Tuesday, 27 February 2007
Mr Acting Deputy President, I seek leave to speak for 20 minutes.
Tonight I wish to speak about a serious problem: the current Defence Capability Plan. This is the plan that supposedly guides the expenditure of some $55 billion of taxpayers’ money to purchase new defence acquisitions. This is the plan that supposedly ties major acquisitions with the associated new personnel requirements and guides the very important through-life support for the new acquisitions.
This plan is a mess. It is a mess because the Prime Minister and successive defence ministers have failed to do their job. They have failed to provide the top-down management of this crucial plan. The Defence Capability Plan was designed to bring strategic coherence, fiscal discipline and clear guidelines to the Department of Defence on how it should spend taxpayers’ money. But the Australian Strategic Policy Institute in its special report of January this year states: ‘The Defence Capability Plan has degenerated into a list of future investment projects.’
The responsibility for this lies with the Prime Minister and successive defence ministers. I say the Prime Minister because we all know that the Prime Minister likes to run defence. It is the Prime Minister that runs defence. It is Mr Howard who tells Dr Nelson what to do, just as he did with Robert Hill, Peter Reith, John Moore and Ian McLachlan. It is time that this government and the Prime Minister, Mr Howard, took responsibility for this mess of their own making.
The national government has sole responsibility—and a grave responsibility it is—to make sure that the ADF is properly equipped and supported to carry out its tasks through capability delivery and beyond. That is the government’s job and the Howard government has not delivered. Every defence acquisition failure hurts the ADF’s operational capabilities. Every failure wastes taxpayers’ dollars and every dollar wasted has to be replaced at some stage. Every dollar wasted represents a reduction in what ADF capability can be purchased or supported. Every dollar wasted is stolen from the future.
We are not talking here about small amounts of money that can be disguised as some inevitable departmental inefficiency or consequence of risk. The top 20 projects due for delivery in the Howard years represent in total in excess of $10 billion of taxpayers’ money. But now these projects will cost up to double that amount. The Howard government’s incompetence measure is up to $10 billion for these projects alone. Four of the 20 projects were cancelled. On average, each of the remaining programs will experience an overrun in excess of $600 million per program. These are staggering amounts. Let us look at three of the programs.
The Royal Australian Navy had six guided missile frigates, or FFGs. The decision was taken to upgrade their capability and performance. A contract was signed in 1999. The completion date for the first upgrade was to be August 2003. Project cost was about $900 million in 1999 prices. It is now 2007. The Navy has no operational upgraded FFGs. No-one can confidently predict a completion date for the upgrade, although the target seems to be late 2008. In other words, the project is at least five years late. During the acquisition phase, no doubt influenced by the increasing delays in delivery, the government announced the retirement of two of the FFGs. But Defence has purchased and paid for upgrade kits for all six ships. The contract price has so far not been successfully renegotiated. Are we getting a bargain? Four ships for the price of six! The contractor has received bonus payments in the order of $3.5 million as well as having been paid nearly 80 per cent of the original contract price. The Navy still does not have an upgraded operational FFG.
As a result of the government’s failure, Navy has not had the benefit of substantial capability improvement. By any standard, this program gets marked as a fail—a fail on cost management, a fail on timely delivery and a question mark on the completeness and effectiveness of the capability that may ultimately be delivered. In plain speak, the government has failed on time, cost and quality.
The second example is the infamous Seasprite helicopters. They form a vital part of the Anzac ships capability, extending the range of their eyes and ears and weapons systems. The ships are not fully effective without them. The Seasprites were planned for delivery in 2000 at a cost of $750 million. Their cost is now in the order of $1 billion and the intended capability has not been achieved. The helicopters remain in their hangars. Strong doubts exist as to whether the Navy’s operational requirements for the Seasprites can ever be achieved and, as a result, Minister Nelson directed a re-examination of the future of the whole program. Whatever the outcome of the review, this project must also be marked as a failure. Up to $1 billion has been wasted.
The last example is the upgrade of the RAAF’s FA18 fleet to incorporate vital capability enhancements. One element of the upgrade is a new radar warning receiver with a project cost of about $330 million. The government took a risk with the direction chosen for the radar warning system. Then, having taken that risk, they failed to properly control the project. The lack of effective control ultimately led to a belated decision to scrap the years of development work and, effectively, the government were forced to buy new kit ‘off the shelf’. Yet again the government get a fail on both time and cost. Quality of the product to be delivered for this project remains uncertain.
In announcing the government’s about-face on the radar warning system, the minister was reluctant to blame the contractor or exchange rate movements. The minister just dismissed this waste as an inevitable risk of leading-edge projects. Dr Nelson, the Minister for Defence, said:
... the Government is not and will not be risk averse in encouraging innovation and in obtaining the best capability. However, we have concluded that this technology cannot be delivered within the necessary timeframe.
The minister went on:
... the Government has now decided to fit the Raytheon ALR-67(v)3 RWR to the entire F/A- 1 8 fleet. The ALR-67(v)3 is already proven and operational in the United States’ F/A- 1 8 fleet, so there is low integration risk.
Granted, to maintain our superiority we need to stay leading-edge in critical areas of capability. Leading-edge projects have a degree of risk. However, in the case of the radar warning system, the government followed a leading-edge approach then decided that a low-risk option would suffice. This leaves unanswered questions. If the low-risk and proven solution can meet the ADF’s needs, why didn’t the government decide on that approach initially? Is this yet another capability compromise, necessary because of poor management by this government? In the interests of an informed public the minister ought to tell us up-front which projects fit in the ‘risky’ category, not use it as an excuse for failure.
So what has been the government’s response to the growing list of failed or failing major acquisition projects? Following a Senate committee inquiry in 2003, defence materiel acquisition was further assessed in the Kinnaird review. Despite the benefits of scrutiny by, and recommendations from, both the Senate Foreign Affairs, Defence and Trade Committee report on materiel acquisition and management in Defence and the Kinnaird review, defence acquisitions remain in crisis. Despite these valuable inquiries, the Howard government has failed to reform the process of acquisition and improve the support for delivered capability.
Not only has the government failed to fix the pre-Kinnaird problems, it has failed to deliver on the review’s recommendations. The government only effectively implemented some of the recommendations. And this is disastrous because the recommendations are inextricably interdependent and were never intended to be cherry-picked. The government may say that the DMO annual report 2005-2006 identifies some project performance improvements. I acknowledge and believe that these can be attributed to better management inside the DMO and reflect well on the work being done by the DMO management team.
However, critical issues continue around the government’s role in major acquisition performance. Nothing the government has done in response to the Senate committee or Kinnaird reviews has achieved the substantial and enduring change that the government trumpeted as necessary in promoting the establishment of the DMO as a prescribed agency. The government has failed to keep the Australian taxpayer fully informed of the status of major projects. Both reviews recommended that there should be more reporting by the government on the status of projects. Indeed, the Australian National Audit Office has recommended on several occasions that Defence should report annually to the parliament on the status of its projects. But this has not happened.
The government is also failing to acknowledge the downstream effects of its acquisition performance. Schedule overrun and delivery of reduced capability have a real impact. Cost overruns, whether they are associated with schedule problems or not, take money away from other worthwhile projects and take funds from future support for the delivered platforms and systems.
This government would do well to remember that every overrun on a major acquisition matters now, and will matter in the future. With these massive cost burdens on the defence budget, fewer capabilities can be acquired and fewer platforms and weapons systems can be supported. The impact will be felt for many years to come—and it will be felt on the ADF and on our defence personnel. Every acquisition failure, every cost overrun, every wasted dollar, is money stolen from the future. We owe the men and women who now—and who will in the future—defend and serve our country the best tools, the best weapons and equipment for that defence. We owe it to them not to squander the defence budget in waste and mismanagement.
I think it shows a remarkable audacity on behalf of a Labor Party senator to raise the issues of defence spending, Australia’s defence preparedness, the build-up of Australia’s defence readiness and the acquisition of materials by the Australian Defence Force. That is firstly because when Labor had the chance to be in power they ran down Australia’s defence preparedness, our defence capital and our defence forces in terms of their capabilities and of the size of the defence forces and, therefore, the contribution that those defence forces can make to securing Australia. Secondly, it shows an incredible lack of serious interest in defence for Senator Faulkner—who is now skulking out of the chamber, because he has more important things to do, no doubt—to raise the issue of defence in the adjournment debate at 10 minutes to nine on a Tuesday night.
I would welcome the Labor Party coming into this place and moving a serious motion on defence issues and debating defence on the floor of this chamber on any day. Let us have a serious debate. Let us talk about the defence budget. Let us talk about our defence preparedness. Let us talk about Australia’s contribution to the defence of the region, our participation in the Pacific region, our participation in the Middle East, our contribution in Afghanistan, our contribution to liberating the people of East Timor, our contribution to peacekeeping and, of course, the substantial increase in Australia’s defence preparedness through the contribution that the Howard-Costello team and the Australian government have made to building up Australia’s defence.
Australia’s defence was run down through the Hawke prime ministership and the Keating prime ministership; it sunk to the lowest levels. Yes, this Prime Minister, John Howard, has a very serious interest in defence. That is one of the few accurate things that Senator Faulkner said. Yes, our Prime Minister takes a serious and substantial interest in defence spending and Australia’s defence preparedness. He is acutely aware of it. He works very closely on it because he knows that the first responsibility of an Australian Prime Minister, the first responsibility of an Australian government, in a world that is very uncertain and threatened daily is protecting Australia and looking after Australia’s interests. And that is why the Prime Minister has—and why the coalition is so proud of him—ensured that we have rebuilt Australia’s defences. Yes, we have undertaken some of the largest defence contracts and defence procurement contracts ever entered into in Australia’s history. We are proud of that. They are very big projects, very big contracts, and they will contribute towards a safe and secure Australia.
What Senator Faulkner did—and I invite anyone to read what he said about the management of our procurement programs—is to put all of the blame on the defence minister and the Prime Minister for any contract that might go over budget. When he recognises, to his credit, that improvements have been made since Malcolm Kinnaird’s review, he gives all the credit to the personnel in the Defence Materiel Organisation, the DMO. I suggest to Senator Faulkner that when he criticises the defence purchasing arrangements of the Australian government what he really does is to criticise the entire defence organisation. He criticises the ADF and the DMO, he criticises the defence minister and he criticises the Prime Minister, but what he is doing—
I raise a point of order, Mr President. I think it is one thing for Senator Campbell to wax lyrical about the issues in Defence and to challenge the issues that Senator Faulkner raised in terms of what is occurring in defence procurement, but it is another thing to impute a motive to Senator Faulkner, which Senator Campbell just did and which is contrary to standing order 193(2).
I always try to be very careful in what I am saying. Senator Faulkner is quite happy to attribute blame to the Minister for Defence and the Prime Minister, but when he does that he in fact criticises all of those responsible for acquisitions of major capital items. Can I put some facts on the record—
I am quite happy to debate it with you, Senator Campbell, but you are imputing a point of view that Senator Faulkner raised about one section of Defence to his views about what the Prime Minister and the Minister for Defence are doing and to his views about other people in Defence. I think that is taking the point beyond the point of reason.
Yes, he has ruled against the point of order. I will now go on with the debate. I will make it quite clear, as a debating point, that I am happy for Senator George Campbell to get up and debate this. I invite the Labor Party, rather than raising this at 9 o’clock on a Tuesday night, to have a real debate about the defence of Australia and multibillion dollar defence projects. Why not have a real debate about defence? We will debate them anywhere, anytime. We know that Labor’s record on defence is appalling. It is a disgrace. We remember the Collins class submarine project. Whenever you think about the Labor Party and defence procurement in Australia, you think about the Collins class submarine project. It has taken a decade to clean up the mess made by gurus like Senator Robert Ray and the other former defence ministers, which created a disaster for Australia’s defence procurement.
Senator Faulkner and the Labor Party cannot have it both ways. They cannot say that the defence minister and the Prime Minister are responsible for some failures in defence procurement but that DMO personnel are responsible for all the improvements. That is the point I am making. You cannot say the minister is responsible for all the failures but the public servants are responsible for the improvements. When you attack defence procurement you attack the people responsible for it, and you cannot get away from that. Senator Faulkner is attacking the defence procurement of the Australian government, and that is the responsibility of hundreds of very decent Australians who work their guts out to ensure Australia is well defended. They are the ones Senator Faulkner is attacking, whether he likes it or not and whether his comrade Senator George Campbell wants to accept it or not. That is the reality of what Senator Faulkner does.
The reality of our projects is that there are no cost blowouts. Senator Faulkner has the audacity to come into this place and say that we are stealing from the future of Australia’s defence capability, when this government has been increasing defence spending year after year and when defence spending under Labor went down and down. The Labor Party talks about stealing from future generations. What happened when we came to power in 1996 and found Defence in a hopeless state—morale down and defence spending slashed year after year? We realised Australia had to rebuild its defences and we looked in the Treasury coffers. How do you rebuild the defence of Australia when you have inherited a Treasury which has been robbed to the tune of $96 billion and when the interest on the debt that the Labor Party ran up is in excess of billions of dollars a year? What did we do? We said that defence is important. We started ramping up defence spending. We had to cut expenditure across every single department of government because of the profligacy of Labor when they were running the Treasury. There was $96 billion of debt. So we started cutting expenditure in every single portfolio. Every single cut was opposed by the Labor Party, but we saved one department. Which one was that? It was Defence. We knew that the most crucial responsibility of the Australian government was to defend Australia. We quarantined Defence, and of course since then we have rebuilt defence expenditure. These people opposite talk about robbing future generations. They ran up debt to $96 billion.
Since July 2003 there has been just a three per cent increase in the real cost of major capital equipment projects. This compares very favourably with our defence counterparts in the United States and the United Kingdom. Let us get some facts for a change—we heard all the rhetoric from Senator Faulkner. Of 93 projects completed since July 2003, 10 required a budget increase and 51 of them achieved budget decreases—10 cost overruns, 51 below budget. Overall, the net variation in cost was just $36 million. Senator Faulkner would have you believe it was $10 billion—and this is from the people who borrowed $96 billion and put it on the bankcard. He talks about $10 billion, but the reality is that the net variation is just $36 million from a total of $5.5 billion.
Let us get this in context: a multibillion dollar increase in Australia’s defence procurement to give us the most historic increase in defence preparedness in Australia’s history. Senator Faulkner will not debate this during the day. He waits until 9 o’clock at night. What is the real increase? It is 0.65 per cent. Senator Faulkner should be ashamed of himself. His audacity knows no bounds. For the Labor Party to raise defence procurement, when they ran this country into debt and ran our defence down, is a joke. (Time expired)