Speech and Q&A to the Defence and Industry Conference, Canberra

SUBJECTS: Department of Defence reforms.

MARK BERETTA, HOST: Now, to open our conference, our first speaker – we’re very pleased to have him – is the Minister for Defence Industry. The Honourable Pat Conroy, MP, is Australia’s longest serving Minister for Defence Industry, appointed in 2022. Minister Conroy is leading efforts to strengthen our nation’s defence capability and industrial base while creating highly skilled jobs for the future. He has been a member of parliament since 2013, joined cabinet in 2024 and also serves as the Minister for Pacific Island Affairs. Ladies and gentlemen, would you please welcome the Honourable Pat Conroy, MP. 

PAT CONROY, MINISTER FOR DEFENCE INDUSTRY: Thank you for having me today, and I begin by acknowledging we meet on the land of the Ngunnawal people and pay my respects to elders past, present and emerging and acknowledge any serving members of the ADF and veterans of Aboriginal and Torres Strait Islander heritage. 

Thank you to the team at Defence who are hosting this conference today, and let me first acknowledge some really distinguished guests here today. We’ve got the Vice Chief of the Defence Force, great to see you here. We’ve got the heads of three of our delivery agencies in Leon Phillips, who’s done such great work really establishing the GWEO and getting some really significant landmarks, runs on the board – the first missile factory open and two more on their way. We’ve got Dave Hanley, Head of Naval Shipbuilding who’s critical to delivering on the Mogami-class build landing craft, LOTE, you name it. And we’ve got Acting Head of CASG Rachel Kuczma here as well. So it’s great to see you here. And we’ve got our Acting National Armaments Director, Ms Nadine Williams, great to see you here on day one of your new role, so no pressure. 

Before we get into the Q&A – and I’m here to answer your questions, particularly the tough ones – I want to acknowledge that we are meeting on a landmark day. This is the first phase – this is the first day of the first phase of our landmark reforms. And this is incredibly important, especially for the thousands of men and women who are truly the heart and soul of the Defence Department. 

I really want to stress that no matter what the headlines say – particularly today, some of the analysis is intentionally mischievous, lots of it is intentionally ignorant – what we are doing with this reform journey is about fixing a system. You get up every day, work and make sacrifices to help defend this country. You get up every day to fight to deliver capability as fast as possible for the men and women of the ADF. You get up every day to do the best that you can, and it’s the system that has let you down. It’s the system that has constructed a defence investment scheme where senior leaders of the department have to digest thousands of pages of submissions, have to spend hundreds of hours in meetings, where 56 per cent of the decisions are for noting. It is the system that requires red tape that is unnecessary. It is the system that is failing, and that is what we’re trying to change today. And I want to make it very clear to the men and women who work really hard that this is not targeted at individuals; this is about setting you up for success so that we can get even greater speed and capability for the Australian Defence Force. 

Today marks the start of the 12-month transition for Defence to a whole new way of doing business. And as I said, today the Acting National Armaments Director takes the reins of the new Defence Delivery Group and our capability delivery functions, with CASG, NSSG and GWEO coming together under the new unifying umbrella. And at the same time, we will centralise capability development from the five warfighting domains and transfer contestability to the VCDF Group to support clearer prioritisation, streamline decision making and accountability for new capability proposals. VCDF Group will prioritise what capability is needed. The National Armaments Director, through what will become in 12 months’ time the independent Defence Delivery Agency, will deliver that capability. 

There are a whole raft of internal governance and systems reform that will occur to operationalise the reforms, which I’m sure others will speak to throughout today. But the overarching effect of the changes will be clearer and stronger lines of accountability and quicker acquisition of capability. 

That’s my main message to you today – that we need clearer accountability, we need streamlined decision making so that you can get on and do the job that we need you to do. So that’s enough of the waffle from me today. I’m really looking forward to your questions and I wish you the best success in today’s deliberations. Thank you very much for having me. 

BERETTA: Thanks, Minister. We are here to take questions, so if you would like to file them through the app, we’ll take some questions. Waiting for our first questions to come through. Minister, the main message for you today is just about streamlining the system, improving the system?

CONROY: Yes, absolutely. It is – I’ve been very honest with people. I think the One Defence reforms, there are some good aspects to it but I think there was some really significant reduction in efficiency. I think a story told to me by a former head of the NSSG was when he started in the department one particular process required two signatures to sign off. By the time of the end of his tenure it required 70 signatures to sign off. That is just not fair for anyone. It’s just – and that’s one of the essences of what the reforms are about – is removing fragmented accountabilities – because if everyone is accountable, no one is accountable – and making it very clear that we’ve got this process under the VCDF for capability development and DDG and the DDA for capability delivery. And that is critical if we are to succeed. And the strategic environment has changed and we just can’t have that fragmented system anymore. 

BERETTA: In the room today, the auditorium, are people who represent pretty much all of Australia defence industry and supporting our ADF. What’s the key message you want to give them about the work they do? 

CONROY: Well, two key messages: one, you are essential to our success. You get up every day and make this country safer by working to deliver the capability the ADF needs. And we’re incredibly thankful for that. The second part is part of this debate around how Defence works will always focus on cost blowouts, but the analysis has revealed that most of the increases in costs have occurred pre-second pass. And, again, that’s not a reflection on the department either; it’s a reflection on a system where we’re not giving people the assistance around costings, we’re not giving the incentives around change discipline so that projects don’t increase in scope and budget from gate 0 to gate 1 and from gate 1 to gate 2. So my message to the defence industry is through this process you’ll get a smarter, more efficient customer who’s more up for taking risks, because that’s what we need. 

BERETTA: Minister, there are a tonne of questions coming in. First one: where do you think the main opportunity to engage is? 

CONROY: Well, I assume this is coming from industry. Well, I think there’s two areas, and I’ll be launching the 2026 Defence Industry Development Strategy tomorrow at the National Press Club, so stay tuned, but in there there’ll be a series of announcements of new fora where industry will be brought into the process a lot earlier. 

I think there’s a lot of sort of myths out there about the role of the Australian National Audit Office. Early engagement with defence industry is a good thing. We have to do it in a smart way that is conscious of probity. But if you look around the world there are systems that engage industry a lot of earlier in the process to help shape capability decisions so that we get the best possible platforms as fast as possible. And you do that by knowing what industry can offer. You know that by having realistic commercial and industrial acquisition strategies. So, earlier engagement from industry is critical, and setting up the department so they can engage with you earlier is a key part of my speech tomorrow. 

BERETTA: Minister, how are you planning to ensure that this landmark reform is implemented well? 

CONROY: Well, that’s the million-dollar question. I’m sure there’s plenty of people who have sat through ministers announcing reforms and then watch them peter out or having success. So the key thing here is having a whole-of-government approach, not just leaving it to the department to drive. And that’s why the implementation taskforce that Nadine Williams led was across whole of government. It involved representatives from PM&C, Treasury, Finance, as well as the Department of Defence, because it’s the system that is broken, not individuals or even individual departments. So it’s going to require a cross-governmental approach as well, and then ultimately ministerial energy. If my ministerial career ended tomorrow – and I hope it doesn’t, for the record – this is my proudest legacy: these reforms. I truly believe that these are the biggest reforms of the Defence organisation in 50 years, so you can be damn well sure that I’ll be keeping a close eye over it every day I’m in this office and working closely with the department to make sure that we’ve got the energy and the resources to drive these reforms because otherwise it’s just waffle, it’s just talk, and we don’t have time for that. 

BERETTA: Next question: if the committees are swamped in red tape, will your changes affect the Commonwealth Procurement Guidelines and the Financial Management Act? Is it that they form the basis of most of those delays? 

CONROY: I actually slightly disagree. I don’t think it’s the procurement guidelines that drive most of the delays; it’s the way we interpret them and the way we approach them. And I think one key part of these reforms is us being smarter, using the procurement guidelines to get the desired outcome. Probity is really important, but if you’re not – if you don’t have the confidence, if you don’t have the right incentives, you’re going to hide behind red tape and avoid making decisions. So it’s about using these guidelines properly. It’s about engaging with the National Audit Office, for example, early on to understand how you can engage industry in a way that doesn’t breach probity, doesn’t sort of pollute decision making but means we can move faster. So I don’t think it’s procurement guidelines; I think it’s the way we interpret them and it’s the way we don’t give the resources to Department of Defence staff to really drive this change. 

And also things like posting cycles, particularly for ADF personnel, if you’re in a job for only two years, it takes a hell of a long time to get up to speed, and then you’re spending the last six months working on handing over to your successor. So longer posting cycles, if that’s appropriate, where you can be promoted from within to have a deeper and more engaged acquisition corps, will allow people to have the confidence to engage and take risks, because that’s what we need. 

BERETTA: Fast forward 12 months – 1st of July 2027 – what does the successful transition look like and what are your parameters for success? 

CONROY: Look, a successful transition looks like, firstly, no delays to existing projects because of this work. That is really important. We’ve copped a bit of heat that when we announced the reforms late last year, we just didn’t say on the 1st of January this year that DDA is being stood up. Well, (a) I don’t think it would have been physically possible, but even if it was, it’s really important to have a staged approach to this, a staged rollout, so that the hundreds of projects that are being delivered right now can continue to be delivered, because ultimately that’s about capability for war fighters, and that must be delivered on schedule and on budget while we roll out these new reforms. So that’s the first parameter of success. 

The second parameter for success is that we see a streamlined process where the VCDF is driving a unified capability development process, that we’re working in that disciplined manner, and that the National Armaments Director is providing advice and working closely with the VCDF to make sure that we’ve got the most realistic and optimal industrial and commercial acquisition strategies from gate 0, gate 1, gate 2 all the way to Government. So for me, they’re the two key parameters. There’s plenty underneath that, but for me that is the most significant changes I’m looking forward to from now but certainly by the 1st of July next year. 

BERETTA: A question from industry: How important is the Industry Capability Network (ICN) playing in the early engagement? We invest time in keeping our capability information up to date on the gateway platform. 

CONROY: The ICN is one of the critical information sources. It’s not the only source, but the ICN has played a really important role. If I think about the Minehunter project that was delivered in my own region of the Hunter, one of the critical inputs to success was utilising the ICN to understand what Australian industry can offer, engaging them early, and that really drove enormous local content in that really important project. 

But it’s also about building a capability within the department. So I think one of the worst parts of the One Defence reforms – and I’m not just saying this because the other side of politics made decisions; I think it wasn’t even a conscious decision – but when the DMO [Defence Materiel Organisation] got abolished, they abolished the industry division. And the industry division – I know it had, sort of, a mixed reputation – but it was sort of the repository of wisdom about what industry could deliver, what industry had, what capability was there. And then that knowledge flowed through to the rest of the department. And it then got fragmented, and some of it was in SP&I, some of it was in the delivery agencies. That is something that I’ve, again, stood up in an interim way through CASG, and we want to really build that internal reservoir of knowledge, because if Defence doesn’t understand what industry can offer, how can we shape capability development to maximise the benefits for the nation? 

BERETTA: Next question: Is the government looking to encourage greater use of public-private partnerships, private capital or other innovative funding models? If so, where do you see the greatest opportunity? 

CONROY: We absolutely are. And when the Deputy Prime Minister and I launched the Integrated Investment Program for 2026, it details $425 billion worth of investment over the decade. And we’ve said around $15 billion of that should be through alternate financing. And we are really challenging Defence. We’re absolutely convinced there’s at least $15 billion worth of projects where PPPs [public-private partnership projects] or private capital or other innovative funding models make a lot of sense. 

There are areas that are obvious to some, where we have tried before, and some of them have been really successful. Bungendore is a great example of using patient capital, and we’re looking for more of those. So the Estate Group is one area. Infrastructure tied to capability delivery, and people can think about things like storage bunkers and others, could be another one. And then there’s areas where we’ve paid upfront for things that could be seen as a long-term service provision for Defence. So there’s three of the main categories. 

But what I want is early engagement with industry to hear from industry where they think it makes sense. Because ultimately, private finance isn’t just about shifting the sort of investment off our balance sheet onto yours; it’s also looking at alternate revenue streams that complement the main work through Defence. So, only industry is best placed to let us know if you do it in this way there’s another alternate income stream that would effectively subsidise the project. 

BERETTA: Next one: clearly, FMS [foreign military sales] is good for primes, but do you think the heavy reliance on them is good for defence industry moving more broadly? 

CONROY: Well, FMS does have a role, but it is not the main driver of acquisition or the entire Defence spend. So we spend 80 per cent of the Defence budget locally. In the capability acquisition and sustainment area, it’s about two-thirds is spent locally. And across sustainment, it’s just under 80 per cent. And even in acquisition, it’s 51 per cent we spend locally. So FMS is not the dominant driver. It’s there. It will have its role in some areas. But ultimately, we need to build sovereign capability in this country because it’s critical to our national self-reliance. And, secondly, we’ve made no – we haven’t hidden the fact that we’re looking at alternate partnerships. We’re looking at broadening our partnerships to countries like Japan through the Mogami acquisition. But even when we engage with the United States, FMS is not the automatic default assumption. So the best poster child for that is how we joined with the US to acquire the Precision Strike Missile. That’s on the basis of co-design, co‑development, co-production and co-sustainment. And within the ‘26 NDS we’ve flagged that we’re looking at co-production of PRISM. So that’s not an FMS acquisition; that’s us through Leon’s group [GWEO] working really closely with the United States to acquire the most advanced land attack missile and produce it here and sustain it here. 

BERETTA: Okay. Will a significant uplift in digital and mission engineering capabilities within the agency and within the industry base be required for large and smaller projects?

CONROY: What we're looking at doing is building the capability within the department. We saw thousands of skilled defence personnel leave the organisation when the DMO was abolished. We’ve made no secret of the fact that we want to build that capability back within the department and really have what I think will be the premier project management agency, not just in the Commonwealth but across the entire public service. Like, the 2014 Commission of Audit said that Defence should no longer be a project management organisation; it should only be a contract management organisation. And I think that has led to a customer that doesn’t engage with industry as well as it could be, and we’re dedicated to having the premier project management organisation in the nation full stop. 

BERETTA: ASCA is demonstrating how to deliver capability at speed. Would you like to see the rest of Defence become more like that model? 

CONROY: I think that there’s certainly lessons that could be concerned from how ASCA is performing and laying it out across Defence. But Defence is doing it much more broadly. Like, I’ll give you an example within the conventional acquisition system, and that’s LAND 156, which is counter-drone capabilities. Through approaching it through spiral development, through establishing a panel for drone providers, for example, what we’re doing there is acknowledging that the technology cycle is faster than government decision making, so we’re not just going to buy 10,000 drones and put them on the shelf somewhere to be out of date within six months. We’re approaching it through an open architecture process where we identify systems that are integrated but then bringing capability as they develop. 

So ASCA has done great work. ASCA only would work when it links into the delivery arms to get – so that new technology can then go into programs of record so that they are funded through the commercialisation valley of death into long-run production. But Defence is doing this as well, whether it’s LAND 156, whether it’s what we’re doing with the acquisition of the Mogami-class. So I want to see the entire department uplift at speed, and that includes government. Government has to move faster in making decisions. We did that with Ghost Shark, and we’ll keep doing that because that’s what the strategic circumstances require. 

BERETTA: What does sovereign capability mean to you, and what are your priority areas? 

CONROY: It’s a great question. For me, sovereign capability means we have resident in this country the intellectual property, or access to the intellectual property, for the platform or the system. Secondly we have the skilled workforce in this country. Third, we have the industrial facility that makes, produces the product and we have access to the R&D base where it makes sense. 

For me ownership will matter sometimes, but it’s not the sole determinant of sovereign capability. If ownership was, that would mean that the 6,000 people who work for BAE in Australia aren’t part of our sovereign industrial base. They clearly are. So for me sovereignty works is based on intellectual property, workforce, decision making and access to the actual capital facilities. 

Secondly, what are the key priorities? Well, we articulate that through the SDIPs – the Sovereign Defence Industrial Priorities – and you’ll see them articulated again tomorrow when we launch the ’26 DIDs. That process is based on an exhaustive analysis from the warfighters in the Department of Defence about what are the sovereign capabilities they need to manage conflict in the modern era. It’s staged across the three epochs, and it’s really important that it’s done at a granular level. And that’s the real difference between what we’ve done with the SDIPs from previous iterations, because everyone – this is an acronym-rich environment, and we’ve all lived through SIGPs and PICs and SICs and they’ve all tried to get at the same problem and they’ve all been attempting to do that. And I sort of worked on SICs and PICs when I was a staffer. But the difference with SDIPs is that the finer the granular level, so that you can look at epoch 3, what are the capabilities we need in these subsystems?

Secondly – and this is the most critical part of it – we’ve got a decision out of the National Security Committee of cabinet that ultimately the best tool for maintaining these sovereign capabilities aren’t grants. They’re the first tool, but the most effective and biggest intervention will be altering the IIP, changing investment decisions to maintain capabilities. And the best example of that is continuous naval shipbuilding, where we’re saying we will maintain a steady flow of work to build this sovereign capability, to maintain its health so that we don’t have the boom-bust cycle of shipbuilding that means that we’ve lost that capability at periodic episodes. 

BERETTA: Minister, thank you very much. Great to have your insight. Thanks for kickstarting our day today. 

ENDS