Minister for Defence - Transcript - The First Principles Review announcement - 1 April 2014

KEVIN ANDREWS: Ladies and gentlemen, I have with me this morning the Chair of the Principles Review of Defence, Mr David Peever, together with the Chief of the Defence Forces, Air Chief Marshall Mark Binskin, and the Secretary of the Defence Department, Mr Dennis Richardson.

A little while ago, both Mr Peever and I addressed the senior leadership group of Defence, to brief them on the First Principles Review, and following that briefing the Government has released the First Principles Review of Defence.

As you may recall, prior to the last election the Coalition committed to a review of Defence to ensure that it is appropriately structured and organised, that it has the right business practices to place- in place to support the Australian Defence Force into the 21st century. That review found that Defence has implemented significant changes since the 1990s, and has a proven record of delivering in the field, on operations, and in humanitarian and emergency assistance roles, both here in Australia, and we've seen it recently in the northern part of this country, and abroad as we're seeing in Vanuatu and the surrounding areas at the present time.

However, despite Defence's outstanding operational record, it's clear there needs to be a better balance between the operational excellence which I've referred to and organisational effectiveness. As I have said before, the first responsibility of a national government is the safety and security of its citizens. And central to this, for all governments regardless of colour or political persuasion or hue, is a compact with Defence. This compact is the proper alignment between the Government's strategic aspiration, with the tasks that the Government asks Defence to perform on behalf of the people of Australia. And completing this trinity of the compact of strategic aspirations on one hand, and the tasks that defence is asked to do, is the resources required to fund those tasks.

The fact is, that during the term of the previous government it's clear that that compact was severely damaged. So this Government is about ensuring that that compact is restored; and this review, along with the Defence White Paper and the Force Structure Review, which will come in later this year, is central to that restoration. The shortcomings identified by the review affect all of Defence, and in the submissions from the review need to be urgently addressed. These include a proliferation of structures, processes and systems with unclear accountabilities, which in turn cause institutional waste, delayed decisions, flawed execution, duplication, over-escalation of issues for decision, and low engagement levels amongst employees in parts of the organisation.

So this review proposes a transformational change across Defence, to ensure that it can deliver on future requirements that will be outlined in the Government's forth coming White Paper and related documents. To achieve this, Defence must move from a current inefficient federated approach into a single, integrated organisation that delivers an enhanced joint capacity; and indeed the title of this review, Creating One Defence, sums up the proposal behind it. The Government has agreed, or agreed in principle, to 75 of the 76 recommendations. The review outlines a two-year implementation plan with key milestones, which provides high-level direction for Defence. The implementation of these recommendations will be led by the Secretary and by the Chief of the Defence Force, and will commence immediately, with the majority of the changes recommended to be implemented within two years.

 And on that note, can I ask Mr Peever to make some comments.

DAVID PEEVER: Thank you very much, Minister.

Can I start by saying it was a great pleasure to be able to Chair this review team, comprised of Professor Robert Hill, Professor Peter Lay, Mr Jim McDowell who's with us today, and Lindsay Tanner. They brought a depth of experience and expertise, which made it a very rich process. Our approach was one of being evidence-based, and with a very broad engagement with stakeholders. Our work concentrated on the business of Defence rather than the military operations of Defence.

The biggest issue we found at the highest level was Defence is a federated structure, operates as a lose federation, where the parts are not well joined up, and therefore not a good fit for purpose for the challenging agenda which Defence has before it. Our recommendations, again at the very highest level, are for Defence to become one end-to-end organisation. And the recommendations really cover four parts: a strong strategic centre, which will be characterised by clear accountabilities, clarity of direction, strong policy advice, services becoming capability managers, the Vice-Chief of the Defence Force becoming the future … future force authority and capability authority, and enhanced organisational arrangements around strategy and planning, and getting the best link between strategy and resources.

 The second area of focus was capability development, and here we're recommending a strong end-to-end capability development process. And again, its characteristic will be one of a smart buyer. In the areas of enablers, we need to move to a customer-centric model for shared services, and a state footprint which is consistent with the Future Force requirements. And finally, as far as workforce is concerned, the review recommends approaches to achieving committed people, professional people, right fit for roles, and a very strong performance management culture.

Finally, unlike other reviews, we have recommended an implementation process; it's a high-level implementation process which will take place over two years. And as the Minister has said, we're delighted that 75 of our 76 recommendations have been accepted by the Minister, and the Secretary, and the Chief of the Defence Force. And we recognise and applaud the Secretary and the Chief for their recognition of the need for change. And finally, an important recommendation here given the plethora of reviews which Defence has had over many years, is this review be used to clear the decks of previous reviews so that the organisation can get on in an unencumbered way with this reform agenda.

KEVIN ANDREWS: Thank you David. And before I ask the CDF and the Secretary to make some brief comments, can I thank [audio skip] Peever, and the rest of the panel for the great work that they've done. Lieutenant-General Peter Lay, former Senator Robert Hill, former Finance Minister Lindsay Tanner, and Mr Jim McDowell who's here today, I thank them publicly for the enormous amount of work that they've done, and look forward to their continuing role as part of the oversight of the implementation over the next two years.

But on that note, can I ask the CDF to make a few comments.

MARK BINSKIN: Thank you, Minister. And I'd just like to also thank David Peever and the team for a very comprehensive report.

From my side of it, this is a report and a review that's been needed. Defence is ready for it. It is tackling the enterprise issues that we all know that we have in Defence. We're ready for it. We've got about three months to do the detailed planning before we start that implementation. We know that there's challenges there, but we've got a team across the fence that are ready to implement this.

Thank you.

DENNIS RICHARDSON: Thanks very much, Minister, I'd simply join with the CDF in thanking David Peever and his team for the report.

Minister, about 18 months ago I gave a speech in which I described Defence as more of a federation, rather than a unitary state. This review, the theme of it is One Defence. It involves a very significant amount of change. It is necessary change, and it is change which I strongly support.

Thank you.

KEVIN ANDREWS: Thanks, Dennis. Now, any questions?

QUESTION: Minister, what sort of savings could you achieve out of this, and will there be job losses?

KEVIN ANDREWS: Well first of all can I say this is not designed as an efficiency review. This was to look at the corporate structure of Defence to ensure it is enabled in a way which can deliver on our Defence needs for this century. So that's the purpose of this. There has been a downward trajectory in terms of Defence jobs since, I think, about 2012, and that's been a reality up until now and it happened prior to us coming into government. There will be some restructure involving jobs. One of the recommendations that Mr Peever and the panel made was that ADF personnel, if they're performing APS-like jobs, there should be a clear case made out for why they're doing that rather than just a, kind of, default position, if I can put it in that regard.

QUESTION: Minister, the report says that the Defence public service workforce could be reduced to within the range of 16,000 to 17,000 full-time equivalents, around 1,000 ADF personnel would be relocated back to the services. So can you say how many people would actually be losing their jobs as part of this, and how would those jobs go?

KEVIN ANDREWS: That will be part- we're starting the second phase of this process effectively now. The first phase has been to bring the report to this point, and for the Government to accept the recommendations. The second phase now is to plan in detail the implementation strategy, which will be done over the next three months, and then beyond that three months will be the actual implementation of the report. Now, this should be taken in the context, also, of other things which we will be doing this year, including the Force Structure Review, and including the Defence White Paper, and part of that will be looking at the future needs of Defence overall. And the reality is that there will be changing needs in the future. And whilst there may be job changes in some areas, it's quite clear that there will be demand for people with other skills and other jobs in different areas. So, the final result of that will be seen at the end of the process.

QUESTION: But [indistinct] is that 3000 jobs?

KEVIN ANDREWS: No no, we're not looking at that. I think we're probably looking at- we're down to I think about 19,000 at the moment. We think that this would- that that trajectory, which as I said started in 2012, will probably end at around the 17-18,000 mark, but that's not taking into account any future decisions that made [audio skip] in the Defence White Paper in terms of what other capabilities we need. And the context of this, of course, is that the Government is committed to returning the Defence budget to 2 per cent of GDP, and I reiterate that commitment today.

QUESTION: So Minister, the changes just in this report would lead to, just to be clear on this, would lead to 1000 or 2000 fewer jobs?

KEVIN ANDREWS: Net outcome will be less than that, we think around about the order of 1000, David.

QUESTION: Minister, Recommendation 5.1 says- suggests an end to the one-third budget split across the three services. Does that effectively signal where the Defence White Paper is going, where you might see fewer funds spent on the Army, more spent on the Air Force or the Navy?

KEVIN ANDREWS: I'll let Mr Peever address that.

DAVID PEEVER: Yeah, no, it's not dealing with the one-third budget split between Army, Navy and Air Force, it's dealing with one-third budget split between operating personnel and capital. And the findings of the review were that those historical-type measures are somewhat arbitrary, and budgets need to be framed based on future needs rather than historic measurements.

QUESTION: Minister, what will- with this report, do you concede that Defence is top-heavy, and then also just tell us exactly when you talk about one Defence, does that mean streamlining current organisations like DMO into the one? Can you just explain that restructuring?

KEVIN ANDREWS: Again, I'll ask Mr Peever to add to it but we're looking at a new structure, that there will not be DMO in the future, there'll be a new capability and sustainment group within Defence which will have a life of project orientation. One of the criticisms that has been made by the panel is that there are many handover points through the Defence chain and we don't have a single capability development and sustainment from beginning of project right through to the end of the life of a particular acquisition at the present time. And Mr Peever might like to add to that.

DAVID PEEVER: I couldn't add anything to that Minister.

QUESTION: What about top heavy, Minister?

KEVIN ANDREWS: There are some changes recommended in terms of senior levels. There's a recommendation that one 3-star general position will go and a number of… six SES deputy levels, so there's a restructure.

QUESTION: Minister, DMO was set up to manage the acquisitions, why do you think that system hasn't worked, and when it's abolished will that mean an end to any further cost overruns in any project?

KEVIN ANDREWS: Well as to why it hasn't worked, can I ask Mr Peever to add to that.

DAVID PEEVER: Yeah I think in terms of its establishment and ongoing evolution, it has certainly improved the purchasing processes by Defence, however, as the minister has said what we've found was lots of handover points which provide scope for inefficiency, and we looked at this from a simple point of view of some basic principles around organisations and a principle that falls out is one system the Defence procurement processes, capability, acquisition and procurement processes are such an important enabler of achieving the outcomes required of Defence that it needs to be well and truly integrated into the Defence organisation.

[Crosstalk]

QUESTION: … That life of project approach, can you just explain how that works, is there a team now located within Defence who basically goes from a decision on what to acquire right through the building phase and the life of the project until it's replaced?

DAVID PEEVER: So the simple flow will be capability managers, the services under the direction and the authority of the vice chief who has accountability for future force and for joint capability will recommend the requirements that they need. That will then go through an approval process which will be contested at arms length by part of the organisation which sits under a DepSec policy and intelligence, so this contest at arm's length which is absolutely critical and an approvals process which takes very significant account of technical capability, technical fit to achieve the requirement that's needed and financial, so life of asset costs including disposal will be a very important part of that approval process.

QUESTION: … about the Defence estate, can I ask about the Defence estate elements? What timeframe is there for sort of a more rapid disposal of some of those [indistinct]?

KEVIN ANDREWS: There's not a timeframe and our decision in that is that each of these, where there's a redundant Defence estate then the Government will consider that estate on a case by case basis and it will look in terms of what our future for structure requirements are, what our needs are and it will be looked at in the context of the White Paper. So this will be done on a case by case basis.

QUESTION: Has there been too much of a reluctance in the past to dispose of estates, the review seems to point to a level of frustration?

KEVIN ANDREWS: Well there are recommendation has been around for some time to dispose some Defence estate. Obviously there are sensitivities in particular locations in relation to disposal of Defence estate, but the reality is that if you're keeping redundant estate that's soaking up funds that can be used and needed elsewhere and as the panel has pointed out itself, that that then also raises work and safety and health issues in relation to some of that redundant estate. But we will do this in a cautious way. It will be a case by case basis and this will be over quite a long period of time. Brendan yes.

QUESTION: Sorry two things in that case, [indistinct].

KEVIN ANDREWS: [Laughs] You don't get supplementaries in the house, you know that.

QUESTION: … recommendations… there's one recommendation you didn't accept can you tell us what that is?

KEVIN ANDREWS: There's a number that we didn't, the one we didn't accept relate to the DSTO. We haven't rejected that recommendation, we just want to look at it in some more detail and consider it in the light of the other changes that are being made so we'll revisit that probably in about 12 months or so. In terms of the recommendations there's a number that we've agreed to in principle at this stage. They relate to things such as the approval thresholds for capability development projects, the use of the net personal operating costs, increasing thresholds for referring proposed works for the Public Works Committee. Those ones we've agreed to in principle, but we have to ensure there is an appropriate mechanism in place to achieve the ends that those things were there to achieve, so that will be something which we'll work through in terms of the implementation. Last one, yes.

QUESTION: Can I just ask [indistinct] how significant is this restructure? The biggest since when? When have we seen an overhaul like this in Defence?

MARK BINSKIN: I think the last overhaul like this, you go back to Tang (*) then you come forward to the DRP in the late '90s. this is the next step in that and if you think about the DRP, if you remember back then it created a number of a thousand day organisations that stayed. This has been a review that's been a long time coming and just consolidating those back now into a more joint organisation, from an ADF point of view, this finalises the John Baker journey, where he first did a review and then another review in the early 2000s. There have been a number of reviews as well on where we should go to be a true joint organisation. But I will say the best bit of this, it continues to blend the APS and ADF together because APS do deliver capability in Defence. They are not some separate organisation they are a key part, we are an integrated force. One Defence, and that's what brings us together with this.

KEVIN ANDREWS: Thank you very much.

END