Chapter 4
Maintaining and rebuilding capability
Introduction
4.1
Chapter 4 will cover the remaining terms of reference of the inquiry. In
particular, it will consider issues raised relating to:
-
recruiting, remuneration, retention and retirement issues;
-
training and development;
-
links with industry, academia and other public research agencies;
and
-
outsourcing and contractors.
Recruitment
4.2
Defence stated that it 'continues to place a priority on attracting a
highly skilled PSE workforce'. It noted that Defence continues to have a high
ratio of applicants to advertised positions:[1]
Defence remains an attractive PSE employer. Eighty
Engineering and Technical job family positions advertised between August 2013
and August 2015 attracted 770 applicants. Similarly, 11 Science and Technology
job family positions attracted 178 applications. Interest in Defence PSE
positions extends to those entering the jobs market. The Department's
engineering-related graduate program received 623 applications for 43
placements in 2015 and 624 applications for 48 placements in 2016. A
recruitment campaign targeting Science and Technology PhD graduates attracted
148 applications for 10 positions. The number of applicants is significant
given the degree of specialisation Defence sought for each of the positions
advertised.[2]
Restrictions on recruitment
4.3
The APS 'recruitment freeze' was identified as having a significant
impact on Defence's PSE workforce. However, Ms Skinner from Defence
characterised it as a 'restrain in recruitment' rather than a recruitment
freeze. She noted that Defence had continued to recruit in areas important to
capability and safety and that 'where there has been any requests for technical
workforce that are critical to capability, they have always occurred'.[3]
4.4
Nonetheless, the consequences of restrictions on recruitment were
highlighted in evidence. For example, Mr Efthymiou from Professionals Australia
stated:
What I have seen over the last 18 months is that an effective
staff freeze, because we have not been able to recruit or promote, has a larger
effect. The staff freeze that we have had for 18 months was preceded by a
previous one in 2011. I am an EL1 with 11 staff and five direct reports. I have
had three people leave in the last four months. I have not been able to recruit
because I have not been able to advertise...I am replacing experienced staff with
staff from a graduate scheme with 18 months of experience. At some point, that
has to have an effect. Logic would dictate that we are introducing risk.[4]
4.5
Similarly, Mr Alan Gray and Mr Martin Callinan described the freeze on
recruiting graduates that has been in place across Defence for the last several
years as 'adding to the difficulties' for DSTG. While they acknowledged that
DSTG was 'planning to recruit 20-25 new graduates in 2015-16', they considered
this would not cover 'the losses that have occurred within the PSE community
over the last several years'.[5]
4.6
Others argued that recruitment restrictions within Defence were
increasingly transferring administrative and unrelated other duties onto the
Defence PSE workforce. One submitter, who requested to be anonymous, described
the focus of technical jobs moving from being less about 'the knowledge to
investigate, develop and keep up with the latest technology available, and how
to integrate it in support of the ADF' and more about 'ensuring we keep to the
travel/training budget':
These [tasks] include booking your own accommodation and
travel arrangements when on course, and trials when support tasking at the
various facilities around Australia. Procurement of plant, spares and even
contractors. There is a high level of Defence Instructions, complex fiscal
instructions and governance with these types of transactions.[6]
Professionalisation
4.7
The AMWU criticised Defence for preoccupation with 'so-called
professionalisation' in its PSE workforce approach. This was seen as adversely
affecting technical staff recruitment. For example, Mr Hunter stated he had
seen 'technical positions lost to "professional" recruits because of the
"more bang for bucks" outlook on worker value and the desire to move
away from costly hardware facilities toward lower cost software oriented
activities'.[7]
However, there were also reports that there had been a progressive downgrading
of some Defence PSE positions to allow staff without specialist skills to be
recruited. Mr Keenan stated:
Most positions that
were dedicated PSE, have been eroded over time because of the inability of
management to attract qualified personnel. The protocol that appeared to have
been adopted at that time, was to re-write the duty statements into a more
generalised nature so that where PSE positions could not be filled, non PSE
personnel could apply and successfully fill these positions to maintain Full
Time Equivalent (FTE) numbers within the departments.[8]
4.8
There also appeared to be difficulties in recruiting particular
specialist Defence PSE positions. For example, Mr Leggatt stated:
[T]his struggle to retain or employ skilled staff for a
specific capability has been demonstrated by the need to conduct a recruitment
action for a radiographer 4 times before a suitable candidate was recruited.
The candidate that was ultimately selected was selected on the full
understanding that they would require training as they, while being the best
applicant, were unqualified in industrial radiography.[9]
The broader PSE workforce
4.9
The capacity of Defence to draw employees from a vibrant and active broader
PSE sector in Australia was perceived as an important recruitment issue. For
example, the Australian Academy of Science (AAS) highlighted the broader challenges
in Australia of maintaining a workforce with expertise in science, technology,
engineering and mathematics (STEM). It noted that the number of STEM-qualified
graduates has declined from 22 per cent of total graduates in 2002 to 16 per
cent in 2012. It stated:
There are particular challenges for defence science.
Currently, workers in Australian defence science are predominantly employed by
DSTG. Not only do employees of DSTG need to be capable scientists and
engineers, but they must also be Australian citizens and able to obtain a
relatively high-level security clearance—usually top-secret negative vetting or
higher. These requirements considerably restrict the available talent pool.[10]
4.10
The workforce challenges in relation to the PSE workforce were not seen
as unique to Defence. For example, the Department of Industry, Innovation and
Science (DIIS) highlighted that employees qualified in science, technology,
engineering and mathematics (STEM) 'are highly valued employees in a number of
diverse workplaces and, given the exponential growth in and demand for
technology and innovation, will only remain so'.[11]
DIIS outlined an 'increasing need for STEM qualified people will be an issue
that will need to be managed across the economy, not just in the Defence sector'.[12]
4.11
The DIIS characterised the ability of Defence to have relevant PSE
capabilities to meet future technological needs as largely dependent 'on the
transferability of skills across the sector and between sectors':
Recent workforce statistics for Australia highlight that
Defence is not the primary workplace for PSE employees. Rather, employment in
PSE occupations is concentrated in five industries: manufacturing (15.9 per
cent of employees); professional scientific and technical services (12.8 per
cent of employees); electricity, gas, water and waste services (15.3 per cent
of employees); construction (7.6 per cent of employees); and mining (31.7
percent of employees). These statistics highlight the importance of
transferability of skillsets between Defence and other industries.[13]
4.12
The AAS observed that while the science sector as a whole has
significant problems regarding gender equity, the defence science sector appears
to have exceptionally low levels of employment of women scientists. It noted
that 'women make up only 20 per cent of the DSTG workforce'. The AAS argued
that, if the gender imbalance in the science workforce was addressed, employers
such as DSTG will have access to a larger pool of high-quality scientists from
which to recruit.[14]
4.13
Defence made the point that following the resources boom the labour
market has eased with 'softer employment conditions and reduced employment
growth in the mining, construction and utilities industries alleviating
shortages in most related occupations'. It stated:
While shortages remain in a limited number of related trade
and technician occupations, they are likely to ease in the short term.
Employment projections suggest demand for the engineering and related
technologies qualified population will remain subdued over the next decade,
though growth will continue above trend for some advanced engineering and
related technologies skills and in information technology related occupations.[15]
Remuneration and retention
4.14
Remuneration and retention issues for the Defence PSE workforce were frequently
highlighted. Several submitters noted the comparatively low pay offered by the
APS in comparison to the private sector or the ADF. For example, Mr Christensen
stated:
The state of payment to APS technical staff within the
Department of Defence (DoD) has fallen so far behind their military
counterparts that staying in the APS DoD is fast becoming an extremely poor
choice of employment.[16]
4.15
Dr Davies highlighted this issue in his evidence to the committee:
Defence simply has to find a way to engage top quality
engineers. One problem, seemingly intractable, is the public service salary
levels. The relatively low pay for engineers in Defence has meant that the flow
between the public and private sectors has been pretty much one way. Defence's
best engineers get better job offers from elsewhere. Surely it is not beyond
the wit of man to find a way to pay salaries commensurate with market value.
Solving the problem, especially if coupled with the ability to offer contracts
over a few years, might make a spell in government an attractive CV addition
for top quality engineers looking to move up into senior management positions
in the private sector.[17]
4.16
PSE workers currently employed in Defence expressed frustration with the
offers to Defence employees as part of the enterprise agreement bargaining
process.[18]
The Defence Enterprise Collective Agreement (DECA) expired in June 2014 and
negotiations for a new agreement under the government's workplace bargaining
policy have not concluded. A submission from person who asked for their name to
be withheld stated:
I get really frustrated when as a group, we get numerous
amounts of praise for being able, to investigate, improve or modify the vast
range of ordinance that is required to support the ADF both here and abroad.
But then get informed that we have no integrity when refusing to accept the
current miniscule pay increase, along with the substantial reduction in
conditions on offer by Defence in the latest DECA negotiations.[19]
4.17
Defence observed that 'retention rates for the engineering and
technical, and science and technology, workforce exceed the Defence APS average'.[20]
However, Defence acknowledged that 'there is scope to further optimise the
existing employment framework, including options for flexible work and where
necessary, Building Defence Capability Payments, so Defence best caters for and
supports its diverse PSE workforce'.[21]
Defence observed that it had a range of options to attract and retain employees
with specialist skills:
For example, broadbands allow for two or more adjacent
classifications to be combined into a single, broader classification that
allows employees to progressively undertake duties of a higher work value as
the employee builds knowledge, skills and experience. To be competitive with
market changes in remuneration, the option for management to initiate a
Building Defence Capability Payment (BDCP) is available for an individual
employee, or for a group of employees in an occupational discipline that is
critical to Defence capability.[22]
4.18
However, some of the methods used to retain Defence PSE staff were seen
as having unintended consequences. For example, a submitter noted:
Inability to attract and retain engineering workforce
expertise due to major deficiencies in salary. Therefore, many APS engineers
are acting in higher level roles (mostly at EL1/EL2 levels) which is then
misrepresenting the managerial numbers across the organisation leading to the
recent voluntary redundancies (VRs) offers to cull them back.[23]
4.19
It was also highlighted the Defence PSE workforce was not only motivated
by monetary considerations. For example, Mr Callinan and Mr Gray noted:
While wage disparities between the private and public sectors
has government scientists, engineers and technologists at a disadvantage, the
opportunity to work at the cutting edge of Australia's defence has innate
appeal. However, national interest must be combined with cutting edge. Science
and Engineering professionals are motivated by discovery and design.[24]
Career paths
4.20
The lack of clear career paths was seen as a major disincentive to both recruitment
and retention of PSE specialists. For example, Mr Jonathan Laird stated:
APS technical career progression does not exist. Period. We
badly need technical broadband positions to allow staff to naturally develop
and be compensated accordingly. We need additional technical specialist
employment streams to be raised (not extinguished).[25]
4.21
Mr Garry Duck, a senior engineer with 29 years of experience,
articulated a common view in relation to the retention of engineers in Defence:
There is no difficulty in attracting inexperienced Graduate
engineers (APS4-5).
There is no difficulty retaining these Graduates for the 3
years or so to develop them into productive and valuable Junior PSE
Practitioners (APS6).
Unless there are available APS6 positions it is difficult to
retain Engineers past 3 years.
Unless there is a clearly available EL1 opportunity it is
difficult to retain Engineers past 5 years.
It is next to impossible to attract highly skilled EL1 and
EL2 engineers due to the poor pay rate compared to Industry.
Retention of the EL1 and EL2 PSE workforce is largely
influenced by work – life balance considerations and the falling morale level
of the remaining senior engineers.[26]
4.22
Dr Klovdahl noted that 'subject matter experts' were frequently unable
to progress beyond APS6 without transferring to a management stream. To resolve
this situation he advocated that the career paths for talented 'technical
experts' with high levels of education and experience should reach to include
Senior Executive Service levels.[27]
4.23
The absence of sufficient opportunities for professional development was
also highlighted as a problem for the retention of PSE workers. Dr Davies
stated:
Defence does not actually do much engineering in the sense
that practitioners of the art would recognise. Instead, it is a customer for
engineering expert advice rather than having engineers design and build stuff,
which is what they really like to do. That makes it hard for Defence to retain
really good engineers...
Building Defence Capability Payments
(BDCPs)
4.24
Building Defence Capability Payments are aimed at assisting Defence to
develop, attract and retain employees with the required skills, knowledge and
experience which are essential to meet Defence capability. However, the AWMU considered
that BDCPs had not had widespread application. Mr Nicholaides stated:
The anecdotes that come back to us are that it is very
difficult bureaucratically to get authorisation for it. It is quite a lengthy
period and there are blockages in the system, because you are actually paying
more money and things are tight.[28]
4.25
Mr Grimm also described access to the BCDP as inconsistent 'even for
staff with the same sets of skills'. Further, he became aware that 'the
additional salary paid for the BDCP for some staff had to be offset by a
reduction in number of APS positions'.[29]
Retirement and redundancy
4.26
A common view was that a large portion of Defence's PSE workforce was
approaching retirement age. Mr Alan Gray and Mr Martin Callinan stated:
DSTG is in a difficult position as a significant cadre of
scientists and engineers recruited in the 1980s and 1990s is reaching
retirement age...Indications are that PSE personnel with 20, 30 or 40 years
experience have taken advantage of redundancy packages on offer to leave the
DSTG workforce.[30]
4.27
Succession planning by Defence was considered insufficient. RINA noted
that 'the current environment means that even where staff are replaced, absence
of career or succession planning means that there are now more limited
opportunities for one generation to pass on their experience and "lessons
learnt" to the next generation'.[31]
4.28
The point was repeatedly made that once capability within the Defence
PSE workforce is lost can be difficult to replace or rebuild. For example, Mr
Keenan commented:
A critical role a skilled Defence PSE workforce with [reliability,
availability and maintainability] training, can deliver is enhancement of
through life support for existing and future platforms, in a very cost effective
manner. The loss of this important capability may in the short term appear to
be a cost saving however, the long term aspect is that once a capability like
the PSE is lost, the ability to retrain and rebuild the skills and knowledge
can take many years.[32]
4.29
Defence outlined that it had implemented a transition-to-retirement
program which 'facilitates the retention of critical knowledge by Defence of
retiring staff':
62 staff are participating, or have participated, in the
transition to retirement initiative. 58 individuals have exited, 24 have
completed a 12 month Senior Fellowship and there are 11 current Senior Fellows.[33]
4.30
On 15 November 2015, it was reported that Defence was cutting middle
manager numbers by accepting 565 applications for voluntary redundancy. In
particular, the executive level workforce was reported to be reduced by 10 per
cent as the Defence bureaucracy addressed 'span of control' issues by
increasing the number of employees under each of its managers:
The breakdown of
voluntary redundancies from Defence include 214 from the [CASG], 42 from the
[DSTG], 29 from the vice-chief of the defence force group, 19 from the air
force and five from the navy.
Among those taking
redundancies are 60 project managers, 55 engineers, 34 scientists and 40
information technology professionals.[34]
4.31
Witnesses told the committee that the redundancies in Defence were
taking away personnel in critical areas of capability development such as
submarines and the Joint Strike Fighter.[35]
Mr Smith from Professionals Australia considered it was 'almost mind boggling'
that Defence was undermining its internal expertise for projects critical to
Australia's ongoing defence capability with 'a significant cost to the taxpayer'.
As an example, he noted that 'there are at best...three APS civilian engineers
with senior expertise in submarine naval architecture':
SEA 1000 has one senior naval architect from the APS in an
organisation that is generally full of contractors. The Collins class
sustainment also has one senior naval architect. Both of those senior naval
architects have been offered redundancy in a very recent round of executive
level redundancies...
We are going from a position where, 10 years ago, we had
probably about 95 years worth of experience in naval architecture. We had still
not a big group in submarines. There was probably about eight to 10. Five years
ago, we had about four or five. If both of these senior engineers take
redundancy, we will have no experience and we will have no internal expertise.[36]
4.32
Ms Skinner from Defence highlighted that the separation rates, which
measure the percentage of employees who left the organisation, were lower for CASG
and DSTG than the average for Defence.[37]
In relation to Defence's redundancy program she stated:
[S]uccessive governments have been concerned about the size
of the middle management—that was again raised in the first principles
review—and enhancing spans of control and things like that. We have focused our
voluntary redundancy program on those levels, but it is primarily focused on
what we would call the enabling functions—so not primarily focused on our
technical workforce. However, we do consider people in that category where
there might not be organisational fit and where they do not meet organisational
requirements. So people were invited to express an interest in a voluntary
redundancy. We very carefully went through each individual request. There were
around 1,100 requests, and we made around 575 offers. But we kept regard to our
critical occupations. We kept regard to people's organisational fit.[38]
4.33
However, others such as Mr Bussell from Professionals Australia
described the devastating impact on the organisational culture of DSTG of
recent changes to the workforce:
I have been a member for 34 years. I have never seen the
staff in such a state of disillusionment. Our morale is low and decreasing. The
confidence we have in our senior management team is decreasing. The trust we
have in our senior management team is decreasing. The only thing that is
increasing is the number of people that want to leave the organisation. For an
organisation that has an historical exit rate, a separation rate, of five per
cent, it is now sitting at something like 27 per cent.[39]
Training and development
4.34
An identified problem for Defence engineers was the limited
opportunities to undertake practical and on-hands work to develop their
expertise. For example, Dr Davies argued that there was a risk that the
relatively long-term nature of employment in Defence could mean that parts of
the PSE workforce have failed to maintain up-to-date skills and expertise. He
argued that Defence needed to make 'a spell in government attractive for an
engineer who has extensive experience—probably gained in the private sector,
where they get to design and build stuff, but they then go and work for
government for a while to bring that expertise into being a smart buyer'.[40]
4.35
In relation to engineering, Dr Davies noted that Defence had outsourced
many parts of its engineering requirement to private sector contractors. In
practice, Defence engineers spend little of their time engaged in exploratory
or research work and instead are helping Defence be a 'smart buyer' of goods
and services from the private sector. Dr Davies identified this as a challenge:
Defence needs experienced and skilled engineers to be a smart
buyer, but doesn't offer the same professional opportunities. In effect, Defence
engineers have to second guess the work of their private sector counterparts in
areas that they have little ongoing exposure to. When dealing with state of the
art technologies, currency matters.
One possible way to manage the engineering workforce would be
to have lower transitional barriers between Defence and private sector
employment, so that part of an engineering career could be spent in government
service, bringing high level private sector expertise with it. Perhaps the
biggest impediment to such movement is the salary differential between private
sector and government positions. During the resources boom in particular, it
was very much one way traffic in engineers from Defence to the private sector.
Today it's probably easier to have a two way flow—the trick will be to make a
stay in Defence attractive enough to entice the best engineers.[41]
4.36
Mr Bussell from Professionals Australia stated:
The issue on smart buyer advice is having the expertise
in-house to interpret claims from manufacturers and industry about the
performance of their products. Industry does a wonderful job of developing
technologies and they also do a wonderful job of marketing those technologies.
Unless have you the in-depth detailed expertise to question those marketing
claims, you are putting yourself at risk of buying a product that does not
perform to a specification that you thought it might. It takes a long time for
defence scientists and engineers to develop a degree of expertise that allows
them to look through the cracks of those marketing brochures and identify just
what is a realistic level of performance for this technology.
4.37
The RINA submission noted:
The current PSE workforce appears to be highly dissatisfied
with the way in which the engineering profession is underutilised and managed.
Engineers are by nature practical people, and it is obvious to them that the
current arrangements do not economically solve engineering issues, rather they
often create more work for them further down the track. Generally there is a lack
of morale and a feeling of frustration, including that numerous previous
reviews have not led to significant improvements or full implementation of
their sensible recommendations.[42]
4.38
There was support for programs to encourage Defence staff with
PSE expertise to rotate back to Defence after a period in the private
sector or to continue their association with Defence following completion of
their service.[43]
4.39
Mr Lovell from Northrop Grumman stressed the need for Defence engineers
to have practical experience.
[A] graduate program that brings an engineer out of
university into an organisation like the Capability Acquisition and Sustainment
Group is actually bringing in somebody who has never done anything. I believe
that the only way an engineer can become effective is by designing and building
things. So in an ideal world, what we would prefer, and I think the service
would prefer, is to have people on the inside who have done some serious work
on the outside.[44]
It's time to change the current policy of attrition and
recruit new people to the organisation so that our knowledge, capabilities and
research can be carried on into the future. There's still a need for technical
people which is largely unmet by the current university and TAFE systems. DSTO
in the 50's through to the 90's had the best technical apprentice training
facilities in Australia but these were closed in 1993. Two decades on and
competent technical people are hard to find so it would be beneficial to
consider some sort of Defence apprentice training scheme once more.[45]
4.40
Witnesses from the AMWU highlighted the importance of growing and
developing PSE expertise from within Defence. Mr Hunter, a delegate with the
AMWU stated:
Many of our members have started as apprentices, have become
technical officers, have gained degrees and have even gone on to get PhDs, et
cetera. So there is a progression up. If you buy a technician at the start, you
can actually grow that person to become someone who then moves up through the
organisation....
The advantage of a long-term relationship with an employee is
that they get a deep knowledge of your particular area. Therefore, they can
foresee things when they come through and know if something is not going to
work. Then they can go back and justify their actions. It is that deep
knowledge that we need to retain, but which we are losing at a rapid rate.[46]
4.41
Defence outlined that in 2014-15 it invested approximately $10.6 million
and $6.2 million in training the then Defence Materiel and Defence Science and
Technology APS workforces.
These figures capture Defence wide education assistance
schemes that enable Defence public servants to study physical science and
engineering courses at a range of institutions, while receiving full or partial
fee exemptions, or reimbursement and study time release. There is also
sponsorship for specific professional development, such as fully funded
training and postgraduate professional studies, and support and funding for
membership of and certification by professional bodies.[47]
4.42
Ms Skinner outlined Defence's approach to investing in learning and
development for the PSE workforce:
This includes significant investment in education assistance
schemes that enable Defence public servants to study physical science and
engineering courses at a range of institutions, while receiving full or partial
fee exemptions or reimbursement and study time release. There is also
sponsorship for specific professional development, such as fully funded
training and postgraduate professional studies, and support and funding for
membership and certification by professional bodies. Various training and
development initiatives are in place to sustain long-term science and
technology capability by attracting new talent and retaining the existing
skilled workforce. For example, we do have mobility programs for placing staff
with industry, academia and research agencies, PhD studies and graduate
transition to retirement retention programs.[48]
4.43
In relation to the opportunities 'for employees to undertake part time
and full-time PhD studies' to gain high-level research skills in order to
increase long-term Defence Science and Technology capability, Defence outlined
there are '13 Leave PhD's and 41 part time PhD's participating in the
initiative'.[49]
4.44
However, there appeared to be further scope for staff development with
the Defence PSE workforce. The Department of Industry, Innovation and Science
observed there were 'noteworthy differences in the PSE qualifications of
Defence employees in the public and the private sectors':
The 2011 Australian Census recorded almost twice as many
Defence employees with PSE and information technology qualifications in the
private sector as there were in the public sector: 50 per cent and 28 per cent
on average, respectively. 11 Additionally, employees in private sector Defence
industries achieve a higher level of tertiary education compared to their
public counterparts: 47 per cent versus 26 per cent on average, respectively.
There is scope for public sector Defence employees to lift
their qualifications and technical expertise to match that of their private
sector counterparts. This will help ensure that communication between them,
especially in relation to complex defence procurements, is highly efficient and
technically sound.[50]
Links with industry, academia and other government agencies
4.45
Many submitters argued there were further opportunities for Defence in
closer relationships with centres of PSE expertise in industry, academia and
other government agencies. For example, Dr Davies considered it was worth
considering 'how innovation in our university sector can be picked up for
application in defence when applicable'. Similarly, he identified the 'transition
of technologies from innovation centres such as [cooperative research centres]
to industry [as] fertile ground for inquiry'.[51]
4.46
The AAS also argued that there may be significant opportunities for
other research institutions to augment the capability of the defence science
establishment. It noted that significant research and development expertise is available
in Australia's university sector and suggested that 'utilising it to complement
in-house activities could allow Defence to maintain a strong and diverse
research program, while working within the constraints of the labour market'.[52]
The AAS recommended that Defence and the DSTG expand opportunities for communication
and engagement with 'the academic research sector, to assist DSTG's in-house
expertise to take advantage of the latest innovations and research'.[53]
4.47
Mr Alan Gray and Mr Martin Callinan argued that 'the decline in a
dedicated defence PSE workforce can be mitigated provided Defence is given the
tools and the ability to incentivize the broader PSE workforce that exists
within Australia's academia, industry and amongst our allies':
Prudent and sustained investments now in the requisite
infrastructure, secure communications links, security clearances and training
and funding to allow targeted basic and applied research to be undertaken by
Australia's PSE communities resident within Australia's academia will yield
returns to Australia defence and well-being for many decades to come. More
importantly, a change in mindset is required to allow such a paradigm to occur.[54]
4.48
Mr Gray told the committee that his ASPI paper with Mr Callinan called
for 'Defence to establish a human resource model that encourages mobility
amongst the defence research and broader Australian PSE community'. He stated:
The skilled scientists and researchers currently employed are
not necessarily the scientists and researchers needed to address the disruptive
technologies on the horizon. Consideration also needs to be given to enabling
academics and other researchers from other government research agencies and
universities to transition employment conditions of both service and
superannuation arrangements so that they are not disadvantaged when working on
Defence related projects. Security clearances and transfer arrangements for
working on Defence projects entails unacceptable delays and impediments in this
day and age. Of course, security needs to be maintained, but security measures
must not be allowed to impede the employment of talent to tackle the national
security challenges.[55]
4.49
His submission with Mr Callinan recommended that a 'security clearance
and terms and conditions framework fit for purpose in the 21st century needed
to support a PSE workforce that moves frequently (eg. 2 -3 years) between our
academic sector, industry sector and defence department to allow them to work
on defence and national security issues'.[56]
4.50
The Australian Nuclear Science and Technology Organisation (ANSTO) noted
that it had a strong record of research collaborations and projects undertaken
with Defence. It noted that ANSTO had worked independently as well as in collaboration
with DSTO on national security science and technology projects and highlighted ANSTO's
unique materials engineering capability, which has proved important in the
development of more effective armour for personnel carriers and naval surface
ships.[57]
It stated:
ANSTO believes that the optimal solutions for shortages in
Defence PSE capabilities will need to take into account other national
investments in science and engineering infrastructure as well as the
non-defence science and engineering workforce. By utilising the unique
capabilities offered through pre-existing national investments in scientific
infrastructure and personnel, Defence can more effectively plan and budget to
develop new and complementary PSE capabilities. ANSTO represents a good example
of the benefits of this approach.[58]
4.51
However, Northrop Grumman was cautious about links outside of Defence.
It noted:
Given the specialised nature of this work, and the fact that
there are few relevant applications outside the environment of the Australian
Defence Organisation, the scope for crossover between defence research science
and commercial industrial science is limited. Whilst historically some
institutional relationships have developed between defence science and academic
institutions, these relationships have generally developed from either a close
organisational relationship in a specific science discipline, or have arisen
from a long standing precedent.[59]
4.52
Engagement with the defence science and engineering expertise of our
allies was also stressed.
Having DSG tied into US military research organisations like
DARPA and some of the think tanks such as Jet Propulsion Laboratory and Los
Alamos laboratories et cetera enables them to assess what else is happening.
Are we on our own with a particular problem?[60]
4.53
While the FPR concluded that, while wholesale outsourcing of DSTG
function would not be wise, there were opportunities for increasingly linking
its work to the broader scientific community, particularly in industry and
academia:
We recommend that strong partnerships be established with key
academic and research institutions to leverage the knowledge of scientists and create
pathways into and out of academia and industry...
The Chief Defence Scientist should examine the methodology
utilised to prioritise blue sky research versus the applied research program.
The Defence Science and Technology Organisation has a niche role to play in a
much larger global scientific research program and it is vital that its blue
sky research focuses on matters of special relevance to Australia.
We recommend that Defence, in partnership with academia and
industry, review its developmental research priorities, their alignment with
future force requirements and capacity to leverage allied partners, in order to
promote innovation and make the most valuable contribution to future Defence
capability.[61]
4.54
However, Dr Zelinsky, the Chief Defence Scientist, described DSTG as 'probably
the best engaged public research agency with the university sector'. He stated:
Last September [DSTG] won the Creative Engagement Strategy
Award from Knowledge Commercialisation Australasia, the peak body supporting
research commercialisation and transfer of technology, for our engagement with
universities. We have struck an agreement with 28 universities that is quite
novel. It allows us now to conduct work where, instead of taking 86 days on
average to strike an agreement, it is now down to 38. The amount of money we
are investing with the universities has moved from $12 million to $16 million
per annum, just in that 12 months.[62]
4.55
The ANAO's report outlined DSTG's links with other public research
orgnaisations:
DSTG has established strategic relationship agreements with
several publicly funded research entities—the Commonwealth Scientific and Industrial
Research Organisation (CSIRO) in June 2013, the Australian Nuclear Science and
Technology Organisation (ANSTO) in 2006, and the Bureau of Meteorology (BOM) in
August 2013. These strategic relationship agreements involve sharing resources,
personnel and facilities to perform collaborative projects and are overseen by
a senior steering committee. To date, DSTG has undertaken a number of joint
research projects with CSIRO and ANSTO, exchanged staff with CSIRO through a
secondment program, developed training programs with ANSTO, and conducted
forums with BOM.[63]
4.56
As part of its submission Defence noted that the DSTO (now DSTG) in
recent years 'has been active in building partnerships across industry and
academia'. It outlined:
This includes a framework agreement signed with Northrop
Grumman Australia in March 2014. The results of research undertaken at centres
such as the Defence Science Institute in Melbourne and the Centre of Expertise
in Energetic Materials in Adelaide demonstrate the value which is being
realised from these partnerships.[64]
4.57
Defence stated it was 'continuing to build and leverage relationships
with Australian universities and external organisations, which provide access
to centres of technical specialisation'. It noted that in 2015-16 Defence
provided $14.2 million to seven organisations to develop and demonstrate
technologies to enhance defence technology.[65]
Outsourcing and contractors
4.58
Defence observed that it 'does not outsource projects, but draws on "contractor
support" for elements of project management'. It outlined:
Integrated support contracts are used to outsource one or
more project-related functions, but not complete control or management of a
project, nor core functions that Defence should retain. Functions that can be
outsourced include the transactional elements of commercial, finance or
integrated logistics support, as well as project administrative support and
engineering services.[66]
4.59
Defence argued that '[d]rawing on the private sector to augment Defence's
in-house capabilities has always been essential to enable the Department to
deliver its core outputs effectively and efficiently'. However it noted that
Defence 'has always, and will continue to, prioritise retaining sufficient PSE
expertise in-house to meet its responsibilities to Government'.[67]
The Defence Portfolio Budget Statement indicated that there were 352
contractors employed by Defence in 2014-15 with an estimated increase to 484 in
2015-16.[68]
4.60
Nonetheless, outsourcing and the use of contractors was seen as a significant
potential risk to the capabilities of Defence's PSE workforce. For example, Mr Nicholaides
from the AMWU stated:
To set the context, you have to plan the department around
peacetime and be ready in case of national emergency. The risk is that you can
outsource some things in peacetime that you may need in times of national
emergency. You run the risk of getting that balance wrong.[69]
4.61
A key concern with outsourcing the Defence PSE workforce was the loss of
skills and intellectual property to Defence.[70]
The AMWU highlighted that a Deloitte study of the engineering and technical
workforce had included feedback which 'frequently identified increased
contracting out of engineering and technical work as a key reason for the loss
of skills within the APS engineering and technical job family workforce'.[71]
Mr Keenan made a related point:
The current trend in outsourcing also reduces Defences
ownership of any skills and knowledge gained (the Intellectual Property), which
is currently retained by non defence organisations (outsourced). The long term
effects of this process would increased future budgets for Defence and limit the
ability of Defence to control future costs, where I have no doubt there would
be an impact on Defences ability to provide state of the art platforms and
equipment to meet the Government of the day's commitment due to cost blow out.[72]
4.62
However many submissions identified the outsourcing of Defence PSE
capabilities as an area of concern. For example, RINA noted a number of
concerns with outsourcing projects to defence industry partners. It considered
the outsourcing of many previous internal Defence positions and the
commercialisation of naval dockyards had exacerbated the loss of relevant
experiential/development positions and suitable competent PSE staff within
Defence.[73]
It stated:
Project outsourcing may lead to the perception that the more
attractive/interesting jobs are outsourced, thus leading to a reduction in the
motivation for PSE staff to stay. It is a serious problem if Defence PSE personnel
are not getting the experience of either undertaking the contracted work or
managing the contracts.
Skills may be built up by the external contractors, but these
skills may then not be available to Defence as and when required – they may be
committed to non-Defence projects or otherwise unavailable. Furthermore,
Defence cannot control the skills available from the marketplace when
outsourcing tasks; it has to either accept whatever is available or undertake
the task internally, if it has still retained the capability to do so.[74]
4.63
Outsourcing was also characterised as inappropriate for some areas. For
example, it was noted that the absence of in-house Defence PSE capabilities
could inhibit government-to-government transfers of defence technology and cooperation
due to sensitive security considerations.[75]
4.64
The efficiency and cost-effectiveness of outsourcing or using
contractors was also questioned. It was noted that outsourced or contracted PSE
work was frequently undertaken by ex-Defence personnel paid at higher rates. Mr
Weaven described how his branch had six different Non Destructive Inspection
(NDI) contractors within a ten year period. He observed that the time 'spent
re-training each new contractor for our specific requirements was a
considerable loss of investment, because each one invariably left as soon as
more permanent opportunities were offered elsewhere and took with them the
extra skills and knowledge they had gained'.[76]
4.65
Integrated Project Management recommended that greater use be made of reservists
with PSE and project management skills rather than outside consultants. It
argued that advantages of using reservists (including reduced cost, improved
flexibility, military background and the importation of private sector
experience) accorded with the recommendations of the FPR that Defence ensure
that 'committed people with the right skills are in appropriate jobs'.
Integrated Project Management observed:
Contractors, when hired as Project Managers, can charge $1300
to $1500 per day, or $330,000 to $530,000 per year. A Reservist employed as the
project manager, say, of Major rank, would cost the pay scale for that rank,
approx $300 per day, or $78,000 for a 5-day-per-week-52-week year.[77]
4.66
In an environment where more work is contracted out, and overseas
suppliers are utilised, the importance of maintaining an adequate quality
assurance (QA) technical workforce within Defence was also emphasised. Ms
Tracey Davis stated:
The First Principles Review has recommended the contracting
out of more work. It is essential that QA staff who ensure Defence materiel is
delivered in compliance with our contracts be excluded from the effects of this
recommendation. Defence cannot delegate its responsibility to ensure the safety
of our ADF men and women...[78]
4.67
Professionals Australia also considered that, if the Australian
Government wished to maintain Australia's position and technological edge, it
needed 'to stop focussing on outsourcing or merging capability, and start
focusing on strengthening it, improving integration and engaging the science
and engineering workforce'. It was aware of 'other examples where outsourcing
or partial outsourcing of engineering support for acquisition or sustainment
has led to inefficiencies, added bureaucracy, delays and blurred accountabilities
for multi-billion dollar programs'. Additionally, it was concerned that critical
science and engineering restructures are being determined by contractors that
have a conflict of interest in proposing structures that may, or may not, lead
to further outsourcing of engineering functions.[79]
4.68
Professionals Australia recommended the Australian Government 'review
all existing contracts for engineering services to identify what can be delivered
more effectively in-house, what is required to maintain sovereignty of
professional expertise and to ensure Defence is a smart customer in both
acquisition and sustainment activities'.[80]
4.69
In contrast, Northrop Grumman had a more favourable view of outsourcing
certain PSE capabilities. It stated:
While there is justification to maintain an in-house
capability in defence science and research within the Defence Science and
Technology Group, there seems no compelling reason to maintain a specialised
engineering capability as these skills generally exist across the Australian
industrial base. Instead, the Australian Defence Organisation, including the
Defence Science and Technology Group, should seek to buy-in these specialised
engineering skills from the Australian industrial marketplace.[81]
4.70
At the November hearing, Mr Lovell from Northrop Grumman differentiated
the specific engineering expertise to complete tasks that Defence would always
need to have 'in-house' with others which could utilise the expertise of large
international Defence companies. He argued that industry has 'a distinct
advantage, particularly when you are talking about the globalised companies, at
the architectural level'.
[W]here industry starts getting involved in the science side
is really to work with governments, particularly DSG, in taking promising
research that really may lead to new capabilities or new products, because
industry really has more horsepower to do this sort of thing. So when you are
talking about product development, you are really talking about engineering.
what we need, as far as looking at the whole of defence
capability, is CASG, the former DSTO, to really have the technical expertise to
be a smart buyer, to actually understand the art of the possible, not try to
build it. Go back to the predecessor organisations of CASG...[W]hat we really
need from CASG is enough knowledge to be a smart buyer and a smart sustainer of
equipment.[82]
4.71
There were a variety of views expressed on whether any of the functions
of the DSTG could be outsourced. The FPR considered that there was 'no clear case
for outsourcing the Defence Science and Technology Organisation and, in fact,
this approach may be detrimental to the support it offers to Defence and its other
customers'.[83]
Similarly, Professor David Field from AAS noted that DSTG was 'a very unique
environment' and that the 'nature of the work that gets done means that some of
it is not easily outsourced'. This required maintaining an in-house capability
to deal with unexpected situations.[84]
4.72
However, Dr Davies identified that parts of DSTG's work 'at the research
end of the spectrum' could be undertaken outside of Defence. He stated:
The [DSTG] has actively resisted any notion of outsourcing
defence science, often citing security concerns and/or the need to protect
allied science and technology. As a result we have ended up with what I think
is an organisation that is mostly fair to good with outposts of excellence.
That is not good enough in a scientific organisation....The Pentagon makes good
use of the many fine research schools in the United States including,
incidentally, on some highly classified and sensitive activities. Defence does
not need to own all of its researchers. In fact, I would argue that the public
service tenured employment model is often an impediment to workforce agility
and to the ability to apply appropriate resources to new problems and emerging
technology.[85]
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