SENATOR MACGIBBON -I have a question for the Chief Defence Scientist. Did you review in a professional capacity the activities during the Gulf war in relation to science and technology?

DR WARD -We have been involved, yes.

SENATOR MACGIBBON -Did you make any recommendations to the Government as a consequence of that?

DR WARD -I have not been involved in these matters myself, no.

SENATOR ROBERT RAY -I would point out that Dr Ward has been the Defence Scientist for 11 weeks.

SENATOR MACGIBBON -One of the reasons I ask is that if you turn to page 358 you see a pie chart there of the breakup. Apart from the executive there are five categories, and the lowest funded category is electronics research. The Department has not always published a pie chart but electronics research has always been one of the lowest level activities of DSTO. I would have wondered whether there was not a case to be made for a higher portion of the pie to go to electronics research, particularly in light of the Gulf experience.

DR WARD -We are endeavouring to decrease the total staffing in DSTO but I think you will find electronics research is the only area which is planned to increase in this coming year. According to the table you are looking at, it is going up from 527 to 552, so we are indeed favouring electronics research.

SENATOR MACGIBBON -I take your point, but it is still No. 5 out of five, getting 16.4 per cent of your funding.

DR WARD -On page 370 under program 8.2, which refers to research laboratories, you can see that there is an increase of nine per cent this year in total appropriations.

SENATOR MACGIBBON -Yes, but what does that apply to?

MR JONES -That is compared to last year's expenditure. There is a real increase of nine per cent.

SENATOR NEWMAN -I was asking earlier in the evening about the appointment of any Australian companies to act on behalf of Defence for sales purposes. It seems that I was talking about DSTO and did not know it. Can you tell me whether a decision has been taken to have Pacific Aviation appointed to represent DSTO in a sales area?

DR WARD -Yes. A joint company has been formed between Pacific Aviation and the Commonwealth, and the agreement was signed quite recently. This allows Pacific Aviation to act essentially as our agent to market the T56 technology worldwide. The T56 technology is to decrease smoke emissions from the Allison engine.

SENATOR NEWMAN -How did Pacific Aviation come to be chosen?

DR WARD -This was a tender situation, and its tender was the most attractive.

SENATOR NEWMAN -So it did go out to public tender?

DR WARD -Yes.

SENATOR NEWMAN -So that implies that it was advertised.

DR WARD -It was advertised. I believe there were 12 tender responses.

SENATOR NEWMAN -I want to ask a question relating to page 396, I think.

CHAIRMAN -Seeing we are on the last program, we will traverse the whole program with all its subprograms.

SENATOR NEWMAN -Thank you. I am trying to get a handle on your revenue expectations. I am not quite sure whether these figures are right, but last year you got substantially less than anticipated. What are you anticipating getting by way of receipts this year?

DR WARD -Are you talking about appropriations?

SENATOR NEWMAN -No, about your commercialisation.

DR WARD -We are expecting to receive about $2.5m this year in profits.

SENATOR NEWMAN -I must have missed it. I could not find where it was.

DR WARD -No, it is not identified in the papers. We are anticipating in 1991- 92, the current year, total revenue from our commercial activities of $5.25m with a profit component of $2.6m. These, of course, are estimates. We are in the hands of the licensees and the commercial companies who are having to fight their way through the current problems in the world. I would regard those estimates as being at least on the optimistic side.

SENATOR NEWMAN -Somewhat optimistic, would you say?

DR WARD -Yes.

SENATOR NEWMAN -And how does that compare with last year's outcome?

DR WARD -Last year the profit from commercial activities was $370,000. That is an estimated figure, we do not yet have the accurate figures. It was $250,000 in 1989-90.

SENATOR NEWMAN -And what assistance do you have as Chief Scientist in developing a market ethos in DSTO, and experienced advisers to market the work of the organisation?

DR WARD -Yes, that has been a problem. DSTO has only been involved in this commercial activity since 1987 and it is now building up to an enthusiastic activity. We have business managers, or their equivalent, in each of the five laboratories, and a small commercial cell in the corporate centre. We are also organising for these people to attend outside courses and to meet people in the commercial world, but it is a total change in ethos from their normal experience.

SENATOR NEWMAN -Because those business managers did not come from outside, they came from within the organisation, is that right?

MR LUSH -It is a mix. Some have been recruited from outside, some are translated, if you like, from inside to the business development side.

SENATOR NEWMAN -And the people that came from outside came from business backgrounds or scientific backgrounds?

MR LUSH -A marketing background in industry with, in some cases, a science or engineering background.

SENATOR NEWMAN -Okay, thank you. Why was the environmental engineering facility transferred to the Army?

DR WARD -It does not really fit with the research activity. We are now progressing a business of contracting away from doing development work and engineering activities and concentrating on the things we are good at, which are research, and that fits in much better with the Army's activities, which are oriented to engineering.

SENATOR NEWMAN -And what has that saved the organisation?

MR LUSH -Senator, $1.2m is transferred from the DSTO to the Army program.

SENATOR NEWMAN -It is an annual cost.

MR LUSH -Yes.

SENATOR NEWMAN -And with the range measurement branch, which was transferred to the Air Force, was that for a similar reason?

MR LUSH -Well, yes, a similar reason in the sense that it is not our core business, with a transition to more at the research end than at the development or operational end. The range measurement branch is associated with Woomera and with the RAAF as the major user of Woomera, it has been transferred there.

SENATOR NEWMAN -And what is the saving there?

MR LUSH -About $3.1m.

SENATOR NEWMAN -So really in both cases it was a case of, `Army and Air Force, if you want to retain that facility, you had better take it on'.

VICE-ADM. BEAUMONT -It really is being run by Army and Air Force on behalf of the Defence Force-the testing and measuring, rather than research.

SENATOR NEWMAN -Yes, but one presumes that each of those Services has a special interest in the branch that was taken on.

VICE-ADM. BEAUMONT -Yes, generally, but all three Services have an interest.

SENATOR NEWMAN -Yes, but I am looking at whose pocket the money is coming out of and whether they have a real incentive to take it on.

VICE-ADM. BEAUMONT -They get a transfer of funding as well, and it is a user pays arrangement between the three Services in each case.

SENATOR NEWMAN -Right. When will the review of the MRL Scottsdale be completed ?

DR WARD -It is progressing at the present time. We are hoping to have it completed before the end of the year. It involves our three clients-the Army, Navy and Air Force.

SENATOR NEWMAN -And does that look as if it will be going the same way as the environmental engineering facility and the range measurement branch?

DR WARD -That is one option, yes.

SENATOR NEWMAN -Is that one of the considerations?

SENATOR ROBERT RAY -Whole areas have been looked at, not just Scottsdale, as I understand it, and it will come to Gordon Bilney and myself for decision.

SENATOR NEWMAN -But it is not necessarily a case of getting rid of it altogether, it could be a transfer within the Department.

SENATOR ROBERT RAY -It could remain exactly as it is, it could be enhanced, it could be reduced. We will wait and see. I have not seen the details of the investigation into it yet, nor has my colleague.

MR LUSH -It could transfer to industry or it could transfer to the tertiary sector as well. It need not necessarily stay within the Defence environment.

SENATOR NEWMAN -Thank you.