Press Conference, Parliament House

SUBJECTS: Defence Reform; ADF monitoring PLA-N task group

ACTING PRIME MINISTER, RICHARD MARLES: Today, the Government is announcing that we will establish a Defence Delivery Agency, which will be an independent agency that will report directly to the Minister for Defence and the Minister for Defence Industry. It will be headed by a new position that will be called the National Armaments Director. The Defence Delivery Agency will begin its life as the Defence Delivery Group on the 1st of July next year, when we will see the merging of three existing groups: the Capability Acquisition and Sustainment Group, the Guided Weapons and Explosive Ordnance Enterprise, and the Naval Shipbuilding and Sustainment Group, into what will be the Defence Delivery Group. In that, the same people who are currently undertaking their work in these three groups will be undertaking their work in the new Defence Delivery Group. And then on the 1st of July 2027, the Defence Delivery Group will become the Defence Delivery Agency and be an independent agency. In that, the agency will be autonomous. It will work clearly in partnership with the Department of Defence and the Australian Defence Force, but it will be autonomous in the way in which it does its work and the way in which it reports to Government through the Minister for Defence and the Minister for Defence Industry. Now, since we’ve come to power, relative to what we inherited from the former government, we have increased defence spending by $70 billion over the decade. What comes with that very significant increase in defence spending — the largest increase in defence spending in Australia’s peacetime history. What comes with that is an obligation to ensure that this money is spent well. The establishment of the Defence Delivery Agency will see a much bigger bang for buck for the defence spend. And that is at the heart of the decision that we have made. It puts a focus on delivery and will ensure that it is much more sharp in the way in which it is undertaken. It will mean that advice comes to government much earlier in the process about the challenges that are facing any particular program, any particular project, so that we can ensure those projects are delivered on time and on budget. And in that sense, it is making delivery very central to the role of what the Department of Defence and what the Australian Defence Force does. What we will see is that there will be decisions made as to the capabilities that the Defence Force needs, which are embodied in the Integrated Investment Plan. That process will also now be consolidated under the Vice Chief of the Defence Force. And having then determined that a particular capability is required, that project will be given to the Defence Delivery Agency with a budget to make sure that that project is delivered on time and on budget. This is one of the most significant reforms to defence that we have seen. It will greatly change the way that defence operates. It will greatly improve the quality of the defence spend, and it will make sure that as we spend more money in the defence budget, we are doing so in a way which sees programs delivered on time and on budget.

MINISTER FOR DEFENCE INDUSTRY, PAT CONROY: Thanks, Richard. This is indeed the biggest reform to the defence organisation in 50 years. It is the biggest reform to the defence organisation in 50 years. And it’s all about getting the equipment  to the brave men and women of the Australian Defence Force need into their hands sooner, while providing, as Richard said, better bang for buck for taxpayers. What we’ve seen is a rise in complexity of projects. Fifteen years ago, 27% of defence projects were complex. That has now doubled to almost 60% of projects being complex. At the same time, the 2014 Abbott Commission of Audit and the First Principles Review abolished Defence’s project management organisation, the DMO, and said that Defence should be a contract manager rather than a project manager. That led to a very significant cut in staff and capability within the Department, and that led to the schedule issues that we inherited when we came into power. For example, 28 major projects running 97 years late — down to these changes that the last government made. Double complexity with fewer staff is a recipe for trouble, and that’s what we inherited due to the last government’s actions. So, as the Acting Prime Minister said, we’re establishing the independent project management agency — the Defence Delivery Agency. It will report directly to Ministers, and it will have control of the budget for all these major acquisitions once government has approved them. So: autonomy, reporting directly to Ministers, control of the budget so that it can deliver the things that the ADF needs. It will have strong industrial and commercial skills, pulling the best and brightest from the private sector to complement the strong public sector expertise that already resides in these three groups. It will have direct control of funding. As I said, this will lead to better project management, better change discipline, and greater accountability. Because, ladies and gentlemen, changes kill projects. Changes kill project schedule and project costs. And we are determined to avoid that by having greater discipline and accountability. It responds to the findings of the Defence Strategic Review, as well as the 2003 Kinnaird Review and the 2008 Mortimer Review. This agency will also provide advice on acquisition strategy at first pass approval and will provide advice on acquisition strategy — the commercial realities of projects — on capability submissions at second pass. And finally, it will be complemented by what Richard already alluded to, which is the centralisation, standardisation, and further professionalisation of capability development under the Vice Chief of the Defence Force. So, these reforms, historic in nature — greatest in 50 years — will deliver speed to capability for the men and women of the ADF, making sure that the record increase in the defence budget will be spent wisely, delivering equipment as soon as possible into the war-fighter’s hands.

MARLES: Now, I will go to questions in a moment, but I just do want to address one other matter, and then obviously you’ll ask questions about all of what we’ve said. On Thursday, there was a report in The Australian Financial Review about Defence monitoring a Chinese task group. I want to confirm today that Defence is monitoring a Chinese PLA-N task group which is currently in the Philippine Sea. But I also want to put this into some context. We maintain constant maritime domain awareness in our geographic areas of interest — that’s Southeast Asia, Northeast Asia, the Northeast Indian Ocean, and the Pacific. And in that context, we will routinely monitor the movements of PLA-N vessels. And when there are movements such as this, we will monitor them, particularly until we know that they are not coming in the vicinity of Australia. And let me emphasise again that this particular task group, which was the subject of the report last Thursday, is currently in the Philippine Sea, and we do not have a sense of where it is going, but we continue to monitor it. As we monitor all movements until we know that task groups are not coming to Australia, we’re not about to give a running commentary on movements of all Chinese Navy vessels. But in light of the report that was made on Thursday, we thought it was important to make these statements and to make them in the proper context, so that Australians can be assured that we are monitoring our areas of interest and we are monitoring the movements of the Chinese Navy.

JOURNALIST: Will the Navy be able to have sufficient ships and resources to monitor that task group if it does, in fact, do a circumnavigation of Australia without relying on our New Zealand friends or commercial airline pilots or anything like that?

MARLES: Well, look, I’m not about to get into hypotheticals — and that would be a hypothetical — because I emphasise again, this task group is currently in the Philippine Sea and we don’t know where it’s going. And it could have a whole lot of destinations. I would say, in respect of Task Group 107 — and that’s the task group that came to the vicinity of Australia earlier this year — that we absolutely had an unprecedented level of surveillance of that task group by the Royal Australian Navy. And we did do it in conjunction with our friends and allies, but that saw an unprecedented level of commitment of the Royal Australian Navy. And you can be assured that at any point in the future, we will bring that same degree of determination and commitment to any journey that happens in our particular area.

JOURNALIST: Minister, on the creation of the Defence Delivery Agency: is this a concession that Defence procurement and acquisition hasn’t been delivering bang for buck for taxpayers to date?

MARLES: Well, I think how we should see this is that we are spending a record amount on defence. And what comes with that is an obligation on the Department of Defence — on us as Ministers — which is to ensure that the very considerable amount of taxpayer money which is going to our national security, which is going to our defence forces, is spent as effectively as possible, where we do have the biggest bang for buck. And so it’s fair to say that as we have been going through the process of having much more money being spent within the defence portfolio, that as Ministers in the portfolio, we have in turn been looking for every possible way in which Defence can operate in the best possible way. Now, it is a massive organisation — I mean, it is the organisation within the Commonwealth Government which employs the most people — and the work will never be done in terms of ensuring that it is operating at the highest level. But what you can see in terms of all the steps that we have taken is really a root-and-branch review of the way in which Defence operates, so that we get the best quality spend, so that we get the best bang for buck from the Defence dollar. And that’s exactly what the establishment of this agency is about.

CONROY: And we shouldn’t underestimate the challenge of these projects. We are doing, through the Department of Defence, some of the most complex acquisitions in the world. We are acquiring the most advanced underwater autonomous vessel in the world, the leading autonomous aerial vehicle in Ghostbat. These are incredibly complex, challenging things. So it’s right that we are always examining our agencies to make sure they’re fit for purpose.

JOURNALIST: Is it going to result in any job cuts?

MARLES: No. So, as I said earlier, what we will see here is the standing up in the first moment of the Defence Delivery Group. That is to say, it will sit within the Department of Defence from 1 July next year, and it will comprise the three groups that I mentioned. And those people who are working in those groups today will be those who give rise to the creation of the Defence Delivery Group, and in time, the Defence Delivery Agency. And it will be the same number of people.

JOURNALIST: But are you suggesting that there’s previously been dysfunction within Defence? Has money been wasted?

MARLES: What we’re saying is that you can always do better and that we feel an absolute obligation to ensure that money is spent in the best possible way. But as both Pat and I have made clear, when the last government was in power, we saw massive blowouts in defence programs — both in terms of the budget that was being applied to them but also in terms of their schedule. And we need to ensure, going forward, that as there is more money being spent within the defence portfolio, it’s being done in a cost-effective way, but that programs are delivered on time and on budget. Now, you achieve that by engaging in reform. And that’s what Pat and I are doing.

JOURNALIST: Moving forward, what will accountability look like for the two of you if there are cost blowouts or delays?

MARLES: Well, government is accountable. I mean, we are right now.

JOURNALIST: Sorry — for the people in the Department?

MARLES: Well, I mean, what there will now be is the National Armaments Director, who will be reporting directly to both myself and to Pat — to the Minister for Defence and the Minister for Defence Industry — and they will be held accountable for the delivery of programs on time and on budget. And to that end, let me say that in terms of the recruitment of the National Armaments Director, we will begin that process very shortly.

JOURNALIST: With this in place, will you be lobbying for even higher defence spending in Cabinet next year?

MARLES: Well, the Prime Minister has been really clear that we need to be constantly assessing our strategic circumstances, understanding the kind of defence force that we need to meet those circumstances, and then resourcing that. Now, we are involved in that process. And next year we will do the biennial National Defence Strategy. And what will happen as part of that is the two-year update of the Integrated Investment Plan, which will sit next to that. And it is literally assessing our strategic circumstances and the kind of capabilities that we need — the kind of defence force we need to meet them — and we will always make the argument for those to be resourced. And that’s what this government has done since the moment it was elected, which is why you are seeing the biggest peacetime increase in defence spending in our nation’s history.

JOURNALIST: Just on the Chinese fleet — is it Australia’s ADF that is directly conducting the monitoring, or are we relying on another country to share that information with us?

MARLES: Look, I’m not going to go into the detail of that. The Australian Defence Force operates to our north. We do have assets which you know and which from time to time we speak about. So we very much have capabilities to our north, in our areas of key interest, and indeed in the Pacific as well and in the Northeast Indian Ocean. But I’m not going to go into the direct source of how we are going about that task, other than to say there is something very routine in this. I mean, the report was made last Thursday, which is really why I’m speaking to you now. And I’m not about to get into a running commentary on the movement of every Chinese Navy vessel in those four areas, because there are many and there are a lot of movements. But be assured, we have maritime domain awareness across those areas and we know what is happening, and we continue that monitoring.

JOURNALIST: And just on job cuts briefly — you talked about skill sets. So, even though there might not be job cuts, could there potentially be redundancies to try and find people who fit better into the particular roles?

MARLES: Look, we are about ensuring that we have the best capability that we can and putting a focus on delivery — that’s what this is about. This is about ensuring that we have a project delivery capability in Canberra. Now, we are not seeing job cuts here. It is the same group of people who are working in these three organisations or these three groups that will form part of the Defence Delivery Group from 1 July next year. But as we move forward, what this group — and as it becomes the agency — will be about is putting a focus on delivery.

CONROY: And if I can just add to that a bit of background: over the last two years, as we’ve built back capability within the Department, we’ve added 500 skilled, highly-skilled public servants in these three groups and got rid of a serious number of contractors and consultants. So, we’re about building capability within the public service to be the best possible project managers. And this announcement will continue that.

JOURNALIST: Minister, does it make sense to move the acquisition agency further away from the war-fighters? And is this a message to the public servants — perhaps even the Secretary/CDF — that you’re now requiring direct reporting because you don’t have confidence?

MARLES: Well, Pat may want to supplement this. I don’t accept the first proposition at all. In fact, I think this is actually ensuring that we have an agency which gets capability into the hands of the war-fighter much more quickly. And what it’s about is making sure that project delivery is moved much closer to government. Because what the National Armaments Director will do is report directly to government through Ministers. So that’s really the direction that we’re heading.

CONROY: And Richard’s absolutely right. At the moment, we have around 1,500 ADF personnel working in these three groups, and we envisage a similar number working across the new agency. Obviously, the details will be worked out, but there will absolutely be a significant share of the workforce who will be highly-skilled acquisition professionals in uniform. But the best thing we can do for war-fighters is get them the capability they need as soon as we can. And this is what this is about — improving schedule performance for the war-fighters, having the ADF and the Department of Defence decide the equipment they need with government approval, and then this agency getting it as fast as possible, combining ADF expertise, APS expertise, and good brains from the commercial sector.

JOURNALIST: Minister, understanding that the Chinese task group in question may never reach Australian waters, when another one does — given all of Australia’s contact with China, including a Prime Ministerial visit post the previous visit of a Chinese task group — how confident are you that we will get adequate warning this time of live-firing exercises?

MARLES: Well, again, I don’t want to speak about hypotheticals or talk in terms of that or any other time. We have made all the representations of which you’re aware in relation to Task Group 107 earlier this year in respect of the live-firing exercise that occurred in the past and in that event. And we have made those representations at the highest level. Look, we monitor our environment closely, and we do that through all our geographic areas of interest, and that includes as far away as Northeast Asia, which is one of the stated areas of national interest — geographic areas of national interest — to Australia. And throughout that, we maintain persistent maritime domain awareness. We are doing so right now. We are aware of the task group that was referred to in that report and, yes, we are monitoring it, and we will continue to do so until we know it’s not coming to Australia.

JOURNALIST: Can we expect the Defence estate audit to be released by the end of the year. Is it the Government’s intention that any land divested would be used for housing? 

MARLES: Well, I won’t answer the last question because when ultimately we do release that, we’ll go into that detail then, and it will be released in the coming months.

JOURNALIST: Minister, would you envisage an Australian is going to be the next National Armaments Director?

MARLES: Look, that would be my expectation, but what we need is the best skilled person available. This is a critical role here, and my expectation is that we will be able to find an Australian to do that. But our fundamental concern here is to make sure that the defence budget is spent with the best bang for buck — that the taxpayers get the best return for their dollar. And it will be the person who is able to deliver that the most who ends up being National Armaments Director.

ENDS