Joint Press Conference with Minister for Defence Stephen Smith, Adelaide



DATE: 29 June 2011

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.