Mike Kelly (Eden-Monaro, Australian Labor Party) Share this | Hansard source

I rise to talk on Appropriation Bill (No. 1) 2017-2018 specifically in the context of the Defence appropriations. This is also in the context of the cumulative effect of the budgets during this coalition government. Labor have always said and continue to say that we would be very keen to make sure that cooperation in this place is bipartisan. We all across the chamber, I think, believe in the concept of bipartisanship on national security. Certainly my colleague here in the chamber with me and other members of the coalition and Labor enact that in the context of the Parliamentary Joint Committee on Intelligence and Security in a very effective way.

I think, however, we have all been disturbed—including, I think, the public and members of the coalition as well—about the degree to which the current Minister for Defence Industry has attempted to politicise this space. He has made some quite outrageous assertions in that context. Certainly I think we could do a lot better when it comes to a minister in that space, and there are many candidates on the coalition side I could suggest, including yourself, Mr Deputy Speaker Buchholz. What we have seen in this four years has been chaos, confusion and dysfunction in the portfolio. We have had three different ministers—and a fourth seems to be on the way, if you believe the reporting. They have included David 'Canoe' Johnston, who had particular issues. I know part of his problem was dealing with the PMO at the time as well. He was hindered by that relationship with the PMO.

What we have seen is a distortion of the history. Across governments there are always issues with Defence procurement and managing highly complex platforms and technologies. Getting that right has always been a challenge for governments of all colours. So it is not just one government that tends to have these problems but many governments over a long period of time when it comes to managing projects that straddle governments.

The few that I am particularly concerned about getting the record straight on include Land 400, which is the project to replace our armoured vehicle capabilities—the combat reconnaissance vehicle and the infantry fighting vehicle. We have also seen issues to do with shipbuilding projects of concern. When we attained government in 2007 we discovered there were about 21 projects that were in serious management crisis and had serious issues. So we had to create a projects-of-concern process to manage that. By the time we left government, we had managed to remediate that down to about six projects.

But there have been significant disasters, such as the Seasprite, which involved the expenditure of $1.4 billion of public money for an aircraft that we did not get any flying time out of at all and which had to be abandoned completely. Labor remediated that by getting the Seahawk Romeos on board, which are world-leading aircraft now being deployed. There was also a landing craft disaster where $40 million was spent on landing craft that did not fit any vessel we owned at the time or any vessel we were going to acquire. That was quite extraordinary. Of course, they have been dispensed with as well.

But I am particularly concerned about Land 400 and the process for that that is underway at the moment. Under Labor's plan for Land 400 we were going to acquire 1,100 vehicles. We would have been through first-pass approval in March or April 2014. We have had the situation where not only has that time line slipped significantly but also the concept of the two phases—phase 2, the combat reconnaissance vehicle, and phase 3, the infantry fighting vehicle—which were linked under Labor for the benefit of the synergies and the involvement of Australian industry and the possibilities of the two platforms being quite related was abandoned under the Abbott administration, which split those two phases for some unknown reason and pushed phase 3 way out beyond the time lines that were feasible and credible.

For those who do not understand that fact: it is the issue that relates to the fact that the M113s are Vietnam-era platforms, and many could argue they are actually beyond their use-by date now. In fact, you could make the argument that they are not deployable, because they cannot survive in the current complex environments of improvised explosive devices and the like. So we are really now expecting to push those out well beyond a lifetime that is sustainable.

The other issue is the reduction in numbers. As I mentioned, Labor had set a 1,100 target, which related to the current usage of combat reconnaissance vehicles and the ASLAVs and the M113 numbers. Now, the ASLAVs have been flogged in recent operational deployments, from Timor to Afghanistan to Iraq et cetera. They are one of the most utilised platforms in the ADF inventory, now well and truly feeling their age and use, and will probably not be able to be used beyond 2021. We have seen the numbers in the combat reconnaissance vehicle aspect of that project drop from the 253 ASLAVs we currently have down to 225, and the numbers just keep falling in this space, so that is also of great concern.

There is more I could say about Land 400, but hopefully we will determine more out of the Senate estimates process coming up this week. I am greatly concerned that really good defence industries in Australia have been excluded from that participation. Why EOS, a great company that does world-leading remote weapons stations, was excluded from competition in this space I have no idea. It has led to a great deal of anger amongst authorities like Lieutenant General Leahy and others, who well understand this project. Elphinstone in Tasmania, which do fantastic metal bending, really should have been proactively and aggressively worked into this project. Two final bids have been accepted. It is really inexplicable why the GDLS-Thales bid and the Elbit TERREX bid were excluded from competition as well. Much more will need to be explained about that. Also, the lack of numbers in this budget over the forward estimates for Land 400 is mystifying.

Also, I want to address specifically the Minister for Defence Industry's statements that Labor did not commission a single local construction of a vessel in the six years that we were in government. This is incredibly misleading about what it takes to do major fleet unit projects in this nation or anywhere. It takes many, many years of planning and process. Just take for example the Collins project. In replacing the Oberon submarines, the process actually began in 1978. We finally got around to building the actual facilities for the Collins through that 1987 to 1990 period, and construction of the submarines began in 1990. That gives you an idea of the length of the process.

Now, to bell the cat on that, this is the government's own Naval Shipbuilding Plan, and I refer to what it says there about the 12 Future Submarines project, which it discusses, in terms of the truth about those time lines. It says, effectively:

The length of a submarine construction process means that Australia will need to be planning for the follow-on submarine capability well before the twelfth future submarine enters service.

That is the truth of submarine construction, so planning for the replacement of the Collins should have begun well before the last boat hit the water in that 2001 to 2003 period. When we got to government in 2007, absolutely no work had been done on the replacement of the Collins. We also found that there had been no investment in sustainment and maintenance of the Collins, so we were hard pressed to keep one vessel in the water.

We immediately threw $700 million at remediating that sustainment and maintenance issue and got up to very good standards of availability. Also, through that process we delved into issues to do with deep-cycle maintenance and improving that, including hull-cutting techniques and the like, which have placed us well for moving into Future Submarine construction. But trying to claim that nothing was done in that six years—it is a complete myth and a falsehood. Apart from the sustainment and maintenance issue that we addressed, we immediately looked at what needed to be done to replace the Collins.

The first part of that process was to do the service-life evaluation program for the Collins submarine, to work out how long we had with the Collins and whether we could do a local build or we would be forced into a military off-the-shelf purchase. At the same time, we did a due-diligence study of those military off-the-shelf options. We discovered, looking at programs like the Ohio class submarine program in the United States, that, yes, we could get quite a few extra seven-year cycles out of the Collins. With the Ohio class, for example, they extended that program by 10 years. So we knew we could cope with that by extending the life of the Collins.

We immediately then engaged in selecting the combat system—the AN/BYG-1 combat system—which the government has proceeded with, as well. The other aspect—the key aspect that you build a boat around, aside from the combat system—is propulsion, so we immediately set funds aside to do a land based propulsion testing facility to progress that aspect of the project. We also allocated $266 million in the 2013 budget to fund 85 separate activities and contracts to get the whole submarine process rolling. We had Prime Minister Abbott coming in with his famous 'captain's pick' process, wanting to go with a Japanese submarine off the shelf, and was trying to reverse-engineer all of these processes around achieving that, simply because of some vague relationship, or other issues—a submarine that was not suitable for Australian operational demands, requirements and environments. So that just 'blew out of the water', to coin a phrase, the whole process and effectively delayed it by four years.

The competitive evaluation process, we will say, has managed to finally get things on track, and we won't take issue with the selection there, in terms of the technical capabilities of the Barracuda—the DCNS proposal—and we are hoping that that project works out all right. But there are now many question marks around the huge problem that has been created for us in the loss of skills and industrial capacity—industrial capacity that we spent $1 billion remediating. Just to back-track a bit there, for the benefit of history I might also correct some of Minister Pyne's assertions, in that it was Labor that created a modern shipbuilding capacity in Australia by bringing home the last two of the Adelaide class Perry frigates to be built in this country, which then rolled into the construction of the Anzac frigates, which was a great success story and built tremendous capacity in this country. Then, of course, it rolled into the Collins submarine, which set this country up very well in that space as well. These are very complicated systems we are talking about here, in terms of naval architecture, systems management, systems integration and engineering skills. All of that was lost because nothing was done through that period from the construction of the last Anzacs and the last submarines. So we lost a great deal of capacity.

Labor mediated that capacity and got the workforce back up to over 4,000 skilled workers. We made tremendous gains in productivity and quality, and the fact that we were maintaining yards in Newcastle and Melbourne helped us to manage that process. So, when we ran into quality or productivity issues or workload issues we were able to shift blocks around yards, initially take blocks away from BAE while they built up and remediated productivity and quality and then, when workflow became a problem for Forgacs, giving four blocks back to BAE in Melbourne.

What we are facing now is this so-called 'valley of death' issue. Labor had fully intended to address that, and, of course, we produced only shipbuilding planned that was a far more substantial document then this pamphlet I am holding in which, if you go through it, I counted there are at least nine repetitions of paragraphs in it to flesh it out. If you come from a military background and read this, you say, 'That, my friend, is not a plan.' There are a lot of motherhood statements and flagging of skills issues, which would not have existed if the government of Prime Minister Abbott had simply picked up the shipbuilding plan and run with it, because in here we flagged the necessity to move towards a continuous rolling build, which creates efficiencies for the long-term and saves, as flagged in this document I have, tens of billions of dollars for the Australian taxpayer. But those skills have bled out. We were going to address that, particularly by moving forward with an immediate build of the supply vessels. The supply vessels could have been built here. In fact, I have the written recommendations from the Department of Defence to me, which said that 'a full in-country build for this project could provide critical workflow to Australia's naval shipbuilding sector, all across three shipyards, avoiding the costly decline of specialist skills between completion of the LHD and AWD projects and the start of the future submarine'. They said, 'actually moving ahead with this project, not only could we do it we should, because'—and they say it here in this optimisation plan—'it could overcome the imminent impact of the valley of death on the sustainability of the national shipbuilding industry and retention of critical skills. There are no known reasons why either design that we were contemplating at the time could not be entirely built in Australia.' What happened? Obviously, Prime Minister Abbott, in another captain's pick saga, decided he wanted to mend fences with Korea, which he had annoyed over another aspect, which I cannot go into the details of, and also to secure the free trade agreement, decided to ask them to build a Spanish design in Korea, which was crazy in itself. Of course, when Prime Minister Abbott was moved on, the government quite rightly said: 'Well, we won't do that. Let's ask the Spaniards to build a Spanish vessel.' That did make more sense.

However, we are still seeing the consequences now of not pushing forward with those massive vessels, over 20,000 tonnes, which would have pushed us into a whole new category of capability in shipbuilding and, as I mentioned, bridged that valley of death, saving us tens of billions of dollars. As indicated in these plans, when you go back to cold starts in shipbuilding, you are causing yourself a world of grief, and it poses serious questions over the time lines and the skills approach that the government will take. There is a much greater need for an aggressive approach to that skills issue. With the attacks that have been made on TAFEs, the skills needs out there and the time lines that are spelled out there, when we are talking about engaging in a future frigate project, for example, in 2020, there are serious questions marks over whether that will be met. So this is a budget that continues a tradition, and a bad one.

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