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have already resulted from the high value of the
Should we be taking more advantage of the
A: I think in terms of the equipment and
systems that we have already determined to
buy off-the-shelf we ought to be buying early
and ought to be buying increased quantities.
The Australian dollar has gone from a long term
average purchase price of around about 78 US
cents, to the situation today we’re getting US
$1.06 and arguably we are going to get up to a
$1.20 by the end of this year.
That means the purchasing capability in
this country in the space of twelve months has
increased by 50 or 60 per cent. So I think that
should be looked at in a serious way – especially
keeping in mind that we are spending tens of
billions of dollars.
At the same time I stand by my earlier
comments that it’s part of the Defence
management function to be seriously looking
at the utility and benefits that can be obtained
from Primes doing work in this country. That
means we should be seriously paying attention to
current and future Priority Industry Capabilities.
Australia, almost uniquely in the Western world,
has excluded Defence from budget cutbacks.
Do you see anything unusual about that?
A: I think that question is totally wrong and I’ll
say this, I think Australia almost uniquely in the
western world – to use your phrase – is engaged
in serious ongoing cost savings via the Strategic
Reform Plan. The Department has identified
savings in current dollar values of $20 billion
over ten years, that’s $2 billion per year.
For the first two years Defence has achieved
it, admittedly by cutting out low hanging fruit,
but we are seriously engaged in that. If you go
back to my first speech in 2010 when I discussed
situation in the US, it is quite clear that we are
probably five years ahead of the Pentagon in
terms of savings from the Strategic Reform Plan.
I think we’re probably a similar period of time
ahead of the United Kingdom. In fact - I didn’t
say this in the speech - it was made clear to me
in the US that both the United States reform
people in Defense and the UK purchasing body
have taken particular interest in the process set
in train in Australia in terms of savings.
A number of Australian acquisitions are being
delayed. How does that sit with your generally
positive view of how Defence is operating?
A: That’s a good question. I think there have
been three problems in defence procurement in
the last 10 or 15 years;
Cost blow out;
Time blow out;
Scope creep or scope blow out.
Okay, I think the cost blow out is in the process
of seriously being remedied and the costing
system has been greatly improved. By and large
now the quoted price remains the delivery price
- so the first of the problems is being dealt with.
So the emphasis on getting it right in planning
and risk analysis seems to be working – even
though it’s taking longer. As we saw with the
Seasprites, better planning may have prevented
the whole thing even starting.
Secondly, I think this timeliness has has yet to
Thirdly, there are still problems in the area
of the scope creep or the scope blow out and
that’s because there hasn’t been sufficient
attention paid planning that particular issue.
This is largely the responsibility of the Capability
Development Group – and in my view there
hasn’t been sufficient oversight of the work
done at service level to ensure that scope creep
becomes the exception not the norm. So that’s
still a work in progress.
In terms of the overall reform process, we’ve
identified the problems. One of the three
principle issues – that of timeliness – needs to
be remedied. The use of the Projects of Concern
list is an important reform in this area. The work
of the Defence Capability Group needs more
scrutiny to make sure Australia is purchasing the
most suitable equipment for our needs.
Defence has just handed back unspent funds to
consolidated revenue. Do you think industry
has a right to feel unfairly treated?
A: The reasons behind that decision
are quite complex. Industry themselves are
partially responsible in the sense that they are
not meeting schedule. However, other factors
come into play and I acknowledge that there are
other participants in the process, including the
Government – usually in the form of the National
Security Committee of Cabinet.
Turning to the Senate Committee’s current
inquiry. As well as hearing from the Department
itself, are you interested in outside views:
A: Well the committee is particularly interested
in hearing from industry.This will include industry
groups, Primes, SMEs and subcontractors as to
short comings or deficiencies that they observed
in the planning process, the procurement
process, the scheduling process and all the
issues you and I have been discussing.
We’re particularly interested in shedding
public light on the internal operations of the
Capability Development Group and its relevant
We don’t believe that’s been sufficiently
exposed and that needs to be examined so that
its pluses and minuses can be identified. In
addition, we want to look at where are the various
capability acquisition and reform processes that
derive from the Strategic Reform Plan and how
their implementation is progressing.
recommendations to the Minister?
A: I think we’re going to end up with a lot
of information on the public record that’s not
Secondly, we’re essentially going to do
a progress report on the implementation of
reform, particularly through an update of the
Thirdly we’re going to produce an information
report on capability acquisition projects
identified in the White Paper.
Fourthly we are going to seriously examine
the entire acquisition cycle - concentrating on
the Capability Development Group - and we’re
going to try and bring that mass of information
together so that it can be both a guide and a
bible for Australian industry in particular.
Q: Do you think Defence receives enough
A: I think the problem is this - I think Defence
reports to far too many committees, up to six
committees in any parliamentary cycle.
Secondly, there’s a lack of continuity in
membership of those committees.
Thirdly, because there is a lack of continuity
the committees themselves don’t develop the
level of expertise that’s needed to effectively
review what Defence and DMO are doing.
Fourthly, I think that almost all reform in
Defence in the last ten years has come from the
public workings of parliamentary committees.
To support that, I nominate military justice and
procurement improvement as two major areas
where positive changes have occurred. These
have come about due to work occurring in
Public Accounts, Senate Estimates – and so on.
The constant discussion and identification of
problems has forced Defence to improve.
So I think that the only way for sustained
reform is to have on going serious informed
public review by a parliamentary committee,
preferably a Senate committee that can gain and
maintain the confidence of Defence so that the
system encourages optimal outcomes and is not
mere publicity point scoring. APDR
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