Minister of Defence Stephen Smith – Keynote address to the Australian Defence Magazine Congress 2011

I thank the Australian Defence Magazine Congress Chair, and Editor of Australian Defence Magazine, Katherine Ziesing, for her introduction and for the invitation to give the keynote speech at the Eighth Annual Australian Defence Magazine Congress.
I acknowledge my Ministerial colleague Jason Clare MP, Minister for Defence Materiel.

I also acknowledge Dr Stephen Gumley, Chief Executive Officer, Defence Materiel Organisation, Air Marshal John Harvey, Chief of the Capability Development Group, both of whom will speak later, Australian Defence Force personnel, Defence and Defence Materiel Organisation officials, ladies and gentlemen.

First a note about our host.

The Australian Defence Magazine is a leading publication on defence issues.

Its commentary and analysis on defence policy, major projects and equipment acquisitions is highly recognized and importantly well regarded.

The Australian Defence Magazine is read widely within Defence itself. In particular, its coverage of Defence capital projects is valued by the defence industry both Australian and overseas.

The Australian Defence Magazine Congress itself provides an important forum for exchanging information and ideas, and you should make the most of this opportunity over the next couple of days.

In what we always knew would be a big year for the Australian Defence Force, the ADF, it has been a very demanding start.

In the face of the extraordinary natural disasters our country has experienced, the response by the ADF and its personnel has been magnificent.

On the east coast over 2000 Defence personnel dealt with floods in Queensland and Victoria, with ADF helicopters and fixed wing aircraft flying more than 1,000 flying hours, transporting more than 680 tonnes of stores and carrying more than 1,400 passengers both military and civilian.

Members of the Australian Defence Force conducted rescues, evacuations, recovery work, engineering and community support activities, often under extreme weather conditions.

In the aftermath of Cyclone Yasi in Queensland’s north, more than 1500 ADF personnel have been deployed to assist, as well as numerous amphibious, mine clearance and hydrographic vessels, helicopters and fixed wing aircraft.

Defence aircraft, from C-17s to King Air, have flown more than 100 hours and airlifted more than 320 tonnes of cargo, including more than 200 tonnes of emergency food and water.

In the west, where I come from, we have had terrible fires in Perth and floods in Carnarvon. At Carnarvon, soldiers and equipment from the Pilbara Regiment provided assistance in flood rescue and relief operations.

This cross country massive effort involved personnel from all three arms of the Australian Defence Force, the Navy, the Army and the Air Force.

In simple terms, we saw a Joint Brigade Group deployed with considerable helicopter and fixed wing air support, and amphibious, hydrographic and naval clearance diver support.

These Defence personnel were of course utilising equipment that you as a collective provide and support.

They are all dependent on Defence and Industry working together. Working together effectively to design, deliver and maintain the equipment they need to both do their humanitarian assistance and disaster relief job in peacetime and their military job during war.

Delivering and maintaining these assets is a critical element of our national security.

But we know that procurement, maintenance and sustainment is not without serious challenges.

A most pressing example of this is the advice to me from Defence over the last few weeks that the maintenance and sustainment of our amphibious capability has, regrettably, effectively failed.

Earlier this month, Minister Clare and I announced that on the advice of the Chief of Navy, HMAS Manoora was to be decommissioned and that HMAS Kanimbla required substantial remediation work. We are not expecting to see HMAS Kanimbla back in operational activity until April 2012.

HMAS Manoora was placed on operational pause by the Chief of Navy following a Seaworthiness Board report in September last year. An examination of the 40 year old ship revealed significant hull corrosion and the need for replacement of both gear boxes.

This work would cost over $20 million and take until April 2012 to complete. That would not be value for money, as HMAS Manoora was in any event scheduled to be decommissioned at the end of next year.

On receiving that advice I asked the Secretary of the Department of Defence and the Chief of the Defence Force for advice outlining the reasons for the early decommissioning of HMAS Manoora and the extended unavailability of HMAS Kanimbla.

Their advice, which I am releasing today, was a frank appraisal and identifies systemic and cultural problems in the maintenance of our amphibious ship fleet for over a decade or more.

It outlines the adverse side effects of a ‘can do’ and ‘make do’ culture and a lack of sufficient adherence to verification, certification and assurance processes.

It outlines a perception that major support ships are not subject to the same level of risk as submarines and aircraft, almost a perception that HMAS Manoora and HMAS Kanimbla are second tier ships.

It outlines insufficient resources being applied to address shortcomings.

I will be as frank in public as I have been frank in private in expressing my disappointment at this.

Maintenance and sustainment must be bread and butter business for Defence, for the Defence Materiel Organisation, for Navy and for Defence Industry.

This amphibious lift situation has been exacerbated by ongoing maintenance activity and operational difficulty with respect to HMAS Tobruk.
On 28 January, I was advised that with the decommissioning of HMAS Manoora, and the extended unavailability of HMAS Kanimbla, Navy was maintaining HMAS Tobruk at 48 hours notice for sea to ensure an amphibious lift capability was available.

On 2 February, I was advised that HMAS Tobruk was to commence maintenance work in order to be fully prepared to provide any assistance in the days following Cyclone Yasi, in the event not required.

On 4 February, I was advised that HMAS Tobruk had left its dock and was being prepared to return to 48 hours notice for sea.

This has however not yet occurred as further maintenance issues and problems have been identified.

This work includes efforts to survey, verify, certify and replace a number of safety critical flexible hoses necessary to ensure the safe operation of HMAS Tobruk.

This recent advice on HMAS Tobruk’s maintenance no doubt reflects comparable issues over the years as identified by the Secretary and the Chief of the Defence Force with respect to HMAS Kanimbla and HMAS Manoora.

The Landing Platform Amphibious story is a protracted one and not a happy one.

It is easy to throw criticism around here, but I caution that many of the seeds of the problems we now face were sown more than a decade ago.

As well, we do need to be conscious of what I describe as the lag effect. Many of the problems we identify today in Defence have their genesis years ago. Some are only now emerging. And much of the reform put in place in the last few years will have good effect for the future but not retrospectively for long standing projects or issues.

The establishment by the Chief of Navy of the Seaworthiness Board in 2009 was a long overdue means of addressing these problems and providing an independent review of maritime systems. It was designed to find problems and it has done so. The Board’s review of amphibious ships provided a clear focus on a problem situation in the final quarter of last year that was not previously available.

The establishment of the Seaworthiness Board follows the creation of the Air Force Airworthiness Management System in the 1990s which itself followed a series of terrible accidents and incidents in the 1990s.

Since then, ADF aircraft accident rates have reduced significantly, despite a much higher operational tempo.

The advice in relation to HMAS Tobruk and the Landing Platform Amphibious ships over the last few weeks and months reflects in my view a similar increasing awareness within Defence and the Defence Materiel Organisation of the need to identify and solve problems as they emerge.

Navy and the Defence Materiel Organisation understand the enormous challenge of cultural reform in this area, and have put in place a number of initiatives to address the current Landing Platform Amphibious situation.

Notwithstanding all of these difficulties, I am advised by the Chief of the Navy that over the last twelve months, all of the assigned operational tasking the Australian Navy has been asked to do, it has done.

But Navy is currently unable to put to sea a heavy amphibious support vessel. It is clear that we must do more.

Today I announce that the Government is appointing an Independent team of experts to help implement essential change in the management and repair of ships.

Mr Paul Rizzo will lead that team.

Mr Rizzo is currently a Director of a number of major Australian corporations including the National Australia Bank and Malleson Stephen Jacques. He has a strong history of developing and implementing structural and strategic reforms in large corporations.

He is also the Chair of the Independent Defence Audit and Risk Committee.

He will be supported by two team members with relevant experience in Defence which includes Defence administration, engineering, maintenance, logistics, systems engineering, safety certification and the operation and support of amphibious ships:
Air Vice Marshall Neil Smith, retired, served in the Air Force for over 35 years. His RAAF career culminated as Support Commander (Air Force), where he was responsible for logistics support, including technical airworthiness oversight, for all Australian Defence Force aircraft.

Rear Admiral Brian Adams, retired, served in the Navy for over 35 years. Specialising in joint and amphibious warfare, he commanded HMAS Tarakan and HMAS Tobruk itself. These two senior retired Defence personnel will assist Mr Rizzo in this task.

Mr Rizzo’s Team will develop a plan to address the causes of the problems facing the availability of the amphibious and support ships and oversee the early stages of the implementation of the reforms.

His team will focus on the causal factors the Secretary and the Chief of the Defence Force have already identified and any other factors it considers played an influence in the current condition of amphibious support ships.

This will take place in the context of reforms already underway.

Many of the causal factors identified have been or are being addressed by substantial reform initiatives underway in Defence, including the Strategic Review of Naval Engineering and the operation of the new Seaworthiness Board itself, both initiated by the Chief of Navy, and of course more generally the Strategic Reform Program.

Mr Rizzo’s team will also consider whether these reforms can be better applied to the maintenance and sustainment of other naval vessels.

His team will also consider the maintenance concept being developed for the new Air Warfare Destroyers and the Landing Helicopter Docks to ensure their suitability to sustain these vessels for whole of life.

Consultation will occur not just with Defence but with relevant members of the ship maintenance community and the contracting community.

An initial report will be prepared for consideration by me and the Minister for Defence Materiel within three months of commencing work. At that time, Mr Rizzo will recommend whether further reports are required.

It is essential that the problems identified are addressed as a matter of priority ahead of the transition to the new Landing Helicopter Dock Ships. This work will be in addition to the new comprehensive amphibious transition plan I have asked Defence to prepare to ensure a smooth transition to the introduction of the Landing Helicopter Dock ships.

Later this week the hull of the first Landing Helicopter Dock will be launched in Spain. The hull will arrive in Melbourne next year for further work to be completed at the Williamstown Shipyard before the Landing Helicopter Dock becomes operational in 2014. Australia’s second Landing Helicopter Dock will become operational the following year.

The Landing Helicopter Docks are bigger than Australia’s last aircraft carrier. Each is 230 meters long and can carry a combined armed battle group of more than 1000 personnel, 100 armoured vehicles and 12 helicopters.

This is a hugely ambitious project. It will require the highest levels of cooperation and expertise between Defence and Defence Industry to succeed.

In developing a new amphibious transition plan, I have asked Defence to investigate all options to ensure Defence is able to provide amphibious lift between now and when the first Landing Helicopter Dock becomes operational.

This includes the possibility of obtaining a Bay Class ship from the Royal Navy. I have discussed this with United Kingdom Defence Secretary Liam Fox both during AUKMIN in Australia and subsequently.

Last week I announced the sharing of key capabilities with New Zealand, in particular HMNZS Canterbury.

HMNZS Canterbury’s amphibious-lift capability will be particularly important in our region over the next few years in light of Australia’s amphibious capability challenges.

The current state of our amphibious lift capability is a sobering reminder of the challenges we face and the risks that we run if Defence and Defence Industry don’t get it right.

We must do more to ensure that not only our sustainment activities work, but that our capability development and procurement processes are successful.

These days we work in a challenging procurement environment. Our projects are among the most complex in our country.

But this is not an excuse for failures. Measures must be put in place both by Defence and by Defence Industry to maximise our successes.

I said to the Defence Senior Leadership Group late last year that we need to significantly improve the whole of Defence’s performance in acquisition and delivering capability outcomes that the National Security Committee of the Cabinet has approved and agreed to fund at a particular level.

We have made substantial changes in recent times. These have seen improvement, through the enhanced first and second pass arrangements and the projects of concern process.

But again we must do more.

We need to instil much greater rigour and individual and institutional accountability to our consideration and management of major projects, acquisition and capabilities.

The Government is determined to apply the highest levels of project oversight and scrutiny to improve performance in the procurement and acquisition area.

We need true ownership of the issues and both personal and institutional accountability. Some good work is already underway.

Business processes have undergone significant reform, making the management of projects more business-like, accountable and outcomes driven.

Defence is constantly monitoring project performance and is currently enhancing its scrutiny to identify project problems and options, including listing Projects of Concern for remediation.

In November last year, Minister Clare and I announced that the acquisition of the Joint Air-to-Surface Standoff Missile (JASSM) had been added to the Projects of Concern list.

This listing was not because of industry delays or cost increases. It was because of Defence’s failure to keep Government properly and fully informed about the Project and its difficulties.

Where necessary, the Government will take the tough decisions to cancel projects, as we did recently for the Amphibious Watercraft project.

This is another example of a project where the seeds of failure were sown long ago.

This project was approved by the previous Government in 1997 and involved the construction of six watercraft for HMAS Kanimbla and HMAS Manoora.

The project suffered a number of problems but critically, the dimensions and weight of the watercraft meant they were unsuitable to be launched from these ships.

Accordingly, the project has been cancelled and Defence is planning to dispose of the vessels.

Defence is now implementing closer oversight of significant projects with implementation of a system for monitoring and reporting on Early Indicators and Warnings so that senior management can intervene to prevent problems or remediate identified problems.

The Defence Materiel Organisation is also using Gate Reviews as a means of supporting and auditing projects before they develop issues that can lead to them becoming projects of concern.

Gate Reviews have been in operation in their current form since late 2009 and provide an objective, analytical and accountable approach to project governance.

There is still much more work to be done here.

We need to prevent problems before they emerge and solve them as they emerge: prevention, not post mortems.

There will always be risk in complex, costly procurements involving cutting edge technology.

But our focus must be ensuring that risk is minimised from day one. That means applying much greater up front rigour and individual and institutional accountability to our consideration and management of major projects, acquisitions and capabilities.

Defence will apply this enhanced rigour to projects under development now, including three projects recently approved by the National Security Committee of Cabinet which Minister Clare and I will also announce details of later today:

First pass approval for joint project 2047 Phase 3, Defence Wide Area Communication Network Replacement.

First pass approval for joint project 2097 Phase 1B, to deliver a modern fleet of special forces vehicles.

First pass approval for project SEA 1448 Phase 4A to upgrade the Anzac class ships’ electronic warfare systems.

These three projects combined are estimated to involve expenditure of between $500 million and $1 billion by the time they are complete.

Defence also is reviewing the effectiveness of its management of major projects, and is using the JASSM project as a case study for further improvements.

I will have more to say over the next few months on reforming and enhancing Defence’s accountability regime following consideration of the Black Review into accountability, which I formally receive from Dr Black later today.

These days we all have a responsibility to ensure that the Defence dollar is spent on priority items, and that it is seen to be spent wisely. This particularly applies to acquisition and capability.

For the first time in many years, perhaps for the first time in the modern era, real parameters have now been imposed around us to deliver these policies: by the White Paper, by the Strategic Reform Program and by Defence’s capped Budget.

This necessitates that we are more efficient and more effective at delivering capabilities to the men and women in the Australian Defence Force, and that together we get that capability right.

Government investment in Defence capability is for national security purposes. Our industry policy must therefore support our national security and Defence priorities. The Defence Capability Plan underpins our national security policy. It is not of itself an industry policy.

This means our focus, the focus of Defence, the focus of the Defence Materiel Organisation and the focus of Industry must be on delivering the equipment the Australian Defence Force needs to meet the national interest and national security tasks set by Government.

In assessing what we all regard as poor performance in acquisition and sustainment three things need to be remembered. Firstly, many of Defence’s projects are among the most complex undertaken in or for Australia, and necessarily on or beyond the edge of current technology.

Second, the projects extend over long time periods. In HMAS Kanimbla and HMAS Manoora for example Defence is maintaining 40 year old ships and some of the problems now becoming apparent reflect decisions taken, or proper maintenance regimes not established, a decade or more ago. Similarly, the decisions that led to the Watercraft failure were taken in the late 1990’s, not the late 2000’s.

Finally, the early stages of reform and change always unearth long hidden skeletons. The very necessary establishment of the Sea Worthiness Board will give us better maintained and safer ships, with better availability rates, but the initial effect was always going to be to highlight past and current deficiencies. The Chief of Navy is to be complemented for being willing to unearth the deficiencies on his watch.

More generally, I know that the Defence Senior Leadership is committed to addressing and solving the problems that I have discussed today. There is no shortage of determination for us to do better.

Mistakes made at the beginning of complex and costly Defence projects are multiplied substantially into major problems later in the life of a project.

It is much more important to get projects right at the outset, than subsequently cancel a project after wasting tax payer dollars, or comprising on capability, schedule or cost. If we fail in this, it reflects badly. It reflects badly not just on Government, but on Defence itself and on the Defence Industry.

If we fail in this, it is a bad outcome for Government. It’s a bad outcome for Defence and for Industry.

Most importantly, if we fail in this, it is a bad outcome for our national security interests.

It is of course easy to focus on failure. We need to remember as well our successes, like the response over summer to our natural disasters.

We all acknowledge that we have more to do. We also acknowledge that we have to do it together.

And we will.

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

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