OPINION - DEFENCE INDUSTRY DESERVES BETTER FROM SUBMARINE PROJECT

By Matt Keogh MP

05 August 2020

COVID-19 has caused Governments at all levels to look at how we can better support Australian jobs to rebuild our economy. As one of the most significant spends in the annual budget, Defence - especially Defence Industry - provides an opportunity to not only enhance our international trade offering but to secure sustainable Australian manufacturing and Australian jobs for the long term.
 
As Labor Defence spokesperson Richard Marles noted at the National Press Club yesterday, the Future Submarine project is the single most expensive item that the Commonwealth of Australia has ever purchased in any context since Federation.
 
So, you might expect that the Australian Government would be doing everything it can to support Australian businesses to win defence contracts for such major projects.
 
Instead, the Morrison Government is relying on “best endeavour” undertakings in unenforceable plans to “maximise” the use of Australian Industry Capability.
 
Any Australian defence contractor or lawyer will tell you – and I was one – that only relying on “best endeavours” isn’t worth the paper it’s written on! The Defence prime contractors will naturally prioritise their pre-existing supply chains (usually foreign) over local businesses, because they perceive the investment in Australian industry as risky.
 
As a consequence, the value of work being given to Australian defence industry businesses is decreasing.
 
The Morrison Government’s failure to support Australian defence industry and grow sovereign capability is most evident in its botched handling of the Future Submarines project.
 
Our highly capable, but ageing, Collins class submarine fleet needed to be replaced before the end of this decade. Plans for this were quashed by the Abbott Government in 2013. Then leadership tensions in 2015 saw, plans for new submarines resurface - for political rather than national security reasons. By year’s end, the Government called for overseas designed and built options, demonstrating a complete lack of faith in our Australian manufacturers.
 
With an election nearing, in 2016 the Government announced these submarines would be built in Adelaide… by the French shipbuilder Naval Group.
 
The designer and builder of the largest purchase in our national history was selected before a design had even been agreed: a negligent move that compromised the management of the whole project.
The critical policy failure in these major defence projects is the lack of any clear, measurable and enforceable Australian industry capability requirements being imposed on prime defence contractors by Defence, which are also regularly audited.
 
This failure has seen the Government’s headline grabbing statements on Australian industry involvement in on our future submarines fall from a 90% local build in 2017 to only 60% of the spend happening in Australia, which isn’t guaranteed in any contract at this stage. Remarkably, the cost of the Future Submarines has also increased from $50 billion to $90 billion.
 
Government needs to work to ensure Australian businesses that have the capability to get into the defence supply chain can do so, and support the development of long-term Australian sovereign capability. This means helping businesses with the right skills and experience jump through the hoops that are the defence procurement process.
 
The Morrison Government must also ensure that we have the skilled workforce necessary to support this work. We need a more significant, targeted investment in training and upskilling to establish a sustainable workforce.
 
After five Defence Ministers over the last seven years of this Liberal Government, the importance of a sovereign defence industry developed by previous Labor governments has been lost. The Morrison Government has used defence industry as a convenient headline grabber after causing the loss of car manufacturing to Australia, especially in Adelaide. Facilitating contract to contract recruitment rather than supporting the development of a critical strategic industry for Australia has also contributed to our nation’s skills crisis.
 
We have a chance now to develop the sovereign capability that will not only better protect our country in these uncertain times, but will also facilitate much-needed economic development when businesses need it most. If the Morrison Government would invest its time and effort into more than just headline-grabbing media releases and start engaging with industry and experts to make positive change, it might recognise this opportunity that’s right in front of them.
 
This opinion piece was first published in The West Australian Newspaper on Wednesday, 5 August.