Minister for Defence - Interview with Lyndal Curtis, Capital Hill

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Senator the Hon David Johnston

Minister for Defence

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30 July 2014

David Johnston welcome to Capital Hill.

You put a lot of weight in a speech yesterday on getting the Air Warfare
Destroyer programme right saying it was a test case for the industry.

The Australian newspaper says you’re thinking of taking it away from ASC,
what was the Australian Submarine Corporation, and giving it to BAE
Industries, a British company with facilities in Australia. Is that the option
you’re looking at?

We haven’t made a decision in that regard but let’s just examine where
we’ve been. This will be the third or fourth iteration of a remediation on the
programme, now we can’t go on, what has been happening here is a coverup.

When we came to power I realised very quickly that this project was
completely off the rails.

Now some of the contractors have done very well and some of them have not
done very well. I’m not going to get into naming names but we do need to
change out some management, that’s an important, significant step for all of
the participants whose interests must be protected.

BAE as one of the candidates have an exceptionally good track record in
manufacturing the Queen Elizabeth-class aircraft carrier, a 65,000 tonne
vessel, in the UK and of course they’re in charge of the Astute-class
submarine programme, a 7,000 tonne submarine programme.

So they’re one of the candidates, they appear to have the credentials. I can’t
go into who’s who in the zoo, but we do need some competitive tension in
there. This project is probably our most complex ever.

Given that BAE Industries has performed well in the past, given that it would
mean keeping the jobs in Australia because they have Australian facilities, it
does look like your best option doesn’t it?

It may do, but I couldn’t comment at this stage because we have a
competitive process unfolding, albeit a very brief one because we’ve got to
get on with the job.

What’s on offer is a further eight, 7,000 tonne vessels. Now to anybody
who’s in any doubt as to my commitment to the Australian shipbuilding
industry let me just say I want to build those eight ships, out to 2035, in

But you did say yesterday ‘a shipbuilding industry in Australia, not at any

Correct and that was the next line I was about to give you Lyndal, not at any
price, it’s not a blank cheque.

We must meet those international benchmarks, we set them at 80 man-hours
per tonne, the international average is 60 so we thought we’d put some
flexibility into the programme. We’re currently doing 150, now that is not

Where are the problems? Is it the way it’s being managed? Is it the way the
industrial conditions are set?

The problem is largely management. Our blue-collar workforce is very
skilled, I think they’re fine, I don’t have an issue with them necessarily.

Productivity is low and wages are high compared to the South Koreans, but
that’s not something we didn’t foresee.

Management has not been able to come to terms with the way we schedule
the blocks, their assembly, etc.

So integration is not a problem. Some of the block builders have been very
good, others not so good, but management has fundamentally been the issue.

Given the timeframes you’re making decisions about the new submarine
project, which is a much bigger spend, will this test case for Air Warfare
Destroyers determine whether the submarines can be either built or
assembled in Australia?

Well of course that’s an ongoing consideration and may I say we’ve inherited
virtually nothing done in the last five to six years, so we’re virtually starting
from scratch.

We’ve got two options on the table, neither of which appear to be that
satisfactory in terms of their development as a plan.

So we’re trying to put together what we see as the most risk-averse, viable,
capable – that is providing the most capability to Navy as they require – sort
of plan that is going to take us forward for a very long time.

Now what Coles taught us with sustainment is you want an enterprise, you
want an industry that’s ongoing. If you start to bookend things you then end
up with the problem we’ve got with AWD, that is green labour and green
management which is very expensive.

The Brits have shown me with the Astute programme and with the Queen
Elizabeth programme that that is the initial hurdle, and they’ve said to me
often that ‘if we had to start the Astute programme again we probably
wouldn’t succeed’, so they’ve come through that.

We are now going through exactly the same problems with AWD and I’m
saying we’ve got to get this right, we’ve got to hurry up, we’ve got to get
back on schedule and get our productivity up and then we’ll be in a position
to do the sorts of work in Australia that we must do if we can achieve a
reasonable premium on the international benchmark.

One final question on a slightly unrelated topic. The Assistant Employment
Minister raised an option when talking about older job seekers finding work
or having to meet an activity test that joining the Defence Reserves could be
part of that, would Defence be happy about that?

Well people have varying skills and I am amazed at the length and breadth of
the skills that we require in Defence. From event planning, to running
funerals, to technical scientific work, to facilitating research, to managing
grants, all peripheral to fighting and winning.

Now I always think that there’s an opportunity for anybody who has
reasonable skills that is prepared to contribute and so I’m excited as a
Defence Minister by a Reservist capacity that brings unique and varied skills
to the game.

We never shut the door on people having some positive input into the way
we do our business.

David Johnston thank you very much for your time.

Thank you Lyndal.

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