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Finance and Public Administration Legislation Committee - 20/11/2014 - Estimates - FINANCE PORTFOLIO - Australian Submarine Corporation

Australian Submarine Corporation

CHAIR: I welcome the Minister for Finance, Senator the Hon. Mathias Cormann, and Mr Stuart Wiley, Interim Chief Executive Officer of ASC Pty Ltd, and other officers. Minister, do you wish an opening statement?

Senator Cormann: No, I do not.

CHAIR: Mr Whiley?

Mr Whiley : No.

Senator WONG: Mr Whiley, I do not want you to reprise all your submission, but I want to start with your opening remarks to the Senate committee in relation to the Collins class. In that, you emphasised the unique capability and also you were very positive about where we have got to in terms of maintenance or sustainment. Could you give this committee a flavour of that?

Mr Whiley : In my previous address, I said that I have been with the Collins class for 25 years as an engineer and I have been through many roles in the ASC and built up my experience. Where we are today in terms of the learning in Collins is a long way ahead compared to where we were when we actually secured Collins 25 years ago. I think the experiences we gained through Collins will hold us in good stead moving forward. In terms of the maintenance, I think the watershed for maintenance was the John Coles review four years ago that has come through and aligned all the agencies to a common way of thinking, to have a common value chain in terms of how we go about maintenance for the Collins class and that our roles and accountabilities in that value chain are understood to allow a better performance. So I think we have come a long way in the last four years in that maintenance space.

Senator WONG: Can you tell me what the submarine availability improvement has been as a result of the picking up the recommendations of the Coles Review? Do you have any figures?

Mr Whiley : We have the figures—current figures. And we are currently forecasting of navy's interim target around about 118 per cent of—

Senator WONG: Sorry?

Mr Whiley : 118 per cent, so a target of 100 per cent. We are currently forecast to be about 18 per cent over that interim target.

Senator WONG: This is in terms of availability hours, is that right?

Mr Whiley : This is material ready days. Days we are able—

Senator WONG: Sorry, could you repeat that?

Mr Whiley : It is in terms of material ready days.

Senator WONG: Right. And what is the material ready days target?

Mr Whiley : For this year—

Senator WONG: Is it per year, or—

Mr Whiley : It is a per annum target, set by navy, based on their need and the availability figure set by Coles, effectively.

Senator WONG: Okay. So, we are forecasting 118 per cent, so that is 18 per cent above that target for the financial year, is that correct?

Mr Whiley : Financial year.

Senator WONG: For the current financial year?

Mr Whiley : Yes, current financial.

Senator WONG: And what did we achieve in the previous financial year?

Mr Whiley : Again, the figure is in excess of 100 per cent. I have not got them to hand at right this point in time, but it is in excess of 100 per cent.

Senator WONG: Perhaps one of your people could get them.

Mr Whiley : Yes.

Senator WONG: Essentially, for 2012-14, in terms of actual outcomes, and 2014-15, ASC and partners have achieved in excess of the 100 per cent target for submarine availability time?

Mr Whiley : Yes.

Senator WONG: So, those who might criticise ASC for its competence in terms of sustainment, really the figures belie that criticism?

Mr Whiley : ASC is only one of the three parties involved in delivery of those days. We are a team member in that delivery, we are not entirely responsible for the generation of those days. We are responsible for—

Senator WONG: Presumably, you would take some credit for the fact that you, as part of that three way—

Mr Whiley : Absolutely, we definitely are. We have a contributing factor to that, yes.

Senator WONG: Just remind me, Mr Whiley, when did you take over? When did Mr Ludlam leave?

Mr Whiley : July of this year.

Senator WONG: Can I just have some detail about how that decision was made?

Senator Cormann: Well, Senator Wong—

Senator WONG: No, Mr Ludlam's departure, was that at the—

Senator Cormann: Senator Wong, I do not think that that is a question that—

Senator WONG: No, it is fine, it is for you.

Senator Cormann: Would appropriately be asked of Mr Whiley. That is obviously a matter that was handled independently by the board of the ASC and under the leadership of the chair of the ASC board, who I believe was appointed by yourself in government.

Senator WONG: Indeed he was. I am actually just asking a process question, initially. Is there anyone who can give me some indication of whether Mr Ludlam resigned or was he asked to leave?

Ms Hall : Mr Ludlam tended his resignation in July.

Senator WONG: Minister, did you request his resignation?

Senator Cormann: No.

Senator WONG: Did he have a discussion with you or your office or the Defence minister's office prior to that resignation?

Senator Cormann: Not with me. I would not expect any conversation with the Defence minister, given that I am the shareholder minister for the ASC, the sole shareholder minister fort the ASC.

Senator WONG: That is true, but Mr Costello, who is the Defence minister's Chief of Staff, used to work at the ASC. So I just wondered if there was some conversation there.

Senator Cormann: I will take that on notice, I suspect not. The communication with me was with the chair of the ASC board who advised me of the considerations of the board and of the fact that Mr Ludlam tendered his resignation.

Senator WONG: Did you and Mr Carter have a conversation ahead of the resignation?

Senator Cormann: No, Mr Carter provided me with advice about the fact that that is what had happened.

Senator WONG: Were you aware that it was going to happen prior to that advice?

Senator Cormann: I was not aware that Mr Ludlam was resigning until such time as he had resigned.

Senator WONG: Was Finance aware, Ms Hall?

Ms Hall : Finance was advised by Mr Carter, just prior to the minister being advised, that Mr Ludlam was intending to tender his resignation. So it was a matter that was handled between the chair and the outgoing CEO.

Senator LUDWIG: When he tendered that resignation, were there any reasons provided?

Ms Hall : I would have to go back to the correspondence and take that on notice for you.

Ms Halton : No, not that I can recall, but we will check that.

Senator WONG: Were there any reasons provided to you, Minister?

Senator Cormann: Essentially I was advised that that was the decision that Mr Ludlam had made. Essentially I was just provided with the outcome. This is a matter that was entirely handled independently from government, by the chair and the board of the ASC.

Senator WONG: Mr Whiley, you have been at ASC how many years?

Mr Whiley : Twenty-five years.

Senator WONG: Prior to becoming interim CEO, what was your position?

Mr Whiley : I was the general manager of the Collins class.

Senator WONG: Right in the thick of it.

Mr Whiley : Yes, very much so.

Senator WONG: Congratulations on the improvements. It was very pleasing.

Mr Whiley : Thank you.

Senator WONG: I assume that, if there were a competitive tender for the Australian future submarine project, ASC would seek to be involved.

Mr Whiley : If that was appropriate, yes.

Senator WONG: Have you done preliminary work in terms of costs, capability and so forth for that project?

Mr Whiley : We have certainly been looking at some of the facts and figures from Collins and other platforms to be prepared, if we are asked, when asked.

Senator WONG: But you have already prepared information, haven't you?

Mr Whiley : We have got some information that we have got now.

Senator WONG: Can you tell me what assumptions, drawing on the Collins class experience, you have made in terms of that information?

Mr Whiley : In terms of thinking about the future and potentially a role in the future, we are certainly using the Collins as a baseline model for that experience. I think there are a lot of good things to be learnt from the Collins experiences, and that is definitely shaping our direction moving forward, in terms of how we would integrate with industry and how we would propose a model moving forward.

Senator WONG: Has that been the basis of a cost range for construction?

Mr Whiley : We have used Collins data to consider a potential cost range, if asked, for a potential submarine, yes.

Senator WONG: Has that looked at different quantities and different sizes?

Mr Whiley : Yes. It varies between a standard Collins as today being built and an evolved 4,000-tonne submarine.

Senator WONG: So just over 3,000 and then 4,000?

Mr Whiley : Yes—3,000 with current technology but 4,000 with evolved technology.

Senator WONG: Have you looked at 'sail away' price?

Mr Whiley : Yes.

Senator WONG: Are you able to provide us with any information about those ranges?

Mr Whiley : It would range, from our figures, around between $18 million and $24 million, depending on what you want and what capability and what the other—

Senator WONG: 'Billion', I assume.

Mr Whiley : Billion, yes. Sorry.

Ms Halton : He did say 'million', Senator; you are quite right.

Senator Cormann: I thought that was sounding cheap!

Senator WONG: Everybody suddenly got very happy, didn't they!

Senator LUDWIG: You were nearly going to buy one, at that rate!

Senator WONG: So $18 billion to $24 billion would be construction plus 'sail away', would it?

Mr Whiley : Yes. In terms of 'sail away', I assume you mean trials and those types of activities.

Senator WONG: I have a recollection of an average unit 'sail away' measure. Am I wrong that you would calculate—

Mr Whiley : It depends on what you mean by 'sail away'.

Senator WONG: Well, what would you mean? What did you mean when you—

Mr Whiley : I am assuming you mean by that that it is when we have handed the boat over to the Navy and it is an in-service vessel. That is what I am assuming.

Senator WONG: You just gave me a figure of—what was it?

Mr Whiley : A figure from 18 to 24, depending on what you were doing.

Senator Cormann: What I have got to say here on behalf of the government is that obviously the government is very much guided by what is in our defence interests, and obviously the cost of any such project ultimately will depend on the specifications that are provided in order to pursue our national interests when it comes to the defence of the nation, getting the best possible bang for our buck in the context of the defence of our nation. Obviously these matters at present are still being considered by government. While Mr Whiley has been able to give you some high-level figures based on some internal work that the ASC has done, that is obviously not in the context of the government having provided any specifications around what is required from a defence interests point of view.

Senator WONG: I accept that, Minister. I am assuming that if he were actually giving me figures that were based on government specification they would probably be commercial-in-confidence at this point, if they were actually a competitive tender.

Senator Cormann: That is another point. I need to put this on the record, Senator Wong, given the way these questions were pursued. These sorts of cost estimates depend on the capability assumptions that are being made, and the ASC right now is not aware of the capability assumptions that would be provided by government given our assessment of what is required from a defence policy objectives point of view.

Senator WONG: I think we all agree therefore that the figures are not based on government specifications, because you have not made a decision—certainly that has been transmitted to industry. Second, therefore they are not commercial-in-confidence, because they are high-level—shall we call them working assumptions?

Mr Whiley : Hypotheticals.

Senator WONG: Okay. Your hypothetical cost range for construction. You said 18 to 24. Are you able to tell me, the quantity and size, six three-tonne submarines at Collins class and today's technology. What would that amount be?

Mr Whiley : Sorry, I didn't—

Senator WONG: Let's do quantity and size. I presume you have this information.

Senator Cormann: Chair, this is very much going into hypothetical and speculation about things that may or may not happen, and I do not think that the interim chief executive officer of the ASC is able to assist in relation to detail on things that may or may not happen. I think there is a standing order that provides that you cannot ask hypothetical questions, and I would submit that that is very much a hypothetical question.

Senator WONG: Chair, it is not a hypothetical question, with respect. It is questions about the calculations they have done. The evidence from the chief executive is that they have done these calculations. With all the caveats the minister has quite properly put on the record—that this is not based on government specifications, it is obviously not in response to a competitive tender, it is not commercial-in-confidence. I am simply trying to elicit the calculation, the work that this entity has done.

Senator Cormann: In relation to any questions about calculations, I will take those on notice so that we can properly assess whether there is any public interest immunity that may be in play, given that we have to protect the national interest in the context of these sorts of considerations.

CHAIR: On your point about hypothetical questions, I think you are quite right. The standing order does prevent hypothetical questions. I do agree though that Senator Wong's question was about some research that ASC has undertaken. Having said that, Senator Wong, the minister has now said he will take it on notice.

Senator WONG: I will just make this point: the difficulty for ASC—and, let's be frank, most of this information has been provided in some form or another publicly—of being told by the minister that they cannot give this information here is that competitors have already put their bids in to the public arena. This puts the ASC at a disadvantage. He has already told me between $18 billion and $24 billion. I am just trying to unpack that.

CHAIR: Senator Wong, the minister has undertaken to take it on notice.

Senator Cormann: The ASC is 100 per cent owned by the Commonwealth—

Senator WONG: So you can control what information they give, in your political interests. That is what you are doing.

Senator Cormann: I completely reject your assertion that the ASC is being put at a disadvantage. That is just not accurate.

Senator WONG: You will not even tell people how much they can construct the submarine for, because it does not suit your political interests. You want to hide—

CHAIR: Minister. Senator Wong. This is not going to work if we are going to go through this all day. If a question is asked, the questioner is entitled to be heard in silence, as is the response. The minister was responding to your statement, Senator Wong. Minister, you have the call.

Senator Cormann: Thank you, Chair. I would go back to the proposition on whether or not this is hypothetical. The questions are hypothetical to the extent that the government, as I have outlined, has not provided any specifications to the ASC. So whatever work the ASC has done themselves is in relation to hypothetical scenarios, by definition. Given that that is the circumstance, I am using my prerogative to take any questions in relation to that sort of work, to the extent that it has happened, on notice to be able to ensure that the information that is provided to the committee is relevant accurate and, where appropriate, we have properly assessed any commercial-in-confidence and other public interest considerations.

CHAIR: You have made that very clear.

Senator WONG: Chair, I have brought the minister's attention to his own resolution of the Senate. What is ground of the—

Senator Cormann: And I have just used it.

Senator WONG: Can I say a hypothetical is, 'If this, then what? That is not what I am asking. I am asking for information that the chief executive has given evidence about before the Senate which has been prepared by the company.

CHAIR: We are labouring a point.

Senator WONG: I have not finished, Chair.

CHAIR: Yes, I know, but we are labouring a point. The minister has taken it on notice.

Senator WONG: You are putting on notice any question about submarine construction costs.

Senator Cormann: Taking it on notice; not putting it on notice.

Senator WONG: Let me finish, please.

Senator Cormann: I am just correcting—

Senator WONG: Sorry—you are taking on notice any question about the ASC's own assessment of how much it would cost to build submarines here in Australia. They have given evidence that they have done the work. They say it is between $18 billion and $24 billion, but you are refusing to allow them today to answer how much it would cost to build submarines in Australia. On what basis?

Senator Cormann: I am not refusing anything. I have taken on notice questions in relation to calculations which may or may not have been undertaken in relation to hypothetical scenarios and the public interest grounds that I pointed to before relate to commercial-in-confidence and, if possible, national security considerations. It is quite appropriate and consistent with past practice and convention and, indeed, it is always the prerogative for a minister at the table to take questions on notice. In this circumstance, I want to satisfy myself that the information that we provide to the committee is accurate, is relevant and does not breach any of the public interest immunities that are traditionally and consistently available to government for these sorts of purposes.

Senator WONG: Okay. It is inconceivable, given the basis of this discussion, that it is commercial-in-confidence or that there are national security implications.

Senator Cormann: I disagree.

Senator WONG: Because we agreed at the start, as per the evidence, that these are internal calculations which are not based on any specification from the government. So it is inconceivable that they are somehow confidential in relation to government specifications because you have not released them. Let us do it this way.

Senator Cormann: Sorry, I want to respond to that. I fundamentally disagree. There is obviously a process under way in government at present when it comes to the procurement of submarines in the future. The government will be guided in making those decisions by what is in our best interests from a defence policy point of view and obviously to the extent that the ASC has done some internal work about possible hypothetical scenarios, that is entirely and totally linked to the government's consideration of highly sensitive and important future defence procurement. So there are possible issues both when it comes to commercial-in-confidence and national security matters. I want to ensure they are properly assessed. That is why I am using my prerogative to take any questions in relation to these matters on notice.

CHAIR: Let me say that it does not matter—there has been no claim of public interest immunity, although the room minister has referred to that. He has undertaken to take this on notice, which is entirely his right. I do not want to continue to labour the point. We should move on.

Senator WONG: No. I just want to ask this question: why is the government so keen to hide the costs of building the submarines in Australia? Every other competitor can put their figures into the public arena, as they have, and you as minister, in your desire to not allow the Australian people to see what the cost could be, are refusing to allow the Australian Submarine Corporation to tell this Senate committee what it would cost to build submarines in Australia. Why are you so keen, Minister, to hide what it would cost? It is because it does not fit with your narrative, does it?

Senator Cormann: Senator Wong, I understand you are making a political point but the truth is that, to the extent that there has been work done within ASC without any specifications provided by government, any such numbers are entirely meaningless because it is the specifications that are provided which drive the cost outcomes. So to have a discussion around numbers which, quite frankly, are irrelevant without having the right assumptions underpinning them is not in the public interest.

Senator WONG: All right. Perhaps I will tell you what I want on notice. I would like the cost range for construction of six by 3.03-thousand-tonne submarines at Collins cost and today's technology cost; for 12 of the same size at both Collins cost and today's technology cost; and then for six by 4,000 tonnes and 12 by 4,000 tonnes at Collins cost and today's technology price. Then, for the same quantity and size, I would like the average unit sail-away price in billions—and all of those figures in Australian dollars 2014, which I know ASC has calculated. That is my request.

Senator Cormann: Take it on notice.

Senator WONG: You did say 18 to 24. We should in fairness to you indicate the number of submarines that that evidence was about.

Mr Whiley : That assumes about 12.

Senator WONG: That was 12. You described it as sort of analogous to Collins, just over 3,000?

Mr Whiley : Yes, the 3,000 tonne was—

Senator WONG: So not the 4,000?

Mr Whiley : The 4,000 would be the 24 number.

Senator WONG: Okay, thank you. So 18 would be 12—

Mr Whiley : Evolved Collins.

Senator WONG: evolved Collins, around 3,000 tonnes?

Mr Whiley : Yes.

Senator WONG: And the 24 would be 12 at the 4,000 tonnes—

Mr Whiley : Yes.

Senator WONG: or thereabouts? That is certainly less than the $80 billion that has been in the public record.

Mr Whiley : Yes.

Senator WONG: Have you ever been advised of how that $80 billion figure has been arrived at?

Mr Whiley : No, I have never been advised.

Senator WONG: As somebody who has spent over 20 years working on—you have done both construction and maintenance, if you have been there 20 years?

Mr Whiley : Yes, I did all the—

Senator WONG: How many did you help steer the build of? How many have you—

Mr Whiley : I was there for six. I was first person in the Osborne facility.

Senator WONG: You know a lot.

Mr Whiley : Yes, I do.

Senator LUDWIG: They made him general manager!

Senator WONG: From that experience, are you able to tell us how one might arrive at a figure of close to $80 billion?

Mr Whiley : No, in that respect I have no idea how they came up with $80 billion. Again, it depends on what you put into the equation, how you generate the number and what people consider the number is, so I have no idea.

Senator WONG: Given what you have said in this hearing and in your submission to the Senate committee, I assume, Mr Whiley, you would not agree with the suggestion that the Collins class was substandard?

Senator Cormann: You are asking him for an opinion here, which is against the standing orders.

Senator WONG: I was trying to shortcut it, Minister. I would not have thought you were trying to defend a suggestion that they were substandard.

Senator Cormann: No, it is not about that. You should not ask an official for his opinion. As a former minister, you should know that.

Senator WONG: All right, we can go through this. How does the Collins class perform as compared—would you like me just to read bits of your submission?

Mr Whiley : Yes.

Senator WONG: You would prefer me to do that?

Mr Whiley : No. For the actual performance of the boats themselves, really Navy are probably the best people to understand that. In terms of the mechanical or technical performance, obviously we have an opinion based on what we see through availabilities and reliability data and what have you. It is currently performing close to benchmark if not below benchmark in the reliability stakes. Certainly, in all indications I get, it is performing well as a platform.

Senator WONG: In your submission to the Senate committee, you said:

Throughout the world's submarine community, the Collins Class submarines are considered a world class conventional submarine with unparalleled capabilities …

Mr Whiley : Yes.

Senator WONG: Do you still hold to that?

Mr Whiley : Yes, I do. I still stand by that.

Senator WONG: Thank you. That is very different to 'substandard', isn't it?

Mr Whiley : No comment on that.

Senator WONG: So, Minister, why does the Prime Minister consider that Australian built submarines risk being substandard?

Senator Cormann: The Prime Minister is focused on national interest. The Prime Minister is focused on making sure that, in the context of the procurement of future submarine capability, we have the best possible submarines that taxpayers' money can buy. And that is of course what the Prime Minister should be focused on.

Senator WONG: Do you agree that Australia builds substandard submarines?

Senator Cormann: I agree that we need to ensure that in the context of our defence requirements we purchase the best possible submarines for Australia that taxpayers' money can buy.

CHAIR: Mr Whiley, we are all South Australian senators who want to ask questions about the submarines—Senator Xenophon, Senator Wong and myself—and obviously we want to see good outcomes for South Australia. The cost of building and designing a submarine is X-billion. How does that compare with the cost of maintaining and servicing the submarine for whole of life?

Mr Whiley : Again, the method by which you build will actually drive the maintenance solution as well. It is really hard to speculate what any future costs of maintenance may be on any future platform depending on how the procurement cycles actually generate it.

CHAIR: It has been put to me that it is a one-third, two-thirds scenario.

Mr Whiley : Generally. The cost of maintenance, considered as a return on asset value, is about six or seven per cent per annum.

CHAIR: Like owning any boat?

Mr Whiley : Yes.

CHAIR: As the fleet ages—the Collins class, for example—I presume the maintenance costs increase as well. Is that an accurate presumption?

Mr Whiley : There is a bathtub curve effect where, as a boat gets older, there is more maintenance that you do. You get other issues relating to obsolescence of equipment. You find suppliers no longer exist to get your materials, so you have to go and specify new equipment. That means your interfaces need to change in the platform. So there are a lot of potential ongoing costs that go into the platform when you do that.

CHAIR: It is more labour intensive; is that fair?

Mr Whiley : Potentially, yes. But there are also potential savings as you get further on.

CHAIR: Potential savings?

Mr Whiley : Some of the original equipment can be replaced by equipment today. To give you an example, the cost of a modern reverse osmosis unit: compared to the one we had in Collins, we found it was actually cheaper to install a new one than to repair the current one.

CHAIR: As technology moves along—

Mr Whiley : As technology progresses there are some cost savings as well.

CHAIR: I want to go to the workforce capability. The last Collins class was completed in South Australia, I think, in 2003.

Mr Whiley : Yes.

CHAIR: So more than a decade ago. I noted that the RAN 2011 paper on Australia's submarine design capabilities concluded that Australia would need a domestic workforce of roughly 1,000 skilled draftsmen and engineers just to create and oversee a new submarine design. Is that in accordance with your own understanding?

Mr Whiley : I do not think it is as high. Again, it depends on the model you are delivering here and how much and where you are condensing those engineers. As a country, probably yes. In terms of the build organisation, no. I would say it is probably a bit high.

CHAIR: What do you mean 'as a country'?

Mr Whiley : Again, it is unlikely, in my estimate, that you would do all this work in a single yard. If this is done in Australia it will be a whole of the nation endeavour; it will not just be in South Australia. For Collins, we had sections manufactured in Newcastle, we had platforms manufactured all around the state in South Australia, and we drew on sections and platforms being manufactured overseas. It is not a centralised solution; it is a disparate solution. If you look at all those combined then that is in the order of the number.

CHAIR: So that is what RAN came up with.

Mr Whiley : I do not know how they came up with that.

CHAIR: They said that the number of skilled draftsmen and engineers required just to create and oversee the design was around 1,000. What concerned me—it is 1,000 people; it is a lot of people, of course—is that they said that such a workforce does not exist in Australia and would take 15 to 20 years to cultivate.

Mr Whiley : As I said, I do not believe those numbers to be factual. If it is just the pure overseeing of the installation and design, that figure is not consistent with what we saw from Collins.

CHAIR: So how many would it take to create and oversee the design?

Mr Whiley : There were about 150 Australians inside the Collins design solution and probably there were about 250 to 300 Swedish engineers. So at its peak around 450 engineers, I would say, approximately. That varies depending where in the lifecycle of the design process.

CHAIR: But that was using an existing design.

Mr Whiley : No, Collins is a new design. Collins is a unique, first of class vessel. Collins is a really good model for the future because it is exactly what you are going to face if you are going to go for a new design moving forward.

CHAIR: The other concern that I have—and I am not being critical of ASC here—is that we have had cost overruns with the AWD production which have been quite significant. They are two years behind schedule and it is $6 million or something over budget. Any figure that was given on a domestically produced submarine might be subject to those same cost blowouts or blowouts of the same magnitude or quantity.

Senator WONG: [Inaudible]

CHAIR: It is.

Senator WONG: Let us be a bit fair. Would that be a hypothetical?

CHAIR: I understand what you are saying and I am not trying to have a crack. I am trying to establish the fact that, historically, whatever the contracted price has been it has been subject to quite significant cost overruns. I wonder whether there has been any consideration of that by ASC and others in determining the capacity to build an entirely new submarine.

Mr Whiley : I think you said the cost blowout is a function of productivity. Productivity is a function of probably four elements: first, the design package and how that is developed and delivered; second, the actual production workforce itself; third, the supply chain and how that is generated and where it comes from; and, fourth, and probably most important, the organisational structure that brings the other three points together and delivers upon them. How those four elements come together will actually probably drive the ultimate cost performance. Collins was a fixed price contract. There was no cost blowout to government.

CHAIR: Going to the AWD, we had not build a surface ship for quite some time, if I understand it—I do not know exactly when. You lose a little bit of the expertise and knowledge when you have not participated in such a construction. Given that it has been a decade since we did the Collins class, have we lost some of those skills?

Mr Whiley : Talking about submarines, if you were to walk around the site today you would see many of these skills employed in maintenance. We have sections cut in half. We are taking motors that weigh 40 tonnes in and out of platform. We are taking diesel in and out of hull. We are assembling them and we are testing them on site. In my opinion, maintenance is technically more challenging than build, where you have a known part that has been tested and validated to go into a predefined system, whereas maintenance is an evolving solution that you have to deal with. Technically, maintenance, if you have a good design and good design product, should be simpler and maintenance.

CHAIR: The maintenance should be simpler?

Mr Whiley : No, build should be simpler. The first of class will be difficult, especially the first of class of a new design. There will be a series of integration and test issues that you have to overcome. There will be problems in the way the design is put together and there will be issues that need to be dealt with, so you have a longer period in that cycle to deal with those issues. It is really important to flush those issues out through that process. So first of class is different, but, generally, once you have it sorted out and all the problems ironed out, build should be a simpler process than a maintenance environment.

CHAIR: So the maintenance effectively maintains a fairly strong skill set, generates jobs and is a positive for the state in which it is being done.

Mr Whiley : Maintenance actually develops a more inquisitive type of skill set because you are working at the sub component level rather than at equipment level. You are dealing with faults in the systems. You have to evaluate underperformance, whether it is fit for class or something else. It draws a lot of energy and technical expertise to come up with the right solutions. Maintenance is a technically expensive exercise to consider.

Senator XENOPHON: Further to Senator Bernardi's very pertinent line of questioning on the issue of maintenance, can there be efficiencies in maintenance and ongoing sustainment costs if a submarine is built locally? Is there a potential to save money through the synergy of maintaining something that has been built locally?

Mr Whiley : There are a set of skills that you need to generate through the build process to inform the maintenance environment. Certainly, the assembly and test phase would be crucial to developing the production and technical skills to inform the maintenance environment. The other key issue is the supply chain in any build environment. Something we have learnt from Collins experience is that a locally generated supply chain is far more agile and responsive to dealing with and supporting a maintenance environment than the overseas supply chain. We are tending to find that the overseas supply chain is breaking down. Many of the OEMs no longer have the technology to be able to support platforms. The workload they get from the Collins is very intermittent, so there is no value in them keeping their expertise up, so we have had to regenerate a lot of the supply chain in country.

Senator XENOPHON: Can I just go to the issue of the Future Submarine project. If the Future Submarine project were made a competitive tender process—

Senator Cormann: Sorry, that is actually not a question for the ASC.

Senator XENOPHON: Chair, the minister does not know what I am asking yet.

Senator Cormann: No, but the introduction to the question was 'if the future submarine program were made a competitive tender process'. Firstly, it is a hypothetical question. Secondly, it is a question for the government, not for the ASC.

Senator WONG: Let him finish the question at least.

CHAIR: I do think Senator Xenophon should finish his question.

Senator Ludwig interjecting

CHAIR: Perhaps, as Senator Ludwig said, you should not start with 'if', and, if it is about a competitive tender process, perhaps it should be directed to the minister.

Senator XENOPHON: I am very grateful for Senator Ludwig's legal counsel. He is very cooperative today!

Senator Cormann: 'If' makes it hypothetical.

Senator XENOPHON: Has the ASC considered producing a tender either by itself or with a foreign design partner in respect of the Future Submarine project? There are no ifs in that, Chair.

Senator Cormann: That question is fine.

Senator XENOPHON: Thank you!

CHAIR: Thank you, Senator Cormann, for intervening!

Senator XENOPHON: That was to Mr Whiley.

Mr Whiley : No, we have not.

Senator XENOPHON: If you—I said 'if'!

Senator Cormann: It is pretty challenging.

Senator XENOPHON: Yes, that is right. It is very hard to ask a question without the word 'if'.

Senator Cormann: It is very hard to get around 'if'.

Senator McKENZIE: Ifs and buts.

Senator Cormann: Ifs and buts, yes.

Senator XENOPHON: Is there a capacity for the ASC to consider working with a foreign design partner in respect of the Future Submarine project?

Mr Whiley : I think the answer to that is yes.

Senator XENOPHON: Is the ASC aware of any factor affecting either itself or the Australian defence industry in general that would prevent an Adelaide Australian build of future submarines?

Senator Cormann: It is probably a difficult question when you put it in—

Senator XENOPHON: It was actually directed to Mr Whiley, Chair.

Senator Cormann: I understand. I am the minister at the table.

CHAIR: It is within the minister's entitlement.

Senator Cormann: It is very difficult when you say, 'Are you aware of any?' That is a very comprehensive set of circumstances that he has to assess in his mind, and it might be more prudent to take a question of that nature on notice. But you might want to rephrase your question—

Senator Ludwig interjecting

Senator Cormann: Narrow the scope of it, as Senator Ludwig very helpfully suggests.

Senator XENOPHON: My legal counsel! Is the ASC capable of being part of an Australian build of our future submarines?

Mr Whiley : I believe so, yes.

Senator XENOPHON: I will put some questions on notice—because I am conscious of Senator Wong wanting to ask some further questions of you—in respect of AWD productivity. I want to ask the minister a question this time. Mr Whiley, I do not want you to answer this question; it is for the minister. Minister, when will your department be cleared to comment on or launch the recovery plan for the AWD project as recommended in the Winter-White report?

Senator Cormann: When it comes to the AWD reform program—and I will ask the secretary of my department to add to this—we are going through a reform process now which is going through the appropriate steps, and we expect to be making some further decisions in the first half of next year. Ms Halton might want to just add to that.

Ms Halton : I can say that we have been going through an extremely extensive process of review, due diligence, in terms of the project. We have been working very closely with all of the current partners.

Senator XENOPHON: Based on the Winter-White report recommendations?

Mr Whiley : Winter-White obviously is a major element of the input into that.

Senator XENOPHON: This is the report we cannot see despite the Senate resolutions?

Senator Cormann: I will just add here that there are obviously some significant commercial sensitivities in this whole process. Once the commercial sensitivities have been resolved, that is the appropriate time to release that sort of information.

Ms Halton : I have to endorse what the minister has said. I can assure you that the views of Winter and White and the report itself—and I have to say that it is not just what is in the report but the discussions that have been had with both of them—have been well factored into the process that has been gone through. We have a team in the department which does not simply comprise finance officers. It comprises people who have expertise across a range of domains and indeed includes people from the DMO.

Senator XENOPHON: But the recovery plan has been prepared. It is out there.

Ms Halton : We are working through a series of steps and, in terms of then fleshing out the elements of those steps—which is what we are doing at the moment—we are on a path, but we have not finalised exactly every single element of that. This is, you would understand, an extraordinarily complex project and we have to be confident—exactly as, in fact, Winter and White and others have said—that everything from the metrics to the financing to the involvement of the partners is right. So we are working through that, but—and exactly as the minister says—we have yet to finalise that for government, and we will do that.

Senator XENOPHON: My final question, which I am happy to take on notice in relation to this, is: how long has this recovery plan been around? It appears that there have been some delays in its implementation.

Ms Halton : I have been there since the beginning of July. I would say there are not what I would describe as material delays. There is a methodical process of going through and reviewing the project, looking at the operation of the alliance and looking at what the commercial partners can bring to the project. We will not be putting any of that into the public arena—and I would not recommend that to the minister—until we have nailed down all of those elements. That is what we are doing at the moment.

Senator XENOPHON: Will it be in the next three months?

Ms Halton : We can assure you, as the minister said, that it will be the first half of next year. But in terms of precision, we will put it in the public arena when it is nailed down and when it is right.

Senator WONG: Can we just go back to broader industry issues and Australian content in relation to the Collins. You might have to take this on notice. Could you give me an estimate about how many Australian companies have been involved in the construction and sustainment of the Collins?

Mr Whiley : We have currently got in excess of 2,000 Australian companies involved in the sustainment space.

Senator WONG: I assume you have got a list of those companies.

Mr Whiley : Yes, we do.

Senator WONG: Are you able to provide that either today or on notice?

Mr Whiley : I could take it on notice.

Senator WONG: I do not need all the details if there is commercial-in-confidence about everything they do or what it costs. I am more interested in who they are and, if you are able to, at a high level, what they provide.

Mr Whiley : Not for all 2,000.

Senator WONG: No. You may say, 'IT: here are these 60,' or whatever—something like that, just the categories. That would be great. My recollection of the current workforce at ASC is that you have obviously got people working on AWD and people working on the Collins, but have you got some flexibility between the two parts of the workforce?

Ms Halton : Yes.

Senator WONG: What is your total?

Mr Whiley : Approximately 3,000.

Senator WONG: About how many of them are AWD and how many are subs?

Mr Whiley : It is about 1,750 AWD and 1,250 in submarines.

Senator WONG: Are you able to give me any indication of an estimate of the workforce of the 2,000. Are many of them very small companies, or are there some very large ones as well?

Mr Whiley : I think it is across the spectrum of companies from multinationals right down to smaller suppliers. It is a huge range of companies.

Senator WONG: I am trying to get a sense of total employment associated with it.

Mr Whiley : It is very hard to actually evaluate that. It is a question we have considered. It is very hard to speculate how much employment that generates.

Senator WONG: I am not asking you to speculate. I am asking if ASC has knowledge of the number of people working in the companies who contract with you.

Mr Whiley : I suppose I am trying to say that that is impossible for us to work out.

Senator WONG: Sure. I thought it might be something you had information about. Has the Prime Minister ever visited the ASC?

Mr Whiley : I do not think so. Certainly not in his capacity as Prime Minister.

Senator WONG: Obviously the shareholder minister, Senator Cormann, has?

Mr Whiley : Yes.

Senator Cormann: Yes.

Senator WONG: And the visit that got some media—the Japanese delegation?

Mr Whiley : Yes.

Senator WONG: Were you interim CEO then?

Mr Whiley : Yes, I was.

Senator WONG: Can you tell me how you were advised of that visit?

Mr Whiley : We were advised through the customer organisation, DMO, that that was happening.

Senator WONG: So Mr King?

Mr Whiley : Actually, John Chandler, who is our local rep on site, advised us.

Senator WONG: When did Mr Chandler tell you that there would be a delegation?

Mr Whiley : Probably two or three weeks before the delegation attended.

Senator WONG: How was it explained to you?

Mr Whiley : It was a delegation of a number of Japanese dignitaries who were looking to understand Australian submarine capabilities.

Senator WONG: Did you get a list of who attended?

Mr Whiley : Yes, we did.

Senator WONG: Can you provide that?

Senator Cormann: Will take that on notice.

Senator WONG: So the invitation was not yours?

Mr Whiley : No.

Senator WONG: Who was the invitation from?

Mr Whiley : I don't know.

Senator WONG: Mr Whiley, you get a call from DMO that a Japanese delegation is going to visit the submarine corporation at a time, let's be frank, of some public interest. Did you or no-one in your organisation know who arranged to have them there?

Mr Whiley : We assumed it came through the DMO organisation. We had no reason to think anything other than that.

Senator WONG: Did any politician attend with the Japanese delegation?

Mr Whiley : No.

Senator WONG: Did any member of any ministers' staff attend with the delegation?

Mr Whiley : I am not sure.

Senator Cormann: We might take that on notice. Certainly none of my staff, I can say that.

Senator WONG: Did Mr Shearer from the Prime Minister's office attend?

Senator Cormann: We will take that on notice. I am personally not aware. Rather than say something—

Mr Whiley : No, I'm not sure.

Senator WONG: Did Mr Costello attend. You at least know him.

Mr Whiley : He definitely did not attend.

Senator WONG: So it was Mr Chandler who told you about this?

Mr Whiley : Yes, Commodore Chandler.

Senator WONG: Sorry, Commodore Chandler. Was there a written letter, an email communication outlining what the visit was for?

Mr Whiley : Yes, we got a letter saying what it was about, which, basically as I told you, was a list of attendees. It was as simple as that.

Senator WONG: From whom was that letter?

Mr Whiley : The email was from John Chandler.

Senator WONG: If you could provide, on notice, copy of that, please.

Senator Cormann: We are taking that question on notice. We will provide what we can provide.

Senator WONG: Was the initial communication by telephone?

Mr Whiley : John's office at the time was about 10 metres away from mine and he came over and spoke to me.

Senator WONG: And he got a call from where?

Mr Whiley : Again, I assume someone within his organisation. I did not ask.

Senator WONG: Okay. What did you understand the delegation would be doing?

Mr Whiley : As I indicated, they would come to look at Australia's submarine capability.

Senator WONG: Did you meet the delegation?

Mr Whiley : Yes.

Senator WONG: Can you give me a sense of which organisations they represented—were they government or private sector or a mix?

Mr Whiley : There was a mixture of government, industry and navy representatives, I think.

Senator WONG: Government, industry and navy representatives?

Mr Whiley : Yes.

Senator WONG: And 'industry' being—what?—submarine builders, shipbuilders in Japan?

Mr Whiley : Yes, Mitsubishi and Kawasaki, I think.

Senator WONG: How high was the Navy representation?

Mr Whiley : Again, sorry—

Senator Cormann: We have already taken it on notice.

Senator WONG: If you cannot recall, that is fine. Were there any politicians or political staff from the Japanese side involved?

Mr Whiley : Again, I am not sure where they sit in the Japanese hierarchy.

Senator WONG: Okay. Did any member of the diplomatic corps—ambassador or somebody from the embassy?

Mr Whiley : No, I am not aware of that.

Senator WONG: You cannot recall, okay. What do they do in the visit? How long were they there?

Mr Whiley : They were in ASC approximately two days in the North organisation and one day in the Western Australian organisation. They were with us probably in total about three-quarters of a day. The rest of the time they had discussions with DMO, which we were not involved in.

Senator WONG: What did they do while they were at either WA or Adelaide?

Mr Whiley : We gave them a presentation on our capability and we walked them around the site. They ask some questions and that was it basically.

Senator WONG: What sort of questions?

Senator Cormann: I do not think that it is appropriate to go into private conversations—

Senator WONG: They are not private conversations; this is a publicly owned company with a delegation from Japan, visiting Australian shipbuilding yard and you do not want them to tell us what questions the Japanese were asking?

Senator Cormann: There are visitations of ASC and other such businesses all the time. I will take any questions in relation to this on notice in order to ensure that the answers that are provided are appropriate.

Senator WONG: Did they inspect the AWD activities as well as the submarine?

Mr Whiley : No.

Senator WONG: So they were only interested in the submarine?

Mr Whiley : Yes.

Senator WONG: I presume you had one in four maintenance at least.

Mr Whiley : Yes, we had Farncomb in there at the time.

Senator WONG: Did you take them inside it?

Mr Whiley : No.

Senator WONG: Just remind me, what are the protocols about non-government officials' access to particular aspects of ASC? Presumably the shareholder minister and the department of Finance do not have any limitations on any aspects of the submarines they can go and look at.

Mr Whiley : We have to get permissions by both ministries on any visits we have on site.

Senator WONG: Okay, so from both the defence and the finance minister?

Mr Whiley : Yes.

Senator WONG: When did you get that?

Mr Whiley : Again, those, I think, were arranged through the DMO organisation.

Senator WONG: Is there any aspect of ASC's operation that you could not have demonstrated to the Japanese delegation?

Mr Whiley : There are certainly aspects of things with security classification that we would not show to them.

Senator WONG: Mitsubishi and Kawasaki are Japanese shipbuilders.

Mr Whiley : Yes.

Senator WONG: They do surface as well as submarine?

Mr Whiley : To be honest, I am not sure.

Senator WONG: But you know that they do submarine.

Mr Whiley : I know they do submarine.

Senator WONG: Their representatives obviously had some knowledge or were involved in submarine construction?

Mr Whiley : The conversations were pretty much one-way. We got very little feedback from the Japanese counterparts in terms of what the role was and what they did.

Senator WONG: What did you understand they were doing? Why were they there?

Senator Cormann: Mr Whiley has already answered that question.

Senator WONG: I am asking him again.

Senator Cormann: I think the Mr Whiley has twice answered the exact same question.

Senator WONG: What did you understand they were doing while there?

Mr Whiley : As I said before, I think they were looking at our capability as a country in terms of submarine space.

Senator WONG: Exploring the option of building or maintaining Japanese submarines?

Senator Cormann: No, that is you speculating.

Senator WONG: You are very anxious to avoid answering this question.

Senator Cormann: No, that is not a question; that is speculation.

Senator WONG: There was a question mark at the end of that.

CHAIR: The minister is responding.

Senator WONG: From what you heard and saw, Mr Whiley, did you believe they were assessing the suitability of maintenance of ASC to undertake maintenance work for Japanese submarines?

Senator Cormann: 'Do you believe' is asking him for an opinion.

Senator WONG: All right, I will do it again. From what you heard and saw, were the Japanese delegation exploring the capacity of ASC to maintain Japanese submarines?

Senator Cormann: You are still asking for an opinion.

Senator WONG: That is not an opinion.

Senator Cormann: Yes you are.

Senator WONG: That is not an opinion.

CHAIR: The question is highly speculative.

Senator WONG: How can it be—

Senator Cormann: You asking him to express a view, and that is not—

Senator WONG: Why are you so worried about telling Australians about this?

CHAIR: Order! Order! The question is asking Mr Whiley to speculate.

Senator Cormann: I am not worried about anything.

Senator WONG: Mathias, why are you so worried about telling Australians about this?

CHAIR: Order! Senator Wong! Senator Wong, let me pull you up on one thing. It is not a first name basis here. It is either 'Minister' or 'Senator Cormann'. That is the first thing.

Senator Cormann: I don't mind you calling me 'Mathias', Penny.

Senator WONG: I like him so much I just flick over to Christian names.

CHAIR: Off-line you can do whatever.

Senator McKENZIE: It adds to the romance!

Senator WONG: Oh my gosh! I remind you that we are not each other's type, remember?

CHAIR: You are asking Mr Whiley to offer a speculation about a conclusion that he has drawn.

Senator WONG: What did they ask about?

Senator Cormann: I have already take that on notice.

Senator WONG: They were there to assess whether you could maintain Japanese subs, weren't they?

Senator Cormann: That is your speculation.

Senator WONG: If it is not, just say no. You see, you won't.

Senator Cormann: I wasn't there and I have taken the relevant questions on notice.

Senator WONG: Let the official answer.

CHAIR: The question has been taken on notice.

Senator Cormann: And the official is not going to express an opinion, which is the same rule that applied when you were sitting in my spot. We have had this conversation before.

Senator WONG: It is not an opinion; it is fact.

Senator Cormann: I learned a lot from the time when you were sitting in this chair and I am applying exactly the same rules.

Senator WONG: Did you understand that they were there looking at whether you could build a Japanese submarine?

Mr Whiley : No, I do not think that is the way we took their questions.

Senator WONG: There, thank you. Excellent. They certainly were not there to look at a Japanese build onshore, but I am not allowed to get an answer to a question to whether they were there to look at we could maintain onshore a Japanese-built sub.

CHAIR: We can all draw different conclusions to the evidence given.

Senator WONG: I think everyone watching can draw the conclusion that the minister does not want Australians to know what you are really doing.

Senator Cormann: I have got to respond to this. I have been very clear right from the top of this particular session that the Australian government is entirely focused on delivering the best possible outcome when it comes to submarine procurement for the future in the context of our defence interests. We are very focused on how we can maximise the defence of the nation, how we can get the best possible submarine capability to support that the best possible price. That is our responsibility and that is what we are continuing to focus on.

Senator WONG: In light of that, Minister, do I then take it that the defence minister is indication for the last election that 'we will build 12 submarines here in Adelaide.' Does that remain government policy?

Senator Cormann: We are working through a process that is yet to come to a conclusion?

Senator WONG: Is it government policy or not?

Senator Cormann: The question that you ask is a question that should be addressed to the defence minister.

Senator WONG: You are the finance minister.

Senator Cormann: I am, indeed, and it is a great job and I enjoyed very much.

CHAIR: The minister is responding to your question, Senator Wong.

Senator Cormann: It is not my area of responsibility and I would refer any relevant question to the Minister for Defence.

Senator WONG: I just want to understand what you understand government policy to be.

Senator Cormann: I have just articulated government policy. Government policy is to get the best possible submarines to maximise our defence capability at the best possible price. We are currently working through a process to ensure that happens.

Senator WONG: So that is government policy and not, 'We will build 12 submarines here in Adelaide'?

Senator Cormann: My statement stands by itself.

Senator WONG: What I love about this government is not only did you lie before the election, you then lie about breaking your promises after the election.

Senator Cormann: That is just political rhetoric.

Senator WONG: I think Australians are pretty aware of what is going on. It is kind of disrespectful—you will not even be up-front about broken promises.

Senator Cormann: I think Australians want the Australian government to focus on the national interest.

Senator WONG: You will not even be up-front about broken promises. You say one thing before the election then afterwards you say something different and you tell everybody that actually you haven't said anything different. Australians are pretty aware of what is going on.

Senator Cormann: The Australian people want us to focus on the national interest, and that is what we are doing.

CHAIR: Senator Wong, ask some questions.

Senator WONG: Yes, sorry, I should. Have there been any other visits to ASC in the time that you have been Chief Executive, Mr Whiley, by other countries—akin to the Japanese delegation?

Mr Whiley : Not nations, no. We have had companies from other countries.

Senator WONG: But nothing associated?

Mr Whiley : Nothing like that, no.

Senator WONG: What you mean 'nothing like that'? Not that high level?

Mr Whiley : Not that high level. We have had delegations from overseas submarine designers and what have you come and talk to us.

Senator WONG: I may or may not have asked this. Minister, when did you become aware of the delegation?

Senator Cormann: I have got to take that on notice. In all seriousness, I cannot specifically recollect.

Senator WONG: Sure, but presumably before it happened.

Senator Cormann: Rather than to mislead you, I better check.

Senator WONG: But I presume before it happened?

Senator Cormann: Yes.

Senator WONG: Ms Hall, when did you become aware?

Ms Hall : The request came through from the DMO per the normal protocols to the finance minister's office and to the department seeking approval for the delegation several weeks before it was scheduled.

Senator WONG: From the DMO?

Ms Hall : Yes, from Commodore Chandler.

Senator WONG: Was the defence minister's or the Prime Minister's office involved in any way.

Ms Hall : The defence minister's office was aware. I am not aware of whether the Prime Minister's office was involved or aware.

Senator WONG: Do you know if any member of the Prime Minister's office attended with the delegation?

Ms Hall : Not to my knowledge, but we would have to take that on notice, as the minister said.

Senator WONG: Did you attend, Ms Hall?

Ms Hall : No.

Senator WONG: Any finance ministry official?

Ms Hall : No-one from the department.

Senator WONG: Do you know which departmental officials did attend?

Ms Hall : Certainly Commodore Chandler and a range of his staff from the DMO. But we would have to check that.

CHAIR: The question has been taken on notice.

Senator WONG: I was just trying to get a sense whether it was DMO plus Finance or just DMO. It appears to be just DMO.

Ms Hall : Yes, just DMO.

Senator WONG: You said, Mr Whiley, that some other companies had visited.

Mr Whiley : Yes.

Senator WONG: Can you tell us which other companies had visited?

Mr Whiley : We have had visitations from Saab Kockums and TKMS.

Senator WONG: TKMS. They are German?

Mr Whiley : Yes.

Senator WONG: And Saab—are they still Swedish?

Mr Whiley : Yes.

Senator WONG: Well, people buy different things. Saab is with Kockums now?

Mr Whiley : Saab Kockums is now one company.

Senator WONG: One company, right. When was the TKMS visit?

Mr Whiley : We have had a visit this week from them.

Senator WONG: This week. Was that through DMO as well?

Mr Whiley : No, that was commercial, through us, but we got approvals from, obviously, DMO and Finance to have the visit.

Senator WONG: So you arranged that?

Mr Whiley : It was a CEO-to-CEO discussion that they wanted to come and have a chat on commercial issues.

Senator WONG: Did those discussions centre around cooperation around a hybrid build?

Mr Whiley : There were certainly discussions about the future and potential for a future submarine design collaboration, yes.

Senator WONG: Okay. And Saab Kockums?

Mr Whiley : The same.

Senator WONG: When did that occur?

Mr Whiley : Again, this week.

Senator WONG: Was that also at your initiation?

Mr Whiley : It was a joint initiation.

Senator WONG: Between Saab Kockums and you?

Mr Whiley : Yes.

Senator WONG: Okay. Have DMO been involved, in the way they facilitated the Japanese visit, in facilitating these visits from what you might term potential competitors, TKMS and Saab Kockums?

Mr Whiley : No.

Senator WONG: Has DMO had any involvement with these companies as part of the discussions with you?

Mr Whiley : No.

Senator WONG: Are you able to enlighten me as to why?

Mr Whiley : The way I see it is simplistically that those are company-to-company discussions. The other one you alluded to was a sort of a more national Japanese delegation, as opposed to any commercial delegation from Mitsubishi or Kawasaki. Had those companies wanted to talk to us, we would have probably talked to them as well.

Senator LUDWIG: Why were you seeking a joint initiative? In your evidence you indicated that they were jointly initiated at meetings. That was the last one, the Saab one, as I understand it. That was both initiated by you and initiated by them?

Mr Whiley : It is because it all came out in a conversation I had. I was at SIA last week and had a conversation with both those companies. We talked about what we heard and what the potential future would be in how, if there were involvement from ASC, we may support them in their potential bid. It was just a discussion, so I cannot say it was actually formulated by any one party. It was out of the discussion, really.

Senator LUDWIG: And it was predicated on a couple of scenarios: one scenario where you may be maintainer of another class or—

Mr Whiley : That level of detail was not discussed.

Senator WONG: Would it be correct to say—I think you used the word 'collaboration'—that there were broad discussions about possible collaboration on a future submarine project?

Mr Whiley : Yes, I think both those parties are considering—it is no secret that there are four potential future submarine contenders—how they may position themselves, moving forward. They are out talking to ASC about any possible role in that. We are being noncommittal in terms of any agreement with any party at this point of time. We are just engaged in a conversation about what they potentially may or may not do with ASC moving forward, depending on how this whole process unfolds.

Senator LUDWIG: And this is about securing work in the long term for ASC?

Mr Whiley : No, I think it is about making sure—the endgame of this is making sure—this country gets the right submarine platform that it needs for the future. Them coming to talk to us is a recognition of the skills and capability we have and what we can contribute to that solution. That is what those conversations were about.

Senator LUDWIG: You have already undertaken work on a future platform?

Mr Whiley : There has been some formal work undertaken under option 3, working with Saab Kockums. That is government funded work through the option 3. We are actually involved in that side of it. Other than that, there has been no work as such looking at how we may work with these parties moving forward.

Senator LUDWIG: Discussions only?

Mr Whiley : Just discussions only. Hypothetical discussions speculating what potential models may be available in the future and how we may work collaboratively to make sure the country gets the right solution and utilises ASC in that solution.

Senator WONG: You said four potential bidders—there are TKMS, Saab Kockums, Mitsubishi and is it DCNS, the French?

Mr Whiley : DCNS, yes.

Senator WONG: Have DCNS visited or are they intending to visit?

Mr Whiley : At the moment there is no scheduled visits.

Senator WONG: Have you had any contact with them?

Mr Whiley : Not recently. No.

Senator WONG: Has DMO given you any indication about ASC's role in the future submarine project?

Mr Whiley : No.

Senator WONG: Obviously the discussion of privatisation of an aspect of ASC has been reported in the media. Can you tell me whether any discussions have been had with you on that topic?

Mr Whiley : No, no discussions on privatisation.

Senator XENOPHON: In relation to Senator Wong's question about whether you have had discussions with the DMO with respect to the future submarines project I think your answer was no. In previous years—you have been there a long time, which is a good thing—has it been the normal protocol to have discussions with the DMO about upcoming projects? Have there been discussions with the DMO about future projects in the past?

Mr Whiley : Not really. Not that I am aware of, anyway. For projects of this significance there is a process that DMO will follow through in that. I am assuming we are not ready for that part of the process to be engaged with—if they want us to be engaged. So it is not generally the case. When we have done design changes on the Collins, and what have you, there has been some pre-engagement on that to get some indicative costing or some indicative design solutions. But not typically, no.

Senator WONG: I think I am done. I am conscious that there is a lot else on.

CHAIR: There is a lot else on.

Senator WONG: I am happy to put more on notice.

CHAIR: I would suggest that, with the concurrence of the committee, we take the morning tea break early so that we are not interrupting further witnesses—that we suspend the committee now and resume at 10.30.

Thank you very much for your attendance today Mr Whiley and Mr Edwards. Your contributions were stoic. And thank you, Minister.

Proceedings suspended from 10:12 to 10:33