DEFENCE CAPABILITY PLANNING:

THE WAY FORWARD FOR THE DEFENCE - INDUSTRY PARTNERSHIP

Defence + Industry Conference

Adelaide Convention Centre, 0910 1 July 2009

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SPEAKER:

Senator John Faulkner

First, let me acknowledge the traditional owners of this land, and pay my respects to their elders past and present.

Let me also acknowledge:

·        Minister for Defence Personnel, Materiel and Science, and Minister Assisting the Minister for Climate Change, Greg Combet;

·        Premier Mike Rann;

·        Kim Beazley;

·        The Shadow Minister for Defence Science and Personnel Bob Baldwin;

·        as well as the many members of Defence and Industry who are here today.

Ladies and gentlemen, the history of military engagements is often told as the history of leadership, of individual courage and cunning, a story in which the tide of battle is turned by heroism, strategy and sometimes luck.

As true as that is, it is also true that military history includes the story of agility in the face of a constantly changing balance between shock and fire, of innovative technological advances and the partnership and teamwork between military and manufacturers to match military capability to strategic demands.

Whether the shield-wall which let the Greeks at Thermopylae turn back a force ten times their number, or the manoeuvrable eight foot bill-hook that gave the English forces a lethal advantage over the unwieldy 15 foot Scottish pike on the muddy, bloody field at Flodden, capability – the right capability – has always been a fundamental part of military success.

Today, the equipment our men and women in uniform carry, or indeed are carried by, is far more sophisticated and complex than a bronze shield or a pole-arm.

But the role of equipment and training, arms and transport, supplies and support, in turning the course of conflict remains undiminished.

And a successful partnership between the defence forces and the defence industry makes that possible.

Ladies and gentlemen, as you know, this is my first major speech in Australia in the Defence portfolio.

These are very early days for me as Minister for Defence. But since taking on this portfolio I’ve set myself the challenge of working through the myriad of complex issues facing defence as methodically as I can. I want to satisfy myself that in tackling these issues we are all – Ministers, the Department, and the ADF – doing the best we possibly can.

The timing of this conference has led me initially to focus on the issues of defence planning and capabilities.

Ladies and gentlemen, maintaining a strong and effective ADF will require growth in both capacity and capabilities of the Australian defence industry sector. 

The Defence White Paper 2009 and the Defence Capability Plan 2009, released today, outline significant growth in procurement.  The Government wants to ensure that Australian industry shares in that growth, and that small to medium sized enterprises in particular are given every opportunity to compete for work using open, transparent and accountable processes.

Despite the global economic crisis, the Government has maintained growth in the Defence budget.  It has provided assurance by maintaining the 3 per cent average real growth to 2017, and 2.2% thereafter, and providing 2.5 per cent indexation that will allow better planning.  No other sector has such a solid predictable growth plan locked in for the future.

Over the next four years, the Defence Capability Plan predicts sustainable average local growth of around 4 per cent per annum.  The amount to be spent in Australian industry by the Defence Materiel Organisation will increase from $4.5 billion to $5.6 billion over the next four years. The Defence Capability Plan shows that over the next four years the electronics and maritime sectors will grow significantly and the land and vehicle sector will also experience growth.

This represents nearly 5,000 additional jobs in the local defence sector, growing from about 29,000 now.  This will be a challenge, but the Government is committed to working with industry to ensure we can meet the increased demand, including through increased training and skilling programs developed jointly with companies and state governments, and through productivity improvements. 

The DCP has a special role in providing the key strategic planning information industry needs. In particular the document provides the long term investment signals for industry - so that you can make the appropriate skilling and infrastructure decisions that are required for Force 2030 to be delivered.

Before I became Defence Minister, the Government had decided to align the Public DCP with the period of the budget forward estimates.

The Minister for Defence Personnel, Materiel and Science, Greg Combet, and I were determined to ensure the information published in this DCP – and in future public DCPs – responded more fully to industry’s need for certainty in planning.

This document includes more detailed information about particular proposals than past DCPs, and given its more realistic time frame, should provide a more reliable and more certain base for planning.

• This DCP contains information on 110 projects or phases of projects.
• In comparison, the public DCP 2006-16 contained 132 projects or phases of projects.
• And while DCP 2006-16 contained information on around $57 billion worth of projects, the public DCP 2009 contains information on over $60 billion worth of projects.
• There are 48 new projects or phases of projects in DCP 2009 which arose from the comprehensive review of Defence’s future capability needs conducted during the White Paper process.

But I have satisfied myself that we can do more to enhance the amount and quality of information available to industry.

Starting today.

Greg Combet and I have decided on two new initiatives.

First, a project to re-examine the way we provide planning information to industry, including the value, the nature and the content of the Public DCP. Given the importance of the DCP for industry, it is right and appropriate for us to re-assess the DCP, and consider how it can be enhanced as a tool for industry, in the context of the new approach involving five yearly White Papers. 

As part of this project we will be engaging with industry, to ensure that we have your input and can respond to your needs. Over the next few weeks, we will be commissioning a consultancy to assist with this review – to work with industry and to work with Defence.

The Government is seeking to improve the content, quality, presentation and  utility of the publicly available information relating to its current and forward capability planning. The Government’s objective is to provide the defence industry with substantive and reliable information about intended capability acquisitions, to help inform future investment decisions and to facilitate quality tenders for upcoming projects.

Secondly, today for the first time we are releasing the Priority Industry Capabilities.

The Defence White Paper outlined the Government’s commitment to ensure that certain strategically important industry capabilities continue to be available from within Australia, to ensure that we maintain a strategic capability advantage in particular areas. These Priority Industry Capabilities will be reviewed annually, taking into account:

• the importance of the industry capability to our position of defence self-reliance;
• the ‘health’ of the industry sector, in terms of workforce size and skills levels, capacity constraints, and individual firm viability;
• the value for money represented by such intervention; and
• market structure.

These priorities are determined through a risk assessment, based on the likelihood and consequences of the non-availability of industry capabilities. Criteria used to assess the reasons why a capability would be critical include:

• whether it provides a particular capability edge to the ADF;
• the degree of national sovereignty or control required over a capability;
• the level of risk around the availability of supplies or support from overseas; and
• the level of difficulty in regenerating a capability should it be in decline.

The Government’s concern is that these capabilities remain available within Australia, including through overseas based companies basing themselves in Australia or investing in a local workforce and infrastructure.

The White Paper indicated that the details of specific capabilities which might receive support under this scheme would not be publicly identified. However, the Government also recognises the value of information about Priority Industry Capabilities for industry, and your legitimate argument that this information will assist in your planning and investment decisions.

Accordingly, we have decided after careful consideration of the commercial and national security concerns of Government, to make additional information about the Priority Industry Capabilities publicly available from today.

Both these significant measures will improve the transparency of defence planning and capability processes.

Ladies and gentlemen, following its election, the Rudd Government endorsed the policy principles underlying the Defence and Industry Policy Statement of March 2007. 

Since then, all of the key points of the policy statement have been acted upon.

However, in the light of the new Defence White Paper which gives clear direction for the future shape and capabilities of the ADF, and the release of Defence Capability Plan today, it is now time to look again at defence industry policy. 

There is a need to define how the competitiveness, capacity and productivity of industry will be increased and managed into the future to ensure we are able to support the future ADF capabilities.  For this reason the Government intends to release a new industry policy later this year.

Ladies and gentlemen, it is, and will continue to be, a challenge to maximise the transparency and openness of defence planning and funding while continuing to protect sensitive commercial and national security information.

Greg and I are carefully considering the issue of how we can better engage with the defence industry, providing you with more information, and how, more broadly, we can encourage greater openness in the defence portfolio. 

Ladies and gentlemen, while my most immediate challenge has been to develop what in my new portfolio might be called ‘situational awareness’ of the issues surrounding the DCP, the wider challenge I have is to thoroughly examine all aspects of this portfolio. It is not a task that can be completed in days. Nor in just a few weeks.  

And while this examination will doubtless identify some issues to address and some changes to be made, let me be clear, there are many matters on which the Government’s and my commitment will remain firm.

Our commitment to supporting the men and women of the ADF is unwavering. I am acutely aware of my responsibility, as Defence Minister, to those in uniform.

Let me also be clear on the question of the Defence White Paper. The recent changes to the ministry do not mean that the Government’s strategic analysis and direction has changed, or will change. And I pay tribute to my predecessor Joel Fitzgibbon for his excellent work on this landmark defence policy statement.

It continues to be the position of the Government that the ADF has to be able to control our air and sea approaches against credible adversaries in the defence of Australia, to safeguard our territory, critical sea lanes, our infrastructure and our people. This means the ADF must be structured and equipped to engage in conventional combat against other armed forces.

Ladies and gentlemen, the White Paper remains the Government’s blueprint for action in Defence. My primary concern as the new Minister for Defence will be to deliver on those commitments.

And we rely on you, on defence industry companies large and small, to arm, equip and supply the men and women of the ADF, at home or overseas, in training or in combat, on the front-lines, or in support roles.

I want to assure you that I know how critical your work is. I know how vital the partnership between Government and the defence industry is in securing Australia’s strategic future.  A great deal rests on the capabilities you provide.

And as I work with you to strengthen that partnership I will certainly be depending on your expertise and experience, your professionalism and pragmatic know-how – because no-one knows better than you how rapidly military capabilities change and evolve in the modern world. 

Ladies and gentlemen, I have yet to hear of a ticker-tape parade for people working in the defence industry sector. The men and women of the ADF are – and quite rightly – held in the highest regard by the Australian community.  But the vital role of defence industry in making sure those men and women of the ADF have the capabilities they need is, if not the best-kept secret about defence, then certainly not the best known fact. 

We may have travelled a great distance from bill-hooks to missiles striking targets hundreds of kilometres away, from shield walls to walls of electronic misinformation.  Today, military capability is discussed in terms of phased array radars, uninhabited aerial vehicles, and extended range munitions – and the training, support and facilities to bring them to bear.

Sophisticated and complex as our military capabilities have become, they rest still on a simple foundation: the partnership between the defence forces and the defence industry, as important today as it ever has been.

And, ladies and gentlemen, I look forward to working with you in our new Ministerial roles, to strengthen that partnership.

Media contacts:

Colin Campbell (John Faulkner):                         02 6277 7600 or 0407 787 181

Defence Media Liaison:                                       02 6265 3343 or 0408 498 664