate the different platforms for safety and performance and defence doesn't like the independent assessment given by those incredibly capable structures inside Defence whose job it is, Defence just goes and seeks a different opinion but without any credible policy basis for it. They keep farming out for second opinions until they finally get someone who says, 'Yes, your original plan to acquire weapon A, B or C is fine. Go ahead and procure.'

This bill may not be the perfect solution, but we believe it requires a serious scrutiny because business as usual is dangerous to taxpayers, dangerous to the public and dangerous to defence personnel.

Question agreed to.