Minister for Defence - Transcript - Naval shipbuilding announcement, CEA Technologies, Canberra

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Senator the Hon David Johnston

Minister for Defence

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6 June 2014

Topic: Australian shipbuilding and naval procurement.


Ladies and gentlemen, thank you for joining me here at CEA Technologies here in Canberra.

What I want to announce this morning is a set of initiatives that the Abbott Government is taking forward to secure naval strategic shipbuilding into the future.

As many of you are aware, Minister Cormann and I on Wednesday discussed the problems with the Air Warfare Destroyer program.

This morning I want to set out some strategies with respect to the urgent requirement for new replenishment ships, I want to talk about the new Future Frigate program and what we’re doing to bring that forward, I want to talk about Pacific Class patrol boats which are vital to our region – particularly the western Pacific – and then more broadly touch on the direction that we’re going to go in with respect to the White Paper.

Firstly I need to say that our replenishment ships HMAS Success and HMAS Sirius are coming to the end of their useful life.

HMAS Success was commissioned in 1986, this ship should have been transitioned out of service much sooner than now and, if you’re familiar with the bathtub curve, the costs of running that particular replenishment ship are climbing, climbing very high and are very burdensome for the Navy.

So what we’re announcing today is that we will, in a restricted competition between Navantia of Spain and Daewoo Shipbuilding and Marine Engineering, conduct a tender competition for the replacement of those two replenishment ships.

We assess that currently Australia is not in a position to manufacture those vessels 20,000 tonnes and above and accordingly we will see those ships produced either in Spain or in South Korea.

Now with respect to the Future Frigate program – which is a very vital program strategically for the Navy and for Australia – we have committed $78.2 million to do the design and engineering research necessary to bring forward the program as best we can to see it is the platform that we can accommodate the very successful CEAFAR Active Phased Array Radar system that is currently on HMAS Perth which has achieved very good things for us in trials last year off Hawaii with the Saab 9LV Combat Management System.

This program is vital to Australia, we are very keen to bring it forward.

We are committed and want to be committed to the Australian shipbuilding industry, it is essential that we get the Air Warfare Destroyer program back on track and as you would have heard on Wednesday Minister Cormann and I are determined to do that.

This is a potential follow-on program with probably at least eight ships based on the F105 Navantia hull that is currently being constructed in South Australia. This is a very exciting proposition and we are determined to leave open the option that this can be an Australian manufactured solution to Navy’s future strategic requirements.

Thirdly I want to say that we are bringing forward the Pacific Class patrol boat – in excess of 20 boats – for our neighbourhood into the Pacific and Timor-Leste. This is a patrol boat of about 150-200 tonnes, a straightforward design, it will be steel, and we will conduct a tender competition to see who will be the successful manufacturer of that boat going forward.

Lastly I want to say that these are the first initiatives of a strategic plan that seeks to provide a productive, cost-effective naval shipbuilding industry for Australia.

The plan will be spelled out in greater detail in our White Paper in the first half of next year, but I want to say that the Government is determined that we have an Australian shipbuilding capability – but not at any price.

The taxpayer’s requirements that we have cost-effective solutions, that we are productive against world benchmarks, are the fundamental thresholds that the Government will be adhering to as we go forward.

So ladies and gentlemen, thank you for coming. I think that these are exciting announcements, particularly for the Royal Australian Navy, and I am happy to take some questions.


Will Australian shipbuilders be given preference in those tender processes?


With respect to the Pacific Class patrol boat certainly.

As you know, the point of my opening remarks were that we want to see Australian shipbuilders, with respect to the SEA 5000 program – that is the Future Frigate – we want to see the ships built in Australia, but if we can’t get the level of productivity to a reasonable standard, to a world-parity standard, then the Government will be left with no alternative but to build them overseas.


Because if they are built overseas is maintenance still going to happen here?


Maintenance would still be able to be done here.


Is it a vote of no confidence in Australian shipbuilders though that you are having the supply ships built in either South Korea or Spain?


Not at all because these ships are so large. We assess that there is very limited capacity for us to build a 20,000 tonne replenishment ship or a 26,000 tonne replenishment ship.

The 20,000 tonne ship would be a Cantabria-class built by Navantia of Spain. The Aegir-class – the 26,000 tonne Daewoo shipyard’s offering – is also, we assess, far too large for us to build here in Australia.


Well there’ll certainly be people disappointed at that though, maybe not dreaming big enough, not being ambitious enough that Australia can build ships like this.


We have a problem that we need to address urgently – a capability gap is what is at the forefront of our mind – these replenishment ships are urgently required.

We have been left a mess – HMAS Success should have been changed out long ago – and so we are taking decisive action to get this problem solved for the Navy. Both of the potential competitors for this tender provide a very successful replenishment ship.

You should bear in mind that we need obviously fuel, aviation fuel, supplies, provisions and munitions on these ships.

With the large LHD’s – 28,000 tonnes each – we must have a suitable replenishment ship to supply and support those vessels going forward, the planning for this should have been done a long, long time ago.


How long has the Australian shipbuilding industry got to demonstrate that it’s viable and that it can deliver projects on time, on budget?


That’s a very good question. We have agreed, Minister Cormann and I, that by March of next year we want to see some productivity improvements, some cost-effectiveness.

We want to see some management skills improved and then I think we’ll be in a position to make a full and proper assessment.


Will you release the Winter Review in full?


We’re considering that and that’s an ongoing consideration. That is a review that has been commissioned by the Finance Department and the Defence Department, so we will need an agreement across the board to do that, leave that with us and we will consider that into the future.


Minister what do you believe the chances are of the Future Frigates being built in Australia and do you believe that will happen in time to bridge the so-called ‘Valley of Death’?


Well the ‘Valley of Death’, let’s deal with that first Brendan if I may.

If we were going to have a solution to the ‘Valley of Death’ decisions needed to be made two or more years ago, I don’t have the magic wand that is required to say ‘here are the designs, here are the ships, set about the task of building them’.

What I am seeking to do today is to mitigate the problem that I have inherited as best I can with limited finance.

We do need to work up these designs, there’s a lot of work – proprietary design, engineering and understanding work – to be done across each of the three solutions that I’ve mentioned.

We’ll initially soak up a good deal of white-collar work which will mitigate the problem to a degree, but we cannot solve that problem and this is the fallacy that is out there.

If we were going to have no ‘Valley of Death’, no constriction in Australian naval shipbuilding, decisions needed to be made long ago, at least two years ago.

We are determined to give Australian industry the option of being able to build the SEA 5000 Future Frigates.

We have fabulous Australian, home-grown technology that has proved itself and amazed our allies and accordingly we want to go forward with that program, but not at any cost.

This is not a blank cheque, Australian industry must be internationally competitive and meet international productivity benchmarks.


Industry has stressed that if there is any sort of gap or any sort of down-sizing in the shipyards the skills-base will be lost and we won’t have the skills we need to build either the Future Frigates or the submarines in Australia for instance.


Submarines are a different order of magnitude completely, a totally different and complex artefact compared to ships.

We have developed and are redeveloping after the Anzac’s (class) shipbuilding skills.

The road has been extraordinarily rocky, we have suffered time delays, schedule and cost overruns that we must repair.

Now if we cannot see some light at the end of the tunnel the Government will be left with no option.

I believe we can do it. I’m determined that Mathias Cormann and I will drive that Air Warfare Destroyer program to a greater level of productivity such that Australia’s naval shipbuilding future can be assured, but it’s not a given.


And there’s been suggestions Minister that if we – and the impression I get here is what’s planned – consider building the Frigates on an Air Warfare Destroyer hull that those hulls would be too noisy for anti-submarine work, is that a fact?


That is exactly what the $78.2 million is set to find out.

The hull was originally designed by Navantia to be an anti-submarine warfare hull, so I’m reasonably confident that with the right construction, the right noise-suppression systems, it will be a very suitable hull for us.

But the essence of the Future Frigate program is the CEAFAR Active Phased Array Radar used in conjunction with the Evolved Sea Sparrow and the Saab 9LV Combat Management System, now that is all Australian product and I must say I am extremely proud of the manufacturers of those products.

We have seen a way forward for us to – for the first time – have an almost totally indigenous Command and Control structure that is world-class on frigates.


There are reports around this morning that there is a Cabinet reshuffle on the cards – a mini-reshuffle – and you could lose the Defence portfolio, what do you say about that?


I’m flat-out doing what I’m doing managing quite difficult programs, I’m part of a very good, strong, cohesive team.

I enjoy my job and everyone wants my job because I deal with such great people, you know sitting next to General Hurley and the Secretary of Defence and all of the people that are behind me at Senate Estimates for two days this week.

I just get on with the job, I don’t get involved in these sorts of matters because I just have too many things to worry about in putting the Defence portfolio back on the right track.


So you can guarantee that you’ll be here in time for the Defence White Paper being released?


Well who’s going to guarantee anything? The bottom line is I’m just working hard at doing my job, I know Malcolm Turnbull’s doing that, I know the Prime Minister’s doing that.

We are focussed on delivering – as we promised to the Australian people – a mature, sensible Government that gets these important matters right and I think you’ll see that in the Defence portfolio we’ve set about the task in the Budget and in this announcement today of repairing the damage that had been done to this portfolio by the previous Government.


Is there a concerted campaign against Malcolm Turnbull within the Coalition?


Not to my knowledge, certainly not to my knowledge.


What would you think if Scott Morrison took your job?


Well that’s a matter for the Prime Minister and as I’ve said no-one has a job for life, this is politics, this is not some sort of charitable institution.

I just get on with doing my job, which may I say is a very onerous and difficult one with a broad spectrum of duties which I take extremely seriously.

I enjoy my job. I remain at the whim, the benefit, the consideration of the Prime Minister and whatever he decides to do of course I am very happy with.


Do you believe that he’s satisfied with the job that you’re doing?


He’s expressed his satisfaction with the job that I’m doing on a number of occasions.

We’ve had a very busy national security program, we’ve taken a lot of programs forward, we’ve been able to secure a much-improved budgetary position in a very short space of time, there have been extensive engagements with the region from a Defence perspective that I think he has been very pleased with.


Minister just one overview question, how important strategically do you believe a shipbuilding industry is to Australia?


I think it’s very, very important for us because we want to have the security.

The capacity to develop strategic capability in Australia that sees us through good times and bad, and bad times means that we will not have necessary access to secure sea lines of communication, we will have to be dependent upon offshore sources for a whole lot of technical equipment, strategic equipment.

If we have indigenous capability it does secure Australia’s national security and that’s what we’re considering doing because we think it’s very important.


And you believe that there’s options for overseas sales with the Phased Array Radar system?


I certainly do.


Given that you’ve announced this new plan to get the Air Warfare Destroyers back on track why has it been placed on the Projects of Concern list and what do you think of Labor when they say it’s a ‘fake Air Warfare Destroyer emergency’?


Well let me deal with the emergency question. The international benchmark is 60 man-hours per tonne, we set the benchmark for that program at 80 man-hours per tonne, currently it is running at 150 man-hours per tonne, now if that’s a fake emergency – well I just think that is the most ridiculous statement I’ve ever heard.

Getting back on track is essential to the future of naval shipbuilding, we want to get the program back up because it is potentially a very, very strong program.

Never forget that when we went into East Timor we had to have the assistance of firstly a British and then a United States air warfare destroyer.

This is a vital program.

Thank you ladies and gentlemen for coming today, I appreciate it and I’m pleased to make the announcements that I have.

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