Keynote Address to the 7th Annual Defence Skilling Summit
Stamford Plaza Hotel, Brisbane
Monday 5 September, 2011
BUILDING THE SKILLS WE NEED FOR THE FUTURE
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In one week it will be one year since I was appointed Minister for Defence Materiel.
It’s been a busy 12 months.
I’ve visited 62 companies – and more than 42 defence bases and establishments.
We’ve rolled out a lot of new equipment to our troops in Afghanistan:
- New combat body armour and a new combat uniform;
- New Maximi machine guns;
- Upgraded the Bushmaster vehicles;
- Enhanced mine and IED detection equipment;
- The CRAM counter rocket, artillery and mortar system;
- And a range of other measures that are part of the $1.6 billion plan to improve force protection.
We’ve made some big decisions on equipment.
- Ordered an additional 101 Bushmasters and a 5th C-17 Globemaster;
- Acquired the Largs Bay from the British Government; and
- Agreed to purchase 24 new Romeo naval combat helicopters.
In the past year Government has given first or second pass approval to 22 projects. The total value of these projects is more than $5 billion.
Minister Smith and I have also announced major reforms to the acquisition, sustainment and disposal of military equiptment.
- Increasing the rigour of the Defence Capability Plan development process;
- Stronger contestability in capability decision making;
- The establishment of an Independent Project Performance Office;
- An Early Warning System to identify problems in projects before they become critical;
- The extension of Gate Reviews to all major capability projects;
- More rigour to the Projects of Concern process;
- The Black Report which is focused on improving personal and institutional accountability in Defence; and
- The Rizzo Report which put in place a plan to overhaul the sustainment of Navy’s surface fleet and the Coles Review whose task it is to do the same for our Collins Class submarines.
I have also:
- Expanded the operation of Australian Industry Capability Plans to increase opportunities for Australian SMEs;
- I have sought your ideas on how we can ensure we meet the sustainment targets set in the Strategic Reform Program and we have started to pilot the best of those ideas; and
- We are conducting health checks on our Priority Industry Capabilities.
That is a lot of work.
The next step is making sure these reforms are fully and properly implemented.
In the next decade we will spend around $150 billion on Defence equipment – and more than half of it here in Australia.
It’s important we get this right.
That’s why these reforms are so important.
They are about making sure the people we put in harm’s way have the equipment they need, when they need it and that Australian taxpayers get value for money.
A key part of that is making sure we have the skills we need to do the job.
This is the next stage of our reform plan.
SKILLS IN DEFENCE
The skills challenge starts inside Defence.
Attracting and retaining the right people with the right skills.
Offering opportunities for professional development and career advancement.
Recognising talent and rewarding it.
You don’t have to read far into the Rizzo Report into the Repair and Management of our Support Ships to see the risks that emerge when Defence lacks skills and experience in its workforce.
This is not a unique Australian challenge. I have spoken to my colleagues in the US and UK – and they face similar challenges – the hollowing out of skills and experience and the transfer of some of that to industry.
One of Rizzo’s key recommendations is the rebuilding and reorganisation of Naval Engineering under a two star Admiral to give the necessary weight to this critical function.
Rear Admiral Michael Uzzell has now been appointed to this task.
As Mr Rizzo makes very clear, this will require:
- the development of a comprehensive through life career plan for the recruitment, retention and development of engineering talent; and
- an effective workforce planning system to ensure staff have the skills and experience required for complex sustainment.
In DMO a lot of good work has been done over the past seven years to boost commercial skills and business acumen – and I pay tribute to the work over this time of Dr Stephen Gumley.
Just one example is the Executive Masters Program developed with the Queensland University of Technology, in complex project management and strategic procurement.
Around 90 Defence and DMO staff have participated in the program since it was established four years ago.
There is still more work to do though to develop the commercial and business skills required in DMO.
Capability Development Group (CDG)
There is also more work to do in Capability Development Group (CDG).
When we released the Black Report into Defence Accountability a few weeks ago, Minister Smith and I announced three year postings for ADF personnel working on capability projects.
The purpose of this is to boost the skills and corporate knowledge – and increase accountability and responsibility for projects.
SKILLS IN INDUSTRY
There is also more to do in industry.
As you know, there are a lot of Government programs that help to build and maintain the skills of the Australian Defence industry.
Many of them are very effective.
The best example is the Skilling Australia’s Defence Industry (SADI) program.
I only hear good things about SADI.
Six years ago it supported eight companies.
It has grown exponentially since then.
Last week I announced that 109 companies will be funded through almost $14 million in training support provided by SADI this financial year.
In the next 10 years it will invest $138 million in boosting skills in the Defence industry.
The sort of people it’s helping are people like Byron Walpole, who I met at Austal in Perth last week.
The SADI funding helped him complete training in 3D software.
It’s also helped his company bid for, and win, projects here in Australia and in the US.
This year Byron won the AIDN Young Achiever of the Year Award.
SADI funding I announced last week means he will do more training, this time in configuration management.
SADI is a great program – but there is always room for improvement.
That’s why I have written to each of the companies receiving SADI grants this year – to get ideas from them about how we can make it even more effective.
A number of companies have already provided me with their ideas.
Later this year we will hold a series of roundtables across Australia to give as many companies as possible the chance to have their say – so that the advice that comes to me reflects your ideas and experiences.
Defence Industry Innovation Centres
The Defence Industry Innovation Centre’s are also helping to build industry skills and productivity.
In the past two years 600 business reviews have been conducted for Australian based SMEs – helping them to develop plans to improve their management and productivity.
Because skills are usually a key part of what these plans identify – the program also funds training. Last year alone – more than $700,000 in training grants were provided under the program.
Global Supply Chain
The Global Supply Chain program is not specifically about skills – but this is one of its benefits.
For example, Boeing has provided titanium and aluminium high speed machining training for 10 Australian SMEs through this program and Raytheon has run systems engineering training.
SME’s have sent key staff to courses in quality measurement, dimensioning and tolerance; proposal writing; LEAN processes; and project management.
The advantage of this kind of training is that it helps SME’s win more work in the global supply chains of the prime contractors.
Priority Industry Capabilities (PICs)
There are no more important skills than those contained within our Priority Industry Capabilities (PICs).
They are the must haves – the things we can’t do without.
We have identified what they are, but as I said earlier this year they need to be more than just a list of capabilities.
That’s why in February at the ADM Conference I announced that DMO would conduct health checks on each of the PICs.
Today I have released the first two of these completed health checks:
- Infantry Weapons; and
- Ship Dry Docking and Common User Facilities.
The results of both are positive.
1. Infantry Weapons
The detailed analysis demonstrates that the infantry weapons PIC is healthy.
- Base-level support can be undertaken by a number of companies, all of whom have significant relevant technical capability; and
- The factory rebuild capability – although confined to a single supplier – is delivering value for money to Defence.
This is because of:
- The relatively steady nature of domestic weapons training;
- The ADF’s ability to stockpile fully functioning weapons and parts; and
- The probability that the tempo of Australia’s military operations will continue in the short to medium term.
The health check concludes that no new forms of intervention are considered necessary to maintain the Infantry Weapons PIC at this time.
Defence will, however, continue provide ongoing advice to government on:
- The cost to Defence for factory rebuild activities;
- The supply of critical skills within the Australian infantry weapons industry and, where necessary, targeting relevant industry skill sets through SADI; and
- The potential importance of projects LAND 159 and LAND 125 Phase 3C to satisfy industry planning and investment activities.
2. Ship Dry Docking and Common User Facilities
The health check into ship dry docking and common user facilities has also found that this industry capability is healthy.
- That Captain Cook Graving Dock at Garden Island in Sydney currently has spare capacity – and can be expected to continue to meet the needs of the Royal Australian Navy fleet, even with the planned changes to the fleet composition outlined in the White Paper; and
- That overall, Australia has enough suitable docks to meet naval needs.
- There are currently two ongoing reviews that have the potential to influence this PIC in the future:
- The Force Posture Review announced in June; and
- The independent review into future non-Defence use of Garden Island announced in June.
Obviously, the recommendations and outcomes of these reviews will be considered in future health checks of this PIC.
While the health check concludes that no new forms of intervention are considered necessary to maintain this PIC at this time Defence will continue provide ongoing advice to Government on:
- The minimum docking capacity required within Australia to support the strategic needs of the ADF in the longer term;
- The appropriateness of moving naval vessels between ports for the conduct of routine repairs;
- The operation of Captain Cook Graving Dock, including the access arrangements for companies engaged in ship repair and maintenance following the expiry of the existing lease in 2013; and
- The supply of critical skills within the Australian ship repair industry and, where necessary, targeting relevant industry skill sets through the SADI program.
The other PIC health checks are still underway and I hope to be able to release them later this year and early next year.
Priority Industry Capability Innovation Program
To help ensure we build and sustain our priority capabilities we have also established the $45 million Priority Industry Capability Innovation Program.
Today I can announce the first $9.2 million in funding will open next month.
Companies can apply for up to $4 million in matched funding for innovative projects that will improve or enhance a Priority Industry Capability.
I expect we will be able to announce the first successful grant recipients in the first quarter of next year.
Defence Engineering Internship Program
I can also announce today another program that will be starting next year – the Defence Engineering Internship Program.
This will allow third year engineering students to complete a twelve-week defence industry placement in an Australian Defence SME as part of the practical component of their studies.
The $1.4 million program will give some of our brightest engineering students exposure to opportunities in the defence industry – hopefully leaving them with a desire to come back into these companies after graduating.
The program will allow for the students to be paid $700 per week – an attractive proposition for any student – while the SME that hosts them will receive $500 for each week they are there.
Applications for the program will open in time for the start of the 2012 academic year– and I expect that between 20 and 25 positions will be made available each year, for the next three years.
ADDRESSING FUTURE SKILLS CHALLENGES
A lot is already happening, but I suspect more is required.
The $150 billion challenge ahead means that we need a fresh look at whether we have the skills to meet it.
Over the next 15 years we will replace and upgrade 85 per cent of ADF equipment.
The amount of work done by Australian industry is expected to increase from $5.5 billion per annum now to $7.5 billion per annum – in today’s dollars – by the end of the decade.
That creates a challenge – the challenge of building the skills and capability to take on, and deliver, the growth in work over the next decade and beyond.
The biggest mountain we will have to climb is the Future Submarine project – potentially the biggest and most complex Defence project ever.
Potentially the biggest and most complex project Australia has ever embarked upon.
A lot of the details of this project are still to be decided, but it will potentially involve hundreds of companies, thousands of workers and a lot of skills that currently do not exist in sufficient numbers in Australia.
While some of those skills are available overseas, others will have to be grown here in Australia.
Meeting this challenge requires us to tackle it from two directions – supply and demand.
Supply side challenge
By supply I mean – what do we need to do to ensure the Defence industry has the skilled workforce it needs as the amount of work increases over the next decade and beyond – the apprentices, the welders, the boilermakers, the avionics engineers, the specialist maritime technicians, the software engineers and systems integrators etc.
Where will the skill shortages emerge and what do we need to do to meet them?
With this in mind I have asked Skills Australia to work with the Defence Industry Skilling Taskforce to map out the range and depth of the skills sets we have, the skills we will need, and how best to build them.
It will report to the Defence Industry Innovation Board mid next year.
Demand side challenge
As I said – I think we need to look at this from two sides – supply and demand.
By demand I mean – what do we need to do to manage the demand or pipeline of work to sustainably grow the skills we need.
As Minister Smith has made clear:
“We run a national security capability policy, not a local industry policy … It is important, very important though, that we understand that an important national security factor is … local industrial capability.”
The risk posed by skills shortages is a real one. It can affect productivity and schedule. It can also affect capability.
Just like you manage your supply chain, this is a risk we need to manage and mitigate.
It’s a lesson learnt from the experience in Williamstown over the past year – where the gap of less than a decade between the last ANZAC Frigate and first AWD blocks led to a loss of skills and productivity.
The gap between the end of the AWD program, the Future Submarine and Future Frigates Projects have the potential to be of a similar size.
It means we may develop a lot of important skills and then lose them and have to rebuild them.
To start addressing this I have asked Defence look at this in this year’s Annual Planning Guidance.
The purpose of this document is to align strategic guidance, capability decisions and resource planning on an annual basis.
One of those resources is the skills embedded in our defence industry.
This report provides an opportunity to look at the future Defence requirements and the things we need to do to ensure they are successfully delivered.
If there is one thing I hope Minister Smith and I have demonstrated this year – it is that we are serious about reform.
The purpose is simple.
We are responsible for a lot of taxpayers’ money – and we have an obligation to ensure it is spent well and our ADF personnel get the equipment they need, when they need it.
An important part of this is making sure we have the skills we need to do the job.
Not all of the military equipment set out in the White Paper and the DCP will be made in Australia.
But a lot of it will be.
And most of it will be sustained here.
That creates a big challenge for all of us – building the skills we need for the future.
How successful we are, will have a big impact on whether taxpayers get value for their money and whether our ADF personnel get the equipment they need, when they need it.
That’s why skills is the next step of our reform plan.