I thank the Australian Defence Magazine Congress Chair, and Editor of Australian Defence Magazine, Katherine Ziesing, for her introduction and for the invitation to open the Ninth Annual Australian Defence Magazine Congress.
I acknowledge the Secretary of Defence Duncan Lewis.
I also acknowledge Warren King, Chief Executive Officer, Defence Materiel Organisation, whom I congratulate on his recent appointment.
Representatives of Defence Industry, Defence Force personnel, Defence and Defence Materiel Organisation officials, ladies and gentlemen.
When I delivered the keynote address at this Congress last year I said that the Australian Defence Magazine is one of our leading publications on defence issues.
Its commentary and analysis on defence policy, major projects and equipment acquisitions continues to be highly recognised and, more importantly, well regarded.
The Australian Defence Magazine Congress itself provides an important forum for exchanging information and ideas.
2011 was a demanding year for Defence and the Australian Defence Force (ADF).
Our operational commitments in Afghanistan, East Timor, the Solomon Islands, United Nations Peacekeeping Operations and Operation Resolute, were our highest priority.
In 2011 our forces in Afghanistan made good progress in their mission to train the Afghan National Security Forces to take on lead responsibility for security in Uruzgan by 2014, possibly earlier. The Australian Mentoring Task Force continued to make progress in training and mentoring the 4th Brigade of the Afghan National Army (ANA).
Australian Special Forces and their Afghan partners also continued to disrupt the insurgency in and around Uruzgan Province.
Tragically, in 2011 we saw 11 combat fatalities in Afghanistan.
These tragedies will not shake the Government’s commitment to complete our mission in Afghanistan, namely to prevent Afghanistan from again becoming a breeding ground for international terrorism.
We again pay tribute to the sacrifice of these troops, and the other 21 Australian soldiers we have lost, now 32 fatalities and 218 wounded in Afghanistan.
In 2011, the ADF and Defence also responded with extraordinary skill and commitment to a range of natural disasters.
Over 2,000 Defence personnel dealt with floods in Queensland and Victoria.
ADF helicopters and fixed wing aircraft flew more than 1,000 flying hours, transported more than 680 tonnes of stores and carried more than 1,400 passengers.
Members of the ADF conducted rescues, evacuations, recovery work, engineering and community support activities, often under extreme weather conditions.
In the aftermath of Cyclone Yasi in Queensland’s north, more than 1,500 ADF personnel were deployed to assist, as well as naval vessels, helicopters and fixed wing aircraft.
Air Force aircraft also delivered much-needed equipment, stores and emergency services personnel to New Zealand in the wake of the terrible February earthquake in Christchurch and returned more than 100 Australian civilians to Australia.
In March, following the earthquake and tsunami in Japan, Air Force C-17s moved more than 450 tonnes of cargo, including 41 vehicles as part of Australia’s relief efforts in Japan.
Three of Air Force’s C-17s helped move Japanese Self Defence Personnel in response to the disaster, the first ADF deployment to Japan since 1952 as a member of the British Commonwealth Occupation Force.
These Defence personnel were operating equipment provided by and supported by Industry, all dependent on Defence and Industry working together: working together to design, deliver and maintain the equipment Defence needs to both do the humanitarian assistance and disaster relief job in peacetime and the military job during times of conflict.
In 2011 we also saw a number of achievements in procurement and capability development.
Delivering new equipment to the ADF to enable it to perform effectively has been a focus of the past twelve months.
New projects approved by Government
In 2011, the Government approved a record 49 first pass, second pass and other approvals for major projects.
The previous record was 39 in 2006.
The total value of the 2011 approved projects is more than $6 billion.
Major new projects approved in 2011 include:
- an additional 101 Bushmasters;
- 24 new naval combat helicopters.
- over 900 more G-Wagon tactical vehicles;
- two additional Chinook CH-47D heavy lift helicopters; and
- the upgrade of naval Evolved Sea Sparrow and SM2 missiles.
Continuing to approve new projects like these is an important focus for Government in 2012.
But the value and number of new projects approved is not the only measure of success in capability development and procurement.
An important success measure is the actual delivery of new equipment and capabilities to Australian Defence Force (ADF) personnel.
Projects delivered by Government
In 2011 we made good progress in delivering new capabilities.
Substantial progress was made in implementing the recommendations of the Force Protection Review, which is providing higher levels of support and safety to our troops in Afghanistan.
The rigorous implementation of these recommendations continues.
Under the Force Protection Review we have introduced new combat body armour and the Multicam combat uniform into Afghanistan.
We have up-armoured our vehicles to provide greater protection for them and our personnel, including:
- energy absorbing seats and stronger welding in Bushmasters to further reduce the probability of lower limb and spinal injury occurring from an explosion; and
- heavier calibre weapons for Bushmasters.
We have also armed our troops with new weapons, including Carl Gustav 84 mm guns and thermal sights.
The Government approved under Project Ningaui the purchase of four route clearance systems to more safely clear roads of Improvised Explosive Devices (IEDs) before troops travel on them.
The four systems will cost about $70 million. Each system includes:
- Two HUSKY Mark 3 protected route clearance vehicles with ground penetrating radars to detect explosive hazards;
- One HUSKY Mark 3 protected route clearance vehicle with interrogator arm to confirm that an explosive hazard has been found from a safer distance;
- Two protected High Mobility Engineer Excavators to repair damaged routes and create bypass routes; and
- Two Bushmaster protected mobility vehicles fitted with SPARK mine rollers to provide a greater level of protection against explosive hazards.
The new systems will provide Australian troops with a permanent route clearance system after the loan of two similar Canadian systems during 2012.
The Canadian equipment has arrived in Tarin Kot and is being prepared for operations. Our personnel have also commenced training in the use of the equipment, which is expected to be operationally available in the coming months.
In addition to this focus on equipment in Afghanistan, other major new capabilities were also introduced in the course of 2011.
We completed the acquisition of 24 Super Hornets.
12 of the Super Hornets are wired with the potential to be converted to Growler in the future.
Growler gives the aircraft the ability to jam the electronics systems of enemy aircraft and land-based radars and communications systems.
Government consideration of acquisition of the Growler capability will occur this year.
Australia’s amphibious capability received a major boost with the arrival and commissioning in Fremantle in December 2011 of HMAS Choules, named after former Chief Petty Officer Claude Choules.
HMAS Choules weighs 16,000 tonnes and its cargo capacity has the equivalent of the Manoora, Kanimbla and Tobruk combined.
Its flight deck has room for two large helicopters and can also carry around 150 light trucks and 350 troops.
We also took delivery of a fifth C-17 Globemaster heavy lift aircraft.
Approval for the purchase of a sixth C-17 is in train.
Another measure of progress in capability procurement is identifying, remediating and resolving problems.
In the last year, we took significant steps in addressing and resolving some substantial and long standing capability problems.
Projects of concern
In December 2011, then Minister for Defence Materiel Jason Clare and I announced the removal of another three projects from the Projects of Concern list – halving the number of projects on the list over the previous year.
This cut the number of projects on the Projects of Concern list from 12 at the beginning of 2011 to the current six.
Seven projects were removed from the list, six through remediation and one through cancellation:
- High Frequency Communications Modernisation (Remediated)
- Air Defence Command and Control System ‘Vigilare’ (Remediated)
- ANZAC-class Anti-Ship Missile Defence (ASMD) (Remediated)
- Medium and heavy vehicles, trailers and modules (Remediated)
- Tactical Unmanned Aerial Vehicles (Remediated)
- Joint Air-to-Surface Standoff Missile (JASSM) (Remediated)
- Watercraft for Amphibious Ships (Project cancelled)
One project, the acquisition of 46 new Multi-Role Helicopters (MRH) to replace the existing Black Hawk and Sea King fleets was added to the list.
The Projects of Concern process was established by the Government in 2008 to focus the attention of the highest levels of Government, Defence and Industry on remediating problem projects.
Since inception, 19 projects in total have been placed on the list.
Of those, 13 have been removed, 11 due to remediation and two cancelled (Watercraft for Amphibious Ships and Sea Sprite Helicopters).
In June last year, then Minister for Defence Materiel Jason Clare and I announced reforms to strengthen the Projects of Concern process, including:
- the establishment of a more formal process for adding projects to the list;
- the establishment of a more formal process for removing projects from the list;
- the development of agreed remediation plans, including formal milestones for the removal of a project from the list;
- increased Ministerial involvement and oversight of the process; and
- incentives for companies to fix projects on the list by taking into account the performance of companies in addressing Projects of Concern when evaluating their tenders for other projects.
Four out of five of these reforms have been implemented.
Implementation of the fifth – development of agreed remediation plans – will be complete when remediation plans for all six Projects of Concern have been prepared.
With these reforms and the continued focus on remediation, Minister Carr and I expect to make announcements in the course of this year further reducing the Projects of Concern list.
The policy objective here is not placing projects on the Project of Concern list, the policy objective is a successful outcome for the project.
We made progress in 2011 in addressing some of the specific capability problems we face, but procurement and sustainment generally continue to face challenges.
As a consequence, it is essential to continue the reform process.
Capability and Procurement reform
In 2011 we made good progress in implementing a range of important reforms.
An effectively functioning Defence organisation, including the ADF, is a critical part of protecting and defending Australia’s national security interests.
Too often we have seen adverse outcomes where Defence has not operated effectively or efficiently, and where despite these adverse outcomes, neither personal nor institutional accountability has come to the fore.
Our guiding principle must be to prevent such adverse outcomes before they emerge and address and solve them early if they emerge: prevention, not post mortems.
As a consequence, it is vital that we continue the ongoing Defence reform program, including accountability, procurement and budget reforms.
Reform – accountability
Failures in accountability arrangements damage Defence, weaken Defence’s performance and make both Defence and Industry less efficient and effective.
We must continue the process of instilling much greater rigour and individual and institutional accountability to our consideration, management and delivery of major projects, procurement and capabilities.
Accountability means ensuring people are trained and resourced to make quality decisions.
It also means that responsibility is aligned with the authority to make decisions, not blame shifting.
It also means that the decision-maker needs to maintain oversight of delivery and implementation.
Without this link between decision and delivery being maintained, there can be no accountability.
In August last year I released the “Review of the Defence Accountability Framework”, the Black Review, the first comprehensive review of personal and institutional accountability in Defence as a whole.
The Black Review confirmed significant problems with performance in many parts of Defence.
To address these problems, Defence has commenced implementing a range of accountability reforms to strengthen personal and institutional accountability, particularly in the areas of capability development and acquisition.
These reforms include:
- reforming Defence planning, decision-making processes and performance management;
- substantially reducing the number of Committees in Defence;
- increasing rigour, contestability and expertise within capability development; and
- the establishment of Associate Secretary positions to strengthen Defence’s capacity to implement the Black Review.
Implementation of the Black Review will improve Defence management and improve delivery of ADF capability.
The Secretary and CDF have now extensively overhauled the Committee and decision making processes, consistent with the changes recommended by Black.
A number of top level senior Committees have been abolished.
We have appointed a new Chief Operating Officer, Mr Simon Lewis, who is now responsible for the management, coordination and better integration of the Personnel Services and Policy, Defence Support and ICT Groups.
The process for finalising the Associate Secretary Capability is continuing and the Secretary of Defence and the Chief of the Defence Force (CDF) anticipate making an announcement with respect to that position in the near future.
In addition to the Black Review reforms we are also implementing additional reforms in the area of procurement and capability.
Reform – procurement and capability
There will always be risk in complex, costly procurements involving cutting edge technology.
To minimise that risk and to manage it effectively, we need to instill greater rigour and greater individual and institutional accountability to our consideration and management of major capability projects, both acquisition and sustainment.
In particular this applies to the early stages of projects – 80 per cent of problems with Defence capability projects emerge in the first 20 per cent of the project’s life.
We need early warning in order to be able to take effective preventative action.
In 2011, we also commenced a series of reforms to strengthen procurement processes and improve accountability within Defence.
- Reforms to project management accountability (announced 18 July) including:
- project directives issued by the Secretary of the Department of Defence and the Chief of the Defence Force to ensure Defence acquisitions progress according to Government direction;
- benchmarking all acquisition proposals against off-the-shelf options where available;
- the introduction of a two-pass approval system for minor capital projects valued between $8 million and $20 million;
- implementation of an Early Indicators and Warning system;
- the expansion of the Gate Review system; and
- the introduction of Quarterly Accountability Reports.
- Reforms to the disposal of military equipment (announced 29 June), to reduce costs, generate potential revenue and provide opportunities for Defence industry involvement in the disposal process.
- Reforms to strengthen Australian industry (announced 29 June);
- The threshold for mandatory Australian Industry Content Plans (AICP) will be reduced from $50 million to $20 million.
- The ability of a company to arbitrarily reduce the level and type of work included in an AICP will be removed.
- A new clause will be included in the Conditions of Tender allowing a company to be excluded from a tender if they have previously failed to meet their AICP obligations.
- AICP performance will be included in the Company Scorecard used by Defence to assess a company’s performance.
- Project teams will be made more accountable for AICP performance by including them in the DMO Project Manager’s Charter.
- Reforms to Support Ship Repair and Management Practices through the Rizzo Report (announced on 18 July) including:
- that Navy engineering be rebuilt and reorganised, led by a two star Navy Admiral to give the necessary weight to this critical function;
- that the Defence Materiel Organisation (DMO) undertake a fundamental restructure of its Amphibious and Afloat Support Systems Program Office; and
- that the DMO increase the Systems Program Office by over 20 new positions.
In 2011, we also accelerated the full implementation of all the Kinnaird and Mortimer recommendations previously agreed by Government.
In 2003 the Kinnaird Report led to the two-pass approval system, the creation of the Capability Development Group and the Defence Materiel Organisation as a prescribed agency under the Financial Management and Accountability Act.
Most of the Kinnaird reforms have been implemented and have had a positive impact.
In 2008 the Mortimer Review into Defence Procurement and Sustainment made 46 recommendations.
The Government agreed to 42 of them in full and three in part.
Many of these recommendations have been implemented including increased investment in Defence industry skills and incorporation of improved commercial practices into Defence procurement.
Some of the key recommendations have not yet been fully implemented.
Defence has accelerated the implementation of all outstanding agreed recommendations made by Mortimer as a matter of priority.
- project directives issued by the Secretary of the Department of Defence and the Chief of the Defence Force to ensure Defence acquisitions progress according to Government direction; and
- benchmarking all acquisition proposals against off-the-shelf options where available.
Implementation of these important reforms to capability development and procurement continues, with specific action including:
- introducing new rigour into the management of so called ‘minor’ projects, including a modified two-pass approval system for minor capital equipment projects valued between $8 million and $20 million.
- implementing an Early Warning and Indicator system to address the early stages of capability planning and prevent problems early in the life of a project;
- expanding the use of the Gate Review process for mature projects to ensure that the desired operational capability is being delivered; and
- providing enhanced and more rigorous reporting to Government on high priority projects.
We are implementing further reforms as part of the Government’s response to the Rizzo Report into the Amphibious Fleet.
Mr Rizzo led an expert team that was appointed in February to develop a plan to address significant problems in the repair, maintenance and sustainment of the Royal Australian Navy’s amphibious fleet.
The Report found poor risk management practices, a failure to manage assets on a ‘whole of life’ basis, negative aspects of a ‘can do, make do’ culture, the failure of Navy and the Defence Materiel Organisation to work together seamlessly, and perhaps most importantly, an overall ineffectiveness of the Naval engineering function in Navy and the maritime elements of the Defence Materiel Organisation.
Mr Rizzo identified a systematic breakdown over a long period of time, including under-resourced naval engineering capabilities, inefficient industry contracts and inadequate risk management.
Collectively, these issues compromised the availability of Navy assets and potentially the sustainability of Navy ships in the longer term.
The Rizzo Report made twenty-four recommendations to improve operational availability and outcomes and ensure the ongoing technical integrity of Navy ships.
The Government and Defence are implementing all of these recommendations.
Actions underway to address these problems include the remediation of our naval engineering capability and an increase to the Amphibious and Afloat Support Systems Program Office of the Defence Materiel Organisation.
These are substantial and important reforms. They will shape the structure and operation of Defence capability development and procurement over the coming decade.
Implementation is well underway.
Further reforms are in hand which will enhance the delivery of Defence capability projects, strengthen Australian Defence industry and improve accountability.
These reforms will include the Government’s response to the Coles Review of the Sustainment of Australia’s Collins Class submarines.
The Collins Class submarine fleet remains our most significant sustainment challenge.
Problems with submarine availability are regrettably of longstanding and well known.
The state of the Collins Class is a matter of ongoing national concern.
Sustainment of the Collins Class submarines is at the top of the Government’s Projects of Concern list.
Insufficient resources have been allocated to address materiel and personnel shortfalls since the ships were brought into service in the period 1996 to 2003.
From the submarine’s outset in 1996 there have been significant reliability and capability problems.
It has taken too long to address these longstanding concerns.
In December last year I released the report of Phase 1 of the Review of the Sustainment of Australia’s Collins Class submarines, the Coles Review.
I have heard the suggestion that this has been the best thing to happen for submarine sustainment in a decade.
Be that as it may, we should not have waited since 1996 to take such action.
This Review is examining complex engineering issues associated with submarine sustainment.
It will play the important role of guiding improvements to the way our Collins class submarines are sustained into the future in the same way as the Rizzo report is doing for the Navy’s amphibious fleet.
Phase 1 of the report identifies a range of key issues that need to be addressed:
- poor submarine availability caused by a crew shortfall, lack of spares and unreliable equipment;
- a lack of cohesion in strategic leadership;
- Department of Finance and Deregulation, the DMO, Navy and Industry not working collectively as an “Enterprise”;
- a lack of clarity around accountability, authority and responsibility;
- submarine knowledge thinly spread;
- lack of robustness of Navy’s contribution to manning and sustainment;
- no long term strategic plan for efficient use of assets;
- DMO seeking direct involvement at the tactical level;
- a performance-based ethos not being embedded in ASC;
- no long term strategic plan for efficient asset utilisation; and
- unclear requirement and unrealistic goals.
Phase 1 makes interim recommendations about how to address some of these issues:
- resources should be directed to the provi