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The Hon Richard Marles MP
Deputy Prime Minister
Minister for Defence
The Hon Pat Conroy MP
Minister for Defence Industry
10 October 2022
DEPUTY PRIME MINISTER RICHARD MARLES: As our Government has come to office, we have inherited a defence procurement mess. A complete mess. Under the Coalition Government, we saw 28 different projects running a cumulative total of 97 years over time. The Hunter Class frigates - four years over time, $15 billion over budget. The Spartan Battlefield Airlifters - 4.5 years over time and unable to fly into battlefields. Offshore Patrol Vessels - a year over time. And the Cape Class Patrol Boat - another year over time.
What we had with the former government was a government that was totally focused on press releases and announcements, on hoopla and vaudeville. But when it came to the active management of defence procurement, they were one of the worst governments in our nation's history. And not least because we saw six - really seven - defence ministers in nine years, the last of whom was the Opposition Leader, and he needs to answer for this.
All of this has occurred at a time when our strategic circumstances are very complex and extremely challenging. In a rational world, defence spending is a function of strategic threat, and we are rational people. We do expect that the defence budget will grow over the medium to long-term, which is why the budget needs to be managed in an excellent way, where we focus on the quality of defence spending so that we achieve the highest capability as soon as possible. The Albanese Labor Government is committed to doing exactly that - getting back to basics; establishing an independent project office, seeking monthly reports, having clear and objective criteria by which projects are placed upon the Projects of Interest and the Projects of Concern List.
In short, we are going to actively manage defence procurement after a lost decade of negligence on the part of the former government. And I want to be clear on one point - this is not the fault of the Department of Defence, this is not the fault of Australian defence industry. They are fantastic and do a wonderful job in serving the national interest. What we have seen is a complete failure of leadership by the former Coalition Government and we intend to rectify that. We are going to manage defence spending in a way which achieves value for money for taxpayers. We're going to manage defence procurement in a way which is going to keep Australians safe. Pat?
MINISTER FOR DEFENCE INDUSTRY, PAT CONROY: Thank you Deputy Prime Minister. As the DPM said, there are three critical and fundamental parts to delivering these sorts of capabilities; there's the Department of Defence and the ADF, there's Defence industry, and a third and critical party is government and the ministers of the day. And the truth is that the last government failed in its job of ministerial oversight and energy. Failed in its job of actually overseeing this process, bringing Defence and industry together to resolve these challenging areas. Because the truth is that defence procurement is complex. It is challenging. And that's why you need defence ministers that are engaged, that are actively working every day to advance the interests of the Australian people and the ADF. And the truth is that defence ministers under the last government lasted on average 18 months. Goldfish lasted longer than Coalition defence ministers. The result of that was a lack of oversight. A couple of key indicators of that are ministerial summits to resolve problem projects. In the last three years of the last Labor Government, there were six summits in those three years. Six summits in three years. In the first nine years of the Coalition Government, including Peter Dutton's time as defence minister, there were a paltry six summits in nine years. So a tripling of the length of time between ministerial summits, which is critical to bringing defence and industry together.
On the Projects of Concern process, which is so important to driving resolution to these challenging projects. The last Labor Government in six years listed 21 projects as Projects of Concern. The last Liberal Government, under Peter Dutton, but across the entire years, listed four projects. And ladies and gentlemen, these projects weren't getting easier. They only listed four, not because the projects were getting simpler, they listed four because they did not care about doing their daily job. They did not care. They were asleep at the wheel and that's why we've seen cumulative delays of 97 years across these 28 projects.
Two examples of that that the DPM talked about - the Hunter Class frigate where the last government lied to the Australian people that they were getting an off the shelf design that was proven and working for other navies. It was a developmental project. They are literally designing this ship right now, and the result of that is a four year delay in cutting steel for the vital project. On the Offshore Patrol Vessels - vital capability to the Royal Australian Navy - the last government actively intervened and instructed the successful tender Lürssen to include the unsuccessful tender in their project as a subcontractor. They intervened to force this outcome, which ultimately failed, delaying the project by a year.
So, as the DPM has highlighted, we're announcing six critical reforms that will improve project delivery, that will improve performance in defence and defence industry, that will help ensure that the ADF get the equipment that they need when they need it, and that taxpayer money is protected. That's the independent project management office; the monthly projects of concern updates to ministers; a formal criteria and early warning indicators for problem projects; importantly, changing the culture of defence, providing greater resources to projects in trouble; and convening regular ministerial summits so that ministers will be involved again in this process.
JOURNALIST: One of the big things that you said in your opening remarks was it's not fault of the Department of Defence. There are two things that come out of that statement; the first is if there's any further delay or blowout, is that all on you? And the second thing is - some of the things that you've outlined here today, including the independent project office, changes to the defence culture, isn't that an admission that there was some accountability here for the Department itself in the blowouts and there is something that the department must do to take responsibility for the blowouts and fix them?
DEPUTY PRIME MINISTER: Well, let me start by saying we accept responsibility. We accept the responsibility of government, and we do so going forward. No ifs, no buts about all of that. It's not ultimately for departments to stand here and accept responsibility for government performance. It is ministers. And we understand that's what it is to be a minister. We also believe that culture starts from the top, and we're really confident that with a change of culture, where our focus is not on press releases and demanding of the department to produce press releases on a daily basis, but actually, our focus is on the outcome of projects, the delivery of capability, that sends a message right from the top. And what we're not going to do is turn over defence ministers every 18 months. So we are really confident that we are put in place a much better situation led by an activist ministry.
JOURNALIST: Deputy Prime Minister, two questions. Will the monthly reports on Projects of Concern be released publicly? And secondly, how safe should Australians feel about the state of the military given the constant announcements of blowouts, delays and glitches in our military?
DEPUTY PRIME MINISTER: It's not our intention to release those reports. But all the mechanisms by which Defence is held to account, obviously, will continue to occur through the ANAO, through Senate Estimates and the like.
Australians should feel confident that they have a first class Defence Force. They do, and I want to make that clear. But there are real challenges that we've now been left with, there's no doubt about that. The real question is of capability gap. I haven’t mentioned the submarines, but ten years of dithering on the part of the former government has raised the real prospect of capability gap in relation to the most important platform that buys Australia strategic space. So there are real challenges for our nation going ahead. Now, we're confident that we can meet those challenges. We're confident that we can get projects back on track. But we don’t want to underestimate the size of the task, and it's very important that the Australian people understand that.
JOURNALIST: The budget is under pressure - the defence budget is under pressure, it's heading towards 2.2 per cent. What's your message to Australian taxpayers about how bad this can get considering it doesn't include nuclear submarines, it doesn't include the additional personnel that are needed?
And secondly, if I may, do Corvettes make sense to you to increase the mass that the Navy has?
DEPUTY PRIME MINISTER: Let me answer the second question first. The Defence Strategic Review is undertaking the assessment of what the shape of our Defence Force should be given a very different set of strategic circumstances which the country now faces. So I'm not going to pre-empt the work that they are going to do. We do see that, given the strategic threat that the country faces, we will have a rising defence budget going forward. It's why it's really important that every dollar of defence spending is managed in an excellent way. It's why it's really important that the quality of the defence spend is put first and foremost in the thinking of government and that we focus on that, and we are completely committed to that.
JOURNALIST: You’ve made clear the scale of the budget blowouts here, the delays to these projects. Is no one in the department going to be held accountable? Is the only change required in the minister's office?
And second to that, does a problem this large require a minister who is not also balancing responsibilities of the Deputy Prime Minister?
DEPUTY PRIME MINISTER: Well, I bring to bear whatever seniority I have in being the Deputy Prime Minister, I think that that adds value to my role as Defence Minister. We take responsibility as ministers. We really do. I think that the Department of Defence are an excellent group of men and women, as I do the Australian Defence Force. And I think that we are well served by a very capable Australian defence industry. But it has been very, very poorly led over the last decade. I mean, Pat has gone into some of the detail of that. But when you're turning a Defence Minister over every 18 months, what can we expect but to have total drift when it comes to leadership in respect of defence. And the Department of Defence, defence industry in this country, have been operating under that burden with no clear leadership from the top. That's going to change. But what we've inherited is a mess, a real mess, which is what we are making clear to the Australian people right now. But we're also making clear that there is going to be consistent and directed and activist leadership on the part of this Government's ministers.
JOURNALIST: Deputy PM, a follow-up to the budget issues. You've spoken about prudent management of this portfolio, even with the growth in defence spending, what contribution is defence expected to make to budget savings? So, what sort of offsets are you required to find and will we expect to see in the budget some deferrals or some changes to the schedule of projects, in order to make some offsets?
DEPUTY PRIME MINISTER: Look, that's a really important question. Defence is not immune from scrutiny when it comes to carrying its weight around the question of making - of doing budget repair. We completely understand that. Defence needs to justify every dollar it spends. That's actually why we're standing here right now. I mean, what we've had is a decade where that didn't occur. Where really, you had a government that was trumpeting nothing other than its spend as being the way in which it sought to project itself, rather than actually building capability for this country. The whole point of the Defence Strategic Review is to apply a critical eye against the integrated investment plan, the 10-year schedule of defence procurements, to make sure that they are fit for purpose for our nation, given a different set of strategic circumstances, and what we're announcing today in the face of what we have inherited over the last decade is to put forward a much more activist management of defence procurement, which is where so much of the spend occurs. So, we are totally focused on a quality and accountable spend in defence when it comes to the future of this country, and we think that is critically important.
JOURNALIST: Does that mean there could be some projects deferred in this budget?
DEPUTY PRIME MINISTER: The Defence Strategic Review is examining the shape of our Defence Force, as we need it. I’m not about to pre-empt that. Today, what we're saying in the face of the hopeless mismanagement that we've seen in the last decade is that as a government, we intend to make sure that we have an activist management of defence procurement going forward.
JOURNALIST: Deputy Prime Minister, will you be able to give a guaranteed timeline of when these projects will be finished? And will we be vulnerable in the meantime?
DEPUTY PRIME MINISTER: Well, after ten years of - or the best part of ten years of neglect on the part of the former government, you can't repair that in a few weeks, in a few months. But I want to be clear that we've started the job, really started the job and we are absolutely committed to trying to get all of these projects back on track as soon as possible. But I don't want to understate the significance of that task. And there is the potential for capability gaps, we've made that really clear, we've made that really clear in relation to submarines, for example and again, we're doing everything within our power to look at ways in which we can close those capability gaps to make sure that we keep Australians safe. Part of that, inevitably, is going to be spending money on extending the life of existing platforms. We will be doing that in relation to our submarines and in all likelihood, will be doing that in relation to the Anzac Class of frigates. So we are very focused on that. But we are confident that we can get the projects back on track.
MINISTER CONROY: As the DPM said, we should also be very frank with the Australian people that the history of defence procurements around the world is that it’s very hard to regain schedule once it's lost. So the first step it is to stop more schedule drift, and work with defence industry and the Department to maintain current schedules and where they can, to be improved. But the history of defence projects around the world is that it's very hard to re-grab it, but, we're going to try very hard.
JOURNALIST: First of all, when will the AUKUS submarine cost actually start appearing in the budget? It will be once you get the Mead report, and you can therefore start budgeting for it? And secondly, the Government is saying its position hasn't changed on tax cuts, on the stage three tax cuts, why can no-one from the Government give a guarantee that it won't change at all in the future and keep those tax cuts in place?
DEPUTY PRIME MINISTER: Well, there's been a lot of discussion about tax over the last week. Our position on tax has been clear and we have not changed that position since the election. What we have been pointing out, in course of the last week, is that there are real pressures on the budget going forward. I mean, given rising inflation, every dollar of debt that Peter Dutton has left us is now more expensive. And there is rising pressures on the budget when it comes to health, when it comes to the NDIS, but when it comes to Defence and we're here making that point as well. Which is why it is so important going forward that the quality of our defence spend is excellent and that the management of our defence spend is prudent.
JOURNALIST: No guarantee (inaudible)?
DEPUTY PRIME MINISTER: Well, we've made our position in relation to tax clear and there is no change to our position since the election.
JOURNALIST: And the submarine budget?
DEPUTY PRIME MINISTER: Oh I'm sorry. Good question. What we have made clear is that with the process that's under way in relation to determining the optimal path in respect of submarines, the part of the question that we seek to have answered, is that is reported at the beginning of next year - in the first part of next year - is cost. I mean, we need to know what the platform is that we're running with, how quickly we can get it, how we can deal with capability gaps, making sure that we are compliant with our non-proliferation obligations, but cost is important element of that. It is from there, that we will then be able to place those figures into the budget.
JOURNALIST: On the Anzac frigates, is it really all Australia’s fault here? Isn't part of the blame with BAE in the UK and them not having that frigate design ready in time? Isn't there a case to actually consider alternative suppliers to BAE?
DEPUTY PRIME MINISTER: Well, our focus is on working with BAE, as we are, very closely, to get that project back on track. It is a fundamentally important project for the country. The capability - frigate capability - is clearly central to our surface fleet and it is really important that we get that project back on track and we're working very closely with BAE in respect of that.
MINISTER CONROY: If I can supplement that, the issue with that project is that the last Government lied about the nature of it. If you're going to have a developmental project, if you're going to have a project that's still under design, be honest with the Australian people about that and set schedules that reflect that accordingly. Unfortunately, the last government, whether it was Peter Dutton or previous Ministers, have a track record of saying that a project they've committed to is off-the-shelf when it is incredibly developmental, and some of the projects that are developmental are justified from a strategic point of view, but be honest with taxpayers about that and have scheduled that reflect that. This last Government promised the world and delivered very little.
JOURNALIST: Does that mean Navantia is an option, or is it really not a realistic proposition?
DEPUTY PRIME MINISTER: The Defence Strategic Review is examining the shape of our Defence Force, including our Navy, as we go forward and I don’t want to pre-empt that.
JOURNALIST: In regards to the Osborne naval shipyard, understand you want to wait for the review for the AUKUS submarines, but is there any work at the actual shipyard itself that can be done to expand it, I know there’s a huge lease underway there, that can be budgeted for in this month’s budget?
And Minister Conroy if I may, can we see any funding for the skills taskforce that you've developed with South Australia in this budget?
DEPUTY PRIME MINISTER: I won't comment on the budget in a few weeks’ time. And really, the answer, as I said earlier in response to the questions about submarine expenditure, will begin to be answered - is probably the best way of putting it - in the report that is made to us in the first part of next year. There are some preparatory steps which have been taken to start the process here. But really, the way forward depends a lot on all of the elements that I've described - not least of which is choosing the optimal pathway forward. We just need to await that process to complete and in the scheme of things, that's happening very quickly
MINISTER CONROY: And on the first question, there's significant work occurring at Osborne right now - the ramping-up of work around the Hunter class frigates and finishing the work on the first two OPVs. Both the DPM and I have inspected the shipyards and seen the growth in workforce there.
On the second question around skills formation, you've identified a critical issue which is that we need to ramp up the number of people employed in the naval shipbuilding industry, in both South Australia and Western Australia. There's significant defence skilling funding that's already flowing through, and we're committed to working with the South Australian and West Australian Governments to make sure we’ve got the skilled workforce to deliver those projects, otherwise that will be a critical inhibitor to those projects being delivered on time.
JOURNALIST: And that taskforce?
MINISTER CONROY: We're working through the details of establishing the taskforce, but we've had really production conversations with both the South Australian Premier and Defence SA, and we're looking forward to developing it further and we're very confident that we can resolve these issues.
JOURNALIST: Is it your view, Deputy Prime Minister, that Defence isn't a competitive employer. There are just a plethora of contractors that money is being handed out left, right and centre. Is that your view? Can things be tightened there?
DEPUTY PRIME MINISTER: Things can be better managed, and that's what we're going to do. I think Defence is an excellent department. I think all of the ability is there to manage defence procurement on behalf of our nation in a way that provides value for money and delivers capability which keeps Australians safe. But you've got to have leadership. Ministers - as it turns out - is an important part of the government equation. We're the ones who set culture. We're the ones who take responsibility. And we intend to do that. That stands in stark contrast to the lost decade we had under the former government.
JOURNALIST: Just for Minister Conroy, on the Offshore Patrol Vessel, I think you referred, maybe this morning, to very silly decisions made by the former government - your words. Would you mind detailing what those were in particular? Particularly around civilian safety standards.
MINISTER CONROY: No well there are two separate issues. So Defence is confident that Lürssen will deliver on its contracted requirements, particularly around safety standards, and we will hold them to account for that. The silly decision I was referring to was the last government at a political level. Let's be very clear - this was not Defence. This was the ministers of the day instructed the successful tenderer Lürssen to delay the project to enter into negotiations with the unsuccessful tenderer to include them as a subcontractor in this project. Just think about that - you've won a project, and you’re now being told by government you have to include the people you beat in the contract. It was an act of insanity, and because of that contractual argy-bargy, we've seen a year's delay in that project, and that means that the Royal Australian Navy is not going get that capability when they need it. So that was one of the decision that we're talking about here. Ministers in the last Government were asleep at the wheel and when they woke up, they made stupid decisions like this.
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