TRANSCRIPT: PRESS CONFERENCE – BLACK REVIEW
TRANSCRIPTION: PROOF COPY E & OE
DATE: 9 AUGUST 2011
TOPICS: Black Review; Iraq, withdrawal of troops.
STEPHEN SMITH: All right. Well thanks very much for attending. I’m joined by the Minister for Defence Science and Personnel, Warren Snowdon and by the Minister for Defence Materiel Jason Clare. I’m also joined by the Chief of the Defence Force General Hurley, the Secretary of the Department of Defence and the Secretary Designate of the Department of Prime Minister and Cabinet Ian Watt, the National Security Advisor and Secretary of the Department of Defence Designate Duncan Lewis and also Warren King, the Acting CEO of the Defence Materiel Organisation.
And can I congratulate Ian and Duncan on their appointments and I’ll have a few words to say about that later.
Today, Minister Clare and Minister Snowdon and I are announcing some deeply significant reforms to Defence, particularly in the area of personal and institutional accountability.
This is the first time in the modern era that Defence and Defence’s accountability has been considered across the board for the organisation as a whole. And also today releasing the Black Review on which these reforms are based, and the decisions made by the government fully implement the Black Review and its various recommendations.
Can I thank Dr Rufus Black for the work that he has done in presenting the report which was commissioned at the request of the former Chief of the Defence Force Angus Houston and the Secretary of the Department of Defence.
I received that report in January of this year and I’ve had a number of conversations with Dr Black since then as I have obviously with senior Defence personnel.
The theme of the report, or the review, and the theme of the government’s adoption of the report, are to effect better outcomes in Defence through better personal and institutional accountability. We want to see better outcomes so that taxpayers get better value for money and our service personnel in the field get capability delivered on time and on budget.
It’s a lengthy report and you’ve been provided with a lengthy media statement and some other materials, including a departmental structure which seeks to represent some of the changes that have been made.
I’m not proposing to go through all of those materials, or to go through all of the changes. That would take too long. But the Black Review builds on the reform program which the government has instituted in the course of this year and that reform is summarised for you in the materials. That reform has gone to, in the course of this year, capability, acquisition, sustainment and maintenance, but also to financial management and budget matters.
The reform program, of course, will continue. There will be further reform. Whether that is as a result of the Coles Review into submarine sustainment, or the work that is currently underway through the Secretary and the Chief Financial Officer on budget and estimation processes, today’s reform, a deeply significant reform, is aimed, I think, in particular at acquisition and capability, particularly in what is described as the pre-first past era.
We have made substantial reforms in the past through the Kinnaird reforms and the Mortimer reforms, to acquisition and capability projects and we are now making substantial improvements in the time between first past approval and second past approval; indeed, we are now seeing between 20 and 25 per cent improvement in terms of slippage of schedule for projects subject to the Mortimer and Kinnaird reforms.
These reforms will build on those reforms, particularly in the pre-first past area; particularly giving greater rigour, greater contestability for those projects in the pre-first past status and those projects which are recommended for approval into the Defence Capability Plan.
There will be better integration, better contestability of ideas, both internal and external and greater rigour. And accountability will bring with it greater individual responsibility for decisions made.
Some of the specifics, the government has decided to appoint – to create two new Associate Secretary positions to assist the Chief of the Defence Force and the Secretary to drive and implement this reform; firstly, a Chief Operating Officer and secondly, an Associate Secretary Capability.
The Chief Operating Officer, as the departmental diagrammatic representation shows, will be primarily concerned for helping to drive those areas related to the Defence Strategic Reform Program.
The Associate Secretary Capability will be responsible for enhancing our outcomes in capability, effecting greater integration between the various stages and sections of Defence involved in and related to capability. But also continue to drive the capability reform process.
I’ve indicated contestability and rigour, particularly applying in the pre-first past – pre-first past area. You’ll see in the departmental diagrammatic representation that the Associate Secretary Capability will have reported to him, or her, the work of the Capability Development Group. And we have also decided to split the Capability and Investment Resources Division, from the Chief Capability Development Group, to give internal contestability. And as the materials make clear, the central agencies, the Prime Minister and Cabinet, Finance and Treasury will be in a position to put a view about those projects proposed for inclusion in the Defence Capability Plan – so greater internal and external contestability of ideas.
There’s a very heavy emphasis on improving project management skills and we will embark upon a program to ensure that those members of the ADF who are posted or appointed to the capability section will, in general terms, have three year terms of office. That can’t be an absolute rule, because people will come up for command postings and command positions and the like. But we need to instil greater expertise; greater experience and greater capacity and that will be very much assisted by a three year tenure for those members of the ADF appointed to the capability area.
There will be a substantial reduction in the number of Defence committees. As Dr Black’s report makes clear, we have far too many committees in Defence, with very diffuse lines of accountability and responsibility. The reform program will see all of those committees subject to a sunset clause over the next 12 month period. The only Defence committees which will survive that process will be committees allowed to continue or established on the authority of the Secretary and the Chief of the Defence Force.
We’re also making it clear that committees are advisory in nature and individual decision-makers will be responsible and accountable for the decisions that they make on advice of committee members.
For the first time, Defence will have a whole of Defence, or one Defence plan aiming to ensure that we have a single integrated organisation and as materials make clear, there will be enhanced mechanisms for performance management driving home the accountability mechanisms.
The Defence Materiel Organisation will continue as it is, as a prescribed agency. Both the Kinnaird and Mortimer reports recommended to the government of the day that the DMO, the Defence Materiel Organisation become an executive agency. Governments of both political persuasions have not accepted that recommendation. The Defence Materiel Organisation will continue as it is, as a proscribed agency. This allows for the continuation of independent advice by the Defence Materiel Organisation, to government, in key points of the acquisition and capability chain, particularly as it relates to cost, schedule and risk.
Importantly, the implementation of these reforms will be the subject of oversight. One of the weaknesses, in my view, of past reforms has been insufficient implement rigour. I’ve asked Paul Rizzo who recently reported to government on the maintenance and sustainment of our amphibious ships to be involved in the implementation and oversight of these recommendations. That will be done in conjunction with the Defence Strategic Reform Advisory Board chaired by Mr Pappas.
Can I conclude my remarks by again thanking Dr Rufus Black for his report. Can I thank the Secretary Ian Watt for his advice on these matters. Can I also thank the Chief of the Defence Force General Hurley for his advice. Can I also thank Duncan Lewis as the National Security Advisor. The Black Review is made available, at senior levels, to the Department of Prime Minister and Cabinet very early in the piece and so Duncan has been involved in the progressing of this report to today’s announcement.
Before I open for questions, can I just make a couple of remarks in other areas.
Firstly, can I formerly, and for the first occasion publicly congratulate Ian Watt on his appointment as Secretary of the Department of Prime Minister and Cabinet. I put out a formal statement last week, but I’d like to take the opportunity of congratulating Ian.
Ian is a first class civil servant, a first class public servant. My first professional contact with Ian was when I was Shadow Minister for Communications and he was Secretary of the Department of Communications. And he is exceptionally well qualified to become the Secretary of Prime Minister and Cabinet. He will do a first class job.
Can I also congratulate Duncan Lewis on his appointment as the Secretary of the Department of Defence. I’ve worked closely with Duncan, both as Foreign Minister and as Defence Minister, from when Duncan was a Deputy Secretary for the Department of Prime Minister and Cabinet and worked very closely with him over the last three or four years sitting around the National Security Committee Table. And Duncan is also very well qualified to become the Secretary of the Department of Defence and I look forward very much to working with him. That will commence in early September.
Can I also take this opportunity of noting the fact that the Chief Defence Scientist, Professor Robert Clark has announced his intention to retire. Warren Snowdon, the Minister for Defence Science and Personnel announced that publicly last week. I just want to take this opportunity of saying that Professor Clark will be a loss to Defence and a loss to the Commonwealth. He’s an exceptional Chief Defence Scientist. He has made a particular point of working very closely with our troops on the ground in Afghanistan, on forced protection measures. And he’s made a significant contribution in that capacity and he will be missed. I know Warren wants to add to that and I’ll give him that opportunity.
The only other matter I wanted to mention up front was just to officially, for the record, indicate to you that effective from the 6 August, the last of our ADF personnel have left Iraq. As you know, the government came to office with a commitment to withdraw our combat troops from Iraq. That occurred in 2008.
Since that time, for force protection reasons, we’ve had Australian Defence Force personnel providing force protection for our diplomats at our embassy in Baghdad. Arrangements have now been effected over a period of time to transfer that responsibility to the Department of Foreign Affairs and Trade and to private contractors. But effective from the 6 August, the last 17 Australian Defence Force personnel left Iraq and I think that’s worth noting for the record.
I’ll give Warren the opportunity of making some remarks about Professor Clark and then we’ll respond to your questions.
WARREN SNOWDON: Thanks mate. Can I endorse the remarks already made by the Minister about the outgoing secretary and our incoming secretary. But can I particularly focus on Professor Clark who, in my view, has been an extraordinary good leader of the Defence Science Organisation. He’s done very, very good work and his emphasis on support for operations has been appreciated by the three services and by the men and women in the field. He will be missed and I wish him well in his new career.
STEPHEN SMITH: All right. I think some of us are keen to be out of here by about quarter past two, so if we get to that stage I might bring it to a conclusion, but we’re happy to respond to your questions.
JOURNALIST: Minister, just in terms of the two Associate Secretaries, what do you say to the suggestion that it’s more bureaucracy and [indistinct] not less. And is the role of the DMO might mean downgrading in any sense-
STEPHEN SMITH: -Well in reverse order, the role of the DMO, the status and position of the DMO remains the same. It continues to be a proscribed agency, so that arrangement hasn’t changed. That’s been the position of governments of both political persuasion.
The DMO will continue to have the capacity to give independent advice to government on key acquisition capability and sustainment matters in key parts of that cycle, particularly as it relates to cost and risk and scheduling and the like.
The Associate Secretary Capability will work very closely with the Chief Executive officer of the DMO and the Defence Materiel Organisation. He or she will also work closely with the relevant division of the Strategy Group, because capability, of course, is linked to strategy and there’s a key – there’s a clear need there for, at senior level, better integration of those pieces of the Defence organisation which have an interest in capability matters. But not just better integration, better contestability to get better outcomes.
So my view, and this arose as a result of discussions not just with Dr Black but with senior Defence personnel, was that if we had two senior officers, one dealing with capability matters, one dealing with operational matters – and I’ll come to that in a moment – then the Secretary and the Chief of the Defence Force – the Secretary and the CDF – as a diarchy, would have two senior officers to help drive reform and outcomes in that area.
So far as the Chief Operating Officer is concerned, you’ll see from the diagrammatic representation that his or her role is primarily in the areas associated with the Strategic Reform Program. The Strategic Reform Program was one of the very key changes that were affected in conjunction with the 2009 White Paper. The external parameters of a capped budget, the guaranteed budget rules, but also the need to ensure that the internal rigour matches the external parameters of a capped budget for guaranteed budget rules, but also the need to ensure that the internal rigour matches the external parameters. And the Strategic Reform Program is essential to that.
The Chief Operating Officer will operate in that space and that’s detailed in the materials. I see this very much as giving the Chief of the Defence Force and the Secretary of the Defence Force, two senior officers to drive two areas where we need to get better outcomes.
In the capability area, better integration, better contestability, better outcomes. In the Strategic Reform area, a better synchronisation of those parts of Defence which are absolutely crucial to the long term success of the Strategic Reform Program.
JOURNALIST: Minister, when are we likely to see the 25 per cent gain in efficiency on first and second pass approval reflected in a decision on the JSF? I think the order – initial order is for 14 – it hasn’t been signed. Also Land 17, the self-propelled artillery?
STEPHEN SMITH: Well a number of things.
Firstly, the early signs – and I describe them as early signs – of those projects which are caught by the Mortimer and Kinnaird reforms are showing an improvement of between 20 to 25 per cent slippage on schedules. That’s clearly a good thing. But we want to get better outcomes.
There’s clearly going to be an overhang with respect to those projects that are not caught by the Kinnaird or the Mortimer reforms, and we’ll continue to see that for a period of time.
We want to bring that rigour because as Minister Clare and I have announced earlier this year, we want to bring that rigour and the full implementation of the Kinnaird and Mortimer reforms effectively to the pre-first pass environment.
I think there are two – in my view – areas that we need to focus on. One is the pre-first pass area; getting greater contestability, greater rigour, greater integration of view into what qualifies for recommendation to go into the Defence Capability Plan.
We also, as I’ve said before, need to improve, in my view, the quality of the Defence Capability Plan, and we are going to align that with the Defence planning guidelines.
There will clearly be a lag effect in both those processes, but the public policy objective here is not to have two Associate Secretaries, or not to have contestability between first past and second pass; the public policy objective here is better outcomes, better value for taxpayers money, and capability delivered to our service men and woman on time and on budget.
In terms of individual projects, and I’ll refer to the Joint Strike Fighter project, I’ve made it clear in the United States and since my return that we are looking very, very carefully at the scheduled outcome so far as the Joint Strike Fighter is concerned.
The original decision put in padding in terms of schedule; we’re now starting to rub up against that as I made clear in the United States. We’re expecting an exhaustive risk analysis of the schedule at the end of this year, early next year. The last thing I will allow to occur will be a gap in capability, and we need to be making decisions in that respect in the course of 2012, 2013.
JOURNALIST: Minister, what kind of resistance are you expecting in the wider organisation to these changes? How soon before you expect that you do see some change? And with the two new Assistant Secretaries you’re looking to appoint, would you like to see them come from within the organisation or from outside?
STEPHEN SMITH: Okay. Well, a range of issues there.
Firstly, as the paperwork makes clear, the secretary of the Department of Defence will now trigger the process for a merit review selection process. That will, I think, almost certainly be drawn to a conclusion, or brought to a conclusion by the incoming Secretary of the Department of Defence. But that will be advertised in the usual way. And indeed, in the very near future, you will see advertisements for the new Chief Executive Officer of the Defence Materiel Organisation – that’s already appeared.
Advertisements calling for suitably qualified people to apply for the two Associate Secretary’s position, and as well for the Chief Defence Scientist. So there are significant appointments; they will all be affected through a merit process, and that opens up the prospect for internal candidates – both from within Defence, internal candidates from the Commonwealth public service generally, but also external candidates from state public servants – services or from private enterprise. And the merit review process will be conducted and announcements made in due course – that’s the first thing.
Secondly, one of the good things about the Black Review is that for the first time, I think for the first time in modern history, a very careful look was given to accountability and structures and decision making processes in Defence across the board.
In my experience as Minister – Minister now for some nine months, one of the weaknesses in the system is lack of integration. Parts of Defence organisation working in silos, a lack of integration – a lack of contestability of view. And so we’ve got a very substantial piece of work which the Secretary and the then CDF have had formally since January, as have I.
I wanted to take my time about coming to conclusions. Firstly, I wanted to have my feet under the desk for a longer period of time. But I also wanted to make sure that senior people – the Defence leadership also worked their way through the report. And that’s occurred, as it has with other relevant agencies, in particular, the Department of Prime Minister and Cabinet.
What I’m absolutely confident about is this; is that the report and the announcements today provide a very, very sound basis, and provide me with a lot of confidence that we will see improved outcomes. That’s first point.
Secondly, the Black Review and the decisions today are embraced by the Defence leadership. That’s a very good thing.
What we need to do is to ensure that whatever cultural change is required is effected through the system, and that’s one of the reasons why I came to the conclusion, and Defence leadership came to the conclusion that the appointment of two Associate Secretaries would assist the Secretary and the CDF in that task.
JOURNALIST: Minister, I was going to ask, will these changes allow you to better identify individuals when a project goes off the rails and to discipline them and sack them?
STEPHEN SMITH: Well to answer, yes, but a couple of points.
Firstly, one of the challenges that I’ve found has been when I’ve been presented with advice where things have gone wrong, and I’ve asked for how did this occur? Where was the senior officer oversight? Where does responsibility rest? And what lessons can we learn? It’s been very difficult to provide answers to those questions, largely because very many of the decisions have been made at committee level where the responsibilities to date have been diffuse and hard to identify.
One of the strengths of the report is that there are too many Defence committees, that committees now will be reduced substantially in numbers. Committees will be advisory, and there will be individual decision makers.
Now from time to time, there might be more than one individual decision maker, but that is also addressed in the various materials. So sheeting home that individual accountability; sheeting home that individual responsibility will in my view lead to better outcomes because people will own the decisions individually to a much greater extent.
On your final point about what adverse things might occur if mistakes are made. We need I think to very carefully keep this in perspective. A junior officer can make a mistake as a result of lack of experience, or not following a well trodden system or path.
More often than not, the lesson learnt is you made a mistake on that occasion for the following reason, make sure you don’t do it again. And so often, the remedy for a mistake in a personal sense is counselling, the performance management analysis and the like.
At the more serious end of the scale obviously, other consequences take or play their part both on the civilian side, which is consistent with the Commonwealth public service generally, but also on the military side. But the fundamental starting point, I think, of Black is personal and institutional accountability and responsibility in Defence needs to be sharpened, and that is what we’ve done with our announcements today.
JOURNALIST: [Indistinct] pretty significant costs involved in these reforms?
STEPHEN SMITH: Well there was a cost to producing the Black Report which I think has been given its Senate Estimates, firstly. Secondly we’re proceeding on the basis that all of this can be done from within existing resources.
JOURNALIST: Is Australia’s long involvement in the Iraq war has ended almost with a footnote, and Labor made much of the foreign policy folly of being there in the first place, but do you now reflect on that as a Defence Minister and take any positives even as a military operation that may have stood Australia in better stead for instance in places like Afghanistan?
STEPHEN SMITH: Well a number of issues there. Firstly I have formally put it out or announced it today because I do think it’s an important point to make for the record, not just for those members of the army or the Australian Defence Force who have been continuing to do their job protecting our diplomats and officials, civilian officials in Iraq over a period of time. That’s been a very important job and I have to tell you I was Foreign Minister at the time and I was very keen to ensure that our ADF continued to provide that force protection for our DFAT, for our Department of Foreign Affairs and Trade and for our AUSAID officials.
Circumstances have moved in Iraq where the National Security Committee of the Cabinet believed we’re in a position to transition that to Department of Foreign Affairs and Trade and private contractor responsibility, and that is essentially the norm these days in Baghdad so far as force protection of diplomats and embassies is concerned.
I have made it crystal clear on any number of occasions that I have seen our involvement and the international community’s involvement in Iraq as a distraction from Afghanistan. I’ve made the point that so far as Afghanistan is concerned we now strongly believe that we’ve got the correct political and military strategy in place, the resources and the personnel on the ground to match that strategy, and we believe we’re on track for the transition in the course of the period between now and 2014.
In terms of what advantage if any advantage despite the fact that my political party opposed that combat presence, what advantage if any has come to Australia’s involvement?
I’ve said publicly and privately on a number of occasions, and I said it most recently in the United States at the Brookings Institution, that we’ve now seen effectively so far as Australian Defence Force is concerned and Australia is concerned a decade of a land war, Afghanistan and the immediate aftermath of September 11th, Iraq and then subsequently Afghanistan. That has seen us working very closely with the United States, our alliance partner, over a decade.
And I think two traits are true of that period; we’ve seen a much stronger relationship so far as special forces is concerned and a much stronger relationship so far as intelligence has been concerned. Those factors, in my view, together with the fact that for a decade our senior ADF personnel have also been working in an embed capacity in international security systems headquarters for example have seen our ADF personnel working hand in glove at senior level with United States, NATO, International Security Assistance Force leadership, and that has also left a singularly good impression.
Combination of those things has seen, in my view, our standing in ISAF never stronger, our standing with NATO never stronger, and the practical cooperation between Australia and the United States putting the alliance relationship into, in my view, the best position historically it’s been in.
JOURNALIST: From this whole examination was there any analysis of ending the diarchy arrangement [Indistinct]-
STEPHEN SMITH: No
JOURNALIST: -the Service Chief and-
STEPHEN SMITH: No. Well certainly not by me and I don’t see that, frankly, as being a productive way forward. I have had the advantage as Minister of Defence of working very closely with Ian Watt and Angus Houston as Secretary and CDF, with Ian Watt and David Hurley as Secretary and CDF, and looking very much forward to working very closely with Duncan Lewis and General Hurley as secretary and CDF. And there were no proposals before me to change that and it’s not something that I would prosecute now or into the future.
JOURNALIST: Have you answered the suggestion made by some commentators though that the independence of one side of that diarchy is somehow compromised by Mr Lewis’s background?
STEPHEN SMITH: Well I think it’s nonsense, I mean Duncan Lewis has a substantial professional military career and experience, that’s the first point. Secondly he’s been out of uniform and in a suit being a professional Australian Commonwealth public servant in the Department of Prime Minister and Cabinet and as the National Security Advisor for a considerable number of years, and he has my complete confidence that he is eminently well qualified to discharge the role of Secretary of the Department of Defence.
The Secretary is not the Government’s military advisor, the Government’s military advisor is the Chief of the Defence Force, and when a minister and a government works closely with the diarchy you get civilian advice and you’ve seen today the substantial challenge we have on a whole range of capability and other issues which are primarily seized by the Secretary and his offices, but at the same time you can’t get better outcomes out of Defence, you can’t get better outcomes out of a Defence organisation unless the military side and civilian side are working hand in glove. And that’s why I’ve made an emphasis on better integration, better integration on the capability side, better integration on the strategic reform process side.
But I’m very confident that David and Duncan will work closely. Whilst Ian Watt will be a loss from Defence I’m very pleased that we will have at the highest level in the Department of Prime Minister and Cabinet someone who understands the complexity of these issues, so I saw some commentators make that comment over the weekend, I frankly thought it was nonsense.
JOURNALIST: How many committees were there in Defence-
STEPHEN SMITH: Hundreds.
JOURNALIST: So it wasn’t the case that some of them just haven’t met or haven’t met for years?
STEPHEN SMITH: Answer hundreds and I think anything is possible, which is why we’ve said sunset clause, after 12 month they’re all gone unless there is a positive decision on the part of the secretary and the CDF to continue a committee or to start a committee anew.
JOURNALIST: Minister, a lot of Australians will be scratching their heads and saying given that you’ve now got set up and people being responsible for actual things and responsibilities in Defence, people are wondering why on earth hasn’t this happened before?
STEPHEN SMITH: Well I make this point. I don’t see – whilst I see today as being a deeply significant occasion and the adoption of deeply significant reforms, I don’t see the reform process or the job being done in Defence. Defence is a big logistical complex organisation. In some respects the job will never be done. In other words you’ve got to keep yourself at it all the time, but what is our ambition here? Our public policy ambition here is to get better outcomes. We want to get better value for money for the Australian taxpayer; we want to get equipment capability to our servicemen and service women in the field on budget and on schedule. That’s our objective.
In Defence, because you’re dealing with a huge logistical organisation and in capability because you’re often dealing, as you are with the Joint Strike Fighter, cutting edge new technology, there are always risks to be managed. What this is about is trying to manage the risks better, and by shooting home individual and personal accountability and responsible we can think we can manage that risk better and get better outcomes.
You’d have to ask the Defence historians why it hasn’t occurred before, but I’ve made a point since I became Defence Minister of very clearly saying there are a range of areas where Defence needs to be the subject of reform. Minister Clare and I have put a number of those on the record and they’re distributed for you today.
Today is a further very important substantial instalment of that. It’s got the very strong support of the Defence leadership and you can’t reform without that support. I’m expecting down the track to be announcing further reforms so far as submarine sustainment is concerned, further reform so far as financial management and budget estimation processes are concerned. But I’m also confident that we will see better outcomes.
Yes, there will be a lag in some of the projects, and we’ll see adverse consequences from projects which haven’t been subject to these reforms or to [Indistinct]. We will see an overhang and the lag, but I’m also confident that we will see better outcomes.
Defence is inherently a good organisation. I am often gob-smacked on a daily basis by the number of fantastically professional Australians that I come in contact with. It might be a troop on the ground, a sailor in a ship, a RAAF pilot or a Defence official, military or civilian. I think one of our problems in the past has been when you put them all together the integration hasn’t been as good as we can make it. We’ll get better integration out of this; better responsibi