Defence Procurement Statements by Senators

I would like to make a few more comments on submarines and Australia’s future submarine capability. I reiterate, up front, the three points I continually make. First, the submarine must be fit for purpose. It must have the range we need, it must have the combat systems that can integrate with our allies and it must have the Mark 48 ADCAP torpedo for all the reasons we currently maintain that capability in conjunction with the USN. I repeat the fact that, inconvenient as it may be for some pundits, at the moment there is nothing off-the-shelf that meets those requirements. Secondly, we must have the sovereign ability to maintain the submarines here. That is not just changing the oil and tweaking up some loose nuts; it is talking about design assurance and, importantly, in a system like a submarine, which is a safety critical system, it includes the process of certifying it as being safe for service. Having come from an aerospace background—a large part of my work running Australia’s flight test organisation for many years involved certification of aircraft and proving them both fit for purpose and safe for operation—I understand that it is no small task to maintain that sovereign ability. If there is anything we have learned from both the Coles review of the poor availability of our submarines and the Rizzo review of the collapse of Navy’s amphibious capability, it is that we must maintain the sovereign capability to do that design assurance and to manage that whole-of-enterprise logistics and engineering and certification process for the capability. The third element is that the government has a duty to find the lowest risk way but the most economically sensible way to do that.

I would like to discuss why the most economically sensible and lowest risk option for achieving that second point of sovereign capability, the ability to maintain—which means also certification and design assurance—could well be to have a build program here in Australia. Since the treaty of Westphalia, the notion of sovereignty comes down to the ability of a sovereign government to make decisions that are in the best interests of its people. I have often used aerospace as an example. An aerospace superpower, if you like, in terms of their ability to design, to build, to repair, to modify and to certify everything they need, would be a country like the United States. There are a whole raft of other countries including China, Italy, India, Brazil, the UK and France who to a greater or lesser extent build, design and certify aircraft. Then there are the Third World nations who have none of that capacity or competence and essentially are takers of what someone else is prepared to give them or sell them, and they need a lot of support in order to maintain it. In terms of sovereignty, you have quite a spectrum there. Australia has no pretensions of being a superpower in terms of sovereignty of aerospace, but nor do we want to be—and nor, I would argue certainly from a national security perspective, can we afford to be—at the Third World end of that spectrum. That means that we need to have not only training but also opportunities for young graduates, whether they be tradesmen or whether they be engineers, to develop the competence to exercise those design assurance and fabrication-manufacturing skills and to develop the capacity that Australia needs.

Some people have used aerospace as an example to say that you never need to build here—look at the fact that we have bought things like the F35 or the Super Hornet or the C17 through foreign military sales, off-the-shelf from the US; we did not build them and yet we operate them here. They are overlooking not only a number of differences but also a number of false assumptions. I would like to address those as they apply to the issue of submarines. The first false assumption is that what we have now is an aerospace system that is sustainable into the future. My argument, based on a career in this area, is that at the moment our ability to do the design assurance and do the maintenance of the capability from a whole-of-enterprise perspective in aerospace is drawing on the legacy capability Australia has built up under both sides of politics over several decades. At the moment, because of decisions—again, by both sides of politics—to pursue, in order to reduce risk and reduce up-front purchase costs, foreign military sale after foreign military sale after foreign military sale, we are eroding that base. Particularly in an environment where our civil aerospace sector, because of developments in design and reliability, is seeing a great decline in Australian engineering and support manufacturing here in country, our national sovereign ability to maintain aerospace assets is also declining. That ability is not sustainable into the future if we continue just to buy off-the-shelf through FMS or MOTS—military off-the-shelf—sales.

There are a number of examples where we have gone down that path where we have had to, in order first to be cost effective but more importantly to keep equipment online and available, bring back to Australia tasks it was originally conceived could all be done by the host country in terms of repair of parts of engines and avionics and other supplies, and in terms of the ability to do the design assurance around those assets. So, yes, with aerospace at the moment there are some things that are still working but it is drawing down a bank account that we have failed to invest in for a number of years. If we, off the low base that we see coming from Coles and the low base that we see coming from Rizzo, attempt to do the same thing with submarines, which are equally complex—some would argue more complex—than advanced aerospace, for example fighter jets, then we will be in a world of hurt in terms of being a sovereign nation and our ability to determine what we want to do with that capability into the future.

The other large difference is scale. For something like the Joint Strike Fighter or the C17, there are worldwide fleets of almost identical configuration—so you have a number of users, many of whom are happy to cooperate with spiral upgrade programs. There is a body of knowledge which is available, supplemented with what I have said is our residual ability, that we are managing. There are good arguments for that, but we do need to reinvest to keep that sovereign ability going.

One of the differences with submarines is that the fleets are very small. When I visited TKMS in 2012 and spoke to them about some of these issues, they argued cogently that, based on their experience with a range of customers, every fleet—if not indeed almost every individual boat—is different. There are differences in design, in configuration and in modification status. The authority that is operating that boat must have access to all of the design artefacts. They need to understand the certification of components, the status of welds in the boat and what each element represents in terms of a systems engineering approach. That is something, based on the experience we have had in the last decade of aerospace, that you cannot just send off to someone else. As sure as night follows day, the situation will arise where you need to make your own sovereign decisions about repairs, modification or certification due to the host country’s politics, priorities or indeed, resources. As we have seen with our very best ally, the United States, when their priorities are different from ours, their resources go to their needs first, not to ours. We have seen that in the past.

In terms of value for money, one of the best ways to achieve the opportunity to grow the skills of our tradesmen and engineers is to actually do the work. One of the best ways to have a supply chain that is capable of supporting the boats is to do the work. Through the work of people like Professor Goran Roos, we see very well quantified examples of complex defence procurement. Having done the work onshore, the flow-back, the spillover, to the economy means that the net cost to the economy, the net cost to the nation—rather than being $20 billion or $25 billion that we have spent somewhere overseas—is probably in the order of around $3 billion to $4 billion because of the money that comes back into the economy. There are many good documented examples in Sweden, Germany, the UK and the US where that has been proven. Australia needs a submarine that is fit for purpose and it needs the sovereign ability to be able to maintain it. And, contrary to many critics, the most cost-effective way to do that is most likely to do it here.