David Watt, Foreign
Affairs, Defence and Security
The 2016 Defence White Paper set out a substantial expansion of Australian defence capability. This will require consistency in funding and timeliness in the decision-making and implementation processes. A cohesive relationship between the Department of Defence and defence industry will also be crucial to ensure that projects are appropriately managed.
Defence White Paper (DWP) set out the Turnbull Government’s commitment
to the acquisition of a wide range of defence capability. This includes an
ambitious naval shipbuilding program with 12 new submarines, nine Future Frigates
and 12 offshore patrol vessels. The maritime focus will be deepened with the
acquisition of fifteen P-8A Poseidon surveillance aircraft and seven MQ-4C
Triton unmanned surveillance aircraft. The maritime capabilities will join the
purchase of seventy-two F-35A Joint Strike Fighters and the LAND 400 Program
delivering new vehicles for the Australian Army.
In fact, the Integrated Investment Program
(IIP), released in February 2016 alongside the white paper, lists 200 ‘key
investment decisions’. Of these, 35 had been approved by the Government at the
time of publication with a further four approved by the end of the 2015–16 financial
The ability of Defence to deliver this ambitious
program will be reliant on three key factors: funding, process and skills.
The first is money. The 2016 DWP promised additional funding of $29.9 billion in funding for Defence across
ten years to 2025 and linked this to a total expenditure of $195 billion
in defence capability across the same period.
There are two potential problems with this
largesse. The first is that historically Defence has sometimes found it
difficult to effectively spend substantial increases in funding. The Australian
Strategic Policy Institute’s Mark Thomson has pointed
out that in the eight years after the 2000 DWP, more than $8.4 billion
of capital expenditure was deferred. Similarly, between the 2009 and 2013 DWPs,
over $10 billion of expenditure was deferred.
The second problem is that the spending commitments
of DWPs have, at best, a mixed record of fulfilment. DWPs
were published in 1976, 1987, 1994, 2000, 2009 and 2013
and 2016 and of these, only the 2000 version could claim to have fully
implemented its planned expenditure. However, the 2000 DWP notably coincided
with a period of sustained economic growth, which substantially aided the Government’s
ability to deliver appropriate funding.
Other Australian governments have not always been so
fortunate. In the late 1980s poor economic conditions led to the Hawke
Government not meeting its funding commitments to defence and instead seeking
to fund capability via internal savings from within the Defence. Similarly,
the Global Financial Crisis (GFC) coincided with the 2009 DWP, making it difficult
for the Rudd Government to live up to its substantial funding commitments. Conversely,
the Government’s response to the GFC led to restraint in defence funding and
the search for savings via efficiencies within defence itself.
A further potential impediment to the fulfilment of
the DWP program is the timeliness of decision-making by the Government.
The First Principles Review of Defence criticised
project approval processes for being lengthy and expensive. The Review stated
that the ‘the average government submission is 70 pages long and takes 16 weeks
to move through the Cabinet preparation process and an average of 46 months to
progress from first pass initiation through to second pass approval’. The
Review recommended a revised process which simplified some aspects of the
decision-making process, albeit introducing a new ‘Gate Zero’ entry point (the point in the approval process where a concept is given initial approval
to progress for potential consideration at first pass). It also
recommended an increase (to $250 million) in the level at which Cabinet
consideration is required. The Government agreed to 75 out of 76 of the Review’s
recommendations (albeit accepting only in principle the raising of the
threshold for Cabinet consideration).
The 2016–17 Defence
Portfolio Budget Statement lists 33
Unapproved Capital Projects for first or second pass approval during the year.
There are a further 11 in the IIP which were expected to be decided during 2015–16
but do not appear to have been.
Defence annual reports for the last
ten years list 208 first and second pass approvals which would suggest that the
Government might struggle to process the number of projects mentioned above. Not
all projects are of equal importance and, presumably, high priority will be
given to the naval shipbuilding program first announced
during August 2015. This brought forward the production of the Future Frigate
(to 2020) and the Offshore Patrol Vessels (starting in 2018).
The IIP does not provide assistance in judging progress on project
delivery because it contains timeframes which appear to reflect the expected
life of a project, but does not contain information about milestones within
those timeframes. In addition, Defence has had to implement the changes to
process while also making a variety of internal structural changes recommended
by the Review.
Much of the white paper capability will be imported from overseas
but there is also a growing emphasis on local industry. The capacity of
Australian defence industry to deliver on time and on budget is an important
aspect to this. This is particularly true of the shipbuilding industry where overlapping programs
will place strain on Australian shipyards and the flow of skills necessary to
staff them. In the Industry Policy Statement which came with the white
paper, the Government sets out its approach to Defence industry and has promised $1.6 billion in funding to ‘build
industry skills’ and lift Australian industry competitiveness.
M Thomson, ‘Funding and delivering the 2016 Defence White Paper’, Security Challenges, 12(1), 2016.
A Davies et al., One Defence: one direction: the First Principles Review of Defence,
Australian Strategic Policy Institute, 2016.
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