TRANSCRIPT: MINISTER FOR DEFENCE & MINISTER FOR DEFENCE MATERIEL - JOINT PRESS CONFERENCE
TRANSCRIPTION: PROOF COPY E & OE
DATE: 28 NOVEMBER 2011
TOPICS: Capability projects; MRH-90; Exercise COOPERATION SPIRIT; DLA Piper.
STEPHEN SMITH: Thanks very much. I'm very pleased to be here at Fleet Base East, together with Jason Clare, Minister for Defence Materiel, and Steve Gilmore, who's Commander, Fleet Command.
Jason and I are making a series of announcements today. The paperwork has been released for you, but I'll go through some of that material and then hand over to Jason.
Can I firstly say there are really four themes so far as the announcements that we're making today are concerned. Firstly is increased approval so far as Defence capability and projects are concerned. With the four announcements that we make today, that brings to some 35 project announcements that we've made in the course of this year at a value of over $6 billion.
Secondly, there is a progress report on the implementation of our reform program. That's very important, and that reform program spans the Rizzo Report on our amphibious fleet, it spans the Black Review on personal institutional accountability, and in the near future, it will of course also include the Coles Report, or the Coles Review, so far as Collins Class Submarines maintenance and sustainment is concerned.
The third theme is delivery of equipment. In the course of this year, through those 35 project announcements, we've seen variously the delivery of a fifth C-17 and a commitment to start the process of buying a sixth. We've seen the arrival of our 24 Super Hornets into Amberley. We see next week the arrival of ADF Ship Choules into Fremantle and subsequently into Sydney by the middle of December. And we've of course seen improvement to the kit and the gear that our frontline troops in Afghanistan have been utilising this year, whether that's uniforms or armour or helmets.
So they are the themes of the various announcements that we're making today.
So far as the capability projects are concerned, today the Minister for Defence Materiel and I are announcing that the Government has approved the upgrade of our Anzac Frigate fleet with the Anti-Ship Missile Defence System. This is a very significant announcement, a project in the order of some $600 million to $650 million.
In the course of this year, we've seen a very successful upgrade of HMAS Perth, and in the last week or so the Government has decided that this upgrade program is to be extended across all of our eight Anzac Frigates, one of which you have behind me.
This upgrade enables us to ensure that the Anti-Missile Defence System of our frigates is substantially enhanced both in terms of defence and attack, with a capacity of now focusing and targeting on more than one target or object at the same time.
This is very much now a success story, and as a consequence of this announcement and decision, it's also been agreed on the recommendation of the acting Chief Executive Officer of the Defence Materiel Organisation that we will take this project, the ASMD project, the Anti-Ship Missile Defence project, off the Projects of Concern List.
There are three other projects that we are announcing today which together make up a combined total of in the order of just over $500 million, and when those projects are complete will be in the order of $1 billion to $1.5 billion.
Firstly is the Battlespace Communications project. This is essentially upgrading Army's radio communications in the battlespace on the ground in the field, an upgrade of some 11,000 radios from analogue to digital, substantially enhancing the battlespace communication capacity so far as Army is concerned. This is a combined approval, first and second class, in the order of some $400 million to $450 million.
Secondly, we have two first pass approvals - our Lead-In Fighter Capability Assurance program. This is essentially the training of our jet fighter pilots and crews, whether they're flying classic Hornets, Super Hornets or in the future, Joint Strike Fighters. And the first pass approval will enable an upgrade of those training arrangements to be effected.
Finally, the first pass approval of our air traffic control management systems. This is the upgrade of hardware so far as military air traffic control is concerned. This is a modest amount of money, just under $10 million for first pass, but for second pass when the upgrade is completed could be in the order of $300, to $400 to $500 million. So substantial projects there.
We've also, as I've indicated, updated the Projects of Concern List. I've indicated that we have taken the Anzac Anti-Ship Missile Defence project off the Project of Concern List, but I'm also announcing today, together with the Defence Materiel Minister, that the multi-role helicopter project, the MRH-90 project, will be placed on the Projects of Concern List.
This has been the subject of delay and technical difficulties. This project was also the subject of an exhaustive Gate Review earlier this year, and in the last few days, the Minister for Defence Materiel and I, on the recommendation of the acting CEO of the Defence Materiel Organisation, have approved the listing of this project on the Projects of Concern List.
At the beginning of this year, we had 12 projects on the Projects of Concern List. We now have nine. So three have been remediated and gone off the list; one has been cancelled, and we've seen the addition, as I've announced today, of the MRH-90 helicopter project on the list.
The Minister for Defence Materiel and I are hopeful, indeed confident, that between now and the end of the year we may well be able to make further announcements so far as the Projects of Concern List is concerned.
You'll see from the update of our implementation of reform that reforming and enhancing and improving our Projects of Concern procedures is one of the things that we dealt with in the course of this year, and the two projects that I have announced - the helicopter project going on the Projects of Concern List and the Anti-Missile Defence System coming off - have both been subject to those enhanced and new procedures.
Finally, there is an update on the Air Warfare Destroyer project. You will recall that earlier this year the Minister for Defence Materiel and I announced a reallocation of blocks away from BAE's Melbourne shipyard. That allocation has now been resolved in the following way: four blocks to Newcastle, two blocks to BAE in Melbourne, seven blocks to Adelaide, and five blocks to Navantia in Spain. And that's been done through the good work of the Air Warfare Destroyer Alliance and the Defence Materiel Organisation.
Finally, I've also released a statement today announcing that, as we speak, Australian Defence Force personnel, together with Chinese members of the PLA, are engaged in a humanitarian assistance and disaster relief exercise and training project in Szechuan Province. This is a very good development. We've been working very hard to enhance our military-to-military and defence-to-defence arrangements with China.
Last year we saw the first live firing exercise with HMAS Warramunga, and today I'm very pleased to announce that over the next few days we'll see that humanitarian assistance and disaster relief training exercise occur in Szechuan Province.
I'll hand over to Jason who will make some remarks about some of the details of those projects, and then we're happy to respond to your questions both in respect of those and other matters.
Thank you. Jason.
JASON CLARE: Well, thanks, Stephen. It's been a very busy year in Defence and it's not over yet. We've approved 35 major projects so far this year. That's a lot more than in recent years, and we expect that we'll be announcing a number of other major project approvals before Christmas.
One of those is the ASMD project, and it's a very important project, adds a lot more capability to our Frigates, makes them a lot more powerful and a lot more capable.
At the moment, our frigates can target and destroy one target at any one time. This will mean that our frigates will now be able to identify and destroy multiple targets at the same time.
So a very important project, and technology that's been developed right here in Australia by CEA in Canberra. And today is a great opportunity to congratulate them on the great work that they have done in bringing this technology to bear, and it provides opportunities not just for the Australian Navy but potentially export opportunities for Australia and for CEA.
This year has also been a year where we have been implementing reform, reforms in procurement as well as in accountability. And we've released a paper today that shows that the implementation of all of the reforms we've announced this year are now underway.
Thirdly, this has been a year where we have been delivering new equipment. New equipment to our troops in Afghanistan, be it body armour or new uniforms or the C-RAM system that's providing early warning against rocket attacks at Tarin Kot. It's also been a year where we've delivered 24 Super Hornets on schedule and on budget at Amberley, as well as our fifth C-17, and ADF Ship Choules, which arrives in Australia next week.
Fourthly, it's been a year where we've been focused on tackling a number of problems in Defence procurement.
At the start of this year, you'll remember that, as the cyclone hit, we didn't have Amphibious Ships available to provide support and assistance, and the Minister and I made no secret of our disappointment.
As a result of that we've taken a number of actions. First we purchased the Largs Bay - it's on its way to Australia now and it will arrive in Australia next week and will become HMAS Choules in two weeks time. We also commissioned the Rizzo Report and we announced and released the Rizzo Report here a couple of months ago. The recommendations that Mr Rizzo made are now being implemented and we've done a lot of work on HMAS Tobruk which is now back at sea. It's been back at sea now for a couple of weeks and I spent a bit of time this afternoon thanking the men and women who work on the dock here for the work that they've done to bring Tobruk back and bring it back to sea.
So, a number of important things that have happened this year - implementing reform, increasing the number of major project approvals, delivering equipment and also tackling problems.
Another example of that is the Air Warfare Destroyer Project. When we were advised that were delays on that project we re-allocated blocks. That re-allocation has now happened and we've announced the re-allocation of those blocks today.
We've also updated the project of concern list which shows that it's now been reduced from 12 projects down to nine. That shows us that the Projects of Concern system is working. It's working to remediate problem projects. We've added a project to that list today and we will work very hard with Defence and industry to get that project off the list as soon as it meets the remediation targets that together we set.
So, a lot of progress has been made this year but no doubt there's a lot more hard work to do and many challenges ahead in the months and the years ahead. Thanks very much.
JOURNALIST: Minister, one week ago you asked your Defence Chiefs to look for cuts to return the Federal Budget to surplus. How many of millions or billions have you found and what will it mean to-
STEPHEN SMITH: Well firstly, I didn't say that. What I said was that in the run up to the Budget next year, Defence has to expect that it'll be called upon to make a contribution to the Government's Budget returning to surplus. And last year we saw, in the course of over a five year period, Defence make a contribution of between $4 to $5 billion.
We know that we have very serious challenges, both in general terms to return the Budget to surplus but that's a very important fiscal and economic priority and objective so far as the Government is concerned. So we'll be doing the hard work again in the run up to the Budget in May of next year. And it's the hard work which ensures that we are on track so far as our strategic reform program is concerned to reform our arrangements, to enable a reinvestment into Defence for capability. But also, if called upon, we do need to expect that we may well have to make a further contribution to the Budget bottom line to help return the Budget to surplus.
JOURNALIST: Will this affect the [indistinct] projects?
STEPHEN SMITH: Well, I've made it clear that one thing that it won't affect will be any of our operational obligations, commitments or the capability that we deliver to our troops in the field. So, whatever we do will not have any adverse consequences so far as our troops in Afghanistan are concerned or indeed our stabilisation forces - whether that's in East Timor or in the Solomon Islands. So far as projects are concerned we know it's in the nature of Defence projects that there is always a fair bit of churning and changes to the detailed arrangements as project [indistinct], you have to expect to see some more of that. That's been occurring for time immemorial.
What we've been working very hard to do is to make sure that we get the projects right at the outset because all of our experience now shows that 80 per cent of the problems we find in projects are caused by mistakes made at the beginning of projects and that's been one of the very important driving forces in the reform program this year. It's reflected in the implementation arrangements that we have announced today and that will continue to be a very high priority for us.
JOURNALIST: So, if it's not operational could it be job losses?
STEPHEN SMITH: Well the only job arrangements that we've seen so far as Defence is concerned were the arrangements that I announced earlier this year so far as shared services work were concerned. I'm not proposing to go into any possible details of changed arrangements in the run up to the Budget which might be announced in the Budget in May of next year. I've simply made the very obvious point that Defence may well be called upon to make another contribution to the Budget's bottom line that will not have any adverse impact so far as our operations are concerned.
JOURNALIST: Can you provide an update into the 1000 allegations of abuse at Duntroon?
STEPHEN SMITH: Yes, as I publicly announced, I received the first part of the DLA Piper Report in October. I'm expecting to receive, either in the course of this year or very early next year, the second part of that Report which deals with the detail of allegations or assertions that have been made. I'm working my way very carefully through the Report that I've received from DLA Piper. It's a comprehensive report.
The first part of the Report that I have received goes to general principles or general ways in which the Government and Defence might respond to anywhere over 1000 suggestions or allegations which traverse a number of decades. So, I'm working my way very carefully through that but I'm also expecting either by the end of this year or, as I say, early next year to receive the second part of DLA Piper's report to me.
JOURNALIST: Is the Commonwealth exposed to risk from compensation and what are you preparing for there?
STEPHEN SMITH: Well, I've said before and I happily repeat it that so far as I'm concerned all options remain on the table. And those options will range or do range from people relying upon the existing arrangements that are in place to a further legal or judicial inquiry. So that is part of the ground covered by the first DLA Piper report to me. How does Defence, how does the Government respond in a general way to the fact that we have over 1000 allegations or suggestions about inappropriate or illegal or unlawful conduct and we're working our way very carefully through that.
JOURNALIST: Just on the project list of concern, are you concerned that some of these projects are the fault of the companies and some are a fault of your own organisation but it's not really specified where those faults lie? Companies are being blamed for things that are not necessarily their problem.
STEPHEN SMITH: Well, it's always a mix and I'd happily invite Jason to add. You might recall, for example, that the last project before today which was placed on the Projects of Concerns list was the JASSM Project. I placed that on the Projects of Concerns list advisably and the reason I gave for placing that project on the Projects of Concerns list was the failure of the Defence Organisation to properly advise the Government of the day and to properly advise Government about difficulties being encountered with the project.
So, there are always a range of reasons and sometimes you'll also have disputes between Defence and companies as to why a project is in difficulty. So occasionally you'll find difficulty so far as the Defence organisation is concerned; occasionally you'll find difficulty so far as industry is concerned; and occasionally you'll find both.
The key point that I always make about Projects of Concerns is this. Our policy objective is not to place projects on the Projects of Concerns list. Our policy objective here is a successful project. And that's why we have reformed and improved and enhanced the Projects of Concerns arrangement with a very focus on remediation of projects. If we had no projects on the Projects of Concern list then we would regard that as a most successful outcome.
So, our objective here is to remediate projects which fall into difficulty. Whether that is as a result of action or inaction of companies or of Defence or Defence Materiel. But the most important thrust, and this is reflected by the reformed program and the progress report on implementation, is to remediate projects. And I'll happily let Jason add to that.
JASON CLARE: Thanks Stephen. Can I emphasise I'm not interested in blame or shame. I'm interested in getting the project fixed and so when a project gets put onto the Project of Concern list I'm not interested in whether it's the responsibility of the company or whether it's the responsibility of Defence - it's all our responsibility. It's our collective responsibility to get the project fixed.
So, twice a year I get around the table with the CEO's responsible for the project as well as the CEO of the DMO and I make the same point to everyone in the room. It's our collective responsibility to get these projects fixed, to make sure that our Defence personnel have got the equipment that they need and that tax payers get value for money. So it requires all of us - the Government, Defence and the companies to get together and work the project out. Get the problem fixed and that's exactly what we're doing.
JOURNALIST: But this does shame the companies though and you would surely agree that the feedback you get from companies is that they don't want to be shamed by being on this list?
JASON CLARE: There's no doubt about it. Companies don't want to be on the list. But the best way to get off the list is to implement a remediation plant that gives defence the equipment that it needs and gives the Australian people the equipment that defence needs. And what we've found over the course of the last year is by working very close together at the highest levels, Chief Executives of the company, the Chief Executive of the DMO and myself, we develop a remediation plan that gets results and gets projects off the list. We've had four off so far this year. I expect that we'll be able to get more projects off before the end of this year, and more projects off next year.
So there's no use putting our head in the sand. If you've got a problem, you've got to fix it. And the best way to fix it is to shine a light on it and get the company, Defence, and the Government all working together to get the problem fixed. And I think the report that we've released today shows that it's delivering results.
JOURNALIST: In regards to [indistinct]
STEPHEN SMITH: Sorry, can I just add one point to that.
In the past we've seen either with a particular company or with particular section of industry we've seen difficulties or problems. When Defence, Defence Materiel and the company have sat down and worked through those issues, we then see a tremendous success story.
Perhaps the best example in that case is Boeing. So far as Boeing is concerned, a decade or so ago, Boeing had a very difficult with defence and with Defence Materiel. Now Boeing is one of the success stories, and you couldn't, for example, get a better illustration than that the fact that the fifth C-17 which we received into Australia was received in record time.
So to underline the point that Jason has made as Defence Materiel Minister, the most important objective here is to work together to remediate projects and turn difficulties into a success story. And there is another example today - we've turned the Anti-Ship Missile Defence programme from a Project of Concern into a success story; a success story both in terms of Australian technological development, but also a success story in terms of adding capability to our Navy capability.
There was a question over here?
STEPHEN SMITH: Well as the press release indicates, there are two reasons for the MRH90 helicopter project going on to the Projects of Concern list. And we have worked our way through this very carefully and very methodically, and it's now been the subject of an exhaustive Gate Review as Jason has indicated.
But there are two reasons for that one going onto the Projects of Concern list. One is a series of technical challenges, a small number of which are unique to Australia, but some of which are shared internationally. And secondly, delays in time.
The press release refers to the potential gap in capability that that causes, but I'm satisfied after discussions with the Service Chiefs that we've put in place the necessary arrangements to cover any gap in capability caused by delay.
JASON CLARE: Something in the order of about two years-
STEPHEN SMITH: It's about two years. It's about 20 months to 24 months.
JOURNALIST: Given the fiscal challenges that your friend the Treasury is about to impose upon you, do you believe that 12 Submarines is a viable economic plan for the future of this country?
STEPHEN SMITH: Well I've made this point before; the 12 Future Submarines is a long term project, and there is nothing in that project which will adversely impact upon next years budget or the forward estimates. There is a range of very detailed planning on our Future Submarines Project.
Some of that goes to strategic planning, and some of that goes to project planning. And we may well see in the course of the next period, indications by me of monies that have been allocated from within existing Defence resources to add to that planning work.
But the 12 Future Submarines are submarines which are earmarked under the White Paper and the Defence Capability Plan to come on stream effectively in two or three decade's time. And so, it is a non-sequitur to view that project in the context of the current defence budget, or indeed next year's defence budget, the budget generally and the forward estimate years.
Yes, we are going through a period where we have to ensure that Defence provides efficiency in terms of expenditure. Also, value for money in terms of expenditure. But there's nothing in that project which will have an adverse impact on the budget or the forward-estimate years. That is a long term project. It will also be the largest single infrastructure project that the Commonwealth has embarked upon, but we remain committed to the 12 Future Submarines, and we remain committed to exhaustively and methodically working through the details of that project before we commence it.
And part of that will be what we do about the maintenance and sustainment of the 12 Future Submarines. And in that respect, I believe we will get some very considerable assistance from the work that John Coles and his colleagues are currently doing into the review that I have requested into the maintenance and sustainment of the Collins Class Submarines, which as you know, has been a problem which has bedevilled Navy and Defence and successive Governments for a decade or more.
JOURNALIST: So the $2000 million of seed funding that you need for the project will be forthcoming in the next budget?
STEPHEN SMITH: Well I never make a comment about what may or may not be in the Budget and I'm not indicating any particular amount or amounts. What I am saying is that from within Defence's existing resources, whether it is this year's budget or next year's budget, there is more than enough capacity to do any and all of the planning that we need to do for the Future Submarines Project. Yes, that will be a project which will run up in the end of the completion of that project into very many billions of dollars. But we're looking at a very long term project. What I am focussing on now is the strategic planning and the capability planning that we need to do to make sure that we get that project right. And there is more than enough from within Defence's existing resources to enable that to occur.
JOURNALIST: Are you preparing to shift responsibility for some of the maintenance then back to the services and the Services Chiefs [indistinct]?
STEPHEN SMITH: Well there are two things. Firstly, there are the recommendations of the Rizzo Report on our Amphibious Ships. We have, on this very site, accepted and adopted all of those recommendations and you'll see the progress report on the implementation of the Rizzo recommendations, which include ensuring that over the longer term, we enhance Navy's capability in this area, both its resources and its expertise.
One of the very clear lessons from the Rizzo report was a running down over a long period of time or Navy's engineering and other capacity in this area. So that work is being implemented and effected. I'm also confident that so far as the Coles Report is concerned into our Collins Class Submarines, the Coles report will do for Submarines what the Rizzo report has done for our Amphibious Fleet. In other words, to shine a light very much on long-standing systemic problems. But to also give us a series of recommendations which we can utilise to substantially enhance the performance of our Collins Class Submarines.
JOURNALIST: Has there been any interest from overseas shown in the Australian developed Anti-Missile Defence System?
STEPHEN SMITH: Well as Jason said, there is a potential here for export opportunities. We're at a very early stage; we have been very pleased with the work that was done on HMAS Perth which successfully conducted the trials, both off the coast of Western Australia and also in United States waters off Hawaii. But because of the success of that and our decision to embark upon upgrading the entire fleet, that export opportunity does arise.
I don't think I mentioned in my earlier remarks that doing the upgrade for all of the eight Frigates potentially we'll see some 200 to 300 jobs created, primarily in Western Australia where the work on the HMAS Perth was done. But it does also as a proven Australian success story, open up the prospect for exports, but we're at an early stage of that.
JOURNALIST: You mentioned you're implementing the Rizzo report. So do you mean that Navy's already taken over more of the maintenance responsibility from the [indistinct]?
STEPHEN SMITH: Well in terms of the Chief of Navy having a very clear line of responsibility and authority so far as maintenance and sustainment is concerned, yes that's right.
Thanks - thanks very much. Thank you.