Wednesday, 11 September 2019
Statements by Senators
I rise today to talk about a total failure by the government in respect of the local content component of our most expensive Defence project, the Future Submarine project. I have established through questions on notice that local content for future submarines is currently running at around 30 per cent. I've given Defence an opportunity to rebut that number. I quote from the Hansard of the April estimates:
I'm open to someone at the table saying, 'You're wrong.' I'm saying that these are rough. I accept that it might be 35 per cent, or it might be 25 per cent. But the reasonable assumption to make is that Naval Group will do most of the design work in France. I invite the officials to rebut that on notice and say, 'No, Senator, you're wrong; it's a better number,' or, 'It's a worse number.'
They haven't done that. We're running at 30 per cent. That's a long way from the 90 per cent indicated by the CEO of Naval Group at the time of the competition, when Mr Sean Costello said in an October 2015 media release:
Under a hybrid build, the percentage of local content would be over 70 per cent and for an onshore build over 90 per cent.
That is what DCNS said at the time. Then, of course, Mr Pyne, the then defence industry minister, stated on Q&A during the 2016 election campaign:
DCNS has admitted that probably less than 10 per cent of the work will be done outside of Australia.
This was the basis of the government, in their decision-making process, selecting Naval Group. Then, in April 2017, there was a walk back. Mr Pyne walked it back down to 60 per cent:
I've always said from the very beginning of the project, once I've secured it for South Australia, that a local build meant around 60 per cent of the project.
So we've lost 30 per cent, just like that. He reiterated that back in December 2018:
Well, this will be a local build. A local build is defined as being around 60 per cent-plus. That's what we've achieved on the Collins class.
The government's new position is: 'We're not specifying a figure. We're just going to maximum local content'—whatever that means. What we do know is, right now, it is an atrocious 30 per cent.
Well, I have something to inform the Senate of, something that the government has been using all possible measures to keep hidden from Australian industry. As a private citizen, as Mr Rex Patrick, I have been FOI-ing Defence. This is important to what I'm going to say later: FOI is a separate process to Senate processes. I'm treated no differently as a senator than I would be as Mr Smith from anywhere around this country. It is a right that Australians are afforded under law to seek information under FOI.
Under FOI, I asked for the Australian Industry Plan that was submitted by DCNS, when they were making their offer to the Australian government. In effect, I was asking for what they committed to when they submitted their tender. Well, the first response I got from Defence was: 'The document doesn't exist. There's no such document.' Of course, I challenged that. And a document was released with a number of exemptions. I have challenged those exemptions. I've spent a year with the Information Commissioner, beating down the government's bogus claims about exemptions, and I'm happy to report that I have been successful in my endeavours to get the exemptions overruled. The Information Commissioner ordered in June that the department release the document to me in full.
The contents of this document are so embarrassing to the government that they've appealed that decision to try to stop me getting access to it. So we're now in the AAT with the government trying to fight me getting access to what it was that Naval Group offered. As a Senator, I'm going to reveal what that document says. I'm going to reveal the content of that document. In some sense, I've already done it, because it is in a question on notice that is before the Senate at the moment on the Notice Paper. In paragraph 5.5 of DCNS's submission to the government, they said:
DCNS proposes a contractual program delivery model for Australian build activities that includes a partnership with ASC Pty Ltd.
DCNS wanted to partner with ASC such they could get access to their supply chains, to make sure they maximised local content. The document goes on further to say, at paragraph 5.6 of the industry plan:
The supply chain formed for Critical and Main equipment will ship to the selected integration facility associated with the build option. This method creates the optimum solution between maximisation of Australian industry involvement, and cost and risk to the build program.
Now here is the important part. Naval Group made these assumptions:
And yet at estimates I've asked Defence, 'What have you contracted?' And they haven't contracted anything. I've asked the secretary, 'Why haven't you?' And he has put up his hands and said, 'That's a question for government.' So I asked the foreign minister in a question on notice:
Were you ever made aware of these 50% and 100% targets when you were the Defence Minister—
because she has been in this place telling us the 'maximum content' line that the government chooses to adopt now—
If so, how were these targets factored into answers you provided to the Senate in the 45th Parliament in respect of questions relating to future submarine local content.
I can tell the Senate that the minister has now answered. She has now provided a sadly bureaucratically drafted answer which reads as follows:
The information to which Senator Patrick refers was the subject of a Freedom of Information request to the Department of Defence. The request is currently subject to consideration by the Administrative Appeals Tribunal. As such, it would not be appropriate for me to comment.
What a disgrace.
We need to separate out what Mr Rex Patrick asked for, under FOI—and he is entitled to go through a process and the government's entitled to appeal—and what Senator Rex Patrick does in this chamber. Under the Westminster system of government I absolutely have the right, on behalf of my constituents, to ask a minister a question, lay it out and get an answer and not have the minister hide behind a bureaucratic process that fails to recognise the separation between what a minister is responsible for in respect of a senator and what a department might be responsible for in relation to Mr Rex Patrick. It's a disgraceful answer. It's there. You're trying to hide the fact that you have mucked this up, and Australian industry will suffer because of it.
People in this place know that I don't lie down easily on these sorts of things. I am entitled to an answer to this question and I will use various methods over the coming months to make sure the government is held to account in respect of this and to make sure I get the right answers. This is a total disgrace by the Morrison government. It's a sell-out of Australian industry. We have a situation where an offer was made under tender and the government presumably assessed that offer. We now need to understand: after the DCNS—or now Naval Group—were nominated as the preferred tenderer and they worked towards contractual negotiations, who walked away? Was it Naval Group that walked away from this 50 per cent secondary equipment commitment and this 100 per cent standard equipment commitment, or was it Defence that simply decided not to contract it in? It was in Naval Group's offer. Why have we walked away from Australian industry involvement in this program? We are running at 30 per cent, and this is a disgrace.