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

I seek leave to table a supplementary explanatory memorandum in respect of the amendments to be moved to the bill.

Leave granted.

The Defence Capability Assurance and Oversight Bill 2023 was introduced to the Senate earlier this year and was the subject of an inquiry by the Senate Foreign Affairs, Defence and Trade Committee, eliciting witnesses from currently serving officers within Defence, from academia and from industry, who put forward their views on the current state of Defence's ability to consistently conduct the test and evaluation that is required to underpin risk assessments around the acquisition, upgrade or introduction into service of the equipment that Australian forces need. Overwhelmingly, the witnesses supported the introduction and the passage of this bill and the creation of the Defence Capability Assurance Agency.

For those not familiar with the bill, the supplementary explanatory memorandum refreshes us on the outline:

This Bill creates an independent statutory body responsible for assessing the complex risks associated with materiel procurement and sustainment, including but not limited to technical risks pertaining to performance and certification.

That is during the acquisition phase but it also spans right from the start of that phase, ensuring there are robust and accurate articulations of the requirements that a capability needs, through to the introduction into service and the integration with the force in being, so the accountable officers within Defence know they have timely and accurate information upon which to make their decisions and recommendations to government.

In fact, the objective of the bill, in the supplementary explanatory memorandum, is to:

a. expedite the procurement of defence capability by providing capability managers and the Australian Government a high degree of confidence in the veracity and completeness of the information they use to make timely, risk informed decisions,

b. provide assurance to capability managers, the Australian Government and the Parliament that weapons systems will be available for use when required and effective against extant and emerging threats, and

c. make existing defence procurement processes and requirements more effective and efficient by ensuring:

i. that risk assessment throughout the capability life cycle is consistently conducted by people who have appropriate qualifications and relevant experience,

ii. the assessment and reporting of risk is independent, free from overt or unintended bias or influence,

iii. identified risk is transparent to decision makers, and

iv. proposed risk mitigations are effective.

That is, where those mitigations are proposed by Defence.

It may surprise people that this bill has had to come forward at all, because the assumption would be there that, if you looked at the rather copious amounts of defence policy in this area, those are exactly the things Defence does. I have to say: there are many people within the organisation who work diligently and who implement that policy, and many projects come to fruition to force integration successfully. But it is not consistent and there have been enough failures over time, many of which have been the subject of specific ANAO reports as well as Senate inquiries, that have highlighted that this assessment of risk—the articulation of the requirements that are required and the transparent reporting of risk to decision-makers—has not been consistent and has led to failures that affect both the mission capability of the things Australia is buying and the safety of the men and women who operate that equipment. That is not something that is acceptable.

In fact, the ANAO did two specific reports on Defence's test and evaluation capability, in 2002 and 2015. The Senate foreign affairs, defence and trade committee made specific recommendations in 2012. Yet, in this most recent review by the Senate foreign affairs, defence and trade committee, we found that many of the failures that were extant over 20 years ago, when the Seasprite debacle occurred, still exist and impact even on very recent projects today. The overwhelming view of witnesses during that inquiry was that reform is needed, and Defence themselves agreed that reform is needed. They agreed that the principles behind this bill—of independence, of ensuring competent staff, of ensuring transparent reporting to all levels of decision-making, and of accountability to make sure that the policy which Defence already has in place is consistently applied—are worth supporting.

We come to the position, though, where, having established all of that, Defence still said, 'We can reform internally.' But a range of witnesses—in fact, everyone bar Defence—highlighted that the history over the last 20 years is that internal reform has been neither effective nor sustainable over time and, with posting cycles and changing priorities, we see that it has lapsed back into the same patterns.

In the context of the 2020 Defence strategic update and the Defence strategic review of 2023, which highlighted the deteriorating strategic circumstances that Australia faces, there is a need to substantially expand both the scope and complexity of Australia's military capability in a compressed time frame. So if ever there were a time when the men and women who operate this equipment needed an answer to the question, 'Will it achieve the mission and will it be safe to operate?' and the government needed to know, 'Is there a product on the market that will meet this requirement and, if not, what are the risks of modifying an existing product or developing a new one, will it have an impact on schedule, can we achieve the capability and can we manage the costs that may come with that? ' now is the time. We need that information for the war fighter, the procurement agency, the capability managers—the chiefs of Army, Navy, Air Force and the cyber and space domains—the Australian government, the National Security Committee of Cabinet, this parliament as representatives of the Australian people and the taxpayer to have confidence that governments of either persuasion are getting appropriate and accurate advice from the department. That is why the witnesses all bar Defence said, 'Yes, we need an independent agency,' or, 'We need independence.' They support the creation of the DCAA.

Defence had four key objections, which, during the course of the inquiry, were shown to be a misreading of the bill. One was that they were concerned that the bill didn't actually create an agency that covered the full scope of test and evaluation. But, as was pointed out, the agency specifically looks to cover the entire capability life cycle, which goes from the conception of a capability and the defining of requirements that are effective and testable, which means that whatever we buy will actually achieve the mission and do so safely, through to assessment of intended solutions, the introduction of the service and the integration with the force.

Their second objection was that perhaps it would cause a duplication of effort. But, as pointed out by other witnesses at the inquiry, the whole intent of this bill is to streamline efforts, to coordinate existing resources and to add new resources so that assessment of risk is timely and done by competent people, which will actually expedite procurement. There were a number of cases cited by witnesses, some in camera and some in public. One example that was publicly cited was where concerns about schedules led to Defence saying, 'We won't do the kind of test and evaluation that is being proposed.' Lo and behold, rather than being delivered on time, that project blew out some seven years and was several hundred per cent over the budget. There are many of those sorts of examples that exist.

The third concern was that it might somehow diminish what they called the accountable officers' obligation to be able to assure service chiefs and the government around the capabilities that have been procured and offered to government as military response options. But their own policy and their own evidence to the committee identified that test and evaluation is actually the key method by which objective, unbiased, accurate risk is communicated to those same accountable officers around whether or not a mission system can achieve the objectives that are required for it and whether it will be safe. Their own policy and their own evidence indicates that an organisation which provides more timely, more accurate and more reliable assessments of risk will actually facilitate these officers conducting their roles.

Their fourth concern—and this is dealt with in one of the amendments covered in the supplementary explanatory memorandum—was that the proposal in the bill for the Defence Capability Assurance Agency to have a regulatory function and, to ensure continuity and depth of expertise, a technical mastery area supplied by industry created the possibility that whichever company won that contract might somehow develop a monopoly by setting standards that were inappropriate or that limited other players. This concern had also been expressed by some from the industry sector.

Discussion during the inquiry and the report of the inquiry highlighted that the explanatory memorandum and the bill should be amended to clarify that the Defence Capability Assurance Agency, as a Commonwealth entity, would be responsible for issuing subsequent contracts for people to deliver services, and that there would be an obligation on the Defence Capability Assurance Agency to make sure the standards set by the regulator met global best practice standards and were comparable with peer organisations, such as the Director Operational Test and Evaluation in the United States, such that they truly represented best practice and didn't advantage or disadvantage any player in the Australian market. This means that the range of companies, including a number of small and medium-sized companies in Australia who provide such services, will continue to have a role—in fact, they will have a greater role—in the provision of expert support for Defence both in training and in the planning, conduct and reporting of risk assessment activities. So in this amendment there is a new clause, subclause (4) at the end of clause 19, which highlights that there is now an obligation on the agency to ensure that the industry partner:

… in maintaining, developing and regulating workforce and infrastructure standards as mentioned in subsection 11(2), does not inhibit effective competition for the defence industry sector to deliver services required by the agency in the performance of its functions.

The legislation envisaged two oversight bodies to ensure accountability and transparency. One was an inspector-general of defence capability assurance, which would be, similar to the Inspector General of Intelligence and Security, a way of having a group who are cleared and capable of ensuring compliance within organisations that, appropriately, operate behind classifications of information. This would make sure that Defence engages with the defence capability assurance agencies; takes appropriate note of the reports that are provided; and provides, throughout the decision chain for capability upgrades or modifications that are being introduced into service, transparent reports of the risks it's identified so that all the way through to the National Security Committee of Cabinet people are able to interrogate what has been done to address risks and so actually expedite decision-making.

The other body was a parliamentary joint committee on defence. The government's response to the inquiry of the Joint Standing Committee on Foreign Affairs Defence and Trade into war powers supported the committee's recommendation to establish a statutory committee on defence. This essentially replicated the role and purpose of what was envisaged by the recommendation in the DCAA bill. So the second key amendment here is the removal of part 4, which was the establishment of the committee, because the government's committee will do that.

I look forward to the contributions of other senators to this second reading debate. Obviously, we don't have time today to bring this to the second reading vote and the committee stage, but I have distributed amendments that reflect this supplementary explanatory memorandum and I look forward in the New Year to being able to complete this debate and bring forward this change for the benefit of Australia's national security.

Carol Brown (Tasmania, Australian Labor Party, Assistant Minister for Infrastructure and Transport) Share this | Link to this | Hansard source

On behalf of the government, I rise to speak on the Defence Capability Assurance and Oversight Bill 2023. The government is committed to ensuring that defence capability acquisition and sustainment decisions are underpinned by a robust test and evaluation enterprise. This requires sensible reforms that do not inadvertently create a self-regulating sector and that mean Defence can access competitive markets to deliver a critical defence capability. That is why the government will not be supporting this bill.

The bill would create two new bodies that would add further complexity to a sector that has been asking for processes that are more efficient, not additional red tape and barriers to entry. It would duplicate functions that already exist in defence and push valuable workforce resources out of defence, thinning out test and evaluation expertise in a sector that is already struggling to increase workforce. The explanatory memorandum to the bill identifies that costs associated with establishing the Defence Capability and Assurance Agency would come out of the Defence Integrated Investment Program. Yet the bill does not articulate the significant operating and workforce costs it would involve. This is not just simply moving people across from one place to another. There are a multitude of costs and to name a few: physical infrastructure, IT systems, human resources and commercial costs. All of the above expenditures would take away funding from defence that could have been otherwise used to deliver critical defence capability.

It is frankly surprising that Senator Fawcett and the coalition are out there saying there's no new money for defence but, with this bill, are seeking to add to the cost pressures they left behind in the Integrated Investment Program. It is indicative of their approach to defence that they have maxed out the credit card with $42 billion in underfunded announcements and an IIP overprogrammed by 30 to 40 per cent over the forward estimates, while cutting Defence by stealth to the tune of $18.5 billion.

The requirement for the Defence Capability Assurance Agency to appoint an industry partner to deliver the regulatory function for T&E is also concerning. The reality is this would likely be a large company with a significant market share. So you could inadvertently allow a large company to set the regulatory standards and practices on T&E. This would disadvantage small and medium companies. You can see a world where they may be subject to standards and processes that put barriers on them. We've seen what happens when you allow commercial providers to set the standards and help regulate a sector. The propose amendments from the coalition, as identified in and from the Senate inquiry, are not enough to satisfy the legitimate concerns around creating a sector that self-regulates. Frankly, the model being proposed in this bill would not work in the Australian context.

The proposals in this bill are not an efficient way to remediate the test and evaluation issues in defence. It is interesting that the opposition seems to now care about test and evaluation in defence. They keep claiming they are concerned about it, yet neglect to recognise they had almost a decade to fix this. So why are they now claiming a moral high ground? In fact, you only have to look at some of the public submissions to see their record on test and evaluation in defence. The OneSKY CMATS project has been used as an example of what happens when T&E is not applied properly. This was a project those opposite mismanaged and neglected, and now we are fixing it through the projects of concern process. If the coalition thought creating an entirely new organisation for test and evaluation was a good idea, why did they not create one in almost a decade in government? It is because they did not support it during that time or did not think it was important enough to bring up. Why are they only now supportive?

Defence recognises they need to improve on test and evaluation. That's why they are delivering on the Defence Test and Evaluation Strategy—something that was actually produced while the coalition was in government in 2021. Is the coalition admitting something produced under their watch is wrong? It is important to recognise the defence achievements on test and evaluation. There is an updated test and evaluation policy, improved governance and increased training, resulting in 120 students in 2023 with the aim of doubling that in 2024. There's also been implementation of a capability risk assessment mechanism for projects, helping to identify and address test and evaluation risks early in the project cycle. You can also expect to soon see a new test-and-evaluation enterprise-governance model informed by extensive engagement with industry, like-minded countries and experts. That is why it would be premature to establish new bodies—as proposed in this bill.

It is notable that only 11 submissions were received by the Senate inquiry. This is a very small number, and it would be a stretch to say that they are representative of the entire sector. Very few of them were from small and medium businesses. We need to consult with a broader range of the sector that includes these businesses before considering the proposals in this bill.

The bill also proposes to establish a new parliamentary joint committee on defence. We agree on the need to strengthen parliamentary oversight of Defence. That's why, on 8 August 2023, the Deputy Prime Minister announced the government had agreed to establish a new joint statutory committee on defence as part of its response to the Joint Standing Committee on Foreign Affairs, Defence and Trade's inquiry into international armed conflict decision-making. This new joint statutory committee on defence will likely fulfil most of the functions that the committee being proposed in this bill would have.

This is something that, again, the coalition had nearly a decade in government to implement if they had wanted to. This shows we're open to sensible ideas for ways to improve transparency and oversight of test and evaluation in Defence, but this bill is not the answer. While the government does not support the bill, we are open to briefing Senator Fawcett on the ideas we are working on with Defence that will strengthen test-and-evaluation in Defence and look at ways that we can achieve the intent of the bill without creating two new agencies.

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

I rise to indicate that, with amendments, the Greens support this bill, the Defence Capability Assurance and Oversight Bill 2023. What does the bill seek to do? The bill seeks to embed four key things into Defence procurement test-and-evaluation. They are—and I will read from the explanatory memorandum—firstly:

Independence. The risk identification function must be independent so that assessment is made without bias or influence (intended or unintended). Independence also ensures that the assessor of risk has a voice (NB not a veto) that is heard at each decision-making level of the capability life cycle.

Secondly:

Task-specific competence. Government must ensure staff with the right skills are employed to identify and manage risk. Competence is a matrix of qualifications and experience that are directly relevant to the task at hand.

Thirdly:

Transparency. Previous inquiries highlight that risk assessors working within Defence face various barriers (individual or organisational) that influence whether decision-makers actually consider their assessments. Given the costs and national security implications, the taxpayer deserves to know that decisions are being made on the basis of accurate understanding of risk.

And, fourthly:

Accountability. The DCAA will be underpinned by an audited and enforceable requirement that Defence engages the Agency to evaluate risk across the capability life cycle. DCAA reports are to be specifically included in briefs provided to project managers, assurance bodies, Defence Investment Committee and the National Security Committee of Cabinet.

They seem like four pretty sensible principles to underpin Defence procurement, and they're embedded in the bill.

I don't pretend that this is the only answer to sorting out the enormous difficulties inside procurement in Defence, which have been demonstrated time and time again by costs overrun, delayed projects and projects that, when eventually completed, go nowhere near meeting their initial performance requirements. I'll deal with some of those later in this contribution.

When you look at the sorry tale of Defence procurement over the last two or three decades at least—a chunk of that lies in the coalition's basket of responsibility and another chunk of it lies in Labor's basket of responsibility—what we've seen has been a kind of collective miasma in the parliament when it comes to Defence procurement. It has been a case of not looking, not checking and letting Defence just grind its way through, as it does. But it's not really about identifying who got us to the mess we're in. The question is: how do we get from here to somewhere where defence procurement meets what I think are some pretty core principles that should unite us? It should be transparent, it should be independent, it should be competent and it should be accountable. Maybe it should also meet the defence needs of Australia, but you can't get to the defence needs of Australia unless you go through a process that ticks all of those boxes.

We had some pretty disturbing evidence in the course of this inquiry about what's actually going on at the moment, particularly on test and evaluation. I'll sort of summarise the broad nature of that evidence. There are elements within Defence that have clear expertise and responsibility for test and evaluation. They are staffed by people who know their stuff and, when they are called upon, they provide competent, independent advice. Many of them are understaffed and face morale pressures. They are facing structural challenges. But there are parts within the Defence establishment that have skills and competencies that you'd want to draw upon in this.

But we heard time and time again that, when they came up with an inconvenient conclusion, Defence found three, four, five or six ways to go around their conclusion and to just drive through the project that they had already decided on. No system has integrity when the system is so opaque and so riddled with political, promotional and vested interests that, regardless of what the independent subject matter experts say, projects seem to get a life of their own and get delivered—or not delivered, as the case may be.

I'll cite some of the evidence we got, which is actually included in the government's majority report and yet somehow didn't inform their conclusion. Dr Keith Joiner gave some pretty frank evidence about test and evaluation and the cultural problems inside Defence. He said on 14 September:

… I'll give one quick example. AIR 9000, I think, was the Navy's helicopter project. We were buying, or we had selected, a helicopter that was used to ferry people out to oil rigs. So that was marinised, used and certified to oversee a city. The Police Force were flown around in it. On that basis, they said, 'We don't need to do preview testing on that helicopter.' I started at the project director level and then went to a one-star who was a Navy commodore and flight-test qualified, who was not interested in letting testers go and fly that before we signed the contract. The two-star also wasn't interested. The then head of the DMO, Warren King, was not interested. They feared that we would find something that would delay signing that contract and the funding would go to somebody else.

In the end we came to a compromise with Admiral Jones in a separate group. We paid the $43,000 for 10 flying hours for three staff from AMAFTU—

the Aircraft Maintenance and Flight Trials Unit—

to go and fly that helicopter. That taught me a lot about the cultural issues. You don't always get that sort of level of serious interference, but it is about risk management. There is something wrong in the culture of Defence when people consistently want to hit milestones for fear of losing their reputation and promotion, I guess, as opposed to what we ultimately found, which was a bunch of things that the contract negotiators were able to get into the price. If you know anything about that project, it's 26 years worth of maintenance and support out of Nowra, so every little thing that you find before you go into contract and have as part of the baseline price pays huge dividends over 26 years.

How do you have a system where taxpayers can be signed onto a contract that runs for a quarter of a century and you don't even test fly the helicopter? When your test and evaluation people say, 'Maybe we should spend 10 hours flying the helicopter before we sign onto what might be a $1.5 billion contract,' there's resistance, refusal and obfuscation. That happened because there was fear that they might have found something that said that they shouldn't go ahead with it and then their promotion would have been at risk and funding might have been at risk.

It's a demonstration of the lack of independence and what's wrong with the system. I've got to tell you, that evidence is a tiny part of what the committee actually heard. We heard evidence in camera that puts that in the shade. Nobody, I would have thought, could have fairly sat through that evidence and come to the conclusion that the current pathway for ADF procurement is anything like 'on track'. The contribution we got from the government just then was, 'There are these internal processes and there's a new subcommittee established and a new joint committee established inside defence, and how dare Senator Fawcett raise this because the coalition didn't do anything for 10 years, and shame on the coalition.' And of course there should be shame on the coalition for not doing anything for 10 years. Of course things like the Hunter frigate process were signed off on by the coalition and were disastrous, but you could list another 10 things that happened under Labor's watch with equal political force. That's not really the issue here, is it? The issue is trying to come up with an independent, credible procurement process which involves independent tests and evaluation so that people serving in the Defence Force have equipment that meets the needs of our Defence Force and our national security without bankrupting taxpayers in the process. I would have thought that was something that would unite us, but no—we get pretty shallow politicking and a complete lack of answers.

What is extra frustrating about it is that the bill largely seeks to replicate what's happening in the United States and, to a degree, the United Kingdom. It's not like this was just created in a thought bubble of Senator Fawcett's mind. It's based on existing international practice where independent agencies—who aren't perfect—in other jurisdictions add a huge amount of transparency and accountability to their procurement. What's so special about Australia that we don't need an independent agency doing it? We get some glib line in both the majority report and in that contribution from the government saying, 'Australia's different and special'. Australia is different and special because we do it much worse—we do it at a much higher cost, with much longer delays and producing much less effective outcomes. That's what's special about Australia.

The most recent Australian National Audit Office report into major projects points out that there are some 21 defence projects—and this is just the major projects—where, collectively, there has been a $17.5 billion blowout in costs after the second pass approval. That's in just 21 of the major projects. It also found that defence refuse to provide the ANAO with key information to assess schedule performance. That was in circumstances when the previous report from the ANAO found that 21 projects were collectively one-third of a century late. Is that working? Is Labor happy with that? Is that good? You could just say, 'That's all the coalition's fault.' Yes, absolutely, a big chunk of that's the coalition's fault, but are you happy with that? Is that a solution you're comfortable with? Is that an outcome where Labor's happy to say, 'More of this, please'?

The ANAO's report into defence contract administration for the Defence Industry Security Program found that defence has not been fully effective at implementing or administering its obligations under the Defence Industry Security Program, which is designed to address risks in defence supply chains. The report also found that defence has not established fit-for-purpose arrangements to monitor compliance, and has not established effective arrangements to manage or identify noncompliance. Are we comfortable with that? In March 2021 defence reported that it had some 16,000 active contracts with a total value of $200 billion. In that context, surely it would be beneficial to have a credible and independent body that could ensure value for money and assess risk in defence procurement.

The Greens have amendments to this bill which will put in human rights considerations, public interest considerations and more thorough conflict-of-interest provisions. We would hope for support for those provisions, which should be contained in defence procurement. Of course they should. But if you want to think of just one reason in the current political debate to support this bill, I give you the Hunter class frigates. It is now a $45 billion contract. It's probably gone up to $50 billion. They didn't assess risk. They didn't assess value for money. They're still trying to work out how to build the thing so it doesn't topple over in a heavy sea. It's likely to be almost unusable in any kind of modern conflict, because it's undergunned and underpowered. It's meant to be an antisubmarine warfare vessel, but it's now a bit of everything. It's like a modern-day Bradley fighting machine, brought to you by the Australian defence procurement process. The Hunter class frigate program in itself and the most recent independent review that I've spoken about before in this chamber are a case study in, 'If not this bill, then what?' So, yes, we'll support the bill. We can't bear the prospect of seeing more hundreds and hundreds of billions of dollars of public funds going into this big dark hole to produce the kind of appalling results we've seen to date.

Ross Cadell (NSW, National Party) Share this | Link to this | Hansard source

The Defence Capability Assurance and Oversight Bill 2023 is everything I came to this place for. So often we see government and bureaucracy having their own way and making very little impact on effectiveness. Senator Shoebridge, who stood up and spoke before me, made so many comments I'd like to associate myself with. He said that he would prefer to see less money spent on defence but that they can support the bill because it is right, because it puts the right procedures in place for procurement and because it's better for Australia. We talk about bureaucracies, and there is a very big bureaucracy in the Australian Defence Force, and for years and years their procurement has had difficulties—some abject failures and some successes. When we look at the three standards of cost, timeliness and effectiveness, very few of their major projects have come out with all three and succeeded.

Senator Fawcett had a look around the world and worked out the way to make this better, the way to make it more effective and the way to protect Australian taxpayers' dollars and protect our war fighters by giving them the things they need, giving them equipment they can use and giving them a way forward to do this better. We went through the four areas this touches on: independence, competence, transparency and accountability. Why would we not want that? The question isn't, 'Why would we support this bill?' It's, 'Why would we not?' I can't see a single reason that we wouldn't want to make something better.

To the government's point that it'll cost money—no, it won't. It will save money. Senator Fawcett, I think, and Senator Brown spoke about the OneSKY project. It was deemed that it didn't need to go through testing and evaluation because it was 90 per cent off-the-shelf technology.

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

It was just off 15 different shelves!

Ross Cadell (NSW, National Party) Share this | Link to this | Hansard source

That's the point! It was a mix. That's like saying that I don't need to go and see Gordon Ramsay to learn how to cook because I'm using the same ingredients as him so I'm going to come up with the same cake, going to come up with the same meal. That is completely what we're talking about. When Defence argues, 'It's existing technology; we don't need to do it,' it's farcical to think that a different process creating those things together—we may as well say: 'We don't ever have to test anything, because everything comes from a tree or a mine or a factory. They're all raw materials, so why do we need to test anything?' What we saw was a massive blowout in time and money and a project that I think is still not out there having a crack and doing what it's meant to be doing.

So why not put in place an independent body? Let's talk about why it needs to be an independent body. When we talk about why we maintain a military, it's to protect Australia's sovereignty. A definition I've heard that really struck me is, 'Sovereignty for a nation is being able to make decisions without undue influence.' Let's talk about that in the defence sense. If the people who are helping to provide our sovereignty are also subject to that undue influence, if the people in testing and evaluation are subject to that undue influence—from within the military, from project managers, from industry—that is what we're getting to here: this group of dedicated, clever people who want to do the best thing by our war fighters, by our troops, by the taxpayer are getting worked around, with patches, as we heard before. Risks exist everywhere, and we don't get better by ignoring them or papering over them. We get better by acknowledging them and working out plans.

Coming back to another analogy, I was working on a maritime festival in Newcastle. We had Formula 1 boats going at 150 kays on the harbour, and the risk assessment was: 'Oh, what happens if there's a boat crash? Don't do a risk assessment there, because we probably haven't got the effective things in place. If you don't do the risk assessment, you won't have to come up with a plan.' We're doing the same thing here: if we don't do risk assessments, if we don't do this the right way, we can pretend there's not a problem. We're seeing what the consequences are: billions and billions of dollars, years spent on projects, and capabilities that aren't as advertised.

Senator Fawcett and I were having a chat the other day, and he was saying that Defence says, 'Trust us; we know what we're doing; it's like cooking a barbecue.' But Defence know nothing about the gas regulators. They know nothing about connecting the barbecue, forging the plate, connecting the valve—all these things. The war fighters say they know, but they don't know the detail of how this happens.

This is why it needs to be independent—so people can have a career doing their job properly without fear of lack of promotion, without being pressured into these things, and still keeping their standard of training. One of the things I read about in the dissenting report is the lack of ongoing training that's available for some of our people compared with the United States and compared with the United Kingdom. This would allow people to have a profession doing something they do well. It would make Defence actually address the risks, not ignore them. That doesn't mean you shouldn't buy the system, but you should go in with our eyes open; have contingencies in place, have coping mechanisms in place. If the risk analysis is going to affect the budget, allocate more budget, instead of blowing out. If it's going to affect capability, work out whether it is still the system for you. And if it's going to affect time, work out whether it's going to be needed and whether it's in fact going to be valid by the time it comes through.

That offset, the ability for people to just do that without pressure from the industry—let's get a project manager. Show them a project manager in Defence—once you get to a certain rank it's up or out; either you get promoted or you're out. That's what it gets to. If I'm running a project I'm not going to sit there and wait for a project of mine to go out the back door. I'm going to push for it. I'm going to run for it, because I want my career to progress. That's the pressure we all have.

And it's not just in the Australian military but in all militaries. I was reading in an article that around the world in defence procurement it's become acceptable for no projects to be done on time, under budget and with capability. Almost none of them are being done, but a way to improve it is what Senator Fawcett has come up with. And he's walked the walk on this. He's worked in the military. He's seen this firsthand. He's used, flown, operated these devices that are purchased. And back in my cadet reserve days we always joked that your equipment was built by the lowest bidder, and you had to operate it.

This legislation will mean the equipment will always work. It will always have a process where they have addressed the risks, where they've looked at the risks. When we talk about the Hunter frigates—again, colloquially, coming through—do they want to float or do they want to fight? At the moment it looks like they can do one or the other, and it's a real concern, for such a big project. They say that a big chunk of the blame lies with the coalition government, and that big chunk lies over there with the previous government. But all the chunks lie in Defence and their way of doing business as usual. This bill seeks to change that.

And from a management perspective, away from Defence, this is just corporate good governance. You can't mark your own homework and say you're doing well when the results are bad. Having an independent body with professionals looking at contracts, making it public or popularising it around the industry so you know what's going on, leads to better outcomes. It means you've got to potentially say, 'You're no Gordon Ramsay; your cake's going to be average.' Then you've got to ask: 'Do I go to cooking school? Do I buy better ingredients? Do I hire a chef to get the outcome we want?' So, when we go through these four core principles, independence is very key: do not be able to be pressured by the defence industry, do not be able to be pressured by the defence department to tick boxes that shouldn't be ticked. Competency, increased training, a career in doing what you want—meeting the benchmark for the international testing and evaluation process, I thought, was a big thing there that we don't do currently, because, if this is a profession that is recognised worldwide to train worldwide, we can learn competencies get better and they can be rewarded across that.

Transparency—what I went back to—the clear knowledge of what this project is, what it can do and what it can't do. It won't be perfect. We won't avoid other mistakes. There won't be other unforeseen devices, but we will know there's a risk. We'll know there's a chance, and it's about minimising that.

The two outcomes of all of this are one of two things. We save money in defence—we get things done on budget, we get things done quicker and we buy less things that don't work, so the taxpayers of Australia actually have more money, so that, dare I say, Senator Shoebridge, gets his wish of less money going into Defence and there's more money for other things—or Defence gets to get more things because they're more efficient. Both of which are very, very good outcomes.

I started by saying this is why I come to parliament. This is a bill that has no downsides—not one. Every outcome from this is good for Australia, Australia's defence, the Australian budget and the Australian war fighters. It balances a big bureaucracy in uniform against those interests because getting it wrong has unfortunately become business as usual in so many big contracts. To say we can redefine it and—what was Labor's claim? We can diminish its capability? Is something wrong? Yes, it's wrong. Senator Fawcett has had the guts not to sit back and try to defend what's happened, in the past when we were in government or they were in government before, but to say, 'This is the way forward. Let's make things better.' That's why we're here.

There is a quote from Senator Brown, where she's saying: 'The principles were not applied properly, and Defence was left to do it to themselves.' Yes, that's because they could. This means they can't. We aren't putting in rules that they can avoid. We aren't doing anything like this; we're actually talking about a way forward where there is accountability for these things—where we stop the BAU, where we stop the mates' rates and the conditions and the groups of people that get together and say this project has to go through. So I can't wait to vote for this. There is only upside if this is supported. The only reasons this wouldn't be supported are vested interests and pressure from the same groups that pressure the people who are doing testing and evaluation at the moment. That is, defence industry and defence headquarters.

Thank you for bringing this to the chamber. I think that Australia needs to have this happen. I think Australia's defence forces will be better for it, and we should all be looking for things like this we can do to make Australia's spending more efficient.

David Pocock (ACT, Independent) Share this | Link to this | Hansard source

I applaud Senator Fawcett for introducing this bill and pushing to improve defence procurement processes, and I thank him for his service in Defence before being elected by the people of South Australia to represent them in this place. Defence is the largest procuring Commonwealth agency—tens of billions of dollars a year. As we know, Defence spending as a proportion of GDP is often used as a marker of how seriously the government is taking national security, but throwing money at a problem doesn't always fix it and we've heard too many stories in this place about faulty procurement processes leading to huge sums of taxpayer dollars being spent on faulty equipment.

It's clear that it's not just money at stake here. I've had concerns about the procurement of the MRH-90 Taipan raised with me by people in Defence as an example of procurement gone wrong. Political decisions ahead of expert decisions are having grave consequences, lethal consequences. Defence personnel who are putting their bodies on the line for us should have confidence that the equipment that they are using is the best available and has been selected using transparent processes.

As other senators have highlighted, there's a long list of issues when it comes to defence procurement: the $2 billion worth of armoured vehicles with braking problems; the $45 billion Hunter frigate program, where ANAO was scathing of the procurement; and the $300 billion committed to nuclear submarines through a completely opaque process, with taxpayers footing the bill for a $835 million settlement paid to French company Naval Group along the way. And we do this while we're told we simply can't afford to increase the rate of welfare payments like JobSeeker to a level sufficient to lift thousands of Australian kids above the poverty line. My point is not that we need to spend less on defence; it's that we need to waste less on failed defence procurements and to spend more on genuinely building the capabilities we need. It's hard to see how more independent oversight, more rigorous risk assessments and more transparency around how decisions are made can possibly lead to worse outcomes here.

Many world-leading defence capabilities are being developed in Australia. But I've been told too many stories of Aussie companies struggling to get a foot in the door with Australian government procurement, being told point blank to go and win a contract overseas to prove themselves before the Australian government will consider using their products. Cutting-edge local defence companies are selling to foreign governments but not our own because our government deems making a better Aussie industry too risky. But perhaps assuming that big multinational primes can deliver better capabilities simply because we know their names is also too risky.

Based on value, roughly 20 per cent of defence contracts won by Australian companies are awarded to companies based here in the Canberra region. People set up in Canberra because they want to work collaboratively with government to deliver the best possible outcomes—and government should be working collaboratively with them. One way we can do this without giving rise to corrupting conflicts of interest is through independent oversight. I'm hearing from local firms that our defence industry is in serious danger; that there is insufficient clarity about the future pipeline of work; and that where new projects are on the table Australian companies are being used for the bits and pieces, with big multinationals brought in to do all the heavy lifting and to skim the cream off the top. I've heard from Canberra based companies who have won R&D contracts to help support the next generation of defence tech they are developing. When they bid for a contract to manufacture the products they've spent years researching and developing, they are overlooked in favour of a foreign company not because Australian companies are offering inferior or more expensive products but because of an inertia in the Australian procurement system that favours big, familiar suppliers. Great oversight and assurance of transparency in defence procurement can help break that inertia not by providing handouts but by spending more strategically, sensibly and transparently.

We need procurement reform to give our sovereign defence industry greater certainty and to help local firms build with confidence into the future. I thank Senator Fawcett for his work on this and for bringing this bill to the Senate.

Claire Chandler (Tasmania, Liberal Party, Shadow Assistant Minister for Foreign Affairs) Share this | Link to this | Hansard source

In the short time that I have, I rise to contribute to the debate on the Defence Capability Assurance and Oversight Bill 2023. I want to start by putting on the record my support for this bill, which has been put before the Senate by my colleague Senator Fawcett. I congratulate him on the hard work that has gone into developing this bill.

This bill was referred to the Senate Foreign Affairs, Defence and Trade Legislation Committee on 11 May this year, and the final report was tabled in this place just last week. I must say that it is disappointing that government members of that committee have recommended that the bill not be passed. This bill proposes a number of important reforms that should be considered in relation to Australia's future defence procurement and capability. Senator Fawcett and I both sit on that Senate committee which inquired into this bill, the Foreign Affairs, Defence and Trade Legislation Committee, and, following the evidence heard in the committee hearings, it is the view of coalition senators that this bill be amended and passed. Like I said, this is an excellent bill, and the Senate should be agreeing to it.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

As it is now 1.30, the debate is interrupted. I shall proceed to senators' statements.