Well, ladies and gentlemen, thank you very much for the opportunity to be with you today, it’s a great pleasure.
Some two months into the job I thought this would be an opportunity to share with you a few of my early reflections. I’m the 29th Minister to hold the Defence Procurement Portfolio since 1939. What I have discovered in these first two months is just how much attention the Defence community pays to this issue of legacy, and it is the case in my circumstance where I’ve taken on what might we describe as the legacy of 28 predecessors. And some, of course, have had more profound legacies than others. But I’m not really here today to talk to you about others’ legacies; I’m here today to talk about our legacy.
I believe that we have to face up to our responsibilities, to our legacy to future generations. This financial year the DMO will spend more than $10B and every day Australian Defence personnel stake their lives on the quality of the equipment that we provide. So our decisions shape the lives of real people but, however, it’s not just the lives of Defence personnel that we’re talking about and it’s not just the lives of the 27,000 people that work in the local Defence industries. More broadly, our decisions help determine what skills, what technologies, what industrial capabilities this country will take well into the next century.
So, all of this begs the question, “What are we trying to achieve?” Defence procurement is not simply about buying modern weapons; it’s very much part of developing a modern country. So I face this job on the basis of asking myself, “What sort of country will we be defending in years to come?”, “What are we as a people capable of achieving?”
Now, there’s a view in some quarters, and I read it in The Financial Review on a regular basis, that these are all decisions that simply come down to the bottom line in next year’s budget. Frankly, I don’t think that’s the message the Australian people pursue. I think the Australian people are tired of small mindedness. They are sick of hearing that other countries are better, are cheaper or are smarter. They want to believe that this is a country that can do great things for its troops and for the people they defend.
So I say we can. I say we should be ambitious. We want the best equipment we can afford and we want to be the best at supplying it. Now, those of you who know me well from another role know that I’m very much in favour of buying Australian. I wear this badge consciously. But it’s not a question of buying Australian at any price or on any terms, and this is a point I cannot stress enough. I’m not in the business of defending second best and, from all of my dealings with industry; I don’t believe that you are either. And that’s why we together must strive for excellence.
Now, we have no trouble arguing the case that we build world-class schools, that we will build world-class universities, we’re building the NBN, we’re modernising our tax system and we are shifting to clean technology. We have no trouble arguing that because we are a creative and a clever people. And so I say why shouldn’t we support our troops by investing in ourselves?
Take the Collins Class subs, it’s quite clear that there were problems, there were mistakes, and there are of course many challenges ahead, but no nation, no matter how advanced, expects to deliver complex projects without controversy. We simply should not forget that the Pentagon was once derided for thinking that computer systems actually had a place in the military hardware; that the Humvee, the M1 Abrams, the Black Hawk were all criticised in their time. And I can recall the Bushmaster here was heavily criticised in the early days and it may well have come to the point where it was closed down. But today would anyone argue that it has saved lives for Australians for many years?
So we shouldn’t judge our achievements on the basis of popular prejudice. Collins subs are, as I’m often told, for complexity on a par with the space shuttle. We forget how ambitious the goal was at the time, largely because we have lost sight of how far we’ve actually moved along the line to be able to produce equipment of this scale and this complexity.
As late as the 1980’s we were reliant on the Oberon Class submarines built in the United Kingdom, yet we developed the capabilities at home to upgrade them and we developed the skills to use them. And that laid the foundations for the Collins build program.
Now, whatever your views on the program, it has delivered one of the largest conventional submarines in the world, and for Australia I believe that has developed a unique capability for our needs. So we should not even contemplate, that when it comes to the question of the Future Subs, that it will be a long journey. And that we should be ambitious for what this country can produce.
And I don’t want for a moment to forget how tough the conditions have been or they’re likely to remain. It’s important to remember a few basic facts. We are a small nation with the world’s third largest maritime territory to secure. We are a great trading nation. Our prosperity rests upon our capacity to keep our shipping lanes open. Ninety-nine percent of all our trade is by sea, and we simply cannot rely upon someone else to do all the jobs that we can’t do ourselves. We cannot leave our security to the whim of the market. We must be willing to achieve great things. And if we have the ambition this government is about building the conditions to realise that ambition.
Now, as I read it, this is very much what DMO’s mission’s all about. They are here to support people who support our troops and I want to assure you they want to work with industry to get the right equipment and the right capabilities together. And that’s, for instance, if we take the example that’s been developed with a priority industry capability health checks. This is a government and industry working together to monitor and build our strength strategically. And today I’m releasing two further health checks covering the Signature Management and the Mission Critical Software Systems and they’ll be available on the DMO website.
Our second example is our reforms to the ship maintenance arrangements, and over the service life of our fleets the total investment in the sustainment can be double or triple the original purchase price of any particular unit. And a lot of that work has to be done in Australia. And it’s a long term need requiring long term investments in capabilities. For that reason, the old sustainable model, I think the sustainment model cannot meet that need and so it’s been changed. The burden of industry suppliers to our larger ships is to bid in the past on the basis of each and every maintenance activity will be a thing of the past. Longer term contracts are the way of the future, to provide the incentives for the investment’s company need in their own capabilities.
And we’ll bring down the administrative costs and we’ll help raise the incentive for our suppliers, as I say, to invest in their own future.
The new arrangements are being rolled out for the ANZAC frigates first, with the FFG fleet to follow, and the next five year contract for the ANZAC fleet is expected to deliver cost savings in that way of between 10% and 15% over the current arrangement.
The government hopes to be able to make an announcement on this contract in the very near future. This is also the contract model for, that Defence may use for the landing helicopter docking ships and the air warfare destroyers.
It’s a new approach, an approach that’s good for industry, it’s good for our navy and it’s good for the Australian taxpayers.
Now, that’s the sort of legacy I think we can all be proud of to build if we simply have the courage to pay our part. Thank you very much.
Minister’s Office 02 6277 7620
Department 02 6127 1999