Australia — Minister for Defence and Minister for Defence Materiel on Future Submarines Project

STEPHEN SMITH: Well, thanks very much for turn­ing up. I’m here with Jason Clare, the Min­is­ter for Defence Materiel, and I must say how pleased I am to be back in Ade­laide — back in South Aus­tralia.

It’s my third vis­it this year as Min­is­ter for Defence; my first vis­it in Jan­u­ary when I came with the Unit­ed King­dom Sec­re­tary of State for Defence to show him some of the facil­i­ties at ASC, but also to tour the defence, sci­ence, tech­no­log­i­cal organ­i­sa­tion DSTO. And that under­pinned the impor­tance of South Aus­tralia and the South Aus­tralian Defence Indus­try to our defence and nation­al secu­ri­ty effort.

More recent­ly in May I was here with the Pre­mier and also with Min­is­ter for Min­er­als and Resources Mar­tin Fer­gu­son with the announce­ment to allow much greater access to [indis­tinct] Woomera pro­hib­it­ed areas. This will be a very sub­stan­tial boost to South Australia’s min­er­als and resources indus­try while at the same time, allow­ing defence to pur­sue its all impor­tant nation­al secu­ri­ty task of test­ing.

Today of course, I’m here with Jason for the Defence and Indus­try Con­fer­ence. This is an impor­tant part of the defence indus­try cal­en­dar. Again, the fact that it’s in Ade­laide under­lines the seri­ous­ness that South Aus­tralia and the South Aus­tralian Gov­ern­ment, through Mike Rann take, so far as defence and defence indus­try is con­cerned.

We, for exam­ple, on an annu­al basis spend some $2 bil­lion in South Aus­tralia. There are some 4000 defence per­son­nel in South Aus­tralia. The Air War­fare Destroy­er Project, for exam­ple, which is an $8 bil­lion project, some $2 bil­lion of that will come to South Aus­tralia with any­where from 800 addi­tion­al jobs, and 1000 direct jobs as a con­se­quence. And of course, here we see the main­te­nance of the Collins class sub­ma­rine. And as I indi­cat­ed last night at the Defence South Aus­tralia din­ner, the Gov­ern­ment has com­mit­ted itself to the Future Sub­marines Project; to the con­struc­tion of 12 new sub­marines. And we have com­mit­ted our­selves to see­ing those sub­marines assem­bled in South Aus­tralia.

So the work we already do in South Aus­tralia, the work for the future augers well for South Aus­tralia and the defence indus­try in South Aus­tralia. And in that, we work very close­ly with Pre­mier Rann and his gov­ern­ment.

Today I’ve announced some fur­ther reforms. I’ve made the point to the con­fer­ence that to dis­charge our nation­al secu­ri­ty oblig­a­tion, it’s imper­a­tive that defence and indus­try work hand in glove; work very close­ly togeth­er.

And in the course of this year, I’ve announced a series of reforms. Reforms to pro­cure­ment, reforms to acqui­si­tion, and today I’ve announced fur­ther reforms for the so called projects of con­cern list.

This is part of the drum beat roll of a reform pro­gram, and in future weeks and months you’ll also see the Government’s response to the Riz­zo Report on our Navy amphibi­ous dif­fi­cul­ties, and also the so called Black Review on account­abil­i­ty; both per­son­al and indi­vid­ual account­abil­i­ty. I’ll throw to Jason for a few remarks from Jason. He’s also made some announce­ments yes­ter­day and today in the course of the con­fer­ence, and then we’re hap­py to respond to your ques­tions.


JASON CLARE: Well, thanks Stephen. It’s great to be here in South Aus­tralia. South Aus­tralia is right­ly known as the defence state, and that’s a trib­ute to the great work of Pre­mier Mike Rann.

South Aus­tralia is crit­i­cal to our nation­al secu­ri­ty. It’s the home of more than a quar­ter of the defence indus­try. It’s the home of thou­sands of defence jobs. That includes the work we’re doing to build the new Air War­fare Destroy­ers. It also includes the work we do main­tain­ing our cur­rent sub­marines, as well as the work that we will do with the next gen­er­a­tion of sub­marines.

This is a very impor­tant con­fer­ence here today. The men and women here today are respon­si­ble for mak­ing sure that our sol­diers — that our troops have the equip­ment they need when they need it. And they do a very good job of that.

But we’ve got a big task ahead. Over the course of the next 15 years, we’re going to replace or upgrade about 85 per cent of our defence equip­ment. That’s an enor­mous task, and to do that we need to reform and improve the way we do things.

We need to improve the way that we acquire defence equip­ment. We need to improve the way that we main­tain it. We also need to improve the way that we dis­pose of defence equip­ment. That’s the focus of the remarks that we’ve been mak­ing today, as Min­is­ter Smith has said, we’ve made a num­ber of announce­ments already about improv­ing defence pro­cure­ment and sus­tain­ment, and there’ll be a lot more to come.

STEPHEN SMITH: Thanks Jason.

Right. Any ques­tions?

QUESTION: You talk about the new sub­ma­rine con­tract as if it’s already signed, sealed and deliv­ered. Is that the case? How sol­id is [indis­tinct]?

STEPHEN SMITH: Well we have com­mit­ted our­selves, both in the run-up to the last elec­tion and sub­se­quent­ly to what’s called the Future Sub­marines Project. That is 12 new sub­marines.

It’s a long lead time project. The sub­marines com­ing on stream in the 2030s, the 2040s and the 2050s. And as I have made clear in recent days, oth­er than con­firm­ing two things; first­ly, that the sub­marines will be assem­bled in South Aus­tralia, and sec­ond­ly, con­firm­ing that the sub­marines will be con­ven­tion­al­ly pow­ered and not nuclear pow­ered, all options are on the table.

One of the themes of my speech was pre­ven­tion, not post-mortem. One of the themes of my speech was if you work very hard in the ear­ly days to get projects right, you avoid, reduce, min­imise project dif­fi­cul­ties down the track.

So for what will be larg­er sin­gle defence capa­bil­i­ty project that the Com­mon­wealth of Aus­tralia has seen, indeed, pos­si­bly the largest cap­i­tal works pro­gram or project the Com­mon­wealth has ever seen requires very care­ful atten­tion in its ear­ly stages, and that’s what we’re doing.

But we have com­mit­ted our­selves to the 12 Future Sub­ma­rine Project, and we’ve com­mit­ted our­selves to assem­bling them in South Aus­tralia.

QUESTION: When con­sid­er­ing whether to do a mil­i­tary off-the-shelf solu­tion, or to build the subs, design a few of the subs here, will you con­sid­er the flow-on effect to indus­try and the capa­bil­i­ty of indus­try?

STEPHEN SMITH: Well the issue or the ques­tion of off-the-shelf or local capa­bil­i­ty devel­op­ment applies through­out our pro­cure­ment, and our acqui­si­tion and our capa­bil­i­ty. And as it has been in the past, it will be in the future. It will be a com­bi­na­tion.

The most impor­tant objec­tive so far as I’m con­cerned is that we get the projects right. We get the capa­bil­i­ty that we want, we get it on time and we get it on bud­get with val­ue for mon­ey. That’s always seen a com­bi­na­tion of off the shelf capa­bil­i­ty as well as local devel­op­ment. And as I say so far as sub­marines are con­cerned, oth­er than con­firm­ing that it’ll be con­ven­tion­al­ly pow­ered, not nuclear pow­ered, oth­er than con­firm­ing they’ll be assem­bled in South Aus­tralia, all options are on the table, and over the course of this year and next year, we will refine and announce the details of that project.

QUESTION: Min­is­ter, you spoke of addi­tion­al reforms before. Can you detail what some of those reforms are? And that, I guess you’re putting indus­try on notice to real­ly lift its game?

STEPHEN SMITH: Well, we are both putting defence on notice and indus­try on notice. We have seen in the past too many exam­ples of where projects have not deliv­ered the capa­bil­i­ty that was orig­i­nal­ly envis­aged, where projects have bad­ly slipped in terms of time, and where projects have bad­ly slipped in terms of cost.

We have insti­tut­ed a range of reforms both in the peri­od that Jason and I have been min­is­ters, but also in the three years pre­ced­ing that. And as I indi­cat­ed to the con­fer­ence, the so-called Kin­naird and Mor­timer reforms, which apply much greater rigour to projects, have seen, the ear­ly indi­ca­tions are, a 20–25 per cent improve­ment, so far as slip­page on delays are con­cerned. So we’re doing bet­ter with the projects, sub­ject to the rigour we have imposed, than in pre­vi­ous projects.

We’re also rein­forc­ing that rigour with announce­ments that Jason and I have made in May, par­tic­u­lar­ly on the ear­ly warn­ing indi­ca­tor front, par­tic­u­lar­ly on the com­pre­hen­sive or gate reviews. And today, we’ve announced mea­sures to refine and enhance the Projects of Con­cern list. Where projects are very seri­ous­ly in trou­ble, they go onto the Projects of Con­cern list. But as I said to the con­fer­ence, the objec­tive is not to put projects on the Projects of Con­cern list. The objec­tive is to get suc­cess­ful projects.

So Jason has been work­ing very close­ly with indus­try [indis­tinct] that process. And our expec­ta­tion is that we’ll see into the future, projects cur­rent­ly on the list come off in a more order­ly fash­ion and, hope­ful­ly, because of our ear­ly warn­ing and ear­ly pre­ven­tion mech­a­nisms, we’ll see few­er projects go onto the list. The list has been there since 2008. And we believe it’s been effec­tive. We also believe it can be more effec­tive.

In terms of future reform, I made it clear to the con­fer­ence that we con­tin­ue to have chal­lenges. We’ve got very real chal­lenges in the Navy amphibi­ous fleet. In the near future, I’ll release Mr Rizzo’s report and the Government’s response to that. We also have the Black Review on account­abil­i­ty. And in the near future, I’ll release the Government’s response to the Black Review.

I made the point before that [indis­tinct] prob­a­bly the case that the sin­gle most impor­tant thing we can do in Defence to improve out­comes is to improve the per­son­al and insti­tu­tion­al account­abil­i­ty, and you will see that in the course of this year, as we con­tin­ue to pur­sue our reform pro­gram.

QUESTION: The ASC is on the Projects of Con­cerns list. Does this — and its capa­bil­i­ty has come into ques­tion. Does this bode bad­ly on its bid to — for the replace­ment sub­ma­rine [indis­tinct]?

STEPHEN SMITH: Well, we have made the point today that if com­pa­nies have a project which is on the list, we will take into account the effort and the work they’re doing on reme­di­a­tion, when it comes to oth­er ten­ders or oth­er appli­ca­tions they may be pur­su­ing.

On Collins class sus­tain­ment and main­te­nance, we have known for some con­sid­er­able peri­od of time that this has been a chal­lenge. It is a con­sid­er­able chal­lenge. It is a chal­lenge for the Gov­ern­ment, it is a chal­lenge for Defence, it is a chal­lenge for Navy, it is a chal­lenge for the ASC. So we have an ongo­ing very big chal­lenge, very large chal­lenge with sus­tain­ment of the Collins class sub­marines. That’s not nov­el.

QUESTION: Are you sat­is­fied the efforts the ASC has made in order to address the prob­lems with the Collins class subs?

STEPHEN SMITH: Well, I am sat­is­fied with the coop­er­a­tion that we’re receiv­ing from ASC with Navy, with the Defence Materiel Organ­i­sa­tion, with Defence and the Gov­er­nor-Gen­er­al. But this is a big chal­lenge and I believe we can, and will, do bet­ter.

QUESTION: Well, what do you think needs to be done to have it off the list of Projects of Con­cern?

STEPHEN SMITH: Well, so far as sub­marines are con­cerned, I am not — I don’t have any aspi­ra­tions that sub­ma­rine main­te­nance or sus­tain­ment will be off the Projects of Con­cern list in any short peri­od. This remains one of our most sub­stan­tial chal­lenges and we need to con­tin­ue to apply our­selves dili­gent­ly, with ASC and oth­er inter­est­ed par­ties, and we will con­tin­ue to do that.

QUESTION: Are there any oth­er projects on your list of con­cerns in South Aus­tralia?

STEPHEN SMITH: Well, there are cur­rent­ly nine on the list. We took two off today. From mem­o­ry, the sub­marines is the one which has most focus in South Aus­tralia.

QUESTION: You’ve had some ini­tial prob­lems with the Air War­fare Destroy­ers, requir­ing work to be re-allo­cat­ed from BAE. Are you con­fi­dent that the AWD project [indis­tinct]…

STEPHEN SMITH: Well, I — you’re quite right. I announced mea­sures in the last few weeks to re-allo­cate the build­ing of some blocks from BAE’s Mel­bourne work­shops to the oth­er ship­yards, both in South Aus­tralia and also in New­cas­tle, and a small num­ber of blocks to Navan­tia in Spain. We will in the future make a judg­ment about the allo­ca­tion of blocks for the third Air War­fare Destroy­er. Those changes have reduced the slip­page and delay in the project by 12 months, by half. But we con­tin­ue to very assid­u­ous­ly apply our­selves. Both Jason and I and Defence and Navy and the Defence Materiel Organ­i­sa­tion very assid­u­ous­ly apply our­selves to what is a most impor­tant project, not just for South Aus­tralia, but for the nation.

QUESTION: Just on anoth­er top­ic, what’s your reac­tion to these lat­est ter­ror­ist attacks in Kab­ul, with, you know, obvi­ous­ly sui­cide bombers [indis­tinct]…

STEPHEN SMITH: Well, it’s the ear­ly hours of Kab­ul, so the cir­cum­stances will become clear­er over the next few hours, but I am in a posi­tion to indi­cate [indis­tinct] First­ly, I can con­firm that no Aus­tralian diplo­mats or diplo­mat­ic staff in Kab­ul have been caught up in this attack. The advice I have [indis­tinct] also applies to ADF per­son­nel. I am also advised that — the advice at this stage is that no Aus­tralians have been caught up in the attack upon the hotel [indis­tinct] Inter­con­ti­nen­tal. No Aus­tralians were reg­is­tered as stay­ing at the hotel. So sub­ject to fur­ther con­fir­ma­tion, as Kab­ul wakes up in the ear­ly hours of the morn­ing into day­light, we will con­firm those, but that is the advice I have. And I am also advised that we are deal­ing here with half a dozen or so insur­gents or ter­ror­ists. The Tal­iban, as you would expect, have claimed respon­si­bil­i­ty. And the advice from the Afghan Inte­ri­or Min­istry Spokesman — Min­is­ter Sid­diqi — is that a large num­ber of the ter­ror­ists, if not all of the ter­ror­ists, have been killed [indis­tinct] but because it’s the ear­ly hours of [indis­tinct] because this has effec­tive­ly come to us overnight, we’ll need to con­firm those in the course of the day.

More gen­er­al­ly, I’ve made the point in the past that in the course of this sum­mer fight­ing sea­son in Afghanistan, giv­en that the Tal­iban now find them­selves under pres­sure, they would do two things. They would seek to recov­er ground, not just in Uruz­gan province, but else­where, but also utilise high pro­file, pro­pa­gan­da-type attacks, and this is one of those. This is aimed at seek­ing to under­mine polit­i­cal will in the Unit­ed States, in Europe and in Aus­tralia and we have seen a series of com­pa­ra­ble attacks in recent times. QUESTION: An audit into the war­ships has been try­ing to iden­ti­fy the prob­lems there and it has come out with quite a list of prob­lems, includ­ing short­ages. Do your reforms — will they go to address­ing some of those prob­lems?

STEPHEN SMITH: Well, in my remarks at the con­fer­ence, I made the point that the Audit Office report into Navy capa­bil­i­ty in very many respects cov­ers ter­ri­to­ry or turf that Mr Rizzo’s report will deal with. Whilst it is the case that Defence have made [indis­tinct] own con­tri­bu­tion to that Audit Office report and accept­ed a range of the rec­om­men­da­tions and find­ings, from my per­spec­tive, I’ll deal with the Audit Office report at the same time as I deal with the Riz­zo Report. The Riz­zo Report cov­ers com­pa­ra­ble ter­ri­to­ry and as I’ve made [indis­tinct] the ear­ly advice from Mr Riz­zo is that we’re deal­ing here with long term sys­temic dif­fi­cul­ties and any prob­lem which has emerged over the long term, with a fail­ure to apply appro­pri­ate resources, a fail­ure to have appro­pri­ate tech­ni­cal capa­bil­i­ty, will require some time to recov­er from. But I’ll deal with those issues at the same time as I deal with Government’s response to the Riz­zo Report.

QUESTION: You talked about reduc­ing the growth in the pub­lic ser­vice sec­tor to increase sav­ings. Does that mean there will be job cuts?

STEPHEN SMITH: Well, I announced in the run-up to the bud­get in May that as a result of fur­ther reform we’re doing to the Defence’s bud­get process­es, fur­ther reform to so-called Shared Ser­vices under the Strate­gic Reform Pro­gram, that we’ve been able to effec­tive­ly reduce the num­ber of civil­ian per­son­nel by 1,000. I’ve pre­vi­ous­ly announced that there will be no impact on mil­i­tary per­son­nel and no impact on key areas, Navy main­te­nance one, our oper­a­tion cen­tres, the Joint Oper­a­tion Cen­tre in Bun­gen­dore and no adverse impli­ca­tions for the Defence Capa­bil­i­ty Group.

So I’ve pre­vi­ous­ly announced that as part of the ongo­ing Strate­gic Reform Pro­gram.

QUESTION: Min­is­ter, ASC is fund­ing design work for the future subs itself. Is that some­thing Defence will look at pro­vid­ing fund­ing for?

STEPHEN SMITH: Well, in any large project, there are indus­try rep­re­sen­ta­tives or indus­try play­ers who will present gov­ern­ment with their sug­ges­tions. At some stage in the future, Defence will, in accor­dance with the usu­al process­es, go out with seek­ing expres­sions of inter­est. ASC and oth­er par­ties have indi­cat­ed their inter­est in the future sub­ma­rine project into the future. That’s just the nor­mal course of events, nor­mal activ­i­ty.

Press release
Min­is­te­r­i­al Sup­port and Pub­lic Affairs,
Depart­ment of Defence,
Can­ber­ra, Aus­tralia

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