Home' Asia Pacific Defence Reporter : APDR May 2014 Contents 38 Asia Pacific Defence Reporter M AY 2014
A Minister, faced with two decisions that involve
downsides, may simply avoid the choice. Such a
proposition is however unlikely; all leaders make
choices and all choices have downsides. The Minister
has already made his first difficult multi-billion choice
on the F-35s, giving the RAAF 72 of the aircraft it
needed, but not the 100 they desired.
The reality of fiscal constraint is a more likely motive
for deterring choice. It may simply be that there is no
money in the pot for either choice described above.
In some sense, this was the position of the previous
government who publically promoted the ‘grand plan’
solution, but behind the scenes would not, or could
not, commit more than a couple of hundred million
dollars to deliver the perception of movement.
Procrastination, a decision in its own right, on the
face of it doesn’t present a downside to Government.
The risk is low as it by-and-large goes unnoticed, at
least to the taxpayers at large, unless the equipment/
capability is suddenly required and unavailable, e.g.
amphibious ships post a cyclone. Unfortunately, painful
as it may be, the rationale should be clearly and
truthfully articulated to the general public.
Collins is costing the taxpayer around $800 million
per annum, though with recent improvements. This
sort of spend places considerable strain on the Navy’s
overall sustainment budget, and there are just too
many other legacy navy sustainment problems that the
Government has been left with by its predecessor to
continue the drain, not to mention sustainment of the
new capabilities soon to enter service.
Secondly, from a value-for-money perspective,
Collins is outside an acceptable financial performance
window noting the spending reform expectations that
the Prime Minister and Treasurer have directed at both
senior and junior ministers. Johnston, in opposition,
badgered Defence on the value-for-money issue.
Defence has been embargoed from budget cuts,
but that does not mean the Minister should or can
accept the burden of a submarine budget assessed as
poor by international benchmarking standards. Neither
should the taxpayers. The question is would this option
stand up to a cost-benefit analysis? Factored into such
an analysis and indeed, important in its own national
security right, is the question of how a 30 to 40 year
old submarine stacks up in terms of regional capability:
would it provide a capability edge?
Over the next twenty one years, the time frame
between now and the entry into operational service of
the first of the option three or four submarines, over $16
billion will be spent on Collins, excluding expenditure
on upgrades of equipment. This number is based on
departmental estimates; numbers which, based on
past performance, have always been underestimates.
At the 2011 SIA submarine conference, Senator
Johnston stated, “So we know that time is a significant
Personal ConsequenCes for
There are rumours afoot that the PM, having undertaken
the commission of audit and refined the direction for
Government, will shuffle Cabinet. In the lead-up to
the election Abbott made a commitment that, post
victory, his shadow cabinet line-up would not change.
Externally, this bodes well for political stability in
an environment where the then Labor Government
had an abundance of instability. Internally, it shored
up support within the Liberal Party at a time when
he was not polling well as the preferred opposition
leader – ensuring that any rebellion would not be led
or supported by members of a stable shadow ministry.
After the election, Abbott kept his word. But as time
marches on, the opportunity to reshape his front bench
will be enlivened, and arguably there is need to do so.
It is a common view that the best time for a
Government to effect change is in the first twelve
So, a year into the term of Government would seem
to be the right time to reshuffle the Ministry - changes
that would see ineffective ministers and office holders
replaced by new faces. There are capable people
standing in the wings, many of whom have the drive
to make a positive mark on a portfolio if they get the
chance to do so.
Laurie Oakes recently suggested that Scott Morrison
might be a candidate for Minister for Defence, based
on his success in presiding over Operation Sovereign
Borders. Though not necessarily a stepping-stone to
the PM’s office (Malcolm Fraser managed it) it has
helped many to attain leadership of their party. More
importantly he has proven his mettle in tackling a
difficult problem, stopping the boats, and has had
substantial interaction with Defence and as such may
be seen within the party as the man to tackle the
challenges of defence reform.
Johnston is an extremely diligent and hardworking
character described by the Australian’s Greg Sheridan
as a ‘mild minister’. But does ‘quiet and mild’ work
in Johnston’s favour? In an environment where his
peers are making bold suggestions and/or decisions
with coverage on the front pages of the newspapers,
Johnston’s profile is left wanting.
He faces criticism for not getting an agreement
on Defence reform until more than six months into
government; and in that instance, according to the
Financial Review’s Geoffrey Barker, had to acquiesce
to the desires of Abbott’s national security advisor,
Andrew Shearer. It’s a loss that doesn’t bode well for
a fourth ChoiCe eMerges
Compromise is another element of politics, and
a compromise SEA 1000 option may have been
bought to the table by Dr Atzpodien, the head of
ThyssenKrupp Marine Systems (TKMS). He rose
to the lectern at ASPI and suggested that his
company could deliver a 4000 tonne Type 216,
built in South Australia, which would meet the
‘unique’ requirements of the RAN for around $20
billion. He put the difference between this number
and the ASPI price point down to what he termed
an ‘experience dividend’ resident in his company
which has built over 180 submarines since 1960.
It’s not a certainty that Cabinet would approve
even this amount. It’s still a large number and the
Type 216 presents more risk to Government than
a strictly off-the-shelf option such as a Type 214
or Dolfin II. But it’s a much more saleable prospect
than that put forward by those engaged in pushing
the Australian bespoke design. Not only is the
price better, but it offers Treasurer Hockey planning
certainty for his forward estimates as he seeks to
manage the deficit in the out years.
If this solution is to be explored, it can’t be a one
horse race. DCNS, Navantia, and perhaps others,
also have an experience and productivity dividend to
offer Australia. This fourth choice must be examined
in the framework of genuine competition. Doing so
could shave a few taxpayer owned billions off the
end-price of whatever solution might be selected;
as occurred in the recent Singaporean TKMS/
DCNS next generation submarine competition.
The Minister can’t afford to NOT make a decision.
expeditiously. A decision on SEA 1000 has already
outlived three Ministers – will it leave another in its
Collins is costing the taxpayer around $800 million per
annum, though with recent improvements.
8/05/14 3:42 PM
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