Dissenting Report by Deputy Chair,
Senator Sean Edwards
It is disappointing that I have to table this Dissenting Report on such
an important national issue. However the Executive Summary to this report has
rewritten history or in this case the evidence we heard at the full day hearing
on 21 July 2014 in Canberra. The first and credible draft of this Executive
Summary bares no resemblance to what is now tabled. This report denies a number
of issues including:
That the Australian Manufacturing Workers' Union agrees that
Labor's failure to address the approaching capability gap has caused this
It would take over two-years and $200 million to upgrade
infrastructure if we chose to build the ships in Australia; and
If a hybrid build was undertaken it would require significant
re-engineering of production methods, upskilling, infrastructure upgrades and
likely further overspends.
Much evidence was taken on the Air Warfare Destroyer (AWD) construction
program during the inquiry yet this report makes scant reference to specific
issues which have led to blowouts in build times and costs, as well as the
positive fact that cost and build times will likely decrease the more of these
ships Australia constructs.
The inquiry was charged with reviewing the tender process for the Royal
Australian Navy's new supply ships as its first order of business.
I do not agree with 3 of the 4 the recommendations in this report and
will address the central areas where I consider that the recommendations cannot
be supported in their current form.
I recognise that the Coalition Government is developing a defence
strategy for a way forward to deal with a range of unresolved structural and
systemic issues that have remained unaddressed for too long. The Government is
again forced to address Labor's economic failures.
The Government has also agreed to and committed $78.2m to bring forward
preliminary design work to ensure Australia maintains the necessary
to retain the option of building the future frigate in Australia. In parallel,
the Government is reviewing Australia's shipbuilding requirements, capabilities
and capacities in order to inform a long-term strategic naval plan that
provides the ADF with leading-edge capabilities and Australian taxpayers with
value for money.
The Government has brought forward an open competition with Australian
industry to construct more than 20 replacement Pacific Patrol Boats. This
important project will boost the maritime security and resource and fishery
protection capabilities of partner countries in the South West Pacific and
generate additional work for yards around Australia.
Australia needs these replenishment ships urgently, they are a vital
part of our Navy that can support the operations of our fleet and we face a
capability gap if we do not act now.
The replenishment ships are so big (26,000 tonnes) that no Australian
shipyard has the capacity to build them without substantial funding for new
infrastructure. Current shipyards are struggling to build ships a third of
The unquantifiable information in the report around 'some future
investment' to upgrade local major shipyards, including 'long-term' benefits
are very vague.
Yet the Defence Materiel Organisation CEO Mr Warren King estimated at the
inquiry hearing it would cost around $200 million. The economies of scale
cannot be expected with the two-off build of replenishment ships.
I note that the report acknowledges the urgent need to purchase the
replacement replenishment ships to avoid a capability gap and to stem the
continuing costs of maintaining an ageing vessel. However, the report fails to
address the main reason for this urgency. Namely, the fundamental failure of
the previous government to act on this two years ago. The Australian
Manufacturing Workers' Union (AMWU) accepts that performance on construction of
the three destroyers is a problem and has caused schedule delays and cost
overruns. The AMWU quotes 'The project to replace Success should have been
approved and announced many years ago'. Yet this evidence is not
highlighted in the report.
There is no getting around the fact that the previous government's
to defer spending on naval capability over a number of years has put Australia
in the position we now face.
I do not believe that sufficient weight has been given to the compelling
evidence provided to this inquiry on the importance of continuity and economies
of scale for a healthy and viable Australian shipbuilding industry.
I acknowledge the Government's agreement and support for much of the
evidence, analysis and conclusions in the Draft Report – in particular, the
discussions on the importance of productivity issues for naval shipbuilding and
the strong track record of overseas shipbuilders in producing large tanker-like
vessels cost-effectively and without delays.
General Recommendations surrounding
the tender process for the Royal Australian Navy's (RAN) new supply ships
I do not support Recommendation 1
This calls for the tender process for the two replacement replenishment
ships to be an open tender to allow all companies, including Australian
to compete in the process. If the Government went to open tender on the supply
ships, Australian shipbuilders could never be successful due to capacity, costs
and schedule, yet it must be conceded that it would have cost them substantial
amounts of money
to take part in the tender process which would exceed millions of dollars with
little chance of success.
I do not support Recommendation 2
This will prevent the Government from investing $78.2 million to provide
the option for an Australian Frigate build with an Australian Radar and an
Australian designed combat system. This would also prevent the Government from
going to tender to Australian Companies for the Pacific Patrol Boat.
This may have led to the current AWD being built OS.
I do support Recommendation 3
This should represent all Australian’s aspirations.
I do not support Recommendation 4
This report is commercial-in-confidence and is industry sensitive.
Governments of all persuasions over the years have dealt with these types of
issues similarly and credibly.
The Coalition Government is committed to a viable 'value for money'
local shipbuilding industry but this cannot start with a two 26,000 tonne
replenishment vessels when the current yards are finding it a challenge to
build warships a third of that size.
To do otherwise would be simply economically reckless and irresponsible.
Senator Sean Edwards
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