Referral to the committee
1.1
On 19 September 2019, the Senate referred an inquiry into Australia's sovereign naval shipbuilding capability to the Senate Economics Reference Committee (the committee) for report by 25 June 2020. On 24 February 2020, the Senate granted the committee an extension to report by 3 December 2020.
1.2
On 12 November 2020, the committee agreed to again extend the inquiry until 30 June 2021. This was subsequently extended to 2 December 2021 and this has been extended again until 1 June 2022.
1.3
The Terms of Reference for the inquiry are:
That the following matter be referred to the Economics References Committee for inquiry and report by the last sitting day in June 2020:
Developing and delivering Australia’s sovereign naval shipbuilding capability, with particular reference to:
(a)
oversight and scrutiny of the national shipbuilding plan, to support a continuous build of vessels in Australia;
(b)
progress of the design, management and implementation of naval shipbuilding and submarine defence procurement projects in Australia;
(c)
progress of the Naval Shipbuilding College in building workforce capability, and developing the required skills and infrastructure to design, build, maintain, sustain and upgrade current and future naval fleet;
(d)
ongoing examination of contracts and scrutiny of expenditure;
(e)
the implementation of Australian Industry Capability Plans;
(f)
the utilisation of local content and supply chains;
(g)
the transfer of intellectual property and skills to Australian firms and workers;
(h)
the prospect of imminent job losses and redundancies;
(i)
opportunities and multiplier effects to local jobs and the economy; and
Conduct of the inquiry
1.4
Details of the inquiry were placed on the committee's website. The committee also contacted a number of relevant individuals and organisations to notify them of the inquiry and invite submissions. All submissions received are listed at Appendix 1.
1.5
As at the date of tabling, the committee has received a total of 38 submissions and has conducted seven public hearings in Canberra:
1.6
Participants at those public hearings are listed at Appendix 2.
1.7
References to Hansard in footnotes and other places refer to the Proof versions and may be different to the final Official versions.
Interim Report – May 2021
1.8
In May 2021, the committee published an Interim Report: Future Submarine Program: Ringing of Bells, Wringing of Hands. The committee felt compelled to do so for two reasons:
the status of the Future Submarine Program (FSP) was causing deep concern not just within the committee but within the defence and security policy community generally; and
the increasingly concerning recalcitrance of the Department of Defence to provide requested information on the projects included in the Naval Shipbuilding Program.
1.9
The committee concluded that it was abundantly clear that all is not well with the FSP. There had been little good news since the April 2016 announcement that Direction des Constructions Navales (DCNS) (now Naval Group) had been selected as the international partner to design and build the nation’s new fleet of submarines. Since then, there had been nothing but delays, cost blow-outs, changes of personnel driven by dissatisfaction with the program’s outcomes, secret agreements on local industry content way below the level initially promised, and a strained relationship between Defence and Naval Group.
1.10
Moreover, the fact that after five years and (the then) $1.7 billion of expenditure, a 'Plan B' with a possible boat from a Swedish supplier was seriously under consideration was an alarm bell that showed the project had run into serious problems.
1.11
In terms of Defence's performance, there was significant evidence that Defence was not as responsive as it should be and, on more than one occasion, it had been observed that the Department had deliberately provided misleading answers to legitimate questions. The committee had been frustrated in its goals by a recalcitrant Department in conjunction with its Minister so much so that a Matter of Privilege was raised with the Senate through its President.
1.12
It also appeared to the committee that the Department was misusing legitimate grounds for withholding information—such as national security considerations—to hide information that is politically embarrassing or information that, on the face of it, demonstrated incompetency and/or inefficiency. In the process, the committee felt that the Department was impeding the work of this committee and others in discharging our duty to the Australian people.
1.13
The committee concluded that this is not acceptable, and cultural change is needed in the Department of Defence’s accountability practices and its approach to its democratic responsibilities.
1.14
Accordingly, as part of the Interim Report, the committee made the following four recommendations:
Recommendation 1
The Commonwealth Government and the Department of Defence report to the Parliament on what discussions were or are being undertaken with Saab/Kockums, or any other alternative submarine builder, about the provision of a Collins-class derivative boat, or any other design, as part of a 'Plan B' should the Naval Group agreement be cancelled.
Recommendation 2
That the Department of Defence provide the Senate Economics References Committee, on a confidential basis, an un-redacted version of the renegotiated Strategic Partnership Agreement with Naval Group for scrutiny.
Recommendation 3
With the aim of increasing its staff’s awareness of their democratic responsibilities:
the Department of Defence re-examine its induction and training programs and corporate culture regarding its role as a department answerable to the Australian people through the processes of the Australian Parliament; and
report back to the Parliament on the progress it making on those induction and training programs.
Recommendation 4
That the Department of Defence provides to the committee in un-redacted form all the documents requested under the Senate's Order of Production of Documents (General Business Motion, No. 786).
1.15
As of Wednesday, 23 February 2022, the committee had yet to receive a response from the government to these four recommendations.
This Second Interim Report
1.16
As it turns out, the first Interim Report was a remarkably prescient document: the Naval Group agreement was in serious trouble, and even more so than the committee realised. Although it was at the time believed that the political cost of the cancelling the Attack-class would be too high, the government has decided to make that decision and accept that risk.
1.17
Moreover, the commentary on the proposed nuclear boats and their strategic ramifications has glossed over the abject failure of the government's decision making processes regarding the Attack-class.
1.18
This report should be read in conjunction with the first Interim Report—particularly with regard to Defence accountability and transparency. It consists of three chapters: this introductory chapter; a second examining the AUKUS announcement and the cancellation of the agreement with Naval Group to build the Attack-class boats with the third providing an update on Defence accountability and transparency.
1.19
The committee notes the bi-partisan support for the AUKUS agreement and the procurement of nuclear submarines. Notwithstanding that bi-partisanship, the committee can only conclude that Australia's submarine acquisition program to replace the Collins-class is a shambles.
War and Peace was shorter…
1.20
Thirteen years after identifying the need for and expanded fleet of 12 submarines, and almost six years after a flawed Competitive Evaluation Process (CEP) and the announcement of the agreement with Naval Group to provide Australia with those submarines, there is not a single new boat in the water and now not even a contract to produce the necessary new submarines. Moreover, almost six years have been wasted and $2.4 billion taxpayer dollars squandered on boats that will now never be delivered.
1.21
The AUKUS announcement has raised more questions that it has answered; not least of which is how boats that are scheduled to arrive in 16 years' time are a suitable response to the changes in Australia's current strategic environment and how will a capability gap be avoided given the age of the current Collins-class submarines? The lack of substance in Prime Minister Morrison's announcement of 16 September 2021 is matched only by the lack of thought behind it.
1.22
Such egregious mismanagement of a Defence procurement program and the radical shift in the Australian Defence Force's posture needs further and thorough examination.
Senator Alex Gallacher
1.23
This inquiry was referred to the committee by Senator Alex Gallacher, ALP Senator for South Australia. The committee notes with tremendous sadness that Senator Gallacher passed away on Sunday, 29 August 2021, after an 18 month battle with cancer. The committee would like to acknowledge the long-standing and extraordinary service of Senator Gallacher to the Australian Senate and the Australian people, and also express our deepest condolences to his family and friends.