Minister for Defence – Speech – RUSI Submarine Summit – 25 March 2015

Distinguished guests, industry leaders, thank you for this opportunity.

It is a great pleasure to address the Royal United Services Institute, one of the great contributors to the national security debate in Australia.

This is a wonderful forum for the discussion of defence and security issues affecting our nation.

It is timely, that today I have been asked to speak on ‘Defining the Right Capability for Australia’.

THE DEFENCE WHITE PAPER

The new Defence White Paper will be released in the second half of this year. It will outline the tasks the Government expects of Defence, set out a credible force structure to achieve those tasks, and lay out how all this can be achieved with the resources available.

The Government’s decisions in the White Paper will guide Australia’s defence capability for the coming decades.

The White Paper will include a comprehensive review of Australia’s strategic environment, including the changes underway in our region and across the globe, and the implications of these changes for Australia.

It will give substance to the principle that the primary purpose of the ADF and Defence is to secure Australia and to shape Australia’s strategic environment in support of our national interests.

The White Paper will be a whole-of-government product. It will focus on Defence’s role as an element of a broader national approach, alongside our diplomatic, trade, policing and aid efforts. And it will reflect the Government’s overall strategic, fiscal and broader policy priorities.

Since the White Paper was announced last year, the Department of Defence, supported by an external Expert Panel, has been consulting with industry, the public, and Australia’s international partners to deliver a plan to achieve Australia’s defence and national security objectives.

FORCE STRUCTURE REVIEW

A fully-costed Force Structure Review will underpin the White Paper. The Force Structure Review will assess Defence’s future capability needs and propose a force structure that addresses Australia’s defence objectives within an agreed allocation of funding.

In conjunction with the release of the White Paper, Defence will publish a fully-costed 10-year Defence Capability Plan and a Defence Industry Policy Statement.

NAVAL SHIPBUILDING

An enterprise-level Naval Shipbuilding Plan is also being developed, and together these policies and plans will ensure that Australia has a sustainable and viable ship building industry.

The shipbuilding plan will provide for the long-term future of the Australian naval shipbuilding industry, and we are committed to continue to work with the industry to achieve that.

For its part, the Government will provide greater certainty to industry about key priorities and timeframes.

On Defence’s side there needs to be improvements to acquisition practices to have more mature designs at the start of production and minimise changes during construction.

However in return, Government has an expectation that, and the ADF has a critical need for, the Australian shipbuilding industry to become more productive.

This is the clear message from the Winter-White Review into the Air Warfare Destroyer Program.

THE VALLEY OF DEATH

The Government wants there to be a sustainable naval shipbuilding industry in Australia.

Furthermore, the Government has a vision for a long term, efficient and productive maritime industry in Australia which will provide high skilled jobs for young Australians for decades to come.

When we came to office in 2013 we discovered that the previous Government had no commitment and no plan for the future of the Australian naval ship building industry.

The previous Government, through a lack of decision making, left the Australian naval ship building industry in a precarious and uncertain state.

The ‘valley of death’ for the naval ship building industry – which will soon be upon us – could have been avoided.

Decisions on the replacement frigates for the ANZAC fleet could have and should have been taken during the previous Government’s six years in office.

The job losses that are now occurring in the naval ship building industry could have been avoided if the previous Government had made the necessary decisions.

The only way Australia can continue to have a naval ship building industry is if the industry is properly structured to drive efficiencies and improve productivity. This will require hard decisions and a commitment to a productivity-based culture.

A SUSTAINABLE NAVAL SHIPBUILDING INDUSTRY

To guide industry’s efforts to become more productive, the Government’s Naval Shipbuilding Plan will provide a clear and sustainable path for the industry to:

  • Support the strategic and capability needs of Defence;
  • Deliver value for money;
  • Build commercial confidence; and
  • Promote the use of global best practice

In doing so, the Naval Shipbuilding Plan will ensure that opportunities remain available for competitive Australian businesses to participate in future naval shipbuilding, sustainment and upgrade projects.

In addition to a partnership with industry, it is my belief that the delivery of defence capability depends on the development and deployment of well-trained, highly skilled and motivated people, both in the Services and in the Department.

Defence must be fit for purpose and able to promptly respond to future challenges.

This is why the Government directed the First Principles Review – because we want to ensure that the Defence organisation can and will deliver on the strategy and capabilities that will be outlined in the White Paper and Force Structure Review.

This is a busy time for Defence, especially as the ADF is embarking on a period of significant modernisation and acquisition projects.

Investment by the Government will provide Defence with a stable and sustainable funding growth path, which was left unachievable by the previous government.

We remain committed to lifting our Nation’s Defence budget to two percent of GDP by 2023-24 to maintain a strong and capable Australian Defence Force.

Building a strong and prosperous economy and a safe and secure Australia, is the Government’s number one responsibility and priority.

FUTURE SUBMARINES – STRATEGIC NEED

Submarines are the most complicated, sensitive and expensive Defence capability acquisition a Government can make in meeting that responsibility.

An effective submarine capability plays a critical role in Australia’s defence in conjunction with all Australian Defence Force elements.

I have previously stated – as a Government and as a nation, we have one chance to get this decision right.

Because of the previous government’s refusal for 6 years to make a decision on the replacement for the Collins class submarines, we had a looming security and capability gap arriving in about ten years.

The process that I recently announced is the best way forward to ensure that such a gap will not occur, simultaneously delivering the best possible capability to the ADF and value for money to Australian taxpayers.

Geographically we are an island continent, the world’s sixth largest country by area. This unique geography means we have special requirements for Australia’s future submarines.

Australia’s national security and our $1.6 trillion dollar economy rely on the unencumbered use of the sea.

Seventy per cent of Australia’s exported goods and services, by value, travel by sea, an export trade worth more than $220 billion in 2012-13. We are a maritime nation and we need maritime security.

By 2030, half of the world’s submarines will be in Australia’s broader strategic region. The Indo-Pacific region has some of the fastest growing economies in the world and the demand for defence technology to safeguard the region’s prosperity and security is ever increasing.

The future submarine programme represent a $50 billion investment in Australia’s safety and security – the largest Defence procurement in Australia’s history – with up to two thirds of this investment being spent in Australia during the lifetime of the future submarine.

To the average Australian taxpayer this may seem to be a huge price to be paid for a capability that may never be used in anger.

But that cost also needs to be measured against the major investment that would need to be made by any adversary to counter the effect of our submarines.

The complexity of Australia’s strategic environment means our defence planning has to cater for a range of possible contingencies, but particularly focussed on maintaining stability in our region and ensuring that conflict doesn’t have the chance to start. So submarines remain a logical and necessary investment in Australia’s wider defence capability.

And for this reason, Australia’s future submarine must give us a significant capability edge in our region as well as meet our needs in respect of geography and strategic outlook.

We need submarines capable of operations at long range over extended periods because they defend our interests far from our shores. The range and endurance must be similar to that of the Collins class submarine.

They are an essential part of our national security capability.

Another key strategic requirement for our Future Submarines includes sensor performance and characteristics that are superior to that of the Collins class submarine.

We need the sovereign ability to maintain the future submarine over coming decades, including repairs, modifications and certifying it as safe for use.

AUSTRALIAN INDUSTRY INVOLVEMENT

Now I acknowledge that – in recent times – there has been some anxiety about the future submarine programme.

This is why I announced the acquisition strategy in February – to provide a pathway for Australian industry to maximise its involvement in the program, whilst not compromising capability, cost, program schedule or risk.

The Government supports local industry and recognises how valuable it is to our nation. As Minister for Defence, I want to see a sustainable and viable industry better able to support Defence.

In 2014-15 financial year, Defence expects to spend $6.2 billion on equipment acquisition and support in Australia.

This equates to around 53 per cent of the military equipment acquisition and support expenditure this year, and is consistent with long-term averages of between 50 and 55 per cent being spent in Australia.

The Government does support local Defence industry.

When it comes to making decisions on Defence capability, the needs of the Australian Defence Force will – must – always come first.

The Government will acquire Defence capability that supports ADF requirements first and Australian industry can play a very significant role in this process.

Our sailors, soldiers or airmen and women need the right equipment and industry needs to demonstrate that they are world leaders, producing the best product at the best price.

SUBMARINES AND DEFENCE INDUSTRY

When it comes to Future Submarines, Australian industry will play an important role in delivering the best possible equipment at the best value for money.  

There will be many new high-skill jobs in Australia for the life of the Submarine program, decades into the future.

Significant work will be undertaken in Australia during the build phase. At a minimum, this includes combat system integration, design assurance and land-based testing.

There will be significant opportunities arising from the support and maintenance of the submarine for decades. In dollar terms, this often accounts for two-thirds of the investment.

All three potential international partners will require significant redesign work to be undertaken on their existing submarines. There are opportunities here for Australia.  

I want to make it clear – that maintenance can occur in Australia, even if there is an overseas build. The important consideration, and a lesson from Collins, is to ensure that maintenance and knowledge transfer are planned from the early stages of design.

As I mentioned previously, this is a busy time for Defence acquisition – and there are many exciting opportunities ahead for industry.  

Here in South Australia alone – over the next four years – subject to the outcomes of the Defence White Paper – there will be up to $4.4 billion in Defence spending for building and sustaining Defence materiel.

PROGRAMME OF ENGAGEMENT WITH DEFENCE INDUSTRY

As the competitive evaluation for the Future Submarine proceeds, Defence is engaging with a number of key industry representatives.

This includes engaging with Austrade and the Department of Industry and Science, along with engagement with State Governments, the Australian Industry Group, the Australian Industry Defence Network and the Australian Business Defence Industry Unit.

Here, in South Australia, Defence is consulting with Defence SA, the Defence Teaming Centre and, of course, ASC and other companies.

Importantly, the potential international partners that will deliver Australia’s Future Submarine fleet need to understand Australian industry’s capabilities and skill sets.

During a meeting yesterday between Defence and Department of Industry officials, State Government representatives, and defence industry groups, there was agreement to the SEA 1000 Industrial Engagement Strategy.  This included the formation of the State and Industry Association Consultative Group, comprising all attendees.

The SEA 1000 Industrial Engagement Strategy involves the members of this group working together with the common aim of providing competitive Australian companies with meaningful opportunities to demonstrate their capabilities and skills to international partners.

The strategy includes bimonthly meetings to monitor progress against planned activities that include preparation sessions for Australian industry, the development of company profiles to be provided to international partners, a schedule of interactions between the partners and state-based organisations, and visits by the partners to states across Australia to meet with company representatives and visit facilities.

These activities will commence in early April with briefings to major companies operating in Australia, and progress throughout the remainder of the year. 

The engagements between international partners and industry will be scheduled to complement the development their pre-concept designs, allowing timely judgments of how to best involve Australian capabilities and skills in their proposals.

Importantly, there is agreement on the need for a coordinated and consultative approach to the engagement, which offers international partners full visibility of how Australian industry can support the project and maximise Australian industrial involvement

INTERNATIONAL PARTNERS

As the Government has announced, France, Germany and Japan have emerged as potential international partners. All three countries have proven submarine design and build capabilities and are producing submarines.

The competitive evaluation process will ensure that capability, cost, schedule and key strategic considerations, along with Australian industry involvement, are carefully and methodically considered, and avoid unnecessary delays to Australia’s future Submarine program.

As part of the competitive evaluation, Defence will seek proposals from potential partners for:

  • Pre-concept designs based on meeting our capability criteria;
  • Options for design and build overseas, in Australia, and/or a hybrid approach;
  • Rough costs and schedule for each option; and
  • Positions on key commercial issues, for example intellectual property rights and the ability to use and disclose technical data.

The level of Australian industry involvement will be a fundamental consideration, as will interoperability with our alliance partner, the US.

The competitive evaluation will take at least ten months, after which time Defence will bring advice to Government for consideration.

The Government will continue to ensure that a careful, considered and methodical approach is taken in making decision on the future submarine.

The opportunity is now there for industry to engage with international partners and to demonstrate that maximum Australian involvement can deliver an affordable and quality submarine such that this vision can become a reality. 

EXPERT ADVISORY PANEL

As part of the Government’s commitment to a robust and transparent competitive evaluation, we will soon be announcing the appointments to an Expert Advisory Panel to oversee the competitive evaluation process.

This panel will oversee the conduct of the process, including ensuring its probity, managing any conflicts of interest, and ensuring that confidentiality is maintained in relation to all sensitive information received during the process.

This oversight will provide the Government and the public with confidence that the evaluation process not only is, but is seen to be, fair and defensible, and that the will robustly address all relevant factors, allowing Government to balance importance considerations, for acquisition and through life support, including capability, cost, schedule, and risk.

In closing, as you know, the first priority of government is the safety and security of its citizens.

As the newly appointed Defence Minister, I ask that we work together to bring this about.

Thank you.

Media contacts:

Chloe Petch (Minister Andrews’ Office)                     0477 395 356

Defence Media Operations                                        (02) 6127 1999


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