CHAIR —I declare open this meeting of the Senate Foreign Affairs, Defence and Trade Legislation Committee. I welcome back Senator Hill, the Minister for Defence, and officers of the Defence organisation. Last night when the committee adjourned we were considering the capital budget. We will continue with questions on the capital budget. At approximately 5.30 p.m. the committee will conclude its scrutiny of the Department of Defence and move to examination of the DHA until the dinner break. After dinner the committee will examine the Department of Veterans' Affairs. When written questions on notice are received, the chair will state for the record the name of the senator who submitted the questions and the questions will be forwarded to the department for an answer. We are dealing with questions on the capital budget.

Mr Roche —Could I provide a couple of confirmations or answers from last night? In relation to the joint strike fighter project, I was asked how many staff we had on that project. I think I said 20 to 30. The answer is actually 25.

Senator HOGG —Good guess!

Mr Roche —I was asked how many engineers were involved in the contract between Hawker de Havilland and Lockheed Martin. There are six engineers and the contract value is $2.5 million. The cost to date of the full cycle docking of Collins has been $120 million.

Senator CHRIS EVANS —That is $120 million for Collins. What is the estimated full cost going to be?

Mr Roche —I think it is very close to the full cost.

Senator CHRIS EVANS —Even though it is going to be up for another year?

Mr Roche —Yes. It factors in all that we know at this stage.

Senator CHRIS EVANS —But you are still in dispute, aren't you, with Kockums about some of the welding issues?

Mr Roche —Yes. That does not make allowance for any recoveries that are made. That just assumes at this stage that that is the total cost. We are in discussion with Kockums about how that might be shared.

Senator CHRIS EVANS —I see. So the costs will not get any greater. It is just a question of whether you get any of that back out of Kockums.

Mr Roche —That is our expectation at this stage.

Senator CHRIS EVANS —Is there any agreement at all with Kockums about that or are you still discussing it?

Mr Roche —We are still in discussion.

Senator CHRIS EVANS —We delayed a conversation about various operations, such as Catalyst, Falconer et cetera, on the basis that we were going to get a schedule that would prevent us from having an unstructured discussion. Are we going to be in a position to get that this morning?

Senator Hill —I have a schedule. Can I have a few minutes to have a look at it?

Senator CHRIS EVANS —Sure.

Senator Hill —I meant to last night but—

Senator CHRIS EVANS —I do not know what you were doing between 12.30 and 7 this morning, Minister. I had all that time on my hands too. While the minister reads that, can I ask a couple of questions about facility projects? The first one is Mulwala, which we have discussed before. Is anyone able to tell me where that is at?

Senator Hill —There is a submission to cabinet on the way forward that should be considered soon. That has been based on a great deal of discussion with ADI and a certain amount of consultation with parties in the global munitions business who would be interested in bidding on the redevelopment.

Senator CHRIS EVANS —So what has happened with the remediation project?

Senator Hill —That is separate and distinct. There is one remediation program being implemented. I thought that you were interested in the redevelopment.

Senator HILL —I am. The remediation project seems to have dropped out of the budget papers. I am trying to get a handle on what has happened to the whole thing.

Major Gen. Haddad —As the minister said, there are two distinct aspects of this activity. One is the remediation of the site. We are getting advice from New South Wales EPA about our requirements in respect of that. That work is nearly finalised. A plan of a strategy of how to do that remediation will then be developed, agreed and implemented. Funding is being provided for that.

Senator CHRIS EVANS —What has happened to the funding? You said $63 million. I cannot track it.

Major Gen. Haddad —That is in the facilities vote.

Senator CHRIS EVANS —Is it just sitting there? That was allocated a couple of years ago—is that right?

Major Gen. Haddad —It was.

Senator CHRIS EVANS —So that has just been carried over.

Major Gen. Haddad —I will have to get someone from that program to tell you how they are managing that in a financial sense.

Senator CHRIS EVANS —Perhaps you could take that on notice for me.

Major Gen. Haddad —It is a separate appropriation.

Senator CHRIS EVANS —Anyway, that $63 million for remediation is still in the budget.

Major Gen. Haddad —Yes.

Senator CHRIS EVANS —But you still do not have an agreed plan on that yet.

Major Gen. Haddad —We do not have an agreed plan on what work will need to be done. That was an estimate of the likely cost, but the agreed strategy will depend on exactly what work will need to be done.

Senator CHRIS EVANS —When will we have an agreed strategy?

Major Gen. Haddad —Once again, this is in another program and I am not managing that particular aspect, but I understand that that work is progressing and we should be there some time this year.

Senator CHRIS EVANS —I will ask you again about that towards the end of the year, because it seems to have been dragging on and on. What has happened with the other aspect of the project?

Major Gen. Haddad —The other aspect of the project is the replacement of the plant at Mulwala. The submission is with the minister. When all that has been cleared through government we will be going out with an RFT for the new work, in conjunction with Australian Defence Industries.

Senator CHRIS EVANS —Where is the budget for that?

Major Gen. Haddad —At the moment the budget is not identified, because it depends on the strategy that we use to do that. It could be a private finance initiative. That will depend on our results from our RFT. If we satisfy the test for it to be a PFI then that will be paid for through ADI. If that test fails, another funding strategy will have to be worked on.

Senator CHRIS EVANS —So it is fair to say that there is no allocation for that work in the current budget.

Major Gen. Haddad —Not at this point.

Senator CHRIS EVANS —And there is no carryover?

Major Gen. Haddad —No.

Senator CHRIS EVANS —So you have not worked out how to fund it yet, while other options are being considered.

Major Gen. Haddad —The preferred strategy is for that to be a private finance initiative, so it will be funded by ADI.

Senator CHRIS EVANS —It is always the preferred strategy to get someone else to fund it, but we have not had too much luck on those PFIs yet, have we?

Mr Smith —We will keep at it.

Senator CHRIS EVANS —Effectively, it is with the minister for decision.

Major Gen. Haddad —Yes.

Senator Hill —Which one is that?

Major Gen. Haddad —He is talking about Mulwala.

Senator Hill —It is with the government.

Senator CHRIS EVANS —Does someone want to clarify that?

Senator Hill —It will be a cabinet decision. It is a lot of money.

Senator CHRIS EVANS —What are we talking about for that project?

Major Gen. Haddad —The estimated cost that we previously published was $230 million.

Senator CHRIS EVANS —Is that still a reasonable ballpark figure?

Major Gen. Haddad —It depends on the scope of the work. Some other things have been identified that need to be done to make the site fully operational. It will not be a significant variation from that—so in the ballpark of $230 million.

Senator Hill —The government committed itself to the project. The detail of the project is the next step to be approved. We hope that will be in the near future.

Senator CHRIS EVANS —Where are we at with the RAAF training college in East Sale?

Senator Hill —At the time of the last election, the government indicated that, with the closing of Point Cook, it intended to transfer the School of Air to East Sale and the headquarters. As understand that, that is basically the officer training bit. The balance was to be transferred to Wagga. The officer training side of it has not yet occurred while the government continues to look at the basing issue nationwide. That is the so-called force disposition project—where the forces for the future should be best based, both in terms of the economic consequences and cost efficiencies and military effectiveness.

Senator CHRIS EVANS —So is it fair to say that the proposal for the RAAF training college at East Sale is now under reconsideration? Is it an approved project, for instance?

Senator Hill —I have said to the people at East Sale that we cannot progress the announcement the government made at the last election until we have completed a look at future basing Australia wide. We are looking to complete that as quickly as possible because we know that there are local interests at East Sale that would like us to get on with the capital investment in their region.

Senator CHRIS EVANS —So we have confirmed that the non-officer training is going to Wagga Wagga?

Senator Hill —It has already gone, hasn't it?

Air Marshal Houston —Yes, that is going to go to Wagga Wagga, but the residual officer training elements of the RAAF college will remain at Point Cook until such time as this study is completed.

Senator CHRIS EVANS —So Point Cook will continue to operate as is for the time being?

Air Marshal Houston —Correct.

Senator CHRIS EVANS —Is there a budget allocation for the development of the training college?

Air Marshal Houston —I do not believe any of it has been formally approved yet. At this stage they are proposals and we still have to go through the cabinet approval process.

Senator CHRIS EVANS —Is one of the options to move the officer training to Wagga as well?

Air Marshal Houston —That is one of the possibilities, but it is all wrapped up in a much broader study. Simply put, we have got too many bases and they are costing us an arm and a leg to maintain. We need to review the estate with a view to rationalising it.

Senator CHRIS EVANS —What about the training that you currently do at Edinburgh?

Air Marshal Houston —The training at Edinburgh is our initial recruit training—our recruit training school. The proposal is that that will be moved to Wagga. The reason for that is most of the people who go through that school end up at Wagga anyway for the remainder of their training, and there are efficiencies to be gained by moving that to Wagga Wagga.

Senator Hill —That was in fact announced several years ago, wasn't it? As I understand it, that was not part of the same announcement.

Air Marshal Houston —Certainly. It has been announced, but as yet we have not funded it, I believe.

Senator CHRIS EVANS —I have found over the years not to follow the announcements but to follow the money. So I am just trying to ascertain whether we have allocated money for any of these projects. It seems that certainly for East Sale no money has been allocated at this stage, and that is now wrapped up in the bases review. Is that a fair summary?

Senator Hill —My parliamentary secretary actually looks after bases, so I am not in a position to say whether there is money attached to it or not. I have never quite worked out how this mysterious blue book works. Is this the blue book or the green book?

Mr Smith —The green book.

Air Marshal Houston —We can check the status of it. I do not actually directly manage that side of it; the infrastructure people do, but I believe they are headed this way at high speed.

Senator CHRIS EVANS —I am not sure whether I am reassured or not by that. Scrafton and Pezzullo headed at high speed! Maybe you could take on notice any further information you can give us about whether that is actually funded. I cannot find it in the budget, so I presume the answer is no. I will leave facilities at that for the time being.

[9.20 a.m.]

CHAIR —We will move on to outcome 1, Command of operations in defence of Australia and its interests and output 1.1, Command of operations.

Senator CHRIS EVANS —I want to ask some questions about East Timor. I want to start with an explanation: I remember that in the 2001-02 additional estimates round $195 million of additional money was promised for 2002-03 but, looking at the budget figures, it appears only half of that was spent and that $95.4 million was returned to the government. I am trying to get a handle on that. I have read a number of interesting press releases by the Treasurer about how much East Timor is costing us, which do not seem to coincide with the Defence estimates figures, so I want to get a sense of the costing of the Timor operation. Then, General Cosgrove, I want to ask some general questions about what is happening. I know the UN has put in the request for a security force to be maintained because of concerns about stability et cetera. So I have some policy and some finance questions and I do not know which are easier to start with first.

Gen. Cosgrove —I think we could do either. We have our financial moguls here.

Senator CHRIS EVANS —I suspect they thought they were going to get a day off today.

Mr Smith —They don't have days off.

Senator CHRIS EVANS —Can someone explain to me what is happening to the funding globally with East Timor?

Senator Hill —It is a big question.

Senator CHRIS EVANS —I am sure Mr Veitch is up to it.

Mr Veitch —We will try. The government's commitment to East Timor is roughly $600 million per annum. It is made up of two components: one is a figure of $260 million per annum which is to maintain the deployment in East Timor and the other figure, which is roughly running at the moment at $340 million, is to maintain the government's commitment to higher preparedness levels, the extra battalion and a combat support group for Air Force to be able to respond to operations, such as East Timor. So the government's commitment is about $600 million at the moment.

Senator CHRIS EVANS —So we are still costing the extra battalion against East Timor?

Mr Veitch —No. It is costed against what we call `force generation'. If you look in the budget papers—I think it is in the overview; I will just find the reference—

Senator CHRIS EVANS —Page 14?

Mr Veitch —It is on page 21. I just have to locate the part in the table. While someone is finding that for me, you will notice two figures, Senator, on page 21 of our portfolio budget statements. One is in the third line of figures—the force generation funding of $448.9 million. If you go about a third of the way down the column you will find another figure in the year 2005-06 of $457.8 million. Those two figures represent the government's commitment at the time the white paper was announced, which in those prices was $415 million, to the extra battalion for Army and the combat support group for Air Force. As part of the white paper, Defence will be funded to maintain that capability on a permanent basis to respond to situations such as East Timor from 2004-05.

In the run-up to 2004-05, the funding is composed of two elements. One is the force generation component, which is building up to the $400 million that I have just described, and the other is the commitment to maintain the forces in East Timor, which is running down as our level of commitment reduces. That is currently running at about $260 million, or that is what is included in this year's budget for it. There are, however, some adjustments that need to be made to that at the additional estimates to reflect the reduced drawdown that has been announced by the government. We did not have time to do that and factor it into the budget papers. A decision was made to put that off until additional estimates.

Senator CHRIS EVANS —By reduced drawdown, do you mean maintenance of current strength?

Mr Veitch —Reduced number of people compared to our original planning estimates. So the $260 million we think will reduce by somewhere between $50 million and $100 million at additional estimates, which would be broadly in line with the adjustment we made in the estimates this year, where we returned $95 million to the department of finance because of the accelerated drawdown.

Senator HOGG —Can I just get this straight: it is out of that $457 million?

Mr Veitch —That is right. The $457.8 million, and the figure for the year before is $448.9 million.

Senator HOGG —You are saying that out of that, roughly $340 million is the—

Mr Veitch —No, that is the—

Senator HOGG —That is the full cost?

Mr Veitch —The number that compares with that which is in this year's budget paper is $340 million.

Senator CHRIS EVANS —Where do we find that?

Mr Veitch —You will not find it as a variation in the budget because it has been embedded there for a number of years. The East Timor commitment has been ongoing since 1999. So what we do from year to year is adjust that on a no-win, no-loss basis, which is the arrangement for which we have the funding for the deployment component, and we adjust at each budget or additional estimates for what the actual costs are. You will notice in the budget papers—I will get someone to find the reference for me—that we handed back to government $95 million this year.

Senator CHRIS EVANS —I have raised that with you, and that is why I want to understand why we did that.

Senator HOGG —If you go to the next page, page 22, you see where you have handed back the money. That is quite obvious, but it is not all that obvious where the recurrent expenditure for East Timor is.

Mr Veitch —As I said, because it has been locked in successive budgets since 1999, it is not visible in terms of a new budget measure because all we do is show variations on it from year to year.

Senator CHRIS EVANS —Why do you show the force generation? That is also locked in.

Mr Veitch —The force generation represents a new measure by the government. We are trying to show in that table a construction of how we have moved forward from the white paper funding commitment back in the year 2000 to today's budget. So we are trying to show the progressive build-up of the budget. If we did not include that, obviously there would be a hole there.

Senator CHRIS EVANS —Explain to me why you returned $95 million.

Mr Veitch —Compared to the original force level commitments that were based on a higher average number of staff being in East Timor for the year, what we did was to adjust our estimates to reflect the actual costs for the year.

Senator CHRIS EVANS —You are saying we withdrew more troops more quickly than had been planned?

Mr Veitch —Compared to the original planning basis of some years ago, yes.

Senator CHRIS EVANS —Compared with when? I have not seen any announcement about that; I understood they were being withdrawn according to the program that had been public for some time.

Mr Veitch —I do not know whether the minister wants to comment, but I think we have made some successive announcements on the numbers that have progressively—

Senator CHRIS EVANS —Maybe we had better come back to that. Maybe General Cosgrove or someone would like to take me through what is happening in terms of troop numbers in Timor. That might help the figures make more sense to me.

Gen. Cosgrove —As you know, the government has committed, over the long haul of Timor, to a proportion of around 25 per cent of the total peacekeeping force and, although we have not changed our position, we have adjusted our force levels to meet the UN's requirements. The UN planned originally to gradually reduced PKF numbers—and we were in the middle of that—but that plan was revised by the UN in March 2003. A slower rate of the PKF drawdown was then proposed as a result of a deterioration in the internal security situation in East Timor in late 2002 and early 2003. I ought to remark, though, that that has not continued and things have been rather quieter in East Timor since that time.

Australia responded to the UN's request for a slower rate of the PKF drawdown by amending the rate of reduction in our contribution. As a result, the 1st Battalion of the Royal Australian Regiment was due to deploy with two rifle companies, a headquarters and support staff but has instead gone with three, with an overall ADF commitment of around 990 people. In November this year—

Senator CHRIS EVANS —When did they go, General?

Gen. Cosgrove —They have gone to the western regions—

Senator CHRIS EVANS —When?

Gen. Cosgrove —They were deployed in early May.

Senator CHRIS EVANS —They have just gone?

Gen. Cosgrove —Yes.

Senator HOGG —Where did they go?

Gen. Cosgrove —They went essentially to the same area where Australian battalions have been operating under the UN, and that is in the western part of East Timor, on the border. In November 2003, the level of commitment will reduce to around 440 people until the planned end of the UNMISET mission in July 2004. We remain strongly committed to the peacekeeping mission and responsive to the UN, although it is our desire not to pass beyond about the 25 per cent level of the force.

Senator HOGG —Have the UN revised their view, which they obviously formed earlier, about the instability that has been there or has it just been a matter of, as time has passed, people have accepted that things have changed?

Gen. Cosgrove —There was a degree of nervousness, if I could put it that way, which was obvious in East Timor and with the UN, concerning a few incidents which cumulatively suggested that they did need to slow down. All I will observe is that, since that time, since March when this negotiation was in train, the security situation has been better.

Senator CHRIS EVANS —When was that change in policy—the March decision— announced?

Senator Hill —What change in policy?

Senator CHRIS EVANS —I think it was described as a slowdown in the rate of reduction.

Senator Hill —I am not sure how fixed the UN reduction schedule was. What was fixed is the time of this mission, which expires in the middle of next year. The force breakdowns are done about on a six-monthly basis. There was debate a few months ago in the United Nations as to whether the UN force term should be extended, and the decision was that it would not, but arising from that debate there was consideration of and a decision to slow the rate of reduction in the meantime.

Senator CHRIS EVANS —I know, but I am also conscious that the Australian government does not just do what the UN says. There would have been a government decision about—

Senator Hill —The UN decides the size of the force, and it is a UN force, but it asks for contributions.

Senator CHRIS EVANS —General Cosgrove just made it clear that we had increased our planned contribution of two rifle companies to three.

Senator Hill —No, we have not increased our contribution.

Senator CHRIS EVANS —Not our total contribution, but it was originally planned, as I understood the government's schedule—

Senator Hill —Our rate of drawdown has slightly reduced. We are not drawing down quite as quickly as we intended to six months ago, and that is as a result of a request from the UN.

Senator CHRIS EVANS —I accept that. What I asked is when we made that decision.

Senator Hill —That was a couple of months ago now.

Senator CHRIS EVANS —I want to know when we made that decision and when it was announced.

Mr Smith —It was March.

Senator CHRIS EVANS —Can someone give me the detail of that and whether there was any public announcement of that?

Mr Smith —We will check that.

Senator CHRIS EVANS —I do not seem to be able to find any record of that. That was the first I had heard that—

Senator Hill —I am told the UN approved the revised plan on 4 April. It is around that period—about a month or so before the last rotation.

Senator CHRIS EVANS —Perhaps you could take on notice the date that we approved that and whether there was any public announcement of that. I understand now we have three rifle companies, with a total of 990 people, up there on this rotation. General Cosgrove, do you have the planned rate of reduction from here on in?

Senator Hill —The next rotation is towards the end of the year. We have not yet finalised the composition of our force. There is still some discussion on that.

Senator CHRIS EVANS —Is that relating to a discussion in the UN about the total size or just about our contribution to it?

Senator Hill —We have got the rate of reduction that the UN would like to see. We have to make a decision on our contribution towards what the UN like to see. We are discussing the detail of that at the moment.

Senator CHRIS EVANS —Can someone tell me what the UN would like to see in terms of the rate of reduction between now and July?

Senator Hill —We can tell you what the projected UN force is at the end of the year. We may be able to do that now.

Mr Smith —I can tell you that. My understanding is that the UN figure for the end of the year is 1,750.

Senator CHRIS EVANS —And there will be total withdrawal in July 2004?

Gen. Cosgrove —The mandate finishes in July 2004.

Senator CHRIS EVANS —And has been no advice that that is likely to be extended beyond then?

Senator Hill —There are some who are arguing that it should be, and I said there was some debate in the UN as to whether it should be, but the nation states decided no at the time.

Senator CHRIS EVANS —I am just following your advice. I am not asking about the discussion; I am asking about the decision. We have no advice from the UN that any decision has been made to extend beyond July?

Senator Hill —The UN has made no decision to extend.

Senator CHRIS EVANS —So we are operating on the basis that our commitment will end in July?

Senator Hill —That is correct.

Senator CHRIS EVANS —Is it fair to assume that, if the government were to determine to maintain its contribution at the current level, we would be contributing in the order of 452 troops at the end of the year?

Gen. Cosgrove —That is the target but, as you would see from the last few months, the UN revisits its plans. But our target is to have 440 late this year. It is around 440; it is not precisely 440.

Senator CHRIS EVANS —Barring advice, requests or decisions by the UN to the contrary, you are planning to reduce our commitment in East Timor to around 440 in the next rotation at the end of the year?

Gen. Cosgrove —Yes.

Senator CHRIS EVANS —I draw back to what seems to be counterintuitive, Mr Veitch— as I understand it, at the same time we are under pressure to maintain our commitment at a higher level than we had planned, we are handing money back on the basis that we have a lower commitment? I find that a bit confusing.

Mr Veitch —It is lower compared to how we structured the budget a couple of years ago in terms of the run-down. While it is running down at a lesser rate than what we had originally planned, it is again less than the original planning base, so we will have surplus money to hand back to the department of finance at the additional estimates.

Senator CHRIS EVANS —So you did not adjust it at last budget in accordance with this timetable?

Mr Veitch —No, we haven't. As I explained, we adjusted it retrospectively with the department of finance in constructing this year's budget for 2002-03, which was the $95 million I described. Time prevented us from coming to an agreement with the department of finance on what the number would be for 2003-04. We mutually agreed with Treasury that we would delay the adjustment in the budget 2003-04 until the additional estimates. When we come back for additional estimates, you will be able to see exactly what we have done with the money. I am expecting the hand back to be of a similar magnitude.

Senator CHRIS EVANS —That is what I cannot understand. What General Cosgrove has just told me is that we will be actually maintaining more troops there in the next financial year than in the plan that has been on the board for a couple of years. But you are telling me that it is going to cost us less?

Mr Veitch —The budget that was struck some time before the plan General Cosgrove talked about was higher than that.

Senator CHRIS EVANS —But in the plan we have been talking about this drawdown has been around for two or three years, and that is why I cannot understand it.

Mr Veitch —I work with Finance and Treasury to adjust it at the appropriate time. We adjust it retrospectively because the thing does move around and under our no-win, no-loss arrangements that seems to be a healthy way of doing it. At the appropriate point in time— when we have enough information, because the finance generally follows the commitment level of forces—it is easy to calculate, and that process works reasonably well. If I can clarify an answer I gave earlier, it might put this in context for you. When you asked, `Where is this visible in the budget papers?', the last time we made it as visible as we are talking about now was in the 2001-02 portfolio budget statements. Someone might have a copy that they could show you.

Senator CHRIS EVANS —I have a copy.

Mr Veitch —If you go to page 18, you will find a breakdown of the two components of the East Timor commitment that I talked about. For example, in 2001-02, the government allocated $275 million towards the deployment and $375 million towards force generation commitments, which is $650 million overall. For 2002-03, the corresponding figures were $291 million for deployment and $310 million for force generation—an all-up total of about $600 million. For 2003-04, in the budget that has just been brought down—and this would have been adjusted for price—the figure was $261 million for deployment and $302 million for force generation, which totals approximately $562 million. As the commitment winds back completely and if it winds back to no commitment at all from 2004-05, obviously the deployment money diminishes to nothing and the force generation rises to the $440 million to $450 million we talked about earlier. That represents the extra battalions for the Army and the combat support capability that will endure as part of the white paper funding commitment.

Senator CHRIS EVANS —Is that still rising because that full capability has not been raised yet?

Mr Veitch —It is progressively being raised. It is a balancing act, balancing the draw-down and embedding of the new capability, but that is substantially complete. So by next financial year that capability, including all the support services and equipment, should be well and truly in place.

Senator CHRIS EVANS —And that will return to a normal budget item, will it?

Mr Veitch —Yes, it will.

Senator CHRIS EVANS —It will be absorbed into the normal budget?

Mr Veitch —It will be but, as I said before at additional estimates, I am happy to update that table to show the actuals that have occurred in those years and the adjustment that we will make with Finance in terms of the $95 million hand-back last year and what we will hand back this year.

Senator CHRIS EVANS —It is the only bit of white paper money I can find, Mr Veitch. Don't take that from me.

Senator HOGG —How will it appear in the annual report?

Mr Veitch —I can undertake to give a similar presentation to table 1.3 that we showed in 2002, if you would like.

Senator HOGG —That would be helpful.

Senator CHRIS EVANS —General Cosgrove, can you tell me at this stage whom it is planned to go on the next rotation to Timor?

Gen. Cosgrove —The 6th Battalion, Royal Australian Regiment.

Senator CHRIS EVANS —What would that consist of, in rough terms—one rifle company?

Gen. Cosgrove —Let me caveat this by saying that, given the UN's propensity to review things along the way—

Senator CHRIS EVANS —A bit like governments.

Gen. Cosgrove —the plan would be for a headquarters, one rifle company and supporting troops. That would be the basis of a multinational battalion which would cover the whole of the tactical control line, which is the border.

Senator CHRIS EVANS —And who else would be there as part of that tactical group?

Gen. Cosgrove —They are irreverently described as bits and bobs—the logistic troops and other small specialist teams that we would routinely keep to support the force, but they would be largely based in the west, probably with a further presence, including a national headquarters, in Dili.

Senator CHRIS EVANS —Can someone take me through what resources are currently allocated to Operation Relex II?

Mr Veitch —In dollar terms?

Senator CHRIS EVANS —In dollar and in platforms et cetera.

Mr Veitch —I can certainly give you the dollar figures. It might be best if I leave the other two to our operations people. The government's commitment to Relex and Relex II has been $58.8 million over the last three years: $18.7 million in 2001-02, $22.3 million in 2002-03 and $17.8 million in this new budget year.

Senator CHRIS EVANS —So we expect to spend $17 million this year?

Mr Veitch —It is $17.8 million.

Senator CHRIS EVANS —What does that largely go on?

Mr Bennett —It includes frigates, naval support ships, helicopters, P3C aircraft and a number of transit security elements.

Senator CHRIS EVANS —I will come to that with the operations people. What are you paying for when you pay them or when you allocate $17 million? Is it for fuel or depreciation on their assets? What are you accounting for in that budget?

Mr Veitch —I have some details on that. There is an amount of $200,000 for planning, travel and communications support to the operation. There are costs of about $1.8 million to Navy for port services and maintenance costs. There is an element of about $100,000 for Army for hard lying allowance for their TSE elements. For Air Force there are travel and accommodation costs for the air crew and maintenance staff that are forward deployed. And for Corporate Services and Infrastructure Group, there are additional garrison support, freight and other support costs for the operation of about $800,000. In the Defence Materiel Organisation, there is $2.5 million for the purchase of repairable items, spares and inventory for assets used in the operation.

Senator CHRIS EVANS —Aren't these spares that they would have sought anyway?

Mr Veitch —These are additional items that have been identified as specific to this operation. There are also some repair and maintenance costs and contractor support for the platforms involved. I think I alluded to that in one of my answers yesterday, that there was some remediation for costs for using the platforms in these operations. And there is $1 million for the Defence Personnel Executive associated with health costs and other overheads. That brings an all-up total of the $17.8 million I described.

Senator CHRIS EVANS —That is to deploy the health professionals to support the operation?

Mr Veitch —I do not have the detail on that; we could probably get that for you later today.

Senator CHRIS EVANS —Perhaps you could take on notice for me a breakdown of those costs—that would be helpful. Can I get a sense of what we have now got deployed on Relex II in the way of assets.

Gen. Cosgrove —I will ask Admiral Bonser, who is the operational commander, to talk to that.

Rear Adm. Bonser —The current forces that are assigned include one frigate as a sea transport ship at notice if required for long-range transportation, P3C Orion aircraft with others at notice if required, a number of RAN patrol boats and an Army Transit Security Element. I should also add that the Australian Customs Service also provides Coastwatch aerial surveillance effort and Australian Customs vessels in support.

Senator CHRIS EVANS —So we have got one frigate, the P3Cs and the patrol boats effectively as ADF resources on the job?

Rear Adm. Bonser —That is correct, and the Army transit security element.

Senator CHRIS EVANS —Apologies to Army: I know how much they look forward to going to sea. Which frigate is deployed there currently?

Rear Adm. Bonser —HMAS Arunta. It has just taken over the duty there.

Senator CHRIS EVANS —Is it sailing out of Darwin? Is it based out of Darwin?

Rear Adm. Bonser —Based in Western Australia.

Senator CHRIS EVANS —You do not change its basing?

Rear Adm. Bonser —They visit various ports in northern Australia for logistic purposes while they are on duty.

Senator CHRIS EVANS —What sort of tour of duty are they doing, time wise?

Rear Adm. Bonser —It is about month about at the moment.

Senator CHRIS EVANS —On Relex?

Rear Adm. Bonser —Yes.

Senator CHRIS EVANS —So you send another ship up there in a month's time?

Rear Adm. Bonser —Yes. In fact, the Newcastle, which has just been involved in the rescue of the rowers, was just coming off station and was relieved by Arunta as she went down to do that particular rescue.

Senator CHRIS EVANS —Why are you turning them around so quickly?

Rear Adm. Bonser —It is just to give people a break and rotate them through that particular task in a reasonable fashion.

Senator CHRIS EVANS —Is that partly driven by the crew's boredom at the tour of duty?

Rear Adm. Bonser —It is related to a whole range of things, including maintenance requirements for the ship's logistics support and everything else.

Senator CHRIS EVANS —I would have thought it was quite costly to rotate them that quickly.

Rear Adm. Bonser —It is the cost of one ship over the same period of time.

Senator CHRIS EVANS —What is their normal sailing pattern on these month-long deployments—are they at sea largely for that month?

Rear Adm. Bonser —A lot of the time they are at sea, and then they do regular visits, every couple of weeks, to a port in the middle of deployments for replenishment of fresh food or the like and a short break.

Senator CHRIS EVANS —Is that likely to be Darwin and Christmas Island?

Rear Adm. Bonser —It might be any of the ports in north-western Australia from Broome through Port Hedland—one of those ports.

Senator CHRIS EVANS —But in terms of off the Australian mainland, is Christmas Island the only other port of call? Is that a regular port of call for them?

Rear Adm. Bonser —They can't actually pull in there because there is no wharf but they do send boats and helicopters ashore to pick up mail, newspapers and provisions.

Senator CHRIS EVANS —How many Orions are currently assigned to the operation?

Rear Adm. Bonser —Currently one with another on standby if required.

Senator CHRIS EVANS —Where is that one operating out of?

Rear Adm. Bonser —Out of Darwin.

Senator CHRIS EVANS —Is the standby one in Darwin as well?

Rear Adm. Bonser —No, back at home base.

Senator CHRIS EVANS —So the standby means it is available if the other one is out of action for some reason.

Rear Adm. Bonser —Or required for searching or anything like that.

Senator CHRIS EVANS —And the patrol boats are doing their normal patrols. Is that fair to say?

Rear Adm. Bonser —Yes, that is fair to say and just concentrating on relative areas as necessary.

Senator CHRIS EVANS —When did we move down to one frigate?

Rear Adm. Bonser —In the last two months. I will just have to go back and confirm the date. We have done that in the last few months.

Senator CHRIS EVANS —So in the last few months you have reduced the commitment to Relex II from two frigates to one?

Rear Adm. Bonser —That is correct.

Senator CHRIS EVANS —I would appreciate it if you could get that date for me. What about the Orions? Were their numbers downgraded as well?

Rear Adm. Bonser —We originally had two working out of Darwin and one of those has been reverted to a notice to move, a lead time to react if necessary.

Senator CHRIS EVANS —And was that part of the same decision?

Rear Adm. Bonser —That is correct.

Senator CHRIS EVANS —What about the survey ships? When did they stop?

Rear Adm. Bonser —That was at the same time. There were not two frigates there; it was one frigate and a survey ship and it was the survey ship that came out.

Senator CHRIS EVANS —So we went from two ships to one and from two Orions to one. Is the helicopter detachment still there? Wasn't there a Sea King?

Rear Adm. Bonser —Not operating out of Christmas Island, no. If the frigates are carrying a helicopter—they may be, they may not—

Senator CHRIS EVANS —I am trying to refresh my memory because was one was based at Christmas Island for a while, wasn't it?

Rear Adm. Bonser —Yes it was. That is no longer there.

Senator CHRIS EVANS —When did that come out?

Rear Adm. Bonser —That was at the same time.

Senator CHRIS EVANS —So the Sea King has gone back to base?

Rear Adm. Bonser —Yes, in Nowra.

Senator CHRIS EVANS —Were there any other changes in commitment? I am just trying to go through the frigates.

Rear Adm. Bonser —The number of transit security elements reduced.

Senator CHRIS EVANS —How many are on that now?

Rear Adm. Bonser —One transit security element.

Senator CHRIS EVANS —How many originally?

Rear Adm. Bonser —Three.

Senator CHRIS EVANS —How many in each unit?

Rear Adm. Bonser —Fifty-odd people.

Senator CHRIS EVANS —Are they stationed on the frigate or are they just on call?

Rear Adm. Bonser —When the frigate is on station, they are there. Sometimes they may be ashore at one of the relevant locations like Christmas Island, but in the main—

Senator CHRIS EVANS —Basically they are on the ship while they are on that tour of duty?

Rear Adm. Bonser —Yes.

Senator CHRIS EVANS —Thank you for that. Minister, are we going to get that schedule?

Senator Hill —Yes, we are just doing some finetuning.

Senator CHRIS EVANS —The whiteout is out, is it?

Gen. Cosgrove —Please!

Senator CHRIS EVANS —Seriously, there are a couple of things that relate to that that I will come to later if the schedule is coming; if it is not coming I will press on.

Senator Hill —No, it is definitely coming. It is not far away.

Senator CHRIS EVANS —I will wait expectantly then.

ACTING CHAIR (Senator Ferguson)—Anything further on outcome 1?

Senator CHRIS EVANS —No. I think we could move on to Navy.

[9.59 a.m.]

ACTING CHAIR —We will now move to outcome 2, Navy capability for the defence of Australia and its interests.

Gen. Cosgrove —Does Senator Evans intend to return to output 1 later?

Senator CHRIS EVANS —No, not really. Basically I want to press on.

Gen. Cosgrove —I propose that we might excuse Rear Admiral Bonser, whose job is in Sydney.

Senator CHRIS EVANS —Yes, sure. I am sure Admiral Ritchie will be able to handle anything that comes up. I will start with the ASC. This question is probably to the minister. I would not mind an update on whether it is still the government's intention to sell the ASC and, if so, when that is likely to occur.

Senator Hill —That is still the government's intention. We do not have a fixed timetable for that. When we took it off the market in about January of last year, we said that we wanted to progress certain matters before returning the corporation to the market. Some of those matters, such as putting in place a capability agreement with Electric Boat, have been achieved but some others, such as settling outstanding disputes with Kockums, have not.

Senator CHRIS EVANS —Is there any likelihood of the dispute with Kockums being settled in the immediate future?

Senator Hill —We live in hope.

Senator CHRIS EVANS —Is there any basis for that hope?

Senator Hill —We also obviously make contingency plans on the basis that it is not going to be settled in the near future. Basically, we cannot allow the disputes to hinder or delay the capability enhancement for the boats that we are getting through our relationship with the US Navy and Electric Boat.

Senator CHRIS EVANS —Is the Kockums dispute now going to be pursued legally?

Senator Hill —We have a preference that matters not be resolved in the courts because that takes a great deal of time and very often just leads to another set of issues.

Senator CHRIS EVANS —That is right but we seem to be using up a lot of time anyway, without resolving anything. I am not being highly critical but we are not making much progress on this, are we?

Senator Hill —A great deal of effort has been made on our side to resolve these issues, short of litigation. Both the DMO and AFC have worked hard to that objective and we are disappointed that, so far, we have been unsuccessful. We believed we had made considerable progress last year in agreements in principle with Kockums, but unfortunately we have been unable to turn those agreements and principles into a final package.

Senator CHRIS EVANS —So what is the next step? Do we just continue to hope?

Senator Hill —We are doing a lot more than hoping. We have a whole range of actions at the moment to further progress the matter but I am not all that keen on putting detail of that on the public record.

Senator CHRIS EVANS —I understand that but equally it seems to me that it is an important public policy issue where we just keep getting told: `We are in negotiations with Kockums. It is all about to be resolved. It is going to be sold.' When did you take over the ASC—back in November 2000? It will be three years by the end of the year. I assume there is no likelihood that ASC can be sold in the next year.

Senator Hill —I would not assume that.

Senator CHRIS EVANS —Is it right to say that you will not sell ASC until the intellectual property issues are resolved?

Senator Hill —No. It is our preference to resolve the intellectual property issues.

Senator CHRIS EVANS —So it is not true to say that you have taken a decision not to sell the ASC until those issues are resolved?

Senator Hill —We took a decision, as I said, to take ASC off the market while we sought to resolve a number of outstanding issues. One of the reasons for doing that was to give greater certainty to potential purchasers. If we are going to be unable to resolve those issues, we will reconsider our options.

Senator CHRIS EVANS —You still maintain you may sell it without having resolved those intellectual property issues?

Senator Hill —That is an option that is open to us.

Senator CHRIS EVANS —When Senator Minchin says it is the government's intention to keep it in government hands for some time yet, is he not singing from the same song sheet?

Senator Hill —Senator Minchin, as the finance minister, and myself, as the defence minister, are working hand in glove on this matter.

Senator CHRIS EVANS —I look at what you said on 7 May and at what he said on 8 May—and there are a few holes in the glove.

Senator Hill —It depends how you read it.

Senator CHRIS EVANS —Literally.

Senator HOGG —Is this a new unity team?

Senator Hill —That is right.

Senator CHRIS EVANS —It seems to me that he is far less optimistic about the sale going ahead than yourself.

Senator Hill —I do not think so; I think he is anxious to sell the Submarine Corporation as quickly as possible. But we also, obviously, do not want to downgrade the government's asset in doing so.

Senator CHRIS EVANS —Are you still in negotiations with Kockums over the IP?

Senator Hill —Put it this way: as a result of the last round of negotiations, we formed the view that it was now less likely to be settled amicably. That was a matter of great regret to us because, as I said, we had reached understandings with Kockums last year. Nevertheless, we have not abandoned the cause. We would still prefer a settlement that did not involve litigation.

Senator CHRIS EVANS —Are you seeking legal advice or legal options?

Senator Hill —We have had a mountain of legal advice.

Senator CHRIS EVANS —But you have not yet decided to initiate proceedings against Kockums?

Senator Hill —All of these matters are very current and, as I said, I am a bit reluctant to go further than I have. We would prefer the matter to be settled out of the courts rather than by the courts.

Senator CHRIS EVANS —Have you take a decision to initiate legal proceedings against Kockums?

Senator Hill —Before such a decision was formally taken, there would need to be further consideration by cabinet and that has not yet occurred.

Senator CHRIS EVANS —When is that likely to go to cabinet?

Senator Hill —The matter is very current.

Senator CHRIS EVANS —You mentioned that the capability agreement has been signed with Electric Boat—is that right?

Senator Hill —That is right.

Rear Adm. Scarce —We have signed a seven-year agreement with Electric Boat to provide services to ASC and the Commonwealth.

Senator CHRIS EVANS —And the Commonwealth?

Rear Adm. Scarce —Correct.

Senator CHRIS EVANS —So you as well as ASC are a party to this contract?

Rear Adm. Scarce —We are.

Senator CHRIS EVANS —The intellectual property is in limbo. What services can they provide us, given that they cannot access intellectual property?

Rear Adm. Scarce —They are providing us with a current range of financial and engineering type services that do not require access to Kockums intellectual property.

Senator CHRIS EVANS —What are they giving us if it is things like financial and management advice? Surely we could have sourced that internally?

Rear Adm. Scarce —They are providing us with a view of how a submarine maintainer operates and the policies and procedures that a submarine maintainer operates in a commercial environment. ASC had a focus on build and EB are providing us with very useful information about how to transition the company into a service company.

Senator CHRIS EVANS —But there is effectively a barrier still between them and access to the IP—is that right?

Rear Adm. Scarce —That is correct.

Senator CHRIS EVANS —Is that in relation to all the IP on the subs?

Rear Adm. Scarce —Only that IP which is Kockums specific. The undersecretary has mentioned to me that, whilst we are negotiating with Kockums, we have imposed this barrier ourselves. We would not wish to inflame the situation—

Senator CHRIS EVANS —Or expose the Commonwealth.

Rear Adm. Scarce —Or expose the Commonwealth to litigation.

Senator CHRIS EVANS —I am not worried about inflaming them; I am worried about them suing us.

Mr Roche —I would not want what we have said though to be taken to infer that we would accept any claims that we are not able to transmit any of that intellectual property to third parties.

Senator CHRIS EVANS —I see. That is part of the argument—you dispute that. We are paying $US20 million. The original was that it be over three years. It is over seven now, is it?

Rear Adm. Scarce —The initial contract is over three years. We have not paid them the full amount because we have not drawn down on all the technical services that were in the original agreement.

Senator CHRIS EVANS —Perhaps you could describe to me, Rear Admiral Scarce, the difference between the three-year $US20 million contract I was briefed about before and what you have actually signed.

Rear Adm. Scarce —We have signed a three-year contract, but we have indicated to the company that we foresee a period of about seven years to utilise their services. But the contract is signed for three years.

Senator CHRIS EVANS —You have indicated, though, that you will not be paying quite as much as originally planned.

Rear Adm. Scarce —No, it is not a fixed-price contract. We draw down on the services as we require them.

Senator CHRIS EVANS —And that draw-down is occurring at a slower rate than first anticipated?

Rear Adm. Scarce —It is.

Senator CHRIS EVANS —How much have we paid Kockums—I mean—

Rear Adm. Scarce —We have paid Kockums—

Senator CHRIS EVANS —That was a slip, but if you want to answer that one, I would be interested in that question too. How much have we paid Electric Boat?

Rear Adm. Scarce —I will have to take that on notice. It is around $A7 million per year at the current rate.

Senator CHRIS EVANS —Clearly the $US20 million would not be paid in the first three years?

Rear Adm. Scarce —That is correct.

Senator CHRIS EVANS —That is a draw-down based on fee-for-service for an agreed set of services, is it?

Rear Adm. Scarce —That is correct.

Senator CHRIS EVANS —What exactly are they doing for us at the moment?

Rear Adm. Scarce —They are working on looking at our planning and scheduling for the first two full cycle dockings. They are looking at the processes that we put in place, making recommendations on how to improve the planning scheduling and the financial accounting for our in-service activities, and bringing with that 100 years of experience in maintaining submarines.

Senator CHRIS EVANS —You said Defence was also party to this contract. Who is paying the $US20 million? Is it ASC or the government?

Rear Adm. Scarce —The government.

Senator CHRIS EVANS —So it is not coming out of the ASC's books?

Rear Adm. Scarce —No, it is being paid directly by the Commonwealth at this stage.

Senator CHRIS EVANS —Looking at the ASC's books, they could not afford it. Mr Roche, are you able to tell me what the current financial status of the ASC is?

Mr Roche —Not as we speak today. It is really a matter for the Minister for Finance and Administration. The Department of Finance and Administration are the shareholders for the company. It is solvent; it is operating; it is ongoing.

Senator CHRIS EVANS —The last profit I saw in 2001-02 was down to $0.1 million, so things were getting pretty close to the line. Was the original arrangement that the government would pay the $US20 million or that it would come out of the ASC?

Rear Adm. Scarce —The original arrangement was that we would pay the first three years.

Senator CHRIS EVANS —I did not understand that. I know it is one and the same thing because the government is the 100 per cent shareholder of this nationalised industry. It is actually going to come out of the Defence budget?

Rear Adm. Scarce —We are paying the bills currently.

Mr Roche —We see the benefit even for the work that has been provided to ASC. To the extent that ASC's procedures are improved and the end result has improved for us, there is a spin-off for us.

Senator CHRIS EVANS —You are also a client of ASC, aren't you? It is a bit of an unusual relationship. You draw up a contract with them for Defence for the full cycle docking.

Rear Adm. Scarce —We are, but at this stage we are joined at the hip in that we are both seeking to improve the performance of the relationship and we are both seeking to improve the performance of the company. EB is vital in bringing that commercial submarine maintenance knowledge into the organisation. I would not want to point to ASC as not having submarine maintenance skills. They certainly do have. This is about raising that level of performance to the next bar.

Senator CHRIS EVANS —I am not suggesting either that there is not a national interest in maintaining our submarine capability, and that it is not perfectly appropriate for Defence to have a passing interest in it. I am trying to understand the relationship. So the Department of Defence are paying the bills for the arrangement with Electric Boat. Is there any contribution from ASC's books to that or is that solely paid by the government?

Rear Adm. Scarce —No, it is solely paid by Defence.

Senator CHRIS EVANS —What bucket is that coming out of inside Defence?

Rear Adm. Scarce —It is coming out of the submarine maintenance allocation.

Senator CHRIS EVANS —How many people do Electric Boat have in Adelaide? What is the size of their physical presence?

Rear Adm. Scarce —Four in Adelaide, and we are introducing an additional member in Western Australia.

Senator CHRIS EVANS —Someone from Electric Boat is coming over to the base?

Rear Adm. Scarce —That is correct.

Senator CHRIS EVANS —So effectively there is still a Chinese wall erected between them on the IP issues and at the moment they are concentrating on the commercial support aspects of the operation—is that correct?

Rear Adm. Scarce —That is correct.

Senator CHRIS EVANS —This question is probably for the minister. Can I have an update on where we are at with the shipbuilding industry rationalisation plan.

Senator Hill —Again, it is linked with ASC. As you know, we have put the plan developed by my department and the industry out in the public arena. There has been considerable debate on that. I have developed a way forward for cabinet consideration. The issue is still basically before cabinet.

Senator CHRIS EVANS —Is there a likelihood of any resolution on the issue soon? Is it effectively delayed by the ASC problems or not?

Senator Hill —It is not easy to progress the issue whilst there remains this uncertainty in terms of ASC. It is hard for us to see a rationalisation of the industry which does not include ASC. If we are unable to sell ASC at the moment, that is a restraining factor.

Senator CHRIS EVANS —I can see that. It seems to me that that is a major issue to prevent it easily going ahead but, given that the ASC thing does not look like getting resolved quickly, is it the case that the rationalisation is dead?

Senator Hill —No, not all because rationalisation will occur in any event simply through commercial pressures. What we are interested in is trying to identify a way in which we could facilitate that rationalisation which would result in the least pain for industry and, at the same time, give us confidence that the Australian shipbuilding industry will be stronger in the future not only in terms of new projects but particularly in terms of maintaining and upgrading our current fleet.

Senator HOGG —Will this impact on any existing or new projects, as you just indicated? If so, in what way?

Senator Hill —We have not allowed it to impact. As we said yesterday, whilst we have been having difficulties in resolving the ASC issues, and therefore the shipbuilding rationalisation issues, we have nevertheless found other ways to progress planned projects. For example, we have been progressing critical prerequisite studies for the proposed air warfare destroyers.

Senator HOGG —What about the patrol boats?

Senator Hill —It has no effect at all on the patrol boats. We are in the final stages of an assessment of the three bids that were short-listed some months ago.

Senator CHRIS EVANS —An announcement on that is due pretty soon, is it not?

Senator Hill —Yes. But, as is the way, it seems to be taking a little longer than what we had hoped.

Senator CHRIS EVANS —So it is the case that the June announcement is now not likely to be June?

Senator Hill —I think the June announcement is now likely to be a July announcement.

Senator CHRIS EVANS —So the May-June announcement—

Senator Hill —It was a May announcement.

Senator HOGG —Another accrual problem.

Senator CHRIS EVANS —Some people came to see me the other day from one of the state governments and they were still working on June. From what you are saying, it is now not likely to be June.

Senator Hill —I think it is more likely in July.

Senator CHRIS EVANS —So the question of the way forward with the shipbuilding rationalisation plan is now to go back to cabinet. Is that a fair—

Senator Hill —That is correct.

Senator CHRIS EVANS —And is that likely to go back to cabinet soon?

Senator Hill —The answer is yes, but we have to make a decision in the very near future on whether there is any point in continuing to seek a negotiated settlement with Kockums. If we reach the conclusion that we are at the end of the line in that process, that will lead to a significant variation to the processes as we have planned them. But, as I think Senator Evans acknowledged, this negotiating process cannot simply go on forever. We would prefer to have reached a negotiated settlement with Kockums and then got on with the other matters that are of interest to us in terms of the sale of the Submarine Corporation and the naval rationalisation plan. If we are unable to reach that negotiated settlement within the very near future we will need to move to plan B.

Senator CHRIS EVANS —Yet it is not just ASC—although the future of ASC and the submarines are important enough—we also have the air warfare destroyer. While you assure me that work has started et cetera, clearly it is impacting on the next huge naval project. Everything is banking up.

Senator Hill —We have been able to avoid it banking it up, as you say, so far by the steps that we outlined yesterday. But we will reach the point soon where it will start to bank up, and we do not want to reach that point.

Senator CHRIS EVANS —What is the impact of the divorce of the Thales and Tenix joint partnership proposition? I understand that they have announced that it is off in terms of the shipbuilding rationalisation plan. What impact does that have on the planning?

Senator Hill —It does not affect the processes that we are going through. We have said to industry that, in the same way as we are looking to facilitate rationalisation in a sensible way, we think it is in their interests to adopt the same attitude in their commercial decisions. I think that is what Thales and Tenix were seeking to do, but obviously, at least at this point, it has not worked out.

Senator CHRIS EVANS —Someone told me that the aerospace industry sector plan had been released. Is that right?

Senator Hill —If it has, it has bypassed me. Anyway, it is pending.

Senator CHRIS EVANS —I know we are on Navy. It just says, `We are discussing industry sector plans.' I thought we would see how the others were going.

Senator Hill —There are another three. To a great extent the aerospace one has been taken over by the decisions the government made last year in relation to the Joint Strike Fighter. So that is the dominating influence of the aerospace plan. But the formal plan has not yet been released. The electronics one is also, I am told, close to delivery to me.

Senator CHRIS EVANS —There is another one as well, isn't there?

Mr Roche —Land systems is the fourth one.

Senator Hill —I understand that that one is further behind.

Mr Roche —It is much more difficult.

Senator CHRIS EVANS —More difficult than the—

Mr Roche —It is a more varied and complex sector than the others.

Senator CHRIS EVANS —I am glad we are dealing with the easy ones.

Senator Hill —It does not fit a plan as easily as the others. They are all complex. It is thought that it was delivered to me in the last day or so.

Senator CHRIS EVANS —Someone suggested that you had it.

Senator HOGG —Is there any proposal to move the home bases of the frigates?

Vice Adm. Ritchie —There is no current proposal. I think what you are talking about is class basing. At the moment we base Anzac ships and frigates in both Sydney and Fremantle. Until we can provide enough shore infrastructure in the west to make sure that those people who are posted ashore in the west get a fair go of it, it is my intention that we remain that way.

Senator HOGG —How long will that remain the case, in your view?

Vice Adm. Ritchie —I think for the next three or four years at least—which is not to say that we will not move, for other reasons of economy, certain Anzac facilities to the west or maintain certain FFG facilities in the east.

Senator HOGG —What would be the reason for transferring the facility?

Vice Adm. Ritchie —Just for economy—to have everything in one place and to say, `That's where you do Anzac training,' or, `That's where you do Anzac maintenance.'

Senator HOGG —Unless anything untoward happens, you are saying it will be at least a three- to four-year period.

Vice Adm. Ritchie —Yes. The reason I am saying that is that, because of the two-ocean basing policy, the Navy has an issue with the fact that most of its shore infrastructure is in the east but half of its seagoing people are in the west. Naturally, there is an imbalance in jobs for them when they come ashore. When you think about retention, the biggest issue is geographical stability. The strategic plan is to over time provide that geographical stability by moving things to the west. Once we have achieved something that equates to parity then we can class base, if that seems to be a good idea at that time.

Senator HOGG —Are you pursuing a program which will see that happen in the west?

Vice Adm. Ritchie —Yes, we are. In fact, the naval parts of the force disposition policy, which was discussed earlier, have as an underlying theme that geographical stability.

Senator CHRIS EVANS —Senator Hogg had to ask those questions on the basis that my bias might show through.

Senator HOGG —He is from Western Australia.

Vice Adm. Ritchie —I gathered that.

Senator CHRIS EVANS —I met with the Western Australian government the other day. They are very keen to develop that maritime base down near Stirling. They are very keen to put a big effort into it, so that is quite encouraging.

Vice Adm. Ritchie —There is a fair degree of development there now.

Senator CHRIS EVANS —Yes, it is really going ahead.

Senator HOGG —What about the shore jobs there? That is the real issue, isn't it?

Vice Adm. Ritchie —Yes, that is the issue for us. You would understand that that is difficult in an ADF where you are outsourcing all the time and putting things to commercial contract.

Senator HOGG —One of the complaints on a visit that I happened to make there 12 to 18 months ago was that the outsourcers were taking the jobs that were traditionally the province of people coming on shore leave.

Vice Adm. Ritchie —The economic imperatives drive us in that way. We are not going to turn around and go in the other direction; therefore, we have to find other solutions, and we are looking for them.

Senator CHRIS EVANS —I have a couple of questions to ask of Navy related to the Westralia. I want to make it clear I am not intending to ask questions about the coronial inquiry. I understand the sensitivities and that that is still ongoing, but a couple of things have arisen out of it that I thought I ought to raise. One is the suggestion about pressure being applied to sailors, regarding their evidence. That obviously received a great deal of publicity and was of great concern. I understand from my reading of the press that the counsel for Navy indicated that some sort of Navy inquiry would be undertaken in response to those allegations. I am wondering, Admiral Ritchie, whether you are able to tell me what steps Navy has taken to deal with the concerns raised.

Vice Adm. Ritchie —When it first became obvious that people were saying that they had been pressured, Navy put out a message for anybody who thought that they had been pressured to come forward. You then saw some pressure in Western Australia from families saying that there should be an amnesty granted for people to come forward. That is not within my power nor, indeed, within the minister's power, as was suggested. What is possible, and what in fact has happened, is that people can go to the coroner and they can seek immunity. In fact, I believe that has been done with some of the people who have come forward. That also has been advertised and is being advertised to everybody we can find who was in that particular ship at the time. As to investigating any specific instances, we will investigate them post the coronial inquiry if indeed the coronial inquiry finds that people were pressured. But so far that has not happened—the people who have come forward have not, under cross-examination, said that they were pressured. It has been reported in the press, but it has not come out in a courtroom.

Senator CHRIS EVANS —I have looked at the transcripts and I do not really want to go there, because I do not think that that is appropriate. I am not sure that I would agree with the analysis. It seems to me that what you are telling me is that there is no Navy investigation.

Vice Adm. Ritchie —There is no Navy investigation.

Senator CHRIS EVANS —So the reports of the counsel for Navy saying that there would be are not right?

Vice Adm. Ritchie —No, it is not incorrect. What he was saying was that, if it is shown that there has been pressure, we will investigate how that pressure came to be applied. But we have nothing to investigate at the moment.

Senator CHRIS EVANS —But the bottom line is that there was no Navy investigation as to whether pressure was applied to sailors with regard to their evidence?

Vice Adm. Ritchie —No, but if it becomes clear in the inquiry that that has happened then there will be an investigation.

Senator CHRIS EVANS —Now that the commodore has joined us, one of the other questions that I want to ask is about the criticism from the coroner about the Commonwealth, particularly the issue about the inquest not being held publicly. I understand that the Commonwealth argued that the inquest should not be held publicly. I want to understand why that was argued.

Vice Adm. Ritchie —I defer to the commodore and, if I have made any incorrect statement on the previous question, he might correct that as well.

Cdre Smith —I was not under the impression that it was closed. I thought it was open to the public, and there has been a DLS meeting.

Senator CHRIS EVANS —You misunderstand. I understand the Commonwealth—

Cdre Smith —The board of inquiry?

Senator CHRIS EVANS —No. I understand the Commonwealth argued that the coronial inquiry ought not to be public.

Cdre Smith —I could not comment on that from my knowledge. I can get further information.

Senator CHRIS EVANS —Perhaps you could take it on notice. I have not perused the transcript. But the coroner said that he rejected the Commonwealth's submission that `I should not hold a public inquest into the circumstances of the deaths in question'.

Vice Adm. Ritchie —That is a different question.

Cdre Smith —That is a different question, as the admiral has observed. That was before the coroner became seized of the matter—as against running the actual inquiry that he is conducting in public. I think the Commonwealth did make submissions, as you have observed, in that light, urging that the board of inquiry conducted by the Navy was to be a full, a thorough and a complete review of the situation and that that should be accepted. I think it was made public at the time by the Chief of Navy at the time. As it turned out, the coroner did not accept those submissions. We have proceeded to the inquiry, which is ongoing, and it will resume later in June. And that is a public inquiry, of course.

Senator CHRIS EVANS —Does the Navy still maintain that there is no need for the coronial inquiry?

Vice Adm. Ritchie —The coroner has decided to have an inquiry and the Commonwealth and the Navy will cooperate, and are cooperating, fully with him.

Senator CHRIS EVANS —There have been a few criticisms made of the Commonwealth during the inquiry that that cooperation has not been as forthcoming as he might have liked. He has been quite critical on a number of occasions about that. I am trying to test whether or not we are being as cooperative as we say.

Vice Adm. Ritchie —It is my understanding that we are cooperating fully. Commodore Smith, do you care to comment?

Cdre Smith —A very extensive legal team that is in place to assist the coroner is very active and there is full cooperation with the coroner's proceedings.

Senator CHRIS EVANS —What about the criticisms from the counsel assisting the coroner about the failure to provide information about addresses and contact details of witnesses?

Cdre Smith —I am not personally aware of that, but I could take that on notice.

Senator CHRIS EVANS —Perhaps if you would. As I said, I do not intend to go to the subject matter of the inquiry but I have been a bit concerned about some of the conduct of the Commonwealth's position and the criticism made of it and also this question of the inquiry, which the admiral has cleared up for us: there is no inquiry. Admiral Ritchie, let us be clear: when you said you made it clear to Navy personnel about how they could cooperate for the coroner's inquiry, how did that occur?

Vice Adm. Ritchie —That was done by signal throughout the Navy. Before that, there had been letters written—not particularly detailing that issue—to everybody we could find who had been in the ship. We are in the process again of writing to everybody that we can find who was in the ship at the time of the fire, telling them that they have a right to go to the coroner and ask for immunity.

Senator CHRIS EVANS —In terms of the instructions about things, such as the issue of this high injector fuel pipe, who provides the instructions to the counsel representing the Commonwealth? There is an issue about whether the Navy wanted this area of evidence examined, et cetera. Who provides the advice?

Cdre Smith —The way the case is managed is that Defence has a director of litigation, Mr Richard Miller, who is the manager of Defence business in this case. His client is the Chief of Navy, Admiral Ritchie, and the Australian Government Solicitor has been briefed to do the solicitor side of things. We have briefed Mr Martin of counsel through the AGS for the Commonwealth. I should point out that a deal of other representation has been afforded to a range of naval members as well. There has also been financial assistance given to the families involved to enable them to attend. The directions given to the counsel would be always settled with the client which, in this case, is the Chief of Navy.

Senator CHRIS EVANS —Is there currently legal action initiated by Navy against ADI in relation to this matter?

Cdre Smith —There is ongoing litigation, which perhaps it is best not to go into. There is a commercial mediation afoot, I understand, which is ongoing and is at a somewhat delicate stage.

Senator CHRIS EVANS —I am not seeking the detail; I want to understand what formerly happened. Was there a suit filed by Navy against ADI?

Cdre Smith —I believe so but that has evolved into a form of commercial mediation. I can get details of that if you like.

Senator CHRIS EVANS —Perhaps you can take some details of that on notice for me. I am happy for you to use your own words because I am sure my terminology is not right. The Commonwealth lodged a legal action against ADI relating to issues relating to the Westralia fire.

Cdre Smith —Yes. If I remember right, it was about April 2002. There was a time limit involved. But I will have to get you details of that, which I am not fully across.

Senator CHRIS EVANS —That is a civil proceeding?

Cdre Smith —Yes.

Senator CHRIS EVANS —That goes to the question of what with their maintenance contract?

Cdre Smith —It would go to claims the Commonwealth might seek. I should say it occurred around the time of the HIH collapse, and that certainly complicated everyone's position. Perhaps we had better not go to too much more—I will get as much as I can from the head of litigation.

Senator CHRIS EVANS —I am just trying to understand the formal aspects at this stage.

Cdre Smith —The Commonwealth had to protect its position in a certain way and that was certainly done. I will get you what details we can.

Senator CHRIS EVANS —And that has evolved into a commercial mediation?

Cdre Smith —In some aspects, yes.

Senator CHRIS EVANS —There are other parts of the action that are outstanding?

Cdre Smith —I will have to check that for you.

Senator CHRIS EVANS —Does the commercial mediation have to be done by agreement?

Cdre Smith —Yes.

Senator CHRIS EVANS —So both parties have agreed for those aspects of it to be mediated.

Cdre Smith —They work with the court. They would have obtained a directions hearing, I believe, and put a proposition to the court to seek to work in this way to address the matter.

Senator CHRIS EVANS —Please take on notice what other matters are outstanding. When do you expect the mediation to be resolved?

Cdre Smith —It has not been visible for some time—I am not sure so, again, I will get you an estimate of that. There was a lot of work done on it in the middle of last year but it seems to have gone quiet, at least what has been drawn to my attention.

Senator CHRIS EVANS —Is there any suggestion that the mediation would not be concluded until the coroner has reported?

Cdre Smith —That may be an element but I would have to check that for you.

Senator CHRIS EVANS —Effectively, the action seeks damages from ADI to the Commonwealth?

Cdre Smith —I would prefer to check that rather than give you the wrong state of it. If it is publicly filed we will get you what the action is about.

Senator CHRIS EVANS —Thanks. I will leave it at that.

CHAIR —Senator Brown has some capital budget questions on Brighton.

Senator Hill —I thought we did that yesterday.

CHAIR —We did.

Senator Hill —So why are we doing it today?

Senator BROWN —Because I have got some extra questions.

Senator Hill —Pity—I think the Brighton people have gone. We will get them back. This is not a very good practice, Mr Chairman.

CHAIR —I understand that, Minister. These questions are not very long.

Senator Hill —I hope they will not be the same questions we got asked yesterday.

CHAIR —When shall you take those questions. Minister?

Senator Hill —What are the questions?

CHAIR —Do you wish to ask your questions, Senator Brown?

Senator BROWN —Who set the reserve price on the Army barracks at Brighton?

Senator Hill —That question was asked yesterday and I think the answer was that there was not a reserve price.

Senator BROWN —So the process of selling the barracks went without a reserve price being set first?

Senator Hill —I think that is what was said yesterday.

Senator BROWN —In the process, was it considered to sell the barracks by auction?

Senator Hill —What was said yesterday was that it was first put up for tender. There was one bid, one tenderer. The price was regarded as unsatisfactory, and the decision was then made to list it with the agent to seek a sale through private treaty.

Senator BROWN —I asked about auctioning.

Senator Hill —Was an auction option considered. Is that the question?

Senator BROWN —Yes. I have read in the press that it was.

Senator Hill —I do not know the answer. That was not asked yesterday. Mr Pezzullo is here. He was not the delegate but he may be able to help. Was consideration given to an auction post the tender process?

Mr Pezzullo —The question of an auction tends to arise with smaller sites—small houses in isolated communities. If it was raised, it would have been raised at much more junior levels than mine. By the time the tender evaluation and tendering plan came to me, it was a straight, open market tender in the terms that the minister has described. As was stated in evidence yesterday, there was one tender offer received.

Senator BROWN —So at your level the option of auction was never considered?

Mr Pezzullo —No.

Senator BROWN —Why not?

Mr Pezzullo —Auctions tend to be used in either smaller communities or in suburban settings, such as a recent example in Sydney, where an auction process was used for 16 to 17 houses. That tends to be a more efficient way of disposing of properties which have more of a character of a residential house.

Senator BROWN —Surely in any sale there is the option of an auction, particularly in real estate. The value of the barracks in Hobart was about equivalent to a Sydney house, so surely this should have been looked at.

Senator Hill —What? The barracks in—

Senator BROWN —At Brighton.

Senator Hill —What was sold was sold on the open market, so that is what the value was, which was $150,000. You can't buy much of a Sydney house these days for $150,000.

Senator BROWN —No, the valuation was not $150,000; it was more in the order of $2 million to $3 million.

Senator Hill —I am sorry, if you did not listen to the expert yesterday, it is very difficult. A valuation was obtained, and the valuation which was the basis for the sale was $200,000. That is what we were told yesterday.

CHAIR —We will now go back to the program.

Vice Adm. Ritchie —Chair, could I read out an answer. A question was asked as to when the force reduction in Operation Relex was approved. It was approved by government on 10 March 2003. The drawdown occurred over the following month.

[11.09 a.m.]

Senator HOGG —As we are now considering outcome 3, Army capability for the defence of Australia and its interests, I have a few questions on the response reserve force that we have an indication is now being put in place. What is the target for the number of recruits for the response reserve force?

Lt Gen. Leahy —The target is in the order of 1,300. That will be spread across the states.

Senator HOGG —As I understand it, it is six sites, isn't it?

Lt Gen. Leahy —Six sites but there are seven different organisations.

Senator HOGG —So six sites, seven organisations. Are they currently being recruited?

Lt Gen. Leahy —We are working through a recruiting program now. We have had expressions of interest which have been quite positive. We are quite confident that we will be able to achieve the numbers that we are after.

Senator HOGG —Are they being drawn from existing reserve forces?

Lt Gen. Leahy —Yes, Senator.

Senator HOGG —Are any people who are not in the existing reserve forces applying to join?

Lt Gen. Leahy —Not that I am aware of.

Senator HOGG —So the issue of basic common induction training for people going into that force is not an issue at this stage?

Lt Gen. Leahy —No.

Senator HOGG —So they are existing people. What additional training will they be given to bring them up to speed?

Lt Gen. Leahy —We have developed a training package that can be delivered either in a full nine-day period or in a modular form. We are expecting that, in the first instance, the training package will be the full nine-day period and, in addition to the skills that the reserves already have within their training, that will give them an ability to handle the types of situations that we expect we will task them with.

Senator HOGG —Will they remain in their existing units or will they be formed into new units?

Lt Gen. Leahy —The companies—and you should expect us to call them companies of about 156—will be based on existing reserve units within reserve brigades in geographic locations. We expect that some reservists will come to that reserve battalion from other organisations, so some will move and others will stay in the same unit.

Senator HOGG —How much will the additional training cost? Will it be funded from the normal training pool or will there be additional supplementary funding for it?

Lt Gen. Leahy —I do not have an exact cost for the training but Army will absorb the costs within its existing budget.

Senator HOGG —What is the basis on which these reservists can be used and who will they assist?

Lt Gen. Leahy —We expect that they will be used to augment and complement the existing regular Army forces that may be deployed on a variety of activities. If I could go back a little and talk about the high readiness reserves, we see that the reserve response force will be one element of the high readiness reserve. We expect over time to develop other elements and we have in mind force protection companies, but the reserve response force will be predominantly for domestic security tasks. They might be used to assist regular forces to provide security around particular sites, perhaps to provide an outer cordon for activities and to provide low-risk searches. The best way I can explain it is to ask you to think of what happened during the Olympics and Operation Gold where we had the reserves form companies and organisations and they came out and did those sorts of tasks for us. That is what we expect of the reserve response forces.

Senator HOGG —On what authority will they be called out?

Lt Gen. Leahy —It will be a formal call-out as required under the legislation.

Senator HOGG —Which legislation?

Lt Gen. Leahy —The Defence Act and the call-out under advice from the government to the Governor-General.

Senator HOGG —Is that the defence aid to civil authorities?

Gen. Cosgrove —It is the Defence Act 1903, part III and/or executive power section 61 of the Australian Constitution.

Lt Gen. Leahy —It will be the normal processes for which we would call Reserve out for now. There is no abbreviated process and there are no changes.

Senator HOGG —Returning to the training for a moment, will the training be compulsory?

Lt Gen. Leahy —If soldiers wish to be in these reserve companies, yes. It is for additional skills that they will need.

Senator HOGG —Are they going to be paid any more for the additional skills?

Lt Gen. Leahy —We are working on a conditions of service package at the moment. We expect that there will be a completion bonus and there may be some other conditions of service relevant to the work that they will be doing.

Senator HOGG —Will they be required to work with local police forces?

Lt Gen. Leahy —We expect in many situations that they will. If they are providing security to a site—

Senator HOGG —But that will be at the direction of the Army?

Lt Gen. Leahy —Yes.

Senator HOGG —They are not being used to plug gaps in existing state police forces and the like, are they?

Lt Gen. Leahy —That is not our understanding of how they will be used. They will be used to augment and complement existing Army forces or defence forces that would be deployed to a site.

Senator HOGG —When will they be up and running?

Lt Gen. Leahy —I am expecting that, on 1 July, we should be able to see some of the forces and there may be the ability to task them, but it will take some time before they are fully mature.

Senator HOGG —What about the equipment that they will need?

Lt Gen. Leahy —The equipment exists already within the reserves. Some of it may be in the regular forces—some of the more specialist search equipment. Again, Army anticipates it will be able to meet the training, resourcing and equipment requirements from within our resources now.

Senator HOGG —It is maybe a couple of years since I have spent a bit of time with the reserve forces, but I found that they were lacking, quite severely, in equipment sometimes because it was taken by others to fill gaps further up the food chain in Army. Is that not the case now?

Lt Gen. Leahy —We risk manage resources and capability, essentially on the requirement for readiness. These Reserve response forces will be at increased readiness and we will allocate capability, equipment and training based on their readiness.

Senator HOGG —What additional and new equipment will need to be purchased to bring these up to the appropriate level of readiness?

Lt Gen. Leahy —I am not anticipating, at the moment, the purchase of additional equipment.

Senator HOGG —I look forward, along with my colleagues, to seeing these groups operate. How often do you think they will operate in the broader community? Is there an expectation of their usage?

Lt Gen. Leahy —Frankly, I hope never. I hope never, but I think we do need to make sure that we can provide capabilities of this nature should the circumstances eventuate.

Senator CHRIS EVANS —Can I ask some questions about this military investigation into the allegations of mistreatment of prisoners in East Timor? General Leahy, my first reaction was that I thought it was still lacking in terms of the detail. I want to be clear in my own mind about what has happened, so perhaps you could give me a summary of where we are at with the investigation. I saw your press release but that is about all.

Lt Gen. Leahy —The investigation concluded and I announced the results on 16 April. I believe that the investigation was particularly thorough and involved extensive investigation in Australia, New Zealand, the United Kingdom and East Timor. We used resources available within the Defence Force plus resources from outside. I particularly appreciate the assistance of the Australian Federal Police for their specialist support and advice to us throughout the investigation. As a result of the investigation, one serviceman has been charged with kicking a dead body. The matter was referred to a convening authority who decided that a Defence Force magistrate should try it. That trial is ongoing now. With your permission, I will be very restrained in my comments about the trial.

Senator CHRIS EVANS —I do not want to take you into anything to do with the actual conduct of the trial. I just want to be clear that that trial has commenced?

Lt Gen. Leahy —Yes, it has.

Senator CHRIS EVANS —And that is before a Defence Force magistrate?

Lt Gen. Leahy —That is correct.

Senator CHRIS EVANS —Is that a public process?

Lt Gen. Leahy —It is public, yes.

Senator CHRIS EVANS —Who determined that that ought to go to trial?

Lt Gen. Leahy —The process was the convening authority. The normal course of action was followed here. A charge was profferred and it was heard by a commanding officer—a lieutenant colonel. The commanding officer decided that, because of the nature of the charge—and this is an option open to him at all times—he would refer it to a higher authority, in this case the convening authority, who is a brigadier. He decided that it should be heard by a Defence Force magistrate.

Senator CHRIS EVANS —Was that the only charge this soldier was facing?

Lt Gen. Leahy —Yes, it is.

Senator CHRIS EVANS —Weren't there other charges originally laid?

Lt Gen. Leahy —There was an alternate charge but there is only one charge that has been proffered.

Senator CHRIS EVANS —What was the alternate charge?

Lt Gen. Leahy —Prejudicial behaviour.

Senator CHRIS EVANS —Is an alternate charge a charge that is of a lesser severity in the alternative? Is that a fair way of describing it?

Lt Gen. Leahy —It relates to the same incident. It is another way of expressing it.

Senator CHRIS EVANS —What I am saying, though, is that it is almost like a higher level or lower level charge relating to the same incident—is that fair?

Lt Gen. Leahy —The charge that has been preferred is a charge under the Crimes Act, whereas the prejudicial behaviour charge is under the Defence Act and the DFDA.

Senator CHRIS EVANS —Who took the decision to prefer the higher charge?

Lt Gen. Leahy —That was a result of the military police investigation after review by senior legal counsel, who advised us that there was the potential for the charge, so the result was determined by the process of the investigation.

Senator CHRIS EVANS —I am just trying to be clear in my own mind. You had the military police investigation which had been going on for some years. When did you get that final investigation report?

Lt Gen. Leahy —I cannot recall the exact date, but I think it would have been earlier this year. Commodore Smith might be able to help me with the dates.

Cdre Smith —That is correct.

Senator CHRIS EVANS —I think he was looking for a little more precision, Commodore Smith. We all know it must have been earlier this year.

Cdre Smith —I will take it on notice if you like.

Senator CHRIS EVANS —I was not being rude, but even the month would have been good. Could you take that on notice. So I am clear on the process: was the long-running investigation purely by military police?

Lt Gen. Leahy —No, there were naval police and Air Force police and, as I said, assistance from the Australian Federal Police.

Senator CHRIS EVANS —But didn't you have a bit of a task force inside your legal section as well?

Lt Gen. Leahy —Yes. It was a joint task force. It involved all those people.

Senator CHRIS EVANS —So the investigation was conducted by a joint task force. Who was it headed by?

Lt Gen. Leahy —The military police criminal records unit.

Senator CHRIS EVANS —And they reported at a date to be determined earlier this year. Did they report to you?

Lt Gen. Leahy —Yes.

Senator CHRIS EVANS —Can you take me through the process of how we get to the soldier being charged? I understand what happened in terms of referring it to the magistrate, but I do not know how we got from the report coming to you to—

Lt Gen. Leahy —The report that came to me included all the observations of the military police and the evidence that they had collected, and, before any decision to prefer a charge was taken, that was referred to senior counsel. I am not exactly sure who it was in this case, but senior counsel were typically QCs or SCs, reservists operating professionally in the states. They looked at the elements of the evidence and the elements of the charge and gave a recommendation that the charge should be preferred.

Senator CHRIS EVANS —Which charge?

Lt Gen. Leahy —In this case, I think it would have been the charge of interfering with the body, under the Crimes Act.

Senator CHRIS EVANS —I would not mind it if you took on notice who provided that advice to you.

Lt Gen. Leahy —We can do that.

Senator CHRIS EVANS —You then had a recommendation that the Crimes Act charge be laid. How then did you end up with an alternative charge?

Lt Gen. Leahy —Again it is within the mechanisms of the advice from the lawyers. Again I would turn to Commodore Smith.

Cdre Smith —The prosecutor has dealt with it. In this case it was a reservist Queen's Counsel from Queensland. The convening authority is advised by the prosecutor as to what charges may be laid. It is not unusual to have charges made in the alternative, as long as they are not the same charge. In relation to your observation earlier, Senator, as the general indicated, there is a charge under the Crimes Act and there is another one under the Defence Force Discipline Act. To some extent, they are quite separate and discrete in terms of what proof is needed, although they must be sustainable on the facts presented to the court. We should perhaps not go into this too much, but you need to make out all the elements of each charge—

Senator CHRIS EVANS —I would have thought the standard of proof for the Crimes Act charge that you are laying is much higher.

Cdre Smith —No, the standard of proof would be the same; it is just the fact situation presented to the court. Whatever charges should be laid on the facts are suggested by the prosecutor to the convening authority. That is the mechanism. I digress by saying that in future the director of military prosecutions will be the institutionalised form of this. That is due to start on 1 July, as we move to a new scheme. It will then be far more obvious how these things are brought to trial, because the director of military prosecutions would be involved in taking the police reports and determining himself what charges should be recommended.

Senator CHRIS EVANS —He will act much more like a DPP?

Cdre Smith —Exactly. That is a significant change in our justice system which has been sought.

Senator CHRIS EVANS —Long overdue.

Cdre Smith —As the general very accurately described, this is the mechanism. The convening authority then, acting on the advice of the prosecutor, convenes a trial. A defence force magistrate who is a colonel reservist sits alone. It is like a sub court martial, and that is under way.

Senator CHRIS EVANS —I will come back to the magistrate question in a minute. General Leahy, was the recommendation from the legal authority—I do not know how we describe the person you referred it to; the person from whom you sought the legal advice— only to charge this one soldier?

Lt Gen. Leahy —Yes.

Senator CHRIS EVANS —They did not recommend that any other charges be laid?

Lt Gen. Leahy —No.

Senator CHRIS EVANS —Obviously the report you received included references to other soldiers. I am not saying that in a negative sense; I am not trying to judge the matter. There were other soldiers in the area; there were other people involved?

Lt Gen. Leahy —That is correct.

Senator CHRIS EVANS —I am not suggesting others should have been charged; I am just trying to ascertain whether the report recommended action against anybody else.

Lt Gen. Leahy —No, the recommendation was only for this action.

Senator CHRIS EVANS —So the report that came to you recommended only one action; you then referred it to the legal adviser. I presume his role was to provide advice as to whether or not the charge could be sustained—is that right?

Lt Gen. Leahy —That is correct.

Senator CHRIS EVANS —And his advice was that a prosecution ought to be lodged on the basis that there was a reasonable prospect of success?

Lt Gen. Leahy —Exactly.

Senator CHRIS EVANS —So that was his role in it—to give you an assessment of it.

Lt Gen. Leahy —Yes.

Senator CHRIS EVANS —General Leahy, you got that advice. I am not quite sure how the colonel and the brigadier came back into play as well, in the sense that it has gone to the top of the tree and now it seems to go back down the process.

Lt Gen. Leahy —Perhaps I should describe it in a bit more detail. I have not actually read the evidence, the witness statements or anything like that. All I have seen is that there was advice given, that there was the potential for a charge to be laid and that it might be successful. I then put it back through into the prosecutorial system, and that is where the lawyers take over again.

Senator CHRIS EVANS —Was the colonel involved someone in the legal branch or someone in the soldier's regiment?

Lt Gen. Leahy —The lieutenant colonel involved, where the charge first went, was not in the soldier's regiment. It was a commanding officer in Sydney who was tasked to deal with the charge.

Cdre Smith —You can be seen by anyone duly authorised in reference to a charge. It can be anyone described lawfully as a commanding officer.

Senator CHRIS EVANS —I am just trying to understand why, once you have been to the chief, you go back down the chain.

Lt Gen. Leahy —It is not my task to find guilt or innocence in the first instance.

Senator CHRIS EVANS —So the colonel could have dealt with the charge himself?

Lt Gen. Leahy —Yes, but he decided that on the basis of the evidence before him he would refer it to a higher authority. In this case the convening authority was the brigadier. The brigadier, on the basis of that, determined that it should go to a Defence Force magistrate. He had open to him other choices but he determined that he would take it to the Defence Force magistrate—

Senator CHRIS EVANS —This is a hypothetical, but the logic of that is that following a recommendation after two or three military police investigations that someone be charged, and there is legal advice that they be charged, it then goes back to a commanding officer who might have decided otherwise. Is that right?

Lt Gen. Leahy —He had open to him a charge of guilty or not guilty, or referring it higher.

Senator CHRIS EVANS —What legal process—

Lt Gen. Leahy —The commanding officer convenes a court—if I could describe it is that—a bit like a magistrate. He takes evidence from both the defence and from the prosecution. He takes a plea from the person who is being charged and it is open to him to make a decision. He has powers of punishment available to him and that happens on a reasonably regular basis for commanding officers.

Senator CHRIS EVANS —I understand that for more minor charges as part of military discipline. I am just a bit taken aback that, given the seriousness of the charge eventually laid, that process comes into play. I suppose it is an argument for the changes that are about to occur, in a sense—

Cdre Smith —All charges start off in this way even if they are the most severe charges that you could imagine. The port inwards in the justice process is exactly as the general has described. The role of the Chief of Army in this has been insulated from the justice process. His responsibilities as Chief of Army, given such a significant series of issues and allegations, was to ensure that his resources of investigation were appropriately deployed and managed and, given the high public interest in the matter, by keeping himself insulated he was able to ensure that the system was going to work and that in the command system, which is where the convening authority and that lieutenant colonel come in, the appropriate information was—if I can use the analogy—fed the ball but nothing else. He remains insulated from the process. Now the convening authority—that happens to be a brigadier in this case—has convened the trial and the system is under way with all the justice processes at work and the subsequent reviews et cetera that—

Senator CHRIS EVANS —The lieutenant colonel, for instance, did not have a hearing; he just passed it on up the line. Is that so?

Cdre Smith —When the charges were read and presented to him he assessed that this was a matter of such significance—

Senator CHRIS EVANS —I am not at all critical of that. I am just trying to understand his process.

Cdre Smith —He had to make a judgment about whether this was a matter that should—

Senator CHRIS EVANS —But he did not have a preliminary hearing; it was just a paper judgment?

Cdre Smith —It would have been a preliminary hearing, if it is what I have been through, and he then would have said that this was beyond his pay grade and referred it up because he saw that a more substantial process was required given of the complexity of the matter and the possible consequences.

Senator CHRIS EVANS —And did the brigadier then have to do the same process or on receiving the information was he able to make a decision? I am just trying to establish whether there was a preliminary hearing or—

Cdre Smith —The brigadier would have taken the report from the commanding officer and he clearly accepted the recommendation that this go to the Defence Force Magistrate trial which is a sub court martial. That is where it currently is.

Senator CHRIS EVANS —For those of us ignorant of such matters, what does sub court martial mean?

Cdre Smith —A court martial would involve three officers sitting as, if you like, the jury assisted by a council. Here you have a Defence Force magistrate under the Defence Force Discipline Act. It is very like a civilian magistrate. He sits alone and is empowered with a range of authorities and penalties.

Senator CHRIS EVANS —Why would that route have been chosen rather than the court martial?

Cdre Smith —Because it was deemed to be about the right weight and significance in terms of the charges. I would not necessarily say it is not right answer; I think it is about the right answer.

Senator CHRIS EVANS —Is there a guide to judgment about that, or was that just the brigadier's call?

Cdre Smith —Yes. There are a range of levels set out in the Defence Force Discipline Act. We could write up the various charges which are appropriate for court martial for the Defence Force magistrate for what is called a summary authority and what is called a discipline officer, which is a very summary procedure. We will get that for you.

Senator CHRIS EVANS —Thank you; I would appreciate that. That trial is now occurring before the Defence Force magistrate. You say that this is a reservist sitting alone.

Cdre Smith —Yes, he is a reservist colonel. We have a range of duly qualified officers who happen to be very experienced counsel in the civilian world and we have experienced officers of the three services in the legal reserve. They are authenticated competent by the Judge Advocate General of the Defence Force, who is a Supreme Court judge, who happens to hold the rank of major general and also happens to be from Western Australia. He gives them a warrant to be a Defence Force magistrate and they conduct trials. Their outcomes are subject to normal review.

Senator CHRIS EVANS —What procedures apply?

Cdre Smith —Normal court procedure applies. There is a prosecutor and a defending officer, and the rules of evidence apply, as in a civilian court.

Senator CHRIS EVANS —Is the defending officer allocated to them by Defence?

Cdre Smith —Yes. That would be free of charge as well. Usually we would find another extremely experienced reservist to be the defending officer. In this case that has been done.

Senator CHRIS EVANS —You cannot hire outside counsel who are not reservists?

Cdre Smith —Yes, indeed. Anyone who was reasonably available, and we would certainly look at funding outside counsel if that were the person's preference.

Senator CHRIS EVANS —So that case is proceeding currently. What are the potential penalties for someone found guilty of this charge?

Cdre Smith —I would have to look at the range. I am not sure whether we would want to speculate on that.

Senator CHRIS EVANS —I am not asking you to speculate.

Cdre Smith —Generally there are penalties such as fines. There are penalties available under the Defence Force Discipline—

Senator CHRIS EVANS —Is there a scale of penalties that apply to certain charges?

Cdre Smith —Indeed. We can get those for you.

Senator CHRIS EVANS —I am not asking about the particular case. I am trying to understand what seriousness is attached to the charge and, therefore, what the potential penalties are.

Cdre Smith —It is a charge under the Crimes Act. The penalties in the act generally relate to the seniority of people. Demotion is a possible penalty. Dismissal from the Defence Force is a possible penalty.

Senator CHRIS EVANS —What appeals against the magistrate's decision are open to someone who is convicted?

Cdre Smith —In the first instance the Defence Force magistrate's findings are reviewed and a legal opinion is taken on them by a duly qualified other officer prescribed by the Judge Advocate General. If the charge is upheld, it is upheld. If the person is convicted, they can seek appeal to the Courts Martial Appeal Tribunal, which is established under the Defence Force Discipline Act. That tribunal is composed of a range of coopted judges from various jurisdictions and they will hear an appeal as sought by the convicted person.

Senator CHRIS EVANS —There is no legislation supporting the director of military prosecutions. Is this is an interim measure?

Cdre Smith —Presently, there is no legislation for the director of military prosecutions. The step has been taken to establish what we have called an interim model. The CDF and the chiefs were fairly keen to get this under way as quickly as we could. So, administratively, we have decided to trial this system starting 1 July. A prosecutor has been appointed, Colonel Gary Hevey, who is a very experienced counsel at the Melbourne bar and previously of the South Australian bar. For the first year or so, until we get the legislation up and amend the Defence Force Discipline Act, we are going to have an administrative system which CDF will mandate under a Defence Instruction General, which will provide for the prosecutor's office to be available to the service chiefs to give advisory legal assessments of material referred to the prosecutor.

The prosecutor's advice, pending the changing of the discipline act, will not be binding on convening authorities who work to the service chiefs. Thereafter, once the legislation is amended, the prosecutor becomes like a full version of the DPP and matters will be passed up. I should say that these are only serious matters. Summary matters, which are the normal military discipline issues which most commanding officers deal with and do not require any referral upwards, will be dealt with by the prosecutor in due course. It will be a one-way transmission: he will get a matter and he will then decide whether to take it to trial himself. His prerogatives and discretions will be, as with a DPP, set out in legislation. He will be supported by a team of prosecutors. That is being set up now and the preliminary version will start on 1 July. I would say it would probably take us a year to get the legislation ready. I know that Minister Vale is very keen to progress this as quickly as we can.

Senator CHRIS EVANS —I want to flag that I am going to take a very close interest in it as well. General Cosgrove, I would appreciate the committee receiving any information on those interim arrangements. I think it is currently a very cumbersome and difficult system to follow that I am sure puts a lot of officers in very difficult positions. I am very keen to see if we can get a better process as well, and I would be very interested to follow what occurs. I understand you will be operating without legislation and that will obviously have its drawbacks. I just want to flag my interest in how that is going to go.

Senator HOGG —On the same matter, can you indicate to us how many matters would go before this new director of military prosecutions each year based on previous experience?

Cdre Smith —Our average over the last three years of Defence Force magistrates' matters and court martial matters—serious matters involving essentially criminal offences—is about 50. The caseload in the trials would be about 50. A whole range of other advice will be sought—ones that do not actually go to those formal proceedings. The prosecutor will be available with his staff to give advice on matters which may well be being dealt with at commanding officer level.

Senator HOGG —If this is a new initiative and it is requiring a prosecutor and a number of support staff, is there a budget allocation for that?

Cdre Smith —Yes, indeed. The budget is mainly going to be the fees of the prosecutor himself and the running of his office. From memory, it is a new net additional cost of about $600,000. The prosecutor will remain at the Melbourne bar. There is some advantage in this. Being a practising barrister as well, we will configure his role in terms of reserve payment days and other payments under the reserve reimbursement scheme for his practice costs. When you add some other staff support, our estimate of the net additional cost is about $600,000.

Senator HOGG —That is in the 2003-04 budget?

Cdre Smith —It is currently lined into CDF's budget, from memory, but I need to check where it actually—

Senator HOGG —Can you find out for us where that is in the actual budget and whether there will be an ongoing allocation in years to come?

Gen. Cosgrove —Yes, Senator.

Senator HOGG —In respect of the proposed change to the legislation, did I understand that this is a 12-month trial and then you are looking to put the legislation in place, or will you see the legislation in place earlier?

Cdre Smith —We are currently seeking to draft instructions to get the legislation under way as quickly as we can. We have been directed to expedite that. There was keenness to move under CDF's administrative authority; we are more than happy that he can do this in terms of this advisory scheme to the convening authorities for a year. Legislation is going to be set to drafting in the latter half of this year.

Senator CHRIS EVANS —I preface my remarks by saying that I still have a little unease about this whole issue, in part because of what was not said in your press release, effectively. I understand the difficulties about full public disclosure of these issues of serious allegations made against serving soldiers—and no-one would argue more strongly than me that they are entitled to the presumption of innocence, a proper trial and that the issue should be resolved in that way. But there is an admission in your press release that some of the alleged conduct did actually occur. It begs the question: what was that conduct? There is talk about changes to Army procedure but, again, they are not detailed. As I say, I am highly conscious that one soldier is on trial, so I do not want to go there but, equally, these are very serious allegations that have caused a great deal of disquiet, as you know, inside the ADF and publicly.

I have had a number of SAS soldiers express their concern to me about being besmirched by the allegations. In a sense, whatever happens with the outcome of the trial, it seem to me that the stain will remain because of the lack of any public reporting on what the allegations were, what the outcomes were found to be et cetera. I understand you would be constrained in press release by some of those requirements for natural justice et cetera, but I am not sure there is enough resolution to satisfy people. This has been driven in part by continued press stories—I think the first one goes back to 1999—about these allegations. There was a sense that Defence was a bit slow to act on them, which may or may not be fair. I know the investigation has been ongoing for some time.

This is a very long-winded way of getting to a question but, as a member of this committee, I am concerned that we have not got the resolution in the public arena to satisfy people about the whole incident and the outcome. I might be interested in your view about whether following the trial resolution either way is possible. In a sense, I suspect that any publicity about the trial will just reignite the whole thing without having any sort of public resolution or understanding of what actually happened. I am sure that that is a very difficult and rambling question. Would you like to respond to that?

Lt Gen. Leahy —I do not believe this was driven by the press. The allegations were made internally within the Army. Once the allegations were made, we very quickly formed the joint task force. Defence, Army, the Federal Police, the United Nations and others have been involved in this investigation. I think it has been a vigorous, very thorough and, I admit, long-running investigation. But from the moment those allegations were made, we were very clear in our resolve to find out what had happened. I agree with you that it may appear that the investigation has been slow, but I think that is because of the thoroughness of the investigation. We have interviewed over 350 people involved in this. Many of them were not readily available. Many of them were overseas, and some were on operational deployments. I think we have shown throughout our determination to get to the bottom of this.

Senator CHRIS EVANS —When was the task force formed?

Lt Gen. Leahy —I am going from memory here. I was Deputy Chief of Army at the time. I believe I first heard of the allegations on or about 6 September 1999, and the task force would have been formed within 10 days. I will get back to you if those figures are wildly wrong.

Senator CHRIS EVANS —September 1999, and the ambush was in October 1999.

Lt Gen. Leahy —I have got my year wrong—September 2000, sorry.

Senator CHRIS EVANS —You are saying that the allegations were not made to ADF until September 2000, even though the incident was about a year earlier.

Lt Gen. Leahy —The first I heard, as Deputy Chief of Army, of the allegations was on about 6 September 2000.

Senator CHRIS EVANS —I will ask you a broader question: when did ADF first hear of it? You may well have been the relevant officer at the time in terms of those things. In essence, are you saying to me that is when the ADF first got official—

Lt Gen. Leahy —There was a single allegation some time prior to that, and General Cosgrove, as the commander in the field, dealt with that with an investigation. Perhaps I should turn to General Cosgrove.

Senator CHRIS EVANS —I understand there was an initial matter and then there was another.

Gen. Cosgrove —There was an allegation made which was not of the nature of the allegation presently being tested in court. So it was of a different nature. It was investigated during the INTERFET operation. It was found not to have substance leading to any disciplinary action. After a quick investigation during the operation by a trained investigator, it was then set aside. When it resurfaced amongst a raft of other allegations in late 2000, it was again included for further investigation by the task force.

Senator CHRIS EVANS —What was that original allegation?

Gen. Cosgrove —I am not going to go into that, Senator. It was of the nature of the allegations that were found and set aside as lacking foundation in the subsequent investigation. It was not of the nature of the one that is being tested by a charge.

Senator CHRIS EVANS —This is part of the problem. I understand your response, General Leahy, and as far as it goes, that is fine. You announce on behalf of ADF that unspecified allegations are found not to be proven, and that is it. It does not seem to me necessarily to satisfy public concern. Then you announce that there was some accuracy to some of the allegations, but we do not know which ones or how serious they were. You then admit that there need to be some changes to Army procedures. Again, they are not detailed. That leaves the whole thing basically up in the air and there is no resolution regarding how serious those things were, which allegations have been tested and found to be accurate, how serious those ones were or whether they were of a very minor nature. It is that lack of detail that makes me think this is not going to go away. Is there any way for us to deal with that?

Gen. Cosgrove —I would like to bring it back to what I understand to be the practice in the wider community whereby, when allegations made against individuals and then investigated by the police are found not to have substance, they are rarely exposed for wide public comment because to do so is simply salacious towards the individual who has apparently found no case to answer. I am reluctant, for example, to detail to you the extent of the allegation made against a particular individual—and this was my response to you earlier— during INTERFET because to do so would no doubt start speculation as to the identity of an individual who has been found by two investigations to have no case to answer.

Senator CHRIS EVANS —I would agree with you on that judgment. I am not arguing that. I am trying to deal with a broader public policy issue about that. For instance, is there any intention for some report to be made following the trial or will it just be a question of whatever publicity arises from the trial is the last word on the matter?

Lt Gen. Leahy —No. We will certainly be making a statement after the trial.

Senator CHRIS EVANS —A statement going to what sort of matters?

Lt Gen. Leahy —In the first instance it would deal with the trial and the results of the trial. As General Cosgrove has explained, it is rather difficult in that the results of this thorough investigation have shown that the allegations are unsubstantiated. It is then quite difficult to talk about something that has been unsubstantiated because it just gives it a life of its own.

Senator CHRIS EVANS —I want to make it clear that my weakness in this is that I don't know what the answer is either, but it just seems to me that what has happened has not necessarily resolved it and I am trying to find a way of dealing with that without inviting the sorts of concerns General Cosgrove quite rightly raised about then implicating or putting someone else unfairly through the treadmill of a publicity circus. For instance, you talked about changes to procedures but you did not detail those. Are you able to detail them?

Lt Gen. Leahy —Perhaps I could treat them in general terms. Certainly on the public record from some of the earlier press reports there are comments about the excessive use of force. That particular allegation has been found to be unsubstantiated. That is an allegation of striking of detainees. That is certainly unsubstantiated. There was also some press reporting that zip ties had been used to restrain people—that is, that they had been tied up with zip ties. That certainly happened. That is well within our training and our doctrine and the procedures that are allowed under the various rules of conflict, such as the Geneva Convention, and procedures of the Red Cross and others who monitor these types of things. We have a minor concern that our training and the doctrine in there need to be enhanced and I stress that it is a minor concern. That is the type of administrative action that we are talking about to make sure that our training is consistent before we get ourselves into a situation like that. As I say, in general terms, that is the sort of thing we will be doing. Another one relates to reporting of incidents and we will be enhancing our doctrine to ensure that incident reporting procedures are thorough and correct.

Senator CHRIS EVANS —I have difficulty myself working through this but the things that most concerned me and I think most concerned members of the ADF were the allegations of torture et cetera.

Lt Gen. Leahy —They were the ones that were found to be thoroughly unsubstantiated.

Senator CHRIS EVANS —I am trying to give you the opportunity to get that on the record, to rule out conclusively, if you like—

Lt Gen. Leahy —I can rule that out quite conclusively as a result of this thorough and vigorous investigation—there is absolutely nothing to do with torture in this.

Senator CHRIS EVANS —What about in terms of deprivation or prevention of feeding and water and those sorts of things?

Lt Gen. Leahy —Absolutely nothing improper occurred.

Senator CHRIS EVANS —Okay.

Gen. Cosgrove —Senator, could I underscore something that Chief of Army has said and I know that you have acknowledged, but perhaps just to once again put it on the record. The team that investigated these allegations could hardly have been more diverse and objective in its structure. UN police were involved as well as those who were part of the task force. The task force included Federal Police as well as Australian Defence Force police, and the police investigating were triservice not from just one service. In that regard, it is hard to see how we could have actually got a more objective view of what occurred. I really think that should be of great reassurance to the public.

Senator CHRIS EVANS —Yes. General Leahy, just for the record: there is no other element of the report, other than the charge that arose out of it, that caused you any serious concern?

Lt Gen. Leahy —There were certainly no other charges preferred against servicemen. However, I did state at the time of my press release that some administrative action had been taken against an individual as a result of workplace and gender harassment. That action has been taken and that matter is concluded.

Senator CHRIS EVANS —Yes, that was another one that begged the question a bit. Is this relating to the incident in East Timor?

Lt Gen. Leahy —No. It was a workplace incident and it was quite separate from any other of the allegations.

Senator CHRIS EVANS —That is what I could not understand—how did it get wrapped up into this?

Lt Gen. Leahy —We looked at everything that happened in East Timor over that period. Where someone had a beef we had a look at it, because we wanted to sweep it all together. I am very confident that we have thoroughly investigated all of the matters there, that we have spoken to everybody that has been available that has wished to come forward and that we have concluded this matter comprehensively.

Senator CHRIS EVANS —Just for the record, on the workplace and gender harassment: I could not understand how that fitted into any of this at the time so what was—

Lt Gen. Leahy —During the interviews that were going on over those couple of years, someone made a comment and we went for it.

Senator CHRIS EVANS —It was related to an incident or allegation relating to service in East Timor, but nothing to do with the Suai allegations?

Lt Gen. Leahy —Absolutely nothing to do with the other allegations.

Senator CHRIS EVANS —That was another one of those things that just seemed to hang out there a bit. So thanks for that.

CHAIR —We are now dealing with outcome 4, Air Force capability for the defence of Australia and its interests.

Mr Carmody —Chair, before we continue, could I respond to something on the East Timor drawdown—some clarification for Senator Evans of the points made during the discussion earlier today?

CHAIR —Certainly, Mr Carmody.

Mr Carmody —The government has not formally announced a slowing in the rate of the drawdown but the government has maintained that it would continue to support the UN contribution in East Timor and the ADF drawdown would be in proportion to and in accordance with the total UN force numbers. The government has maintained in its public position that Australia will provide around 25 per cent of the PKF but has not made separate announcements of the UN Security Council's drawdown plans. At the end of April 2003, Australia advised the United Nations that it would maintain three rifle companies until November 2003 but the exact nature of the ADF commitment to UN operations in East Timor until June 2004 is still being determined, and the government will be asked to approve these details in the near future.

I also have two points of clarification or correction. Firstly, the UN mandate expires on 20 May 2004, not in July. Secondly, formed units of the United Nations peacekeeping forces in East Timor are planned to be withdrawn by the end of June 2004, not in July.

Senator CHRIS EVANS —I take it that confirms there was no public announcement about the increase from two rifle companies to three—is that right?

Mr Carmody —That is correct.

Senator CHRIS EVANS —There was no formal announcement of the government's response to the UN request?

Mr Carmody —That is also correct.

Senator CHRIS EVANS —What about the suggestion that the commitment to June 2004 is under review or before government now? What do I understand that to mean?

Mr Carmody —It follows on from the point CDF made about the precise numbers of the force composition. So the fact that there are three rifle companies until November 2003 is clear, but the ones and twos of the precise numbers that are around that are the things that we are still sorting through.

Major Gen. Haddad —I, too, would like to read in an answer to a question from yesterday. This is in relation to questions I was asked by Senator Evans about the value of the ammunition that we had drawn directly off the United States in the Middle East. As per my comment yesterday, the only items that we have drawn off the US under that arrangement were MK82 2,000 pound bombs, MK84 500 pound bombs and five-inch gun ammunition plus some minor amounts of small arms ammunition. Based on our prices—and we are yet to get the US bill for this—the likely expenditure is about $A2 million. I also mentioned that we had another arrangement with the US for drawing accommodation services—working accommodation, living accommodation and food. The price we have been charged for that arrangement is $US27 a day.

Senator CHRIS EVANS —So $US27 a day to feed and house our troops.

Major Gen. Haddad —It is living accommodation, working accommodation and subsistence food et cetera.

Senator CHRIS EVANS —I presume that did not apply to the SAS out in the western desert somewhere.

Major Gen. Haddad —This was only when they were in one of those fixed installations.

Senator CHRIS EVANS —Yes, thanks for that. I think Air Marshal Houston—or somebody indicated on his behalf yesterday—wanted to have a talk about FA18s and if not clarify the record then rebalance the evidence in some way. I was going to go to some of those issues, so perhaps Air Marshal Houston can tell us what he wants to tell us about that and then I will go to my questions.

Air Marshal Houston —The F18 aircraft started to be introduced back in 1985. So it is now an ageing aircraft and as aircraft age, as we have said many times, the requirement for logistics support increases, the expense of maintaining the aircraft increases, and what you would expect is an increasing requirement for injections to top-up logistics funding. To some extent, that is exactly what is happening here. Our F18s are now using more spares than they did in the past. We need more spares to maintain the aircraft at the required rate of effort. Some of our repairable items are in a situation where we simply have no availability for them.

Senator CHRIS EVANS —Is that because they are not being manufactured anymore?

Air Marshal Houston —Perhaps I will explain what a repairable item is first. A repairable item is a spare that you can repair. What we plan to do when we purchase a weapons system is that we intend to maintain the engines, the radios—those sorts of parts that can be repaired— through the life of the aircraft. So we have a maintenance plan against each of those items and each of those items goes into the logistics pipeline and goes through a process of repair and then comes back and is serviceable and is available for fitment to the aircraft.

What has been happening is that, because we have had a shortage of some of these repairable items and indeed some of the other spares because the aircraft are getting older, we have been on occasions removing serviceable parts from other aircraft. As I said yesterday, our preference would be to remove those parts from the aircraft that are going through servicings or are in a modification program. In fact, that is what we do. There are costs associated with that because, in removing a part—particularly a big part, such as an engine— it does cost to remove the part and then fit it to another aircraft. So it is really not the best way to do business. Simply put, we have got to the stage with the aircraft where we need more spare parts to maintain this ageing fleet of aircraft. The logistics input is a very welcome input at this time.

I mentioned to you that I would give you some idea of the number of aircraft that we have in, if you like, the operational pool. I think I said around 50; I confirm it as being 48 at the moment. With those 48 aircraft we obviously keep statistics and the indicators are that we do need more logistics at this time in the life of the aircraft. It is as simple as that.

Senator HOGG —What about the cannibalised aircraft that we heard about yesterday? I think a figure of 21 was given to us. Is that reasonably accurate? If it is 20 or 22 I am not worried about that.

Air Marshal Houston —It is in that order. Essentially, we have at any particular time a number of aircraft within the fleet that are awaiting spare parts. They cannot be utilised because they are awaiting spare parts.

Senator HOGG —The logistics shortfall that you have had, which is now meant to be covered by the injection that we saw yesterday, will enable you to restore those 21 to being fully operational. Is that the plan?

Air Marshal Houston —The fleet of 48 aircraft is the pool that we use for operations. Essentially those 48 would be the ones that we would want to have the spare parts available for in the first instance.

Senator HOGG —I accept that.

Senator CHRIS EVANS —Does that mean you are giving up on the others?

Air Marshal Houston —No, not at all.

Senator CHRIS EVANS —Realistically, though, how many of those others will get back in the air?

Air Marshal Houston —The fact of the matter is that if you have an aircraft in major servicing and you remove all the parts from it, it takes a lot longer to put it through the servicing. It is an inefficient way of doing business.

Senator CHRIS EVANS —I accept that. Are any of those aircraft not going to make it back?

Air Marshal Houston —No, they are all going to make it back.

Senator HOGG —In the upgraded form?

Air Marshal Houston —At the moment we have nine aircraft in the Hornet upgrade and that is a rolling program. Those aircraft will go through each stage of the Hornet upgrade. As you saw with our recent deployment, HUG 2.1—Hornet upgrade 2.1—performed absolutely superbly. In fact, in many respects it was probably the best of the old Hornet aircraft in theatre because of the upgrade we had given it. That comes from a couple of sources.

Senator CHRIS EVANS —Who else had Hornets in theatre?

Air Marshal Houston —The US Marine Corps and the US Navy. Our aircraft is quite unique because our upgrade is different from what they have done with the aircraft. The APG 73 radar gives much better situational awareness. We had a software upgrade. We also had a combined interrogator transponder, which made the aircraft a preferred option for the defensive counter air task. That aircraft performed very, very well. Of course, our pilots are very well trained, highly skilled and used it to maximum effect.

Senator HOGG —In terms of servicing, does that limit your servicing options—for example, if you are with the Americans and you are starting to creep ahead of them in this area? I presume they do not have the same capacity that you would have to service the aircraft.

Air Marshal Houston —We have a different aircraft. There are many common systems, but particularly on the avionics software side of the aircraft we are in a different configuration from them. I imagine there would be differences between the US Marine Corps and the US Navy as well.

Senator HOGG —Where are the aircraft that are currently being cannibalised? Are they all at the one site or are they spread over a number of sites?

Air Marshal Houston —I guess the terminology `cannibalisation' conjures up a particular picture—

Senator CHRIS EVANS —Air Marshal Houston cringes every time he hears that.

Senator HOGG —We are not trying to make you cringe. I did not use the term first, I might add.

Air Marshal Houston —What we are talking about is the removal of a particular part that is not available in the store systems.

Senator HOGG —Which makes them unable to operate.

Air Marshal Houston —It makes them unable to operate. They are not fully mission capable.

Senator HOGG —Where are these planes?

Air Marshal Houston —They are spread right through the whole fleet. Having said that, we manage the fleet in a particular way to ensure that we can meet our preparedness requirements.

Senator CHRIS EVANS —That leads us to the question: what are the implications for the management of the fleet of the deployment to Iraq and the high number of flying hours that you detailed for us yesterday? What are the major ramifications for the management of the fleet arising from that? It seems to me that you will have a larger number of aircraft now that have done an awful lot of flying in a short period of time. You generally try to share the flying hours around, don't you?

Air Marshal Houston —Yes, I should make the point about the way we accrue fatigue on this aircraft. The life of this type of aircraft is determined by the rate of fatigue accrual and the rate of effort that the aircraft flies. On this particular occasion, we will have flown about 14,000 hours, we expect, by the end of the year. That is 1,500 hours more than we had anticipated at the start of the year. Of course, that is a direct consequence of flying in Iraq. That probably means we have additional servicings to perform in the next two to three years. It probably also means that we have had to transfer a lot of the spare support from operations in Australia to the support of the operation in the Middle East. That is now finished, and we are now getting back to normal.

There will be a requirement to look at all the aircraft. They operated in a very harsh environment—lots of sand and lots of dust. We do not fully understand what the effect of that environment will be on the platform. But I would imagine that we will need to look at things such as the erosion on the compressor blades and the effect on the airframe. Suffice it to say that all of that is very manageable. We were only deployed for three months and we only flew an extra 1,500 hours. So I am confident that that will not have any substantial impact on the long-term health of the fleet. As I said to you yesterday, a lot of the flying was fairly undemanding from a fatigue point of view. There was not a lot of air combat manoeuvring; it was a lot of combat air patrol and a lot of being available for interdiction and close air support, which meant holding at 1G type flight a lot of the time. So the rate of fatigue accrual was probably a little bit less—this is my feel for it—than would normally be the case.

Senator CHRIS EVANS —We had the discussion earlier, during capability, about what seemed to be the placement on the backburner of the structural or barrel replacement type project. What is the most likely management of the F111 and FA18 fleets until the introduction of the JSF? Has a decision been made about that or are you still exploring options?

Air Marshal Houston —The first point that I would make is that we need all 71 aircraft to get through to 2012 to 2015. We cannot make the planned life of type without all 71 aircraft, so we have to manage the fleet so that we can get them through—or the majority of them through—to 2012 to 2015. In terms of the considerations about centre barrel replacement, we would prefer to avoid that. Our position has not changed since the last time I briefed you on that. However, we are studying all aspects of managing the fleet, including the likely rate of fatigue accrual, the rate of effort and the way we run the fleet, to determine whether we need to proceed with doing a centre barrel replacement on a small number of the aircraft.

No decisions have been made at this stage. As the capability manager I am briefed on a regular basis by my experts, the Commander of the Air Combat Group and the Director General, Technical Airworthiness. Of course we also have a very close relationship with DSTO. Particularly on the technical side, DSTO and DGTA are working very closely together to study how this might go and the best way to—

Senator CHRIS EVANS —Is it fair though to say therefore that we are much more likely to try to get them through?

Air Marshal Houston —We are trying to manage the fleet to get them through to their life of type. We obviously have to study not only the FA18, but we also need to study the F111 and we need to be fully cognisant of what is happening with the joint strike fighter. There are three variables there and we are endeavouring to find out as much information as possible in terms of the effects on all three variables so that we can come up with the best plan for the future to manage the two legacy systems in terms of the way we introduce the JSF to service.

Senator CHRIS EVANS —I accept all that but I am just trying to understand the time frame. Clearly, we cannot make that decision in 2007 or 2008 when it is too late. I am sure the minister is not interested in buying you interim aircraft as well as making the decision to go ahead with the JSF. When is crunch time for determining whether or not that will get you through or whether you will have to do a barrel replacement or whether you have to do something else in terms of the F111s? When does this come to a head?

Air Marshal Houston —I spend a lot of time and my senior people spend a lot of time reviewing this on a very regular basis. We review it annually. As a consequence of the deliberations last time there are a number of studies that are ongoing. Those studies will report back in due course and I think we will probably have more information later this year on what we need to do in terms of structural refurbishment. One of the things we are trying to determine at the moment is what we need to do as part of HUG 3.1, which is the initial part of the structural refurbishment. That will also inform the scope of HUG 3.2, which is the potential centre barrel replacement. It is a very complex business and I would imagine that by the time I come back here next time I will be able to give you an update and let you know a little bit more about where we are going with structural refurbishment.

Senator CHRIS EVANS —What is the critical point in all of this? The centre barrel replacement, 3.2, seems to be put on the backburner. What is the critical decision in relation to the Hornet?

Senator Hill —It is related to the assessments that are currently being made and being made over the next 12 months because the dates will change according—

Senator CHRIS EVANS —I accept the general thing. I am just trying to understand, in terms of government decision, whether or not that will get you through, and what triggers that decision.

Air Marshal Houston —I keep the minister fully informed about how we are going. At the moment I am confident that I can keep the FA18 going to meet the life of type requirement, 2012-2015. We are clearly gaining as much information as possible from DSTO and DGTA. The fatigue test on the FA18 airframe was only recently completed and there is an awful lot of analysis of the data that comes out of that to determine whether our assumptions are correct.

It is a very dynamic process. If there is a crunch time, it will come when we have to make the decision on the joint strike fighter, when we come to government and say, `It's time for phase one of the joint strike fighter.' At the moment we see no reason why we cannot keep the FA18 going through to 2015. If there is a crunch, it is the decision whether we need to proceed with the centred barrel replacement. That is the important thing, and that is likely to come either later this year or next year—a decision on whether we need to do a limited number of airframes in that regard.

Senator CHRIS EVANS —You think you would only have to do a limited number?

Air Marshal Houston —Yes.

Senator CHRIS EVANS —Is that because you would only try to carry a limited number—

Senator Hill —With respect, Mr Chairman, Senator Evans is asking too much. You can keep pushing to get these answers but, if the answers are only as good as the future research is going to show, there is not much point. The air marshal has explained the process. He has said that he is confident that the full life can be achieved but he has major studies going on to confirm that and the results will be known in due course.

Senator CHRIS EVANS —With respect, Minister, we get a lot of expressions of confidence at estimates, and part of the process is to test the bases of that confidence.

Senator Hill —But you are not testing it; you are trying to get him to nominate dates that are impossible to be nominated when you do not have the full information base.

Senator CHRIS EVANS —I am not trying to get him to nominate dates; I am just trying to understand—you have reviews all the time—by what stage you, the government, will have to make a decision about whether you are going to go ahead with the barrel replacement. When is the critical time? We were talking about it. It has clearly been put on the backburner a bit in terms of approval.

Senator Hill —We will know more about that when this two-year process of assessment has been completed. The air marshal said that even within those two years he may know more, because the process of research is ongoing.

Senator CHRIS EVANS —I still think it is perfectly appropriate for me to try and tease out an understanding of those issues. I do not see why you are so sensitive.

Senator Hill —Because you are pressing him beyond reasonable limits.

Senator CHRIS EVANS —He doesn't look unduly strained.

Senator Hill —He is a very generous person and he wants to help you.

CHAIR —With respect, Minister, he can choose not to answer. I cannot control which questions are asked. You can decide which questions are answered.

Air Marshal Houston —Perhaps I can finish it off by saying that we manage the fleet tail number by tail number, so we know exactly where each airframe is in terms of fatigue accrual.

Senator CHRIS EVANS —I understand that.

Air Marshal Houston —In other words, it is a dynamic process and we are managing it very closely. We need all 71 aircraft to get there, and I am confident we can get there.

Senator CHRIS EVANS —Do you have the same confidence about getting the F111s through?

Air Marshal Houston —I was at Amberley at the weekend for the 30th anniversary of the F111 and I was very pleased with what I saw. We currently have 17 aircraft with the refurbished wings. There is a pool of 13 aircraft available for meeting our operational and preparedness requirements.

Senator CHRIS EVANS —There are 13 that you can get into the air at the moment?

Air Marshal Houston —There is a pool of 13 aircraft that we have available for operations. I do not know what the day-to-day serviceability is; we usually manage it to what our requirements are. I suppose that the long and the short of it is that we can meet all our preparedness requirements at the moment with a credible capability.

Senator CHRIS EVANS —Do you have confidence that you can continue to get the F111 to meet that level of requirements through to 2012 or 2015, the possible date of the introduction of the JSF?

Air Marshal Houston —I am confident that we can, given sufficient funding.

Senator Hill —It depends on how much money you are going to spend.

Air Marshal Houston —Again, it is an ageing aircraft.

Senator CHRIS EVANS —It is not just the money. It is an operational issue—whether we actually have those aircraft available.

Air Marshal Houston —The aircraft is very expensive to operate. Given sufficient resourcing, I am confident that we can get the aircraft through to the end of the decade.

Senator Hill —You can keep rebuilding them if you so wish.

Air Marshal Houston —We are doing a sole operator support project where we are specifically looking at whether we can get the aircraft through to 2015 or even 2020. Until we complete those studies, I am only prepared to say that I am confident we can get it through to 2010. The reality is that if we are going to take this through to 2020, as indicated in the white paper, it will be very expensive. I think one of the things that we need to study is how much is it going to cost and whether it is better to perhaps say, `Enough's enough and we will retire it at this point.' I am happy in terms of getting it through to 2010. We need to do a lot more work to determine what is involved with going to 2020 and how much it will cost.

Senator CHRIS EVANS —What are the major costs that will start to impact on the F111? Are they straight logistics costs? I know ageing aircraft cost more and more in servicing. I am trying to get an understanding of the cost drivers for the F111 that are looming large.

Air Marshal Houston —You have to keep it airworthy. That probably means more and more maintenance as we go further downstream. We have a fairly good stock of spare parts because we are the sole operator, but that in itself presents significant challenges. I would anticipate that as the aircraft gets older we could have more surprises. By way of illustration, if you look at our Boeing 707s, we have got to the stage with them now where we have calendar servicings and quite often when we do those servicings we find something that we were not expecting. That is normal with an old aeroplane, so it tends to spend a lot longer in the hangar than it does out on the flight line. Obviously, the availability is not as good as it was when it was a young aircraft. The F111 was an extremely serviceable aircraft when it was young. The older it gets, the more maintenance we will have to put into it to maintain the capability.

Senator CHRIS EVANS —Give me a sense of the sole operator problem. Is it that you are not dining out on other people's experience, so you are not seeing things coming down the track? Is that the disadvantage of being the sole operator?

Air Marshal Houston —If there is a problem, we are going to be the first to know about it—the only ones to know about it—and we are going to have to come up with a solution to the problem.

Senator CHRIS EVANS —You have the cost of the solution as well. You are not able to piggyback off the costs others have had.

Air Marshal Houston —Can I just say that the way my people, DSTO, the DMO people, the strike reconnaissance systems, the program office and the principal contractor, Boeing Australia, have responded to do some of our recent problems has been truly outstanding. We have got on top of all of the significant ageing aircraft issues that have arisen recently. We are over them. At this stage everything is looking good for the future.

CHAIR —Can I ask a few questions on the F111 and the FA18? Air Marshal, you said that there were 48 out of 71 mission capable aircraft. How does that compare in broad terms with this time last year and this time two years ago?

Air Marshal Houston —We are in much the same situation. We have that pool of 48 to 50 aircraft. The Hornet upgrade program was going two years ago and it has been ongoing. Essentially, the 48 relates to having one aircraft over at ARDU, the Aircraft Research and Development Unit; we have nine aircraft in upgrade; and we have 13 aircraft in depot level maintenance, so what is left is the rest of the fleet. We are in the same situation. Essentially, we are still doing the same number of servicings as we did two years ago.

CHAIR —This applies both to the F111 and the FA18: does the operational envelope change in terms of how you extend life of type?

Air Marshal Houston —In terms of the FA18, we have a finite fatigue life, which is related to the rate of fatigue accrual and the rate of effort. In order to go beyond that, we have to do a major rebuild of the aircraft, and that is what the centre barrel replacement is all about. We could then, perhaps, take the FA18 much further. In terms of the F111, we do not have those sorts of considerations. The F111 is a very robust airframe. The fuselage should be able to go on for as long as we want it to go on. We have had a close look at a number of fuselages and they are in good shape. The advice from DSTO is that the fuselage should be able to go for a long time—

CHAIR —The operational envelope does not change?

Air Marshal Houston —It depends. If you want to extend the life of an FA18, you could put some fairly stringent restrictions on the aircraft and that would cut down the rate of fatigue accrual, and you could probably lengthen the life of the aircraft. In doing that, you would probably make the aircraft ineffective in its primary role.

Senator HOGG —I want to go to the air traffic controllers issue. I note in the PBS that it is still an area of grave concern; it was an area of grave concern when we did the inquiry on retention and recruitment. Can you give me some idea of the shortages? Firstly, how many air traffic controllers are there currently?

Air Marshal Houston —There are 315.

Senator HOGG —Are you able to break that down by base?

Air Marshal Houston —I cannot do that here and now, but I can give you an overview.

Senator HOGG —Could you take that on notice—

Air Marshal Houston —I can.

Senator HOGG —and also give me an idea of the shortages at each base.

Air Marshal Houston —The overall shortage at the moment is 51. We have an establishment of 315; we have 51 short. We are recruiting 35 Australian public servants. So, when that program is complete, there will be fewer shortages. In fact, we should be down to only 16. The other thing we have done is to have a competency based retention scheme, and that has been very well received by our air traffic controllers.

Senator HOGG —Could you outline the competency based retention scheme for us?

Air Marshal Houston —A controller has a number of skill sets that he requires. We have related that to gaining proficiency to perhaps be a tower operator, in the first instance, and then later gaining proficiency to be a radar controller and so on. The increments in the retention benefit relate to the achievement of those skill sets.

Senator HOGG —Are the shortages still leading to a number of sites operating at a reduced capacity, a reduced number of hours?

Air Marshal Houston —At the moment we do have some restrictions in terms of operating hours as a consequence of the shortage of air traffic controllers, but we are able to manage it. As we bring the public servants on line, that is going to help enormously.

Senator HOGG —What role will they fulfil that will ease the situation?

Air Marshal Houston —In studying the problem, there are a number of people out there who would be very willing to join us and essentially man some of the less popular posts in the Air Force. They would be very happy to remain at that location for a long period of time. A lot of these people will probably be former air traffic controllers. We just want to source that potential part of the air traffic controller market.

Senator HOGG —Are the shortages spread evenly over the system or are they in one or two particular bases?

Air Marshal Houston —I have some information in regard to how we are looking. These numbers are a little out of date, but I can give you some idea—

Senator HOGG —If they are indicative, that is what I am looking for at this stage.

Air Marshal Houston —At Amberley we have an establishment of 22 and a strength of 15. We have done some work at Darwin and I would prefer to give you the absolutely accurate figures for that location. At Edinburgh we have an establishment of 11 and a strength of 10. At East Sale we have an establishment of 19 and a strength of 11. One of the problems with East Sale is that not everybody wants to go there.

Senator HOGG —So that is one of the more undesirable ports of call?

Air Marshal Houston —It is a remote sort of area and it is harder to get people to go there.

Senator HOGG —The people going from Point Cook to East Sale will be very happy to hear that!

Air Marshal Houston —If we look at Nowra, we have an establishment of 20 and a strength of 13. At Oakey we have an establishment of 19 and a strength of 17. At Pearce we have an establishment of 28 and a strength of 26. At Richmond we have an establishment of 13 and a strength of 13. At Tindal we have an establishment of 18 and a strength of 13. At Townsville we have an establishment of 31 and it is pretty well manned. Again, I would like to give you the actual figures there. I will take that on notice because that is important. At Williamtown we have an establishment of 26 and a strength of 19. And at the School of Air Traffic Control we have an establishment of 24 and a strength of 24.

Senator HOGG —You are going to supply me with figures for Darwin later as well?

Air Marshal Houston —I will come back on Darwin. Twenty of the military positions at Darwin, Edinburgh and Richmond and the naval air station at Nowra have been identified as the Australian Public Service positions. That will give us a little more stability.

Senator HOGG —How is retention?

Air Marshal Houston —Retention is not too bad. We are not getting worse. The competency based allowance seems to have been well received, and we are in a slightly better position than we were, say, two years ago.

Senator HOGG —In terms of the operation in Iraq, I understand from evidence earlier that 13 air traffic controllers went to Iraq. Did they come from any specific base or was it spread over the whole—

Air Marshal Houston —The thirteen air traffic controllers came from 12 different bases.

Senator HOGG —Basically, one a base.

Air Marshal Houston —One from each base and one base provided two. Before they departed, I had the evening with those individuals and they left me in absolutely no doubt that that deployment and the potential for that employment would keep them in the Air Force. So we have sent 13 away and those people were very happy to be sent away because that is why they joined the Air Force. I think if we can give that sort of opportunity from time to time that will aid retention in the Air Force.

Senator HOGG —But that is not an opportunity that has been available in the past, is it?

Air Marshal Houston —The last time that sort of opportunity was available was in Somalia back in the early nineties. Again, our air traffic control people did a magnificent job there. In fact, we were requested to provide air traffic controllers this time because of the magnificent job our air traffic controllers did when they were in Somalia.

Senator HOGG —Are the 13 who went to Iraq due to be rotated at any stage?

Air Marshal Houston —As General Cosgrove said yesterday, it just depends how the deployment pans out. Initial indications were that this would be a fairly short-term deployment and that the air traffic control capability would be outsourced. But the further we go into it, it seems that it might be extended. If it is extended, we will review the situation and, yes, it is possible that we may have to send another rotation.

Senator HOGG —Do you have a contingency plan in place for the replacement of these people and have you called for volunteers at this stage?

Air Marshal Houston —I have got about 200 people who want to go.

Senator HOGG —That is interesting.

Air Marshal Houston —The point I am making is that the best thing I can do for retention in the air traffic control category is to have the opportunity to pursue this sort of prospect.

Senator CHRIS EVANS —My lasting impression from the farewell ceremonies—I think Senator Hill would have had a similar experience—is that all the personnel were very keen to go and all the families were nervous. You felt like you had to have two different conversations with the one family about it. Mum and dad were very nervous and not at all enthusiastic but their son or daughter was bursting at the seams to get into it. It was a very unusual experience, so I understand what you are saying. We were talking about the F111s. I was going to raise this under `personnel', but no doubt that section will be truncated because we are pressured for time. How are we going for F111 pilots and crews in terms of their profile?

Air Marshal Houston —I was up there at the weekend. Are you talking in terms of numbers?

Senator CHRIS EVANS —I was interested in the F111 retention rate.

Air Marshal Houston —We are doing fine. In fact, at the moment, just relating to the broader question of pilot retention, I now have more pilots than I need. If you look at it strictly on paper, we probably have about 65 more pilots than we need in terms of a direct comparison between strength and establishment. When you eliminate the people in the training pool awaiting courses and so on, we probably have an excess of about 15.

Senator CHRIS EVANS —Are they trained up for F111s?

Air Marshal Houston —Some of them are. I will have to take that on notice. I think we still might need a couple of people in there to meet the full complement of the squadron, but it is healthier than it has been for a long time. I will take the question on notice to give you the precise detail.

Senator HOGG —Eighteen months ago, I think the attrition rate was in the order of one a week and the recruitment rate was in the order of 40, so Air Force was facing a net loss. Are you saying that has turned around?

Air Marshal Houston —The situation with recruitment and retention has turned around totally.

Senator HOGG —How much is that due to the crisis in the international airlines?

Air Marshal Houston —I think the crisis in the world airlines helps. At the moment, all the airlines that fly into Asia are really doing it tough. Qantas is obviously one of those; Cathay Pacific is another. Of course, over the years Cathay and Qantas have taken a lot of our pilots. Right now I do not think they need to recruit any pilots, because they simply have enough pilots to meet the current level of airline demand. That obviously helps. The other thing that worked in our favour was 11 September. Not only did we have the terrorist attacks which had this effect on the world aviation market; we also had the demise of Ansett. We were able to recruit some of those ex Air Force people back into the Air Force. That was very helpful at the time. But right now our retention is the best it has been for probably 10 years. We are running at a six per cent separation rate for officers and eight per cent for other people. That compares to the 10-year average of something like nine per cent for officers and 11 per cent for other ranks.

General Cosgrove —Could I interject for a moment. Air Force's retention rate is the superior of the three services.

Senator HOGG —Can I ask about the other two areas identified in the PBS where there are deficiencies: aerospace engineers and logistics officers. Are they being addressed? How serious is the problem?

Air Marshal Houston —They are being addressed, absolutely. We have run an aerospace engineer sustainability project. We have also run a logistics officer sustainability project. The direct outcome of those two studies is that we are taking a raft of measures for both aeronautical engineers and logisticians, which includes opportunities for further education. It also includes remuneration, retention benefit and a whole raft of smaller measures. As a consequence of that, we are having a very positive effect on the retention of both logisticians and aerospace engineers. I would hasten to add that we have very healthy recruitment in all areas. We are meeting almost all our recruiting targets—we are close to 90 per cent for recruitment. To give you an example, we get a lot of our engineers and logisticians through the defence academy and we had well over 100 per cent achievement in terms of recruitment for the defence academy last time around. All our engineer and logistician slots were filled.

Senator HOGG —This is not a comment that is directed specifically at Air Force. I think it was common to all the services. When we did the inquiry into retention and recruitment, we found that career management was being poorly handled, if I can put it in those terms. What steps have you taken to manage careers better, and has that assisted in the retention of these key personnel?

Air Marshal Houston —I think, if you have a look at the feedback from the field, we still have a way to go in terms of the way we manage our people. But one of the things that we have done—one of the first things that I did when I came to the job—is to come up with a new way of managing our people. We put in place a personnel management strategy which better aligns the requirements and the expectations of our people with the requirements of the service. So the whole idea is to get better alignment and to get a more individual approach to the way we manage our people. That has been very well received, but we still have a little way to go. I think the YourSay survey points to the fact that we are on the right track.

Senator CHRIS EVANS —Given the minister's concern about Air Marshal Houston and the badgering he is getting from us, we will cease asking questions of the Air Force.

Senator HOGG —He looks completely badgered.

[2.00 p.m.]

CHAIR —We now come to outcome 5, Strategic policy for the defence of Australia and its interests. I understand we have about half an hour of questions on this matter.

Senator CHRIS EVANS —It depends on whether Mr Carmody coughs up straightaway or not.

Mr Carmody —I will be brief, then.

Senator CHRIS EVANS —I have a few questions on strategy issues. First, I wondered whether Mr Carmody could outline for us what discussions have been occurring with the United States defence about this realignment they are having in terms of their position in Asia and what the implications are for Australia. I am trying to get a sense of what issues are on the table, what the implications might be for Australia and whether they are consulting us about those issues or whether that is a decision for them.

Mr Carmody —I have not had any discussions on these matters yet with the Untied States. I note that there has been a great deal of speculation in the press running on for the last three to four weeks about future US posture in the region, including some speculation on basing. But to my knowledge there have been no approaches by either side.

Senator CHRIS EVANS —On the question of bases, yes. There is this review of their posture and resourcing in the Asian region. That is a matter of public record and there is a lot of debate about that. As a starting point, I figured you would want to say something about bases and I presume the minister would want to say something too. I was really starting from the level of what is the department's relationship in this, how we are involved, what sort of discussions occurred and at what level and how that process works for us as an ally.

Mr Smith —This is an issue that our embassy in Washington and our defence staff there have been working closely on and our staff in Honolulu have been talking to US military people there about those intentions with regard to Korea, Japan and so on. That has been a fairly close dialog for some time.

Senator CHRIS EVANS —What is the nature of our input? Obviously we are interested in their posture as an ally but, given that we do not have forces generally stationed in those areas, what is the nature of our involvement? It is just keeping us informed or are we putting a view?

Mr Smith —Naturally we are keeping ourselves informed and, as you know, we believe that it is in our interests to see the United States presence in the region remain. That is the context in which we have to keep ourselves informed about their intentions and what those implications would be.

Senator CHRIS EVANS —What are the main drivers behind the US reconsideration of these issues?

Mr Smith —How would we summarise that, Shane? I think there is a recognition that the nature of warfare and so on is different and the configurations that they therefore have in response to that will be different—different sizes and nature of forces. The United States has different capabilities. It can move more quickly than it used to be able to move and those factors lead to the economic consideration of the cost of them keeping themselves offshore.

Mr Carmody —In terms of other factors, aside from the nature of warfare and others, there is the US basing in both Japan and Korea. Certainly it is a question for the United States to decide whether it is going to continue having large forces forward deployed and where it might deploy them. That is the nature of their discussions with the host nations that they are dealing with. But there are those sorts of considerations, and they are political considerations in those countries, and of course taking into account the nature of warfare, their forward deployment, what has changed and what the strategic circumstance might be. They are considering those things all of the time. The nature of our discussions with the United States is pretty free and constant, so those sorts of things have been going on for a long time in one form or another. There has been speculation for many years about whether the United States will stay in Korea, what the size of its force structure will be and whether it will stay in Japan. This is not new. Maybe they are refining their view at this time, but it has been a long while in development.

Senator CHRIS EVANS —Yes, I am sure of that. I am just trying to understand what is happening at the moment and what might be impacting on us. Has the department formed a view about what any realignment might mean for Australia? Maybe you could advise me what you think some of the key considerations might be that might impact on us.

Mr Carmody —I will be in a position at least to form my view and provide some advice if and when the United States makes up its mind and starts dealing with concrete proposals, if it decides to bring forward a concrete proposal. Until then it is purely speculative.

Senator Hill —I think whilst the review is taking place it is probably unwise to be drawing conclusions.

Senator CHRIS EVANS —No, I was not. I was looking for some information from the department as to what issues were at stake for Australia, what the department's assessment is of how it impacted on our interests. I am talking about the debate.

Senator Hill —We have an obvious interest in the US maintaining its capabilities within the region. We think it has a critically important role in terms of preserving stability and security within the region. But there are a number of different ways of doing that, and the model that was basically developed 50 years ago may not be the most appropriate—both from a cost-effective point of view and also from a military capability point of view—means of achieving that. That is why I think we should wait and see what the review shows.

Senator CHRIS EVANS —As you indicated, that is a decision obviously for the United States. What I am just trying to tease out, I suppose, is what issues are important to us, particularly from a defence perspective.

Senator Hill —I beg your pardon?

Senator CHRIS EVANS —The decision about what they do is clearly one for the United States and I am not attempting to ask you what they are going to do. I am just trying to understand what the department might be advising are the critical issues.

Senator Hill —But it is the department's job in the first instance to advise government, and we would not even ask the department to be providing that advice in a speculative situation.

Senator CHRIS EVANS —I am not asking you for that, though.

Senator Hill —I think you were.

Senator CHRIS EVANS —You are mistaken. I am just trying to get an understanding of what you, or the government, might think might be some of the issues involved that impinge on our defence interests in this debate. I am not asking what the decision is. I am not even asking whether you have formed a view about some of these things. You made it clear, I thought, that the major one you saw was a continuing role for the USA in the region and a continuing military presence in the region. That is a first thing.

Senator Hill —That is right. But we do not see it as our job to tell them how to do that.

Senator CHRIS EVANS —I am trying to understand from our perspective.

Senator Hill —We would urge them to maintain that capability and that role, but there has been no suggestion that they will not. In fact, it can be argued that they are enhancing capability within the region.

Senator CHRIS EVANS —I did not say that they were not. I am just trying to understand what issues might impact on us and what the implications are for us.

Senator Hill —It would only impact significantly on us if they were reducing that capability.

Senator CHRIS EVANS —Unless, in the alternative, there was a proposition that they wanted to base some of that capability here.

Senator Hill —That is a different issue. And there is no suggestion that they do in any event.

Senator CHRIS EVANS —We have not been put in a position other than the broad one described by the minister? We are not involved in the detail of these things—as an ally that has worked very closely with the United States in recent times?

Senator Hill —No. They have certainly kept us informed of the process, and because we have a close relationship with them it may well be that our military people have chatted with their military people about some of these things, but it is their review.

Senator CHRIS EVANS —That is what you said before the Iraq war, Minister. I am just trying to ascertain whether there is—

Senator Hill —What did I say before the Iraq war?

Senator CHRIS EVANS —That we were just chatting, exchanging information.

Senator Hill —No, I did not say we were just chatting. You are verballing me.

Senator CHRIS EVANS —Are there any other issues apart from the question of potential basing of US or other troops in Australia that are impacted by this US process? Do we have any other issues at stake that will impact on our defence arrangements by any changes in their posture? That is what I am trying to understand.

Senator Hill —There could be incidental matters that affect us, such as their request for us to support sea swaps. That is just an example of using their equipment more effectively and asking if we could facilitate that—not only us but Singapore and maybe other allies around the world. But not of a fundamental nature.

Senator CHRIS EVANS —I would have thought if there is an assessment made about security, for instance, in some other regions, that might impact on us in terms of what they might want to do, say, through Australian ports. Sea swaps are one example. I was going to come to where we were at with the sea swaps, but if they are feeling that the security situation in some other ports, be it air or sea, has worsened, they might be looking to transit through Australia more. I am trying to understand whether those issues are at stake or on the table.

Senator Hill —You can ask that specific question. I do not know that there is any sign they are wanting to transit through Australia more than they have been doing in recent times. We welcome their visits. We don't mind earning a dollar from it as well, I might say. Ship visits are a good money flow for local communities as well as being good for morale. If we are helping our ally in such a way, it is a good thing.

Senator CHRIS EVANS —Is there an answer to the question as to whether or not there has been any proposition to increase those things? That is what I am trying to get a sense of.

Mr Carmody —Senator, I can answer that. To my knowledge there has not been any proposition to increase the tempo of those sorts of things. Sea swap, as the minister mentioned, is alive and well, and was agreed in 2001. That is about the only initiative that fits in with that framework. But there have been no other proposals to my knowledge that would indicate a change in posture, tempo or interest.

Senator CHRIS EVANS —The sea swap is actually a trial, isn't it? Aren't they going to trial it on a couple of occasions and then make an assessment about a more permanent arrangement?

Mr Carmody —It was certainly trialled and it was very successful. I was under the impression that we had agreed to the proposal and that therefore, if it was found to be successful and we did not have any difficulty with it, it would continue. My understanding is we have certainly done one. I had a view that another one was foreshadowed but I do not actually have the detail of that.

Senator CHRIS EVANS —Can anyone help us? My understanding is that we were going to do two trials, then the Americans were going to assess whether they were interested in continuing it and then we would make a decision. I cannot speak for the government but it was put to me as a sea swap trial.

Mr Carmody —If someone from Navy cannot help me, I can take it on notice and get back to you as soon as I can. I should be able to get a response today for you without too much trouble.

Senator CHRIS EVANS —I am happy for you to take it on notice. I was trying to understand whether there had been an assessment. Do you understand whether we were doing an assessment from our perspective on it?

Mr Carmody —I do not understand how formal that assessment process was going to be. My view was that it would happen, and if it worked and if no-one had any problems we would do it again. In terms of the nature of a formal assessment, I would have to go back and review the proposal and see on what basis it was agreed. But I understand that it went well, that both parties were happy and that the Western Australian government, for example, supports it.

Senator CHRIS EVANS —That is my understanding. So there has been no suggestion or request for an increase in transiting through Australia or joint exercises—nothing of that nature?

Mr Carmody —As I said in answer to your previous question, not to my knowledge.

Senator CHRIS EVANS —As far as you are concerned, that is not an active part of the debate about how the US might reposition itself inside Asia?

Mr Carmody —To my knowledge, no. According to the press, there is a lot more debate on the other side—a lot more going on in US thinking than anything that is happening here, aside from the speculation. Our engagement in this has been very limited. As Minister Hill said, my only statements have been that a US presence in the region is a good idea. When they make up their minds and decide to do something or come forward with a proposal, it will no doubt have elements in it and then we will have to consider it. But there has been nothing, for example, that looks like a stalking horse for a proposal or an increase in anything.

Senator CHRIS EVANS —I thought I had better let you respond on the record, Mr Carmody, to your famous quote that seems to have featured so much in the Australian.

Mr Carmody —It was very selectively quoted, Senator.

Senator CHRIS EVANS —I will put it to you formally. Mr Carmody, in terms of the prospect of an increased US military presence in Australia, you were quoted as saying:

... down at a working level, it has certainly been suggested.

What did you mean by that remark?

Mr Carmody —What I meant by that remark, Senator, was that people have been discussing informally at various levels and speculating about a US presence in Asia for the entire time I have been at Defence. Therefore, I could not answer the question that Mr Beazley put to me in the committee and say that absolutely to my knowledge it has never been discussed, because I don't think that is true. I am certain that it has been discussed and canvassed. I do not know at what levels. But I have absolutely no doubt that it has come up somewhere at some time at some level of conversation. During that session I made the point that there had been no formal proposal, to my knowledge, and I stand by that.

Senator CHRIS EVANS —Thanks for that.

Mr Carmody —It is a pleasure, Senator.

Senator CHRIS EVANS —The Defence Update referred to the dialogue we were to have with the United States on a US national missile defence scheme. Can I have an update on what the nature or extent of that dialogue has been or is proposed to be?

Mr Carmody —Regrettably, the dialogue has not moved ahead as quickly as I would have liked. I was hoping earlier this year—in fact, by now—for a senior US official who is involved in the missile defence program to come to Australia so that we could talk in some detail about what missile defence is and is not. That is yet to occur. I am hoping that he will come out in the latter half of the year and that we will then be able to explore what it is. Then we can get away from the speculation and rhetoric about what it might or might not be and get down to some facts. So it has not happened.

Senator CHRIS EVANS —So what is the level of work done inside the department about what missile defence means for Australia?

Mr Carmody —At this stage, not a great deal. At a policy level, in the broader sense, looking at US relations and looking at our global position, we have thought about it; but it is first and foremost a US proposal. They are involving their allies. They have offered, probably in similar ways to the JSF technical partnerships, opportunities to participate in the missile defence program to various nations around the world. Until that gets some form, we really have no way of dealing with the issues, because again it is only speculation. What they offer to one partner might be different from what they offer to another. Until we know that—

Senator CHRIS EVANS —Have they made an offer to us in terms of the technical partnership?

Mr Carmody —What they have said is that there will be opportunities for people to participate at various levels in the program. In waiting for formal briefings or some formal discussion, we are waiting to see what those opportunities really are. Until then, it is pretty difficult to deal with what might or might not be opportunities for Australian industry participation or any one of a range of other areas. Until there is some more definition, it is very difficult. So it is in its early days, but I would hope to have advanced it later this year.

Senator CHRIS EVANS —What is your understanding of what is to go ahead? Someone was putting to me the other day that a trial missile is to be erected in Alaska. Is that your understanding?

Mr Carmody —I am not completely across all the detail—I might have something in my briefing notes—but there has been some agreement between the United States and some nations about potential missile defence activities and positioning on the use of radars or use of facilities. But there are missile defence trials going on in the United States all the time. It is a very big-budget program—as usual.

Senator CHRIS EVANS —A lot bigger than the Australian defence budget.

Mr Carmody —It probably is.

Senator CHRIS EVANS —Many times over.

Mr Carmody —There is such a range of activities going on under the program that it is pretty hard to tie down the specifics. Again, once we tie them down this year, we will be in a much better position to know.

Senator CHRIS EVANS —So there is no formal proposition before the government, no request to participate in a formal sense?

Mr Carmody —There has been nothing formal come forward. My understanding is that the level of involvement would be that we are welcome to participate if we want to. But, until we get some definition on that, it is quite open ended.

Senator CHRIS EVANS —General Cosgrove, I want to tune you in here. I wanted to know what our understanding or thinking was on in-theatre missile defence, what involvement we had with developments in that area and how one saw that maybe linking into national missile defence.

General Cosgrove —As a bit of background, it is my understanding that the United States is seeking to remove the `national' connotation from its missile defence posture in that that implied a certain isolation of United States territory, and it has tended to speak just of a concept of `missile defence'. If one takes that construct and then sees that there should be a complementarity and seamlessness then theatre missile defence is that which might be applied over, classically, a theatre of operation—something less than the size of a nation-state, certainly something less than the size of continental United States.

In the Australian context, that would mean that theatre missile defence as a concept would apply more to, say, an area like East Timor or the area of operations of our forces recently in the Middle East or a part of Australia. That would be available in a modern military force through a variety of means which were essentially less technical or high-end technology than perhaps has been envisaged in the overall previous concept of a national missile defence. That tended to protect against intercontinental ballistic missiles—something which went into space and returned at very high speeds obviously with WMD warheads. Theatre ballistic missile or theatre missile defence may actually be in a lower layer of defence, more of the sort of missile defence afforded by patriot batteries or Aegis class ships. For example, Japan relies quite heavily on several Aegis class warships that, by sitting in the seas near Japan, actually provide an air defence envelope over Japan.

In the sense that Australia has a small but reasonably highly technologically developed force, it is quite reasonable that we could, at some future time, contemplate incorporating our air warfare destroyers into some notion of theatre missile defence. It is a moot point as to whether we will go for a high-end land based missile, such as patriot. That is not something we have thought about or ever sought to fund, but I give it to you in the context that it is probably reasonable for smaller but highly developed military forces to have some aspects of theatre missile defence available to them.

Senator CHRIS EVANS —Where are we at with the development of those options for the Australian Defence Force? Where does the responsibility lie for that?

Gen. Cosgrove —If I could put it to you this way: the theory, the conceptualising, the philosophy and the discussion cost nothing. Accordingly, we are well developed in that area, but we would need to be very careful to make sure that that investment would not be chasing clouds, so to speak, in offering a reasonably impermeable air defence envelope in a strategically important area. I think our approach, as articulated by Mr Carmody, is spot on— that is, we are supremely interested in talking to the experts, in this case the Americans, and studying very carefully what emerges; but we should make sure that we digest that before heading off with a potential participation.

Senator CHRIS EVANS —I just want to note for your information that the members of the committee from Queensland and WA might have a different view of what is strategically important than what sometimes the military has taken.

Gen. Cosgrove —There is no part of Australia that is less important than another, Senator, as you well know.

Senator CHRIS EVANS —No rabbit-proof fence or Brisbane lines.

Gen. Cosgrove —Not even a crow fence.

Senator CHRIS EVANS —That is all I have on strategy.

Air Marshal Houston —With regard to the air traffic controllers, at Darwin, the establishment is 38 and the strength is 38; at Townsville, the establishment is 31 and the strength is 30; and retention is currently running at about eight to 10 per cent. In other words, the retention benefit is having the desired effect.

Senator HOGG —Thank you very much, Air Marshal.

CHAIR —Senator Bartlett, do you have a question on outcome 5 or are you hoping to put some questions on outcome 6?

Senator BARTLETT —Both.

CHAIR —We were looking to finish outcome 5 now, because our time is very short. If you have some short questions on outcome 5 we will take them, otherwise we are shortly moving on to outcome 6.

Senator BARTLETT —I know that part of this was covered under a previous outcome or output in terms of national support tasks. Concerning the long-term implications for defence in terms of ongoing Operation Relex and the logistical impact that has, is there any thought being given as to how long that is likely to stay in place and whether it can be serviced through other mechanisms?

Gen. Cosgrove —We are continually reviewing the operation to see how it matches with the threat which, as you would imagine, ebbs and flows somewhat, so that we have an appropriate level of surveillance and reaction in Australian waters. We adjust from time to time our presence and our operational tempo to meet the threat. For obvious reasons we would not want to absolutely specify the tempo of operations or, indeed, say from moment to moment the precise nature of our contribution because that could to some degree negate its effectiveness; but we do adjust.

The other aspect of my reply is to say that we are set for the long haul. While government in its turn reviews the overall need and the operational response is essentially not led by Defence but by DIMIA, in the sense that that occurs across the board and we know that a review of the need is ongoing. Given that, we are set for the long haul.

Senator BARTLETT —So you are not anticipating, even if the operation continues, that Defence's contribution to it is likely to diminish significantly?

Gen. Cosgrove —We are set to be a part of the operation as long as the government sees a need for it.

Senator BARTLETT —One example of the impact that I noted under the hydrographic section under Navy was that only 28 per cent of the hydrographic ship days were devoted to hydrographic work and the rest were spent in support of border protection operations. That is one example of distortions—though distortions is probably a negative word—or the impact that it is having on your core business. You obviously factored that in. You are not trying to look for ways to reduce the impact?

Gen. Cosgrove —In relation to that specific example, it is a point well taken that we were looking to adjust the types of fleet units that were used in the operation so that no one sort of vessel—and crew of course—had such a presence as to impact adversely in its ability to do a core job. We did that in relation to the hydrographic survey ships in an adjustment to their representation on the operation which took place a few months ago. Part of the challenge being met—and met pretty well by the Maritime Command fleet planner—is to ensure that there is a rotation sufficient to be both effective in the operational area and to allow certain sorts of ships do those other things for which they are primarily suited.

[2.34 p.m.]

CHAIR —We now move to output 6, Intelligence for the defence of Australia and its interests.

Senator CHRIS EVANS —It will come as no surprise to Mr Bonighton or the minister that I am interested in exploring the intelligence basis for our assessments on Iraq prior to the war there, and an understanding of the process or what the starting point was. Could someone outline for me the nature of the arrangements that allowed us to generate the intelligence? Who was it generated by? Was it Australian sourced? Which agencies were involved? I just want a general outline of the processes involved in the intelligence material provided to government.

Mr Bonighton —The answer is in the same way as any other intelligence is generated. We have some collection of our own. We have some collection that is provided to us by other countries, and we have an independent assessment capability which looks at that raw data and makes judgments about it. Those judgments are put out as intelligence reports.

Senator CHRIS EVANS —I understand the sensitivities about this but I am trying to get a feel for this. In terms of the collection, we would have had access to information collected obviously by our own agencies. Which Australian agencies would have been involved in the collection?

Mr Bonighton —Certainly all the Australian agencies would have been involved in that. I would not like to leave the impression that we had lots of assets directly looking at what was happening in Iraq.

Senator CHRIS EVANS —That was going to be my next question. I would have thought Iraq was not, prior to more recent times, a huge area of interest of ours.

Mr Bonighton —You would be absolutely right, Senator.

Senator CHRIS EVANS —Therefore the amount of assets and resources devoted to intelligence work in relation to Iraq would have been fairly limited?

Mr Bonighton —I think that is a fair assumption.

Senator CHRIS EVANS —Is it fair to say we would not have had very much at all in the way of direct source of our own material?

Mr Bonighton —I think that is probably a fair statement.

Senator CHRIS EVANS —Whose material would we mainly have relied on? Who would have been seen as the lead ally in terms of source material?

Mr Bonighton —Certainly—and this would again come as no surprise—we have very close exchange arrangements with the US and of course with the UK as well. So we certainly had access to some of that data.

Senator CHRIS EVANS —It struck me that probably the UK would have reasonably good intelligence sources in the Middle East, given their history, or maybe I have been reading too many spy novels over the years. They would have been a fairly important source, wouldn't they?

Mr Bonighton —I would not want to go into exactly who is doing what, but certainly they do have considerable resources there. There is a fair bit of information available as well from open sources and from the UN work that has been done, both by UNSCOM in the past and more recently by UNMOVIC.

Senator CHRIS EVANS —I accept that. I took as a given the stuff that was on the public record. I was talking about the stuff that you normally don't share with us. We will work on the basis that even I can get into the Internet and find the UN reports.

Mr Bonighton —And very illuminating they can be as well, Senator.

Senator CHRIS EVANS —Therefore the major collection obviously was done by other agencies. What is the method in broad terms about how that is shared? How does that come to us? Do we have to request it or do we get it as a matter of normal distribution?

Mr Bonighton —I think it is fair to say that, if Australia has an interest in a particular subject, we would make arrangements for that material to come to us. Once that arrangement was made, it would come to us in a routine fashion.

Senator CHRIS EVANS —Would that be an unfettered access to source material or would the other countries, such as the US and the UK, determine what it is that they would want us to see?

Mr Bonighton —I guess `unfettered' is a limitless concept. I do not think any exchange anywhere in the world would ever be unfettered, but it would be significant and substantial.

Senator CHRIS EVANS —Maybe it was a poor choice of words. Clearly, from their points of view, I am sure all agencies like to protect their sources. Therefore, there would be protections put in place about source material, and they would not want to identify their sources even maybe to an ally. I am not trying to put words in your mouth; you may express it how you want to express it. Would we have got raw source data or would it have been assessments made on the basis of the information?

Mr Bonighton —I think we get down fairly near the raw. I guess what I should say is that the days when we accepted intelligence as uninformed consumers are pretty much gone. Collectors anywhere these days need to establish some validity for the sort of material they are putting forward. Assessors need to be able to have some idea of whether it is credible or not. I think that the collectors over the last four or five years at least have gone a long way down the path of enabling an understanding to be had as to how valid the source would be.

Senator CHRIS EVANS —Does that mean that when an ally supplies you with some source material they provide some support for its validity, or do you then try to do that?

Mr Bonighton —Again I do not think we are looking at a bunch of dumb consumers here. We have arrangements for discussions and for analytic exchanges. There are open source conferences, which we send our people along to. So there is whole range of data that we have access to. I refer again to the work on the ground by UNMOVIC, for instance.

Senator CHRIS EVANS —This may be a bad example, but I am trying to put it is layman's terms. If an agency reported it had information from a defector about, say, something that occurred inside Iraq, would you get an assessment made on the reliability of the defector or would you make your own assessment about that person's validity? For instance, would an ally identify to you who the source is or would you not get that? If you did get the source, would the assessment of the validity, authenticity or reliability of it be made by you or by the originating agency?

Mr Bonighton —We would seek a judgment as to how valid and credible that source might be. Of course, over time we, ourselves, would build up a picture as to what is valid, what is reliable and what is not.

Senator CHRIS EVANS —So we have the capacity to start linking into our allies' source material in terms of Iraq. I assume it is fair to say we started doing that some time ago?

Mr Bonighton —I think it is fair to say that since the Gulf War we have maintained a watching brief in this area. We also have experts on weapons of mass destruction—what they are, how they work and how they might be employed. That is something we have built up over time.

Senator CHRIS EVANS —Inside the various agencies?

Mr Bonighton —Especially DIO, but ONA as well. Of course, some of those staff have experience in country as weapons inspectors from UNSCOM days. We can also draw on DSTO for some of the more technical and scientific judgments to do with these matters.

Senator CHRIS EVANS —So would it be fair to say that DIO was the lead agency in terms of the Iraq intelligence effort on Australia's part?

Mr Bonighton —Certainly from the defence side of things and certainly during the war in terms of support to our own troops and support to government in understanding what was going on.

Senator CHRIS EVANS —Was a joint working party set up, in terms of the intelligence agencies, to focus on Iraq or was there a special administrative structure put in place in terms of dealing with Iraqi intelligence?

Mr Bonighton —I would say that there was a constant interchange between agencies.

Senator CHRIS EVANS —I am not suggesting that this was the model, but there wasn't a separate Iraqi task force intelligence structure of some sort?

Mr Bonighton —No.

Senator CHRIS EVANS —Could you describe for us briefly the nature of your normal interchange?

Mr Bonighton —It would be between analysts and of course we receive each other's product as well.

Senator CHRIS EVANS —So you share each other's—

Mr Bonighton —Judgments and assessments.

Senator CHRIS EVANS —We have established that the source material is likely to be largely from our allies. When that source material comes into the various agencies, what do they do with it?

Mr Bonighton —Assess it, put it in context, put it together with the other information they have, both classified and unclassified, and make judgments on it.

Senator CHRIS EVANS —Did they each do that individually? Did DIO do it? Did ASIO do it?

Mr Bonighton —ONA and DIO come to their own judgments and assessments.

Senator HOGG —Do they test it in any way?

Mr Bonighton —In what sense?

Senator HOGG —As opposed to making a judgment.

Mr Bonighton —I am using judgment and assessment interchangeably. I will just use assessment, how's that?

Senator HOGG —I am not worried about that, but sometimes you get a person's judgment or someone's assessment and then you go out and test it against either facts that you know or you test it with other sources. That is what I am trying to find out.

Mr Bonighton —I guess I should say that we rely on people's judgment in making the assessments. What they are doing is judging the various items that relate to a particular topic and they make an assessment as to what that means.

Senator CHRIS EVANS —In terms of source material coming in from our allies about Iraq, DIO and ONA would both have received the source material?

Mr Bonighton —Yes, I think that is fair.

Senator CHRIS EVANS —And they both would have made independent assessments of the validity and importance of that stuff?

Mr Bonighton —Yes.

Senator CHRIS EVANS —They then exchange those assessments—I think you call it product—

Mr Bonighton —Yes, product.

Senator CHRIS EVANS —By product you mean some sort of written assessment of the intelligence?

Mr Bonighton —Yes.

Senator CHRIS EVANS —Consumer product stuff has even flowed into the dark arts; it is interesting.

Mr Bonighton —It is how we live.

Senator CHRIS EVANS —So both DIO and ONA would provide some assessments. What happens then in terms of those assessments if there is a contradictory assessment, a significant divergence of view or even a minor but important divergence of assessment?

Mr Bonighton —Generally what would happen is that the analysts themselves would be looking to each other to work out why this had happened, what was the difference, did someone have some information that the other didn't and was someone putting more weight on one aspect rather than another. That is the way that would be resolved. It might take a little time or it might be done quickly. It might be that the customers of that product had asked, `Why have we got a diverging view?'

Senator CHRIS EVANS —But there is no-one like yourself sitting there saying `hang on' and trying to resolve those issues?

Mr Bonighton —It would certainly be of interest to me.

Senator CHRIS EVANS —You describe the customers of the product. Who are the customers of the product?

Mr Bonighton —The customers would be those areas of government that had put their hands up to say that they had an interest in the particular topic under discussion.

Senator CHRIS EVANS —I assume that is a limited availability.

Mr Bonighton —Yes, people have to be properly cleared to the right levels to receive that information.

Senator CHRIS EVANS —In terms of the Iraqi intelligence, who were the lead customers for that information?

Mr Bonighton —Quite clearly, the department of foreign affairs and Defence would be two who had a great deal of interest in that.

Senator CHRIS EVANS —PM&C as well?

Mr Bonighton —PM&C, certainly.

Senator CHRIS EVANS —Could other departments and ministers have access to that on request?

Mr Bonighton —Yes, providing they had the proper security clearances. I cannot give you a list of who got what.

Senator CHRIS EVANS —I am not necessarily seeking it at this stage. If the junior minister for employment wants it, does he get it?

Mr Bonighton —I think we would want to explore why he had a particular interest in it.

Senator CHRIS EVANS —One thing I know for sure is that the Senate estimates committee would not get it.

Mr Bonighton —There are briefings given to the opposition from time to time.

Senator CHRIS EVANS —I understand that. Those departments and presumably their ministers would get a regular supply of intelligence on Iraq during the relevant periods?

Mr Bonighton —Yes.

Senator CHRIS EVANS —ONA reports to foreign affairs—

Mr Bonighton —Yes, I think the ONA's distribution will be much more limited than Defence's because Defence is trying to support operational areas of Defence. ONA is much more directed to servicing the needs of ministers.

Senator CHRIS EVANS —Would the Minister for Defence and the Department of Defence receive the ONA product?

Mr Bonighton —Yes.

Senator CHRIS EVANS —And would the Minister for Foreign Affairs receive the DIO product?

Mr Bonighton —Yes.

Senator CHRIS EVANS —You are suggesting that, outside of that tight circle, the ONA would be more tightly held? Is that the import of your comments?

Mr Bonighton —I am not saying tightly held. The fact is that is their customer set. You would have to talk to them about the detail of it.

Senator CHRIS EVANS —I am not sure I quite understand what you are saying. Is it that inside Defence you have a broader distribution of material?

Mr Bonighton —Yes, and, I think, a broader area of interests as well. We would be looking at what are the implications of weapons of mass destruction on the operations of our special forces, so we would be looking very much at a lot of technical detail to do with operations.

Senator CHRIS EVANS —Rather than the macro political issues you would be worrying about whether the SAS had the right gear to deal with a germ warfare attack or something?

Mr Bonighton —That is correct and, from a general point of view, what are the advances that are being made in weapons of mass destruction and what are the threats—those sorts of things—which are going to be of interest to our scientists and technical people to enable us to counter threats into the future.

Senator CHRIS EVANS —When you exchange information with our allies, in addition to their source material, do we get their assessments?

Mr Bonighton —That can certainly happen and in something like Iraq, where we have a shared interest, that would be something we would expect.

Senator CHRIS EVANS —So we had been regularly getting from our allies their interpretation of intelligence?

Mr Bonighton —Yes.

Senator CHRIS EVANS —As well as a lot of the source material?

Mr Bonighton —Yes, I think that is fair to say.

Senator CHRIS EVANS —Was there source material that we were not getting?

Mr Bonighton —It is difficult to know what you are not getting, as I am sure you understand.

Senator CHRIS EVANS —I thought that was what we paid you for! If you do not know, none of us have got a chance.

Senator HOGG —We are in trouble.

Mr Bonighton —Again, I think it is fair to say that we are looking at significant and substantial success.

Senator CHRIS EVANS —So you do not suspect that we were denied any great source material?

Mr Bonighton —No, and I think it is fair to say that, if we became aware that there might be something we were missing, we would well ask for it. These things tend to be omissions or oversight rather than being deliberate.

Senator CHRIS EVANS —So you share the source material and you share the product. In terms of the product, were there ever substantial disagreements between our assessment and our allies' assessments?

Mr Bonighton —I think the word `substantial' is probably too strong. I think there was a fair thought that Iraq had weapons of mass destruction. The question was the degree of that rather than kind. There were questions, obviously, as to whether they would use them. There were those sorts of questions. There was a forward looking aspect to this, as well.

Senator CHRIS EVANS —There was of course the question of whether they had been weaponised, I suppose.

Mr Bonighton —Indeed. We knew from the past that they had weaponised some areas. We had fair evidence that programs were continuing. We certainly knew from UNMOVIC that there were discrepancies in the records that the Iraqis were able to produce, and quite significant amounts of material were missing.

Senator CHRIS EVANS —Did we ever actually make independent assessments of the UNMOVIC or the International Atomic Energy Agency's assessments? Did we make independent judgments of those or were they accepted largely as being reliable?

Mr Bonighton —I think we felt that because they were on the ground, they obviously had a view of things that was very important. We could certainly make judgments as to how effective they might have been and we are certainly very interested in the extent to which the Iraqis were attempting to deceive them. Mr Blix himself has been less than happy about the degree of cooperation he achieved. Certainly, our assessment was that the Iraqis were deliberately going out of their way to make life difficult.

Senator CHRIS EVANS —In terms of their assessment about what that meant for nuclear programs or for biological programs, did you assess their work or did you just feed that in as part of your overall—

Mr Bonighton —I think a fair assessment would be that they were working under great difficulties and without substantial cooperation.

Senator CHRIS EVANS —How did our assessment compare with, say, that of the US or the UK in terms of material or raw data? Were there any major disagreements or significant differences of view?

Mr Bonighton —Certainly over time there would be changes in emphasis. I think that is bound to happen in any long-term assessment project. We all had the same view that Iraq had weapons of mass destruction and it had programs that were ongoing and a likelihood that they could well use those weapons simply because this was a pretty dangerous and desperate regime—indeed a murderous regime that had already used these weapons on their own people and others.

Senator CHRIS EVANS —For instance, was there a disagreement about the level or likelihood of the threat posed? There were very few people in the world who would not have said that, on the basis of the UNMOVIC reports et cetera—

Senator Hill —Disagreement between whom?

Senator CHRIS EVANS —The allies in their assessments of the raw data.

Senator HILL —I do not know the extent to which the official can answer. I am not sure how far he can really take that. Logically, it leads to the question: what were each of their assessments?

Senator CHRIS EVANS —I am happy to concentrate on our assessment. What was the process for informing government in terms of the assessment of the risk of the use of WMD by Iraq? Was it just these constant assessments of intelligence as it came in or did you provide keystone pieces of advice? Back to a process question: how did you pull this together, as it were?

Mr Bonighton —I guess I would say that it is not our job to pull this together in a policy sense; it is our job to provide the best intelligence we possibly can so that the policy process can move forward.

Senator CHRIS EVANS —The way you have described it to me so far—and maybe I have got it wrong—it sounds like almost a daily assessment of whatever has come in. Did you provide a report or summary of the intelligence, a benchmark report, if you like, that brought together the intelligence information at various times?

Mr Bonighton —From time to time there would be particular reports on Iraq and WMD and where we thought it was, but I would not say that we had material coming in daily that was red hot and being reported. This is a very intensive and detailed process. We reported on it when there was sufficient information to make some judgment.

Senator CHRIS EVANS —Do you report by virtue of a request from government?

Mr Bonighton —It comes through the national foreign intelligence assessment process, where government sets priorities in the broad sense. That process is then managed through the Office of National Assessments, who run a collection requirements committee, and collectors then respond to that. A number of priorities are set.

Senator CHRIS EVANS —Yes, I understand that. Were you asked, say, prior to the decision to predeploy or the decision to go to war to provide an intelligence summary on latest and best analysis?

Mr Bonighton —Once Defence looked at predeploying I think that very much focused our minds on what we should be doing, but very much in support of the ADF—what sort of environment it might have to operate in. That was certainly the focus of our effort.

Senator CHRIS EVANS —In terms of the broader macro issues, was there a report that pulled it all together in a way that in Britain the Blair document was the public version of that? Did you respond to a government request to pull together the best analysis of Iraq or was there just this continuing—

Mr Bonighton —I do not recall a single, what you might call, capstone product. We are looking at a series of activities ongoing.

Mr Lewincamp —Yes, we did do that. There is a push and pull mechanism operating in relation to intelligence.

Senator Hill —When you say `yes, we did do that,' you had better say what that is.

Mr Lewincamp —We provided a capstone document which pulled together the picture, and we did that on several occasions. Going back to the process itself, it is both a push and a pull. The two assessment agencies—Office of National Assessments and Defence Intelligence Organisation—publish on a regular basis, and certainly in the lead-up to the Iraqi conflict we were publishing daily on Iraq, on various aspects of the impending conflict there. A large part of that reporting would have related to Iraqi military capability, including weapons of mass destruction. There were several occasions during the early part of this year where we pulled together a compendium of information related to weapons of mass destruction. There was one joint product done by ONA and DIO together which was presented to senior customers, including the Prime Minister and senior ministers. There were a couple of other occasions where DIO pulled together an integrated product which we briefed to senior ministers or to other senior customers.

Senator CHRIS EVANS —What did you call it—capstone?

Mr Lewincamp —I did not use the word.

Mr Bonighton —That was my word, Senator. And what in fact Mr Lewincamp has described is what I would say is a process of ongoing reporting.

Senator CHRIS EVANS —The more major document advice you pulled together: you can choose the word, Mr Lewincamp—what would you call it?

Mr Lewincamp —Just a major report—a snapshot, if you like.

Senator CHRIS EVANS —With respect to this major intelligence report—for the sake of the debate today, we will call it that—did you do more than one in that sort of format?

Mr Lewincamp —We did it at various stages for different people who requested it. So clearly, at each stage that we did it, we updated it and included the newest information.

Senator CHRIS EVANS —That was done on each occasion in response to a request from one of your customers?

Mr Lewincamp —Yes.

Senator CHRIS EVANS —For instance, did you provide one to cabinet on request prior to them considering major issues concerning Iraq?

Mr Lewincamp —We briefed the senior ministers in the national security committee of cabinet individually.

Senator CHRIS EVANS —Was the national security committee one of the customers to whom you would supply the major intelligence report?

Mr Lewincamp —All the members of the national security committee were regular recipients of our product on Iraq.

Senator CHRIS EVANS —I am trying to get an idea of when you pulled it all together. Was that to facilitate a report to the national security committee or to bring it all together for them?

Mr Lewincamp —It was a briefing to those ministers before a national security committee meeting at which they were going to discuss issues related to Iraq.

Senator CHRIS EVANS —And that happened on more than one occasion?

Mr Lewincamp —It happened on one specific occasion during February, but then later, when we went closer to Iraqi operations, we briefed the national security committee regularly on the progress of operations.

Senator CHRIS EVANS —You would have briefed the national security committee a few times in 2002 as well?

Mr Lewincamp —The responsibility for briefing the national security committee rests mainly with the Office of National Assessments. Kim Jones, the head of the Office of National Assessments, attends those meetings and is the principal intelligence adviser. There would be some occasions where the issues under discussion relate more to the responsibilities of the Defence Intelligence Organisation—that is, they are more specifically military or defence matters. On those occasions we would provide briefings, but in written form. It would be very rare for me or one of my officers to attend a national security committee meeting.

Senator Hill —When we refer to specific reports, it can lead maybe to an inadvertent consequence. My recollection was that, from DIO, for example, there was an ongoing flow of information, not surprisingly, on Iraq for many months. Often it made reference to assessments of weapons of mass destruction issues. It might have arisen out of a report from UNMOVIC or whatever was happening at the time, but there was a constant flow of information on weapons of mass destruction in Iraq. So it was not just out of the blue that a report was prepared. This did not come from nowhere. In fact it has been going for years.

Senator HOGG —So the report could be made on quite publicly available information but giving an assessment of that information?

Senator Hill —The report takes into account publicly available information but the value added is what the experts can provide, in further material that confirms or whatever, plus in the professional assessment of the experts.

Senator HOGG —How often would you provide a brief to the national security committee?

Senator Hill —With respect, it would be better to ask how often they provide a brief to ministers.

Senator HOGG —Or to ministers.

Mr Lewincamp —DIO produces a daily product which goes to all the senior ministers. In addition to that we produce special reports on special interest subjects. We could do half a dozen of those a week. We also do major reports on issues related more specifically to defence matters. So it is a wide range of product that is flowing constantly and the senior ministers are on our distribution list.

Senator Hill —If they knew there was an NSC meeting coming up, for example, which was going to discuss Iraq, more likely than not DIO would prepare a brief for me on matters relating to Iraq whether or not I had asked for it. It is not only when requested. Their responsibility is to keep government informed of these matters, in accordance with their specialist knowledge.

Senator CHRIS EVANS —I think that is right. That is consistent with what Mr Bonighton and Mr Lewincamp have said.

Senator Hill —I do not think that there is any inconsistency in what has been said. It is just that if you hear a bit of the story you might think that is the whole story.

Senator CHRIS EVANS —I am sure that people will read the Hansard very closely, Minister, and get the balanced view—

Senator Hill —I am pleased to hear that people read the Hansard.

Senator CHRIS EVANS —It is obvious that the defence minister would have been getting the daily product and would have been taking a clear interest in it directly but there are other members of the NSC who, while having a strong interest, would not have had as much of a hands-on, day-to-day interest. I was trying to get a sense of when they got the collected product—the equivalent of a cabinet submission.

Senator Hill —They would all have access to the daily brief, wouldn't they?

Mr Lewincamp —Senator, I think the difficulty lies with your concept of `collected'. You asked me whether we pulled together the whole picture into a major update on weapons of mass destruction, and I said yes, we did that on several occasions. But, as the minister rightly says, we are publishing constantly every day on this subject and there would be references to these sorts of issues several times a week in our published product, and that published product is widely available to senior ministers and to senior officials around government.

Senator CHRIS EVANS —Yes, but equally I think it is fair to say that busy ministers who may not be directly involved—brilliant as every word is—may not read every word that you publish. I am sure that when they know they are going to make a decision like predeploying a couple of thousand Australian troops, they would certainly focus their minds on a collected collated assessment of those issues. Just as we have cabinet submissions that seek to do that and to focus the mind, I was trying to get a sense of whether, in terms of an intelligence brief, the NSC members got the equivalent of a cabinet submission that pulled all that together.

Mr Lewincamp —Yes, they did on several occasions.

Senator CHRIS EVANS —I think we had better leave that there; I think we have exhausted it. I do not mean the discussion, I mean the cabinet submission question. What work has been done by our intelligence services since the military action in Iraq in terms of assessing what weapons of mass destruction exist or making assessments about what has been found? What is your involvement in terms of the post Iraq assessment?

Mr Lewincamp —I think your question is: what is our role in the ongoing assessment of Iraqi WMD? Clearly, it is a subject in which we continue to have a very strong interest. We have been monitoring it continuously and continue to do so. Going back to some of your questions to Mr Bonighton, we have a highly interactive approach in the rest of the intelligence community, both within Australia, with the Office of National Assessments, and with our allied agencies overseas. Our analysts are in constant discussion with each other and they continue to refine their judgments and assessments. That process is continuing and it has continued throughout the Iraqi operation. We are continuing to monitor discoveries that are made within Iraq and we continue to reassess our judgments during that process.

I could also say that we do have some of my staff working in Iraq now with the survey group. You have heard previously that there are 13 Australians there—12 from the Department of Defence and one from the Department of Foreign Affairs. Ten of the 12 from Defence are from the Defence Intelligence Organisation, and eight military personnel and two civilians are now working in that region. They are some of our experts on weapons of mass destruction. They are there because of their specific skill sets and they are involved in the investigations.

Senator CHRIS EVANS —You have them embedded in Iraq right now, which is interesting. When you said you had been reviewing material and refining your judgment, what is your refined judgment?

Mr Lewincamp —As Mr Bonighton said before, we believed that before the war Iraq did have a weapons of mass destruction program, and we still believe that. The exact nature and extent of the program will be a matter that we will uncover very slowly through the detailed investigation in Iraq. This will take some time. The type of capability that Iraq had was one that was tied up in various parts of the country in available technology, in industrial processes and facilities, in a range of trained scientific and technical personnel, and also with stocks of some precursor agents and chemicals and things of that sort. It is going to take a great deal of time for us to investigate the true extent of all of that and reconstruct a picture of the full range of the chemical, biological warfare capability that Iraq had at the start of the war.

That is going to be a lengthy process involving the interviewing and interrogation of a range of people inside Iraq, not just scientists and technical personnel but also people involved in transport and logistics and a range of other functions. It is also going to involve the very detailed investigation of documentation and records to try to understand the Iraqi acquisition programs and their research and development programs. This is a regime that was well practised in concealment and deception.

Senator CHRIS EVANS —I accept that and I am not rushing to any judgment. But equally, when we are talking about the threat from weaponised Scud missiles containing WMD et cetera, isn't it the case that if they had been deployed we would have found them? I think this is where the public and people like myself find this a bit difficult. We understand that there may well be well hidden elements of the program but, equally, part of what were talking about, and what concerned a lot of us, was the threat to ADF personnel from weaponised WMD. Surely we must make some judgments now about whether that existed or about the extent to which it existed. I do not understand how we cannot at least make some preliminary judgments about all this.

Senator Hill —The trouble with making tentative judgments or preliminary judgments is that you might find you were wrong. We were much relieved that weapons of mass destruction were not used against Australian forces. Obviously we thought it was a real possibility and that is why we took exhaustive precautions to protect our forces from that possibility including the purchase of a lot of new protective equipment and the like. Whilst being much relieved that WMDs were not used, we are not yet in a position to draw a conclusion as to why they were not used. Some are arguing that it was because they were no longer available. That will ultimately be tested. Some were arguing that there was a decision made not to use them for military reasons. Time will tell. That is why we are part of this exhaustive process to get the full story.

Senator CHRIS EVANS —I accept that, Minister, but I do not—

Senator Hill —But you are asking us to draw tentative conclusions.

Senator CHRIS EVANS —We drew conclusions based on very sketchy intelligence.

Senator Hill —I do not know whether the experts want to draw tentative conclusions, but I would be reluctant to draw too many tentative conclusions.

Senator BARTLETT —In terms of the assessments that were being made prior to the war starting—and we have talked about those a fair bit already—as well as assessments about the extent and nature of weapons of mass destruction, did you also make assessments about the likelihood of the UN inspection process succeeding?

Mr Lewincamp —Yes, we did.

Senator BARTLETT —What was your assessment?

Mr Lewincamp —I think it is not appropriate for me to share in this forum the exact nature of those assessments.

Senator Hill —From a government point of view, we saw the difficulties that the inspection teams had had in the past. We saw the way in which they had been perceived in the past. We particularly took into account that, in terms of the UN resolution, it was not the role of the inspectors to actually find the materials; it was the responsibility of the Iraqis to convince them that they had met the obligations set by that particular resolution and the previous resolutions. I think the fact that the obligation was fashioned in that way is a demonstration in itself of the difficulty of their task. Also, it reinforces the conclusions that were reached, including, in the last of the carried resolutions, that Iraq did have weapons of mass destruction.

Senator BARTLETT —Did the assessments also include the potential for success or otherwise of other means of finding the weapons of mass destruction, such as we are attempting to do now, and the risks of any weapons that existed being smuggled out to neighbouring countries?

Senator Hill —We obviously think there is a much better chance of getting the story now that the regime has been removed, but that is going to be a time-consuming task. There are interviews to be had with hundreds if not thousands of individuals—

Mr Smith —Some 3,000.

Senator Hill —and there are literally hundreds of sites that have not yet been exploited, and so it goes on. I think the important thing is that the process is thorough in order to give the best picture and we can all learn from that in terms of future security.

Senator BARTLETT —I want to get on the record—although I am fairly sure what the answer will be—that you actually did make assessments about the risks of the WMDs being smuggled and of the potential prospects for finding them if the regime was disposed of.

Mr Lewincamp —Yes, we did.

Senator BARTLETT —There have been reports from the US and the UK about the credibility of the information and the intelligence that was provided, particularly from the US. As I understand it, already a parliamentary inquiry is going to occur in the UK. Certainly some senior Republicans from the Congress have been talking amongst them about a congressional inquiry into the US intelligence. As well, people are talking about a Senate inquiry here of course. We already established earlier on that the vast bulk of the intelligence that we relied on in relation to Iraq came from the US and the UK. Do you have any concerns or does the government have any concerns about the accuracy of what you have actually been provided with, given some of the allegations that are now being made? Will you be paying particular attention to any findings of UK or US inquiries by Congress or parliament?

Senator Hill —Will we be taking particular notice of their inquiries?

Senator BARTLETT —Yes, given their inquiries into the accuracy of intelligence that we are a consumer of.

Senator Hill —They will contribute to the debate. How useful they will be will be seen in due course.

Senator BARTLETT —Are there any extra concerns about the accuracy or veracity of the intelligence that we relied on, given subsequent events or information that has arisen?

Senator Hill —We have confidence in the intelligence agencies of our allies. What they provide to us is critically important to our own national security. We work closely with them.

Senator BARTLETT —So you are as confident now as you were six months ago in the accuracy and adequacy of the intelligence we are being provided with?

Senator Hill —Yes. I have confidence in the capabilities of our allies and the contribution that they are making primarily to the security of their own nation but also incidentally to the security of the Australian people. Every day we are provided with vital information from the agencies of our allies that helps us with national security.

Senator BARTLETT —You would be aware of some of the public reports about concerns amongst the US intelligence community about not just the adequacy of intelligence but the completeness of intelligence that was provided in relation to Iraq.

Senator Hill —I am aware of what is being said publicly. As you say, I am aware that a political process is evolving in both the United States and Britain.

Senator BARTLETT —Are those public comments from various parts of the US intelligence community of concern to the government or the intelligence sector?

Senator Hill —There is always someone within the intelligence agencies who is unhappy. If you go back over the years, every time there is a major issue there is somebody who takes a different point of view. But we pay specialists to analyse that information and they give us advice. We think they do it both professionally and capably.

Senator BARTLETT —Is any actual cost involved in receiving information? Obviously, there are costs in having the division in the department, but do we get charged at all for being provided with information?

Gen. Cosgrove —No, there is no actual cost involved in that sense. It is a sunk cost.

Senator Hill —The cost is enormous and we pay a very small proportion of it. The value that we get far exceeds the cost that we can contribute. In fact, we could never pay for the breadth and depth of the information that we get through our allies.

Senator BARTLETT —What is the current extent of our access to intelligence from the Pine Gap facility? What is the completeness of our access to intelligence that is going through there?

Mr Smith —We still enjoy full knowledge and concurrence.

Senator Hill —There has been no change from what has been said before.

Mr Bonighton —It is a joint facility in the best sense of the word.

Senator BARTLETT —Is any examination being given to further expanding intelligence links between us and the US?

Senator Hill —I do not quite know what that means.

Senator BARTLETT —Are we putting more resources into it?

Senator Hill —We are putting resources into it. We have put in significant new resources since the attacks on Washington and New York, particularly related to intelligence in this region. That becomes a contribution to a picture that we share with friends and allies.

Senator BARTLETT —Will the effect of those extra resources mean access to a broader range of intelligence or is it in terms of extra sources of intelligence from a range of countries?

Mr Lewincamp —Our access into US intelligence is excellent and vice versa. We have very close arrangements for sharing collected intelligence and assessed intelligence. Those arrangements have increased in depth and strength since September 11 and there is a very wide ranging sharing of information. It is hard for me to envisage how we could strengthen that further.

ACTING CHAIR (Senator Ferguson) —We are considering outcome 6.

Senator CHRIS EVANS —Before Senator Bartlett asked a few questions I was asking Mr Lewincamp what sort of assessment had occurred about our assessments made prior to military action in Iraq and what refinement of judgments had been made. Mr Lewincamp gave me a fairly general response to that. I am making the point that while I accept that—and I do not have a firm view either about what one might ultimately find—it seems to me that we should be able to draw some conclusions about what we have discovered so far. We were able to offer advice and judgments while in the dark and not in occupation of the country. We must be able, a month or so after occupation of the country, to form some better informed, more recent and updated judgments. While I accept that final judgments will need to await the forensic examination of every file and the cross-examination of every scientist known inside Iraq, I think it is a bit unreasonable to expect that we cannot conclude anything before then or that we cannot reassess judgments which we were happy to make on the basis of quite limited intelligence previously. I am trying to get a sense of what we think now about our judgments made prior to the war.

Mr Bonighton —Perhaps I could start by saying that I think our judgment has to be that it is too early yet to say. I think the minister has already outlined where we are at.

Senator CHRIS EVANS —Mr Bonighton, with respect, you are prepared to make judgments from thousands of miles away based on limited source material, which is what we pay you for and I am sure you are very good at it—

Mr Bonighton —Very kind, Senator.

Senator CHRIS EVANS —but when we actually get into the place and have military control of the place, we cannot make any preliminary assessment based on being physically in possession of the country.

Mr Bonighton —I think we are now in a unique position to exploit what is there. So I think it would be premature for us to make all sorts of speculation about what might be there. We can now actually say with some deliberateness exactly what is there.

Senator CHRIS EVANS —But we pay you to make these fine judgments based on available material. I am asking you, given the available material, what refinements to judgments we made with very little material.

Mr Bonighton —That is why we have 12 people over there from DIO who are exploiting that in great detail, or will be. I think it would be very foolish of me to sit here and say that, just because we now have some people there, we can now refine all our judgments and say exactly what was what.

Senator CHRIS EVANS —We might not come to a final position but it seems to me we can refine our judgments. We invaded a country based on your judgments. We are now in a much better position to assess some of those issues—not a perfect knowledge situation but a much better position than we were three or four months ago. Quite frankly, the defence that we have to wait until everything is known, from intelligence agencies that make their living out of making assessments based on very little, seems to me quite unbelievable.

Mr Smith —Senator, to assert that the country went to war on the basis of Mr Lewincamp's or Mr Bonighton's judgment is surely just a touch hyperbolic.

Senator CHRIS EVANS —I concede that.

Mr Smith —The reason for the war is related to Saddam Hussein's non-compliance with 17 Security Council resolutions, including those relating to weapons of mass destruction. That is the basis for going to war, not anything that Mr Bonighton or Mr Lewincamp sent to us.

Senator CHRIS EVANS —I was referring to the general intelligence.

Gen. Cosgrove —If I could pick up on that too, I would say that you are asking Mr Bonighton to be judgmental, where before he was predictive of a set of circumstances which might prevail. He is simply asking for what any reasonable person would want, which is time for the investigation to conclude so that he can rather better inform you and the government. It seems to me that the request to allow some of the 1,000—or whatever the number is—sites to be properly exploited is pretty reasonable.

Senator CHRIS EVANS —To reach a final judgment, General, I do not disagree with you. But I was referring to the fact that we—the coalition—made a decision to go to war, in part based on the joint intelligence effort about the risk posed by Saddam Hussein and the regime in Iraq. It seems to me that we ought to be able to say something some three months on about what we found about that. But now it seems that the corporate line is to say, `We will say nothing at all about those judgments.' For instance, one of your officers, General Cosgrove, provided the media—

Senator Hill —We have said a lot about what we have found. For example, we have said that we found vehicles which we believe to be mobile laboratories for biological agents.

Senator CHRIS EVANS —So we have made some assessment of that?

Senator Hill —The vehicles have been exploited in depth. That exploitation is continuing.

Senator CHRIS EVANS —Are we are convinced now that they contain biological weapons?

Senator Hill —No. We are not convinced that they contain biological weapons.

Senator CHRIS EVANS —That is one of the things—

Senator Hill —We can find no other logical purpose for the vehicles than for the production of biological weapons.

Senator CHRIS EVANS —When you say `we', which `we' are you referring to? `We' as in the coalition or `we' as in the government?

Senator Hill —The `we' is those who have carried out that assessment. Mr Lewincamp says it is the US and the UK. They have also been frank about what they have not as yet found.

Senator CHRIS EVANS —I am trying to understand though what refinement we have made on our assessment. For instance, much was reported, and Brigadier Hannan has commented, on the SAS's discovery of—I am trying to find the correct words here—a potential missile site. This is something we have direct knowledge of because it was our troops who went in and were involved in this successful action. What assessment have we made on what this site was?

Gen. Cosgrove —It was a potential missile site.

Senator CHRIS EVANS —A potential missile site?

Gen. Cosgrove —Yes, as Brigadier Hannan said.

Senator CHRIS EVANS —So was it a missile site or a potential missile site?

Gen. Cosgrove —It was a potential missile site.

Senator CHRIS EVANS —What is a potential missile site?

Senator Hill —We said at the time that Scuds are launched from hard pads. Is that what they call them? Perhaps I should have the expert answer the question. Basically, they are on mobile equipment and delivered in that way to the sites. Therefore, to ensure you are defeating the Scud you seek to find those sites and destroy them because then Scuds could not be launched from the area in which our troops are located.

Senator CHRIS EVANS —I understand that but—

Senator Hill —We said that at the time.

Senator CHRIS EVANS —That is right, and you did that on the basis of intelligence and a picture of what threat they might pose. I have no problem with that; that was the judgment at the time. Three months on, we have been there, we have invaded, we have taken over the country, and the SAS have captured this site and, I understand, destroyed sections of it. What do we know now about that site? Was it a missile site? Did it contain any evidence of WMD? Surely we must have made a judgment about that now, even if we have not made a broader judgment.

Mr Lewincamp —We are constantly refining the judgments we make. I explained that to you earlier in my answer to your question. My difficulty is the extent to which it is appropriate for me to talk about he fine nuances of those changed judgments in a forum such as this. But in answer to your direct question, there were a large number of sites in western Iraq that we knew to be presurveyed and preprepared potential launch sites for missiles.

Senator Hill —Hardened stands.

Mr Lewincamp —As the minister has said, they have hardened stands on them to withstand the blast of the missile on launch. They had been surveyed which reduces dramatically the amount of time it takes to launch a missile from the site. If you have to survey the site once you arrive there, it is a couple of hours extra activity and you increase the risk of interception before launch. We were aware of a large number of those sites in western Iraq and a number of them were destroyed by our forces amongst others. They were, and they remain, potential missile launch sites.

Senator CHRIS EVANS —But there is a difference here, isn't there? You knew beforehand that they were there—

Mr Lewincamp —A number of them.

Senator CHRIS EVANS —I put it to you that you thought or your intelligence advice was that they were there—

Senator Hill —That is right. Sounds like it was good intelligence.

Senator CHRIS EVANS —Sounds like this might have been good intelligence. This should go down as a tick. I am prepared to concede this as a tick.

Senator Hill —Thank you.

Senator CHRIS EVANS —But what I am trying to analyse here is what occurred. The difference between what you thought you knew beforehand and what you know now is that you have had General Cosgrove's SAS troops stamping all over it, knowing exactly what is there. You have much better intelligence about it, I would suggest, because you have physically had ADF personnel on the site. I would therefore have thought that you would have upgraded your assessment of the possible missile site in the sense that you now have much better first-hand intelligence about those particular sites. Is that not fair?

Gen. Cosgrove —If I could put it this way: if there had been a missile there, it would have been a missile site. Without a missile it can only really be a potential missile site. That is the way our SAS reported it and when they left that was still the state of affairs.

Senator HOGG —Do you know if it was used as a missile site at any stage? Is there anything to indicate that?

Gen. Cosgrove —No, we don't know that and there was never an attempt to assess that. Was it used in the 1991 war? Probably not, but we don't know and it was not used after our SAS exploited it and captured it.

Senator HOGG —I understand that.

Senator CHRIS EVANS —But the point is that the quality of our intelligence on the potential missile site is now much better—is that not fair?

Mr Lewincamp —In a sense it is, but it is also true that we are no longer scouring Iraq looking for potential missile launch sites because there is no longer a threat from the launch of missiles.

Senator CHRIS EVANS —But in terms of your intelligence work, you went from—and you can characterise it how you wish—having intelligence which said that these were potential missile sites to now having had ADF personnel verify for you the nature of the site and its exact location. Having had them physically in possession of the site and destroy certain equipment, no doubt they have fed back to you, the intelligence services, some of that information. Is that fair?

Mr Lewincamp —That is fair.

Senator CHRIS EVANS —As a result of that I would have thought you would have upgraded the certainty with which you asserted that there was a potential missile site at point X.

Mr Smith —I think we are now certain there was a potential missile site because we have actually been there.

Senator CHRIS EVANS —So we have refined our judgment and our assessment.

Mr Smith —In relation to that site.

Senator CHRIS EVANS —That is right. So what I am asking is: can we do that on anything else or is it just this one site where the SAS were about which we have better knowledge than we had prior to the action?

Mr Lewincamp —We have done that across many issues.

Senator CHRIS EVANS —And what did we conclude?

Mr Lewincamp —As I said to you earlier, Senator, my difficulty is how much of that I can share in this forum. I can talk to you in general terms, as I did earlier, about our understanding of Iraqi capabilities and our understanding on that has not changed much. But you did not appear satisfied with the generality of my answer then.

Senator CHRIS EVANS —I thought it was a bit of a Yes, Minister response about the process, to be frank, Mr Lewincamp.

Mr Lewincamp —No, it wasn't.

Senator CHRIS EVANS —I do not mean to be rude, but I am trying to get a sense of what judgments you have made now in terms of your assessment about Iraq and what changes you have made to your assessment.

Mr Lewincamp —Which particular aspect of Iraq?

Senator CHRIS EVANS —I am happy for you to be general or we can go as particular as you are prepared to go.

Mr Lewincamp —We have moderated some of our assessments about the commitment of Iraqi troops to fight, about the likelihood of them exercising certain strategies that we thought they might have used in the defence of Iraq—some they did and some they did not. We have made revised assessments about the capacity of some of their systems and about the number and capability of some of the bits of equipment.

Senator CHRIS EVANS —What do you assess about their weaponisation of WMD?

Mr Lewincamp —It remains a largely unknown factor. Our assessment prior to the conflict was that Iraq had weaponised some chemical and biological weapons, that they had a latent capability—that is, the skill set, as I said earlier, associated with technology, production facilities, personnel and agents—to reactivate that capability very quickly and to be able to produce large stocks of chemical and biological weapons within a short period of time. What was unknown was the extent to which they might already have done that. So one of the factors that we measured before the conflict started was the extent of actual weaponisation of chemical and biological weapons. That was a consistent part of our intelligence assessment and it remains the case because of the great difficulty now in actually finding the types of agents, materials and trained personnel. That is going to be a long process.

Senator CHRIS EVANS —That is where you lose me and where I have some difficulty. In terms of tactics, commitment to fight and some of those things, you say that you are now able to make a much better judgment because you have had the experience of it.

Mr Lewincamp —Yes.

Senator CHRIS EVANS —The coalition now occupies the country. It seems to me that you are in a position to make some assessment about how much of the WMD had been weaponised.

Mr Lewincamp —No, because a lot of it is fairly easy to hide. You can break it very quickly into component parts, you can bury it in different parts of the country and there is a lot of intelligence to indicate that that is precisely what the Iraqis did. If you are talking about chemical and biological agents, they exist in very small containers—for example, small vials of material—that are readily hidden in a suburban household.

Senator CHRIS EVANS —I accept all that but, in terms of an assessment about their capability to launch weapons against an army—WMD armed weaponry—it seems me you are able to make some sort of judgment now about their capability for that.

Mr Lewincamp —In March, we assessed their capability to do that as very high, and that would still be our assessment now. In terms of using things like artillery shells, bombs and a range of other munitions and delivery devices, they did have the capability to deliver chemical and biological weapons.

Senator CHRIS EVANS —What do we now know about whether or not they had equipped the Iraqi army with weaponry to deliver that sort of armament?

Mr Lewincamp —That is the point about which we would not want to make a premature judgment. That is what we are now investigating to determine precisely that point, and it would be wrong of me to try and make a judgment on that now.

Senator CHRIS EVANS —I can understand why you cannot make a judgment about capability, but you can make a judgment about whether they were armed. Is it fair to say that the Iraqi army were not armed with WMDs?

Mr Lewincamp —It is not appropriate for me to make a judgment on the extent of that at this point.

Senator CHRIS EVANS —So they had it, but they just they hid it somewhere?

Mr Lewincamp —I am not prepared to make that judgment now.

Senator CHRIS EVANS —Aren't we even prepared to make the judgment that, as part of their defence measures, they had not broadly distributed WMD?

Mr Lewincamp —It is too early to make that judgment.

Senator CHRIS EVANS —Wouldn't we have run into it?

Senator Hill —He said that nearly an hour ago.

Senator CHRIS EVANS —Minister, if you are bored just tune out. That is fine, it doesn't worry me.

Senator Hill —I am back in now.

Senator CHRIS EVANS —Either stay with us for the duration or stay tuned out.

Senator Hill —I have done some other business and I am now involved again.

Senator CHRIS EVANS —We are pleased to see you are engaged again. What I am saying is that we now have direct physical experience of the Iraqi army and the Iraqi defence systems. I can see how you can maintain—and I do not dispute it for a minute—that the argument about capability remains an unproven case in the sense that we thought they had the capability but we are not yet convinced that they did not maintain the capability. I am perfectly comfortable with that. It seems to me that that is something that requires a bit more forensic investigation.

Senator Hill —We know they have the weapons.

Senator CHRIS EVANS —Why didn't we find any, then?

Senator Hill —The whole world knows they had the weapons. It was the finding of the United Nations. It was the finding of the inspectors.

Senator CHRIS EVANS —You for one, Minister, were very critical of the UN. I keep an open mind on it following your advice. Now I am relying on our real intelligence as to whether or not the UN was right. Why didn't we find any of those weapons?

Senator Hill —It is the same as with the biological weapons. We only found out when that informer came forward, and then the regime acknowledged it. What year was that?

Mr Lewincamp —1995.

Senator Hill —What I have said before is that I think you have to take into account this record of deception. You have analysts seeking to assess the current capability to a history, and it is a history of somebody who has clearly had these weapons, who has successfully deceived the inspectors in the past in relation to these weapons and who has used these weapons against his own people and his neighbours.

Senator HOGG —Did our forces participate with another partner in the coalition in capturing?

Senator CHRIS EVANS —American communications officers!

Senator HOGG —With other partners in the coalition where they found any evidence of weapons of mass destruction—biological, chemical or whatever they might be.

Senator Hill —They found protective equipment designed to protect the Iraqi forces.

Senator HOGG —You found equipment.

Senator CHRIS EVANS —I think he means chemical suits.

Senator HOGG —That is right.

Senator Hill —Chemical masks and the like.

Senator HOGG —But in none of the forces with which our forces were engaged in an action did we find chemical, biological or other weapons?

Senator Hill —No.

Senator HOGG —So we can come to that conclusion at least.

Senator Hill —I did not know there was any dispute about that.

Senator CHRIS EVANS —We seem a bit reluctant to even admit that. That is why we are trying to work out what we do know now.

Senator Hill —I have taken a big step forward then.

Senator HOGG —A very big step forward. I do not think it is a matter of trying to get a detailed analysis.

Senator CHRIS EVANS —I think our earlier position was that it was too early to know what we know, but I think now we have agreed that we know what we know.

Mr Smith —It depends what question you ask. Senator Hogg asked the question: did we encounter any of these weapons in our encounters with the Iraqi soldiers. It is a simple question with a simple answer: no.

Senator Hill —I am very pleased we didn't.

Senator HOGG —That still leaves open the question of where the capability might be hidden and whether it, in effect, does exist. That is correct.

Mr Lewincamp —The extent to which it exists would be the way I would phrase the question.

Senator CHRIS EVANS —When you are refining your intelligence assessments, does the failure to find any major evidence so far of weapons of mass destruction influence your assessment?

Mr Lewincamp —I would come back to the point that I think it is too early to make a definitive judgment. I have outlined for you the key elements of the Iraqi weapons of mass destruction program as we assessed beforehand. Those elements do exist. The pointed issue is the extent to which actual chemical and biological warfare weapons were produced. It is too early to make the judgment about the extent to which that was done.

Mr Bonighton —What we have now is the opportunity to actually do that task in a way that we have never had the opportunity before.

Senator CHRIS EVANS —I accept that; I have never argued with that. It is a question about when we go from very scant knowledge to full knowledge. I would have thought your advice might change somewhere along the continuum. But it seems the position that has been adopted—and it seems a very defensive position—is to say that we have no new knowledge until we have final knowledge. I think that is where people are a bit frustrated.

Senator Hill —We have new knowledge all the time.

Mr Lewincamp —We have not got to full knowledge. We are a long way from full knowledge.

Senator CHRIS EVANS —That is my point.

Mr Lewincamp —What we have at the moment is occupation of the country and we have the capacity now to conduct a far more thorough and forensic investigation than previously we had the chance to do. We are now starting that process in cooperation with the US and the United Kingdom through the survey group. It will be the detailed interrogation of individuals, the interviewing of individuals, and the inspection of documents and records and the continued exploitation of suspects sites. We expect that process to throw up an extensive amount of information which will allow us to reconstruct the exact extent to which Iraq had an operating and developed weapons of mass destruction capability and the extent to which they had actually weaponised.

Senator CHRIS EVANS —I do not want to labour the point, but it seems to me your reluctance to make any interim judgments is contrary to the whole way you operate. You operate on the basis of what information you have at the time.

Mr Lewincamp —We make interim judgments. My reluctance is sharing them here. We provide a constant stream of advice to government on such judgments.

Senator CHRIS EVANS —In terms of the assessment of the judgments you have made, what internal mechanisms are in place for reviewing the judgments made in relation to Iraq?

Mr Smith —As General Cosgrove and others said yesterday, we have a range of reviews going on across the organisation of performance in relation to the war and lessons learnt. And lessons learnt in terms of the intelligence community, its support for the operations, its advice to government back here are all part of that.

Senator CHRIS EVANS —I appreciate that, Mr Smith. Part of the description by Mr Carmody about that process talked about workshopping at seminars in the defence department on such information. I suspect, given how we have gone today with sharing that information, that that is not likely to be a big focus of that process. I am particularly asking the question in relation to the intelligence data provided to the government prior to the military action in Iraq. What processes are in place for assessing the accuracy and the efficacy of that intelligence data?

Senator Hill —I do not quite understand. Do you mean our people assessing the assessments of other agencies?

Senator CHRIS EVANS —I am open to suggestions. You were quoted as supporting the need to be sure about how we performed in such matters.

Senator Hill —That is correct.

Senator CHRIS EVANS —So, in endorsing your remarks, I am trying to understand what the intelligence community and the Department of Defence will do, as a matter of either normal process or special initiative, to assess their performance in providing intelligence data and the accuracy and efficacy of that intelligence data. I was starting with the internal processes and I was going to ask whether the minister had requested anything special or out of the ordinary as well. I assume there was a normal process that the intelligence agencies and particularly DIO would have anyway, so I am trying to get a sense of that, and then I was going to ask you, Minister, whether you had requested in addition.

Senator Hill —After any operation there is a process of review, not surprisingly, particularly to learn from the experience and hopefully to improve capability for the future. That is taking place in my department, and it is across the whole of the military operation and the contributions of all parts of the department. And that will include intelligence, obviously. But it is not a special inquiry or a one-off arising out of any particular concerns about any aspect of the operation. Overall, we think the operation was very successful. Have I asked for more than that? No, I have not asked for more than that.

Senator CHRIS EVANS —Mr Smith made much the same point. I was really trying to concentrate on the intelligence processes. Because of the nature of their work it seemed to me, in the broader defence review, it would not be necessarily as public or as caught up in that process.

Senator Hill —They are professional people, and professional people always review their work. I have not seen any need to ask them to take any special action in this matter.

Senator CHRIS EVANS —I accept that. I was just wondering whether Mr Bonighton could explain to me what their normal professional systems are.

Mr Bonighton —As part of the lessons learned, we are not going to workshop that down in the main street but we have an interest in how well we went during this operation, so we are not going to be doing a once over lightly. We will be looking at the performance of our collectors and at what information we got and how we used it. We will be going to our customers—the users of our product—to see how effective it was. Then it will become part of the lessons learned.

Mr Lewincamp —There are three points to that. First, as the minister has said, we take some pride in being a professional organisation. We will go through an internal process of sitting around and reviewing the judgments that we made in a very open way. I will sit down with my analysts and do that. That will be an internal process. Secondly, we have a process of providing an annual report in which we make an assessment of our performance over the year, and we provide that report to government—the National Security Committee of cabinet. Thirdly, a report on the performance of the Australian intelligence community is prepared by the Office of National Assessments, which goes to the National Security Committee of cabinet. That report makes judgments about our performance in particular instances and in particular operations, and for the last year or two it has used case studies of particular incidents and talked about the performance of both the collection and assessment agencies. ONA will make a judgment of our performance as well. There are those sets of normal procedures in addition to the special ones that Mr Bonighton and the secretary have mentioned.

Senator CHRIS EVANS —In terms of those processes, which of those reports goes to the joint intelligence committee of the parliament? I know that is not the right title; I have been in the estimates committee too long.

Mr Lewincamp —The Defence Intelligence Organisation does not come under the auspices of that committee.

Senator CHRIS EVANS —What about the ONA report? None of those is actually presented to the joint committee. What is its proper title?

Mr Bonighton —The Parliamentary Joint Committee on ASIO, ASIS and DSD I think is the one you are referring to.

Senator CHRIS EVANS —Yes.

Mr Bonighton —That committee does not look at operational matters, so it would be unlikely that a report would go to that committee.

Senator Hill —It is interested in process, of course. It may well have questions to ask about process.

Senator CHRIS EVANS —There is a question about the assessment of our intelligence performance. It is a live issue. I am trying to explore what processes are in place and what occur automatically. As you know, Minister, some of our Senate colleagues have called for a wider inquiry. I am just trying to get on the public record what the reporting assessment procedures that are automatically in place will be. You have made it clear that you are not calling for anything in addition or out of the ordinary. Mr Lewincamp and Mr Bonighton have gone through what the internal processes are. I am trying to get a sense of what the reporting to parliament on that might be.

Senator Hill —It is fair to say that officials can be a little more open with that joint committee, if I might say with great respect, because they have taken on a particular responsibility in relation to the intelligence services. That builds some confidence. You will not believe this, but we believe that it is important that there be public confidence in agencies and institutions, particularly in this area. In any area where the information is secret, extra effort should be made to ensure the maintenance of public confidence. Where we can do that, whilst at the same time protecting what we obviously have to protect, we want to do so. That is why I have said that, at the end of this process of analysis, I hope the full story does become apparent—and I think the full story should be told—and we should all learn from it. It may tell us that the weapons were further developed than we had thought; it may tell us the weapons were less developed. I do not think that really matters, because intelligence is not an exact science. It is important, however, to be as open and frank as you can be, because that keeps public confidence.

Senator CHRIS EVANS —I appreciate that, Minister; I share those views. I am just trying to find out how we are going to give you the opportunity to tell the full story.

Senator Hill —I think you are a little premature.

Senator CHRIS EVANS —I have never been accused of that in the past, but I do want to work out—

Senator Hill —There will always be another Senate estimates meeting.

Senator CHRIS EVANS —how we ensure the full story is told. I am not arguing that we are in full knowledge currently and that there will not be information revealed that will be vitally important to a final assessment. I must admit I am very frustrated and unconvinced by what seems to be a very defensive position taken about adding to our knowledge base what we have learnt in the last three months as we militarily invaded Iraq. I do not accept that, but we will have to agree to disagree on that. I do want to know how we make sure that the full story is told, and that is why I am exploring what the reporting mechanisms are—because, as you know, the Senate will be under pressure to launch some other sort of inquiry. I have an open mind on those things at the moment, and part of my judgment about that will be on how much information I gather here and how much confidence I gather here—

Senator Hill —It looks like we are going to have another inquiry then, doesn't it?

Senator CHRIS EVANS —I think it is fair to say the odds have shortened—but part of that involves what will occur in coming months to allow that story to come out. That is why I am keen to explore that issue. I would have thought you would have been a bit interested in this as well in the sense of how you get that full story told and what the options for having that story told are.

Mr Smith —In relation to your point about defensiveness, let me make the counterpoint that the coalition countries, including Australia, put 1,400 people into the field in the last couple of weeks to seek and inquire about weapons of mass destruction and so on and about the programs that were running them. We have talked about the number of sites they will have to visit; we have talked about the number of people they will have to interview. It seems to me that it would be not just premature but quite unfair for us to try to reach any judgments before that very large group has had a chance to report on the work that it is doing.

The second point I want to make is to reiterate what I said before. The issue in relation to the war was Saddam Hussein's noncompliance with Security Council resolutions requiring him to demonstrate that the weapons of mass destruction—which he had had—had been destroyed. He did not demonstrate that. It was on those Security Council resolutions that the case was based.

Senator CHRIS EVANS —We might leave it as an open question about how the full story is told, and the department and the minister might like to have a think about that as well because it is something we are going to need to turn our minds to. In terms of the personnel now inside Iraq as part of the inspection team—

Mr Lewincamp —The survey group.

Senator CHRIS EVANS —what is their reporting mechanism? Are they reporting back to Defence here, or are they reporting through the coalition? I have seen figures of 1,400 to 1,700 as being the total of the group. I just want to understand the lines of authority and the reporting for the Australian contingent.

Mr Lewincamp —There are two lines. One is that, as Australians in theatre, they fall under the command of the Australian commander—that is, Air Commodore Graham Bentley—and they report back through him as Australians in theatre. The other is that they are part of a tripartite US, United Kingdom and Australian team and we have full access to all the reporting and material originating from that team. It is shared amongst those three intelligence communities.

Senator CHRIS EVANS —Mr Bonighton, you described for me the internal processes for assessing performance and intelligence that you provide for an operation like Iraq. Given that much of the source material was from our allies, particularly the US and the UK, is there a joint mechanism for reviewing those intelligence assessments or does each agency just do its own?

Mr Bonighton —Basically it is up to each country to make its own assessments. As I said before, there is a lot of interchange, obviously, between individual analysts, but not some sort of standing committee.

Senator CHRIS EVANS —Not as a regular arrangement whereby you assess your joint performance on an issue?

Mr Bonighton —That sort of conference could well be arranged on certain topics from time to time, and part of that would be to assess where we are at, how we are doing, what other avenues we might explore.

Senator CHRIS EVANS —Could I ask about the Bulletin articles which made some allegations regarding the issues surrounding Mr Brereton's office and potential bugging. Mr Bonighton, could you give me an overview of Defence Intelligence's involvement or contact in relation to that issue. I noticed that one of the officers was quoted in the Bulletin article more recently, Minister. I wanted to get on the record Defence Intelligence's response to that more recent Bulletin article.

Senator Hill —With great respect to the Bulletin, we do not normally respond to Bulletin magazine articles. I would prefer it to be a specific question.

Senator CHRIS EVANS —I will paraphrase it, Minister, by asking a question about it. Have Australian Federal Police staff ever occupied any office space within the DSD's Canberra HQ or any DSD office?

Mr Bonighton —There was a task force established to look into a security matter within Defence. That task force was accommodated in DSD. The reason it was accommodated in DSD was to enable it to handle the high security classification of the material that it was dealing with.

Senator CHRIS EVANS —When was that task force located in DSD's offices?

Mr Bonighton —It was back in 1999—about the middle of 1999, perhaps towards the latter part.

Senator CHRIS EVANS —Was that the task force established to inquire into the alleged leak of information from DSD?

Mr Bonighton —Yes. It was looking at leaks of classified information at that time.

Senator CHRIS EVANS —But looking at leaks of classified information originating from DSD?

Mr Bonighton —I think there was a variety of information but it was classified information of Defence origin.

Senator CHRIS EVANS —And how long did that task force operate for?

Mr Bonighton —The task force operated for several months. I would have to get you the exact detail.

Senator CHRIS EVANS —Perhaps you could get me the dates it operated from on notice. Can you indicate who participated on the task force? I mean the agencies, not the persons.

Mr Bonighton —It was a Defence Security Authority investigation or under their auspices. They were working for Defence.

Senator CHRIS EVANS —Were AFP officers involved?

Senator Hill —That leads me to wonder whether you are the right person to be answering the question if it was run through the Defence Security Authority.

Mr Bonighton —Yes.

Senator Hill —You are a sort of incidental actor.

Mr Bonighton —Yes. It is within my portfolio but I do not have the detail on exactly who was where and who did what. But we can get that.

Senator CHRIS EVANS —This is the intelligence section of the estimates. Is there someone here who can help us?

Mr Bonighton —We can ask Ms McCarthy. She may have the dates and detail.

Senator Hill —I think the period of the investigation is fine. Do you know roughly when the investigation was taking place?

Ms McCarthy —I do not have exact dates. Sorry, Senator, I am just referring to my notes. A joint Australian Federal Police Defence investigation into the unauthorised disclosure of classified information about East Timor was carried out between December 1999 and May 2001. The investigation commenced in April 1999. At that point it was a Defence investigation into those unauthorised disclosures. In December 1999, the investigation became a joint Australian Federal Police Defence investigation.

Senator CHRIS EVANS —And it concluded when?

Senator Hill —I have been reminded that the Inspector-General of Intelligence and Security is conducting an inquiry into this matter so I don't think we want to trample on his ground either. He announced that on 30 April of this year. We welcome the inquiry.

Senator CHRIS EVANS —You always do, Minister. You like the full story to be told.

Senator Hill —Yes. Well, as much as is appropriate.

Senator HOGG —That's the quote of the week!

Senator Hill —If he is carrying out an inquiry with all his statutory authority, I think that is probably—

Senator HOGG —Are you saying that this inquiry is proceeding now?

Senator Hill —According to this note.

Senator HOGG —To conclude by when?

Senator Hill —This note doesn't tell me that.

Senator HOGG —Sorry, who is conducting it?

Mr Smith —Mr Bill Blick, the Inspector-General of Intelligence and Security.

Mr Bonighton —This is in relation to the allegations—

Senator CHRIS EVANS —If officers of the DIO are able to comment to the Bulletin it seems to me that it is not unreasonable for me to ask the same question here.

Mr Lewincamp —No officers from DIO have commented to the Bulletin.

Senator CHRIS EVANS —Who was the officer quoted then?

Gen. Cosgrove —Probably mentions his name.

Senator CHRIS EVANS —Sorry, DSD.

Mr Bonighton —I am sorry, I am not aware of any—

Senator CHRIS EVANS —Director Steve Merchant?

Mr Bonighton —Yes, he denied the allegations, I think.

Senator Hill —And he welcomed the inquiry. It is all coming back to me now.

Senator CHRIS EVANS —There you go: we can do it in the Bulletin and we can do it at estimates.

Senator Hill —We've just done it.

Mr Bonighton —When we get the right cue, Senator.

Senator CHRIS EVANS —Now that we've stopped denying that anyone said anything, we can move on.

Mr Smith —Senator, your bottom line is clear enough, but to go into the detail of it in the way in which we were leading is what we are concerned about in relation to Mr Blick's inquiry.

Senator CHRIS EVANS —I think that is right, Mr Smith. All I have asked you about so far is a historical about whether there was an inquiry and who participated on the task force.

Senator Hill —I thought we had acknowledged that some years ago.

Mr Bonighton —Yes, we had.

Senator CHRIS EVANS —When did that conclude?

Ms McCarthy —My notes tell me that the investigation was carried out between December 1999 and May 2001.

Senator CHRIS EVANS —Was anyone charged as a result of that inquiry?

Ms McCarthy —No.

Senator CHRIS EVANS —Was any action taken against any officer?

Ms McCarthy —No.

Senator CHRIS EVANS —In relation to this matter did DSD or DIO have any involvement in gathering information on any Australian citizen?

Senator Hill —DSD is obviously restrained by its legislation. DIO is not in the business of gathering information. We have had long debates in the Senate about the constraints that are upon DSD.

Senator CHRIS EVANS —Therefore there would be no trouble in answering my question.

Senator Hill —In relation to an Australian citizen, it is only very limited circumstances in which they can do that, with various approvals. I do not think we would normally say whether or not that has happened. Mr Blick can clearly inquire into that to ensure that DSD has operated within its legislative restraints. That is part of his job.

Mr Bonighton —Indeed, and Director DSD has denied those allegations. I was director at the time and I have made a sworn statement to that effect to Mr Blick, from my time there. Certainly there has never been any thought that DIO would be involved in anything like that whatsoever.

Senator CHRIS EVANS —DSD has formally denied any involvement in gathering intelligence on any Australian citizen in relation to this matter?

Mr Bonighton —Yes, we have advised the minister to that effect. It is now part of Mr Blick's inquiry and, as we have said, we welcome the inquiry. We hope that it is finished soon and we can lay this one to rest.

Senator CHRIS EVANS —I will leave it there and come back to it when Mr Blick reports.

Mr Veitch —Before we start on outcome 7 there is one outstanding question. I would like to read the answer into the record, if I could, please.It was in relation to the question asked this morning about the cost of Relex and the million for the health costs. I have some information back from the department. The million dollars represents an amount of $2,500 per person for the 400 people involved in the operation. It is worked up on a costing model that we have used fairly successfully in recent operations to assess the health costs. It is basically composed of four components: the predeployment health checks, including medical, dental and ancillary services; during deployment costs, including emergency treatment, accident and injury; postdeployment treatment of deployment related illness and injury, and mental health support. The fourth component is to do with the backfilling of medical positions with contract health professionals and in the case of operational Relex it is estimated that there will be a requirement to backfill about three positions during the course of the operation.

Senator CHRIS EVANS —That is because those other people are forward deployed.

Mr Veitch —We have arrived at a model where $2,500 per person has proved to be a fairly reliable estimate of the health services for each operation. Each time we assess these operations, the costs are examined by Finance and agreed by them.

[4.46 p.m.]

ACTING CHAIR (Senator Ferguson) —We will move on to outcome 7, Superannuation and housing support services for current and retired defence personnel.

Senator HOGG —There are a number of specialist groups who have raised concerns about the fact that, over and above their base salary, they are paid significant ongoing allowances, including things such as retention payments, but these are not included for the purpose of the calculation of their superannuation. What can you tell us about that? We might then be able to get into a couple of the groups that are significantly affected, in their eyes.

Rear Adm. Adams —This is not a new issue and I should say it is one that Defence believes has merit: the issue of what is allowed for superannuation and what is not. You are right in saying that to answer the question properly we would need to go back to the issue of what is the base military salary.

Senator HOGG —Is that significantly different from what would apply out in the commercial world? Will you include that in your comments?

Rear Adm. Adams —Certainly, to the best of my ability. What we have in the Defence Force is a military salary, which is a base salary—in other words what is fixed by the Defence Force Remuneration Tribunal—and people of lieutenant colonel equivalent and below receive a service allowance, which is unusual in that it is an allowance which is allowed for superannuation purposes. In other words, it is incorporated in their military salary. The base salary is standard for most, although people like doctors and dentists get a different rate from the common scale, which the rest of us of get.

However, in addition to this military salary, a significant number of ADF members get a range of other allowances. The big ones—and there are a number of them—we are talking about here are: submarine allowance, seagoing allowance, special action forces allowance and flying allowance. The original intent of these allowances was really to recompense people for disability. However, in the case of flying allowance, for example, there has always been an element of skill. But, as the years have gone by and these allowances have become more complex, the skill element has—it is probably fair to say—increased. What Defence has been keen to do under a program called the remuneration reform program—I could be corrected here but I think it has been going for about a year—is to come up with a different approach to remuneration. It is three-phase approach—

Senator HOGG —Can I ask about that program. Does it have a finite ending?

Rear Adm. Adams —We have not set a finite ending in time. We would like to get it done as soon as we possibly can but it is a current activity. We plan to go back to the Chiefs of Service Committee this month and brief them on where we are up to and where we should take it.

Senator HOGG —So have you a list of recommendations? I do not want to go into the detail of the recommendations—

Rear Adm. Adams —I can give you the thrust. The core of this program is to look at the allowances I have listed and to identify their constituent parts—that is, identify which are the disability elements and then put a numerical figure to it, and which are the qualification and skill elements. We would then propose that we incorporate qualification and skill elements as part of superannuable pay. To do that requires us to go to the Defence Force Remuneration Tribunal, which sets the quanta of these allowances, and get them to identify which part is in fact qualification and skill.

Senator HOGG —This is in effect a work value case, isn't it?

Rear Adm. Adams —Essentially, yes. We have been back to the DFRT once this year. The DFRT, which as you know is a statutory body with independent decision making power, is unwilling to retrospectively or historically try to place a figure on the qualification and skill component of that allowance. That set us back a little bit in that we now need to go back to the DFRT in future for each of the major allowances and identify that quality and skill element. That is essentially where we are now. If I could summarise: it is not a new issue, it has been around for a while. I would be foolish to sit here and pretend that it is not a source of concern for some members, and they have expressed that concern to us and certainly through the minister assisting the Minister for Defence. We believe there is merit in exploring it. It is the DFRT in the end, using that mechanism, to go back and identify the sub-element to see if we can incorporate it in superannuable pay.

Senator HOGG —For a number of people it would impact on their view of their retention within the force, wouldn't it?

Rear Adm. Adams —In the case of pilots it is impacting on them right now. Army pilots in particular are the ones who seem to have become more concerned than others most recently.

Senator HOGG —Other than just having them as superannuable items, there are other consequences of the decision you take. There is an impact. Did the Nunn review address this issue?

Rear Adm. Adams —The Nunn review is complete—

Senator HOGG —Did it address this issue though?

Rear Adm. Adams —Part of the reason we have a remuneration reform project is to try to further some of the things that are part of the Nunn proposals. The so-called Nunn review is being developed and it is with government for decision. You are right, it is part of—

Senator HOGG —Did it make any recommendations?

Senator Hill —There may be consequences. They may be superannuable.

Senator HOGG —The Nunn review has made a recommendation, Minister?

Senator Hill —The Nunn review also saw the other side of the coin. This proliferation of allowances has a downside attached to it as well in terms of efficient labour relations. Sometimes there are unnecessary rivalries and comparisons between different specialist groups and their specialist allowances and so forth. In some ways it is a clash between the military culture and what is seen as contemporary industrial relations practice.

Senator HOGG —You are saying that equity has some boundaries to overcome, in a sense, that are more culturally based than based on straight-out equity?

Senator Hill —These allowances are not just about money; they also seem to be about status. It is a particular badge within the military community. One of our difficulties with Nunn is that when you start meddling with that there may well be inadvertent consequences. It might seem to be a sensible thing to do for sound economic or IR policy but you then might find that you have suffered a loss of morale or whatever.

Senator HOGG —But on the flip side there are those who are not receiving it, and who claim that they are reasonably entitled to it, losing morale as a result of the fact that they are not receiving it. So it seems that no matter which way you move you are damned if you do and damned if you don't.

Senator Hill —They want to keep their separate classification but make that superannuable as well, whereas Nunn tried to engage in some trade-off.

Senator HOGG —But at some stage you have to bite the bullet on the issue.

Senator CHRIS EVANS —I think it is also much more important to realise that when we talk about allowances people tend to have an assessment that it is a small thing, but we are talking about 30 to 40 per cent of their income.

Rear Adm. Adams —It is very significant.

Senator HILL —That is the other thing that has happened over time. That was part of Nunn's argument—that in many ways it has become in practice part of the base salary.

Senator CHRIS EVANS —You would not retain those people if you took the allowance off them; I can tell you that.

Senator HOGG —If I can just get this correctly, you have the situation where Nunn has recommended the rolling in of some of the allowances for the purpose of superannuation. You have now tried to further that through the remuneration reform program, to see how you can implement the recommendation in Nunn. But then, at the end of the day, you have to go to the Defence Force Remuneration Tribunal to actually have it implemented at all. Is that correct?

Rear Adm. Adams —That is correct, but the remuneration tribunal are not against this. We need to look back and recognise that the so-called Nunn review is not about getting a pay rise; it is about restructuring the way we approach paying people in the Defence Force.

Senator HOGG —Yes, I understand.

Rear Adm. Adams —I do not want to put words in their mouths, but I understand that the remuneration tribunal agree entirely that we need to go down this path of restructure, certainly to a point where people do not get such a significant quantitative element of their take-home pay as an allowance. The qualification is skill. If they are worthy of earning that money because of the additional skills they have to acquire, whether it be flying a plane or being a special action force trooper, it should be in their salary and should be part of their superannuation. So it is a structural issue in the end.

Senator HOGG —When is that most likely to be resolved? Will it be before the end of the year?

Rear Adm. Adams —I cannot tell you. I think Nunn is subject to cabinet decision, so I cannot forecast that, but I can say the remuneration reform program is proceeding now. This month we will be looking to see how we approach the issue of identifying those Q&S elements of the allowance. So we will move on it as quickly as we can. It is a priority.

Senator CHRIS EVANS —You are only looking to roll in elements of the allowances, aren't you? It is very much a halfway house between what is being sought and where we are now.

Rear Adm. Adams —Allowances involve a number of elements. I have mentioned qualification, skill and disability. Some allowances have attraction and retention elements.

Senator HOGG —Where does retention fit into that group? You listed three before— disability, qualification and skill—of which you said qualification and skill were superannuable. Where does retention fit in there?

Rear Adm. Adams —Retention is particularly evident in allowances. For example, you spoke earlier with Air Marshal Houston about the air traffic control allowance.

Senator HOGG —But do you see retention as being superannuable?

Rear Adm. Adams —No, we do not.

Senator HOGG —You would see disability and retention as being outside the superannuable elements, whereas I think you conceded that qualification and skill are superannuable.

Rear Adm. Adams —That is the focus of our work, yes.

Senator HOGG —If I understand your process in going before the DFRT, it is to find what elements of those allowances are skill and qualification and what elements are disability and retention.

Rear Adm. Adams —Precisely.

Senator CHRIS EVANS —I do not want to delay this too much, but I want to understand. I can understand the argument about a disability allowance being treated as not for super purposes. I remember similar arguments from my deep, dark past. What argument would you use to say that retention allowances should not be superannuable?

Rear Adm. Adams —In a purer sense, the wage you pay people should be sufficient to attract them to the job. As I said, that might be purist, but in restructuring that is the point we should get to. The money we pay a person for the value of his or her input and their skill and qualifications should be sufficient to attract them. When it does not, we have recourse then to particular retention allowances, such as the air traffic control allowance. This is the very problem we have got to: we have got to a point where the wage we pay people is not a sufficient attraction in itself. We have then gone down the path of having larger and larger allowances, particularly in the case of flying, seagoing submarines and special action forces. That is an attraction rather than the wage itself. We are saying, `Surely the wage should stand by itself.' It should be adequate to attract people to employment in the force.

Senator CHRIS EVANS —But isn't that an argument for rolling the retention into the basic wage?

Rear Adm. Adams —It could well be, yes, but—

Senator HOGG —That the retention allowance has been around as long as I have been in this place, particularly in respect of pilots, and that is nearly seven years now. In terms of air traffic controllers, it has been there almost as long if not as long. So you are talking about allowances that are not something that come in on an occasional sort of basis but that have been persistent over the years as part of the income that these people generate. It seems to me to be a fair case for that to be included with qualifications and skills for superannuation purposes. That is all I would say.

[5.02 p.m.]

ACTING CHAIR —There being no further questions on outcome 1.7, we then move on to Corporate Services.

Senator ALLISON —Yesterday, we got up to questions about subdivision around existing buildings. First of all, I think the minister has indicated that there is no opportunity for lease through this process; it is a question of selling the land.

Mr Pezzullo —That is right, Senator.

Senator ALLISON —Are the matters of how access would be provided to each allotment and who might manage the common property canvassed in the expressions of interest, or would you expect them to be in the tender documents? Or is that more detail than the Commonwealth would be expecting?

Mr Pezzullo —The Commonwealth would have no jurisdiction in that matter so the EO documents, going off my recollection, would treat those issues very lightly, if they treated them at all. As I said to you yesterday evening, the moment the title transfers, the planning instruments that are applicable are all state and local government instruments.

Senator ALLISON —Are there details of a restrictive covenant on the transfer of the land? Would the Commonwealth be expecting some aspects of it to have a covenant?

Mr Pezzullo —As I indicated to you or Senator Hogg last night, the final documentation for the RFT has not yet been finalised and approved, but at this stage I am not anticipating that any restrictions would go on title.

Senator ALLISON —Why is that?

Mr Pezzullo —The Commonwealth has attempted to capture the maximum level of restriction that we think we can exercise through the contract of sale process. In other words, we will attempt to bind obligations through the contract.

Senator ALLISON —I thought one of the points you made yesterday was that a third party cannot be bound by the contract of sale with the Commonwealth.

Mr Pezzullo —I did make that observation. I would not express a legal opinion about it; it is not the appropriate forum in which to do so. But I am certainly advised that it would be a pretty vexed question to, if you like, chase down through the ages those legal obligations on third, fourth, fifth, sixth parties et cetera.

Senator ALLISON —Which is the reason covenants are applied, is it not?

Mr Pezzullo —They can be used for that purpose. As I was at pains to stress to you, Senator Hogg and others last night, the responsibility for the appropriateness of development after the title transfers is really a matter that the Commonwealth believes is properly in the hands of the state of Victoria and the applicable local council.

Senator ALLISON —I understand that. But one of the few conditions that is actually written into the expressions of interest document is the requirement that there be no objection put up against a heritage listing process on an adjoining site or a site nearby.

Mr Pezzullo —That is right.

Senator ALLISON —Let us take that as an example of how you see this working.

Mr Pezzullo —You are correct in your characterisation there. My own recollection—I do not have the detailed documents before me—is that we will attempt to capture that obligation in a common law contract, as distinct from trying to put it across by way of covenant on the title.

Senator ALLISON —That is what I understand you to have said. We discussed yesterday the 70 or so buildings that are there, and I must correct the record: it is my understanding that there are actually 150 buildings and about 70 of those do not have any historic value. It would be possible, would it not, for the purchaser of the site to sell those sites subsequently?

Mr Pezzullo —Yes, indeed—they would have a property right.

Senator ALLISON —Yes. So what legal obligation do you see there being on that subsequent purchaser of a site or sites for not objecting to heritage listing?

Mr Pezzullo —As a statement of fact at common law the Commonwealth would consider that the contractual obligation is carried with ownership.

Senator ALLISON —So you consider that the obligation keeps going further than the first purchaser?

Senator Hill —I think what is being asked of the official is the legal consequences of various matters, which I do not think is really appropriate. I do note the point that Senator Allison makes. We would be as interested as she in ensuring that the commitments that we have made are honoured by any subsequent purchaser, and we will therefore be endeavouring to ensure that that is the case. There are a number of legal mechanisms that occur to me, but I do not really feel like speculating on those on the run. It may well be that I end up with some decision making role in this matter anyway, so that is another reason why I would not get too engaged. But I do hear what she has said. The official should not have to answer legal questions; he is not here to give his legal opinions.

Senator ALLISON —I was not asking for legal opinions, Minister. I was just asking about the effectiveness of the condition applied to a contract of sale.

Senator Hill —He said what the policy position of the government is, and that is currently in the tender documents.

Senator ALLISON —Let me ask you, Minister—am I hearing that you would not rule out a covenant being applied to this effect or to any of the other conditions?

Senator Hill —I have said the position that the government is seeking to achieve, and there would be a number of different mechanisms to help achieve that.

Senator ALLISON —And you would expect to resolve that by the time of the next part of the process—the invitation for tenderers?

Senator Hill —I am not sure whether that would resolved then or whether it would be part of the final negotiation.

Mr Pezzullo —It could be done at both points.

Senator Hill —It could be done either way.

Senator ALLISON —I have some questions about the Australian Heritage Commission requirements and the Australian Heritage Commission Act. Has any—and, if so, what— landscape assessment been carried out at Point Nepean, pursuant to the act?

Mr Pezzullo —There have been a number of site characterisations including, from memory, topography and soil. If by `landscape' you mean the general natural state of heritage, certainly there are reports that go to that issue. Whether you would classify one as a landscape report, I would have to check.

Senator Hill —I do not recall any provision in the heritage act that requires a landscape assessment as such. What section are you referring to?

Senator ALLISON —I do not have it before me. Section 30 of the act talks about assessment of adverse effect. I wonder whether that has been carried out.

Senator Hill —That would be part of the whole process because we have obligations under section 30 of the act.

Senator ALLISON —As I understand it, there is a requirement for an archaeological assessment.

Senator Hill —There is no requirement in the act for an archaeological assessment.

Senator ALLISON —So neither of those will be conducted?

Senator Hill —We may well do those as part of meeting our obligations under section 30 of the act, but the act does not specify the form of assessment that is necessary.

Senator ALLISON —So will you do those assessments?

Senator Hill —I do not know whether we have done any.

Mr Pezzullo —I am no expert on the heritage act to which you refer, but we certainly have done studies that go to matters of topography, soil, archaeology, natural heritage and, indeed, built heritage.

Senator Hill —Hasn't the Heritage Commission been brought into this process?

Mr Pezzullo —The Heritage Commission, as has been announced by the parliamentary secretary, will be engaged in additional vetting prior to the final reports going to the decision maker.

Senator Hill —They will clearly be concerned with the values for which the property is being listed.

Senator ALLISON —Has a review of the National Estate registration of Point Nepean been carried out or is it proposed to be carried out?

Senator Hill —That is what I was just saying. The Heritage Commission is interested in National Estate values.

Mr Pezzullo —And the Heritage Commission has been engaged in the evaluation process. They will be formally part of the vetting process—that has been announced by the parliamentary secretary by way of media release.

Senator ALLISON —What procedures have taken place so far in terms of the act?

Mr Pezzullo —I cannot answer the question with reference to the act. With reference to the normal range of due diligence reports that we prepare for these properties—not only to inform ourselves as to the disposal approach but also to advise the market through that confidentiality process that we talked about last night—a whole series of reports have been produced, which I think would touch on or have bearing in relation to the heritage legislation at a Commonwealth level. But you might remember the other condition of sale that I specified is that a future owner would agree to be bound by and not object to any determinations made by Heritage Victoria as well. In addition to that, the vetting by the Australian Heritage Commission that I have reminded you of would occur pre the final preparation of advice to the decision making delegate. So there is a series of intersecting protections there.

Senator ALLISON —The 2003-04 budget has $115 million from the sale of Defence and Commonwealth land around Australia, which has been allocated to the restoration of heritage in areas around Sydney. What is the number of Commonwealth properties in that $115 million?

Mr Pezzullo —I would have to ask you to direct me to the relevant reference. It is not a number or a concept that I am familiar with.

Senator ALLISON —I have rushed in without my reports, so maybe you can take that on notice.

Mr Pezzullo —As you please.

Senator ALLISON —How will that $115 million be used in the restoration works in Sydney? Is there a program and breakdown of that figure?

Mr Pezzullo —Is the amount that you are referring to possibly in relation to the Sydney Harbour Federation Trust?

Senator ALLISON —Yes, it is.

Mr Pezzullo —I have no visibility of what is inside that number, what makes it up or how it was arrived at. The trust is not an agency within the portfolio.

Senator ALLISON —To whom should I address those questions?

Mr Pezzullo —The trust is an agency within the environment portfolio.

Senator ALLISON —Thanks. We talked yesterday about possible subdivisions into separate allotments of sites which had buildings on them. Can you indicate whether there are any other sites apart from those which currently have buildings on them which could be demolished? I think there is a parade ground. There is also a playing field. What conditions would be applied by the Commonwealth to those sites?

Mr Pezzullo —As I have already stated in evidence, the condition about residential subdivisions is applicable not to buildings as you just described them but to buildings which already have an existing residential use attached to them. In other words, to take an example, the building that houses the former immigration quarantine centre, where there is an old cast-iron thing where they used to burn clothes or sanitise them or whatever, would have no residential use rights attached to it.

Senator ALLISON —That is understood. That has a heritage protection.

Mr Pezzullo —That is right. So there would be no capacity, given the condition in the contract of sale that I described to you last night, to create a residential allotment in relation to a building that did not already have—

Senator ALLISON —I understand that. That was not my question. It is about other sites.

Mr Pezzullo —Sites other than Point Nepean?

Senator ALLISON —No, such as the parade ground or the playing field.

Mr Pezzullo —Perhaps I have not expressed myself clearly enough, Senator, and I apologise. Parade grounds clearly would not have a residential use attached to them because, while animals scurry across them, no-one lives on them. Buildings that did not have residences in them beforehand could not be created as new residential allotments. I think that is the answer to the question that you have asked me.

Senator ALLISON —I just wanted to clarify that because I did not raise the question of those other sites yesterday. And this would be the case as well for any of the areas of the site which have vegetation on them?

Mr Pezzullo —That is right. The only residential development that is permissible under the restrictive conditions that the Commonwealth is seeking to bind into the contract relates to development on existing residential use. A grassland, a tree, a cave or a beach would not have those uses attached to it.

Senator ALLISON —Could the state government apply a planning regime which would allow subdivision of those sites?

Mr Pezzullo —As I have already indicated, at the moment the ownership is transferred through title. It completely becomes at the state government's discretion and it is really up to them.

Senator ALLISON —I do not mean the land which is provided to the state government; I mean the land which is being sold—the 90 hectares.

Mr Pezzullo —That is the land to which I refer—the 90-odd hectares that is being sold on the open market. By definition, it goes into the great stock of Australian privately held land and state planning jurisdictions kick in the millisecond the title is transferred.

Senator ALLISON —I understand that but, at this stage, we have no precise details of what the local government or the state government planning would mean for this site. As far as I know, we have some statements in the press—correct me if I am wrong.

Mr Pezzullo —That is true. We have no formal advice from either layer of government as to what their intentions are.

Senator ALLISON —Right. I am sorry to ask another hypothetical question but I think it is important to understand what might and might not be done under the current conditions that are applied. Yesterday, I asked you if the council or the state government declared the entire site a park, you offered the view that there would be an entitlement or at least a case for claiming compensation—they weren't your words.

Mr Pezzullo —A possible case.

Senator ALLISON —Understood. But in the case that the state government said, `We could subdivide the playing oval,' is there anything in the government's potential agreement with a purchaser which would preclude that by way of condition?

Mr Pezzullo —It takes us back to that contract of sale and it is ongoing enforcement subsequent to the sale. As the minister indicated a few moments ago, I think the Commonwealth would take a pretty direct interest in such a development. As to what action the government would decide to take in, that is a completely hypothetical matter and I could not even possibly begin to answer it.

Senator ALLISON —I did not ask you to answer it; all I am asking is what condition would apply which would preclude that and the answer is that there isn't one.

Mr Pezzullo —There is an applicable provision that has indirect relevance, remembering that the purchaser is binding themselves to not seek such a subdivision. I guess you get into the moot point: if the state government whacks a subdivision planning regime over the top of it, are they in breach of their common-law contract with the Commonwealth? That is all hypothetical and that is why I do not want to chance my arm in response to your direct question.

Senator ALLISON —Again, it is only by raising hypothetical situations that we can understand the conditions and the restrictions that are able to be applied to these sites. I realise that it is hypothetical, but we are trying to understand what can and cannot be done on this site, and I think it is a reasonable question.

Senator Hill —We will stick by the tender conditions whatever the state government does. If they adopt a more liberal view than us—goodness only knows what view they will adopt— that is their business, but we will stand by the restraints that we are requiring in the tender documentation.

Senator ALLISON —What opportunities would you have to remedy the situation if that were the case? Would you resume ownership of the land and hand back the money?

Senator Hill —As I said to you a while ago, there are a number of potential mechanisms to protect the commitment we are seeking from tenderers, and I do not think it is appropriate that I speculate on them at this time.

Senator ALLISON —Don't you think this suggests that the whole matter has been done in too much haste and that we should firstly understand what sort of planning regime the council and the state government would apply before going to expressions of interest?

Senator Hill —No. We would like the Victorian government to cooperate with us in this endeavour. We are providing them with a large area of land—an extension of the national park—and I think we are paying for the remediation of that land, so they get that for free. We have offered this other piece of land to the state government at market price and they have refused it. The best outcome would be if all three tiers of government worked together. But if the Victorian government won't, then we will use other mechanisms to protect the commitments that we have made.

Senator ALLISON —But you did not even have any discussions with the council. What efforts were made to work with the other two levels of government?

Senator Hill —I have not had any discussions with anybody on this.

Mr Pezzullo —It is true to say, without forensically detailing every single occurrence, that the parliamentary secretary herself has had discussions if not with the elected officers of the council then certainly with the staff members of the council. She has had correspondence with them. My staff have been in discussions with the Mornington Peninsula shire council—my apologies if I have got the name wrong—and we have been in extensive negotiations and discussions with them about that surveyed portion that is going to be transferred in perpetuity.

Senator ALLISON —Yes, but no discussions about the planning regime they might impose.

Mr Pezzullo —I stand to be corrected but I am 98 per cent sure that they were directly involved in the planning reference group and I think they had indirect involvement in the community reference group. There were certainly bilateral discussions at staff level and with the planning consultant with officers of the council.

Senator ALLISON —Is the Commonwealth aware of the planning restrictions that are generally applied by the council in this area in terms of height restrictions, density and so forth?

Mr Pezzullo —Yes. That is why we engaged the planning consultants and disposal managers that I referred to yesterday.

Senator ALLISON —And the assumption was made that the same planning regime would apply to this land as for the rest of Portsea or for Rosebud?

Mr Pezzullo —No, we did not act on assumptions. We attempted to gain as the good understanding as we could. I think it is fair to say that council staff are not in a position necessarily to bind the elected members of the council. But the Victorian land planning system is quite well known to be Defence property disposal officers—we sell a lot of property in Victoria. The restrictions processes are pretty well known to us across a number of sites. Point Nepean is somewhat atypical because of its nature but it is not atypical in terms of land planning law.

Senator ALLISON —The master plan to which you referred yesterday talks about the importance of environmentally sensitive provision of public access through the site and along the Port Phillip Bay foreshore whilst maintaining the isolation of scientifically significant Bass Strait coastline. Minister, in answer to a question of mine recently you indicated that there was no condition and you intended to apply no condition to protect the beach and the foreshore in terms of public access. Can you explain this departure from what ostensibly you claim the government supports?

Senator Hill —Where is the inconsistency in what I have said?

Mr Pezzullo —I am not sure there is a reference to inconsistencies. There is a draft master plan, which is a summary of all those community consultations. The question is the enforceability of that master plan, given the Commonwealth's lack of jurisdictional capacity in this area. The draft master plan has been issued as, if you like, representative of the attitude of the community, culminating in that process over summer last year.

Senator Hill —I am sorry, Senator, I am puzzled as to where you are arguing that I have been inconsistent.

Senator ALLISON —My question was whether the government would agree to excising the beach and the foreshore from the site to provide sufficient area for pedestrian access along the foreshore and into the national park from Portsea. Your answer was no.

Senator Hill —Did the master plan deal with this issue?

Mr Pezzullo —It dealt with it in general schematic terms. It laid out some general desirable land uses. The government on 12 March announced its decision about how it would address those community concerns, and the government decided to set aside reasonably extensive public open space in relation to the Police Point park that I have described, which has now been surveyed and agreed with the Mornington Shire Council. That is, if you like, the contribution of the Commonwealth to public open space for family picnics et cetera.

Senator ALLISON —But this site has a very extensive section of beach, some very beautiful bays—

Senator Hill —It seems that I answered the question on the basis of that position.

Senator ALLISON —I would have thought it was an important principle that we do not alienate foreshore land. In Sydney a lot of money and effort is going into retrieving some land which was sold off privately. This would be, to my knowledge, the first time in a long time that foreshore beach land has been sold for private purposes.

Mr Pezzullo —Without contesting the veracity of any of the premises in your question, the government announced a three-part package for this property which, in the government's view, balanced all those competing interests: the public open space to which I have referred, a national park to be managed by the state, south of the defence road feature, and then a priority sale initially offered to the state government—they declined to pursue that course—now on the open market. But, what I keep coming back to is that, the moment the title switches over, issues to do with alienation of foreshore planning controls over beach access et cetera are completely within the gift of the state government and the applicable local council regulations, rules and ordinances.

Senator ALLISON —You would be surprised, would you, if this land was sold and that beach area was not available for public access?

Mr Pezzullo —I would not presume to speak for the intentions of the state government of Victoria. I have no definitive information on what they intend to do.

Senator ALLISON —What if Mr Fox, for instance, buys the site and decides he does not wish people to walk along in front of—

Mr Pezzullo —I have a formal role in the decision making process. In fact everyone at this table, bar the CDF, has a formal role—unless you want a role, CDF!—

Gen. Cosgrove —No, I do not want a role.

Mr Pezzullo —and it would be highly improper for us to go to such a specific hypothetical as that.

Senator ALLISON —It would seem to me to a very simple condition to apply to the site, Minister, and show good intent on the part of the government if we could at least excise a bit of the beach and foreshore.

Senator Hill —I hear what you are saying.

Senator ALLISON —But you do not agree.

Senator Hill —That is not the position that the government adopted.

Senator ALLISON —Could you explain why?

Senator Hill —I cannot really, to be frank, other than repeating what the official said, which is that there was an attempt to balance various interests. Public access was provided to other parts.

Senator ALLISON —How is this a balance? You seem to be suggesting that it is in some way tit for tat, which would suggest that you would be quite willing to see that beach and foreshore alienated.

Senator Hill —As I said, we have an economic resource that we are seeking to protect; we have a heritage resource that we are seeking to protect; we have a public interest resource that we are seeking to protect.

Senator ALLISON —You do not think the beach and the foreshore is a public interest?

Senator Hill —I can understand that, but I can also understand that, in a master plan, you can address that public interest in a number of different ways. I do not think it would be too helpful for me to try to rewrite the master plan in here today.

Senator ALLISON —Minister, do you expect to have any talks with the Victorian state government once the expressions of interest are in and there is some sense of knowing what is being proposed for the site? Will you then engage in discussions about the planning regimes?

Senator Hill —I do not think they want to talk to us, other than that they want us to give them the land.

Senator ALLISON —So the answer is now?

Senator Hill —I am not personally engaged in the process at this time. It is being looked after by my very able parliamentary secretary.

Senator ALLISON —Is she going to engage in discussions about planning?

Senator Hill —She will make a judgment on that.

Senator ALLISON —You are not concerned that, without that discussion and without that agreement on the planning regime with both the state government and the council, you would be setting up a legal minefield?

Senator Hill —I said it would be better if the state government were prepared to cooperate with us, but apparently it is not.

Senator ALLISON —You seem uninterested in persuading them to.

Senator Hill —If I thought I could persuade them to I would, but I think that they see a political opportunity in this so they are not interested in sound policy.

Senator ALLISON —How many sites currently have residential use? Have they been identified on a site plan?

Mr Pezzullo —I have seen so many charts and maps on this site that my memory does blur a little bit. My recollection is that there is a very specifically surveyed chart which does show residential land use. In any event, as part of the finalisation process, either in the RFT or in the contract negotiations, those surveyed allotments would have to be agreed because they are critical to the contract of sale on the day of sale.

Senator ALLISON —What do you mean by their having to be agreed?

Mr Pezzullo —They will have to be known precisely. They are not agreed as such, but the vendor, namely us, will say to the purchaser, `Here is what you are buying.'

Senator ALLISON —So can a map which shows those sites be provided now?

Mr Pezzullo —I will take that on notice. There is quite a number of charts and site maps on the planning consultant's web site and I will see if one of those broadly conforms with that.

Senator ALLISON —Was that part of the package that went out for expressions of interest?

Mr Pezzullo —If it is on the web site, it almost certainly would have been, but I will check that for you.

Senator ALLISON —Yes, and identified as residential.

Mr Pezzullo —I understand your question.

Senator ALLISON —And including the whole site, not just the residence itself or the building itself.

Mr Pezzullo —Sorry, I do not understand that qualification.

Senator ALLISON —We discussed yesterday the likelihood that some of these buildings which are not protected by heritage values might have gardens and boundaries and so on. Out of the 70 which are not protected by heritage values, roughly how many do you think would be residential and how many would be for other purposes?

Mr Pezzullo —I would have to take that on notice. It was a training establishment which was reasonably remote from Melbourne, therefore it would have had a number of residences on site to cut down on commuting backwards and forwards.

Senator ALLISON —So by `residential' we are talking about dormitory buildings, for instance?

Mr Pezzullo —No. Most of the residential land use rights would attach to what you and I would understand to be private residences, but I will have to take the question of dormitories on notice. There certainly are some buildings that fit within that classification.

Senator ALLISON —What else would be in that category—a canteen?

Mr Pezzullo —You are going to have all manner of buildings: canteens and instructional buildings—and there is a hospital, as I recall.

Senator ALLISON —No, ones that would fit within `residential'. Would the hospital fit within residential?

Mr Pezzullo —No. A residential use right normally only applies to land on which people have been living in a residence; people do not live in a hospital.

Senator ALLISON —Including a dormitory building, if one exists? I do not even know if one does.

Gen. Cosgrove —If it was not a heritage building.

Senator ALLISON —Yes, that is assumed.

Mr Pezzullo —I would prefer to take on notice the totality of the quantum question as to numbers of sites and which ones are residential and which ones are not.

Senator ALLISON —Okay. So there is no flexibility about that, in that that residential use right is already identified in some way on this plan?

Mr Pezzullo —It would already have been identified in our documentation.

Senator ALLISON —Can you indicate what existing uses might be suitable for other uses such as tourism projects and hotel accommodation?

Mr Pezzullo —As I stated last night in evidence, the contract of sale will not preclude a purchaser from creating subdivided allotments for those kinds of purposes out of any other portions of the land.

Senator ALLISON —So the playing field, for instance, could be subdivided for tourist purposes.

Mr Pezzullo —Unless, as I was just about to say, there was some heritage protection. The parade ground might have heritage protection over it, or Heritage Victoria may place one on it. In that case, it would be impossible to subdivide that for another purpose without breaching the heritage conditions. Sometimes heritage conditions, of course, can be observed by preserving the fabric of a building and adaptively reusing it.

Senator ALLISON —I understand. Would some of the area which is within this site but not cleared be able to be cleared for tourist purposes or a motel, for instance?

Mr Pezzullo —Sorry—I do not understand.

Senator ALLISON —There is some bush on the site, is there not?

Mr Pezzullo —Most of the bushland falls within 205 hectares south of the Defence—

Senator ALLISON —I know most of it does but some is on this site.

Mr Pezzullo —Yes, indeed—in between buildings and whatnot. They would presumably form part of the commons, but that would be a subdivision decision for the council.

Senator ALLISON —So, if the council agreed to a subdivision in an area which is currently bush and there are no heritage provisions, one would expect, on bush, then it could be subdivided for tourist purposes.

Mr Pezzullo —So long as it cleared all the conditions that we have set down in the contract for sale, so long as no applicable—

Senator ALLISON —I do not have the advantage of seeing the contract of sale, so I am asking you whether it does or not.

Mr Pezzullo —The conditions of the contract of sale are those that I read into evidence last night. There is a heritage condition, which is broken into two parts: you have to abide by the conservation management plan and you have to commit yourself to not objecting to Heritage Victoria rulings. The other condition of sale that is in the draft contract of sale pertains to the residential development question. So long as you tick those boxes—that there is no state government override applied through their mechanisms and the council subdivision powers do not prevent you from doing it—you can make such an application.

Senator ALLISON —So, when the submissions come in and if—and I am sorry; it is another hypothetical but I do need to understand how you would regard this in terms of planning—there is a proposal to clear four or five acres of bush in order to put a tourist complex including a hotel there, that would not necessarily be outside the conditions set.

Mr Pezzullo —As I have stated in evidence, I need to be very careful about how I describe the evaluation process that is now going to be undertaken. There is a board that is being convened pursuant to the closure of the tender box. They will be—in fact, I know they are— listening to this evidence, so I need to be careful about how I couch this. As I also stated in evidence, the Commonwealth has not requested a specific land use vision that it will evaluate. Some tenderers—and I would not have a clue whether this has been the case—may put in such a vision; some may not. I literally do not know.

Senator ALLISON —And they literally do not know what is going to be allowed.

Mr Pezzullo —No, I do not think that is entirely fair, Senator. They have to make their own risk judgments based on the market information that has been provided through that confidentiality process that we described yesterday—that bilateral relationship they have with the Commonwealth. It is up to them to make their best judgments about the prevailing conditions in Victoria, their knowledge of state and local government politics, their knowledge of land planning laws et cetera.

Senator ALLISON —Getting back to those sites that are not covered—not protected—by heritage provisions, you are going to indicate how many of the 70 or so are residential and how many are not. Presumably those which are not are able to be demolished. All of them would be able to be reused or developed as a hotel or conference facilities.

Mr Pezzullo —The Commonwealth is not specifying other than their non-usability for residential purposes. The Commonwealth certainly would not be specifying a theme park, a heritage precinct or a restaurant complex.

Senator ALLISON —So anything at all goes, provided it is a state planning regime.

Mr Pezzullo —I would not want to be understood to be using those words. Reasonable land use is that which will ultimately pass the hurdles set by the state government and local council, as I keep stressing.

Senator ALLISON —Which we do not know about, because there are not any yet.

Mr Pezzullo —I am making a presumption, for instance, that, from what I have read in media reports, the state government would not want a Coolangatta style Gold Coast development, for instance. That is my understanding, informed by reading press clips. But that knowledge would also be available to people who put in a bid, people who did not want to put in a bid and people who half thought they were going to put in a bid but decided not to.

Senator ALLISON —The bids will not be made publicly available?

Mr Pezzullo —It is a tender process. The answer is no.

Senator ALLISON —The expressions of interest will not be made publicly available?

Mr Pezzullo —An expression of interest is the first phase of the tender process.

Senator ALLISON —Yes. They are the ones that closed last Monday.

Mr Pezzullo —They are all submitted to the Commonwealth expressly under confidentiality provisions.

Senator ALLISON —So none of those will be available?

Mr Pezzullo —If bidders themselves wish to disclose to the world what they have put in, that is up to them, but the Commonwealth has given an undertaking not to disclose such matters.

Senator ALLISON —And the same will be the case with the tender documents?

Mr Pezzullo —That is normally the process followed.

Senator ALLISON —Does the Commonwealth intend to prepare some kind of summary of them or a discussion about them?

Mr Pezzullo —There will certainly be internal evaluation documentation prepared through the—

Senator ALLISON —But that will not be publicly available either.

Mr Pezzullo —I cannot think of a case where the documents were made available as part of a public consultation process. There is a whole range of techniques, which the senator would be better aware of than I am, in terms of the forms of the Senate or FOI or whatever. But the Commonwealth is not going to engage in a public consultation process on a tender evaluation.

Senator ALLISON —There is quite a lot of community interest in this one. Would the government consider in the next stage, the tender stage, inviting submitters to indicate what documents—say, plans or whatever—might be put on public exhibition to invite comments on those?

Mr Pezzullo —That would be a matter for the government to give direction and guidance on.

Senator ALLISON —The minister is not listening. I wonder if I can ask that again. Minister, for this site, because of its great interest to local community, would you consider in the next tendering process inviting tenderers to prepare a document which is able to be put on exhibition for comment by those who would wish to do so?

Senator Hill —I will ensure that that idea is passed on to the parliamentary secretary. I suspect it has already happened.

Senator ALLISON —Is it possible for you to let us know the response?

Senator Hill —She is managing the governance responsibilities. You have put an idea to her and she can take that into account.

Senator ALLISON —Can I put it to you and can you put it to her on my behalf?

Senator Hill —I think it has already got to her, but we will make sure it does if she is not watching.

Mr Pezzullo —Perhaps I could add by way of supplementation of a previous answer—as the minister has inferred, the TV system works very well here—public access to the beach is going to be permitted through the approximately 20 hectares of public open space to be granted to local council.

Senator ALLISON —I am talking about along the beach rather than to the beach.

Mr Pezzullo —I understand that but, for the purposes of clarity and complete disclosure, I can tell you there will be access down to the beach through the Police Point area.

Senator ALLISON —That I understand. By the way, is the red dotted line on the aerial photograph indicative of a carefully surveyed and precise boundary?

Mr Pezzullo —I do not have that image in front of me. From recollection it is not survey quality boundary definition, but it is starting to get pretty close. As I have already indicated, one of the three parcels has already been precisely surveyed because a public open space needs to be delineated. By definition, boundaries have started to be drawn. But I would have to take on notice whether that particular image is survey quality or merely computer assisted graphical quality. But I doubt it; I do not think it is a surveyed line.

Senator ALLISON —The map on the other fold looks even less precise.

Mr Pezzullo —I think it is pretty close, but it is for graphic purposes rather than land planning purposes. Survey documents are extremely precise documents.

CHAIR —Senator Evans, you have some questions to take us up to six o'clock.

Senator CHRIS EVANS —Senator Hogg has questions first.

Senator HOGG —I have a couple of quick questions on the Military Compensation Scheme. I note in the PBS that there is a commitment to proceed with legislation for the Military Compensation Scheme six years after it was announced. Is that right?

Mr Henderson —Have we finished with the property issues?

CHAIR —I am sorry, that is my mistake. Anybody to do with Defence science, the inspector general and public affairs can leave because we are going to go on with corporate services until six o'clock and then we are having DHA.

Senator ALLISON —I am sorry, Chair, I have just discovered some papers with a couple more questions.

CHAIR —Unless Senator Hogg allows you to ask some questions—

Senator Hill —Put them on notice.

CHAIR —this is Senator Hogg's game now.

Senator HOGG —I have just asked a question of Mr Sharp. I am very interested in where the Military Compensation Scheme is. I am sorry, Senator Allison, I did not realise. I had the call.

Senator ALLISON —Yes, you did. I was not wishing to interrupt you either.

Senator HOGG —Could I have your answer please, Mr Sharp? After six years it seems as if legislation is about to arrive.

Mr Sharp —I do not have the detail on when it was first thought of, Senator.

Senator HOGG —I can tell you: 1997.

Mr Sharp —I can advise you that the exposure draft bill has been finalised and it is with the government, and launch is expected shortly of that exposure draft.

Senator HOGG —Who will see that exposure draft?

Mr Sharp —That will be a public document, available for consultation by, in particular, the veterans community and the Australian Defence Force, but any member of the public can have access to the document and comment on it.

Senator HOGG —When will it be launched?

Mr Sharp —Shortly—within a couple of weeks, I would expect.

Senator HOGG —What will be a period of consultation?

Mr Sharp —Current planning is for eight to 10 weeks.

Senator HOGG —And then the introduction of the legislation?

Mr Sharp —Current planning is for the introduction in the December session of parliament, consideration by a committee and then finalisation in the autumn session.

Senator HOGG —You are anticipating that there will be a Senate committee review of the proposed legislation?

Mr Sharp —Yes.

Senator HOGG —It would be finalised in the autumn session?

Mr Sharp —That is right.

Senator HOGG —And then implemented? Will it be implemented straight away or will there be a transition period before the implementation takes place?

Mr Sharp —Current planning is for 1 July 2004. The new scheme does not replace existing schemes insofar as members that have entitlements under the Military Rehabilitation and Compensation Scheme and under the Veterans Entitlements Act are grandfathered. So initially there will not be too many people eligible under the new scheme, so 1 July 2004 is the planning at this stage.

Senator HOGG —Whilst it will operate from 1 July 2004, I presume that in the 2004-05 budget we will see a separate line item for the funding of this particular scheme?

Mr Sharp —Assuming we do go for the 1 July start date, yes.

Senator HOGG —What has caused the massive delay for this legislation coming before the parliament? The original announcement, for your benefit, was a press release from the then minister Ms Bronwyn Bishop on 11 June 1997. It seems a terrible long delay.

Mr Sharp —I am a new to this. What I can say—and I have been around the bureaucracy a little while—

Senator HOGG —If you were waiting for this bill, you could be in real trouble!

Mr Sharp —Some of my colleagues might laugh. Just because you haven't got hair doesn't mean you are not with it.

Senator HOGG —That did not come from this side of the table, Mr Sharp.

Gen. Cosgrove —That's my boy.

Senator HOGG —Fellow feeling makes wondrous kind, I know, General Cosgrove.

Mr Sharp —What I can say is that this is an exceptionally complex matter. There are a large number of issues that have had to be worked out, and worked out in ways that ensure that existing members of the veteran community, if I can call them that, are comfortable with the way we are going and that future members can be confident that the new arrangements are going to look after them well. So I put it down principally to complexity, and that is the way I see it in the time I've had a bit to do with it.

Senator HOGG —Will there be an option under the new scheme for people who might have been covered by the old scheme to opt for the new scheme?

Mr Sharp —That is perhaps an issue that has not yet been resolved, although we do recognise that that issue may arise. I do not think it is a matter that we have given any particular attention to yet, or that we have advised the government on.

Senator HOGG —It is not covered therefore in the exposure draft?

Mr Sharp —Not at present, no.

Senator HOGG —I will leave my questions there.

Senator CHRIS EVANS —I have two issues I intended to deal with. I want to ask in relation to DIDS where that negotiation was at. Major General Haddad has been—

Senator HOGG —He has been sitting in the back, but he has gone AWOL.

Senator CHRIS EVANS —I assumed he was waiting for this.

Gen. Cosgrove —You called the odds and I think he left.

Mr Smith —We will get him to get in touch with you.

Senator CHRIS EVANS —Perhaps you could take it on notice then. I know last time we talked about how you were negotiating with both bidders. Has the DIDS contract been finalised?

Mr Smith —It has not been finalised, but that negotiation is nearing conclusion, as I understand it.

Senator CHRIS EVANS —Is that still with both bidders or with one bidder?

Mr Smith —With both. I believe I am right in saying it is with both, but we will have to confirm that.

Senator CHRIS EVANS —I want to ask a couple of questions about health outsourcing. I want to get an update on the health outsourcing. I made it clear before that I am fairly concerned by this process. From the public information I have got so far that there seems to be further delays and renegotiations occurring. I want to get a sketch of where we are at in each of the various manifestations of this. In Victoria, has the contract with Mayne been signed?

Mr Sharp —Negotiations of that contract are nearing completion.

Senator CHRIS EVANS —When will that be finalised?

Mr Sharp —I would say within a month.

Senator CHRIS EVANS —Is there a deadline for these negotiations to be finalised?

Mr Sharp —The deadline really is when the satisfaction of both parties has been achieved.

Senator CHRIS EVANS —Didn't they win the tender?

Mr Sharp —They are the preferred tenderer. Until a satisfactory contract is negotiated with the preferred tenderer, they are not the winner.

Senator CHRIS EVANS —Is it fair to say that they have been seeking to get Defence to take more of the responsibility than was originally envisaged?

Mr Sharp —Not that I am aware of.

Air Cdre Austin —No. There has been extensive negotiation on each of the military facilities to ensure that the customers' needs are met, but to the best of my knowledge there has been no intent on the part of the prime contractor to in any way walk away from our original requirements.

Senator CHRIS EVANS —So why has it taken so long?

Air Cdre Austin —The delay has been predominantly in negotiating with the military occupants on the sites to ensure that all facets of service delivery are going to be met to their satisfaction. As you are aware, this is the first time within Defence—and perhaps within the Western world—that a similar contract has been negotiated. It is absolutely imperative for us that the customers, the Defence sites, receive best possible health care delivery. It is an extremely complex task. It has required a lot of negotiation, particularly as we still have embedded service providers in some of these facilities to make sure that they have appropriate access to the facilities. We believe we have now reached a point where all those customer sites are happy with the services that will be offered.

Senator CHRIS EVANS —Has there been any alteration to the contract price?

Air Cdre Austin —Not that I am aware of.

Senator CHRIS EVANS —So it is going to be signed soon, there is no change to the contract price and there is no alteration to the share of responsibilities between what ADF will continue to do and what Mayne will take on?

Air Cdre Austin —There have been some very minor modifications at several sites, but they do not change the nature of the contract to any significant degree.

Senator CHRIS EVANS —So you still express confidence that this is all going to be resolved happily and signed shortly?

Air Cdre Austin —I have an enormous investment in the success of this process, as does my directorate, and we are optimistic that it will in fact continue to deliver high-quality health care to those ADF sites, yes.

Senator CHRIS EVANS —I am certainly hopeful, but I guess the question is: are you confident the contract will be signed?

Air Cdre Austin —Absolutely.

Senator CHRIS EVANS —What about in terms of ACT and southern New South Wales? Where are we at with that one?

Air Cdre Austin —The tender evaluation was conducted. There were two tenders submitted. Neither was successful. In one case the tender that was put forward was approximately 10 per cent over our baseline costs and we require a saving of at least 10 per cent against our baseline cost. We did not believe that tender was capable of meeting the financial requirements. With the second tender, whilst it was eight per cent under baseline costs, we had serious concerns about the ability of the tenderer to provide the quality of service. The manning levels they were proposing were significantly under existing manning levels, and, as such, the tender evaluation board considered that tender to be unsuccessful.

Senator CHRIS EVANS —Where does that leave us?

Air Cdre Austin —The tender evaluation board is exploring alternative methods of service delivery for ACT and southern New South Wales.

Senator CHRIS EVANS —The tender evaluation board is making that assessment?

Air Cdre Austin —Let me check my notes on that, but I believe the board is reviewing that.

Mr Sharp —The officers involved in the tender board are part of the rationalisation of health services and so they would be involved in developing other options—they are the same people, by and large.

Senator CHRIS EVANS —I would have thought that would be a central ADF responsibility. You have had a tender process that has failed. I would have thought that would go back for decision by government.

Mr Sharp —I do not think there is any decision for government. We do not have a preferred way forward, and until we do we have got nothing to put forward.

Senator CHRIS EVANS —Yes, that is why I could not understand what a tender board would be doing.

Air Cdre Austin —I apologise, Senator; that was an incorrect statement on my part.

Senator CHRIS EVANS —So the tender process has not been successful. Does that mean that the outsourcing in southern New South Wales and the ACT will go ahead or not?

Air Cdre Austin —We are exploring alternative methods of outsourcing, but we are now back to reviewing the original proposal to conduct that. That is CSP. So we would need to review the full range of options and those include repopulation with military health providers; continuing the status quo, which is a composite military and individually contracted health provision under the auspices of Defence; or retendering for the process.

Senator CHRIS EVANS —Who will make that decision?

Air Cdre Austin —That will follow a review of the viability of each of the options. That review has not been completed.

Senator CHRIS EVANS —But that will go back to the minister?

Mr Sharp —I think that decision there will lie with Head, DPE, which is the group responsible for this activity. In the event that we do not proceed with outsourcing we will need to go back to the minister.

Senator CHRIS EVANS —But it is your intention to continue to pursue other outsourcing options?

Mr Sharp —As the Air Commodore Austin said, one of those options is retendering, and we need to evaluate all three.

Senator CHRIS EVANS —Was Mayne one of the bidders for the ACT-New South Wales tender?

Mr Smith —Yes, they were.

Senator CHRIS EVANS —What is happening in terms of Sydney?

Air Cdre Austin —The proposal for Sydney was to conduct a rationalisation study. The ADF requires that the majority of its health care providers be in uniform and be available for deployment; they form part of our operational capability. In Sydney there are three large military deployable health facilities—one Army, one Air Force, one Navy. The rationalisation study was firstly to scope the service delivery that is taking place there and to explore ways in which we could provide a more efficient health care system to the people in Sydney. However, that was predicated on the understanding that we would need to maintain the same number of uniform providers to meet our operational needs. So it is not a CSP process; it is simply a means of looking at rationalising and increasing the efficiency of service care delivery, given the same number of people that we have.

Senator CHRIS EVANS —Yes, but where is that leading us?

Air Cdre Austin —That study is in progress. It has completed the first phase, which is a definition of scope.

Senator CHRIS EVANS —Who is doing the study?

Air Cdre Austin —It is being done through a contractor.

Senator CHRIS EVANS —Who is the contractor? You can take that on notice.

Air Cdre Austin —Certainly.

Senator CHRIS EVANS —Has Major General Haddad brought the silver bullet?

Mr Smith —Yes, he has; thank you for your patience. Both bids are still under active consideration and a decision will be put to government within a few weeks.

Senator CHRIS EVANS —The decision will be taken by the minister as to how to proceed from there?

Major Gen. Haddad —As the secretary said, it will be going to government for decision in about two weeks time.

Senator CHRIS EVANS —Yes. That decision will be exercised by the Minister for Defence?

Major Gen. Haddad —On previous occasions the minister has chosen to take it forward to his cabinet colleagues.

Senator CHRIS EVANS —But is clearly not a departmental—

Mr Smith —Certainly not.

Senator CHRIS EVANS —It is going to the minister. Just so I am clear: you have been negotiating with both parties on their bids. Is that a fair way of describing it?

Major Gen. Haddad —We have been in parallel negotiations with TenixToll and ADI-Fox, so both their bids are alive at this point.

Senator CHRIS EVANS —There is no preferred tenderer then?

Major Gen. Haddad —That is the process we are about to conclude. Our recommendation that we will reach in a couple of weeks time is on our new preferred tenderer.

Senator CHRIS EVANS —So it will still be a question of then going away and negotiating a final agreement with the preferred tenderer?

Major Gen. Haddad —Having selected our new preferred tenderer, we will still have to do contract negotiations. They were scheduled, under the other arrangement that we had, to go for three months so I imagine it will take—

Senator CHRIS EVANS —You would be hopeful on this occasion as you have got them to the starting gate.

Major Gen. Haddad —We are certainly more advanced than we were last time with all the additional work we have been doing in our parallel negotiations, but the purpose of the parallel negotiations has been to identify a preferred tenderer.

Senator CHRIS EVANS —Okay, thanks for that.

Senator HOGG —Will this be concluded by the year 2010?

Major Gen. Haddad —I certainly hope so.

Senator HOGG —It is just that we have been waiting such a long time.

Major Gen. Haddad —Senator Hogg, both you and I have been waiting for a long time on this.

Senator CHRIS EVANS —There are casual employees coming up for long-service leave there!

Senator ALLISON —I am sorry as I was not in the room when we started this discussion. Can somebody indicate if it is correct that the outsourcing process was abandoned for the ACT and southern New South Wales? Mr Sharp, you were saying that you were beginning the process again in some way?

Mr Sharp —Correct. We are reviewing the process and retendering is one of the possible options.

Senator ALLISON —What was wrong with the process that it had to be abandoned?

Mr Sharp —As the air commodore indicated, one tenderer was thought to be far too costly and it was considered not possible to make up the difference. The other tender was inadequate, being non-compliant.

Senator ALLISON —What effect does that decision have on Victoria? I think you said earlier that it does not make any difference.

Mr Sharp —No.

Senator ALLISON —So it does not have an effect?

Mr Sharp —No, in terms of no impact on Victoria.

Senator ALLISON —Were the tenderers the same parties?

Mr Sharp —Both were.

Senator ALLISON —And the tender bids are not yet in for Victoria?

Mr Sharp —The preferred tenderer in Victoria is Mayne Health and contract negotiations are nearly complete.

Senator ALLISON —I understand that OPSM are involved in talks which might result in a takeover by an Italian company. What effect will that have on the contract that was awarded to OPSM for optometry for ADF personnel?

Mr Sharp —I would have to take that on notice, but none that we can think of.

Senator ALLISON —Getting back to Mayne, the preferred tenderer for Victoria, has the fact that they have recently announced a six-month loss for their hospitals division of some $57 million—with the suggestion that the company may sell off this division within two years if it is still underperforming—made a difference to your discussions with Mayne so far?

Mr Sharp —No difference. The due diligence process—a critical part of any tender evaluation—has been conducted on Mayne and all issues such as those that you have outlined have been considered.

Senator ALLISON —What guarantees are there that this division will not be sold off?

Mr Sharp —The due diligence process takes account of the impact of whether it might be sold off or not and what impact that might have on the service delivery.

Senator ALLISON —Would the new owner be bound by whatever is agreed in the contract with Mayne?

Mr Sharp —My colleague might be able to add something to this.

Air Cdre Austin —As far as I am aware, it is not actually the hospitals division within Mayne that we are contracting with; it is Mayne Health. Mayne Health has various components, of which the hospitals area is but one.

Senator ALLISON —So you do not think this is likely to be handed over to another organisation?

Air Cdre Austin —No.

Senator ALLISON —If it were, would that raise any problems in terms of the situation? Do you need a contingency plan in place, given the financial vulnerability of Mayne at present?

Air Cdre Austin —Obviously, as part of the contracting process, there is a risk analysis that is conducted by Defence. Consideration is made of various recovery or retrieval options available to us. But no, as has been previously alluded to by Mr Peter Sharp, we have recently redone the due diligence for Mayne in light of the recent media coverage, being aware of the selling off of those hospitals. But they in fact do not in any way impact on this particular contract.

Senator ALLISON —I understand. So you have concluded that the risk of sell-off, liquidation or whatever other financial risks there are is low in this instance—is that what your due diligence has told you?

Air Cdre Austin —That is correct. In relation to the off-loading of the hospitals division of Mayne Health, we do not believe that it will adversely impact this contract.

Senator ALLISON —If it were the case that it happened, what would happen to the contract?

Mr Sharp —Perhaps I will make the more general point that Defence contractors' companies do change hands from time to time. They are taken over and amalgamated, and this is not uncommon. The challenge for us is always to ensure that the contract conditions and the due diligence process ensures that in that event the risk to us is low and manageable.

Senator ALLISON —How do you manage it in the event? I know this is hypothetical, but one has to have a contingency plan in place should it happen, whether it is Mayne or somebody else. What is that contingency plan?

Mr Sharp —The contingency plan is not worked out if the risk is very low.

Senator ALLISON —So there is none.

CHAIR —Senator Allison, you have two minutes.

Senator ALLISON —I have more than two minutes, Chair; I am sorry.

CHAIR —I am sorry. You will be asking your questions until 6.20 and then Senator Evans has questions to DHA. That is the arrangement.

Senator ALLISON —Are we coming back to this program?

CHAIR —No, we are not coming back to this program. You can think about what questions you might put on notice, but you have two minutes.

Senator ALLISON —Thanks.

CHAIR —I think that brings us to an end, General Cosgrove and Mr Smith. Thank you very much indeed for the courteousness of your presence and that of your colleagues. We look forward to seeing you later in the year.

[6.20 p.m.]