Nick Xenophon (SA, Nick Xenophon Team) Share this | Hansard source

I move:

That the Senate take note of the explanation.

I fundamentally repudiate what the minister said at the conclusion of her speech. This is about ensuring accountability, about transparency, about making sure we maximise Australian industry involvement and making sure that our national security and sovereignty are not in any way compromised. To say that I, and Senator Carr and others, are somehow trying to jeopardise this program—on the contrary, we are trying to ensure its utmost success. The matter we're dealing with today is a serious national security and sovereignty matter involving $35 billion of public expenditure. I'll speak to this, but, before I move to my substantive concern, I wish to spell out to the minister my reservations in respect of the public interest immunity claim that she has made in relation to the tender and other documents that are subject to the order.

As a starting point in this discussion, government should be transparent in their policies—in the execution of their policies and in the way in which they spend taxpayers' money. Consistent with the need to be transparent, the Commonwealth Procurement Rules normally require tenderers to be published on AusTender, which any Australian citizen can gain access to. When I say 'normally', I'm talking about the default procurement method, being open tender. The minister makes a claim that tabling tender documents will affect the probity and integrity of a tender. That claim cannot stand, in my view. If that were the case, then all open tenders would be compromised. The Commonwealth runs tenders with the tender documents public all the time.

The future frigate tender released on 30 March 2017 was a limited tender; I acknowledge that. A limited tender occurs when an agency approaches only a limited number of suppliers. There is nothing in the Commonwealth Procurement Rules that prevent limited tenders being published. Indeed, the Commonwealth Procurement Rules certainly permit limited tender documents being published. Again, I do not believe that is a credible claim by the minister. The fact that all three designers have access to the tender documents—as does Defence—means that the release of the tender documents cannot disrupt the process. It simply lets the public see what the designers already have—not the responses, but what the designers have been given.

The minister also makes a claim that release of the documents relating to industry will cause damage to Australia's international relations. It beggars belief that details of how Australian industry will be used, how ASC might be used and how facilities at Techport might be used could in some way affect international relations. I've sought the same details from Defence under FOI. After consideration by officials, no claim of harm to international relations has been advanced by the department. Again, that is a claim that is not credible.

Finally, the minister makes a claim that release of the documents will harm national security. The order for production of documents only sought unclassified information which, by definition, cannot harm national security if released. The minister made a claim about an unclassified future frigate document in the chamber on 16 July that 'sensitive tender information has been released'. The minister needs to understand that in this case we're talking about unclassified documents. 'Unclassified' means exactly that: unclassified are not harmful to national security. It may be embarrassing, but it is not harmful to national security. So I think that there is a duty for these documents to be tabled—and I again urge the minister to table the documents.

I now move to the more substantive issue of the future frigate program and why it is most reasonable for the Senate to require examination of the program. What we have learnt of the government's plans, through the brave actions of a whistleblower, who only has regard to the proper implementation of sovereign continuous naval shipbuilding program, is, I believe, scandalous. Two Australian naval shipyards, ASC and Austal, have been locked out of any leadership and management role of Australia's $35 billion future frigate program.

When it comes to ASC and Austal, let's put this on record: ASC are a world-class shipbuilding operation. They've been building some of the most complex steel-hulled surface combatants in the world. They have deployed significant expertise and capability, with robust skills in engineering, planning, supply chain manufacturing, tests and activation. The company did have some problems with the first air warfare destroyer. That is not surprising. The AWD build was commenced from a greenfield site. However, learning from the experience, ASC have come ahead in leaps and bounds. From testimony at May estimates, ship 2 was 89 per cent complete and was 40 per cent less expensive for ASC's scope of work than ship 1. Ship 3 was over 50 per cent complete and was travelling at 38 per cent less expensive than ship 2.

ASC have been recently benchmarked by Booz Allan Hamilton and are approaching worldwide benchmarks on major elements of their shipbuilding value stream. The European shipbuilding industry took 100 years to get to that point. The American shipbuilding industry has taken 50 years to get to that point. In this regard, ASC's achievements are nothing short of remarkable. It's a credit to the management at ASC, the workforce and the supply chain. ASC Shipbuilding are continuing to deliver value to the Commonwealth and for the wider Australian industry and economy.

Austal are the largest aluminium shipbuilder in the world. Last year, Austal delivered 10 ships all around the world. They have 14 other ships in construction right now. Some of these ships are as big as, and bigger than, the ships being proposed by the Navy for its future frigate program. In the United States, Austal are the only company since American independence that has ever designed and built ships for the United States Navy that is not a US based company. In fact, they design and build two classes of ships for the United States Navy. No-one else in the world has ever done that, whether they be British, Spanish or Italian.

So, I just don't get it. We have these two experienced, efficient and highly regarded naval shipbuilders in this country, and yet the government has decided specifically that the management and supervision of the $35 billion future frigate program is to be given to either BAE of the UK, Fincantieri of Italy or Navantia, in Spain. I believe it shows a totally unwarranted lack of confidence in Australia's industrial capacity and is, frankly, just not right. That's not what the tender says, but we found out on Friday that Defence doesn't seem to know what `sovereign' means. At Friday's economics committee hearing into the future of Australia's naval shipbuilding, Defence, in response to a question from Senator Carr, said:

Later on this year the government will be releasing its defence industrial capability plan, which includes the Sovereign Industrial Capabilities requirement, in which the government will make some choices about what sovereignty means in terms of a sovereign Australian company. I am not in a position to give you an answer on that until such time as the government has had a chance to consider advice from the department and make some choices about that.

The reality is that foreigners will take the lead and control the future frigate program in terms of filling the key management positions, determining Australian industry involvement, controlling the intellectual property and determining the shipyards' strategic direction. For instance, will Australia export from the Australian yards? I've got no problems with foreigners contributing to this program, their input is both necessary and welcome, but this is an Australian naval shipbuilding program and Australians must be at the helm.

One of the four core strategic industry policy goals mentioned in the Naval Shipbuilding Plan is to 'promote a highly resilient, sustainable, and innovative industry through defence exports, growth and employment'. This is a critically important aim point. European and US defence industries are dedicated to this aim. In Europe, on average, 50 per cent of their defence industry is dedicated to exports. In Italy, which has a defence procurement budget very similar in size to Australia's, 80 per cent of their industry is dedicated to exports. This is only achievable because they have a strong sovereign local capability. Apart from a strong sovereign local capability, it is a critical pre-condition for defence exporting to have the imprimatur of the home government.

When the CEO of Austal travels, he is often asked, as came out last Friday, 'What is the credibility of Austal to build these ships?' He says two things to them. One is, 'I sell ships to the United States Navy that meet the full and exacting demands of the United States government.' The other is, 'I build and design ships for the Australian government that meet Australian demands as well.' In many countries that's as big a tick as you can possibly give. Austal are currently building our Navy's Pacific patrol boats for the Commonwealth. They are, it now turns out, getting interest from Hong Kong. In a recent visit to Hong Kong, representatives told Austal:

If it's designed in Australia under the guise of the Australian government, if it's accepted by the Australian neighbours … then for us in Hong Kong that is acceptable.

Having procurement backing from the Australian government through the Australian shipbuilders gives Austal the imprimatur and confidence to promote export opportunities overseas.

Exports create many more jobs for Australians than the Royal Australian Navy programs alone. These programs are the bedrock on which the industry will continue to build. Austal has created thousands of jobs, and thousands of apprentices have gone through Austal over the last 30 years—not based on Australian programs, which have been a relatively small part of their business, but based on their industrial success in exports overseas. At the committee hearing last Friday I asked Austal:

What is at stake here in terms of sovereign shipbuilding capability, having the ability to be the primes, unlike the RFT, which basically shuts you and ASC out? You're saying that what is at stake here are literally thousands of additional Australian jobs in this country.

Their answer was between 8,000 and 10,000 jobs. History shows we can do this. The Navy's Fremantle class patrol boats, its Durance class supply ships, the Antarctic Division's icebreaker—Aurora Australisthe Anzac class frigates, the Armidale class patrol boats, the Collins class submarines and the air warfare destroyers were all built in Australia by Australian companies as primes. I'm concerned that we're casting aside that history—our supply ships build has been exported to Spain; our icebreaker is being built offshore in Romania; our Future Submarines are being built by a French company, albeit here; and our future frigates will be built by a British, an Italian or a Spanish company. That offshoring, in terms of the primes, is very concerning. This is not acceptable. We are supposed to be building a world-class sovereign shipbuilding base which will support thousands of long-term, high-quality jobs directly and thousands more through the supply chain. More importantly, we are supposed to be building an industry base that supports our sailors at sea in times of peace or conflict.

From an Australian industry perspective, this decision will see the two local shipbuilders placed in the shadows of new invitee foreign shipyards. I fear that ASC will wither away as a result. Austal may survive, but certainly it will not thrive as much as it could have. Strategically this is a big deal. This is about $35 billion dollars of taxpayer expenditure, it is about national security, our sovereignty, and it is about an extra 8,000 to 10,000 Australian jobs. We have not asked the minister to table the response of BAE Systems, or Fincantieri or Navantia. We are simply asking the government to be transparent as to how the program will be managed and how sovereign capability will be achieved. There is an urgent need for Defence Industry Minister Pyne and the federal government to re-initiate the future frigate tender to permit Australian shipyards to take the lead role in the ship build. The future frigate tender is fundamentally flawed in its current form. I believe it is strategically inept, and it compromises our sovereign capability. It is certainly not Australian to lock out our own industry from taking a lead role in what is being claimed to be an Australian sovereign program.