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Economics References Committee
Future of Australia’s naval shipbuilding industry
- Parl No.
- Committee Name
Economics References Committee
ACTING CHAIR (Senator Edwards)
Carr, Sen Kim
Conroy, Sen Stephen
Edwards, Sen Sean
CHAIR (Senator Dastyari)
Canavan, Sen Matthew
Xenophon, Sen Nick
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Content WindowEconomics References Committee - 19/02/2015 - Future of Australia’s naval shipbuilding industry
EDWARDS, Mr Martin, General Manager, Current Operations, ASC Pty Ltd
WHILEY, Mr Stuart, Interim Chief Executive Officer, ASC Pty Ltd
Committee met at 09:32.
ACTING CHAIR ( Senator Edwards ): I declare open this hearing into the Senate Economics References Committee's inquiry into the future of Australia's naval shipbuilding industry. The Senate referred this inquiry to the committee on 25 June 2014 for report by 1 July 2015. As part of this broader inquiry, the committee resolved to inquire into the tender process for the Royal Australian Navy's new supply ships, as its first order of business. The committee reported on this matter on 27 August 2014.
The committee also reported on developments related to the acquisition of Australia's future submarine. This report was tabled on 17 November 2014. The committee has received 37 submissions so far, which are available on the committee's website. The closing date for submissions was 1 December 2014.
These are public proceedings, although the committee may determine or agree to a request to have the evidence heard in camera. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee. Such action may be treated by the Senate as contempt. It is also a contempt to give false or misleading evidence to a committee. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer, having regard to the ground on which it was claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may also be made at any other time. Witnesses should speak clearly into the microphone as these proceedings are being recorded by Hansard.
Before we proceed, and in the absence of the Chair, Senator Dastyari, I would like to put on the record my absolute outrage at what I believe is a complete abuse of Senate committee process. In all my time in this building, in this office, I have never been denied a witness to a committee hearing. I have been denied—
Senator Canavan interjecting—
ACTING CHAIR: Labor has denied the Defence Materiel Organisation from appearing here this morning, so we cannot pursue the competitive evaluation process and we cannot fully ascertain how you people, Australian shipbuilders, can compete in this process. I think it is rank hypocrisy. I can only assume that you want to deny the Australian public any transparency into this process—
Senator Kim Carr interjecting—
Senator Conroy interjecting—
ACTING CHAIR: so that you can ride this electoral donkey all the way to the next election.
Senator Kim Carr interjecting—
ACTING CHAIR: You actually do not want ships built in this country, because it suits your political purposes.
Senator Conroy interjecting—
Senator Kim Carr interjecting—
ACTING CHAIR: With that, I welcome witnesses from ASC Pty Ltd. I thank you for appearing today. I am sure you also would have been interested in DMO's appearance today.
Senator KIM CARR: Who wasn't?
Senator CONROY: What meeting?
Senator KIM CARR: When was the meeting where this was discussed? It is a wild accusation you are making.
ACTING CHAIR: I invite you to make a brief opening statement, should you wish to do so.
Mr Whiley: No, we do not wish to do so, thank you.
ACTING CHAIR: Would you have liked the opportunity to sit behind and hear from Defence Materiel Organisation about a competitive evaluation process this morning? You are the nation's pre-eminent shipbuilders.
Mr Whiley: Obviously, we would be interested in anything government has to say about the future submarine acquisition process.
Senator EDWARDS: Have you had any dialog with the government since the Prime Minister gave a commitment to involve Australian shipbuilders in the competitive evaluation process?
Mr Whiley: No, but we stand ready for those conversations.
Senator EDWARDS: Are you being proactive? Have you reached into the defence minister's office and sought him out?
Mr Whiley: No, we have not. As you know, the defence minister was at ASC two weeks ago, but we definitely have not sought him out since then. But in terms of being proactive inside the organisation, we are certainly thinking about the future.
Senator EDWARDS: Since Tuesday of last week nobody in your organisation has sought out any kind of competitive evaluation process from the defence minister?
Mr Whiley: No.
Senator EDWARDS: Why not?
Mr Whiley: We assumed that we were going to be informed by government on that process.
Senator EDWARDS: You are a company. You operate independently of government. Your fortunes are tied to your productivity and your profitability. Correct?
Mr Whiley: Yes.
Senator EDWARDS: Are you being entrepreneurial in sitting back?
Mr Whiley: I do not think we are sitting back. The debate is ongoing about the process. Only a little bit of time has passed since the announcement was made. We are waiting to be contacted—
Senator EDWARDS: Why aren't you kicking in the door? I have been selling things a long time in my life, and I would be rat-tat-tat on the door.
Senator KIM CARR: You sold them a pup; that is the sad truth.
Senator EDWARDS: You are unbelievable. You have denied me a witness—a government senator; a government department—because you do not want ships built in this country, because it suits your political purpose. How shallow.
Senator CONROY: We could get David Speers on to interview you again, if you like.
CHAIR ( Senator Dastyari ): Can we get back to the witnesses.
Senator EDWARDS: We can get Chris Bowen to talk about the tax threshold too.
Senator CONROY: Can I ask a question?
CHAIR: Senator Conroy, Senator Edwards has the call.
Senator CONROY: He took the call himself as the chair.
Senator EDWARDS: Because we were starting at 9.30. I was the chair.
CHAIR: As deputy chair, you would have had the call first up.
Senator CONROY: Ask one.
Senator EDWARDS: I am asking.
CHAIR: Senator Edwards has the call.
Senator EDWARDS: I think I asked the question.
Mr Whiley : I thought we answered the question.
CHAIR: Can we ask the question again so there is clarity about it.
Senator EDWARDS: I just want to know: are you prepared to sit back and wait for government to come to you as a company with thousands of jobs on the line? Are you now prepared to sit back as management of that company—when you have sat in front of me at inquiry after inquiry after inquiry begging for an opportunity to be involved in this process—
Senator CONROY: Yes; it is all your fault!
Senator EDWARDS: twiddling—maybe—your thumbs waiting for the documents to arrive in the mail?
Mr Whiley : I do not think we are twiddling our thumbs. Behind the scenes we are actually strategising and preparing the tools that we may need.
Senator EDWARDS: Tell me what you are doing behind the scenes.
Mr Whiley : Obviously, an endeavour of this magnitude requires a lot of skills and a lot of capability. Behind the scenes we are looking at the tools and the models and the capabilities that are required to support this type of endeavour. But it is really difficult to actually do anything definitive until we have a clear set of requirements and directions. Once we have those, then we will respond to them.
Senator EDWARDS: When do you expect them?
Mr Whiley : That is a matter for government. Tell us.
Senator EDWARDS: Is it? This is a very important issue, and you and the unions and the Defence people—
Senator CONROY: You.
Senator EDWARDS: Me—you are quite right. I have been pleading for government to come out with some information for you. Now they have said that they will—that you will be involved. And we have not done anything for 10 days.
Senator CONROY: Have you called Senator Edwards's uncle? He might be able to help.
Senator EDWARDS: Don't be a complete buffoon.
CHAIR: Senator Conroy, Senator Edwards has the call. We are going to try and keep a level of civility.
Senator EDWARDS: Is that all you have? Is that all you have?
Senator CONROY: I have some questions.
Senator EDWARDS: You are a numbskull.
CHAIR: Senator Edwards, that is unparliamentary.
Senator EDWARDS: I have never been denied a witness, and I do not know any other precedent.
CHAIR: Let's be clear.
Senator EDWARDS: No. You used the numbers to block a witness.
CHAIR: We never had a meeting. There was never a meeting to actually discuss it.
Senator EDWARDS: Come on. You and I met yesterday, and the witness was blocked.
CHAIR: Senator Edwards, you have the call.
Senator EDWARDS: I will come back.
Senator CONROY: I just want to go through the events of the last few days to try and get an understanding of where things are up to from your perspective. Senator Edwards indicated, in an interview recently, that on Friday ASC were not allowed to bid, but on Monday you were allowed to bid. Had you been instructed you were not allowed to bid?
Mr Whiley : No, never.
Senator CONROY: Have you been instructed that you are now allowed to bid?
Mr Whiley : No.
Senator CONROY: The minister flew with Senator Edwards and a range of people down to the front gates of the ASC and stood where they promised previously and made the announcement that they would build 12 right there. Did he seek a meeting with you when he came down to Adelaide to inform you of the government's new position?
Mr Whiley : Not specifically on this. It was just a general meeting regarding our capabilities and showing him what we do.
Senator CONROY: This is on the morning?
Mr Whiley : On the morning.
Senator CONROY: Did you have a meeting with him?
Mr Whiley : Not a private meeting. We met in the ASC boardroom with the number of the senators as we talked about what we are doing, and we walked around the site.
Senator CONROY: That was with all of the team that was with you?
Mr Whiley : Yes.
Senator CONROY: So the minister at no stage indicated to you that you were now allowed to bid?
Mr Whiley : No.
Senator CONROY: So you actually had a meeting with the minister and half a dozen or more of the Liberal Party's finest in South Australia and there was no discussion of the new process that was being undertaken?
Mr Whiley : There was no discussion about the process, no.
Senator CONROY: Was the press conference before or after the meeting?
Mr Whiley : It was after. Meeting is a very loose word; it was a general get-together to—
Senator CONROY: You welcomed them and then took them out.
Mr Whiley : We welcomed them and walked them around the site, so it was after we had done the walk-around and shown them the capability.
Senator CONROY: Did you meet with the minister after that?
Mr Whiley : No—only to say, 'Thank you for coming and'—
Senator CONROY: Okay.
Mr Whiley : So there was no discussion.
Senator CONROY: I will take your lead and not describe it as a meeting, but when you were with the minister and all the Liberal Party senators and members, the minister did not say to you, 'You can bid now'? He did not say, 'There's now a competitive evaluation to take place'? Did he use those words at any stage? Did anyone in the room use those words at any stage?
Mr Whiley : I did not hear them.
Senator CONROY: So the first you heard of them probably was when you were watching the press conference.
Mr Whiley : That is right, yes.
Senator CONROY: So, the minister, in front of you, had the opportunity to tell you there was going to be a competitive evaluation and what that meant, and there was no conversation about this whatsoever.
Mr Whiley : There was no conversation about the process, no.
Senator EDWARDS: And you denied us DMO here this morning—
Senator CONROY: No, we did not.
Senator EDWARDS: to talk about the competitive evaluation process.
Senator CONROY: I am just asking questions of whether or not the minister, on the day that you held a press conference to announce a new process, took the time in the gathering, at which you were present, to actually explain the process to the ASC. The answer is no.
Senator CANAVAN: I do not think Senator Conroy can handle the truth, Senator Edwards.
Senator EDWARDS: You can't handle the truth!
Senator CONROY: I can handle David Speers.
Senator KIM CARR: I suppose you would like the truth, would you?
Senator EDWARDS: The opposition denies again the department the opportunity to appear—extraordinary.
Senator CONROY: Back to my questions, I am just trying to establish some facts. So it seems that the Liberals' finest from South Australia and the minister went to the ASC and at least were gathered in a room with Mr Whiley. Mr Edwards, were you present?
Mr Edwards : No, I was not.
Senator CONROY: You were not present? They gathered at least with Mr Whiley and never mentioned a competitive evaluation there.
Senator EDWARDS: Process.
Senator CONROY: They never mentioned a competitive evaluation process there, at any stage, when they had full opportunity to. Then toured the base and held a press conference and the first time you were aware that there was a new process was probably watching the TV or perhaps standing there, outside, watching the press conference live.
Mr Whiley : That is correct.
CHAIR: I do not understand how these thing work, so my apologies. When do you get the call that the minister is coming? How does that work? Do you get a call the night before or the day before? Just explain to me the process of when you were notified. It was on a Tuesday morning, correct?
Mr Whiley : Yes.
CHAIR: Did you get called on the weekend or the Monday? When did you get the call and who called you saying, as is completely appropriate, 'By the way, the minister is coming?' When did you know?
Mr Whiley : I got notified on the Monday through DMO that the minister was coming.
CHAIR: What time did they call you?
Mr Whiley : In the afternoon, about 2.30 or three o'clock.
Senator EDWARDS: You would have had to have been asleep not to know.
CHAIR: No, that is fine. I am trying to work out how these thing work. You had not been spoken to on the weekend; that was the first call you had been given. There was obviously a fair bit of media about promises from the government and so on. No-one had spoken to you until 2 pm on Monday and that was only a call to tell you the minister was coming the next morning—is that right?
Mr Whiley : That is correct.
Senator CONROY: So you took the call on Monday, organised the site visit and the tour, met in the boardroom and finished the press conference outside, and at no stage did anybody up until the press conference mention a competitive evaluation process. Were you physically at the press conference, Mr Whiley, or had you retreated inside?
Mr Whiley : No, I was standing to the side. I actually could not hear what was being said, so I did not hear—
Senator CONROY: Okay, so you had not even heard? So you missed that?
Mr Whiley : I missed that.
Senator CONROY: Fair enough.
Mr Whiley : I did not hear until afterwards what had been said, because I was standing behind, in the background.
Senator CONROY: And so when DMO phoned to say, 'The minister's coming with an entourage of the South Australian Liberal finest,' they did not mention to you that there was a new process?
Mr Whiley : No.
Senator CONROY: Has DMO been in touch with you since then?
Mr Whiley : No.
Senator EDWARDS: I would like to ask them why not.
Senator CONROY: Well, that would be a good question, and I would probably ask them—
Senator EDWARDS: Well, we cannot ask them. We cannot ask them.
Senator CONROY: They will be around next week, but I am happy to ask them. I will be, in fact, game to ask them.
Senator EDWARDS: Well, you will now that you have been outed.
Senator CONROY: So I just want to make sure I have got this right. So the DMO phone you on Monday.
Mr Whiley : That is correct.
Senator CONROY: They do not tell you that there is a new process. The minister and Senator Edwards and gang turn up, meet with you, tour the facility and do not mention there was a process. They held a press conference announcing a process, and that was Tuesday last week, so it is just over a week and you have not heard from the minister, the DMO, the department or anybody else about the new process yet?
Mr Whiley : That is correct.
Senator CONROY: Now, just going back, I just want to again verify that you were unaware that you were not allowed to bid for the process.
Mr Whiley : I was unaware of any restrictions on ASC regarding the future submarine process.
Senator CONROY: Right, okay. So when Senator Edwards said you were out on Friday and you were in on Monday, that was news to you in both directions? You did not know you were out in the first place, and you did not know you were in.
Mr Whiley : I did not know that in fact anything had changed.
Senator EDWARDS: The process was announced two days before we got there though, wasn't it? That is the reality, because the Prime Minister called me and said that Australian shipbuilders—
Senator KIM CARR: You announced the process.
Senator EDWARDS: would be able to compete.
Mr Whiley : I do not think that is a definition of process. That was just a clarification, I think.
Senator CONROY: So Senator Edwards is saying you made the announcement when you did your press conference?
Senator EDWARDS: It was hard to miss.
Senator CONROY: Yes, but there are a few people who were wishing—
Senator KIM CARR: It is a convention of policy, custom and practice that the minister announces the policy.
Senator CONROY: The Prime Minister did not announce the process. The minister did not announce the process. A South Australian backbencher announced the process and—
Senator KIM CARR: And you were repudiated the next day.
Senator CONROY: So it is no shock to them that Mr Whiley was perhaps doing something other than watching Sky TV on that afternoon, Senator Edwards. I would be hoping you would be having a family life.
Senator EDWARDS: We will get back to Mr Shorten's ASC visit shortly, when he went down on his xenophobic rant on the back of a truck and how much notice he gave you for that visit, and who was involved and how he talked—
Senator CONROY: He was not announcing the process.
Senator EDWARDS: to you about how he can be helpful in securing Australian shipbuilding jobs by ensuring that they—
Senator CONROY: Do you have a question?
CHAIR: Senators, let us all try and at least—
Senator EDWARDS: hold the government accountable.
Senator CONROY: Is this another stream of consciousness with your uncle? Because I would like to finish my question.
Senator EDWARDS: Oh, stop being a buffoon.
Senator CANAVAN: There is a fascination with your uncle there, Senator Edwards.
Senator CONROY: There are a lot of people who are fascinated by your uncle now.
Senator EDWARDS: Well, there you go.
Senator CONROY: Okay, so you were unaware that you were restricted from bidding? So in your mind you were able to bid before the famous press conference?
Mr Whiley : Yes.
Senator CONROY: I read yesterday online, I think, that a DMO official is now going on another tour of the world, DMO having just come back from a tour of European facilities, to inform the European bidders of what the process will be. Did you see that yesterday?
Mr Whiley : No, I did not see that.
Senator CANAVAN: Isn't that a question for DMO?
Senator CONROY: I am just asking if Mr Whiley saw the article.
Mr Whiley : No, I did not.
Senator CONROY: I think it is a Mr Gould who has indicated, publicly, that he will be touring Europe. Perhaps the DMO, having just come back from touring Europe, could have informed them, without there needing to be a second trip. Did you not see that article?
Mr Whiley : No.
Senator CONROY: Has Mr Gould been in touch with you?
Mr Whiley : I had a meeting on another matter with Mr Gould yesterday.
Senator CONROY: Did he explain the process to you?
Mr Whiley : No.
Senator CONROY: Even though you met Mr Gould yesterday, you still have no information whatsoever about the process.
Mr Whiley : As I said, this was pertinent to a different issue. It was not related to a summary.
Senator CONROY: It is a pretty topical issue at the moment, the process. I would have thought that Mr Gould would have wanted to say, 'By the way, this is a competitive evaluation process. Here are the details of what it is.'
Senator CANAVAN: This is a multi-billion-dollar contract. Presumably there is more probity than just 'by the way'. It might have worked in the NBN, but I think this government is not going to be—
Senator CONROY: We are hoping there is some probity involved. That is what we are seeking. I am sure you would support there being probity.
Senator CANAVAN: Yes, I would—
Senator CONROY: It was news to you when Senator Edwards announced you have been excluded, and it is news to you that you are now allowed to bid.
Mr Whiley : Yes.
Senator CONROY: Even though you have met with the official, Mr Gould, yesterday—who is going on a world tour to inform people of the process—you still have no information a week later, including a meeting with the relevant official who is doing the world tour.
Mr Whiley : That is correct. It is a matter for government when they inform us of the process.
Senator CONROY: I accept that knocking on government doors, demanding answers, is not a good way to get business done. So at this stage, you have not received from the government any information or specifications about capability requirements to be tendered against, or bid against, in this process. You do not know what capabilities we are asking the submarines to be built to.
Mr Whiley : We have no information to the government's requirement for a future submarine at this time.
Senator CONROY: You have no idea what size submarine you have to build, at this stage.
Mr Whiley : As I said, we have no details of any requirements relating to the government's requirement.
Senator CONROY: You have no details on the size, no details on the displacement, the range or anything at all. Is it hard to put in a bid without any of that information?
Mr Whiley : We have no information to compare the bid against.
Senator CONROY: Have you been given any guidelines?
Mr Whiley : We have been given no information relating to the government's requirements to choose a submarine.
Senator CONROY: The competitive evaluation process has been mentioned a fair bit in recent days. Have you been able to find a definition of it in the Defence Procurement Policy Manual? I am sure you must have gone looking for it when you heard the announcement.
Mr Whiley : Actually, I did not, no.
Senator EDWARDS: Are you saying it does not exist?
Senator CONROY: No, I am asking if he could find it in the manual.
Senator EDWARDS: Are you saying it does not exist?
Senator CONROY: I am asking Mr Whiley if he had looked it up in the manual.
Mr Whiley : I did not look it up in the manual.
CHAIR: That was a point of clarification, Senator.
Senator EDWARDS: That was a point of clarification.
Senator KIM CARR: I want to be able to understand it.
Senator CONROY: We will come to all that. The Defence Procurement Policy Manual is 439 pages long. I am not aware that anybody has been able to find a definition of 'competitive evaluation process' in the manual. Is that consistent with your information?
Senator CANAVAN: These are questions for DMO, Senator Conroy.
CHAIR: No, they are questions for ASC. ASC are the ones who are meant to be bidding for this.
Senator CONROY: Correct.
Senator CANAVAN: But they are not the ones asking for the tenders, and they should not know—
Senator CONROY: I am asking if Mr Whiley has been able to find a competitive evaluation process definition in the 439-page Defence Procurement Policy Manual.
Mr Whiley : I have not looked for it.
Senator CONROY: Is it mentioned in the Public Governance, Performance and Accountability Act? Have you had a check in there?
Mr Whiley : I have not looked for it anywhere.
Senator CONROY: It is not in the Commonwealth Procurement Rules or the Defence Act or—
Senator EDWARDS: On a point of clarification, Chair: I will help Senator Conroy. DMO is already on the record acknowledging the term and history of competitive evaluation processes. There have been a number of them.
CHAIR: Is this a question, a point of order or a clarification?
Senator EDWARDS: You as the shadow Defence minister probably should know that—just like the tax-free threshold.
CHAIR: It is a debating point, not a point of clarification.
Senator CONROY: I phoned my uncle; he did not know.
Senator EDWARDS: He was probably at a wedding!
Senator CONROY: He could have been. It could have been the wedding you invited him to. The only place I have been able to find mention of a competitive evaluation process is the government's own talking points, which were published by The West Australian newspaper. Have you seen that?
Senator EDWARDS: The acting Chief of Defence acknowledged this last week.
CHAIR: Senator Edwards, you have had plenty of opportunity. Let Senator Conroy ask his questions.
Senator CONROY: Mr Whiley, have you seen that West Australian newspaper article?
Mr Whiley : No.
Senator CONROY: I will help you out. These are the talking points given to backbenchers, including the two senators on my left. It said:
Decisions on a design partner and construction of the submarines will be based on a competitive evaluation process managed by the Department of Defence that takes fully into account capability requirement, cost, schedule, technical risk and value for money considerations,
Any Australian company that can credibly meet these criteria will be considered on merit, as will potential international partners.
Senator Abetz clarified it all on 10 February, when he said: 'A methodology will be employed whereby an evaluation is taken on a competitive basis.' I am sure that has cleared it up for you, and you will draw the papers up straightaway.
Senator EDWARDS: Are we going to talk about Australian shipbuilding jobs here, at any point?
Senator CONROY: We are trying to make sure there are some. We are not sending ships offshore.
Senator EDWARDS: Where is DMO?
CHAIR: Senator Edwards, let Senator Conroy ask his questions.
Senator CONROY: Are you aware or do you have any documentation to assist you with understanding what a competitive evaluation process is?
Mr Whiley : No. I took the words the government used to describe the selection of the future submarine process at face value. It is a question for government to outline the meaning behind those words.
Senator CONROY: Even though you met Mr Gould yesterday, who announced he is touring the world to explain it to other countries, he did not take that opportunity to explain it.
Mr Whiley : As I said, I was meeting Mr Gould on other matters yesterday.
Senator EDWARDS: Chair, regarding the competitive evaluation process, the C27J aircraft acquisition and the MH60 helicopter acquisitions were done on a competitive evaluation process. As the shadow Minister for Defence in this country, you might have known that. I am only a backbencher.
Senator CONROY: A competitive evaluation to existing planes—that physically existed—is what Senator Edwards is describing. It is a little different from submarines.
Senator EDWARDS: You said you have never seen it before.
Senator CONROY: I did not say I have never seen it. I asked if there was a description of it in a manual anywhere.
CHAIR: Can we stop the debating and get back to questions.
Senator EDWARDS: We are talking about jobs.
Senator CONROY: Trying to pretend that two existing planes—that physically exist—and a process to compare them is the same as comparing non-existent subs—that do not exist—where no-one has explained the capability, range or any other part of the process is a little bit different.
CHAIR: Please turn this into questions for the witnesses. I have plenty of questions.
Senator EDWARDS: It is clear that you four people are here just for the theatre.
Unidentified speaker: Exactly.
Senator CONROY: The ASC is owned by the Department of Finance, in terms of its shareholders. Is Finance and Defence joint, or is it just Finance?
Mr Whiley : No, just Finance.
Senator CONROY: Have you heard from the finance minister—who owns your company on behalf of the people of Australia—what the new process is?
Mr Whiley : No.
Senator CONROY: Were you told by the finance minister, previously, that you were not entitled to bid?
Mr Whiley : No.
Senator CONROY: Have you been told by him, subsequently, that you are now entitled to bid?
Mr Whiley : No.
ACTING CHAIR: Why don't you ask him?
Senator CONROY: Well, he was never not allowed to bid, so nothing changed. You sold your vote for nothing, because no-one had told Mr Whiley he was not allowed to build.
ACTING CHAIR: Why don't you ask him? What is precluding you from asking him?
Senator CONROY: In your mind, Mr Whiley, nothing has actually changed with the announcement that Senator Edwards made the other day?
Mr Whiley : No. We stand ready to support government in the selection of the future submarine.
Senator CONROY: Were you expecting to be part of that process, before Senator Edwards's famous press conference.
Mr Whiley : We would certainly like to think we would be part of that process—yes.
Senator CONROY: But the government had not asked you to put forward a bid?
Mr Whiley : No.
Senator CONROY: You would be aware that unsolicited bids have been submitted into the government so far by at least a German consortium and possibly a Swedish consortium?
Mr Whiley : I heard the rumour that that was the case.
Senator CONROY: There have been press articles saying that this was the case. No-one has denied that.
Mr Whiley : No.
ACTING CHAIR: Why didn't you put one in?
Mr Whiley : I do not think it was appropriate for us and it did not fit in with our strategy as to how we want to undertake the selection process when we get involved, effectively.
ACTING CHAIR: There is no space to be a shrinking violet, I would have thought.
Mr Whiley : The other issue is that we do not have a design to put forward.
ACTING CHAIR: You have design partners around the world you could talk to.
Senator CONROY: Is it hard to do the design when you do not know what you are designing, in terms of size, range and capability?
Mr Whiley : That is right. At this point in time government have not specified what their requirement is for the future submarine. It is very hard to speculate on what that requirement is.
Senator CONROY: In November estimates last year you, Mr Whiley, were asked by Senator Wong: 'I assume that if there was a competitive tender for the Australian future submarine project ASC would seek to be involved?'
Mr Whiley : Yes.
Senator CONROY: You said, 'If that was appropriate, yes.' When you said 'if it was appropriate' did you mean that the government had to give you permission?
Mr Whiley : No.
Senator CONROY: At the same estimates in November last year you provided the Senate with an estimate to build 12 new submarines. That was for between $18 billion and $24 billion. Is that the figure the ASC still has in mind, notwithstanding the uncertainties.
Mr Whiley : The figure I gave at estimates last time was in regard to a model ASC had generated, based on the Collins design. It was in regard to the development of the tools that we may need in future submarines. So it was actually an extrapolation of the Collins design escalated at current—it does not reflect any government's future submarine requirement.
Senator CONROY: I accept that point. You have helped the committee. Can you explain the difference in figures. I understand it was the difference between building 12 3,000-tonne subs at $18 billion and building 12 4,000-tonne subs at $24 billion. I understand that that was where the range came from.
Mr Whiley : As I said, it is against Collins and not against any future submarine requirement as defined by the government.
Senator CONROY: But at this stage you cannot really refine those estimates until the government actually gives you something to refine them against?
Mr Whiley : No. That was a tool that we used—when we are involved—to actually test some of our hypotheses in that space.
Senator CONROY: You mentioned the design capability before. What skill sets would ASC need to supplement for a new build process?
Mr Whiley : We have a large range of skill required for a build but the fundamental one we do not have is the conceptual design process required for a submarine design.
Senator CONROY: Would you have to bring that skill set in or would it be a partnership? What are your options?
Mr Whiley : The obvious option would be partnering with an overseas submarine designer or design and build agency to see how we could work together moving forward. ASC's pedigree is such that we have done that in the past with Kockums. We have a submarine design agency, EB, who are currently working with us helping us inside the sustainment environment.
Senator CONROY: You have been with the ASC for 25 years. I think you told Senator Wong you were one of the first people through the gate.
Mr Whiley : That is right.
Senator CONROY: So you have a reasonable amount of experience in the submarine building industry?
Mr Whiley : That is right.
Senator CONROY: How many extra people do you think you would need for a design team—these are people you do not have at the moment?
Mr Edwards : The design is quite complicated. It is often built on the previous history of a design from somewhere else. We do not have that pedigree or history. You do not just create something out of thin air.
Senator CONROY: No, I am asking how many people you would need to be ready. If you said, 'We are going to bring it all in-house. We are going to hire some people either as consultants or partners,' how many people would you need to be involved in that process? From your experience of this sort of thing, would it be 20? Would it be 100?
Mr Whiley : For only a rough point of reference, we can provide you with our experience of the design process for Kockums. I would estimate there were probably around 450 to 500 engineers and designers in the design phase. But, again, depending on the future submarine requirements, it may be a different model. So again it comes back to what the requirements are. They inform the size of that model moving forward.
Senator CONROY: As a publicly owned company, are there any restrictions on your ability to partner? Are you allowed to form a consortium with an individual partner or do you have to you provide the same opportunities to all bidding partners? If three companies approached you, could you partner up with all three or can you enter an exclusive partnership? Do you have any restrictions on your—
Mr Whiley : I am not aware of any restrictions.
Senator CONROY: So you could partner up with just one company and, if others came to you and said, 'We would like to partner up,' you can say, 'No, sorry. We're only partnering up with one—
Mr Whiley : I am not aware of any restrictions.
Senator CONROY: Could you take that on notice. If there is any change to that, the committee would be interested in that.
Mr Whiley : Yes, okay.
Senator CONROY: Someone put to me that, as part of the constitution or guidelines, you had to treat all potential bidders equally. I am just trying to get to the bottom of whether that is true or not and whether or not you can enter into an exclusive relationship.
Mr Whiley : We will take that on notice.
Senator XENOPHON: Mr Whiley, how many people do you have working at ASC in Adelaide on Collins related sustainment activities?
Mr Whiley : Approximately 850.
Senator XENOPHON: Does that include contractors who are part of that supply chain?
Mr Whiley : The contractor numbers vary depending on where we are in the scope of the full-cycle docking work, so it is hard to give you an accurate number of those.
Senator XENOPHON: But can it vary from zero to 100 or zero to 300 depending on the nature of the work?
Mr Whiley : Yes. Our labour pool can probably go from about 20 to 150. Other contractors on site can go from 10 to over 100. The number I gave you of 850 was for the ASC employees for ASC North.
Senator XENOPHON: But the other jobs could push it up to 1,150 or 1,200?
Mr Whiley : They could do, yes.
Senator XENOPHON: The bulk of this work relates to what? Is it to conduct full-cycle dockings or something else?
Mr Whiley : The work we do at ASC North is full-cycle docking type work.
Senator XENOPHON: A large proportion of your submarine workforce is highly specialised?
Mr Whiley : They certainly have specific competency and skills related to submarines, yes.
Senator XENOPHON: And these specialist skills have been cultivated over how many years?
Mr Whiley : I think we have about 250 people still there from the build. That has been 20 or 25 years. So they have been building their skills base for a long time.
Senator XENOPHON: When is the last Collins class full-cycle docking scheduled to take place?
Mr Whiley : The current plan has it finishing in around 2026.
Senator CANAVAN: I was not at the hearings in Adelaide in October last year. I apologise that I could not make those. I want to ask for your experience about how submarines are generally tendered for. Is there an open tender process for them normally in other examples?
Mr Whiley : I think that is a question for government. The buying of a submarine is something you do once in 50 years. It is not something we could comment on at all. It is a government question.
Senator CANAVAN: I read your evidence in the Hansard. Was there an open tender process for the Collins submarine?
Mr Whiley : Again, I was not there at that time, so that is a question the government.
Senator CANAVAN: I thought you were, sorry.
Mr Whiley : No, the contract had already been let about 29 years ago.
Senator CANAVAN: You were asked questions about the process and you did say the process for the: submarine was a good one, I thought.
Mr Whiley : I do not think I said that. I do not think I made any comment on the process.
Senator CANAVAN: I am referring to the Hansard from 14 October. Senator Carr quoted John White saying that procurement practices associated with competitive project definition studies could be appropriate. You said:
Yes. That is basically what the Collins was procured upon.
So you are familiar with the Collins procurement process.
Mr Whiley : The procurement practices at the time were applied.
Senator CANAVAN: I am struggling here, Mr Whiley. Were you familiar with the Collins procurement process or were you not?
Mr Whiley : I was not involved in the Collins procurement—
Senator EDWARDS: But you have a corporate knowledge of it.
Mr Whiley : I have no corporate knowledge. I was not a member of ASC at the time of the procurement process for Collins. It was before my time.
Senator CANAVAN: That is okay. I am just struggling because you answered that question in October by saying that the Collins was procured on that basis, so you did have some knowledge—
Mr Whiley : I assumed—and maybe that was a wrong assumption—that the procurement processes at the time were—
Mr Edwards : I can comment that we are aware that there was a project definition stage involving a number of parties and the company was formed at the completion of that process. That is how our company—
Senator CANAVAN: Were there limits around that process, though? It was not just open to all comers? Is that your understanding?
Mr Edwards : We are not familiar with that.
Mr Whiley : We do not know.
Senator CANAVAN: It would be good to have DMO here, wouldn't it?
Senator EDWARDS: These poor souls here have just been—
Senator CANAVAN: Thrown to the lions? I wanted to ask some more about the earlier evidence. I was not there, so I was not able to ask follow-up questions. In your opening statement about submarines you said that:
… one option that could merit exploration is a hybrid approach, one that optimises the level of in country and overseas build.
Is that still ASC's view?
Mr Whiley : That is one option, but it is for government to make that selection.
Senator CANAVAN: What sort of split between in-country and overseas build do you think is appropriate going forward?
Mr Whiley : Again, that is not a question for us. That is a question for government.
Senator CANAVAN: But have you thought about that yourselves?
Mr Whiley : We have considered the options but it is not a question for ASC.
Senator CANAVAN: Senator Conroy asked earlier about overseas partners. Have you considered who you might partner with?
Mr Whiley : We have certainly considered those issues, yes.
Senator CANAVAN: Who are those countries?
Mr Whiley : I do not think it is appropriate to make those comments now.
Senator CANAVAN: Have you considered how much work you would do here relative to overseas with those partners?
Mr Whiley : No, we have not considered that level of detail?
Senator CANAVAN: You have not considered that at all?
Mr Whiley : No.
Senator CANAVAN: I want to ask about the air warfare destroyer program. Where is that at at the moment?
Mr Edwards : We are currently working with government in the reform process. We are working through phase 2 of that process as we improve performance in the program and productivity in the yard.
Senator CANAVAN: What is the reform process exactly?
Mr Edwards : That is something that the government probably could comment on in more detail as part of that process is working with them.
Senator EDWARDS: We cannot get the government here.
Senator CANAVAN: We have not got the government here, Mr Edwards. Presumably you are aware of the reform process being an integral partner in the contracts?
Mr Edwards : Yes, at the moment we are.
Senator CANAVAN: What are you doing with the government at the moment?
Mr Edwards : Providing more shipbuilding capability into the shipyard, working with partners such as BAE. As well there has been some reallocation of blocks to other yards. We are focusing now on productivity and improving or rebaselining the program to give a better outcome for the cost and schedule and stability in the program.
Senator CANAVAN: What is the delay at the moment we are looking at compared to the original time frame?
Mr Edwards : I think it would be inappropriate to comment on that until the rebaselining exercise is completed as part of the reform process with the partners we are working with.
Senator CANAVAN: When is that process going to be completed?
Mr Edwards : It would be within a few months from now. It will probably be two or three months from now. It is a matter for the reform team themselves to comment on.
Senator CANAVAN: Okay.
Mr Edwards : We are supporting that process and we will continue to support it.
Senator CANAVAN: In that previous evidence you gave in Adelaide about the AWD program and the problems and challenges you have had, you said:
These issues have been documented, but examples include reinstating ship construction skills at various locations across Australia, transitioning a European production design into an Australian environment and re-establishing a somewhat dormant supply chain from Europe to support the Australian construction.
That is quite a nice summary, I think, of the challenges you have faced. But won't you face almost all of those same challenges with a submarine project?
Mr Edwards : From experience, I think—
Senator CONROY: You are not trying to bail Senator Edwards out by bagging the ASC again, are you?
Senator CANAVAN: I do not quite understand the interjection. Sorry, Mr Edwards; I think you were going to actually say something substantial there. I do not think Senator Conroy wants that today, so he interjected. You will face the same challenges, won't you?
Mr Whiley : I think that is hypothetical. We are not sure what the government's selected process or model is going to be for future submarines—
Senator CANAVAN: I am not asking about the government, though. You obviously want to bid for this project. You have already considered partnering with overseas partners. I presume some of those are in Europe, as they have been for the AWD project. You will obviously need to consider those challenges in bidding. Won't you face the same challenges with shipbuilding as you have the AWD? You will need to partner with a European country, we will need to reinstate our naval submarine construction skills and presumably we do not have a supply chain on submarine construction with Europe at the moment and have not for some time.
Mr Edwards : I think there is a number of issues as far as the final build solution and the approach taken. What I can say is that, as a company, we have a lot of strong capability experience now given the programs we have been involved in—Collins, particularly. We have over 250 people who have been involved since the original build days, so we hold that experience and knowledge. With AWD we have obviously been learning. We have built a significant capability in the last seven years at Techport. We now have over 1,100 tradesmen working at that greenfield site. They are building ships. We have gained some experience. We just remain open to support the government—
Senator CANAVAN: I am really interested in those lessons. I am not here as a representative of the government; I am here as a backbench senator from Queensland. We as a Senate committee have a job to oversee the spending of billions of dollars of taxpayers' money. So what are those lessons from AWD? How can you do it better in the future? Obviously things have not been perfect.
Mr Whiley : The process we are undertaking in getting prepared for the future submarine is asking, 'Do our lessons learn from our previous experience with both AWD and Collins?' and looking at what worked well and what did not work so well and also looking at how we strategise to improve on those issues as we move forward. But, again, how those lessons are applied is all very dependent on what model is outlaid by the government. We are considering lessons learnt and we are considering how we might mitigate those issues in the future.
Senator CANAVAN: Is that an internal process at the moment?
Mr Whiley : Yes, it is an internal process.
Senator CANAVAN: Have you got a timeline for when you will finish the concluding report or recommendations?
Mr Whiley : We are doing various iterations of that process. It is ongoing. We will continue to learn. We will continue to learn in the sustainment space and in the AWD space. Those lessons will continue to be fed into our environment.
Senator CANAVAN: So, internally, who is doing this work?
Mr Whiley : It is part of our core nature in the way we undertake work. We take lessons from each of our activates, we capture those and they get fed back into the overarching structure of the company. In terms of process improvement and—
Senator CANAVAN: So you do not have a specific team trying to provide some sort of third party—
Mr Whiley : We have a tool that captures lessons learned. We have various other groups that are set up to undertake specific tasks and specific exercises. But there is not one team dedicated just to capture lessons learned, no.
Mr Edwards : We also work with a number of capability partners who are experienced in that—Electric Boat Corporation, for one, Navantia, Bath Iron Works. They all bring their own experiences from their history to the programs we work on, aiming to build that skill and capability for Australia.
Senator CANAVAN: Have you considered bringing in some third-party management consultants or risk consultants about what went wrong?
Mr Whiley : We were very open. We have had numerous types of consultant experts and submarine designers come to the company to help us improve our performance, and we continue to do that. We are open to being an organisation that is improving. We are not—
Senator CANAVAN: I am not necessarily thinking of people in the submarine game—
Mr Whiley : No, no, I understood—
Senator CANAVAN: because obviously there is a management components to this and—
Mr Whiley : Absolutely.
Senator CANAVAN: there is a risk management component. In building a submarine, while very different from other management process, obviously there are lessons across all business development. You have not thought of bringing in somebody else to look at yourselves as a third-party and say, 'Tell us what we did wrong'?
Mr Whiley : On the contrary, we do that as a matter of course. We evaluate—
Senator CANAVAN: But you have not engaged anyone right now to do that?
Mr Whiley : In certain areas we have people engaged today doing exactly that to deal with issues in specific areas of performance.
Senator CANAVAN: Can you outline who they are then?
Mr Whiley : We have Denken, in terms of our productivity performance.
Senator CANAVAN: Are they looking at technical matters, management matters or administrative issues?
Mr Whiley : They are looking at productivity related issues in terms of our performance.
Senator CANAVAN: Are they management consultants or are they technical engineering—
Mr Edwards : These are just one of a number of technical type people we bring in to support with specific processes—
Senator CANAVAN: They are technical engineering people.
Mr Edwards : and they bring capabilities that are not readily available in most organisations. We aim to improve continually. As part of the way we work, we bring in those skills.
Senator CANAVAN: You have a board, presumably?
Mr Edwards : Yes.
Senator CANAVAN: Who is on your board?
Senator CONROY: Sophie Mirabella.
Mr Whiley : Bruce Carter, Kathy Hirschfeld, Sally Pitkin, Jack O'Connell—
Mr Edwards : I think we should take it on notice, and we can provide that detail—
Senator CANAVAN: Yes, if you can provide us a background of who they are.
Mr Whiley : That is all on our website, I believe.
Senator CANAVAN: It would be, I know, but this is not my area. It is a funny inquiry for the economics committee to have. But it does involve a lot of money, so it is fair enough for us to be looking at it. I am interested in those governance things. Have you looked at trying to change your governance since what has happened in the last couple of years? I can see that you are concentrating on the technical side of things—and, yes, the blocks did not come together properly and perhaps there were coordination issues across shipbuilding sites. But there has to be a management component to this, too, and a governance component. Have you looked at changing those processes in your organisation?
Mr Whiley : We have just gone through a major operating model restructure in terms of how we structure as a management team. Over the last nine months we have effectively restructured ourselves in terms of being more focused in our program output—so effectively putting the functions back into the program. AWD effectively has its own set of core functions to help deliver the program. Likewise, submarines has got its own set. So we have actually set ourselves up as two business units. We have gone from a structure where we had a core set of capabilities that were then distributed to an organisation where those capabilities have their own core functions. Again, that is a model we previously had operating. We tried another model, and it did not work for us—it was not successful for us. So we have actually reverted back or evolved on a previous iteration of our model moving forward.
Senator CANAVAN: Mr Whiley, have you spent your whole professional career at the ASC?
Mr Whiley : No. I have spent the last 25 years—
Senator CANAVAN: 25 years, okay.
ACTING CHAIR ( Senator Edwards ): You look quite young.
Senator CANAVAN: Yes, I did not think he would have much more than that. So you were an engineer before that?
Mr Whiley : I had been an engineer for 10 years in the UK before I came. And, Mr Edwards, have you—
Mr Edwards : Yes, I was with the Submarine Corporation for nearly 20 years. I spent five years away doing some other things in industry and returned three years ago.
Senator CANAVAN: Right. I want to understand how it works internally, because you are government-owned with a government contract. If that contract gets blown out, the losers are the government. Where does the discipline come internally to make sure you are on time and on budget?
Mr Whiley : We are a commercial entity and we have all the other pressures of any other commercial organisation.
Senator CANAVAN: Except you do not have shareholders that lose their share if you—
Mr Whiley : No, we do not have shareholders but we have to be commercially viable.
Senator CANAVAN: So when you are making decisions as a board and considering these matters, you try to maximise the profit of the business? That is the goal?
Mr Whiley : Yes, we have a five-year plan that has profit and performance targets laid out in front of us. As management, we are required to target and meet those performance requirements set by the board.
Senator CANAVAN: Have you delivered a profit? What has your performance been financially for—
Mr Whiley : Up until last year, we met all our performance targets. Last year we did not meet the performance target.
Senator CANAVAN: Is that target a profit? What is your performance target?
Mr Whiley : Yes, in terms of fees, we did not deliver a fee.
Senator CANAVAN: Do the board have certain KPIs for your net margins, return on capital, return on equity and those ratios?
Mr Whiley : We have what we call a game plan, where we have some performance targets, which we work to, that actually define what we think is important from a performance perspective, and we report to the board on those issues.
Senator CANAVAN: So what is your target for return on equity?
Mr Edwards : I think that is probably sensitive. We would rather take that on notice.
Senator CANAVAN: Can you provide us your results over the last five years?
Mr Whiley : They are in our annual report.
Senator CANAVAN: On notice, I would be interested in your return on equity, your return on assets, your net margin on revenue and your operating margin as well.
Mr Edwards : Sure.
Senator XENOPHON: Mr Whiley, I note that the ASC actively marketed a 'three for the price of two' solution for the SEA 1654 Phase 3 Maritime Operational Support Capability, the tank capability, but dropped your marketing efforts when the government announced that the job would go to either Spain or South Korea in that limited tender. While the ASC's endeavour was not successful, I think that it did show an entrepreneurial approach by the ASC in terms of marketing. I wonder why there apparently, or publicly, has not been the same level of marketing in relation to what might be your biggest potential future project—that is, the submarine project. Is that in part that you just do not have the specs yet or something else?
Mr Whiley : Sorry, we are not getting the question.
Senator XENOPHON: Sorry, I will try again. Mr Wiley, the ASC actively marketed a 'three for the price of two' solution for the tank capability, the SEA 1654 Phase 3, correct?
Mr Whiley : Yes.
Senator XENOPHON: But that was dropped because the government announced that the job would go to either Spain or South Korea. Is that correct as well? You did not proceed with that?
Mr Edwards : Yes. We understand that they have taken a different approach to that.
Senator XENOPHON: While that endeavour was not successful, it did show an entrepreneurial approach by the ASC in terms of marketing. Has there been any similar approach with respect to the future submarine project? If not, is that because you have not been given the specs yet as to what the government requires?
Mr Whiley : Sorry, I did not quite get the question. It is not coming through.
Mr Edwards : At this point in time, until we are clear on the specifications, the number of submarines and the number of options, it would be a bit presumptuous to try and push forward a solution. Until we are clear on that, we stand ready to support the government in their process or whatever acquisition process they choose to use.
Senator XENOPHON: Further to Senator Conroy's line of questioning, can you give details on any directions that your shareholder minister has given you in relation to the future submarine project?
Mr Whiley : We have received no directions from our shareholder in relation to future submarine.
Senator XENOPHON: Going back to Senator Canavan's line of questioning, where you mentioned a five-year plan, when was the current five-year plan instigated? What year was that?
Mr Whiley : We have an ongoing annual process where the ASC has a five-year rolling plan. So we have actually just gone through our recent planning exercise, and that plan is currently being reformulated as we talk.
Senator XENOPHON: Does that five-year plan allow for the future submarine project in its current form?
Mr Whiley : I am not sure what its current form is, but certainly it speculates on various aspects of the future submarine and ASC's involvement.
Senator XENOPHON: But if Australia were to build its future submarines at Techport in Adelaide, why do you think Defence or DMO should go with ASC as the builder?
Mr Whiley : The selection of a future submarine really is a question for government. In terms of ASC and what it can offer, I think that is well documented. Our learnings from Collins will certainly enhance any future acquisition process, I believe, that may be undertaken by government.
Senator XENOPHON: So you are saying that there have been significant productivity improvements at Techport over the years as a result of a number of reviews?
Mr Whiley : Yes, certainly in recent times; I think it is well documented. There was the recent report by John Coles last year. He says that the transformation has been 'remarkable' in terms of the productivity and output in terms of the yard.
Senator XENOPHON: In terms of Defence—and again this goes to Senator Conroy's line of questioning—at what level and frequency do you have communications from government on the future submarine project, given that it is such a contentious issue?
Mr Whiley : We have not had any discussions, certainly in my tenure in the role, with government on future submarines.
Senator XENOPHON: I am surprised by that. So, not even in terms of the parameters for the project, or on what it might be appropriate for the ASC to say about it, given that you would be asked questions on this in the media all the time? There is no direction, no guidance, no assistance from government on that?
Mr Whiley : No, no. The answer is quite simply no.
Senator EDWARDS: Senator Xenophon, you are surprised; I am speechless.
Senator XENOPHON: It is not a criticism of the ASC, Chair, that there has been no guidance from government. Can I just go quickly to this issue: Mr Gould from the DMO informed the Foreign Affairs, Defence and Trade Legislation Committee on the subs, in terms of reverse engineering the diesels; are you familiar with that evidence, Mr Whiley?
Mr Whiley : No, I am not familiar with what he said.
Senator XENOPHON: He gave an example of not needing to build in-country in order to maintain any future submarines because, he told the Foreign Affairs, Defence and Trade Legislation Committee:
… the knowledge and understanding of the diesels was not transferred into Australia when the submarines were first built, and we have had to recreate that knowledge by reverse engineering them to correct faults in the diesels and rebuild them here. So that is a good example of the key point that, wherever the submarine is designed and built, the really important thing is to make sure that the understanding and knowledge of the design is transferred …
Other experts have suggested that there is a connection between building the future submarines of Australia and maintaining them more efficiently and effectively in-country. How do you see the connection between the two?
Mr Whiley : I think it is really important that sustainment is considered in the design and build process, and it needs to be at the forefront and not an afterthought, and I think that is one of the big learnings from Collins. So that process and the transfer of knowledge and capability in that design-build process has to be one of the key tenets, I believe, of the government's future submarine program.
Senator XENOPHON: Further to that, can you tell the committee about any long-term savings that could be achieved through life support—the sustainment of the future submarines—by building the submarines in Australia? Are you aware, for instance, of any independent studies done on this very issue overseas? In other words, what do other countries do in terms of making sure that their sustainment process is more cost-effective by building submarines in-country?
Mr Whiley : I am not aware of what other countries do in regard to those types of models. The only learnings I have in this type of space are from Collins.
However, I can say that the learnings that ASC has gained certainly can help minimise some of those long-term sustainment issues in the government selecting a future submarine. Some of the performance issues of the design need to be considered from a sustainment perspective in that design process. We can certainly add value in that, which will ultimately mean there will be cost savings through life for the platform.
Senator XENOPHON: I do not mean to put you on the spot, but Mr Gould's assertion was that where you actually build the submarine is of lesser importance than the knowledge for maintaining it. New evidence now seems to be at odds with that. Would that be a fair assertion?
Mr Whiley : No, no I do not think that was the assertion. I think Mr Gould and I are saying the same thing. What you need to do is transfer from your build process the appropriate knowledge and capability to be able to maintain the submarines through life. I think that was what Mr Gould was alluding to.
Senator XENOPHON: In terms of the open tender process, are you aware of other submarine projects around the world being subject to an open tender process? I think the Minister for Defence said on 10 February this year that there has never been an open tender process for any submarine project around the world.
Mr Whiley : No, I am not aware of that.
Senator CONROY: I know you said that you have never been told that you were not too big. Have you been given any informal understanding? Has anyone indicated to you that you should not bother being interested?
Mr Whiley : No.
Senator CONROY: So the DMO has never said to you they are not going to be built in Australia?
Mr Whiley : No, they have never said that to us.
Senator CONROY: Are you aware of reports and claims that the DMO have told other bidders to stop saying that they can build them in Australia?
Mr Whiley : I have seen the media articles.
Senator CONROY: You would be concerned if the DMO was saying things like that to potential partners of yours?
Mr Whiley : That is speculated in the media. I do know if that is true or not.
Senator CANAVAN: We could ask DMO.
Senator CONROY: I am sure we are going to. I know you said you did not see Senator Edwards's press conference at the airport. Were you in Adelaide or Canberra when you made that announcement? It was in Adelaide where he announced that the ASC were in the bid—there had been a change in the government's policy. Are you aware whether or not the Prime Minister asked Senator Edwards to hold that interview and make announcement?
Senator EDWARDS: I did not say that.
Senator CONROY: I know that. I was not trying to verbal you there. I apologise if I verballed you.
Senator EDWARDS: I did not say a change of policy.
Senator CONROY: Your exact words at Adelaide airport on Sunday the 8th were:
I'm just telling you that the Prime Minister has called me and he's told me this and this is significant news and South Australians will be delighted, and indeed Australians.
And then the journalist asked Senator Edwards:
That's an open tender for a whole contract that ASC can compete equally with Japanese, German tenderers?
And Senator Edwards said:
A fully open tender.
I am conscious you did not see that live, but are you aware whether or not the Prime Minister asked Senator Edwards to make that announcement?
Mr Whiley : No.
Senator CONROY: So you do not know whether Senator Edwards was asked by the Prime Minister or his office to make that announcement?
Senator EDWARDS: What a circus. I apologise to you two. This is a complete abuse of Senate process.
Senator CANAVAN: He has made his point.
Senator CONROY: I have asked him to answer it.
Mr Whiley : I think I have answered the question.
Senator CONROY: Is it true, Senator Edwards? Did the DMO ask you to do that press conference? Was that true? It is, isn't it?
Senator EDWARDS: You have been here longer than I have—
Senator CONROY: You can say 'no'.
CHAIR: If you are not going to ask the witnesses anything, we should probably let them go.
Senator EDWARDS: These poor people have been brought here to this theatre.
Senator KIM CARR: Given the evidence you have given to the committee concerning the improvements in the productivity and the performance of ASC and given the evidence you have given us concerning your experience in building the Collins, what was the reaction within the ASC when the Defence Minister last November said that you could not be trusted to build a canoe?
Mr Whiley : There was no reaction from my perspective.
Senator KIM CARR: What about within the ASC? What was the reaction?
Senator CONROY: No, you do not mislead in the Senate. It is a punishable offence. You must have been disappointed.
Senator KIM CARR: I understand the officers have some difficulty with the question but I am asking it. It is a genuine question. What was the reaction within the ASC to the statement by the Defence Minister that you could not be trusted to build a canoe?
Mr Edwards : I think there is lots of speculation in the media about a number of programs. We had to have a specific item and we are just trying to focus on our—
Senator KIM CARR: There is no speculation that the Minister for Defence told the Australian Senate that you could not be trusted to build a canoe. There is no speculation about that whatsoever; it is a statement of fact. My interest is to know what was the response within the ASC to that claim?
Mr Whiley : There was no response visible in the ASC to that claim. We got on with our jobs—it is like water off a duck's back.
Senator EDWARDS: And consistently repeating the line, Senator Carr, reinforces something we know not to be true.
Senator KIM CARR: I presume you did not agree with the claim that you could not be trusted to build a canoe?
Mr Whiley : It is not worth talking about.
Senator EDWARDS: You are undermining the workers in the ASC when you continually—
Senator KIM CARR: It is quite an important issue. You have also told this committee that there has been no contact with the government concerning the future submarine project on an ongoing basis. Have I understood your evidence correctly?
Mr Whiley : That is correct, yes.
Senator KIM CARR: Given that the Minister for Defence made this assertion, which is demonstrably untrue given the evidence you have given the committee, there would be cause for concern that there has been no ongoing consultation involvement of the ASC in the future submarine program?
Mr Whiley : I am not making that linkage, no.
Senator KIM CARR: You can understand why I might be concerned about that matter.
Mr Whiley : No, not really.
Senator KIM CARR: Sorry, I did not hear that.
Mr Whiley : No, I do not think so.
Senator KIM CARR: You could not understand why I would be concerned about that?
Mr Whiley : No, I cannot.
Senator KIM CARR: That surprises me. I am not clear and perhaps you could help me. What do you understand the term 'competitive evaluation' to actually mean?
Mr Whiley : I have already answered that question.
Senator KIM CARR: That is why I am asking you again. I am not clear. What do you understand that term to mean?
Mr Whiley : Those were the words we believe the government has chosen in regard to the future submarine selection process.
Senator KIM CARR: Do we assume from that that on your understanding—I am not asking about the government's understanding or anyone else's, your understanding on behalf of the ASC—this process will involve some form of assessment of your capabilities?
Mr Whiley : We have no visibility of that process at this point in time. It is a matter for the government to inform us.
Senator KIM CARR: But is it your understanding that some assessment of your capabilities would invariably occur?
Mr Whiley : As I said, at this point in time we have no visibility of what that process is.
Senator KIM CARR: How then are you able to present to the government your understanding of your capabilities?
Mr Whiley : We will respond to government when we are asked to respond to government.
Senator KIM CARR: What information do you require in order to demonstrate your capabilities to deliver the project? Whether it is on your own or as part of a consortia, what actual information do you require from government in terms of specifications, guidelines, time frames and workforce development? What detail do you need from government to be able to do your job?
Mr Whiley : When we get requested a proposal along the lines of the information you are talking about, it will be presented to us and we will provide our responses back.
Senator KIM CARR: Will you need all of that information?
Mr Whiley : If that is what government is using as the criteria for selection. But at this point in time, we are not privy to what that requirement is.
Senator KIM CARR: Do you get press monitoring services at the ASC?
Mr Whiley : Yes.
Senator KIM CARR: There is a report in this morning's The Australian on page 4 that says the Swedish defence manufacturing company, Saab, believe they can build a boat better than the Japanese. Have you seen that report?
Mr Whiley : No I have not seen it.
Senator KIM CARR: You have not read the report?
Mr Whiley : No.
Senator KIM CARR: Do you have any response to the proposition, that Saab have put out publically now, that they are open to a partnership with the ASC and they would even consider buying the ASC? Have you had any conversation or are you aware, in any way, of that claim?
Mr Whiley : No.
Senator KIM CARR: Are you aware of the assertion that the government actually has a priority list of companies already in existence?
Mr Whiley : Sorry can you just explain what—
Senator KIM CARR: In terms of the building of the future submarine are you aware of the assertion that the government already has a list of preferred tenderers—an order list, a priority list, that already exists.
Mr Whiley : I am not aware of that list; no.
Senator KIM CARR: It was argued in the paper this morning, but I have you at a disadvantage, clearly. This is the first time you have heard of this.
Mr Whiley : Yes. I have not got my media this morning. I have not got it so I have not read the article.
Mr Edwards : We were here early to prepare.
Senator KIM CARR: What is your response to the suggestion that you would work in collaboration with a Swedish company if they were prepared to take an equity stake in the ASC?
Mr Whiley : I think I have said previously today that ASC is more than willing to work with overseas partners. Kockums may be an appropriate partner. In fact, Saab Kockums were a previous joint venture member in Australian Submarine Corporation when we built Collins. So we have good relationships with Kockums; it would not be an issue for us.
Senator KIM CARR: And that would also apply to the French company?
Mr Whiley : We are open to working with anybody. I think our track record—our pedigree—is that, as I have said, we have worked with General Dynamics Electric Boat and Saab Kockums. We are happy to work with any partner.
Senator KIM CARR: So that would go for the Germans as well?
Mr Whiley : Yes; exactly right.
Senator KIM CARR: You have taken on notice whether or not you are required to have an exclusive arrangement. Could you work with any of these companies?
Mr Whiley : That is right; yes.
Senator KIM CARR: That is your understanding?
Mr Whiley : Yes.
Senator KIM CARR: You have already indicated that you are not aware of the international practice with regard to procurement for submarine builds.
Mr Whiley : Not aware of any international practices; no.
Senator KIM CARR: It does surprise me that there is no-one in the ASC that is charged with the responsibility of comparing these types of issues, or is this just a matter you leave entirely to the DMO?
Mr Whiley : It is for the government to choose its practices for procurement not for ASC as a commercial entity.
Senator KIM CARR: That is true, but I am surprised that ASC has no knowledge of these processes around the world. Is that the evidence you are presenting?
Mr Whiley : Our market is currently the Australian market not the international market.
Senator KIM CARR: I see.
Senator EDWARDS: Can I just follow on from your line of questioning?
Senator KIM CARR: Yes, sure.
Senator EDWARDS: Senator Carr has quite rightly said that in the newspaper this morning a potential suitor to you in a partnership for a design has put it on the front page—
Senator KIM CARR: Page 4.
Senator EDWARDS: —page 4 of The Australian that they are prepared to deal with you. What is going on at the ASC? Are there any entrepreneurs in there at all that are looking to protect the jobs of all of these workers at the ASC? Saab are advertising their willingness. Where is the telephone call from you guys to Saab saying, 'Good idea, why don't we have a chat?'
Mr Whiley : At this point in time, there is no clarity on the government's requirement for future submarines. Until such time as that clarity—
Senator EDWARDS: The government is getting unsolicited tenders, Mr Whiley, and you are all having a little sit-back.
Mr Whiley : We are not having a sit-back.
Senator EDWARDS: Well, what are you doing?
Mr Whiley : On the contrary; we are behind the scenes considering the options but it depends on what the government—
Senator EDWARDS: You are talking with yourselves.
Mr Whiley : wants as its solution for the submarines—
Senator KIM CARR: That is fair enough.
CHAIR: Mr Whiley, I am not going to purport to know as much about the internal workings of ASC as Senator Carr and Senator Edwards, but all of this is a bit surprising to me. I want to get my head around it. At this point in time, nobody has spoken to you about the possible capability requirements for the future submarine project.
Mr Whiley : No. We have no insight into the future submarine capability requirements.
Senator EDWARDS: That was not the question. The question was about whether you have spoken to others.
CHAIR: Either way.
Mr Whiley : Yes; I think I answered it.
CHAIR: Mr Whiley, I did notice that the CDF said last week—and I do not pretend this to be my area of expertise—that the real issue was about capability and the need for urgency. There is a time constraint that continues to grow as time goes by—that is natural—and the question is about capability. Isn't it weird that no-one has spoken to you about capability and what they want?
Mr Whiley : Government needs to define what the capability requirement is, not ASC. Once they find it we can provide a solution with other partners to meet that capability.
CHAIR: This is not a new debate. This debate has gone on for a couple of years. You talked about 850 people working on the current project for the Collins. Is that right?
Mr Whiley : That is right. That is at ASC North.
CHAIR: How do you run a business, a firm or a company with that many employees when no-one in government is talking to you about what the future prospects are going to be? You are reading about it all in the paper and you hearing a minister make inappropriate comments about your firm.
Senator EDWARDS: And they are hearing from an opposition leader.
CHAIR: There are press conferences and others talking about the future of ASC. What does all that do to confidence internally?
Mr Whiley : ASC has a contract for the support of the Collins, and our focus primarily is for making sure we have availability for the current platform. So 99 per cent of those people are focused on that task.
CHAIR: But, Mr Whiley, let's not kid ourselves—there is obviously a lot of concern. I am just asking you about the human element to all of this lack of certainty. From a business perspective, it would be very hard to run a firm with a lack of information about what the future holds. I am asking for a human response about what all this means for the people involved and the need for certainty from, firstly, a business perspective. You are running a company—and it is a big business. Secondly, I am also asking about the human element and what this means to all these people. You are right: they are working on a project at the moment. But, surely, that lack of future certainty would be grating on them, wouldn't it?
Mr Whiley : I think we have certainty in ASC. As I said, we have enough work—in terms of North, 10 years, and inside the company for at least 20 years. As a management team, we are looking at the future and how we mitigate any changes as they arise and we will put in strategies to deal with them. So, in terms of a company with certainty, we are probably better off than most companies in the country at the moment.
Senator KIM CARR: I am just trying to understand your attitude on this matter. Is it your view that you cannot take initiatives with regard to discussing future operational requirements of the company for future contract work without explicit advice from government?
Mr Whiley : Absolutely not.
Senator KIM CARR: On what basis do you make that assertion? Is it a requirement of your charter? What is the legal basis on which you can say that in such an emphatic way?
Mr Whiley : As a GBE we operated under the GBE guidelines and are supposed to act as a commercial entity.
Senator KIM CARR: So the GBE guidelines require you to only act when you are asked to act?
Mr Whiley : No; I did not say that.
Senator KIM CARR: Then why can't you talk to these other companies about future contractual arrangements?
Mr Whiley : Because those arrangements are not clear—certainly not to us. We do not know what the government requirement for Future Submarine is.
Senator CANAVAN: These other companies are doing that. Business is always done in the fog of war. They are looking to get on the front foot and get in first when the government does make a decision. Why aren't you doing the same?
Mr Whiley : As I have said, the one element we do not have that those other companies do have over us is that we do not have the conceptual design capability. They are the core conceptual design knowledge to be able to offer a solution. Ours is a slightly different model to those companies. We are here to support those moving forward once it becomes clear.
Senator KIM CARR: I can understand your dilemma. As a GBE I can understand your interpretation of that matter. But, in my experience within the Australian Public Service, agencies are always looking at options. It may not be a formal process. What you seem to be suggesting to us is that you do not even have an informal line of communication.
Mr Whiley : No, I am not. We certainly have strategies, processes and plans to look to how they can benefit the company moving forward.
Senator KIM CARR: But you do not feel at liberty to explain or argue that case before this committee?
Mr Whiley : Not at this point in time, no.
Senator CANAVAN: Do you have a business development division?
Mr Whiley : We have a small business development group.
Senator CANAVAN: What do they do? How many people are in that group whose full-time job it is to develop business for your company?
Mr Whiley : We have three people employed in that space.
Senator CANAVAN: What is the most senior rank of that group?
Mr Whiley : It is probably a senior manager.
Senator CANAVAN: And they report to you or to the board?
Mr Whiley : As I said, we are in the process of transition at the moment. They are reporting to me, effectively.
Senator KIM CARR: But your evidence is that you require advice from government before you can actually take these matters up with any great vigour.
Mr Whiley : To the contrary—I did not say that at all.
Senator KIM CARR: Well, what do you mean? Why can't you go out there and look for new business?
Mr Whiley : I did not say that we were not.
Senator EDWARDS: What do the development officers do? Do they just nurture the business that already exists or do they look at new business opportunities? That is where Senator Carr is going. I am in total agreement with his line of questioning.
Mr Whiley : We look at other markets and opportunities and look at competitors and strategize on potential work that is coming through the pipeline.
Mr Edwards : The complexity is in understanding what the requirement is for the submarine, what is needed and when it is needed. We do not have a design to sell. We have the capability to build and maintain and support, and we are open to support into the future.
Senator KIM CARR: But there is nothing to stop you going to have a conversation with Swedish SAAB, the Germany or the French company about a consortium?
Mr Whiley : We have had informal conversations with all three of those companies about Future Submarine.
Senator KIM CARR: And there is nothing illegal about that and nothing improper about that.
Mr Whiley : No.
Senator KIM CARR: So you do have a fairly good grasp of what they are proposing?
Mr Whiley : We have no grasp of what they are proposing. We have not had that level of detail conversation.
Senator KIM CARR: Why don't you have that?
Mr Whiley : Because I do not think it is appropriate at this point?
Senator KIM CARR: Why don't you think it is appropriate?
Mr Whiley : As Martin said, we do not know the solution required by government in moving forward.
Senator KIM CARR: And I come back to my point: are you waiting for advice from government so that you can develop those—
Mr Whiley : No, we are awaiting advice to understand what the requirements are so that we can make the appropriate choices at that time based on the requirements and how those requirements may be met.
Senator KIM CARR: Who provides you with that advice?
Mr Whiley : Government will clarify what those requirements are.
Senator KIM CARR: That is the suggestion that I am making to you: you are waiting for government advice.
Mr Whiley : We are awaiting government advice, as are other parties, regarding the government's requirements for the Future Submarine before we make any commitment of—
Senator KIM CARR: Once you have received that advice, given the specifications and the like, you can act quite quickly to develop those—
Mr Whiley : Yes. In the background we are preparing how we may—
Senator KIM CARR: How much time do you need to do that?
Mr Whiley : Depending on what the scope of requirements set out by government is.
Senator KIM CARR: But, in general terms, how long would it take to get a bid together?
Mr Whiley : A minimum of six months, based on whatever—
Senator KIM CARR: So a minimum of six months.
Senator EDWARDS: I am following up on Senator Conroy's discussion about our visit last week to the ASC site to announce the competitive evaluation process. The Leader of the Opposition visited the ASC late last year—and made what is now quite an infamous xenophobic rant—on the back of a truck.
CHAIR: That is your assertion.
Senator EDWARDS: How much notice did you get of Mr Shorten's visit?
Mr Whiley : I do not remember.
Senator EDWARDS: Could you take that on notice for me?
Mr Whiley : We will take it on notice.
Senator EDWARDS: At that time, did he discuss with you how you could best position yourself for a future build of the submarine projects?
Mr Whiley : No.
Senator EDWARDS: So did you just have a cup of tea and a wander around?
Mr Whiley : We gave a presentation on capability and we showed the capability of ASC.
Senator EDWARDS: Did he discuss the strategy of how best the Labor Party would position you with government to enable the process for you to be successful or at least show yourself as capable to tender?
Mr Whiley : No.
Senator EDWARDS: Or be involved in the process?
Mr Whiley : No.
Senator EDWARDS: So it was somewhat of a media event rather than anything else?
Mr Whiley : From an ASC perspective, it was just a normal visit.
Senator EDWARDS: On 14 October last year, as you know, I came out quite strongly in support of a positioning for you, because I had heard enough evidence in inquiries—particularly the day before in Melbourne from Dr John White, who is still an adviser to this government. I found his evidence compelling. I find that DMO, who I have been precluded from having here today as the Labor Party blocked them appearing this morning, because I do not think they want to know—
CHAIR: We are having them for 2½ hours at estimates next week.
Senator EDWARDS: Now you are.
Senator CANAVAN: And not in front of this committee.
Senator EDWARDS: I do understand that there is a capacity in Australia to build and manufacture highly technical pieces of equipment. Since backing you, I have come under an enormous amount of fire from within and out for doing so. Your presentation here this morning is somewhat hollow, from my point of view, in terms of you enabling yourselves to best equip yourselves in front of a government to ensure that you are right at the forefront of any kind of process which will enable the workers in this country to be involved in this process. How do you think you might go forward in convincing the Minister for Defence and the Prime Minister that you are indeed a capable team of management and workers to compete in this competitive evaluation process?
Mr Whiley : That is a hypothetical. You are asking us to speculate.
Senator EDWARDS: What are the research and development officers doing?
Mr Whiley : We are waiting for the government's requirement in terms of the specifications and need for our Future Submarine. Once we understand that, we can engage with some of the other parties. At the moment everything is speculative.
Mr Edwards : As a company we are focusing on performance improvement across all our areas, across all our business elements.
Senator EDWARDS: What are your business development people doing? By implication, they are looking to develop business. What are they doing? Are they tasked with anything to do with the submarine project?
Mr Whiley : We have a strategy that we are applying in terms of the Future Submarine space, and that is in train.
Mr Edwards : We are obviously concerned in this event about describing all of our strategies associated with future business for this company. It is very commercially sensitive.
Senator EDWARDS: My suggestion is that you perhaps give them a call. Is that helpful?
Mr Whiley : We will take it on notice.
Senator EDWARDS: I would have liked you to have heard from DMO this morning.
CHAIR: We have the DMO for 2½ hours next week and we had DMO on three separate occasions.
Senator EDWARDS: It is just a shame that Australia will get to listen to what they say about the future of shipbuilding in this country.
CHAIR: We have had the DMO on many occasions. Mr Whiley and Mr Edwards, I want to thank you again for making yourselves available to this inquiry. I believe it is the third or fourth time you have appeared before this inquiry, as it has been ongoing. It is interesting that it is one of the few inquiries that is concurring with live events as they happen. You have been incredibly hospitable and treated us very well when we went to South Australia, and we very much appreciate that. And we get to do this all again on Monday night or Tuesday night.
Mr Whiley : I think it is Tuesday.
CHAIR: Thank you so much, Mr Whiley and Mr Edwards.
Committee adjourned at 11:09