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FOREIGN AFFAIRS, DEFENCE AND TRADE LEGISLATION COMMITTEE - 06/11/1995 - DEPARTMENT OF DEFENCE - Program 2--Navy - Subprogram 2.1--Combat Forces (Maritime Operations)

Senator MacGIBBON --Page 67 of the annual report says that HMAS Canberra withdrew from South-East Asian deployment in 1995 due to hull defects and returned to Australia. What were those defects?

Rear Adm. Barrie --Canberra suffered a defect to her sonar dome in the middle of that deployment. It could not be rectified overseas, so she returned home to make those repairs.

Senator MacGIBBON --What initiated the failure?

Rear Adm. Barrie --It was a failure of material. The rubber facing on the dome opened to let sea water into the dome itself.

Senator MacGIBBON --What did it cost to repair it?

Rear Adm. Barrie --I do not have that information.

Senator MacGIBBON --Is that a frequent occurrence with FFGs?

Rear Adm. Barrie --It is quite unusual. It is the second occasion only that that defect has occurred in the operation of our FFG class ships.

Senator MacGIBBON --In early October, there were reports that Navy grounded the entire helicopter force for an emergency safety audit. Is that true?

Rear Adm. Barrie --A safety audit was conducted in October this year. That was ordered by the Chief of Naval Staff following the Sea King accident and a perception that an audit needed to be done of the safety measures in place. One of the squadrons was not allowed to conduct operational flying. That was HS817 squadron. The remaining squadrons were allowed to continue flying. The safety audit took one day to complete. All the squadrons resumed flying on completion.

Senator MacGIBBON --There was a prohibition on flying?

Rear Adm. Barrie --The only squadron that was prohibited from conducting flying was the Sea King squadron.

Senator MacGIBBON --So the newspaper reports that said that all naval aviation was grounded were wrong?

Rear Adm. Barrie --That is correct.

Senator MacGIBBON --Why did Navy not put in the estimates this time a summary, in the way that Army and Air Force did, which lists the inventory of aircraft, projected hours to be flown and actual flying hours? I see that they have done it in the annual review. That was asked for last time. Was there a reason for not complying?

Rear Adm. Barrie --For my part, there was no positive reason why that was not included.

Senator MacGIBBON --Could it be done on future Defence estimates?

Rear Adm. Barrie --Certainly.

Senator Robert Ray --Army and Air Force have a variance. Apparently, Navy does not. That is why it is not in the portfolio statements.

Senator MacGIBBON --Is it true that Navy run their own logistic support system for aircraft?

Rear Adm. Barrie --That is true. It is the Naval Aviation Logistics Office based in Sydney.

Senator MacGIBBON --Is this inventory on page 68 of the annual report correct? It lists the Bell 206, the Squirrel, the Sea Kings, the Hawker Siddeley 748s and the Sea Hawks. Is that an accurate listing of the aircraft in the naval inventory?

Rear Adm. Barrie --That is correct.

Senator MacGIBBON --What is the difference between that list and the aircraft that are operated by the Army and the Air Force, except for the Sea Kings? What are the orphan aircraft?

Rear Adm. Barrie --We would describe the Sea Hawk aircraft as being quite different from the Black Hawk aircraft. Our aircraft is much more complex. It is a very different flying machine, although the overt visual characteristics are much the same. The HS748 does not differ very much in terms of the air frame from those operated by the RAAF, although we have an electronic warfare training system fitted to our aircraft. The other two types of aircraft would probably be fairly similar.

Senator MacGIBBON --Is it true that Navy runs their own airworthiness division?

Rear Adm. Barrie --That is correct.

Senator MacGIBBON --How many people are involved in NALO? What is the cost of the establishment of it?

Rear Adm. Barrie --There are a considerable number of people in NALO. I do not have the precise figures. I do not have the figure for running it as a separate entity. It does perform a very useful function for us, giving regard to those types of aircraft.

Senator MacGIBBON --What is the benefit of running your own organisation?

Rear Adm. Barrie --From Navy's perspective, they are focused on the conduct of aviation operations in the maritime environment. That is quite different from the conduct of aviation operations in the other ground and air environments.

Senator MacGIBBON --Why do you need an airworthiness authority for air frames and engines that are essentially the same as those being operated by the other two services? If it were a cost free exercise, we would not be arguing about it.

Rear Adm. Barrie --For example, the Sea Hawk aircraft does not have the same engine as the Black Hawk aircraft. It is a different type of engine.

Senator MacGIBBON --With respect, I have spent some time in Sikorsky's factory. There are variations in the undercarriage; it is marinised, and there are a few other things like that. Essentially, it is just another aeroplane. How can you justify the establishment cost of an airworthiness authority and your own logistics support unit when Air Force and Army can share the same facilities with cost savings? Why are you different?

Rear Adm. Barrie --Our perspective is that it is the unique operation of aviation in the maritime environment that gives us credibility for running that organisation.

Senator MacGIBBON --I do not agree with that. Air Force and Navy share missile maintenance, with one dealing with the Harpoons and one dealing with the Sparrows. Dealing with the way that a Harpoon or a Sea Sparrow rattles around on a ship is as valid an argument for having one as anyone flying a Sea Hawk onto the stern of a DDG. Quite frankly, your argument does not stand up.

Rear Adm. Barrie --The question we address all the time is what common interests we might share if we did that sort of thing. Every time the answer is that it is better to stay with the current organisation.

Senator MacGIBBON --Has an independent audit been done of this by the triservice group?

Rear Adm. Barrie --There have certainly been reviews of the function of NALO. It has been an ongoing process, to my memory, over certainly the last 15 or so years. Whether I would describe it as being as independent as that I would have to take on notice; I do not know the answer to that. But it is certainly part of an ongoing examination of efficiency and effectiveness.

Senator MacGIBBON --By your own admission this morning, there are a large number of people involved in this organisation. I hope you can give the committee the cost of maintaining the establishment. Frankly, there does not seem to be any benefit in what you are doing.

Rear Adm. Barrie --I go back and re-say what I just said. We think the conduct of aviation operations in the maritime environment is unique and requires a unique supporting agency.

Senator MacGIBBON --It is very different hammering through at 200 feet on a very bad night with weather all around you in an F111. I am sure the Air Force would not see any difference in the basic skills of doing the airworthiness and the logistics support. I think you are costing the taxpayer a great deal of money for no benefit at all.

While we are on this, last time you appeared before a committee I put some questions to you about the manning of Navy ships. We spent a great deal of time while you tried to explain that in an emergency you can get some ships to sea. Since then the situation seems to have got much worse. The minister confirmed in answer to a question of mine in September that resignation rates at the end of August were 14.7 per cent. The anecdotal evidence from the Navy is that there are now acute problems in getting ships to sea. Can you define the extent of the problem and what you are doing about it?

Rear Adm. Barrie --It is true that Navy's wastage rate is over 14 per cent at the moment and that is further exacerbated by our lag in being able to achieve recruiting numbers. Nonetheless, I say again what was said at earlier hearings. The fact is that right now Navy is under significant pressure to provide people for additional training functions, for the seaman category rationalisation study and TTP 92. Some of those people are being made available for courses from combat billets in seagoing ships and from billets in shore establishments. Nonetheless, if there was a requirement to send any of our ships on an operational activity, that ship could be manned to 100 per cent from existing resources. To describe the picture broadly, Navy has about 14,800 uniformed people and about 12,300 billets. The margin between those two figures is taken up with those under training and those who are ineffective.

Senator MacGIBBON --For routine peacetime operations, can you put a figure on what the shortfall is on crewing strengths?

Rear Adm. Barrie --Yes, Senator. For our ships at sea at the moment we have 2,711 personnel, occupying on average 93 per cent of the billets in those ships.

Senator MacGIBBON --I accept that with the new equipment that is coming along you have a major training problem. Anecdotally, there are stories that Navy has great difficulty in getting sailors and officers to go to sea. Have you done any research as to why you have those people in uniform?

Rear Adm. Barrie --Why we have people in uniform to go to sea?

Senator MacGIBBON --No. You have sailors who would prefer to stay onshore rather than go on a deployment. That seems to be quite unique to Navy, because Army and Air Force do not seem to have any difficulty getting their personnel to travel on whatever posting they have. But sailors seem to be wedded to the shoreline. What is the problem?

Rear Adm. Barrie --I think that is to not fully comprehend the nature of sea service. Let there be no doubt that it is our view that everybody who joins the Navy is eligible for sea service. That does not mean to say that there are not circumstances that arise in each person's career from time to time which might make it preferable if they did not go to sea. But it is our expectation that people will go to sea, albeit that occasionally for personal, family or other circumstantial reasons, they cannot go on a particular deployment at a particular time.

Senator MacGIBBON --Can you assure the committee that, apart from a shortage of technically skilled people, there is no general resistance to going to sea, other than for the personal reasons you are talking about?

Rear Adm. Barrie --I would very much like to be able to assure the committee of that and be absolutely confident of it, but generally speaking I think most people in our Navy do enjoy going to sea and doing what they have been trained to do.

Senator Robert Ray --I think you need a more precise definition here too, Senator. I think what the admiral said is true as far as it goes, but when you introduce the concept of the extent to which they have to go to sea, you may get a different answer. It is the length of time at sea rather than going to sea per se that may become critical to our personnel policies in future.

Senator MacGIBBON --I accept that. There is a difference between going away for nine months and going away for three months. But given the very nature of naval operations and the slow speed of movement of ships and all the rest of it, people ought to be recruited with the expectation that they will be at sea for three months and similar periods.

Rear Adm. Barrie --There is no question of that. There are some people who go to sea for the first time and find the life unpalatable. That is a very small proportion. There are also those who, through dint of circumstance, would not like to be available for a particular deployment. By and large our thrust is that people are eligible for sea service and that is what the Navy is here to do.

Senator MacGIBBON --Given the re-equipment program and so on, what is the point of keeping the DEs in the inventory at sea? Why not tie up half the FFGs and put your effort into training for the new ships coming along?

Rear Adm. Barrie --Much of that training we require to do for the new ships coming along is going to be conducted at sea. To take out of our operating inventory vessels in that proportion would be to threaten the training we can make available for the people we need for the future.

Senator MacGIBBON --Are you telling me the fire control systems and so on in the Anzacs are the same as in the DEs or the Collins?

Senator Robert Ray --He is not saying that at all. What he is saying is that there is still great merit not in absolute replication of the training for an ANZAC and a DE, but the experience at sea and so on does flow over. Therefore, it is valuable in the sense of bringing people through. I assume that is what he meant.

Senator MacGIBBON --You hope it is!

Senator Robert Ray --It will be now!

Rear Adm. Barrie --The other point to be made here is that our young people join the Navy to go to sea. There is no point in our saying that we have all of those ships alongside tied up and not going to sea to meet their expectations. It is a very critical problem for us in providing those necessary skills.

Senator MacGIBBON --You should not have any manning problems then, if that is their belief.

Senator NEWMAN --I refer to page 67 of the annual report. I ask a question about the notes on table 2.8. Also there is no note relating to the shortfall of 22 sea days achieved by the submarines. Can you tell me the reason for this shortfall of 22 days?

Rear Adm. Barrie --That table is a very simple construct of the difference between the development of the fleet activity schedule and the achievement of sea days. The drop of the 22 sea days for submarines, for example, could easily be delays in sailing due to minor defects that had to be repaired, or a change in the program itself. We moved from not going to sea on Sundays to going to sea on Monday mornings and so on.

Senator NEWMAN --There are so many notes in that column that it seemed unusual that there would not be an explanation for the submarines.

Rear Adm. Barrie --Because of their slow speed, submarines used to go to sea mostly over weekends and come back to harbour at weekends. We changed that policy in order to give them much more equitable sea time with everybody else. That would influence the difference between the predicted fleet activity schedule and the achievement.

Senator NEWMAN --Note 2 to that table--that was for patrol boats--talked about defect rectification, extended refits and decreased availability and activity levels. Can you tell me a bit more about that?

Rear Adm. Barrie --Certainly, there were one or two patrol boats whose depot level maintenance was extended. That certainly influenced them in decreased availability. However, when I examined that proposition I looked at the performance from the previous year, in which we delivered 1,839 sea days. This year we achieved 1,820, which was still a fairly good outcome.

Senator NEWMAN --Was a growing corrosion problem part of the reason for spending more time in refit?

Rear Adm. Barrie --As a generalisation, I would say it was setting to work of machinery which was the problem.

Senator NEWMAN --What do you mean?

Rear Adm. Barrie --Getting it to operate and do all of its things according to specifications.

Senator NEWMAN --But is that not allowed for in planning for how many sea days patrol boats will have?

Rear Adm. Barrie --In depot level maintenance it is allowed for, but sometimes it takes longer than we expect.

Senator NEWMAN --So you do not have a sort of fudge factor in your prediction for sea days?

Rear Adm. Barrie --I do not think any of my engineers would like to hear me talk about a fudge factor, but certainly it does crop up from time to time that we do not achieve the result we expected.

Senator NEWMAN --Can you tell me about note 4 that there were other reductions relating `to withdrawal from exercises (SQUADEX) due to defects and the cancellation of some Army support requirements'. What is that about?

Rear Adm. Barrie --SQUADEX is a joint Army-Navy work-up in the Shoalwater Bay area. There were certainly a number of defects which occurred to the LCH class ship. Not every vessel was pulled out of that exercise. They rotated out of the exercise as their defects were corrected. There were some minor adjustments to the Army support requirements.

Senator NEWMAN --You say minor.

Rear Adm. Barrie --I think mostly transportation.

Senator NEWMAN --This is cancellation of the support requirements. Does that mean exercises were cancelled?

Rear Adm. Barrie --No.

Senator NEWMAN --Are we having increasing problems with the LCH? Is this going to be cumulative as they get older?

Rear Adm. Barrie --I would not describe them as increasing problems. The LCH class is a fairly rudimentary class of ship. Nonetheless, it is still quite old. It still does have unexpected defects from time to time.

Senator NEWMAN --Several were mothballed, weren't they, a few years ago?

Rear Adm. Barrie --We still have one in dry storage in Cairns.

Senator NEWMAN --Weren't there some at Moreton as well? Weren't a couple mothballed--

Rear Adm. Barrie --There were, but that was not because of maintenance. That was a manpower issue.

Senator NEWMAN --In planning for the future, you are not going to have to plan that they will not be around or that they will not be much use for very much of the year. How do we get a feel for that?

Rear Adm. Barrie --The fact is that there are more and more requirements for them. We have recommissioned vessels into full-time service with the Navy. At present we are looking at whether we need to replace this class of vessel to continue the sort of work they have been doing.

Senator NEWMAN --So they are actively under consideration for replacement, are they?

Rear Adm. Barrie --Certainly.

Senator NEWMAN --The refit of Moresby was extended due to lack of available spare parts. Can you tell me what they were and why?

Rear Adm. Barrie --I do not have detail on that. The fact is that in HMAS Moresby the main engine is a diesel-electric drive. What I can say is that her refit always seems to suffer from a problem in provision of appropriate spare parts. I think that is because it is a one-off diesel-electric drive in this country.

Senator NEWMAN --And we do not keep enough in stock?

Rear Adm. Barrie --I could not answer that.

Senator NEWMAN --The obvious question to come from that is: why is it that there is a lack of available spare parts? Is it that we are operating on the just-in-time principle? Are we now allowing enough for the track record of Moresby, or is it too expensive to hold them?

Rear Adm. Barrie --Moresby is just about to reach the end of her life. I do not know the answer to the question, but it could be the spare parts required were not available, although I would say that in the past it has been a question of reassembling the diesel-electric drive and setting it to work.

Senator NEWMAN --This says `lack of availability'. Over the page there is a note to table 2.9 that `Aircraft serviceability was adversely affected by personnel and logistics support shortages. Could we have some amplification of that?

Rear Adm. Barrie --The operation of the Seahawk aircraft in the last fiscal year is very interesting. There is an inventory of 12 aircraft. The revised flying hour prediction grew some nearly 1,000 hours from that of the previous year. The achievement grew by 400 operational hours. Nonetheless, there were still only 12 aircraft meeting an increasing demand to get Seahawks to sea.

Navy is very keen to get as many Seahawks out to the FFG class ships as it can. We have been affected by reduced stockholdings which resulted from putting our Seahawks into the Gulf operations based on an inventory which foresaw six aircraft at sea, six aircraft ashore, a time build-up and in addition the growth of a requirement for having to provide two flight crews in each FFG at sea.

Senator NEWMAN --The personnel shortages referred to in this note were at which level? Were they crews or were they maintenance?

Rear Adm. Barrie --Mostly crews.

Senator NEWMAN --To what extent were you short?

Rear Adm. Barrie --Against the double crewing at sea standard, we were 10 short. What we have done is operate some of those flights with a single crew.

Senator NEWMAN --With the logistics support shortages, was that a question of funds or was it a question of inadequate stock management?

Rear Adm. Barrie --It was not a question of funding. In essence, as the inventory from logistics support drew down because of those Gulf operations and putting those aircraft to sea, demands were placed and they have not been able to be filled from the United States.

Senator NEWMAN --Why?

Rear Adm. Barrie --Inability of supply.

Senator NEWMAN --From the Americans?

Rear Adm. Barrie --Yes.

Senator NEWMAN --So it was not a lack of us having the cash in our hand or the willingness to buy?

Rear Adm. Barrie --No.

Senator MacGIBBON --Do you mean there is no surge capability in your planning?

Rear Adm. Barrie --Our planning was based on putting six flights to sea and having six ashore for training purposes. We have actually outperformed that original plan. That is why the inventory of stocks was reduced.

Senator MacGIBBON --But there was only one helicopter in the Gulf.

Rear Adm. Barrie --No, that is not correct, Senator. There were at least five at one stage.

Senator MacGIBBON --All at one time?

Rear Adm. Barrie --I think so, yes.

Senator MacGIBBON --Or sequentially?

Rear Adm. Barrie --RAN FFGs are deployed with two helicopters.

Senator NEWMAN --Note 1 to table 2.10 is about the Jindivik. It states:

A small number of sorties were cancelled due to changes in the Fleet Activity Schedule, mechanical problems and industrial disputes.

What does that mean?

Rear Adm. Barrie --The operation of the Jindivik takes place in Jervis Bay airstrip. It is a single strip only. We actually programmed a number of flights with the expectation of not being able to achieve them. We did suffer a minor industrial dispute in the middle of the year over work practices.

Senator NEWMAN --Where?

Rear Adm. Barrie --At the operation of the JBMR itself.

Senator NEWMAN --Who were they?

Rear Adm. Barrie --They were the civilians who worked for the contractor.

Senator NEWMAN --So it was a CSP arrangement?

Rear Adm. Barrie --No, it was a straight contract. It was never subject to CSP.

Senator NEWMAN --And will it be?

Rear Adm. Barrie --It is already in the hands of civilian operators.

Senator Robert Ray --CSP is really going from the internal to external--

Senator NEWMAN --I understand, but CSP also makes provision for just this very thing, doesn't it?

Senator Robert Ray --Yes. This is just a straight contract.

Senator NEWMAN --So are you saying to me that all our CSP contracts do not have any provision as to industrial disputes?

Senator Robert Ray --I am sorry; we are at entirely divergent things. This sort of work done in Defence--CSP--is work that was done internally in Defence and is now done either externally or by in-house bid. On top of that, a lot of work in Defence was done by straight contracting before commercial support. My understanding of what the admiral was saying is that it is one of those.

Senator NEWMAN --My understanding was--and it may be quite wrong--that the commercial support program made provision to avoid industrial disputation. Is that wrong?

Senator Robert Ray --No. Now we are at that point, we can proceed.

Senator NEWMAN --Is that assumption by me about CSP and industrial disputes wrong? There is no protection for the defence of Australia with CSP from industrial disputes. Is that right?

Senator Robert Ray --I do not think there is anything in the contracts which says you can take away the civil rights of employees.

Senator NEWMAN --We are talking about the defence of Australia. Are you saying that, as has happened in the past, where industrial disputes have held up our ability to load ships to servicemen on active service, we are going to have that multiplied in the future because we have so many civilians in direct support of the military and that that has not been given thorough and careful consideration? It arises out of this, but I assumed that we would have had a CSP project and it would have been protected.

Senator Robert Ray --We made it very clear when we went to commercial support that there were core and non-core areas and that the core areas would not be subject to commercial support. Therefore, they are not vulnerable to those disputations. That is why Defence spent a lot of the time and a bit of effort and a bit of aggro probably in arguing about what is core and what is non-core.

Senator NEWMAN --We have the Seahawks down at Albatross that are being maintained by British Aerospace under a CSP contract. If there is no protection for Defence in keeping those aircraft in the air--

Senator Robert Ray --What do you want--a fourth wave of legislation or something: `You as repairers have no rights whatsoever; just get on with your job and shut up'? Is that what you want?

Senator NEWMAN --You as defence forces have no rights to be supplied or keep your equipment available for use on operations.

Senator Robert Ray --If we were in that sort of warfare area--

Senator NEWMAN --So there is no provision for being in that situation?

Senator Robert Ray --If we were in that area where this was constantly a problem, I would probably worry, but we are not.

Senator NEWMAN --It may be peacetime but you do not make those contracts on the basis that they are always going to be in effect in peacetime.

Senator Robert Ray --You are basically saying that they are going to affect us in a more high-level contingency.

Senator NEWMAN --Yes. In an operational sense, it is important that those contracts are not impeded by industrial action.

Senator Robert Ray --That would be a decision you would make at the time you got to that high level. I do have basic faith in people, like we had to gear up two ships over 48 hours to go to the Gulf in 1990. Everyone came back to work and we got them under way. I have basic faith in people that they will do those things in those circumstances.

Senator NEWMAN --Provided the country is supportive of the effort, that is probably true. That is not always the case. You had the great advantage of having the nation behind you in deploying troops to the Gulf. It may not always be the case.

Senator Robert Ray --In which case you would have to meet at the time. What do you suggest? We put into the current concepts that we disagree? I will not do it.

Senator NEWMAN --I think such contracts with Defence should make a provision for operational needs.

Senator Robert Ray --Well, I will not do it.

Senator NEWMAN --I hope that history does not judge you harshly.

Senator Robert Ray --I do not think it will judge me harshly because, if this country is ever under threat, a different set of conditions will apply. There is no question about that.

Senator NEWMAN --It is not as if you have required that the people who do these contracts are reservists, for example. In the case of British Aerospace, you are lucky that a proportion of them are. But, if you do not have some certainty that they are going to be there, what have you done to the defence of Australia?

Senator Robert Ray --I think you are selling your fellow citizens far too short.

Senator NEWMAN --No, I am not selling them short at all; I am going by history and learning the lessons.

Senator Robert Ray --It is the old bigotry against working people coming in.

Senator NEWMAN --No, it is not. We have seen a circumstance where industrial disputes have substantially impeded the work with the Jindivik.

Senator Robert Ray --There is no doubt that at different times--I will let Rear Admiral Barrie go to the specific case--Defence has been affected by industrial disputes. There have been times when this Parliament House has been affected by industrial disputes. These things happen in life.

Senator NEWMAN --In peacetime it is a totally different ball game. But you are planning to protect Australia in the event of a war.

Senator Robert Ray --I think you would find the activities of unions in the work force different in terms of wartime than in peacetime.

Senator NEWMAN --No, they have not been in the past. That is why I am drawing your attention to it.

Senator Robert Ray --Time moves on and relationships move on. We are not in the industrial situation in the Second World War.

Senator NEWMAN --And Vietnam, which is more recent.

Senator Robert Ray --We are not in that situation.

Senator NEWMAN --I would go by human nature.

Senator Robert Ray --Now that we are off the philosophical thing, do you want Rear Admiral Barrie to go to the industrial thing?

Senator NEWMAN --That is what alerted me to it. To what extent was it impeded and what was the problem?

Rear Adm. Barrie --The contractor operates a number of these flights for what are called operator training for people who actually remotely pilot the Jindiviks. I am aware that none of those industrial disputes affected the fleet's requirement to provide targets at sea and it was over a work practice case.

Senator NEWMAN --But we are talking about only 47 flights achieved out of 109.

Rear Adm. Barrie --Yes, that is true. Again, to go back to where I started with this, it is a single strip runway and an awful lot of spare serials are programmed simply because on a large number of occasions the wind conditions alone will not allow the launch of the aircraft.

Senator NEWMAN --I understand that work is currently under way to develop a leadership management and personal development policy for the RAN. Is that not something that is basic to the training of leaders in the Navy? What is different about it?

Rear Adm. Barrie --Of course it is fundamental to the Navy, as it is to any military force. What we are looking at now is to set in place through career training courses improved approaches to the teaching and conduct of leadership training, to draw together many of the lessons of our past, put them in the modern context and make all of our people aware of the current imperatives for leadership. It is an attempt on our part to try to redress what some might call the imbalance that we have given to management practices over the last 10 years or so.

Senator NEWMAN --Are the other two services undergoing the same sort of analysis and direction?

Rear Adm. Barrie --I cannot answer that.

Vice Adm. Walls --They are. I am aware of what is going on in Army through training command. It is also reflected, apart from the other services, in what we are doing at ADFA. General Hickling has established a new arrangement with a visiting fellow program for leadership. I would support what Rear Admiral Barrie said; there is a growing re-awareness of the need to pay more attention to leadership skills development.

Senator MacGIBBON --Why was there an increase in medical and dental costs? That seems to be across all three services. Why wasn't that foreseen?

Rear Adm. Barrie --I do not know the answer to that question. I am certainly looking at it fairly harshly.

Senator MacGIBBON --It was $2.8 million for Navy.

Rear Adm. Barrie --If it continues to grow--and it is our expectation that it has probably plateaued--it has very serious implications for us. The cause of it has not been defined with any precision. Once we know what the answer is, we will be able to do something more about it.

Senator MacGIBBON --Where did these increased costs come from? Are they services provided outside the medical and dental services within house? How did it happen?

Rear Adm. Barrie --The costs come from a range of those sorts of activities, whether it is the use of in-house medical services or external services. I think there is also some variation on costs depending on which part of the country the medical service is being provided in. I am not in a position to answer for the rest of the Defence Force on how that looks. It is certainly a concern to Navy and we are having a look at it. The Surgeon-General may have more information to offer in that regard.

Vice Adm. Walls --I know that there has been an increase in what I will call outsourcing of health services for the Defence Force. There has been a change in some areas and some arrangements to make more use of civilian services. Partly that relates to the need to make sure that health personnel were associated with those who are deployed to remote areas or deployed in operational tasks.

For example, in areas like Darwin, Tindal and so on where the opportunity to use commercial outsourcing in the civilian community is much restricted, it is more appropriate for services people to be providing the services. That shift in emphasis, availability and priority has meant there have been increases in costs in other areas. I am conscious, for example, that the recruiting approach of attempting to get increasing numbers of qualified health personnel into the services to cover a shift in priorities is under way, but the benefits of that will take some time to flow through. The response to that has been quite encouraging. It is fair to say that the cost of health services generally within the country has increased.

Senator MacGIBBON --But, overall, you have a very big medical and dental establishment. You have hospitals like the one that has been rebuilt at Enoggera, you have Laverton, Navy has a hospital somewhere and you have dental units. Looking at the establishment you have, to hang in the case of Navy a $2.8 million increment on it, you would have to be doing an enormous number of hip replacements or other really expensive operations to justify an increase of that size if things are being run properly.

Vice Adm. Walls --I confess that I do not have a detailed answer about why the individual increases might have occurred. I would be surprised if the Navy was into hip replacements in a big way.

Senator MacGIBBON --That is the point I am making. I am glad you picked it up.

Senator NEWMAN --Is the government planning to announce the acquisition of an additional two Collins class submarines?

Senator Robert Ray --The government considered that in June 1992, I think. I indicated that any decision on that is a question of how you formulate a future budget and would be considered in the context of a five-year budget. There are strong force multiplier reasons for having submarines 7 and 8, but they are not the reasons that are usually articulated out there in the political community; they are usually about the continuation of the Adelaide facility and so on. But that is the way I look at it: it would be a good force multiplier. It would depend on future budgetary considerations. That is an answer for the straight stream. It is traditional for the cost of any election promise by a Prime Minister or a Leader of the Opposition to be fully supplemented, so it would not come out of the Defence budget. I assume it works that way for opposition parties as well.

Senator MacGIBBON --We never make false promises.

Senator NEWMAN --When would you expect that such a decision would have to be made? You said it was from mid-1992. This is now three years later.

Senator Robert Ray --The decision we made in 1992 was not to proceed with Nos 7 and 8; but not to rule it out.

Senator NEWMAN --But you said that within the five-year plan it would have to be assessed again.

Senator Robert Ray --A sensible decision about it, in terms of the work force we already have and in terms of the program and so on, would be made by the end of next calendar year--and no later. Otherwise, you will find skilled work forces drifting out and it would not fit into the timetable. If you had asked the management, it would have been done six months ago, but management always say that.

Senator NEWMAN --We are already out of the time scale for the lower price under the original contractual terms, are we not?

Senator Robert Ray --Yes, in contractual terms. However, it is a buyer's market.

Senator NEWMAN --What are the implications for the balance of ADF's force structure--in particular, the Navy's force structure?

Senator Robert Ray --You would have to think about how well you could crew submarines 7 and 8. That is one of the factors you would take into account as the first factor. Secondly, you may be looking for an air independent propulsion system, like the Stirling system, in submarines 7 and 8. You may retrofit it to other submarines. Those are the sorts of things you would have to take into account. You would take into account the cost. All those things are important. I acknowledge that there is a force multiplier that gives 7 and 8 a big lift. It is not a lift just of 25 per cent; if there is a force multiplier there would probably be a lift of about 50.

Senator NEWMAN --It also affects the ADF's force structure. That is the question I asked. What are the implications for the force structure?

Senator Robert Ray --In terms of setting aside things you may have planned, it would be substantial, in my view, if it was to be done out of the existing forward budget allocations. That is one of the reasons, even though I am enthusiastic for submarines 7 and 8, I have not believed that it should take such priority as to sacrifice these other projects. I hope you remember that if it is an election promise by either side, whichever side gets up, it has to be paid for--and not by Defence.

Sitting suspended from 12.46 to 2.02 p.m.