ACTING CHAIR (Senator Ferris) —I declare open this meeting of the Senate Foreign Affairs, Defence and Trade Legislation Committee. I welcome back the Minister, Senator Newman, and officers of the Department of Defence. The committee will return to consideration of the particulars of proposed expenditure for the Department of Defence and will begin today by continuing with Air Force.

Senator WEST —I turn to output 18, capability for airlift, which is about where we left it last night. The last sentence in the big paragraph states:

As a consequence of recently updated Government direction, the force is transitioning from a long term `fitted for but not with' capability focus to a more operational readiness focus.

Can someone give me some details about this, please?

Air Marshal McCormack —The policy in the past has been that we would not fit everything for operations immediately—for example, electronic warfare equipment. At the moment we are upgrading some of the aircraft to fit electronic warning equipment to them now.

Senator WEST —Is it basically just fitting electronic warning equipment?

Air Marshal McCormack —It applies to some other aircraft with weapons and things like that.

Senator WEST —This question might be one for the minister: is this decision in line with the increased readiness?

Air Marshal McCormack —That is part of the whole process. To support the 28 days extra brigade et cetera, we have to have a certain number of our equipments ready to go at short notice.

Mr White — If I could just add a couple of observations on that. The change in priorities that both you and Air Marshal McCormack have referred to also reflects a broader set of decisions by government over the last couple of years, in particular over the last year, to move the focus of the Defence organisation away from what has been over some decades a very strong focus on building future capability towards a stronger focus on maximising our current capability. Across a range of different capabilities and platforms, we have put less emphasis on the long[hyphen]term investment in inherent capability that could be turned into current capability some time in the future, if that were necessary, towards having a higher level of capability ready to go at relatively short notice. I guess the most spectacular demonstration of that has been the decision to move a second brigade to 28 days notice to move. But across a range of other platforms—including, as you have noted, in Air Force—we have been moving to make sure that the equipment we have is fitted with the whole range of systems and support capabilities which ensure it can undertake operations at short notice.

Senator WEST —Does this restrict the flexibility that you have with these platforms or are you just loading them up?

Mr White —No, I would not say it restricts our flexibility. It entails priority choices. It means that we do have to put more of our resources, both investment and day[hyphen]to[hyphen]day running resources, into maintaining higher levels of current capability than we have in the past. So it certainly has consequences for the overall shape of the Defence Force now and in the future. But the aim is to increase the range of military options the government has available to it at relatively short notice. That is its specific intention. It is a reflection of the fact that, for a
range of reasons, governments have found themselves deploying the ADF in operations more often over the last few years than was the case through most of the 1980s.

Senator WEST —Turning to the capability for airlift, which is the C130Js. Are they still on track for delivery mid to late 1999?

Air Marshal McCormack —We expect to take delivery in Australia in August this year.

Senator WEST —Can you give us details of the post[hyphen] delivery modification program that has been proposed?

Air Marshal McCormack —I will ask Acquisition to take that.

Air Vice Marshal Conroy —When we take delivery of the aircraft in the United States between the end of July and early 2000, the aircraft will be complete in a hardware sense but they will not be contractually compliant in regard to software until some time later. There will be two further software upgrades released to us: one in November 1999 and the other in August 2000. We will be receiving the aircraft progressively between the end of July 1999 and April 2000, and the final software deliverable will be in August 2000.

Senator WEST —And those software deliverables are part of the original contract?

Air Vice Marshal Conroy —Yes. When we get the final software deliverable, they will be contractually compliant aircraft.

Senator WEST —Was it always anticipated that it would be going this way?

Air Vice Marshal Conroy —No, it was not. We have just negotiated a contract change proposal and rescheduled our payments in order to accommodate this change.

Senator WEST —How much extra money is this costing us?

Air Vice Marshal Conroy —None.

Senator WEST —It is not costing us anything; this is still part of the original contract?

Air Vice Marshal Conroy —Indeed. Because the aircraft is some two years late, according to the contract, we will be getting some $US27 million in liquidated damages.

Senator WEST —Thank you. And the post[hyphen]delivery modifications will bring them up to contract; they are not taking them ahead. Will that mean that they are in a more operational readiness state or still just the platform?

Air Vice Marshal Conroy —They will come with Federal Aviation Authority airworthiness certification for what we call linehaul operations, strategic transport. To actually use them in tactical activities, such as night vision goggle work or dropping parachute stores, will require some follow[hyphen]on test and evaluation to bring them up to full military certification. That could take a period of up to 18 months after they are delivered.

Senator WEST —So even after the software upgrades are complete in August of 2000, they will still not be ready for strategic work?

Air Vice Marshal Conroy —They will be ready for strategic work.

Senator WEST —But not ready for line work?

Air Vice Marshal Conroy —They will not be ready for tactical work.

Senator WEST —When do you expect to have them online for tactical work?

Air Vice Marshal Conroy —Some 18 months after delivery. It is a matter of military airworthiness certification.

Senator WEST —Is there a problem—

Air Vice Marshal Conroy —This was always planned to be the case.

Senator WEST —So 18 months to get them to tactical is not a change?

Air Vice Marshal Conroy —It is the sort of thing we have to do ourselves. It is not the sort of certification that the Federal Aviation Authority, a civil organisation, will give. In order to have the airworthiness certification for full military operations, we need this period of follow[hyphen]on test and evaluation.

Senator WEST —When do you plan to phase out the C130Es?

Air Marshal McCormack —We plan to phase them out at the end of 2000.

Senator WEST —They would be approved for tactical work, would they not?

Air Marshal McCormack —The Hs and the Es are both approved for tactical work, yes.

Senator WEST —If it is going to take 18 months to get your Js passed for tactical work, are you going to have a period of time there where you are down on some of your C130s for tactical?

Air Marshal McCormack —No, the 18 months that we take for the J model should coincide with when the E models are going out.

Senator WEST —Are you saying to me that you are phasing out the E models after the Js have their certification?

Air Marshal McCormack —The certification is not just a straight item; there are a lot of different elements to it. They will gradually get cleared on the way through and, by the end of 2000, most of them will be cleared.

Senator WEST —From Air Vice Marshal Conroy's comments, I would have thought that it would have been a bit after the end of 2000 before the Js were ready for tactical—

Air Marshal McCormack —No, he said 18 months from delivery, so it is only a month or two. But, as I said, it is not that straight—non[hyphen]tactical today and tactical tomorrow. There will be a phase[hyphen]in period where they do the tests.

Senator WEST —You are phasing out the C130Es?

Air Marshal McCormack —Yes. We do not have a final date on the E but it is roughly the end of 2000 at this stage. That is the best estimate we have.

Senator WEST —You will be phasing out the Es as you are phasing in the Js?

Air Marshal McCormack —There will be an overlap, yes.

Senator WEST —That is what I want to know: is there going to be an overlap or is there going to be a period where the Es are going and the Js have not starting coming online?

Air Marshal McCormack —No.

Senator WEST —What are you going to do with the Es?

Air Vice Marshal Conroy —Seven of the aircraft are traded in as part of the contract and will be on[hyphen]sold by Lockheed Martin—where, we do not know, that is their business. The rest of the aircraft will end up in museums or as training aids here in Australia.

Senator WEST —How many are there?

Air Vice Marshal Conroy —Twelve.

Senator WEST —What is happening with the current VIP fleet—the current VIP jets?

Air Vice Marshal Conroy —We have a tender on the streets at the moment. The tender closes at the end of June, and we hope to announce the successful tenderer some time around October. We plan to have the first of the international aircraft delivered to us around January 2001 and be ready for service in April 2001. The first of the F900 leases expire in October 2001, which gives us a bit of breathing space. There will be two international aircraft and three smaller aircraft.

Senator WEST —Is the current fleet all on lease?

Air Vice Marshal Conroy —Yes.

Senator WEST —So when the lease expires it goes back to whoever owns them. You do not have any disposal issues.

Air Vice Marshal Conroy —Westpac.

Senator WEST —When I was out yesterday did somebody ask about tender evaluation for the Caribou replacement?

Air Vice Marshal Conroy —That project is currently under evaluation. Source has not been announced as yet.

Senator WEST —Do you have any idea when the announcement is likely to be made?

Air Vice Marshal Conroy —A way ahead will be announced by the minister in the near future.

Senator WEST —Can we expect an announcement before we meet again?

Air Vice Marshal Conroy —Yes, you can.

Senator WEST —Also in output 18 you give the composition of the C130, the 707, the F900, the Caribou, the HS748 and the B200 King Air—you have two aircraft—and you list all of the flying hours that are expected. But I see no flying hours for the B200 King Air.

Air Marshal McCormack —Those two aircraft are on civil lease at the moment for navigational training. I am not sure where they are.

Senator WEST —How many hours do you expect them to fly next year? How much are you budgeting for?

Air Marshal McCormack —We have just taken another two on lease so that there are four now. In the notes it says that there are approximately 2,000 hours, but we have four on lease now. That will be changing.

Senator WEST —Would you expect that to go up to 4,000 hours?

Air Marshal McCormack —Not necessarily.

Senator WEST —When will you make that decision?

Air Marshal McCormack —That will be done in the flying hours conference. It will be done within our budget and we balance off the flying hours. It may be that the 748s will decrease a bit more or less. We will have to sort that out.

Senator WEST —I see that you are going to acquire a new 707 full flight simulator. How much longer are you going to keep those 707s because you must be having difficulty flying them into a number of airports?

Air Marshal McCormack —One of the options that we were talking about last night was the tanker option. One of the options is to actually zero life the 707 and modify those, so they could be around for a long time. It depends on how that project goes.

Senator WEST —What does `zero life' mean?

Air Marshal McCormack —An aircraft fuselage acquires fatigue as it flies. You can actually—like `Grandpa's axe'—change bits and pieces to make them new again. Then you zero life them so that they are not worn out.

Senator WEST —But you have replaced a lot. How much of a problem do you have obtaining permission for 707s to land at a number of airports these days?

Air Marshal McCormack —Because of ICAO standards the 707 is not allowed at a lot of international airports, but they are okay at military airports.

Senator WEST —So people at Williamtown and Richmond will still be having 707s?

Air Marshal McCormack —The 707 is not as noisy as the FA18 anyway.

Senator WEST —I think noise is another issue that my colleague wants to discuss.

Air Marshal McCormack —Just a note on the 707 upgrade: we would not keep the same engines if we did upgrade it. They would be engines that would meet the FAA requirements. When I said zero life I meant not just the airframe but everything—the avionics and engines—would be upgraded if we went that way.

Senator WEST —So you are basically rebuilding the aircraft every time?

Air Marshal McCormack —Basically you take the good bits, throw away the bad bits and put another lot in.

Senator WEST —Presumably they have no original parts in them left?

Air Marshal McCormack —No, that is not true. There is still the basic frame. It is just that some parts of a frame, such as where the stresses are, wear out a lot quicker than others.

Senator HOGG —On output 19, capability for combat support of air operations, I understand that RAAF Base Scherger will be activated for the first time during Crocodile 99.

Air Marshal McCormack —That is not true. It was activated last year at the opening.

Senator HOGG —Then I note in the PBS at page 117, under `Capability enhancement initiatives', at the fourth dot point, it says:

Equipment purchased to enable the bare[hyphen]base at RAAF Scherger to be operationally activated for deployments and exercises.

What equipment has been purchased to make it operationally activated for deployment and exercises that was not there? Is it substantial? I am not talking about sand now.

Air Marshal McCormack —At any bare[hyphen]base it is the case that it is a decision on how much we want to carry forward for each exercise and how much we want to leave there. It is only through experience that we find out what we have to take forward. If we have it totally bare with nothing on the base at all, just concrete, the footprint of what we have to take in is a lot more. If we take too much up there, it degrades. Like a lot of electrical equipment, telephone type equipment, it will degrade in the area if we just leave it. It is a case of learning from experience what the best balance is of what we take in and what we leave there for the whole period. That is the sort of equipment. If it is computers, do we fully stock the place with computers?

Senator HOGG —Are these new purchases this year, in the forthcoming financial year, in the PBS? That is what I am interested in.

Air Vice Marshal Titheridge —We are at the moment defining those requirements, and we intend to purchase quite a significant number of them this year, 1999[hyphen]2000.

Senator HOGG —So what is the difference? You pulled me up when I first said it was activated for the first time during Crocodile 99 by saying it had been operational before that. What are the different stages?

Air Marshal McCormack —You could activate the base with nothing but concrete.

Senator HOGG —I accept that.

Air Marshal McCormack —And you can activate the base with a whole lot of other kit there. We are deciding what the footprint is that we need on the base all the time versus what we carry in. It is a matter of what air transport and road transport you need to take the gear in to make it operational. The first time we took everything in.

Senator HOGG —So you have taken everything in and obviously pulled some out?

Air Marshal McCormack —Brought some of it out.

Senator HOGG —Some of it out?

Air Marshal McCormack —Because it degrades if you leave it on the ground.

Senator HOGG —Does this base require a change in some of the purchasing strategies for things that you leave on the base, the development of new equipment that does not degrade?

Air Marshal McCormack —No, I do not believe it is in purchasing strategies. From experience up there, there might be stuff that we have to change occasionally, buy new stuff, replace. It depends on how difficult it is to take it in.

Senator HOGG —I am not going to pursue that. There are standard questions that I have asked the other two groups. One is the number of publications that Air Force produces and the cost of producing those publications. You can take that on notice.

Air Marshal McCormack —Yes.

Senator HOGG —And the general communication types of publication. Also, the Chief of Air Force's personal staff and the positions that they hold.

Air Marshal McCormack —I can give you that now if you like.

Senator HOGG —If you can.

Air Marshal McCormack —I have a staff officer, wing commander, an ADC, a flight lieutenant, a driver who doubles as a general dogsbody around the office, a sergeant, a steward and a personal assistant—I guess they used to be called secretaries. That is it.

Senator WEST —You do not get a chef?

Air Marshal McCormack —RAAF Base Fairbairn was contracted out commercially quite a few years ago and since then the chief has on occasion used the cook out there at cost.

Senator HOGG —Does your staffing arrangement differ from those in the other services?

Air Marshal McCormack —I have not had a great look at what their arrangements are.

Senator HOGG —Has that staffing arrangement altered in any significant way in the last 12 months or 18 months?

Air Marshal McCormack —No.

Senator HOGG —The next issue I want to raise is in respect of the Great Barrier Reef Marine Park. I presume this is the appropriate place.

Air Marshal McCormack —It is for both Air Force and Defence Estate. It is a mixture.

Senator HOGG —It is just that there has been a fair bit of adverse publicity in recent times with the RAAF range at Halifax Bay, I understand. I understand that area is world heritage area and I understand that, particularly in the Townsville region, there has been growing criticism of the use of that range by the RAAF. Is that continuing to be a range that is used by the RAAF?

Air Marshal McCormack —Yes, we use the range. We have a requirement to drop high explosive weapons. The availability of those ranges is very important to us. We are looking at alternatives.

Senator HOGG —What level of explosive device is used in that range?

Air Marshal McCormack —The largest weapon would be a 2,000[hyphen]pound high explosive weapon.

Senator HOGG —And what would be the average?

Air Marshal McCormack —We have 500[hyphen]pound and 2,000[hyphen] pound weapons.

Senator HOGG —Criticism that I have heard—it does not matter whether it is the 500 pound or the 2,000 pound—is that any bombing in that world heritage area is very much frowned upon, and of course apparently there is a very strong campaign to get Air Force to cease using that range. If you are looking for alternatives, how long do you believe it will be before alternatives can reasonably be found? What is the sort of lead time in looking, assessing and then finally making a decision? Are you looking at two years, five years? I would just like to have some rough sort of idea because it seems to me that this argument is going to flourish for a substantial period of time.

Air Marshal McCormack —I will pass over to Defence Estate on that.

Mr Corey —This needs to be put in a little bit of context before we actually explain where we are going. On the level of impacts of concern to the people who are concerned about the Great Barrier Reef Marine Park, Defence activity is well down on the bottom scale of impacts and we are doing an environmental study to actually assess the impacts of our activity in the park. We have been conducting these sorts of activities for about 40 years on a lump of rock in Halifax Bay, which is fairly remote from any of the pristine areas in the park, and to date we have not really been able to establish if we do much actual damage.

The alternative sites require identification of the site and actually establishment of a range, but I would think within a period of 12 months to two years we will know, firstly, whether there is a range available—and it is quite likely there will be one—and, secondly, the impact on Air Force's operational activity.

Senator HOGG —Does it have to be in a coastal region? Is there some significance in the fact that this range is a coastal site?

Air Marshal McCormack —One of the issues is the distance between where the base is and where the bombing range is. The further away they are the more effort we have to do, the more hours we have to fly to get there. So, ideally, that is very close to the airfield. That is one of our criteria—we would like it close to an airfield. All our training bases are on the east and south coast.

Senator HOGG —When the bombing actually takes place at Halifax Bay, do any bombs explode in the water or are they all exploding on the land? The reason for this I will come to in a minute.

Air Marshal McCormack —The majority are on the land, on the island itself. We cannot guarantee that they will not hit the water, but the majority are on the land.

Senator HOGG —Concern has been expressed, as I understand it, about the dugong population. Have you done any research to find out whether if any bombs go astray they will go into dugong areas?

Air Marshal McCormack —The Queensland Conservation Foundation actually complained that we had killed the dugong, but after some research they realised that we were not involved in that and have withdrawn their complaint.

Mr Corey —Just on that, we have been working with the Great Barrier Reef Marine Park Authority and the Queensland Department of Health and Environment to establish what the impact is, if any, on dugong populations by our activities. It is an ongoing process. Since the commission of inquiry into Shoalwater Bay we have been conducting a whole range of investigations.

Senator HOGG —I think you have a whale and a dolphin policy in Defence; is that correct?

Air Marshal McCormack —I have never heard of it.

Senator HOGG —I think I have. I am wondering if there is any similar policies in respect of what effects bombing and other things may have on the dugong population, where dugong populations are situated.

Mr Corey —In relation to Cordelia Rock in Halifax Bay, we do not have a deliberate policy because the dugong population there is spasmodic at best. In the areas around the Shoalwater Bay training area, where Navy conducts some activities, there is a deliberate policy of scanning the areas and arranging scare tactics to make sure that there is no dugong population in the area of activity.

Senator HOGG —So the best that the people in Townsville can look forward to is a further period of use of the Halifax Bay area for bombing over the next 12 to 18 months at least?

Mr Corey —Until such time as we establish alternatives.

Air Marshal McCormack —We will continue to have to use the range if they do not have an alternative.

Senator HOGG —It might interest you to go to the Defence site and you will find that there is such a thing as the `Whale[hyphen]dolphin conservation policy, Great Barrier Reef environmental management'. I would be interested if there is a similar policy for the dugong. What about other world heritage areas within that general environment; are there any other bombing or munitions?

Mr Corey —Not in world heritage areas. At Shoalwater Bay, which is also in the Great Barrier Reef Marine Park, we do conduct high[hyphen]explosive activities on Townshend Island which is adjacent to the Shoalwater Bay training area.

Senator HOGG —What sorts of investigations are made to see if there is any damage to wildlife in the Halifax Bay area as a result of the bombing?

Mr Corey —As I said, we have a study that has been going for some months and will continue until about August or September this year to try to ascertain the impacts on marine life in the Halifax Bay area.

Senator HOGG —So there has been no study before this?

Mr Corey —There have been many anecdotal and ad hoc studies but nothing scientifically based that we have been involved in.

Senator HOGG —So we should expect the results of that to be available later this year?

Mr Corey —Yes, we should.

Senator MacGIBBON —I have a question on the same topic. Air Marshal McCormack, when did the bombing start at Halifax Bay; wasn't it through the Second World War?

Air Marshal McCormack —Yes.

Senator MacGIBBON —Wouldn't it be true that there were hundreds of thousands of tonnes of ordnance dropped on that bombing range?

Air Marshal McCormack —That would be true.

Senator MacGIBBON —Wouldn't it be true that the incidence today would not be a hundredth of what it was in previous years?

Air Marshal McCormack —That would be true.

Senator MacGIBBON —Wouldn't it be true that the wildlife is still there through all that great devastation in the past which has now disappeared?

Air Marshal McCormack —That would be true.

Senator MacGIBBON —Thank you.

ACTING CHAIR —Senator West, do you have some more questions on Air Force?

Senator WEST —No.

Air Marshal McCormack —We could get the Scherger questions out of the way. Senator Faulkner had some follow[hyphen]on questions on Scherger.

ACTING CHAIR —I understand that. I just wanted to see whether Senator West had finished.

Senator WEST —I am happy for Senator Faulkner to go first.

ACTING CHAIR —Let us start with Senator West and then we have finished the section when Senator Faulkner's questions are completed.

Senator WEST —My questions relate to the Sandline issue and an article that appeared in the Northern Territory News entitled `Mercenaries win battle for arms bid'. I understand there has been an agreement between the Papua New Guinea government and Sandline for the return of weapons and equipment to Sandline. Am I correct in that understanding?

Mr White —Let me put it this way: when the Australian government took over custody of that equipment—I think that would be the correct way of putting it but I do not want any legal weight to hang on that term—or came into possession of the equipment at the request of both the PNG government and Sandline at the time of that very complex incident, the position the government took was that the ownership of the materiel was a subject of dispute between the PNG government and Sandline and we took no sides in that dispute. After a fairly lengthy process, the PNG government and Sandline have settled. The PNG government has, as I understand it, formally advised the Australian government that it acknowledges Sandline's title to that equipment.

Following that, we and other departments have entered into discussions with Sandline as to how that equipment is to be handled from here on out. That is subject to a number of things, including Australian defence export regulations as the materiel is within Australia. It will be for Sandline to decide how it wants to handle that stuff in future, in the light of the need to comply with Australian law in relation to it.

Senator WEST —How did we come by the materiel in the first place?

Mr White —That is a long story but to give you the short version: it was in transit to PNG under the Sandline contract. When it became apparent, to put it no more vividly, that the Sandline contract was not going to proceed, the Sandline company was keen that the materiel not be delivered to PNG, although it was already on its way in a big transport aircraft. It was also the wish of the PNG government at the time that it not be delivered to PNG as it included some fairly potent systems, including in particular two helicopter gunships. It was regarded by both Sandline and the PNG government—and I might say by the Australian government—that it would be better for all parties if the stuff was not delivered to PNG. So we offered for it to be delivered to Tindal and to be stored there until its ownership could be sorted out.

Senator WEST —What has been the cost to RAAF of this storage?

Mr White —I could not give you that figure.

Air Marshal McCormack —They have just used one of our hangars. We do not use any manpower at all. They are just a couple of old hangars we have got there.

Senator WEST —Are the hangars surplus to your needs?

Air Marshal McCormack —They are for storage. They will be knocked down in one of the development areas, but at the moment we are not using them.

Senator WEST —So there is no cost to RAAF for storage?

Air Marshal McCormack —I do not believe so.

Senator WEST —I am happy for you to take that on notice and find that out. Is RAAF maintaining the equipment?

Air Marshal McCormack —No.

Mr Tonkin —It is likely to be effectively zero cost; it is a surplus hangar.

Senator WEST —That is what I was trying to find out: was it surplus hangar space now or was it going to be surplus?

Air Marshal McCormack —It is the old original hangar that will be knocked down in part of the development. It really is virtually no cost. It is just locked up and left.

Mr White —If I could expand on that a little, we have been careful to ensure that we, the Commonwealth, abide by what is required as a gratuitous custodian, I think the technical legal expression is—that is, we are not being paid to look after it. We have been also pretty careful not to do anything more than what is required of a gratuitous custodian. We are not, for example, under any obligation, nor have we done anything to maintain the equipment in the condition in which it was delivered to us. In fact, it would be our judgment that it has probably deteriorated pretty significantly while it has been sitting up there at Tindal.

Senator WEST —Thank you.

ACTING CHAIR —We now return to Senator Faulkner to complete some questions in relation to the Scherger Base in Queensland.

Senator FAULKNER —Madam Chair, as you will recall yesterday, we were canvassing an issue in relation to supply of concrete on Scherger Base by a company called Cape York Concrete. Specifically in relation to the contract to which we were referring, I wonder if Mr Corey or any of the other officers at the table might be able to provide us with some information about the details of when this particular contract was let and so forth.

Mr Corey —The contract was let in the period between 21 April and 24 May 1999.

Senator FAULKNER —Between 21 April and 24 May?

Mr Corey —That was when the contract was let and the works were executed.

Senator FAULKNER —What was the tendering process for this contract, Mr Corey?

Mr Corey —The tendering process was following Defence procurement guidelines. Procurements under $250,000 can be deemed simple procurements provided adequate research is done to ensure that we get value for money in the decision that is made. The decision on the procurement rests with the delegate, who in this case was a member of the operational facilities flight. The simple procurement process involves obtaining quotes verbally, or doing sufficient research to ensure value for money in the process. A quote was obtained from Cape York Concrete, and documentation from the other competitor in the region, Boral, indicated that Boral's prices were some $40 minimum per cubic metre in excess of that of Cape York Concrete. Some of the add[hyphen]on costs associated with Boral's way of doing business indicated to the procurement officer that the value for money was better value for money in going with Cape York Concrete, which he did.

Senator FAULKNER —Under the Defence procurement guidelines, this particular contract was under the value of $250,000. I think that is what you are saying, Mr Corey?

Mr Corey —That is right.

Senator FAULKNER —Could you indicate what the value of this particular contract was?

Mr Corey —For the concrete, the original estimate was $150,000. In the final contract it was $175,000. It was for, I think, 583 cubic metres of concrete—in contrast to the figure I gave you yesterday.

Senator FAULKNER —That is $175,000. That is the final contract price?

Mr Corey —That is the final cost, yes. It was $175,500, to be exact.

Senator FAULKNER —Thank you, Mr Corey. Can you give me those cubic metre figures again, please?

Mr Corey —It was 585 cubic metres.

Senator FAULKNER —Thank you for that. The amount of $175,500 was paid to the contractors, Cape York Concrete? Can I be clear on that?

Mr Corey —The documentation I have in front of me suggests that that was the case. There is an invoice here from Cape York Concrete. I can only assume that it has been paid.

Senator FAULKNER —How much is the invoice for?

Mr Corey —It is for $175,500.

Senator FAULKNER —What is the date of that invoice?

Mr Corey —It is a pretty bad copy. I cannot read the date on it, I am sorry, Senator. I can probably get that for you.

Senator FAULKNER —Can the invoice be tabled for the benefit of the committee, please?

Mr Corey —Yes, I can do that.

Senator FAULKNER —Thanks very much.

Mr Corey —I do not think you will be able to read it, though.

Senator FAULKNER —If we cannot read that one would you perhaps consider providing a cleaner copy that we could read?

Mr Corey —Yes.

Senator FAULKNER —Would you be able to have a stab at the date? I am interested in the time lines here.

Mr Corey —The work was completed in the period, as I said, but I can probably get an actual date of the payment, yes.

Senator FAULKNER —What you are saying to us in terms of 21 April and 24 May is that the work commenced some time on or after 21 April and was completed some time on or before 24 May. I think that is what you are saying to us.

Mr Corey —That is exactly what I am saying. The people who were involved in the work arrived in Scherger on 21 April and left on 24 May.

Senator FAULKNER —Thank you. But let us go back to some of the time lines that are involved in actually letting the contract itself. You have told us that the delegate is responsible for obtaining quotes and engaging in, I think, an adequate level of research—`sufficient research' I think were the words that you used. That is the delegate's responsibility. I do not want to put words into your mouth, but I think it is important that the committee does understand what the delegate's responsibilities are in this regard, and perhaps you might provide the committee with—

Mr Corey —If I could read out the guidelines to the delegate, they say:

Within the framework of measures taken by Defence to reduce tendering costs to industry, purchasing officers can play their part by:

. fully researching and understanding the market so that the appropriate method of procurement is chosen to help find the right supplier. For example, it would be appropriate to use a sole source type arrangement, instead of public invitation, when it is known the requirement can only be met from a sole source.

In these circumstances a public invitation is not appropriate there anyway. So I guess that is the guidance to him. There is a page and a half on value for money that I can table for you.

Senator FAULKNER —Thank you, Mr Corey.

Mr Corey —And the determination of a simple, complex and strategic procurement I can also table for you.

Senator FAULKNER —That is appreciated. So the situation here is—I think you or Wing Commander Nicholson yesterday indicated, or it may have been Air Marshall McCormack; one of the witnesses at the table, anyway—that the work was identified in September. I understand that this was effectively at the time the base was opened—the first time that aircraft had actually used the base, and that makes sense.

Mr Corey —That is true.

Senator FAULKNER —At that time in September 1998 the need for these works was identified.

Mr Corey —Can I just correct that, Senator? When the base was opened the people who went there to activate the base at that time did some work and developed some paperwork to develop a case to say that there were deficiencies on the base from an operational viewpoint. That paperwork, and I will have to check the date, probably would have taken three months or more to actually arrive down here with a request to do works. At that time a decision was not taken whether we would do those works or not. We actually went through a process of saying, `What sort of priority do these works really have?', and the decision to undertake these particular works was done on an opportunity basis when the Operational Facilities Flight was
deployed to Scherger. So I think the timing is not September through to April. I do not know exactly when the decision was made to do the works but we can probably find that out.

Senator FAULKNER —I would appreciate that. Do you know who made the decision? It may have been on an opportunity basis, but there must be some line of responsibility here. I mean the operational—

Mr Corey —We would have funded it from my organisation so that would be the best source of knowing when the decision was made to proceed with the work.

Senator FAULKNER —Yes, but the Operational Facilities Flight would not have done this effectively self[hyphen]generated, off their own back. I would assume that someone would have made a decision at a higher, more central level to progress this particular work. I am not suggesting there is anything wrong with that.

Mr Corey —I think that is probably right. All I am trying to indicate to you is that the time frame would have been much shorter than September. We can find out when that decision was made.

Senator FAULKNER —So you are saying that it probably would have been at least three months on?

Mr Corey —I am not suggesting what the time frame is. We will have to look at that.

Senator FAULKNER —With respect, Mr Corey, you said it might have taken three months for the paperwork to get from—

Mr Corey —It would have taken at least three months, yes—I would stand by that—and probably longer.

Senator FAULKNER —I appreciate that if you do not know the precise detail you cannot provide it. But it is useful at least to understand what the broad parameters are. I do not think we are going to hold you to it, if it is two months, four months, five months or one month. But it is still useful to have an understanding of the sort of time that is involved. What we have here is the delegate making a decision. Just so that I am clear, does the documentation that you are tabling explain to me who and under what circumstances a delegate can be appointed for the purposes of making decisions in cases like this?

Mr Corey —As I said, for up to $250,000. There are three pages of documentation here, of guidelines, for the delegate to make that judgment.

Senator FAULKNER —Yes.

Mr Corey —He will also be guided by people who are on the ground. We have a project officer for the Scherger project up there who has been involved in contracting works worth $143 million over some five or six years. So it is not as if he is on his own to do it; he has other people to rely on for their experience.

Senator FAULKNER —I appreciate that. What I am trying to understand—and I am sure the documentation that you are tabling will be helpful to the committee—is how the process is determined of who is the delegate in these circumstances. I am not asking for the individual's name at this point; I am just asking how decisions are made in relation to who the designated delegate is.

Mr Corey —There is a system of delegation, which again we can provide for you if you wish, that shows at what levels delegations are held throughout the organisation. There are dozens, if not hundreds, of people who have a delegation to approve contracts for works throughout the country.

Senator FAULKNER —But we would not find the delegate in this circumstance in Operational Facilities Flight, I assume?

Mr Corey —You will find the delegate in Operational Facilities Flight. You will find delegates in a whole range of areas. In the event there was a contingency operation and the Operational Facilities Flight was deployed, they would have to exercise a delegation; so they carry the delegation.

Senator FAULKNER —In this case the delegate is a member of that flight?

Mr Corey —He is, yes.

Senator FAULKNER —Thank you, that is what I was trying to get to.

Mr Corey —If you had asked that question, Senator, I could have answered it for you.

Senator FAULKNER —I did ask it but in a very subtle way, I thought. Let me take it back a step. I appreciate that you said that the final invoice that RAAF received—that is an invoice to OFF, is it? I know you tabled it.

Mr Corey —An invoice from OFF, it would be.

Senator FAULKNER —It is an invoice from OFF to—

Mr Corey —Defence.

Senator FAULKNER —To Defence?

Mr Corey —I presume it came to us. We have paid the bill, so I guess it comes to us.

Senator FAULKNER —Can you explain to me how the invoicing procedure here works so that I am clear?

Mr Corey —I would be guessing, I must admit, but from my experience I would suggest that, when we actually contract someone to do the works, they would provide us with an invoice that says, `They have supplied 585 cubic metres of concrete in one, two or three'—

Senator FAULKNER —Who is `us'?

Mr Corey —Defence. They would say that they have provided the Department of Defence at Scherger with probably three different batches of concrete, as I understand it, totalling 585 cubic metres and valued at $175,500. Then we would raise a payment advice, a claim would be raised, it would go through the system and a cheque would go to Cape York Concrete.

Senator FAULKNER —The invoice that you are talking about, could the secretariat—

Mr Corey —When I have gone through my papers, I have not actually got an invoice. I have got something else. I have been advised that it is not an invoice that I have in front of me.

Senator FAULKNER —I am talking about the invoice that you said you were tabling.

Mr Corey —I will table the invoice. It is out in the back room.

Senator FAULKNER —While the questioning is progressing, Mr Secretary, if we could have that invoice tabled quickly so that I can try to eyeball and understand some of these processes a little better as we work through the issue. I thought you said you had an invoice in front of you, Mr Corey.

Mr Corey —There are two out in the back room that only total $126,000, I have been advised. We have not got the final one yet.

Senator FAULKNER —Whatever you have got, Mr Corey—

Mr Corey —I am sure we can table the ones that we have.

Senator FAULKNER —If that could be done while we are moving through this so that I can try to get a grip on this. So we do not have an invoice for $175,000. Why do we not try to establish what we do have an invoice for—

Mr Corey —I have been advised that we have invoices for the total amount, but the only ones we have here in Canberra—you realise Weipa is some 5,000 miles away.

Senator FAULKNER —I do appreciate that, Mr Corey.

Mr Corey —There are the two that we do have.

Senator FAULKNER —Thank you. Do we know in this case whether the delegate has obtained written quotes?

Mr Corey —We know he has not obtained written quotes. They obtained verbal quotes from Cape York Concrete and they had a copy of the price list, dated February 1999, from Boral, which indicated Boral's prices, including a loading for Scherger.

Senator FAULKNER —Although the final amount to be invoiced is $175,500—I appreciate that there may be a number of stages of the invoicing process; that is quite understandable and explicable—I understand from you that OFF assumed this work would be in the order of $150,000. So effectively a verbal quote would have been obtained for works for around that amount. Or let me make it precise: did Cape York Concrete verbally quote $150,000 for the works we are talking about on Scherger?

Mr Corey —They quoted $300 per cubic metre for the supply of the concrete.

Senator FAULKNER —Did OFF understand how much concrete would be required? I imagine they would have a pretty fair idea.

Mr Corey —Based on their original estimate of $150,000, I guess they assumed it would be 450 cubic metres.

Senator FAULKNER —So they had a pretty reasonable idea.

Mr Corey —My maths is probably not right—it is probably 500 cubic metres.

Senator FAULKNER —And are you saying that it turned out to be 585 cubic metres?

Mr Corey —That is right.

Senator FAULKNER —For a sum of money, let us say around the $150,000 figure, in the RAAF is it common practice not to receive written quotes for work of that value, for that sort of expenditure?

Mr Corey —The procurement guidelines do not require them to have written quotes if it is assessed as being a simple procurement. Purchasing concrete from a concrete supplier is quite clearly a simple procurement. They had a price list from Boral which showed the Boral prices were $412 per cubic metre, which included the aggregate. The aggregate that was supplied was assessed at being at a maximum price of $60 per cubic metre, and therefore they made a judgment. I might add there were also other factors, in that some of the other on[hyphen]costs that were in the Boral written price list, which they had used previously on the Scherger base, indicated that in a value for money context Cape York Concrete were quite clearly the value for money provider. There is nothing in the documentation that I have seen that suggests anything different.

Senator FAULKNER —I am just having a look at those invoices now.

Mr Corey —I better have a look at them as well!

Senator FAULKNER —They might make more sense to you than they do to me. So in relation to the first invoice, the Defence Estate Organisation was invoiced before the work commenced.

Mr Corey —That would normally be the way, but maybe not. I do not know how they work their actual stuff. It all depends whether they put a quote in or—

Senator FAULKNER —You would have more of an idea than me, I can tell you.

Mr Corey —This looks like it is in response to a purchase order, which is number 24499. I would say that this is after the event.

Senator FAULKNER —After the event?

Mr Corey —Yes.

Senator FAULKNER —How could it be after the event?

Mr Corey —A purchase order has gone out there. Are we reading the same document?

Senator FAULKNER —Yes.

Mr Corey —The purchase order says purchase order number E920019D, and it is to supply 300 cubic metres of concrete at $300 a cubic metre. Then down the bottom it says that it was approved and received on 24 April 1999. Someone signed it off. It looks to me like that was after the event, and the next one looks similar.

Senator FAULKNER —Would that need to be received and approved by the delegate or by a delegate of the delegate?

Mr Corey —No. You have a certifying officer who says, `Yes, the service has been provided.' Somebody would have said, `Yes, the concrete is there. It has been poured. We've received it.' There isn't some suggestion that the concrete wasn't provided, is there?

Senator FAULKNER —Not from me. No, none at all. But if that is the case, please let us know! The concrete plot really thickens if that is the case. You are saying that there are only two groups on the cape that the Defence Estate Organisation could sensibly go to. That makes sense. The supplies would obviously be limited on the cape. You have named who they are. A verbal quote was received from one and a price list from another. Would that be an accurate summary?

Mr Corey —That is my understanding.

Senator FAULKNER —Is it enough to get a price list from a prospective supplier? Is it possible, given the amount of concrete to be poured in this case or the sort of quality of concrete and so forth, that the price list might be a starting point for any quotation or contract negotiations?

Mr Corey —That is not an unusual circumstance. I agree with that. In the case of this project, Scherger has been dealing with Boral over five or six years as the sole supplier of concrete in the area. I guess they have a pretty fair understanding of what his prices really are. There was one other item that may throw some light on it. A representative of Boral visited the base on 20 April and asked for information as to why he had not been allowed to tender for the project. He was given some advice, told why he did not get the job and given the opportunity to come back with a competitive bid before the actual task was undertaken, which he chose not to do.

Senator FAULKNER —But there were, therefore, some concerns by a prospective tenderer. What you are saying to us is that a prospective tenderer expressed concerns on the base about the process that you are outlining to us.

Mr Corey —That is not unusual, Senator.

Senator FAULKNER —No, I am not suggesting it is unusual, Mr Corey, I am merely establishing that that process took place.

Mr Corey —Yes, it did take place.

Senator FAULKNER —Thank you. So a prospective tenderer—

Mr Corey —The only other prospective tenderer.

Senator FAULKNER —I know. I do appreciate that there are limitations because, as you say, of the location of the base, which I am well apprised of, actually. So the research that has taken place effectively is to get a price list from Boral. Was there any follow[hyphen]up for a verbal quote from that prospective tenderer? `Tenderer' is not the appropriate terminology; a prospective supplier of a quotation would be a better way of—

Mr Corey —Nothing in the papers I have seen suggests there was any follow[hyphen]up. There was a verbal quotation obtained. It was compared with Boral's price list and, as I said, the other on[hyphen]costs that were associated with Boral's price list and a judgment was made on value for money.

Senator FAULKNER —We know that a verbal quotation was not sought from Boral; we know that they had a price list in, but no attempts were made to establish whether there might be some sort of discounts in relation to the quality of sand and so forth that might make up the concrete in this particular instance?

Mr Corey —My understanding is that, in relation to quality of sand, provided the sand is washed and having regard to the type of sand that is being used, it has no impact. The assurance was given that the sand used in this was washed; there was a testing profile put in place to ensure that the concrete was of sufficient standard; and the two tests that have been done to date indicate that it exceeds the compression level that was required, and there is still one further test to be done.

Senator FAULKNER —But you are satisfied that, with regard to the two companies that were able to quote for this, there was adequate research undertaken by the delegate and others responsible in this instance?

Mr Corey —Given the experience and the number of years at the base that the project has been under way in Scherger, I am convinced that there was enough research done.

Senator FAULKNER —When was the verbal quote received from Cape York Concrete?

Mr Corey —Some time between the 22nd—

Senator FAULKNER —Can we be more precise? I gather it is some time between September—

Mr Corey —No, I do not know. I would have to take on notice when they actually got the verbal quotation. I should not be off[hyphen]hand about it; I should find out exactly what the date is. I have not got the paper in front of me. I will have to come back to you on the actual date.

Senator FAULKNER —Do we know when the delegate made the determination that Defence would go with Cape York Concrete?

Mr Corey —Seeing that Boral visited the site on 20 April, I can only assume it happened very near that date.

Senator FAULKNER —There would be a paper trail on that, wouldn't there, which is actually—

Mr Corey —There should be a paper trail on that, yes.

Senator FAULKNER —held within Defence Estate, wouldn't there?

Mr Corey —Yes, there would; probably at Townsville rather than in Canberra, though.

Senator FAULKNER —I wonder whether that date could be provided to the committee fairly urgently. I would have thought that would only take a phone call to establish.

Mr Corey —Yes. Somebody is probably already on the phone out the back.

Senator FAULKNER —That is good to hear. Do we know which particular principals in Cape York Concrete, or who in Cape York Concrete, the delegate and others responsible were dealing with?

Mr Corey —Sorry?

Senator FAULKNER —Who were the principals of Cape York Concrete that the delegate was negotiating with?

Mr Corey —I have no idea. I imagine Cape York Concrete is like many of those organisations up there—there would probably be only one or two people you would be dealing with.

Senator FAULKNER —I think you would be right. I think it is maybe like a lot of organisations up there. But Mr Entsch, the member for Leichhardt and Parliamentary Secretary to the Minister for Industry, Science and Resources, is a principal of Cape York Concrete, isn't he?

Mr Corey —I have no idea, Senator. I had never heard of Cape York Concrete until yesterday.

Senator FAULKNER —But, surely, the Defence Estate Organisation would understand who you are dealing with here. If you are going to write a contract—if, in fact, there is a contract; and I think it would be useful for the contract itself to be provided to the committee, if one exists—or come to an agreement to pay an organisation like Cape York Concrete $175,500, you would want to know who you were dealing with, wouldn't you?

Mr Corey —I must admit I have some difficulty with your line of questioning. We do about $800 million worth of work each year in Australia and to get that done we contract it out. We have quite specific guidelines for our major procurements about who we will deal with and who we will not deal with. For simple procurements, we deal with the person who offers the best value for money, and this is a very simple procurement. Supply of concrete is a very simple activity.

Senator FAULKNER —I looked up the House of Representatives register of members' interests and I found that Mr Entsch, the member for Leichhardt, has a shareholding—according to this form dated 7 December 1998—in Cape York Concrete Pty Ltd. Can the minister tell us whether that is still the case?

Senator Newman —Of course I can't.

Senator FAULKNER —You can't?

Senator Newman —Of course I can't. Are you implying that if he is a shareholder, or if any member of parliament is a shareholder, in a company that supplies services to any department of state, that somehow puts the whole question of the contract in doubt or that it is improper? Is that what you are suggesting?

Senator FAULKNER —At the moment I am not implying anything. At the moment I am asking.

Senator Newman —Yes, you are. You quite clearly are.

Senator FAULKNER —You cannot answer that question?

Senator Newman —Of course I can't. I do not know what your shareholdings are, either, or what you have done with the money you had when you were a minister.

Senator FAULKNER —I do not have any shareholdings, just for your information.

Senator Newman —So you lived it up, did you?

Senator FAULKNER —What?

Senator Newman —You lived it up while you were a minister and didn't save?

Senator FAULKNER —Just like most people, in the ordinary course of my activities, I did what other people do with their wages: spend it on the necessities of life.

Senator Newman —Are you asking that Defence should do a—

Senator FAULKNER —I do not have any, if that puts your mind at rest.

Senator Newman —Are you asking that Defence should do a search of the shareholders of each company before they do business with them?

Senator FAULKNER —No, I am asking about Mr Entsch, who is a principal—sorry, who has a shareholding in Cape York Concrete.

Senator Newman —You said `a principal' before; now you are talking about shareholdings.

Senator FAULKNER —Is he still a shareholder in Cape York Concrete?

Senator Newman —Are you asking Defence to search who are the shareholders of a company before they decide who to do business with?

Senator FAULKNER —What I am asking you is—

Senator Newman —Would you please get it straight. Are you talking about principals or shareholders?

Senator FAULKNER —Let us get to the issue of principals. You can't, first of all, tell me whether Mr Entsch is a shareholder in Cape York Concrete?

Senator Newman —No, of course I can't.

Senator FAULKNER —Can you tell me whether he is a director—

Senator Newman —You apparently have information to that effect.

Senator FAULKNER —Can you tell me whether he is a director of Cape York Concrete?

Senator Newman —No, of course I can't. What a ridiculous line of questioning. You are just trying to smear good people in Defence for somehow having done something that is improper.

Senator FAULKNER —I am not trying to smear anyone in Defence.

Senator Newman —That is the implication.

Senator FAULKNER —You are quite wrong, Minister. I am just asking questions.

ACTING CHAIR —Senator Faulkner, perhaps you can explain the relevance of the question in relation to Mr Entsch's shareholding.

Senator FAULKNER —I am asking, Madam President, whether Mr Entsch—

ACTING CHAIR —I wish I was Madam President. I am, sadly, Madam Chair.

Senator FAULKNER —Madam Chair, however you prefer to be called. I am asking, Madam Chair, whether Mr Entsch, the member for Leichhardt and Parliamentary Secretary to the Minister for Industry, Science and Resources, is still a shareholder in Cape York Concrete.

ACTING CHAIR —Senator Faulkner, I think we have established that the minister is not able to answer that question.

Senator FAULKNER —Thank you. So now I am asking: is it true that Mr Entsch is a director of Cape York Concrete, even though he has not provided that information on his pecuniary interests return?

ACTING CHAIR —Clearly, we are not able to answer that question either at this stage.

Senator FAULKNER —The minister might care to quickly establish that with the Prime Minister's office so that the committee can be apprised of this as soon as possible. Would you undertake that course of action, Minister?

Senator Newman —I am sure that the directors of that company are on the public record, Senator. You can find that out for yourself.

Senator FAULKNER —The reason I am asking is that if he is a director, it does not appear on his statement of interests. Would you be able to explain that?

Senator Newman —We are currently examining the estimates for the Defence budget. Madam Chair, these questions are not appropriately directed either to me, representing the minister, or to the officers, who are dealing with a very small contract in a very remote locality of Australia where there are two organisations who can supply concrete. I have not heard anything in the answers that have come from the officials to suggest that anything improper has been done by Defence. If that is what the senator is suggesting, then he should look very carefully at what he is implying.

Senator FAULKNER —Madam Chair, I am asking questions. I am not suggesting that anything improper has occurred in relation to Defence.

Senator Newman —In his attempt to somehow smear Mr Entsch—

Senator FAULKNER —Don't put words into my mouth. I am asking questions as I am entitled to do—

Senator Newman —he is in fact smearing the officials—

ACTING CHAIR —Order, Senator Faulkner! The minister is speaking.

Senator FAULKNER —and I won't allow you to cover this up.

Senator Newman —Of course I wouldn't cover up anything that was wrongdoing.

Senator FAULKNER —Well, answer the questions then. Is he still the company secretary?

Senator Newman —Madam Chair, will you please call this man to order. He is offensive.

ACTING CHAIR —Senator Faulkner, the minister has already indicated to you several minutes ago that she does not have the answers to those questions.

Senator FAULKNER —I have asked her to take them on notice.

ACTING CHAIR —I am aware that you have asked her to take them on notice. I am making the point that she is not able to supply you with the information that you are currently requesting. Do you have any further questions for Mr Corey?

Senator FAULKNER —Yes, I do.

ACTING CHAIR —Would you please proceed.

Senator FAULKNER —I have a question now to the minister. I want to ask whether Mr Entsch is the company secretary of Cape York Concrete.

Senator Newman —I am not the minister responsible for parliamentarians' interests and this is the wrong place to be asking those questions.

Senator FAULKNER —Can you inform the committee whether Mr Entsch has himself conformed with the Prime Minister's code of ministerial conduct?

Senator Newman —Once again, this is not a committee responsible for members' and senators' interests and Senator Faulkner knows full well that he is asking the questions in the wrong place.

Senator FAULKNER —Can you take it on notice and ask the Prime Minister and perhaps come back to us.

Senator Newman —That is not appropriate for the Defence estimates, either. You will have to go elsewhere for that information.

Senator FAULKNER —So you cannot confirm—

Senator Newman —No, I cannot assist you in this matter.

Senator FAULKNER —You cannot confirm that the parliamentary secretary has conformed with the Prime Minister's code of conduct?

Senator Newman —We are here examining the Defence budget and expenditure of Defence moneys. That is not an issue for me representing the Minister for Defence.

Senator FAULKNER —It is very disappointing to hear that you will not take those—

ACTING CHAIR —Senator Faulkner, could I make the point that there is no suggestion that Mr Entsch's statement of interests is in any way out of date or wrong. Could we proceed with questions on the contract.

Senator FAULKNER —Madam Chair, you obviously have not been listening.

ACTING CHAIR —I have been listening very carefully.

Senator FAULKNER —Then you would understand, Madam Chair, that if Mr Entsch is a director of this company, then clearly that has not been declared on his most recently published statement of interests.

ACTING CHAIR —Questions related to those matters are not part of the Defence estimates.

Senator FAULKNER —I am sorry; the statement that you are making as an intervention—I might say, an inappropriate one from the chair—is plainly wrong. I have a final question. I would like to know—and this is directed to the minister; if she does not know, perhaps she can take this on notice and come back to the committee also—whether Mr Entsch has declared these interests to the Prime Minister as part of the Prime Minister's system of a private declaration of interests. I would appreciate it if the minister would come back on that issue as well. I thank the officers for their cooperation.

Senator Newman —Madam Chair, I will not be coming back with answers to any of those questions because Senator Faulkner, as the Leader of the Opposition in the Senate, is well conversant with what is appropriately covered in each department's estimates and those questions were not for this particular committee.

ACTING CHAIR —If there are no further questions on Air Force—

Senator HOGG —Yes, there are. Not surprisingly, I want to revisit the issue that I asked about on the last occasion with respect to the Salt Ash Weapons Range. Some of the questions I will ask fall within Mr Corey's domain. Firstly, can RAAF confirm that there was an incident last week in which two FA18s flew at low levels directly over the Moffatts' property, turned near Swan Bay and then flew directly over the property again?

Air Marshal McCormack —We cannot confirm two, we can confirm four.

Senator HOGG —That is even better.

Senator WEST —That matches the photographs.

Senator HOGG —That matches something else I have got, so that is even better. With regard to the description that I just gave—that not two but four FA18s flew directly over the Moffatts' property at low levels—is that confirmed at low levels?

Air Marshal McCormack —About 800 feet.

Senator WEST —So if the wheels were down they would be able to see the tread on the tyres.

Air Marshal McCormack —The reason they were at 800 feet was that it was bad weather that day and the leader of the flight was trying to position his aircraft to get back over the field. So it was a case of keeping the flight of four in visual contact, VFR situation, and get back into the field. Those are the pressures that you get under. With all the best will in the world, you are not going to be able to miss an individual house if the case is getting into the field.

Senator HOGG —So it just happened to be the Moffatts again.

Air Marshal McCormack —I can assure you it was not deliberate against the Moffatts.

Senator HOGG —I am not suggesting for one moment it was deliberate, but unfortunately—or fortunately, whichever way one might look at it—it was the Moffatts again. They flew at low levels, turned near Swan Bay and then flew over the property again. That implies to me that there were two passes of the property.

Air Marshal McCormack —Yes. They flew out from the airfield and then had to get back into the airfield. The open space where there were not clouds just happened to be over that area.

Senator HOGG —All right. If there was bad weather, as you have said, why did they take off in the first place?

Air Marshal McCormack —There was a family day at the base where the squadron had the wives and kids come in and see what dad does. All the airmen and technicians came in and they flew four aircraft that day for that purpose. It is to show the families what dad and mum do.

Senator HOGG —I accept that, but could it not have been foreseen that this would impact upon the Moffatts and their property, which has been the subject of a fair deal of controversy, as I understand it, over a period of time?

Air Marshal McCormack —The weather moves.

Senator HOGG —I understand the weather moves.

Air Marshal McCormack —To say it is going to be clear over the Moffatts' or not clear over the Moffatts' would be totally unpredictable. The captain of the lead aircraft has to make a decision at the time and that was his decision.

Senator HOGG —Was the incident reported to the base commander?

Air Marshal McCormack —Yes, it was. It was verbally de[hyphen]briefed to Mrs Moffatt. She asked for it in writing and she has been given a total explanation in writing. That was done before the weekend.

Senator HOGG —I understand you said there was bad weather. It must have been fairly severely bad weather for the flight to have been at 800 feet.

Air Marshal McCormack —No, 800 feet is not what we would call low level; 500 feet and below would be low level.

Senator HOGG —As I understood it, there are no low level flight tracks for the FA18s below 1,500 feet close to the Moffatts'?

Air Marshal McCormack —Senator, you are talking about two different things. The flight tracks are for the weapons range. These people were not involved in Salt Ash. You have to remember that Williamtown and Salt Ash are one big unit. We try to keep the public happy while we are still using very noisy aircraft with explosive weapons. It is a balance between the two, but at this stage they were just doing a flight out of Williamtown. It had nothing to do with the range.

Senator HOGG —Undoubtedly, though, it was a cause of grave concern for the Moffatts. Getting back to the issue of the range itself, I am aware that the RAAF has attempted to provide some relief to the Moffatt property by relocating their Macchis pop run 400 metres further to the north away from Oyster Barn. Can you confirm for me that there is a flight track tolerance of 0.25 of a nautical mile, or approximately 400 metres, either side of the nominal path, with the result that some aircraft continue to pass directly over Fishermans Village?

Air Vice Marshal Titheridge —The tolerance in the range area and on these sorts of tracks is plus or minus 200 metres. I can actually guarantee that the Macchis do not overfly buildings.

Senator HOGG —And they do not pass directly over Fishermans Village?

Air Vice Marshal Titheridge —No, Senator, they do not.

Senator HOGG —If I can move on, I think these questions probably fall to Mr Corey; I am not too sure, but I am sure you will sort it out.

ACTING CHAIR —We might have a morning tea break now, or would you prefer to complete your questions?

Senator HOGG —I have got another two pages of questions.

ACTING CHAIR —We will stop now.

Proceedings suspended from 10.31 a.m. to 10.48 a.m.

Senator HOGG —Does the Department of Defence ever compensate owners of noise affected properties or businesses or does it purchase them? If so, what criteria are used?

Mr Corey —We actually provided you with an answer to that in your question on notice that you asked during the last hearing on 5 May. We said:

. . . Defence does not acquire noise[hyphen]affected property unless there are exceptional circumstances. There are no such circumstances in relation to the Fishermans Village Resort. Notwithstanding, it is not Defence policy to compensate owners of such properties.

That is the formal policy that exists. Where we want to extend something or we have changed the way we operate to bring in a new platform, then it may well be that we have to acquire
properties. But where we have been operating for a number of years, we do not acquire properties.

Senator HOGG —I have been given a copy of a noise impact assessment that was prepared for the Moffatts by Caleb Smith Consulting in May 1999, and that is after the movement of the pop runs. I would just like to go through this to get your views. The assessment finds:

The summary clearly shows exceedances of all criteria referring to instantaneous levels of relatively long term environmental noise sources, noise levels very close to the related transportation criteria which assess daily average noise levels, and clear exceedances of the recommended ANEF limits for residential and tourism (hotel, motel) zones.

It should be noted that only two aircraft were active during the noise measurement periods, whilst it is not unusual to observe four aircraft (2 experienced pilots, 2 trainees) flying over the same nominal tracks at the same time with resultant increases in daily average noise levels. With 4 aircraft flying in the area, for a total flying time of just less than an hour per day, all related environmental noise criteria are exceeded.

That is from the report commissioned through Caleb Smith Consulting. Defence maintains that the movement of Macchi low level track places some of the building in the 20[hyphen]25 ANEF contour and the rest under a lower ANEF contour. However, the report finds:

This assessment of RAAF aircraft noise received on the Moffatt property, including a review of predicted ANEF noise contours and actual site measurements, has shown noise levels exceeding not only the applicable aircraft noise criteria (ANEF contours) but all related criteria applied to other sources of fixed and transport related environmental noise.

Would you agree that a reasonable person would conclude that the Moffatts' property is seriously noise affected, based on that report?

Mr Corey —I am not aware of the report you are referring to, Senator, so I cannot really comment.

Senator HOGG —I will be able to provide you with a copy of the report, as I understand. It would seem to me that the report is an independent report. I do not think it is trying to fudge the results. It is a report that states quite openly the dilemma that the Moffatts find themselves in in this long[hyphen] running battle between themselves and Air Force. I am aware that one of the reasons why the department is not compensating the Moffatts is that they do not believe the Moffatts have demonstrated that the downturn in their business is attributable to Defence activities.

I have in front of me a letter from K.H. Perry and Co., chartered accountants, regarding the Moffatts' business. I can supply you with a copy of this letter as well. It states:

The financial statements for the business reflect the dramatic decrease in turnover with the business going from a seven day a week affair to only trading two days per week over the weekend when the RAAF aircraft are not carrying out manoeuvres.

The financial statements also reflect the business is flourishing every weekend and the Moffatts have been dedicated to holding onto that trade in order to keep their business alive, and to support their outstanding mortgage commitments.

On the last occasion that I raised this issue I mentioned that the financial crisis confronting the Moffatts was serious indeed and, of course, they attributed that to the changed circumstances brought about by RAAF. That letter from K.H. Perry and Co. continues:

The Moffatts' reputation as excellent operators in the Tourism and Hospitality market place has been severely affected as the operating hours have become unpredictable and several international contracts have been jeopardised through the unreliability of the resort and restaurant who have been attempting to trade around the RAAF flight program.

The economic loss to the Moffatts is substantial. The development is now at a standstill and with the withdrawal of financial arrangements, the Mortgagee is considering taking possession of the development.

Not only have the Moffatts had to suffer the total devaluation of assets that were valued in excess of $3 million pre ANEF, but have had to significantly inject funds from private resources over the past twelve months whilst waiting for the Government to address the situation.

What investigations has the department made to determine the level of economic loss by the Moffatts? Has there been any investigation at all?

Mr Corey —No, there has not been any investigation. The Moffatts' business arrangements and their viability is really a commercial judgment for them, I would suggest.

Senator HOGG —That is the vexed question, Mr Corey. They claim that as a result of changed circumstances brought about by the RAAF, their business has suffered adversely and that, as stated in that letter, their assets were valued at $3 million pre the ANEF and of course now have little or no value because of the training at the Salt Ash Weapons Range. Have the Moffatts provided to Defence any statement of economic loss as a result of the changed circumstances that they see arising, whether or not Defence agree with those changed circumstances? Has that been the subject of any discussion between the Moffatts and Defence?

Mr Corey —The only information I have seen in that context are some general statements about the impact of RAAF operations on their business. I have not seen anything in detail and we have not had any discussion with the Moffatts.

Senator HOGG —Has there been any discussion between the Moffatts and the local base commander—I do not know how long the current base commander has been there—or any previous commander, on the economic loss or potential economic loss because of the changed flight paths?

Mr Corey —I will have to ask one of my RAAF colleagues to answer that.

Air Marshal McCormack —I missed that last question but you must realise that we have been flying Vampires and Macchis on that range since way back in the sixties. There has been a slight increase over the last two years of Macchi training because of our increase in flying training for Macchis, but that is the only change—a slight increase in the numbers of Macchis flying, not significant numbers like you are talking about.

Senator HOGG —I understand there are always two sides to a dispute and the Moffatts' view of the world is obviously one at odds with the view that has been adopted by Defence. My question, Air Marshal, was: have there been any approaches by the Moffatts to either the existing base commander or any predecessor—given that I do not know when the current base commander was appointed—on the issue of economic loss or potential economic loss as a result of what the Moffatts see as being changed circumstances brought about by the RAAF?

Air Marshal McCormack —I know that the base hierarchy has been talking to the Moffatts, as you can imagine, almost constantly over the last year or so. Whether the specifics of economic loss have been raised, I am not sure.

Senator HOGG —Could you take that on notice and find that out for me please? I am not just concerned about economic loss retrospectively, I am looking at whether there was any prospective statement by the Moffatts to either the current base commander or a former base commander about what they saw as being potential economic loss. In other words, if we went back, say, two or three years, was there a statement by the Moffatts to the then base commander that there would be an economic loss as a result of changed circumstances?

Air Marshal McCormack —We would have to take that on notice.

Senator HOGG —I accept that you will have to take that on notice. I am just trying to find out what has actually transpired on this. Mr Corey, do you have something?

Mr Corey —No. The only information that we have had from the Moffatts is, as I said, in general terms on their assessment of the value of the property when they first directed it and their assessment of what the property is worth now. We have received nothing more than that from them.

One other point that I should clarify is that you talked about pre[hyphen]ANEF and post[hyphen]ANEF. That really is a meaningless term in many ways, because all we ever provided was a draft noise exposure forecast that indicated what the likely noise limits were around the property. In the event that council were to take the noise exposure forecast and actually legislate to control the properties within those noise areas then it would be a different circumstance and it could impact upon their property. But until such time as the council actually pick this up and run with it, I do not think there is too much to debate.

Senator HOGG —I hear what you say. Whether or not the council pick it up and run with it does not answer the problem that the Moffatts have—that is, the noise problem. The noise problem does not change.

Mr Corey —The noise problem, as Air Marshal McCormack said, has been there since 1960 and perhaps earlier. It is not something that has just emerged; it is something which has been there for 40 years.

Senator HOGG —The Moffatts are stating that the noise problem has got worse. Otherwise I do not think they would be raising it with this tenacity and forthrightness. My experience of life is that, if someone has a fairly shallow case, they will pursue it for a while and then, in the end, you can wear them down. These people are either a very tenacious group or very mad. I do not think they are the latter; I think they are the former. I think they have been badly aggrieved by the whole process and they are seeking to have this issue resolved. That is all I want to pursue on that issue at this stage.

There is just one thing about the event that happened recently in terms of bad weather. At some stage, I recommend that we have a look at the photographs that they have supplied me of the flyover that day. Whilst bad weather moves and weather moves, it looked inappropriate from the photograph that there was a flyover that day. The bad weather was not simply to the left or to the right of the property with a clear space—that is not shown. It really begs the question why those four FA18s took off that day, given the weather in the photograph.

Air Marshal McCormack —The limits for take-off for—

Senator HOGG —You have not had the benefit of seeing the photographs, so I am not asking you to comment on them.

Air Marshal McCormack —No, I am not commenting on the photographs. You said that you were questioning why the aircraft took off at all. I can assure you that they would not have taken off if it was not considered safe by the base executive.

Senator HOGG —I am not doubting the safety; safety is not the issue. The issue is that, in taking off, they were immediately placed in the position of overflying the Moffatts, which would have been the most unfortunate consequence of any take-off.

Air Marshal McCormack —On that other issue, it may be worth while to record the numbers of flights. I am not sure whether we answered the question on the number of Macchi sorties when they talked about an increase. Do you have that as a question on notice—we had that last time?

Air Vice Marshal Titheridge —Last time I mentioned the figure of 88 that was reported in 1997—that was the 1996 figure. I think I might have reported at the additional estimates 120. In fact, the number for 1997 and 1998 is 115 days that the range had been used—

Senator HOGG —One hundred and fifteen days.

Air Vice Marshal Titheridge —In each of the years 1997 and 1998.

Air Marshal McCormack —That is actual usage, not programmed usage.

Senator HOGG —Right. When were most of those days—weekends or weekdays?

Air Vice Marshal Titheridge —All weekdays, no weekends.

Senator HOGG —All weekdays?

Air Vice Marshal Titheridge —Correct.

Senator HOGG —Thank you. That is as far as I need to take that issue at this stage.

Senator WEST —Can I have a list of what Air Force assets are not operational at present?

Air Marshal McCormack —That gets into the classification area, if you are talking about aircraft.

Senator WEST —I am talking about your assets which includes aircraft.

Air Marshal McCormack —Are you talking about trucks, buses, buildings? It is a very broad issue.

Senator WEST —Yes. You are basically in the use of aircraft. Are there any other major assets apart from aircraft that are not operational?

Air Marshal McCormack —There are all the radar sites. There are thousands and thousands of items of equipment if you just say, `What are the assets?'

Senator WEST —In broad categories. We have asked this of some of the other two forces.

Air Marshal McCormack —But it was more specific because general purpose trucks, I believe, was one of them.

Senator WEST —That was what Senator Hogg was asking Army about and, I recall, asking Navy also. They were basically interested in their ships. Your aircraft would be your major assets, would they not?

Air Marshal McCormack —That is what I am trying to get down to. Are you talking about aircraft? Are you talking about ground equipment?

Senator WEST —Do you have major ground equipment that is not operational?

Air Marshal McCormack —A radar unit at times would be down for servicing.

Senator WEST —I am not terribly interested in the routine, but are there major assets—particularly your aircraft—that are off[hyphen]line for a reason that is not associated with routine maintenance?

Air Marshal McCormack —We have scheduled maintenance and unscheduled maintenance. If a bird goes down an intake, the engine has to be changed, therefore it is an unscheduled maintenance. At any one time, the figures I gave you could be quite misleading because it is a case of when it happened. That is an enormous undertaking.

Senator WEST —So none of your assets are off[hyphen]line in an unexpected manner, in a manner that is going to cause them, for whatever reason, to be—

Air Marshal McCormack —We have some F111G models that are in long[hyphen]term storage. We do not fly them on a regular basis. There are that type of effort where we have put some equipment in long[hyphen]term storage. They are the only ones that are scheduled.

Senator WEST —That note did not mean—

Air Marshal McCormack —Last night I mentioned the F18 engines, but we are meeting our requirements. Our requirement to beat the CPD—the CDF's Preparedness Directive—is being met. We are meeting the schedule of serviceable equipment; in all cases we are meeting those.

Senator WEST —That will do then, thank you; I am happy with that.

ACTING CHAIR —That concludes Air Force. We now move to output one, Command of operations.

Senator QUIRKE —The exercises under the name Crocodile, which were called the Kangaroo series: why the name change?

Air Vice Marshal Treloar —It was a change of the whole process, of the way we approached exercises. It would reflect changed objectives that we needed out of those exercises and, in some cases, it would have reflected a change of components of the exercise and participants.

Senator QUIRKE —How is progress going for the planning of Crocodile 99?

Air Vice Marshal Treloar —Very well. We are already doing Crocodile 99.

Senator QUIRKE —It has already started, has it?

Air Vice Marshal Treloar —Yes. If I may, there are three part components for Crocodile 99. There is a command post exercise. We have just completed the first phase of two phases of the command post exercise. We are working to a war game, which is the second part, at the end of June and the start of July. Then there are two FTXs, which are field training exercises, one in the west and one in the east. The one that reflects directly with us is the one in the east, which is working out of RAAF base Scherger and down through RAAF base Williamtown and in the Shoalwater Bay training area—that is in the September[hyphen]October period.

Senator QUIRKE —What sort of time frame is the exercise over? It has already started and it is going to go into September[hyphen]October. When did it start? When are you projecting that it will finish?

Air Vice Marshal Treloar —There are two phases of the CPX. The first phase was conducted on 10 May to 4 June. The second phase will be 28 June to 9 July. There are two field training exercises that follow on from that. There is Field Training Exercise West, which will be conducted in the Tennant Creek area, and there is Field Training Exercise East, which will be conducted in eastern Australia in the areas I have just mentioned. The time for the FTX West, which is in the Tennant Creek area, is from 17 May to 20 June. Field Training Exercise East will be conducted from 13 September to 27 October.

Senator QUIRKE —That is when the exercise is finished?

Air Vice Marshal Treloar —That is correct.

Senator QUIRKE —As I understand it, the United States is the only country that is participating in Crocodile 99 apart from our own forces.

Air Vice Marshal Treloar —That is correct. This exercise, Crocodile 99, is to work on the interoperability of the two countries' forces, and it is an Australian led activity.

Senator QUIRKE —Other countries, such as Indonesia, have participated at least in the Kangaroo exercises in the past: they are not involved this time?

Air Vice Marshal Treloar —No, they are not.

Senator QUIRKE —Is there some reason for that?

Air Vice Marshal Treloar —No, it never was intended that Indonesian forces would be in Crocodile 99. As I said, this is a two-country exercise or activity and is designed for us to work up our interoperability between the two countries' forces.

Senator QUIRKE —It has replaced the Kangaroo series of exercises. Is that right?

Air Vice Marshal Treloar —Yes, Senator.

Senator QUIRKE —The Kangaroo one used to have Indonesia and other regional countries involved in it.

Senator WEST —Plus lots of observers from other countries.

Mr White —We did take advantage of the Kangaroo exercise the last time round, I think it was, to have participation by Indonesia and one or two other regional countries. The approach we are taking in future is to use, as the Air Vice Marshal has said, the Crocodile series as an opportunity to exercise bilaterally with the United States, which does of course provide us with an opportunity to undertake different types of activity from what we would in a broader multilateral exercise.

There will be opportunities to look for other exercising opportunities with Indonesia and other regional countries, so it is not in any way a move away from a commitment to maintaining exercise as part of the broader defence relationship with regional countries. It is more using different types of exercises for different sorts of activities. The focus of this particular exercise, the Crocodile exercise, is on unilateral and bilateral operations with the United States involving the sorts of techniques and approaches that would be more appropriate to do with an ally than with regional countries. That reflects of course, amongst other things, some quite natural long[hyphen]standing regional constraints on the sorts of exercising I think it is appropriate to undertake.

Senator QUIRKE —What countries will observe Crocodile 99?

Air Vice Marshal Treloar —I will have to take that on notice; I do not know the answer to that question.

Senator QUIRKE —When do you anticipate that the United States and New Zealand will solve their difficulties over ANZUS, and that New Zealand will be able to take part in the largest triennial exercise?

Mr White —It is obviously very much a matter for the United States and New Zealand to resolve.

Senator QUIRKE —You have seen no breakthrough at this stage?

Mr White —`Breakthrough' is a big word; no, I see no breakthrough.

Senator QUIRKE —What is the size of the United States contingent?

Air Vice Marshal Treloar —There are approximately 7,000 US personnel involved in the exercise.

Senator QUIRKE —Is that Australia as well as New Zealand?

Air Vice Marshal Treloar —No, that is US personnel.

Senator WEST —How many Australian?

Air Vice Marshal Treloar —There are 15,000 ADF personnel.

Senator WEST —And how many of the 15,000 are reserves?

Air Vice Marshal Treloar —I would have to ask that question of the single service, predominantly the Army, to give you that answer, but there will be reserves in the exercise.

Senator WEST —Would you take that on notice, please.

Senator QUIRKE —What is the cost of Crocodile 99?

Mr Anderson —We are currently developing a cost estimate of that whole exercise; that should be ready in about two weeks time.

Senator QUIRKE —So you will take that on notice and bring it back to us?

Mr Anderson —Yes.

Senator QUIRKE —I note in the schedule of planned exercises that there are a number of exercises planned with the Indonesians including Kakadu, Cassowary, Rajawali Ausindo, Elang Ausindo, Albatros Ausindo, Trisetia and the New Horizon. In the light of information that has come to light regarding the Indonesian military arming the pro integrationist militias on Timor and of the Kopassus use of East Timorese prisoners on exercise with the SAS, do you consider that a review of defence cooperation with Indonesia might be appropriate?

Mr White —The government of course has paid a lot of attention over many years to building close defence relationships with Indonesia, and exercises with ABRI have been an important part of that. In doing that, successive governments have always paid a lot of attention to balancing the strategic benefits to Australia of building that relationship with strong national priority to uphold and, where possible, in a non intrusive way, transmit Australian views of the proper roles of the military in society and respect for human rights, and we very much continue to do that.

Without wanting to comment on specifics in your question, with respect to the present situation, the government has taken a clear position that, through this process of turbulence and transition in Indonesia—including, of course, a very significant re[hyphen]evaluation by ABRI itself of its role in Indonesian society, mirroring I would guess a re[hyphen]evaluation by many Indonesians about ABRI's role in society—we should, where possible, maintain an active defence relationship with Indonesia and maintain the active exercise program with Indonesia because that serves long[hyphen]term Australian strategic interests.

Senator QUIRKE —The Kopassus group—I do not know if I have the pronunciation of that right—seems to be the one which is causing the most worry where this is concerned, particularly with the programs that have been aired on television in recent times about the use of Timorese prisoners. In fact, as I understand it, the allegations were that SAS forces were used together with Kopassus to deal with insurgency, and these people—the Timorese rebels—were used as the target of this particular exercise. It is a bit of a long bow, is it not, to say that this is just us getting across our views to the Indonesians about the use of the military?

Mr White —There are a few points in that question. Let me try to address them in turn. Before the program went to air, we responded to the makers of the program on the allegation, I think, by one of the people appearing on the program, that SAS personnel had been involved in a training exercise which involved East Timorese prisoners of war. We told them that our clear advice is that that was not the case. Our understanding of the particular incident, which I think was a training program in 1994, was that ABRI soldiers of East Timorese origin were
involved in some aspects of the training and survival but that the ADF personnel involved got no impression that they were prisoners of war in any sense; they were ABRI soldiers who had come from East Timor.

More broadly, our SAS cooperation with Kopassus has been limited to two types of activity. The first is counterterrorism training, and that is training in particular in counter[hyphen]hijack techniques. Successive governments have put a high priority on that for the very direct reason that, as so many Australians travel through Indonesia by air, the chances of Australian lives being at risk in any aircraft hijack situation in Indonesia is quite high. There, therefore, seemed a high strategic interest or a high national interest in Indonesian forces being as competent as possible in performing those very difficult and complex types of operations.

Secondly, there has been interaction between the SAS and Kopassus in normal war roles. This training is not in anyway oriented towards counterinsurgency or internal security operations. There has been no occasion on which SAS forces have in anyway been involved in operations with Kopassus in Indonesia under any circumstances.

Senator QUIRKE —Looking through the PBS, it seems to me that there are fewer exercises planned with our regional neighbours then in previous years.

Mr White —I am not sure about the numbers. I could not give you a comparison there. If it is so, it may reflect one of two factors: first of all, our own attempts to be more cost effective in the way in which we use our exercising effort. Of course, exercises are very expensive activities. They count for a high proportion of our overall expenditure on international engagement activities. The other thing is, of course, that the economic difficulties in South[hyphen]East Asia, where a high proportion of our bilateral exercising takes place, has significantly affected the operational budgets of quite a few of those armed forces and has resulted in a degree of belt tightening there. So that may also be a factor.

Senator QUIRKE —I understand that in February this year the minister told the Temasek Society in Brisbane that the failure to complete the exercise program for 1998 has caused great inconvenience and cost for the ADF and that:

Naturally we are disappointed that the program and multilateral exercises planned for 1998 were unable to be completed, and that some uncertainty has emerged over this year's activities.

This uncertainty imposes a cost on Australia as these exercises are substantial and have long planning cycles and require the identification and commitment of significant assets.

Which exercises were cancelled in 1998 and are there fewer projected joint exercises for 1999?

Mr White —I will just give a bit of background to that. The minister was addressing the situation that arose within the five power defence arrangements—which is, of course, an important focus for a high proportion of our multilateral exercising in South[hyphen]East Asia—following difficulties between Malaysia and Singapore last year that arose primarily from issues outside the defence area but which did affect cooperation under FPDA. The Australia government viewed this as being disappointing. Successive Australian governments have regarded FPDA as a very valuable medium for pursuing Australian strategic interests and regional strategic interests, and the exercising is a very valuable element of that. We were disappointed that this had affected the exercise program and the minister took advantage of his visit to encourage—and, if I may say so, pretty effectively—Malaysia and Singapore to get back into business on FPDA exercising. That succeeded, and an exercise which had been under a cloud, as I remember the history, was rescheduled and occurred. We are continuing to work at maintaining the pattern of FPDA exercising intact as much as possible.

Senator QUIRKE —So you are fairly certain that the projected exercises for 1999 are going to take place?

Air Vice Marshal Treloar —Yes, we are fairly certain, given the vagaries of the real world. The way the planning has proceeded, the indications to us are that we expect to complete the exercises we have planned for this year.

Senator QUIRKE —I presume the changes to last year's program were to do with the Asian economic crisis?

Air Vice Marshal Treloar —It was many factors, but the bottom line, as was mentioned by Mr White, was the fact of an FPDA internal reconsideration of exercise activity. It was started by the Asian economic decline.

Senator QUIRKE —These joint exercises, I gather, have a crucial part for our training of our particular defence personnel.

Mr White —I think they have a number of aspects. The first is that they provide valuable training opportunities for Australian defence personnel. Secondly, they provide us with an opportunity to help develop the capabilities of regional armed forces in ways that we think contribute to broader regional security. At the higher and—if I can put it this way—more symbolic but nonetheless significant level, they are a very powerful and imminent demonstration of Australia's strategic commitment to the security of the region. So, quite apart from their practical contribution to developing capability, they are also very strong and have a very valuable strategic role in the way in which they demonstrate Australia's commitment.

Senator QUIRKE —Thank you very much.

Senator WEST —Can I turn to an article that appeared in the Army newspaper, I think it was late last year, entitled `Having your say'. It relates to concerns that Corporal L Smith of 6 RAR at Enoggera had about voting while on operations and exercises. He said that on the recent Exercise Phoenix many soldiers expected to vote either by postal or absentee and that they had little information on what was happening in their electorates or the overall situation in total. He also said it raises the issue about providing a national newspaper or information on preferences and things like that in various electorates. Do you consider this is an issue? Are there concerns about it?

Mr Tonkin —We have had, as you will recall, some history of issues relating to the provision of the opportunity for personnel posted overseas to vote in elections. There was some difficulty experienced during Rwanda which had some effect on an electorate in Queensland or it was suggested that it might have had some effect on an electorate in Queensland. Our obligation is to provide the ability for the Electoral Commission to communicate with our personnel so that our personnel have the opportunity to exercise their rights to a postal ballot. That requires information to be provided to our people. Our people can indicate an opportunity to vote. In some circumstances of course a mobile polling booth could be provided, depending on the scale of the activity.

We also seek to undertake, when significant numbers of Australian personnel are posted overseas, to provide communications in a more general sense to link our people with the Australian community for issues as significant as the football scores and so on. In the context of an election campaign, again, the transmission of general information is sought to be provided. There is a practical limit as to what can be done. At the base level, we certainly have clear instructions which relate to the opportunities for people to exercise their democratic rights, and those instructions were reviewed following the issues in the Queensland election.
We provide the more general support to our deployed force personnel as best we can through our public affairs organisation so they get access to general community interests. Beyond that, I am not quite sure what we could do.

Senator WEST —I am not sure either. Exercise Phoenix, where was that?

Mr Tonkin —I do not have that information.

Senator WEST —The suggestion is that maybe if they had some access to a national newspaper, at least one per unit or something—

Mr Tonkin —It is a question of the issue of scale, the issue of the notice of the activity and the location of that activity. Depending on where you are, access to daily newspapers can be reasonably challenging even, I suggest, in some parts of Australia.

Senator WEST —As politicians we like to have some thought that they might know whom they are voting for.

Senator HOGG —And what our preferences might be.

Air Vice Marshal Treloar —I have just come back from two years in Malaysia. For any of the elections that were held, state or federal, whatever election of whatever issue came from Australia, I know the people from the top to the bottom had good access to newspaper clippings and reports. I know they could make their decisions in quite an informed manner, and that is a small group of Australians quite a way from home.

Senator WEST —This group were out on exercise in Australia and were probably more remote. They might have been sent for six weeks out to the back of Bourke and had no access to what was happening—no CNN, as my colleague says.

Senator HOGG —While Senator West is looking through her notes, I have a range of questions with respect to our cooperation with Indonesia. In light of the fact that my colleague has just asked a number of questions, is it appropriate to ask those questions now or are they better left to Defence Cooperation?

Mr White —I think it will be more appropriate to do it under Output 20. You will get the same people answering but it will be more orderly.

Senator HOGG —That is fine. They do touch on some of the specific issues that have been here as well. I just want to let you know that.

Senator WEST —Is it correct that there are some satellite contracts to be signed shortly?

Air Vice Marshal Treloar —Yes. I will pass that question to the Acquisition Organisation.

Mr Bonighton —We are at the moment speaking with Optus concerning the prospect of a joint venture, a hybrid satellite, both commercial and military. We are at a fairly delicate stage at this point, but our aim all along has been to look at their offer, which was an unsolicited offer originally, as to how they could meet our requirements and we could benefit from them having to replace some of their existing satellites.

Senator WEST —So you are looking at one satellite option?

Mr Bonighton —Yes, indeed. That aim is to give us some pretty wide[hyphen]band capability. We already have an interim satellite capability that is provided through one of the Optus satellites, but this would give us much more reach.

Senator WEST —I see. But it is still at a delicate stage of negotiation.

Mr Bonighton —Yes, indeed.

Senator WEST —I will leave it there and we will follow that up.

ACTING CHAIR —If there are no further questions on output 1, we will now move to output 6, Military geographic information.

Senator HOGG —The first question is in relation to Indonesia. I understand that we are developing a new memorandum of understanding on military geographic information with Indonesia; is that correct?

Major Gen. Keating —Perhaps I could help with that question. I understand that there is a new memorandum of understanding being developed. The current state of play with that is that, in March of this year, a draft was sent to Indonesia. At this stage, there has been no response from Indonesia, perhaps for fairly obvious reasons.

Senator HOGG —Can you tell us to what extent we share information with Indonesia in this area, or will it be dependent upon the entry into the memorandum of understanding?

Major Gen. Keating —I do not know the detailed answer to that question but the drift of what you are getting at will certainly be addressed in the MOU. That is the best I can do at this stage.

Senator HOGG —How will the memorandum of understanding differ from previous arrangements in this area? Do we know? Has there been a sharing of military geographic information previously with Indonesia? Is what we are seeing now a formalisation of maybe ad hoc arrangements?

Major Gen. Keating —I am not sure of that.

Senator HOGG —Would you take that on notice and find out for me. But I see Mr White coming to the table, so it looks as though I have an answer.

Mr White —We had quite extensive sharing of MGI with Indonesia over quite a long period of time in the 1970s and 1980s. I could not give you the precise dates but, in that time, we undertook a substantial amount of cooperative aerial photography and mapping with Indonesia. The basic arrangements there were that Australia undertook aerial photography primarily and also produced maps. I am not quite sure exactly how much of the groundwork in terms of surveying was involved; I think it was mainly produced from the aerial photography. We shared the resulting photography and maps with Indonesia.

That arrangement, if my memory serves me correctly, was one of the things that fell into disuse in the mid[hyphen]1980s when our defence relationship with Indonesia underwent a period of difficulty. It had not really been revived in a big way until recently—a couple of years ago—when, as I think General Keating suggested, we started looking again at a new MOU to cover MGI cooperation with Indonesia. That has been in the works for a while but, as he suggested, it has not been driven to finality at this stage. People have had other priorities.

Senator HOGG —Was that our initiative or theirs?

Mr White —I am sorry, I just do not know that. I would be surprised if there were not significant interest from both sides as we have obvious shared interests. I could not tell you whether it was specifically the initiative of one side or the other. An idea often emerges in these cases where we have very dense and regular contact. It is not clearly the formal initiative of one side or the other.

Senator HOGG —Could you clarify that for me?

Mr White —I will take on notice.

Senator HOGG —Thank you very much. I understand that we have been reliant for a number of years on the United States for mapping for military use. Is that correct?

Mr Tonkin —Maps of what locations?

Senator HOGG —I am just saying that in the broadest sense.

Air Vice Marshal Treloar —We have our own topographical map units. Some of those exist inside Army so that we can produce many of our own maps for our own area of interest in Australia.

Senator HOGG —Do you rely on the United States for any maps at all?

Air Vice Marshal Treloar —I am sure we do for some of the more remote parts of the world, particularly where there is a US interest. I do not have that detail at my fingertips.

Mr Tonkin —There are shared arrangements. If you take nautical maps, for example, areas of the world are the responsibilities of various countries. In some contexts, clearly the United States would be the ones providing the maps as would the United Kingdom, France and other countries and as we would do for any users in our maritime approaches.

Senator HOGG —Are any of the maps that we produce for military purposes also able to be sold for commercial purposes?

Air Vice Marshal Treloar —To the best of my knowledge, the majority of maps, if not all the maps, are produced perhaps for military purposes. They are general maps. None have military installations placed on them.

Senator HOGG —Are they onsold to the public? If so, what revenue does it generate?

Mr Tonkin —My understanding is that military maps are available through government sales outlets. We have to take it on notice to confirm the nature of the maps that are for sale and how much revenue we get from them. These are nautical maps, military maps and air navigation maps.

Senator HOGG —I do not want you to waste a great deal of time. If it is something that is readily available, take it on notice and give it to me. Under no circumstances do I want a lengthy search.

Mr Tonkin —We will see what we can find.

Senator HOGG —Thank you.

ACTING CHAIR —We will now move to output 21, Effective contribution to national support tasks.

Senator WEST —Can I kick off with asking for progress and details of the Army assistance to the ATSIC Army Community Assistance Project?

Air Vice Marshal Treloar —That question is best answered by Army.

Senator WEST —It is just that it appears in output 21.

Air Vice Marshal Treloar —Yes, Senator, that particular responsibility is to the Army.

Mr Tonkin —We will see if we can find somebody and come back.

Senator WEST —If there is nobody out there—and I presume there would not be at this stage—

Air Vice Marshal Treloar —He was outside. Senator.

Mr Tonkin —We might come back to that, Senator, if you like.

Senator HOGG —Could you outline for us how the Defence Force aid to the civil power and the Defence Force aid to the civil community schemes work, and the average level of assistance that has been provided under both these schemes.

Air Vice Marshal Treloar —In both cases there is a difference. First, defence assistance to the civil community normally occurs when there has been a disaster of some type. An example is the recent hailstorm that went through Sydney. An army contingent was used to help restore some of those houses in the immediate term. Defence aid to the civil power is for restoration of law and order or to react in the case of a terrorist activity or terrorist[hyphen]type activity.

Senator WEST —Have you any estimate on how much it cost the Defence Force to provide the assistance for the hailstorm in Sydney? I know that was a natural disaster so the funding would have been shared around and come from various buckets of money. I hope it was not coming out of yours. You should have been funded for that and not had it classified as a training exercise.

Air Vice Marshal Treloar —I have that detail, Senator. The full cost for ADF support for that operation was estimated at $2.18 million and the Minister for Defence waived the cost recovery with the concurrence of the Minister for Finance and Administration.

Senator WEST —Waived the cost recovery?

Air Vice Marshal Treloar —Yes, Senator.

Senator WEST —Does that mean that Defence is going to be supplemented with $2.18 million from Finance?

Air Vice Marshal Treloar —I do not know the answer to that question I am afraid.

Senator WEST —Is the answer no, or you do not know?

Mr Lewincamp —No, we will not be supplemented; we have waived the cost recovery.

Senator WEST —What impact does that have upon the budget as all these $2.18 millions add up?

Mr Lewincamp —That is true.

Senator HOGG —Don't be so pleasant about it.

Senator WEST —I am trying to get you more money, Mr Lewincamp.

Mr Lewincamp —It is a fact of the way that we operate. We absorb certain costs during the year and we have done so for many years.

Senator WEST —Can someone tell me if that $2.18 million gets classified? Because it was declared a natural disaster, the state had obviously put in its $10 million or the trigger mechanism. After that it went on a dollar for dollar Commonwealth[hyphen]state arrangement. Is that $2.18 million part of the Commonwealth's contribution to this natural disaster funding or not?

ACTING CHAIR —I should let the officers know that the camera that has just arrived is for internal photographic purposes for the annual report and is not media.

Mr Lewincamp —Senator, could you repeat the question?

Senator WEST —My understanding of natural disaster funding is that, after something is declared a natural disaster by the state, and they spend a certain level of money all up on natural disasters in a year, it then triggers in the component from the federal government, so that it becomes a one for one allocation of funding. Is this $2.18 million classified as part of the federal government's contribution towards that one for one natural disaster relief funding or is it handled differently, given that you are not going to get any money out of Treasury for it?

Mr Lewincamp —I am unaware of the relationships with the states for recovery of those costs. The $2.18 million we are talking about here are Defence costs.

Mr Tonkin —It would not be one for one. That would be in the relief which is provided to victims of disaster. These figures are the additional cost incurred by Defence to provide support firstly to the civil community. We would expect to absorb a cost of that magnitude in the normal course of business within the financial year and we make adjustments amongst our other priorities to accommodate that.

Senator WEST —Thank you.

Senator HOGG —If I could just butt in there—

Mr Tonkin —Could I clarify: that was full cost not additional cost.

Senator HOGG —That was what I was going to ask: if they were additional costs. They are not. They are full costs.

Mr Tonkin —It is the full cost to salaries. The real additional cost of the activity is minimal.

Senator WEST —Am I able to go back to the ATSIC Community Assistance Project?

Mr Tonkin —Yes, you are.

Senator WEST —I was wanting an update on the progress of the ATSIC Army Community Assistance Project, please?

Major Gen. Abigail —The ATSIC Army Community Assistance Project has been running now since 1996. Under the current memorandum of understanding there is one project remaining to be completed. That is at Jumbun, a semi[hyphen]remote rural community of about 110 people, 200 kilometres north north[hyphen]west of Townsville. We expect the work at Jumbun to be completed during the period June to September of this year. That will be the completion of the current set of works.

Senator WEST —Wasn't there a budget announcement that there were going to be some more works undertaken?

Major Gen. Abigail —Yes. On 27 May 1998, the Prime Minister noted that there would be a further $5 million for 1999[hyphen]2000 and then on 23 September Senator Herron announced a further $40 million extension to ACAP. Our capacity to undertake the types of works that could be covered by that amount of funding is limited in the next year because of our commitments to the Olympic Games and others. Army's contribution to this program is essentially done on the basis of absorption of the cost, because we are essentially using army engineers; they get training value and job experience value out of it. They are being diverted to Olympic tasks during 2000. We are still going through the process of negotiation of what time frame army support for this program could run over.

Senator WEST —After you have finished the Jumbun project, you are not anticipating that, until after September 2000, you will be undertaking any more?

Major Gen. Abigail —We are not precluding the possibility. There might be some smaller tasks that we could undertake. We are still going through that process of identifying what the projects might be.

Senator WEST —I would like some understanding of what the projects have been to date because I have a concern. I do not think it is anything that the ADF and Army in particular can answer; it is more that Health and ATSIC have to. I have a concern that the projects that are being done have ongoing maintenance requirements, and infrastructure refurbishment requirements eventually. I am trying to get a handle on the nature of what the tasks have been
in order to get some idea of what the refurbishment and the maintenance will be down the track. There is no point you fellows going in every five years to completely renew something when, if adequate funding had been given through another source, the local population or the local areas could have undertaken a maintenance and refurbishment program that would have meant that you did not need to keep repeating the work.

Major Gen. Abigail —I can give you a generic coverage of the scope of army activity to date: construction of houses, sewerage systems, causeways, rubbish tips, football fields and an airfield; maintenance of roads, tracks and a barge landing site; upgrades to water supply systems and wet areas within existing houses; installation of security lighting and upgrades of electrical fuses and distribution boards; and some landscape and fencing work. That is essentially the construction engineers' work.

We also assist with medics, dentists and vet support. That tends to be on the basis that, whilst the project is in a location, our people will be involved with training local community members in personal, oral and dietary hygiene, management of their own dog care programs, and maintenance and operation of basic mechanical equipment that is owned or operated by a community. There is a range of ancillary training activities, community training activities, that are part of the program.

Mr Lewincamp —If I might add, in the annual report last year, on page 65, annex C, that includes a list of the particular projects with a brief description of their scope and their status. It gives a fuller explanation of location and scope.

Senator WEST —Yes. You can see my concerns, though, if somebody else does not put some money into maintenance. I shall pursue it elsewhere.

Senator SCHACHT —You mentioned the services provided by the defence forces for the Olympic Games. Last week in the estimates hearing for Prime Minister and Cabinet, my colleague Senator Ray asked some questions about what would be provided to the defence forces in the budget as supplementation, if any, for the services provided for the Olympic Games. The answer was a bit vague, if I recollect. Are you provided with any extra supplementation in funding for the services you will provide for the Olympic Games?

Mr Lewincamp —Yes. If I could go into some of the background on our support for the Olympic Games, you will be aware that the Commonwealth and the government of New South Wales have signed a memorandum of understanding.

Senator SCHACHT —Yes. That was tabled in the estimates hearing last week.

Mr Lewincamp —That requires Defence to negotiate an individual agreement with SOCOG. We are now in the process of drafting that agreement. In terms of our approach to cost recovery, we have defined three broad categories of the sort of support that Defence might provide to the Olympics. One is assistance or expertise that is unique to Defence, such as security, counterterrorism and things of that sort. Defence has agreed to provide that at no cost because it is a core part of our capability.

Senator SCHACHT —Providing the services of—

Mr Lewincamp —Counterterrorism and security type services. We will do that at no cost. The second category is requests for assistance that is not readily available in the community. Some examples of this are things like warehousing or communications facilities. As a broad principle, we will provide that on an additional cost basis—we will seek recovery of additional costs. Thirdly, there is a category of requests for assistance where the expertise being sought is readily available in the local community. We will provide that only at full cost recovery
or not at all—for example, where they are simply looking for a source of manpower, where we do not think we ought to be in competition with the private sector. They are the broad principles. We are still going through a process of discussion with SOCOG about exactly what their requests will be, and that is far from finalised. So, at this stage, we cannot make any predictions about overall costs.

Senator SCHACHT —Go back one step. The Commonwealth has made available assistance to the Olympics. For example, Customs has received supplementation running into several millions of dollars to meet the increased demand for passenger processing, sniffer dogs and those sorts of things. That is in the budget. I think it runs to $6 million to $8 million at least for Customs. You have been given no figure. All of these things you either provide free or SOCOG pays you?

Mr Lewincamp —Yes, that is the case.

Senator SCHACHT —Did Defence request some direct supplementation for provision of these services? I am surprised if you did not.

Mr Lewincamp —For a complete answer, I would have to take that on notice. My recollection is that, in the discussions leading up to Cabinet consideration of this last year, some estimates were made of possible Defence costs based around certain assumptions. But you will appreciate that at that point the assumptions were so general that they were not particularly meaningful.

Senator SCHACHT —They were general for Customs, too, I should imagine, at that time. I am surprised you missed out.

Mr Lewincamp —I am not sure that we have missed out entirely. I think that—

Senator SCHACHT —But you have said—can I go through these again?

Mr Lewincamp —What I said to you was our approach to three different categories of activity that we will provide, but I think there is still scope for us to seek supplementation from government for some of those activities.

Senator SCHACHT —Out of the existing budget of the pot of money made available overall?

Mr Lewincamp —I believe so, yes. But can I take that on notice?

Senator SCHACHT —Yes. I would like to have an answer by the time we sit again, at supplementary estimates.

Mr Lewincamp —Certainly.

Senator SCHACHT —I know this is not totally in your hands on negotiations. You are dealing with an outside body called SOCOG and you are also dealing with the Prime Minister's department, which is in charge of the overall relationship. Can I just take each of the categories. You said counterterrorism and security expertise is something that you would provide free because you are the only people who have it.

Mr Lewincamp —Broadly, yes.

Senator SCHACHT —Customs are the only people who have the ability to man the barrier, and they are getting supplementation.

Mr Tonkin —The difference, I suggest, is that in the case of Customs it is really a workload determined requirement. If you have a significant number of extra people coming through the airports, you have to have more people positioned to process them. In the context of what we
are providing to date within the Defence budget, it is a contingency capability which is broadly already extant.

Mr Lewincamp —Can I add that we are engaged in discussions at the moment with the New South Wales police—

Senator SCHACHT —The what?

Mr Lewincamp —We are engaged in discussions with the New South Wales Police Force—

Senator SCHACHT —Good luck.

Mr Lewincamp —who have the initial responsibility for handling security at the Olympics. They have made some assessment of their capacity to handle that response and have sought some assurance from the Department of Defence that we can supplement that capacity in things like bomb disposal expertise and things of that sort. We are currently negotiating with them our respective shares of that responsibility.

Senator SCHACHT —Is it the view that because of the Olympics there will be an increased need to look at counterterrorism and security overall in Australia than if the Olympics were not being held? The ubiquitous Mr White. I know we are getting serious when he comes to the table.

Senator WEST —That is a bit rough on the rest.

Senator SCHACHT —I am very much appreciative of Mr Lewincamp's answers, and the briefing he gave us privately was very useful. But I always note that, when something gets a bit ticklish, Mr White sprints to the table.

Mr Lewincamp —It is just that you moved away from money, Senator.

Mr White —Yes, never ask me for a number! The broad responsibility for the security of the Olympics lies with the New South Wales government. As I understand the arrangements, the Commonwealth government is responsible for the things that it is normally responsible for in Commonwealth[hyphen]state relations. ASIO has a specific responsibility in terms of making assessments about security threats in the stronger sense—and, of course, questions on that are not for me to answer. As far as the security issue itself is concerned, what Defence is responsible for providing are our normal counterterrorism capabilities and some additional capabilities to meet the sorts of specific circumstances you might expect to arise in regard to the Olympics.

Senator SCHACHT —So there is an extra demand.

Mr White —They are an extra demand. We are doing additional things to ensure that we are in a position to meet any demands that might be imposed upon us by the Olympics.

Senator SCHACHT —So that is additional, like Customs are doing additional work, Mr Tonkin. Therefore—and this is the point my colleague Senator Ray made last week to PM&C, on your behalf, I must say—why don't you get supplementation for this additional work, this additional demand for security and counterterrorism expertise while the Sydney Olympics are on?

Mr Lewincamp —As I said, I am taking that on notice. I do believe we have the capacity to seek some of that supplementation.

Senator SCHACHT —For No. 1—so you will seek supplementation. Clearly, you are going to have an extra demand.

Mr Tonkin —Ultimately, it is a matter for the minister to determine whether he wishes to seek supplementation.

Senator SCHACHT —I appreciate that. Senator Ray started this discussion last week. He asked why it is that Defence is always the one department that seems to have to always meet all of these costs from internal resources, whereas every other department queues up and gets supplementation.

Mr Tonkin —I could answer that, Senator, but I do not think I will.

Senator SCHACHT —I think you should.

Mr White —Can I try and answer it because it is very—

Senator SCHACHT —I thought this was money; it was out of your area, Mr White.

Mr White —This is diverging into policy, Senator. Of course, it is very nice to observe Senator Ray's continuing loyalty to the portfolio.

Senator SCHACHT —Yes, I think you should note it.

Mr White —Our approach to this issue was, as Mr Tonkin or Mr Lewincamp said, based on the proposition that there are some things that Defence does, and only Defence does. The government—and, for that matter, the taxpayer—thinks they are spending $11 billion or $18 billion a year on this already, so they feel they might have already paid for it and should not supplement us for it. We would always encourage people to supplement us for it.

Senator SCHACHT —But you said this is additional. Is it mentioned anywhere in the budget paper?

Mr White —We are doing more things in security and counterterrorism related areas than we would normally do because, obviously, the Olympics produces a bigger possible demand for those sorts of services. But the government's view has been that they are services that Defence is responsible for providing uniquely and that we ought to rearrange our priorities to continue to provide those. Where we are doing other things such as providing drivers and that sort of thing which is not really—

Senator SCHACHT —I will come to that in a moment. Take provision of staff or people who are expert in counter terrorism. They do not all live in Sydney. Some of them are based elsewhere in Australia. You do not have to be a genius to say that maybe the SAS are not from Perth. If they have to be transferred to be on[hyphen]station in accommodation in Sydney, will you get supplementation for their cost of accommodation or do you pick that up as an additional cost?

Mr White —I do not know.

Senator SCHACHT —I am just using them as an example.

Mr Lewincamp —We would not expect to get supplementation for that.

Senator SCHACHT —But that is an increase in their budget. That is an extra expenditure.

Mr Lewincamp —It is an increased rate of effort for an existing capability.

Senator SCHACHT —Are you telling us you have the spare cash?

Mr Lewincamp —No, I am not saying that. It is a matter of priorities.

Air Vice Marshal Treloar —We would endeavour to use military or defence facilities wherever possible. For example, in the case that you are using, if we were to bring those people across from the west to the east, we would put them into military barracks in the Sydney area.

Senator SCHACHT —Do they get paid an extra allowance for being away from their home base?

Air Vice Marshal Treloar —There would be minor additional costs in terms of that.

Senator SCHACHT —Would you bear the cost of shifting equipment from anywhere else in Australia to Sydney?

Air Vice Marshal Treloar —It depends how it was transported—if it was a defence aircraft, for example, as opposed to a contractor.

Senator SCHACHT —But that is an additional flight. I am trying to help you blokes and you seem to be saying you do not want the money. I cannot work this out.

Mr Tonkin —The point is that, within any given year, organisational elements in Defence have a range of activities. During the coming financial year and the next bit, a higher priority for the allocation of activities would be the Olympic Games. So the longstanding Defence practice in seeking supplementation for activities which we undertake outside what you might define as the normal course of our business is that we firstly determine what offsets there are inside the Defence budget. We never go forward to government with any bid which is a gross or ambit bid. In the same context, in this case we will firstly look at what the offsets are which are available inside our own organisation through changed priorities. If, at the end of that calculation, it is our judgment in recommending to the minister that the additional costs are significant, then it is open to our minister in all normal courses to consider whether he wishes to seek supplementation.

Senator SCHACHT —Can I ask you to take it on notice. Can you provide to the committee what the cost will be to provide these additional counterterrorism security services to the Sydney Olympics. You mention there is additional demand to do it, therefore that is measurable.

Mr Tonkin —What we would seek to provide is a response on what is our present judgment of the additional costs of the Olympic Games. I am not sure that we would wish to be so precise.

Mr White —There may be a classification issue—

Senator SCHACHT —I knew you would say that, Mr White.

I am not asking for the detail of which unit and so on; I understand that. But I would be staggered if, with all of these new accrual accounting measures that Mr Lewincamp and others are insisting on, you cannot identify what you actually spent to provide these additional services.

Mr Lewincamp —We are talking about a forecast of activity—

Senator SCHACHT —Give us the forecast in round figures.

Mr Lewincamp —for next year, in advance of negotiations that are still going on about exactly what support is to be—

Senator SCHACHT —When you complete the negotiations on category 1, counterterrorism and security, provide to us the forecast of what the additional costs would be for Defence.

Mr Tonkin —I am not trying to be unhelpful to you but this is not within the time frame of the responses to questions on notice in this cycle.

Senator SCHACHT —I accept that. It might be provided at a subsequent meeting outside the time frame of this one, but I think that you should be able to provide it without giving away classifications or accidental help to any would[hyphen]be terrorist, et cetera.

Mr Lewincamp —Certainly, I would expect that, following the completion of the Olympic Games, we will be able to determine the full costs for Defence of our contribution.

Senator SCHACHT —It might be a bit late to get the money from the government then, after the Olympics.

Mr Lewincamp —It is only at that point that we will know exactly what we have to do.

Senator SCHACHT —Customs got it up front, and good on them. I suggest that you want to use that as an example.

ACTING CHAIR —I think the officers have got a good idea of what you were—

Senator SCHACHT —That is counterterrorism and security. The next issue is that you mentioned there may be some cash recovery from providing use of warehouses, storage and so on. Can you give me a few details of what those areas are, with respect to which you would look at some cash recovery—not necessarily full cash recovery.

Mr Lewincamp —The sorts of examples—and there have been some requests for assistance to date already in these areas—are things like use of ADF facilities around the Sydney area; provision of container storage; provision of berthing facilities; provision of warehouse facilities; communications support; logistics support. That is enough to start with, I think.

Senator SCHACHT —Do you have any idea how many personnel would be involved?

Mr Lewincamp —No, because we have not yet agreed exactly what contribution Defence will make in these areas.

Senator SCHACHT —I thought SOCOG had substantial sponsorship from the private sector to provide the communications system. People like Telstra and Samsung are in there as big sponsors and so on. Have you got something that they have not got?

Mr Lewincamp —I am unable to comment on that.

Senator SCHACHT —Because you do not know. But you said communications was one of the areas.

Mr Lewincamp —We have had a request for assistance for communications support. I am unaware of the details of that request.

Senator SCHACHT —This is Wagtail coming back, is it? It is certainly not Raven, I presume, because not even a weight[hyphen]lifter would get one of those units around the Olympic site without collapsing.

Mr Tonkin —I do not think we wish to revisit that issue, Senator!

Senator SCHACHT —Again, I do not want to belabour it, but could you take on notice and come back to us at some stage with category 2—what you will actually provide?

Mr Lewincamp —Certainly, at some stage we can do that, when we have an agreed list.

Senator SCHACHT —When you get the MOU signed, which would certainly be before the Olympics—hopefully, for you, within the next month or so.

Mr Tonkin —Madam Chair, this might be more appropriately, rather than on notice, explored at the hearings of the additional estimates, when things might well have advanced.

Senator SCHACHT —Do you have, Mr Lewincamp, a deadline for when you want to sign the MOU?

Mr Lewincamp —I am unaware of that.

Senator SCHACHT —Who is in charge of the negotiations on the MOU?

Mr Lewincamp —There is a brigadier within Commander Australian Theatre that is our point of contact.

Senator SCHACHT —He is not here today?

Mr Lewincamp —He is our contact officer on Olympic matters.

Senator SCHACHT —He is based in Sydney, presumably?

Mr Lewincamp —I believe so.

Air Vice Marshal Treloar —Yes, he works out of Sydney. The MOU that will eventually be signed will be at a government level.

Senator SCHACHT —Yes, I know, but we know that the guts of negotiating it is done at the staff level.

Air Vice Marshal Treloar —Yes, that is correct. We will process the request. Some of the difficulty that Mr Lewincamp is alluding to is that the people inside the organisation who are providing support for the Olympic Games—and I am talking about various government bodies inside New South Wales—are still exploring the requirements that are needed and what their own capabilities and facilities are. They have yet to turn to us in any form of detail so that we can give you a sensible answer on some of those questions. They are yet to be developed.

Senator SCHACHT —The final one is with regard to full cost recovery. What request has SOCOG put in for the numbers of cars, chauffers, batmen, signallers, et cetera? I presume they are in category 3, Mr Lewincamp?

Mr Lewincamp —I am unaware of the exact details of the request to date. Yes, there have been requests for transport, including things such as drivers, but I do not have the details.

Mr Tonkin —We will take that on notice.

Senator SCHACHT —That could be provided by the next meeting, because if they put a request in—

Mr Tonkin —If formal requests have been received, we can provide an answer in relation to the formal request.

Mr Lewincamp —In many cases these are not formal requests, they are simply meetings and discussions that go on. I am not sure what the value is of tabling requests that we have received of a variety of forms. It would be much better, I think, to give you the data on what we actually agree to.

Senator SCHACHT —Such things as, for example, Defence Force bands—are they being requested to be available to play Advance Australia Fair on the many occasions that we win gold medals, et cetera?

Mr Lewincamp —Yes, the provision of bands has been requested and agreed. I am not sure about quantity.

Senator SCHACHT —How many bands do you have?

Mr Lewincamp —I am unable to answer that question.

Senator SCHACHT —Air Marshal Riding, how many bands do we have in the Defence Force?

Air Marshal Riding —Air Force has one; Navy one or two; Army, I do not know.

Senator SCHACHT —Major General Abigail, how many Army bands do we have?

Major Gen. Abigail —It has been a declining number over recent years and the subject of considerable ministerial correspondence. I would need to get you an accurate number.

Senator SCHACHT —Has the defence reform program abolished bands?

Mr Tonkin —I do not think the defence reform program targeted bands.

Senator SCHACHT —They are too hot, are they?

ACTING CHAIR —Mr Tonkin, would you like to take Senator Schacht's question on notice.

Senator SCHACHT —No, just give me an idea. Have we got five bands, between the lot?

ACTING CHAIR —I believe officers have just told you that they are unsure.

Mr Tonkin —We will take it on notice.

Senator SCHACHT —How many requests have we had for bands to be at the Olympics at various venues playing national anthems for the gold medals, the opening ceremony, the closing ceremony and any other passing parade?

Mr Tonkin —We will take that on notice.

Mr Lewincamp —Again, Senator, I think I would prefer to give you the figure that we actually agree to, when we have that agreement.

Senator SCHACHT —Take it on notice. I would just like to know, out of curiosity, how many bands we have as of today.

Air Marshal Riding —I can give you a list—and I apologise for being out of the room. The provision of bands has already been agreed.

Senator SCHACHT —Does Defence get full cost recovery for the provision of the bands?

Mr Lewincamp —I think that is unlikely.

Senator SCHACHT —So the provision of the bands is out of the Defence budget?

Mr Lewincamp —We have already taken that question on notice about the overall cost to Defence and whether we have the opportunity to bid for supplementation. We will answer that question on notice.

Senator SCHACHT —What I want to ask is: with respect to the bands, if they are going to be available at all sorts of times, is there any need for extra salaries and expenses for the provision and services for the musicians in the bands being available at odd hours, for expenses, TA and the provision of transport?

ACTING CHAIR —Mr Tonkin, I believe, was trying to answer your question.

Mr Tonkin —In the advice that we will provide in response to the senator's questions—as Air Marshal Riding has already observed, this has been agreed—we will set out the nature of the agreement of the level of involvement of bands. That should answer the range of issues that the senator has raised.

ACTING CHAIR —Senator Schacht, do you have any further questions?

Senator SCHACHT —Yes, I do. If the bands are playing at venues where there are medal ceremonies, will the bands be given extra training time to learn all the national anthems of the world? I think there are around 190 countries.

Mr Tonkin —I am speculating, but it is my understanding that there will be the recording of national anthems.

Senator SCHACHT —I see.

Mr Tonkin —There is not necessarily the prospect that a band will be in place at each venue for each medal.

Senator SCHACHT —Will there be a band playing the national anthems at the main stadium?

Mr Lewincamp —We will take that on notice.

Mr Tonkin —The arrangements for the conduct of the Olympic Games are not exactly the responsibility of the Defence organisation.

ACTING CHAIR —Senator Schacht, I think Mr Tonkin as already given you an undertaking to answer some of these questions.

Senator SCHACHT —I appreciate that very much. These are all additional costs. If there is to be a band in the main stadium, having to learn 190 different national anthems on the prospect that Patagonia south[hyphen]west will win a medal cannot be ignored. You do not want the embarrassment. When Flack won the gold medal for Australia, they played the Austrian national anthem because they did not know that Australia had one.

Senator Newman —That is for SOCOG.

Senator SCHACHT —So, in a sense, the band is in the same category as counterterrorism in not getting any supplementation?

Air Marshal Riding —It is not the same. Counterterrorism is an assigned Defence role. We undertake that under all circumstances. As far as the bands are concerned, it is a matter of balance. There is a distinct benefit to the ADF for our bands to participate in the Olympic Games in a very public way, and I am sure they will. The degree to which they participate, as required or requested by SOCOG, will dictate whether we seek some cost reimbursement or not. That is a variable for our later negotiations with them.

Senator SCHACHT —Has SOCOG put requests in as part of the ceremonies to have fly[hyphen]pasts by the Roulettes, F111s, FA18s?

Air Marshal Riding —They have.

Senator SCHACHT —Has that been agreed to?

Air Marshal Riding —They have, but I do not know the quanta.

Senator SCHACHT —Is that going to be a cost borne by Defence—the cost of fuel, et cetera—or will you bear the cost and claim it as training exercises?

Air Marshal Riding —I would suggest that will be in the same category as the bands—it will depend on the PR value to the ADF and Australia as to whether those assets are used. We will make judgments on cost recovery at that time.

Senator SCHACHT —I will ask you to take it on notice. If you could give us a quantity at some stage of what that is going to cost, it would be appreciated. I am just trying to help you people get some more money.

Air Marshal Riding —We appreciate it too.

ACTING CHAIR —Further questions on this particular section.

Senator SCHACHT —No.

ACTING CHAIR —We appear to have completed output 21. Are we taking output 20 and 22 together?

Senator HOGG —We are taking those together, 22, 20 and group 1.

ACTING CHAIR —We will now take a lunch break. We have decided that after lunch we will do group 9 and output 5, Capability for submarine operations, and then we will move to output 20, 22 and group 1.

Senator HOGG —Before we go, there are still a few questions overhanging for Navy. Will they be handled at that time as well?

ACTING CHAIR —Yes.

Mr Tonkin —We will do Navy at the end of the acquisition submarine issue.

Senator HOGG —Yes, that is fine. So long as people understand that those questions are still there.

Proceedings suspended from 12.25 p.m. to 1.31 p.m.

CHAIR —The committee has now resumed. Let's get these questions on notice tabled, and then we will move on to Navy.

Mr Tonkin —Yesterday a question was asked by Senator West in relation to recovery vehicles—I think these were known as the wreckers or something.

Senator HOGG —Yes, the wreckers.

Mr Tonkin —The question was how much was the cost and how many vehicles? The cost was $28.7 million, which was phase 4 of the project—

Senator HOGG —So the wreckers are—

Mr Tonkin —The wreckers were $28.7 million, which purchased 55 recovery vehicles. These are large six[hyphen]wheel drive vehicles, and it also includes the spares. It is not a matter of dividing $28.7 million by 55 to get the cost.

Senator HOGG —I think we came up with a fairly exorbitant price for them.

Mr Tonkin —I think they are quite an elaborate device at any rate. So that essentially is the answer to the question.

Senator HOGG —Do you have the cost of each vehicle in that break[hyphen]up that you have just given us? Is that possible? It just seems to me that, otherwise, whilst your explanation is reasonable, you are looking at nearly half a million dollars for a vehicle. Is that correct?

Mr Tonkin —I will refer you to Rear Admiral Lamacraft, who may have more details.

Rear Adm. Lamacraft —I could give you a cost dissection of that which might help. The prime equipment is some $23 million. Also included in the cost—and I will try to pick the significant ones out—are training, documentation, repair parts, some contingency and some travel, which makes a total of $28.702 million.

Senator HOGG —It looks as though the vehicles themselves are of the order of about $23 million, and I understand that there are other costs in that as well.

Rear Adm. Lamacraft —That is correct.

Senator HOGG —So they are a fairly expensive vehicle.

Rear Adm. Lamacraft —Indeed. Six[hyphen]wheel drive vehicles are quite complex.

Senator HOGG —That is fine. The question hanging over from yesterday from Navy was the involvement of the Navy in the massive culling of 1.5 million chickens as a result of the outbreak of newcastle disease on the Central Coast.

Mr Wallace —On 23 April, the New South Wales Department of Agriculture sought assistance to aid in controlling the outbreak of newcastle disease on poultry farms in the
Mangrove Mountain area of New South Wales. Some 94 Navy personnel were provided from ships currently in Newcastle, HMAS Manoora and HMAS Kanimbla , and from other establishments in Sydney. The total chicken population to be destroyed was approximately 2 million. The RAN was one of 39 agencies providing more than 500 personnel to the task. Personnel were given briefings and viewed videos on the culling process. Two teams of 30 personnel were sent to farms to aid in the culling process while a third team was employed in site security and vehicle decontamination. Navy involvement lasted for 21 days with personnel being rotated throughout the operation.

Senator HOGG —Was that an additional cost to Navy or was it supplemented?

Mr Wallace —There was a slight additional cost involved which would have been absorbed within the overall Navy allocation.

Mr Lewincamp —Can I add to that answer. The overall costs were about $900,000. Most of that was salary and related overheads which we absorbed, but there is a figure of $50,000 additional cost that is being recovered from the New South Wales Department of Agriculture.

Senator HOGG —So there was that recovery. As to why Navy were involved, were there any special skills that Navy brought to the program or was it just a community focused project?

Vice Adm. Chalmers —No special skills. It is not part of our core business.

Senator HOGG —No. I did not think it would be, but I thought there might have been something in the biological area or something.

Vice Adm. Chalmers —No.

Senator HOGG —Thank you. I still have a couple of other questions, but Senator Margetts has now arrived.

ACTING CHAIR —We will move now to a section that we left aside yesterday afternoon, that is, output 5, Capability for submarine operations, which we will take along with group 9, Acquisitions.

Senator MARGETTS —How confident can you be that the Collins class submarines will be in action by the end of next year?

Vice Adm. Chalmers —We have put in place a strategy which gives us two tracks towards ensuring that we will have a submarine that we could put in harm's way by the end of this year. I am confident that the progress we have made to date will allow us to do that.

Senator MARGETTS —End of this year?

Vice Adm. Chalmers —End of this year.

Senator MARGETTS —Which is different from what Rear Admiral Oxenbould has said in recent interviews.

Vice Adm. Chalmers —The capability that we will produce by the end of 1999 will not be the full capability, but it is a capability that meets the milestones that have been put in place that would allow that submarine to go in harm's way and on operations.

Senator MARGETTS —When you say `harm's way', does that include the ability to be able to surface without knocking over another ship on the way?

Vice Adm. Chalmers —We would hope that when we go on operations we do not have to do that. I am confident that the submarine can now surface without necessarily running into another ship.

Senator MARGETTS —You are saying you are hoping you will not have to do that in operations—

Vice Adm. Chalmers —But I am confident that we can now surface safely.

Senator MARGETTS —Isn't the sound signature an issue in relation to the shape of the hull? What can you do between now and the end of this year to change that sound signature considering how much of it is involved with the actual shape of the hull?

Vice Adm. Chalmers —The sound signature is made up of a number of different elements. There is that element which is caused by the submarine moving through the water. The submarine can be operated in such a way when it is surfacing for that not to be a real issue.

Senator MARGETTS —How slow would it have to surface for that not to be an issue?

Vice Adm. Chalmers —It would depend on the depth from which it was coming, the water conditions at the time and what was occurring in the water column in terms of how well the submarine could hear.

Senator MARGETTS —Are you suggesting that by the end of this year the submarine will still have to be very careful about how it surfaces to be able to work out what is above it?

Vice Adm. Chalmers —The submarine will always have to be particularly careful when coming from depth. That is just a part of normal submarine operations. Coming from depth to a shoal depth in which surface ships might be operating is always something that is done with a lot of care—and it will always have to be.

Senator MARGETTS —With this `lot of care', what speed will the submarines be limited to to avoid surfacing below another ship?

Vice Adm. Chalmers —It will be up to the commanding officer to determine what the surface picture looks like before he comes shallow. That is a normal part of operations.

Senator MARGETTS —I think you are avoiding the question somewhat. The issue that has been publicly talked about is that generally effective surfacing requires a certain amount of speed and to have a variation of speeds to be able to effectively be put, as you say, in harm's way. If there are very distinct limitations on how a ship can surface, does that not make a very dangerous situation?

Vice Adm. Chalmers —When I talked about putting a submarine in harm's way, I was talking about putting it in harm's way in terms of a credible anti[hyphen]submarine warfare threat, not necessarily just bringing the submarine from a dive position to the surface.

Senator MARGETTS —You still have not answered, and it is a fairly simple question. You are saying you are confident that these ships will be operational by the end of this year and be able to be put in harm's way. It is reasonable for me to ask: what will the operational ranges be? What are the limitations of operational ranges that will make it a problem because of the shape of the hull in relation to the signature?

Vice Adm. Chalmers —The shape of the hull quite frankly has nothing to do with the speed at which the submarine has to operate to surface. The shape of the hull is to do with the way the water flows down the hull into the propeller.

Senator MARGETTS —I do understand that. I am talking about the fact that there is a certain amount of signature noise that is related to the shape of the hull and, whatever you do to the other elements of the ship, you and I know that as long as that shape remains it will be a problem under certain speeds. What I am trying to work out now is what limitations will still exist in relation to the operations from the speed point of view.

Vice Adm. Chalmers —By the end of this year, when we get to the submarine that will meet this level of capability that I have described, that submarine will be very quiet while it is on station. It will meet the requirements to get on station in a quiet state. It will be able to do both of those things. If it can do that, it will be able to surface quite safely. I would add that we have three or four Collins class submarines at sea now which dive and surface every day very safely. If they were unable to do that, the sub safe system which we have in place, which is a very sophisticated system that measures risk, would give me an indication that I should stop those submarines from going to sea. As I said in a message to our sailors the other day, if I thought that these submarines were even barely unsafe, they would not be going to sea.

Senator MARGETTS —I think I asked a reasonable question but you have avoided answering it. I would like to talk about some of the other issues in relation to the combat system. How much needs to be done for the combat system to be fully operational or even considered to be up to date?

Vice Adm. Chalmers —The combat system we have at the moment started life as a fully integrated combat system. It was a combat system that we contracted for in 1987. What it is unable to do is to be fully integrated. Other nations around the world have had this same problem in trying to integrate the combat system completely. Indeed, they have gone away from such an approach.

What we now have to do in the short term is augment the combat system that we have today. We have to build some interfaces around that part of it which is preventing us from fully integrating it. That will give us a combat system which will draw together all the information that we gather. It will provide a picture to the commander that will allow him to fire his weapons from the combat system without transferring any data manually. This means building a number of interfaces. That work is under way—again, through a dual track that is being done by the contractor and by arrangements we have with the United States.

Senator MARGETTS —In a nutshell, what kind of expenditure has been involved in the combat system—which needs to be updated now so that it can operate—which has not actually ever really been in operation?

Vice Adm. Chalmers —We need a certain amount to cover both the combat system and the work that we are doing on the hull and propellers. We estimate, for all six submarines, that that will be a figure of less than $100 million.

Senator MARGETTS —Various statements have indicated that there is hope that the contractors will cover a lot of the other expenses. Is this the bit of the other expenses which will be picked up out of the Defence budget?

Vice Adm. Chalmers —I will ask Mr Jones to follow me, but I would anticipate that we will recover, in terms of the combat system, some of those resources through work in kind with the contractor. In terms of the work that is being done on the propellers, again, if we end up using the contractor's propeller, then we will necessarily pay for those others that we have had modified and built. If we end up using our propellers I would say that they will be provided as government furnished equipment and we will recover that from the contractor.

Mr Jones —I cannot add a lot to that. Perhaps I could back up a little bit and point out that the government currently has a review under way on the issues for the submarine and the combat system and the way ahead being performed by Dr McIntosh and Mr Prescott. We are not able to identify too many details of what the way ahead is for the submarine until this review is presented to the minister and he has had a chance to consider it. There are limitations on that—

Senator MARGETTS —Why would there be a problem in answering questions here?

Mr Jones —Because the report is not yet available to the minister.

Senator MARGETTS —I am not asking you what is in the report. I am just asking normal questions about where the Collins class submarine is going.

Mr Jones —Yes, and where the Collins class submarines are going will depend on the outcome of the report.

Senator MARGETTS —Yes. I am asking questions about the current situation with the current problems that you are dealing with. I am not asking what is in the report or what the report is recommending. I am just asking questions about the Collins class submarine. Surely you are not saying that because a review is happening about this, which is hardly surprising, that somehow or other that will be the reason for not providing information to this committee.

Mr Jones —No. We are certainly happy to provide whatever information we can but, as your questions move into the future of what we will do about these things—and that seemed to me to be where you were heading—we are not able at this time to give you a clear indication of what solutions the government may adopt following this review.

Senator MARGETTS —As you mentioned the review, do we have the terms of reference for that review?

Mr Jones —The minister published the terms of reference, I believe. He certainly announced who was doing the review and the time scale—which was to report by 30 June.

Senator MARGETTS —Yes, I will get back to that. What is the issue currently with the hydraulic system? Have those problems been sorted out with the seals?

Mr Jones —I believe that currently we have no significant issues with the hydraulic system in the submarine.

Senator MARGETTS —Can you enlarge on that a little bit?

Mr Jones —There were some issues during the build progress but, to the best of my knowledge, those issues have been overcome. In other words, we have no active issues of any significance dealing with the hydraulic systems in the submarine.

Senator MARGETTS —Does that mean that, apart from the Collins class, the subsequent submarine ended up with a different sort of system?

Mr Jones —Maybe I need to get some more expert advice. I suspect what you are alluding to was a situation where some of the couplings external to the pressure hull were determined to have been of faulty manufacture. Those couplings have been replaced through a program of replacing them. I might take some advice on where that is up to, but it is not currently an issue so far as we are concerned. My information is that they have all been replaced.

Senator MARGETTS —Every coupling on the ship has been replaced?

Mr Jones —That there was a concern with.

Senator MARGETTS —And how many were those?

Mr Jones —I do not know. If you want the exact number, we can get that for you.

Senator MARGETTS —How about the problems with the gearing system?

Mr Jones —With?

Senator MARGETTS —The gearbox.

Mr Jones —There is no gearbox in a submarine. There is an auxiliary gearbox in the diesel engines that has had some manufacturing issues to do with it. We have had—

Senator MARGETTS —Sorry, when you say there is no gearbox in the submarines, the diesel engine is in the submarines.

Mr Jones —Yes, but it does not have a gearbox. It is an auxiliary gearbox that drives some of the accessories. It is not what people would normally characterise as a gearbox in the sense of a main gearbox or something.

Senator MARGETTS —Okay. Can you tell me about the diesel gearbox issues?

Mr Jones —Again, I am not the best person to tell you the detail, if you want to get into that, but there were some manufacturing and other issues with the auxiliary gearboxes. A couple of them have been replaced and we are watching closely the performance of the others. But, again, that is not high on our list of issues with the submarine either.

Senator MARGETTS —The least of your worries at the moment?

Mr Jones —It is not considered a major problem at the moment, no.

Senator SCHACHT —Who is the manufacturer of the gearbox?

Mr Jones —I am not sure of that. It certainly came as part of the diesel engine. The diesel engine prime manufacturer is Hedamora, but exactly which company manufactured the gearbox we would have to find out for you.

Senator SCHACHT —You could find that out for us, couldn't you?

Mr Jones —Sure.

Senator MARGETTS —I have been looking back at questions I asked in 1994 and 1995. The questions I was asking at that time were related to how the choices were made in selecting this kind of system. At that stage we were asking about what the options were for the ADF to choose a particular type of hull and design and expenditure. What were the main performance criteria that were set down for the submarines? I will not say the Collins class submarines because I got into that issue with a former minister. What were the most important performance criteria for the choice of the submarines?

Mr Jones —Senator, can I remind you that this took place back in the mid[hyphen]1980s.

Senator MARGETTS —That is okay. It is relevant now.

Mr Jones —In generational terms, it is like my great[hyphen]grandfather did this, so I do not have a personal, strong recollection of what all the issues were.

Senator MARGETTS —I am sure that on a day[hyphen]to[hyphen]day basis, when you are talking to, for instance, the contractor, you will be talking about what it is you are hoping that those submarines could do.

Mr Jones —The contract has a large specification that has all sorts of areas of performance. What inevitably happens as you get into a complex contract like this is that 95 per cent of the things, even though they may be very important, are not issues because, clearly, the contractor is able to meet the performance.

Senator MARGETTS —Okay. This is still a very highly relevant question. The question is: what were you hoping these submarines could do? What is it that you were hoping they would be able to do?

Senator SCHACHT —Sink enemy ships, I suppose.

Senator MARGETTS —I am sure.

Mr Jones —I am not quite sure at what level you are expecting me to answer the question.

Senator MARGETTS —Okay. What kind of engagement were the submarines meant to be involved with?

Mr Jones —I think I should defer to Admiral Chalmers if you want to talk about operational issues, Senator.

Vice Adm. Chalmers —We were looking for a submarine that had a good endurance, a long endurance, so that it could operate within our area of strategic interests. It needed to be able to conduct surveillance, to be able to conduct intelligence. It needed to be able to conduct antishipping warfare, antisubmarine warfare, to be able to lay mines and to be able to put special forces ashore. It needed to do that in a very covert way so that it would not be detected.

Senator MARGETTS —So covert was very high on your list?

Vice Adm. Chalmers —Yes.

Senator MARGETTS —So it is quiet: that is your covert element. Intelligence and surveillance capacity: I suppose one could argue that there is a whole range of ways of getting good surveillance capacity—submarines are one. Good endurance: where was the long distance element of it on your agenda?

Vice Adm. Chalmers —Anywhere where Australia's interests could be harmed.

Senator MARGETTS —Of the original list of potential choices for the submarines, were all of them capable of endurance operations?

Vice Adm. Chalmers —This was part of the acquisition process, Senator. I think I had better hand it back to Mr Jones.

Mr Jones —Senator, as I guess you observed on Four Corners the other day, all the submarines offered to us did not have equal capability. So while we set down a set of standards that we sought to have met in submarine performance, the contenders met those or exceeded them or did not meet them to varying degrees. I cannot give you an answer other than that sort of general answer. Part of that process, of course, was our view of their view of what the submarine they were offering could do for us. So it is a complex set of equations and, as I intimated to you earlier, a wide range of parameters are specified in something as complex as a submarine.

Senator MARGETTS —There obviously have been some questions asked about the process, and for quite a few years I have been trying to work out the process. Which part of the ADF actually goes through this process of working out what characteristics are required and then working out which of the candidates or potential tenderers will be able to meet those characteristics best? Could you just remind us, in a nutshell, how this process occurs?

Mr Jones —If you like, I will describe it in terms of today's organisation. At its simplest, the decision is made to acquire a particular capability. What that capability consists of in general terms is determined by a process that operates in the headquarters of the Australian Defence organisation and involves quite a large number of people. Once we have project approval—that is, the government has approved the broad parameters of the project—the project is taken over by the Defence Acquisition Organisation, although it was not called that in the days of the submarine project, and it is the job of the acquisition organisation to go out with whatever process we go through: invitation to register interest, request for tender, or whatever.

When we come back then to evaluate what the tenderers have offered us, it again involves all the significant players in the organisation. We have a process in Defence called the Defence Source Selection Board these days—it used to be called the Defence Source Definition Committee in the old days—that has a broad representation from Defence. It reviews, if you like, or assesses the performance and other factors that are offered by the various tenderers. It is through that process and review that a decision is made. It would depend on the size and scale of the particular project as to who the delegate was in the organisation that took the actual source selection decision. Then you go through the contracting process and the management of the contract.

When the particular project is completed and accepted from the contractor, it is then handed over to the service, in this case the Navy, that also performs a series of tests and introduces the capability into service. That, in a nutshell, is the process.

Senator MARGETTS —Of this large number of people, which of them would normally have taken the responsibility to advise in the strongest possible terms that you do not make a decision on any of these proposals unless you have had independent tank testing of whether they can meet such things as their covert requirements?

Mr Jones —Tank testing is a subject that interests Senator MacGibbon as well, I recall. I was not around at the time and involved in that, but I guess the short answer is that we employ in Defence professional naval architects who are able to assess these things. We also take independent advice when we feel that is necessary. These people would have advised the people in the selection process as to their assessments of the performance of the different submarines. The confidence they would have in those assessments and the results of those assessments would have been influenced by the extent that tank testing had been done and the results of those tests.

Senator MARGETTS —But there was not independent tank testing of the model that was chosen.

Mr Jones —I am not sure independent is an important word. Tank testing is done by a number of—

Senator MARGETTS —It obviously is on this occasion.

Mr Jones —No, but these are credible professional organisations. I do not think anyone suggests that the sort of organisations around the world—and there is not a huge number of them—that perform tank testing do anything other than independent testing of these things. That is not something I have heard anyone else suggest.

I would be pretty confident in the sorts of results you get from a professional tank testing organisation. I think the real question to ask yourself is: what sort of realism does the model present in relation to what the submarine will really be like. That is the hardest step to make. It is easy to do very complicated tank tests but, if they do not give you a good correlation to what your submarine or whatever the platform is going to be, they can be far from fully helpful.

Senator MARGETTS —What are you finding out now? What did you find out from the most recent United States tank testing that you did not find out from your original tank testing? What would be the point of doing tank testing now?

Mr Jones —The issue is how much is enough of anything at any given time? It seems to me that the tank testing that was done was probably adequate for the purposes and, indeed, the performance of the Collins replicates pretty accurately the performance claimed by the
contractor. In the time we were talking about we probably did not have access to some of the facilities that are now available. We certainly did not have access to some of the numerical fluid mechanics techniques that are available today to deal with the issues that you are alluding to. It is typical in any sort of engineering regime, when you can focus on things that are specific issues, to go back and do finer grained and more extensive testing. It is not feasible to test every feature of a submarine before you embark on a contract.

Indeed, in an ideal world, you might build a prototype and do all those things. It is perfectly normal when there is an issue—for instance, with an aircraft when there is an issue with some particular feature of performance you take the aircraft model back into the wind tunnel—to do more extensive and detailed testing to try to understand the particular features. It is in those terms that I would describe the work we have had the US Navy help us with in the present time for the Collins submarines.

Senator MARGETTS —What cost was involved in the most recent tests?

Mr Jones —I do not have that figure to hand but I can get it for you. It is not a huge amount of money; some millions of dollars is the answer.

Senator MARGETTS —What would be the size of the model that would be used in the most recent tests?

Vice Adm. Chalmers —The one that the US has been modelling for us is a one[hyphen]twelfth model.

Senator MARGETTS —Would that have been the same size as that used by the manufacturers when modelling in the first place?

Mr Jones —Our understanding is that the models used previously were one[hyphen]sixteenth rather than one[hyphen]twelfth.

Senator MARGETTS —Does that make a difference?

Mr Jones —I guess the cheaper the better. If you can get them full size, you can tell what it really does. I would have thought one[hyphen]sixteenth model testing would give you results of a reasonable degree of accuracy.

Senator MARGETTS —There are obviously fairly distinct design laws in relation to such things, are there any occasions where they just simply make the hull and test it for some of those characteristics?

Mr Jones —Do you mean build a full[hyphen]sized hull?

Senator MARGETTS —Yes.

Mr Jones —I guess it is possible. The difficulty would be to power it through the water. You are trying to measure a number of things. You are trying to measure the resistance of the hull at certain speeds; you are trying to estimate and optimise the performance of the propeller; you are interested in the manoeuvrability of the submarine; you are interested in the flow in some detail around the submarine, if it has to deal with acoustics; you are interested in launching torpedoes and other weapons out of the submarine while submerged. There are a whole lot of factors of features you are interested in when model testing. The extent you model test depends a bit on the degree of uncertainty you have on the performance in different areas.

Senator MARGETTS —What is the most likely scenario in the use of submarines? I gather submarine fleets, if there are any in the region, are of quite a different capability. They are more of a short[hyphen]term endurance. I know we have a large coastline, but surely we would not necessarily have to be covertly approaching our own coastline.

Mr Jones —I can start and I am sure others would like to help. I just point out that the distances involved from our submarine bases in Sydney and Perth are substantial. So the range and endurance of the submarine is perhaps more important for us than it is for countries in the north Atlantic or in some areas of Asia. The simple geography is one indicator of that.

Senator MARGETTS —I would like to ask some questions in relation to the process of choosing a submarine. In particular, I would like to find out at what point it was chosen to locate the emergency systems either forward or aft of the submarines?

Mr Jones —I suspect you are alluding to the thing that was on the Four Corners program. That dealt with, as I understand it, an issue where the German contenders had proposed that the auxiliary propulsion unit most submarines and most naval vessels have be located in the same space as the main machinery. The concern was that, if there were some major failure of the main machinery, it could well incapacitate the auxiliary propulsion unit. As was at least partly illuminated in Four Corners , the Germans were concerned as to how we would treat that. I understood we said that was acceptable, not that we preferred it or that it was the best solution you could get but, if that was the choice we faced, we could live with it.

I suspect our preference would have been to have that capability in a separate compartment in the submarines. As in all these things, your preferred tenderer will normally have a number of features that may not be optimal but you have to consider the design in totality. It is often not feasible, for a variety of reasons, to change one little bit of the design. I suspect that was what you saw on the TV the other day.

Senator MARGETTS —Was that specified in the original specifications for the tender?

Mr Jones —I am sorry, I have no idea. I would imagine there certainly was an auxiliary propulsion mechanism specified. I am not aware that it was specified down to the level of saying where it had to be located.

Senator MARGETTS —If that was a major issue in the choice, one assumes that there would be some indication to the prospective tenderers about the preference.

Mr Jones —I think your inference is incorrect. To the best of my understanding, it was not a major influence in the choice of submarines. It was one of the many factors. Indeed, my understanding is that we said that would be acceptable. In our jargon, if it were not acceptable and was a critical

deficiency, that could rule out that contender. We were saying we acknowledged it was not perfect but it was acceptable to us. By definition, it could not have been a critical decision factor in the choice.

Senator MARGETTS —Okay. So what were the most critical decision factors in the choice?

Mr Jones —I would have thought a combination of price, performance, Australian industry involvement and all the normal things that are there but, as in all complex acquisitions, a range of factors are taken into account.

Senator MARGETTS —That gets us into the interesting document you keep referring me back to. I am happy to refer back to that Four Corners evidence. You mentioned endurance was a big issue and the issues of battery hours and endurance days. Whose responsibility was it? Which part of the department would have changed those specifications before that final choice was made?

Mr Jones —I do not understand your question, Senator. I do not believe there was any change to the specifications.

Senator MARGETTS —The document which was the basis of the Navy's preference shows two points on which the Navy's project team and the Germans had agreed—that was the propulsion system. There was a document which had the name of Admiral Mike Hudson, apart from the names of others, on it. It was a document from just before the decision was made to buy the submarines. There was an annex at the back which had a table. I am sure you know the document to which I am referring; I am sure you have gone through every word of the Four Corners program.

Mr Jones —Madam Chair, can I point out that the document was a classified document, and it would be a breach of the laws of this parliament for me to comment publicly on what is in that document, regardless of the fact that you and I could see it on a TV screen.

Senator MARGETTS —Excuse me, which are the laws of this parliament?

Senator SCHACHT —Mr Jones, which law of the parliament prohibits you from commenting in an estimates committee on any document?

Mr Jones —I feel, like everybody in this room, that we are under some obligation to protect national security secrets under the Crimes Act.

Senator SCHACHT —Which law of the parliament? It might be a Department of Defence law.

Mr Jones —No, it is the Crimes Act, as I understand.

Senator MARGETTS —Who would be committing a crime—me?

Senator SCHACHT —You said the Crimes Act applies here.

Mr Jones —Yes, indeed. That is a classified document.

ACTING CHAIR —I think Mr Jones made the point that it is a classified document. I feel sure, Senator Schacht, that you understand what he meant.

Senator SCHACHT —I do not think that is right.

Senator MacGIBBON —If the committee wishes to know, the committee must know. You may resort to going in camera with your evidence but, at the end of the day, there are no secrets from any committee.

Mr Jones —I feel that I am obliged by the laws of this country not to discuss publicly in detail what I believe to be a classified document.

Senator MARGETTS —I can, however, ask you in relation to such documentation, as we do ask on an ongoing basis: who would have been responsible for writing or changing such specifications?

Mr Jones —I do not know, I suspect it was probably the then director of the submarine project. The document that appeared on television appeared to be signed by Admiral Hudson, then Chief of Naval Staff. I would need to reiterate that my understanding is that the specification for the submarine had not changed. What was purported in that letter to be the case was an analysis of the assessment of the performance of the different contenders against what they claimed.

It is very common in major Defence contracts to need to assess the performance independently of the claims by contractors. If we were to believe the claim of every contractor that responded to Defence tender, we would be facing a lot more questions from parliament than we do today. It is very important that we have the ability to independently assess what is offered to us. It is not at all unusual. The contractors take a very optimistic view of their products and attempt to present them in the best possible light.

It is our job to make sure we are able to assess those products on an even[hyphen]handed basis. The process that I believe was referred to in the Four Corners program was exactly that process. It was a process that took the claims by the various tenderers, assessed them and brought them to a common benchmark. It is also my information that the data inferred on the Four Corners program was derived only weeks before the final decision. It is my understanding that the data was well known for months before the final decision. It just so happens that the particular minute that recorded that information at that time had that date on it. I understand that the inference in the Four Corners program was totally false.

Senator MARGETTS —You say that it is certainly not unusual for the specifications or the claims of manufacturers to be downgraded.

Mr Jones —Or to be upgraded in some cases. Some manufacturers are conservative, interestingly enough.

Senator MARGETTS —How often in this area have you known claims of manufacturers to be upgraded by the ADF?

Mr Jones —Or by the assessment team?

Senator MARGETTS —Yes.

Mr Jones —I would say to you the majority would end up in a downgrading and a minority would end up in an upgrading of some elements. It is not at all uncommon.

Senator MARGETTS —It would surely be fairly unknown for one particular tenderer to be upgraded in four vital areas and the other tenderer to be downgraded in the same four areas.

Mr Jones —No, I do not think that is unusual.

Senator MARGETTS —You do not think it is unusual for Kockums to have hidden their light under a bushel and underestimated their capacities? The indications are that you were testing their claims against uses that the manufacturers might not put their ships to.

Mr Jones —I think it is more a question of the conservatism of different organisations and their willingness or otherwise to be ruthlessly critical of their own products. Some companies find that very difficult and they deliberately distort the figures to make their products look good. You find in a lot of aerospace projects, where you have to specify a number of important parameters, such as the temperature and altitude conditions and the fuel states that you need for reserves, it is not uncommon to have people respond to tenders and to ignore some of the conditions we set which we need to have them judged against.

The other thing to keep in mind is that when we ask people to specify the performance in a request for tender, we normally expect them to contract and to guarantee that performance. There are many areas of defence technology where contractors have a different view about what they will put in a glossy brochure and claim a proposal will do, to the view that they will sign up for damages if they do not accede to it. Some of our contractors are necessarily conservative. They believe there is a good prospect of their various systems performing better than they claim, but that is the limit of what they are prepared to sign up for contractually. You get both sides of the equation, depending on the particular systems, the nature of it and the industries you are dealing with.

Senator MARGETTS —Let us see if that over time was justified: would Kockums have indicated to you that they had noise problems with their submarine because of the design features? Is it an area that was upgraded or downgraded?

Mr Jones —The Submarine Corporation, the contractor, signed up to achieve certain performance in terms of the acoustic signature of the submarine. It is our view that both potential and actual signatures that are likely to be achievable on the Collins will be superior to the actual or potential signatures that were offered by the other finalists in the competition. Does that answer your question?

Senator MARGETTS —In terms of the noise signature, you are happy with what came out of the ships when they were made available from Kockums?

Mr Jones —Clearly, the contractor has not yet been able to meet the performance that we sought and they signed up for in the contract. That is why we are pursuing them to do it. The point I was trying to make is that that is still a very superior level of performance and, in my view at least, is superior to what we would have obtained from the other contractors. You are asking me about these comparative statements and that is my view.

Senator MARGETTS —The other contractors were all noisier than Kockums?

Mr Jones —That is my view, yes.

Senator MARGETTS —And that is what they said in their ratings themselves?

Mr Jones —I am describing a situation where we are down to two finalists and we are comparing submarine A with submarine B. Just to reiterate, my view is that, while the submarine we selected still does not meet the contracted acoustic signature, it is already today in all events probably superior to what the other contender would have been and certainly it will be in my view superior to what the other contender could have been.

Senator MARGETTS —So the other one must have been fairly noisy?

Mr Jones —No, this is a particularly sophisticated and quiet submarine by world standards. Even the other one was a very good submarine. We are talking about the difference between very good and outstanding.

Senator MARGETTS —Sorry, when you say `quiet by world standards', quiet at what speed? What do you mean by `quiet by world standards'? Are you saying that the Collins class submarine is quiet by world standards at a particular speed, staying still or what?

Mr Jones —Let me go back a bit. The specification that we laid down and sought for this submarine was aimed to produce an extremely quiet submarine by any standard. As I said to you a moment ago, we have not yet reached the performance we seek in all areas of the submarine capability. But it is already and it will be a very quiet submarine. Naturally, a submarine will make more noise when it goes faster because it is putting a lot of energy in the water. But in the areas that were specified in the contract and in the areas that were seen to be the most critical for the submarine's survival, which tends to be the lower speed characteristics, as Admiral Chalmers and others have said, we already have an extremely quiet submarine.

Senator MARGETTS —Just to clarify this: what was the speed specified in the contract for which you say you have got a quiet submarine?

Mr Jones —I am sorry, Senator, the acoustic performance information relating to the submarine is a highly classified piece of information. I am not at liberty to disclose it in open session. We have been through this with the JCPAA recently and had detailed discussions with them about these issues.

Senator MARGETTS —This is about very large amounts of public money, and I am trying to work out whether there was any commonsense in the putting together of the spending of
these very large amounts of public money. I am trying to get to whether or not the manufacturers understood that you needed a submarine which could operate in the normal way of operation—not just at very low speeds—as a quiet submarine. I also want to know that whatever they said about their acoustic performance is an indication of whether or not they were right about their other performance criteria and whether or not you were justified even in upgrading any of their criteria based on even one thing—that is, their sound performance.

Mr Jones —Senator, I see the relationship between the various factors as not necessarily being highly correlated. What a submarine does in one area in its performance, range and endurance do not necessarily have a lot to do with its acoustic signature or the ability of its radar or something else like that. I just do not see the connection you are trying to make.

Senator MARGETTS —Perhaps I will ask you an easier question. Have the trials for endurance been satisfactory for the Collins class submarine?

Mr Jones —I guess the short answer is yes, but we have not yet completed all the trials. I am being less than total in my comment, I guess.

Senator MARGETTS —Has it reached 47 days?

Mr Jones —I cannot answer that question directly.

Senator MARGETTS —Is there someone who can?

Mr Jones —The best answer we can give you is that we have no indications at this stage that the submarine will not be able to perform in that particular performance criterion that you outlined, even though we may not yet have finished all the trials.

Senator MARGETTS —So you have no idea, even on things like endurance, as to whether or not the Collins class submarine has met that criterion?

Mr Jones —It is a question of the opportunity for doing these long and complicated trials and the degree to which we allow inference or extrapolation to guide us in our view about where the issues are in the submarines. As you may appreciate, at the moment we are spending our time and effort trying to focus on those areas of the submarine where we are concerned that it may not meet the full performance we have specified. That is not one of those areas.

Senator MARGETTS —That is extraordinary. I am sure that Senator MacGibbon has some questions as well.

Senator MacGIBBON —Before we go on, I did say with some directness that we can go in camera to get evidence—that is not true. The estimates committee cannot go into an in camera hearing, but we can go in camera in relation to annual reports, legislative matters and other things. There is no question that this committee can determine the facts if it so chooses. It is not only in this committee but also in a number of other defence committees where we can extract that information quite legally. At the end of the day, no executive government is going to pull on a fight between the parliament and itself over the handing over of information that a committee views as vital, and commonsense always prevails. I will leave it at that at the moment.

I would like to go back to the vexed question of the V31 valve incident. You will remember, Mr Jones, that I asked a question about this on 12 February:

Have there been any safety incidents through the trials program?

Mr Jones —To give a totally complete answer I would need to take advice. But, in reference to the article that Senator MacGibbon mentioned and other claims that have been made, I certainly undertook what I thought was a reasonable investigation and sought information from the projects as to what incidents we had had. As Senator MacGibbon is aware, there is a really very extensive safety program going on in the submarine. It is always a matter for judgment as to how good or bad it is but in my view is it is a very extensive safety program and
certainly, I think, to a standard of other major Western navies. I am advised that there were no incidents of any significance on this submarine that in any way hazarded the submarine or its crew with the potential consequences that were alluded to in the article referred to by Senator MacGibbon. There was nothing in any way, shape or form even remotely approaching an incident as described in that article.

Senator MacGibbon —Putting that aside, I would like to ask if there was ever an incident known as the V31 valve incident—a deep[hyphen]dive isolation test—in around September 1995 which created a problem. Your response to that was that you would take it on notice. A response to that came in due course and the response was:

During sea trials in 1995 which were conducted under highly controlled conditions a fault was detected with the V31 valve. Backup valves ensured that the crew is never at risk. Our systems enabled detection of the fault and its rectification, with test procedures amended to ensure that this fault would not be repeated.

The first sentence confirms that there was a problem with the V31 valve. I want to put the second sentence about back[hyphen]up valves to assure that the crew was never at risk aside from a moment because that is at the very heart of the matter.

If you look at the third sentence, how systems enabled detection of the fault and its rectification, any reasonable person would assume that there was no risk at all arising from this incident. The clear implication of that statement is that our systems enabled detection of the fault and its rectification. Any reasonable person would assume from that that the fault was detected before the incident occurred, whereas the timing of it is really the critical thing. The latter part of the sentence, that test procedures were amended to ensure that this fault would not be repeated, implies that there were no test procedures in place which should have been in place to prevent it occurring.

I want to go to the Joint Committee of Public Accounts that you mentioned a few minutes ago and look at the evidence given by a Commodore Asker. There was a question from Mr Cox:

Can we move on to valve 31 and its supposed incident

Commodore Asker replied:

This was raised at the last Senate estimates by Senator MacGibbon. I am not sure that he referred to valve 31 or he called it valve 35, but in any case I think the occasion to which he was referring relates to valve 31 in the main bilge system of HMAS Collins . This particular valve is operated by an actuator, which is designed to shut off at a certain depth. During trials in, I think, late 1995—and these trials are very carefully controlled and monitored—it was found that the actuator was not in fact shutting this valve off at a particular depth. As with any valve on the main bilge system of a submarine, there are backup valves and isolating systems. These backup valves were operated; the actuator—there is some wiring in there—was corrected and that was the end of the problem.

Mr COX: Was there anything approaching a catastrophic incident?

Commodore Asker said:

I think this is one of those instances where there is a grain of truth that is taken up by the media and then amplified out of all proportion, rather like a rock concert—

And he goes on. That is in contrast with your statement, Mr Jones.

Mr Jones —No, I believe it is quite consistent with my statement.

Senator MacGIBBON —Very well. Are you aware of a report by the investigating officers of the Inspector[hyphen]General's Division of the Department of Defence which confirmed the accuracy of an incident with the V31 valve at a debrief meeting held on 15 April 1997?

Mr Jones —I am not denying that that event took place as part of the trial's program and that a fault was detected. What I am denying is that in any way that was a serious accident
that potentially jeopardised the submarine or the lives of the people in it. It seemed to me a perfectly normal occurrence which says that submarines or anything else are made by human beings and that, no matter how hard we try, there will always be things that need to be fixed, and that is exactly what a trial's program was designed for. The design of the submarine was proven conclusively because there were other back[hyphen]up and safety features to ensure that at no time was the submarine's condition a hazard. I think it exactly explains what I was trying to articulate to you in general terms as my initial answer.

Senator MacGIBBON —That is the heart of the matter—whether there was an incident which compromised safety in any way at all. I would like to put this schematically for you. You might be able to help me understand it. Although my great grandfather was a professional portrait painter, I have very few artistic skills. If that drawing represents the V31 valve, we have seawater out here and we have the internals of the submarine there. The control mechanisms from this, as I understand it, go across with two gates on it. Outside the hull there is a transducer, which is activated by the water pressure, and that is the deep diving matter that I am referring to. That actuates this valve or gate here. For this valve to open, both gates have to be closed.

Below a certain depth it is impossible to get this gate to close. This becomes what is a hard system; it cannot be interfered with by any human control. On this side there is a soft system which is subject to operator control. Now did the situation arise in September 1995 where the software was being tested and the commanding officer of the submarine actuated the software side, closed this valve, and this valve then opened?

Mr Jones —Senator, I do not know the answer to your question.

Senator MacGIBBON —That is the heart of the problem.

Mr Jones —With respect, Senator, I do not think it is.

Senator MacGIBBON —It is not to you, but my advice is that there was a bridge left in place there, that there was a connection, and that bridge should have been found before the submarine went to sea.

Mr Jones —Madam Chair, that may well be the case, and if Senator MacGibbon would like to participate in a detailed technical debate I will have to bring in my technical specialists on this issue. He did not provide advance warning that he would like to get to this level of detail. I would just like to point out to the committee that this is exactly what our trials program is designed for. We take the submarine out very carefully, very gingerly. We test it on the surface; we test it just below the surface; we test it at a series of depths. In other words, the process we go through in the trials is designed exactly to point out the difficulty—the risk that you identify there—which it did, and which proves the trials program and the trials process.

Senator MacGIBBON —Right. This is a valve that opens to the porthole—

Mr Jones —And I cannot comment on your diagram because I am not sure they are correct representations of what is on the submarine.

Senator MacGIBBON —And my understanding is that this valve should be activated at the test, at the deep diving level. Now that is at the heart of the matter. If you can convince me that it did not happen and you have the proof that it did not happen, all my fears will be allayed. That is the point of contention between us.

Mr Jones —Even if it had happened, are you claiming that that hazarded the submarine and the lives of the people on it?

Senator MacGIBBON —Well, in so far as it was at the deep diving isolation depth.

Mr Jones —It was not, I believe, at the deep diving depth.

Senator MacGIBBON —Not the ultimate diving depth but at the depth at which the transducers should have shut off the valve.

Mr Jones —I think Senator MacGibbon has gone into this in extensive detail and we do not have all the experts here, but we do have some people from the project office. I would like to try and provide some further explanation to the committee as to the nature of the systems and the risk that Senator MacGibbon has now put very publicly on the record. So, with your indulgence, I would like to ask Commander Andy Millar to talk about the systems and the safety issues of the submarine.

Cmdr Millar —Madam Chair, I am not an engineer; I am a simple sailor. But if the senator was suggesting, as I gather he was, that at any stage, at any time, in any trial conducted on a Collins class submarine we were open to the sea and water was coming into that submarine, it is not possible for that to happen without everybody on the submarine, in the project office, throughout the whole of Defence, knowing about it, investigating it. We are desperately concerned about the safety of our men in our submarines. That did not happen. There was no valve open to the sea that let water into the submarine.

Senator MacGIBBON —Will you provide to the committee all the papers in the hazard analysis relevant to this issue? That will resolve it.

Cmdr Millar —Certainly will. If that is what is required they are available. We have the most stringent safety system in place in this submarine for any submarine force in the world. It is so far ahead of what the Americans and the British have it is almost another generation. Now, that does not guarantee that an accident will never happen. Of course accidents are going to happen, but we take every possible care and every precaution to ensure that it will not—or the risk is reduced to the absolute minimum. That could not happen without our knowledge. It would be impossible to cover such a thing up.

Senator MacGIBBON —Very well, just prove your point. Now you are the Commander Andy Millar that writes for Navy News , are you?

Cmdr Millar —I am the Commander Andy Millar to whom you sent a personal letter, Sir.

Senator MacGIBBON —Yes, that is right.

Cmdr Millar —The very one.

Senator MacGIBBON —And I never had an acknowledgment of it.

Cmdr Millar —Did you expect one? I mean, what was I to say?

Senator MacGIBBON —As an elementary matter of courtesy I would have thought so, because I viewed your charges as very serious—otherwise I would not have written to you.

Cmdr Millar —I would be happy to sit down with you personally, face to face, for as long as it takes—days, whatever—to convince you that this submarine is a great submarine, it is a safe submarine. My time is at your disposal. All you have to do is ask.

Senator MacGIBBON —I write to you and you do not respond. That is enough on the submarine for this time.

ACTING CHAIR —Senator Margetts.

Senator MARGETTS —I would like to respond and ask a follow[hyphen]up question. I wanted to hear the questions from Senator MacGibbon on this issue. Commodore Mick Dunn obviously does not agree with the assessment that has just been given, and I wonder whether the issues
that have been brought up—which Commodore Dunn has taken the quite courageous step of bringing out in the public arena—have been dealt with, and how have they been dealt with?

Vice Adm. Chalmers —Commodore Dunn, before he left the service, did produce a report for me in the last few weeks in which he was serving. That is a report which deals in some detail with the ability of this submarine to operate, in particular how quiet it is, and a number of other operational issues—and, as you would imagine, it is fairly highly classified. It so happens that at about that same time we were seeking to ensure that we would have a submarine available for operations to ensure a continuity of the submarine available for operations, and some of the work he did assisted me in putting in place the arrangement that we have with the United States Navy.

I do not recall, and I have checked the paper, that he drew to my attention any safety incidents or any safety matters at all. The matters he drew to my attention were more to do with operational issues. If there had been safety issues there that would or could have endangered or put our sailors at risk, I would have immediately sent that paper to the sub safety committee which, as Commander Millar has just said, is probably one of the most sophisticated and forward looking sub safety programs in the world.

Senator MARGETTS —So did Commodore Dunn's paper go to the sub safety committee?

Vice Adm. Chalmers —No. I saw no need for it to go to the sub safety committee. If I had, I would have sent it there.

Senator MARGETTS —From public statements that Commodore Dunn has made, he saw, or he considered, that what he thought were the operational problems were also safety problems. Given the safety regime that you have described today, would you not say that it would be worthwhile for the sub safety committee to at least rule those out if someone of the stature of Commodore Dunn saw or believed that they were in fact issues that could cause a submarine to be lost?

Vice Adm. Chalmers —That particular paper was staffed around a group of people, a group of senior officers in Navy.

Senator MARGETTS —Sorry—`staffed around' means?

Vice Adm. Chalmers —It was passed for staffing through a group of my senior officers. Some of those officers were members of the sub safe committee. They saw no reason to take it there. Commodore Dunn was giving us an opinion, and an opinion of someone who was just leaving the Navy and had had plenty of time to voice his concerns, if he had them, in the previous years before he left.

Senator MARGETTS —When a person leaves, isn't that the time when someone is more likely to be up[hyphen]front and honest than they might be if they see concerns about their career in front of them?

Vice Adm. Chalmers —That is not the sort of culture I would like to see in our Navy. I would like to think that people would be up[hyphen]front at all times, and that is the sort of culture that I encourage—not one where people leave and then shoot their mouths off.

Senator MARGETTS —So you are obviously very angry with him at the moment.

Vice Adm. Chalmers —I am disappointed.

Senator MARGETTS —Could it not be true, within the Navy and with any collection of human beings, that there is a decision making process where there is personal investment in
that decision making that makes people within that system wish to defend their original decision making processes?

Vice Adm. Chalmers —I would like to think that our ethics are a little higher than that. I would like to think that, at the very forefront of what we do, we think of our sailors, that we think of their safety and that we do not think about our own personal gain. I find it reprehensible that you would even say that and think that of us.

Senator MARGETTS —What? That people in the Navy might be human beings?

Vice Adm. Chalmers —No, that people in the Navy would put themselves before their fellow sailors.

Senator MARGETTS —I see today an angry response defending the Collins class submarine when there are acknowledged problems within the process. What I am seeing today is a defence of a decision. I cannot see that what we are seeing today is some kind of full and frank discussion about—

Vice Adm. Chalmers —I am not defending the decision because actually I think the decision was a good decision. What I am trying to achieve is to provide for this country a submarine that works—the best conventional submarine in the world—which is what we need for the region in which we operate. I am not here to defend the decisions which were made. My aim is to look ahead and ensure that we have a submarine that we can put in harm's way safely at the end of this year, and I am confident that we can do that.

Senator MARGETTS —Was it a mistake by Rear Admiral Oxenbould? He said the end of next year. Why did he mention the end of next year when you have said the end of this year?

Vice Adm. Chalmers —I am aiming at a submarine at the end of this year that can be sent on operations. He was talking about a submarine that will be fully accepted into naval service by the end of next year. There are some areas where even by the end of this year we will not have met the levels of operational requirement that we desire, but we will be far enough down the track to be able to safely send that submarine on operations.

Senator MARGETTS —I guess my final question is this: can you please provide me with any occasion—any occasion—when the actual specification of such a major purchase item was upgraded for a particular tenderer on several points? Is there any example? Mr Jones indicated that it is not an uncommon thing for the specifications of a particular tenderer to be upgraded. The very clear question I am asking is: can you give me an example of where that has happened before.

Mr Jones —We will take that question on notice.

Senator MARGETTS —Thank you very much.

Senator SCHACHT —In the Four Corners program which I saw, there seemed to be a theme running through it by implication that Australian industry is not capable of delivering a sophisticated system such as the submarine. My recollection—and correct me if I am wrong—is that a number of the major difficulties in meeting delivery times, et cetera, were by companies which were not Australian, such as the combat system the contract for which was actually won by an American firm. Is that correct?

Mr Jones —That is correct. The principal subcontractor who signed up for delivering the combat system is a firm of US origin.

Senator SCHACHT —Yes. Not an Australian firm. You would have got the impression from the Four Corners program that only Australian firms were involved and they were the ones, Australian industry, not capable.

Mr Jones —To be fair, a lot of the work was done in Australia, but I certainly agree with your general comment—that is, I see no evidence across the whole range of projects we have in Defence that Australian industry is any less able to perform than overseas industry. Indeed, I would put it the other way, as I did in a recent procurement conference: I think in general the performance of our industry is as good as, if not better than, that of most overseas firms.

Senator SCHACHT —I accept that when you start a new project, as the submarine was, from scratch—a greenfield operation—that there will be delays, mistakes, or things that have to be corrected, but in that submarine contract Australian firms were involved as subcontractors. There is the Submarine Corporation itself, which is a mixture of Australian ownership with the Swedes in there as the major operator. With all those Australian companies, there is no evidence that they were disproportionately creating difficulties in the program vis[hyphen]a[hyphen]vis those companies that won contracts from overseas?

Mr Jones —No, none at all.

Senator SCHACHT —Admiral Chalmers, you responded very vigorously to a suggestion from Senator Margetts about the officer who recently retired, Mr Dunn, I think it was, and about wanting an open system in the Navy, with people having the ability to speak up without fear for their career, even if they are the odd person out, so to speak. Only recently, an article appeared about the captain of the Melbourne and the collision with the US ship Evans . The story by the supporters of the captain—I think his name was Stephenson—is that he was made a bit of a scapegoat to appease the Americans and, even though he was ultimately cleared of the charges of the court martial, his career was effectively at end. Do you think that we have now reached a state in the Navy where there is the feeling that if, you do not watch out, someone is going to be made the bunny or the scapegoat, and therefore it is better to shut up?

Vice Adm. Chalmers —I certainly hope that during my time on watch that has not been the case. Going back to the fire in Westralia in May of last year, I was very careful to ensure that there was no scapegoat, and that is the sort of culture that I have encouraged in the Navy throughout my watch.

Senator SCHACHT —You encourage the culture, which is always the most important thing to change. Have you put into place any changes in regulations or orders that would show that not only was the culture changing but the system was changing—that openness within the context of good operation was being encouraged?

Vice Adm. Chalmers —No, I have not. I have always taken that to be part of the way I work, and I expect people in the Navy to understand that.

Senator SCHACHT —Yesterday you said, in response to a question about the end of your two[hyphen]year contract, that you would have liked another year as head of Navy. Is one of the reasons you would have liked another year in the Navy that you would like to continue to change or get that acceptance of the culture of openness and people being willing to speak out?

Vice Adm. Chalmers —I would like to encourage the Navy to continue in that direction. I guess the other reason I would have liked to have been there would be to be able to come back here and say, `I've delivered a submarine that works.' But, as I said yesterday, I will not comment on that either while I am in the service or, most certainly, once I have left.

Senator SCHACHT —That is all right. That is all I have to ask. I hope that your successors carry on that change in the culture that I think would be a very good outcome for all the service.

ACTING CHAIR —Are there any further questions on group 9?

Mr Jones —I have an answer to a question that was asked yesterday by Senator Hogg, I believe.

ACTING CHAIR —Before you give that answer, are there any further questions on this matter?

Senator SCHACHT —This is Acquisitions. What output is it?

ACTING CHAIR —It is group 9 on page 3 of the program, but it also includes output 5.

Senator SCHACHT —I want to raise something which I raised in discussion with Mr Lewincamp and others yesterday. In the new accrual system, we see the acquisitions listed in dot points in group 9, though most of them are listed elsewhere in other tables. I know Mr Tonkin says he wants to get rid of all the group sections of the PBS in the future. Is that a misunderstanding I have had with Mr Tonkin?

Mr Tonkin —That is an ongoing misunderstanding on your part, Senator.

Senator SCHACHT —I see. Now that Mr Tonkin has confirmed that the group section will continue, including for acquisitions—

Mr Tonkin —That is a further elaboration and supposition on the senator's part.

Senator SCHACHT —Hopefully, in his discussions with DOFA, he will take note of the committee's report on pieces of useful information that will continue in the PBS in the future. In the layout of the acquisitions section—as well as those of the various outcomes—it would be useful if the programs were listed with the amount of money allocated to them and how much had been spent. I think that would be useful in the group section as a layout issue for information. I know you can say to me, Mr Tonkin or Mr Lewincamp, that if you go to output numbers in various areas, you can see some of it, but you cannot see all of those other areas of outputs. It is not all completed. It is not a complete list of significant acquisitions, and this probably leads into group 9, where you have a total outlay of $1.1 billion. As a one[hyphen]liner, I think $1.1 billion is a bit bald. That is a comment I have made, and I wanted to reinforce it.

Mr Lewincamp —Senator, rather than refer you to the output sections, I was going to refer you to the capital budget section of the overview, from page 24 onwards, which gives you that breakdown. We could put that material in the group section, but we were trying to integrate a capital budget section at the front.

Senator SCHACHT —I know. I noticed last night, going through the Army section—where they were talking about acquisitions, new equipment, et cetera—that not all of them are listed in a paragraph subheading on pages 24 through to 28.

Mr Lewincamp —That is true.

Senator SCHACHT —Again, that is what I am getting at. Maybe, wherever they are, there could be a complete list in one area. I do not think it is too difficult to put an extra couple of pages in the capital section of the acquisitions section so that they are all listed together. All the Army ones were not listed. I noticed that specifically, and they are significant acquisitions. That is a matter for format which I want to put on the record, as we seek perfection.

Senator MacGIBBON —Could I raise under the acquisitions banner the Air 87 contract which we have now down selected to three companies. The requirement to be filled was described as an armed reconnaissance helicopter requirement. Is there a definition of what was required other than the two words `armed reconnaissance'?

Mr Jones —Yes. Quite a degree of definition of the sort of capabilities we were seeking was initially released in the invitation to register interest, I believe, and then in a request for a proposal that resulted in the outcome you described.

Senator MacGIBBON —Did any role have predominance over any other role?

Mr Jones —Let me see if Air Vice Marshal Conroy can help with that one. I do not believe so.

Air Vice Marshal Conroy —The requirement as it came through the headquarters evolved from a reconnaissance helicopter that had the ability to protect itself in harm's way. That was the dominant requirement, but the ability to deliver a precision weapon and deal with a certain level of threat itself rather than having to call in fixed[hyphen]wing close air support was a parallel requirement.

Senator MacGIBBON —The primary responsibility was a reconnaissance role, and then the ability to look after itself was also part of it?

Air Vice Marshal Conroy —I think they are somewhat equal requirements. We are replacing the gun ships that currently exist in the force and we are replacing the reconnaissance helicopters with a single type.

Senator MacGIBBON —You are aware that one of the American generals with a wing or a group of these AH64Ds has said on the public record that he does not view them as a reconnaissance platform at all, that they are too vulnerable in that role?

Air Vice Marshal Conroy —He would then be referring to the whole genre of helicopters.

Senator MacGIBBON —That is right—they are all vulnerable to a $20,000 rocket.

Air Vice Marshal Conroy —Yes, but we live in Australia; we are not going to be going tank busting on the north German plain, Senator.

Senator MacGIBBON —Isn't the AH64D primarily designed as a tank buster?

Air Vice Marshal Conroy —It has that capability.

Senator MacGIBBON —Better than any other helicopter.

Air Vice Marshal Conroy —And the radar that is the heart of its tank[hyphen]busting capability does not feature as an essential or even an important requirement.

Senator MacGIBBON —Okay. Let us get back to the RFP. Was there any requirement there with respect to interoperability?

Mr Jones —I would have to take advice on that. I suspect we indicated that interoperability would be of interest. But interoperability is such a general term that you have got to get down to more specifics. If you are asking me if interoperability figured prominently in our decision to short list, the simple answer to that is no.

Senator MacGIBBON —Yet all government documentation for many years now has put a very high premium on interoperability between the Australian forces and particularly the United States forces, hasn't it?

Mr Jones —That is correct, but it depends on what you mean by interoperability.

Senator MacGIBBON —It is the ability to communicate with and to operate with; and it is a well understood—with the greatest of respect—term in military vocabulary. If it was not mentioned, or was mentioned in a minor way in the RFP, why was that so?

Mr Jones —I guess it was not clear that was a significant discriminator. I would make the comment to you that, based on some other recent source selections, the appearance of commonality in things like helicopters is seldom supported at a detailed level. In other words, what to the general public may be roughly similar products often have a very low degree certainly of commonality, perhaps better interoperability, but if you are taking that to the next step, particularly if you are thinking about interoperability and commonality within the ADF, it is very hard to achieve high levels of that in the reality.

Senator MacGIBBON —Are you saying that if we bought the AH64 it would be quite a different helicopter from the one that the American army are operating?

Mr Jones —I cannot predict to what extent it would be different. But I would point out that the Blackhawk is different from the helicopter that the US army operates, for example—the Blackhawk is different to the Seahawk. They have features in common. They are able to communicate with each other. They are not able to share data links in most cases. In some cases they can fire common weapons. It is a more complex issue than you can describe with a single word.

Senator MacGIBBON —We would then completely reinstrument the AH64 if we bought it; we would have a totally different software program for the target acquisition and the fire control system from what the American army operate. Is that true? If so, at what cost?

Mr Jones —I do not know the answer to that. It would depend on what is offered in the request for tender, which we have yet to go out with.

Senator MacGIBBON —I think you would find we would be operating a platform that was really very similar to the American one. I think that would have been of some importance. What were the pricing arrangements specified in the RFP?

Mr Jones —The RFP stage, I should explain to the committee, is a preliminary phase to try and get some broad idea of what is available out there in the field, but to a degree where we feel we would not be at serious risk of being misled later in the process. You might ask why we do that. In this particular case we had six quite strong contenders in the field. As a matter of government policy and, I think, convenience to everyone, we went through a process that allowed a refinement of the contenders and an elimination of those contenders that we felt at the end of the day were unlikely to be successful, therefore trying to save their time and their money and our time in the process.

The difficulty of going through that process is that people have public views about the quality of their products, their representatives in countries like Australia have public views about the quality of products and have interests in seeing certain outcomes. When you go through a down selection process, inevitably you will find one or more of the contenders are unhappy just because it is seen as detracting from the overall public view of their product. Our view is that it is better to do that and put up with the pain than to waste their time and effort and take them through a very expensive full tendering process.

Senator MacGIBBON —In general terms, what were the pricing specifications in the RFP?

Mr Jones —We asked them to provide budgetary quality prices, not only for the acquisition phase but for the in[hyphen]service phase. In other words, we were very interested in trying to obtain as good a view as we could of the through[hyphen]life costs of the particular platforms—the cost to
support them, maintain and operate them. As an incentive—and we have done the same thing in the AEW project—we have said, `If the prices you give us now vary by more than 15 per cent from prices that you subsequently provide in the formal request for tender stage—that is assuming you are selected—then that alone would be grounds for rejection of your offer.' In other words, we are trying very hard, through that and a number of other devices, to ensure that people are not able to bid in by making somewhat exaggerated claims, either on price or performance or other parameters, at the request for proposal stage.

Senator MacGIBBON —So you really did consider through[hyphen]life costing?

Mr Jones —Yes, indeed. We asked for and received from all the tenderers their estimates of some of those elements.

Senator MacGIBBON —Getting down to this 15 per cent price cap, how was that operated? Did you specify that a certain number of helicopters had to be provided or was that left open?

Mr Jones —We defined some of the parameters in terms of the number of on line helicopters we wanted in the number of locations. It was then up to the companies to suggest how many total helicopters we would need because of maintenance and other requirements. Also, we asked them to provide estimates of suitable attrition numbers of helicopters.

Senator MacGIBBON —What sort of technical evaluation took place of the responses to the RFPs?

Mr Jones —Would you elaborate on what you mean by `what sort of technical evaluation'?

Senator MacGIBBON —Did you just take the manufacturers' claims or did you go to other sources to confirm the accuracy of the claims in the RFPs?

Mr Jones —Others may be able to give you more detail, but it is my understanding that, first of all, we have a reasonable sized project team that has been involved in this. In the evaluation, we draw in a bunch of other experts from DSTO, for example, Air Force, Army and other parts of the Defence organisation. Those people assessed the offers that were provided. Some of those people had the opportunity in some cases to visit and to fly similar or roughly identical aircraft, but not in all cases because, as you would be aware, some of the offers really are about aircraft that are not yet fully in production, so a degree of extrapolation was required there. It was not as thorough as you would do in a request for tender but it was still a fairly thorough process.

Senator MacGIBBON —You raised the matter of some of the aircraft not being yet in production. Was there any time line on production of aircraft in the evaluation?

Mr Jones —I would have to refer to the details of the documents. Basically we are trying to look into the future to see what will be available for us at the time we go to tender, at the time we go to contract for the offer. So it was not a requirement that the helicopter had to be in volume production today, at this stage in the process.

Senator MacGIBBON —Is it a fact that two of the three helicopters will be re[hyphen]engined to meet the Australian requirement?

Mr Jones —It is possible that all three of them may have a different variant engine to what is currently offered to some customers. It would have been the case for most of the people who were not selected as well.

Senator MacGIBBON —Are you saying that the Boeing AH64 offer is inadequate with respect to power to meet the requirements laid down?

Mr Jones —No, I was making a general comment.

Senator MacGIBBON —I was unaware that the Boeing proposal was subject to a re[hyphen]engining proposal. You are telling me it is?

Air Vice Marshal Conroy —It could be that Boeing choose to offer us the engines in the British variant. We do not know what is going to come in in the tenders.

Senator MacGIBBON —Anyway, that is a design that is spoken for and planned for production.

Mr Jones —But it is not there flying today, in the sense of an operating fleet.

Senator MacGIBBON —No, but the other thing is that it is an engine that is already in production, isn't it? Is it a fact that with the Eurocopter Tiger and the Agusta there are proposals to meet the Australian requirement by re[hyphen]engining with a new Allied Signals T700 engine that as yet has not been built? Is that true or false.

Air Vice Marshal Conroy —The Agusta is powered by the T800. There is an implication that in order to meet our requirements for hover out of ground effect that were expressed in the RFP we would actually need a growth engine, which I understand was referred to as the T800 high shaft horsepower engine which is a growth variant of the T800. But we found that we inadvertently overspecified the hover out of ground effect requirement. It becomes a cost driver, and in the RFT we will be demanding a less—

Senator MacGIBBON —So you are going to move the goal posts now, are you?

Air Vice Marshal Conroy —That is the whole idea of going through an RFP phase.

Senator MacGIBBON —All right. I come back to this 15 per cent price cap: how do you accommodate that when an engine has not flown and probably in one case has not yet been designed? Do you grant an exclusion, a waiver, to the tenderer on those grounds or not? Or is he still held to the 15 per cent price cap?

Air Vice Marshal Conroy —My view is that if what we take up is the same as what he offered in the RFP, then the 15 per cent applies. If there are some variations from that, they would have to be audited and tracked. But, essentially, what they offer is the pricing we seek, and the 15 per cent cap applies to that.

Senator MacGIBBON —There is a very high hypothetical element in that assessment then, because you are accepting the word of a manufacturer and some notional costings that flow from that to meet a specification and you have eliminated other contenders on quite a different level of evidence.

Mr Jones —I do not really understand the point you are making. There are a number of elements. What someone offers us in terms of price may depend on the market conditions and all sorts of things; and, indeed, on many of the things the price may vary by the time we get to the contracting stage. What we are saying to this contractor is, `Get enough definition in your price, put enough contingency there to make sure that you do not breach that threshold when we come to the tendering stage, or we have the option of eliminating you.' That is intended to make them focus and spend a reasonable amount of effort in getting us reasonable quality prices at this stage.

Senator MacGIBBON —So, really, it is an option whether you apply that 15 per cent price cap?

Mr Jones —Yes.

Senator MacGIBBON —I see. The three down selected: are they marinised at all?

Mr Jones —We did not have a requirement to have a marinised helicopter. We have a requirement to be able to operate that helicopter in some circumstances in a maritime environment, but we were not seeking a fully marinised helicopter. The ones offered have, to varying degrees, features in their design that contribute to their ability to withstand corrosion in a marine environment.

Senator SCHACHT —In group 9, acquisition, on page 152 and 153, where it talks about developing and managing Defence policies for industry and its related programs et cetera, I cannot see any specific mention of acquisitions to encourage the development of Australian industry. Is that somewhere else in the document or is it taken as said that when we talk about industry and industry related programs they are Australian industry and Australian related programs?

Mr Jones —Australian and New Zealand industry, under the terms of the CER with New Zealand. So, yes, you should infer wherever you see `industry policy' that we really are principally talking about Australian industry.

Senator SCHACHT —Does Defence have a particular percentage target to reach?

Mr Jones —We vary it depending on the particular project. As you might imagine, it can vary a lot. We are really after two things: the quality and, to some extent, the quantity. In the old days we just specified a quantity of Australian content. We found that was a bit of a course measure, I guess, and we have moved in recent years much more to saying the quality of what we want, the type of work. One example would be that we are much more interested in people writing software code in Australia that we will need to maintain than we are in some sort of non[hyphen]recurring tin bashing exercise.

The first thing to say is that we are generally interested in cost[hyphen]effective things to do in Australia. We will seldom knowingly pay a premium for the work done here, so we look to Australian industry to be world competitive—and generally it is.

Senator SCHACHT —Is one of the measures—

Mr Jones —Sorry, could I just finish here. What we have moved to, at the moment, is probably more a hybrid thing where we have both quality and quantity, but the quantity is usually expressed as a target. In other words, we give some indication of what we think would be reasonable. They are free to offer more or less. If they offer more, or if they offer less, will not put them out of the competition, but will give them more marks or fewer marks—if you want to put it that way—in the evaluation.

Senator SCHACHT —Australian industry often says that, if they get a bit of extra lead time, they will get themselves up to the quality level that is quite rightly demanded. But if they do not get a bit of extra time to get there, it will automatically disadvantage them, because someone else already has it on the shelf in another country, another company, and they can say, `We can deliver in three months.' Whereas a company in Australia might say, `If you can give us an extra six months, we will meet the quality arrangement; we will meet what you need, but we need a bit more time maybe to tool up, to design, to get our manufacturing processes to the quality that you need.' How do you handle those sorts of requests; do you give them a bit of leeway?

Mr Jones —It is a sad fact, I guess, that normally we are under time constraints for Defence projects. I am not managing many projects where the sponsors would be happy to take them later than what is currently planned, so that is part of the environment.

Senator SCHACHT —They tell me that the Parakeet program has been going for 20 years, so there is plenty of lead time in that, obviously.

Mr Jones —No, you keep forgetting it has been in a series of different phases. Each phase—

Senator SCHACHT —Each phase has been about five or six years.

Mr Jones —in itself was urgent, I am sure, at the time.

Senator SCHACHT —Yes, they always make it urgent, but then it falls over.

Mr Jones —To answer your question, what we try to do is to provide as much advance notice as we can. We spend a lot of effort advising industry what projects are coming up, or doing preliminary project definition studies, allowing people to team up and look at the investments. Airborne early warning control is a good example. We are going through this phasing and teaming up process.

I think the point to make is that we do generate some technology in Australia, but principally we import the technology. Those people who invented that technology will have a whole range of suppliers and subsuppliers that they have lived with for many years. To me, anyway, the Australian Industry Involvement Program is largely about breaking some of those links and forcing these overseas owners of intellectual property to come and look at what we are able to do in Australia. When we force them to come and look, the answer is usually pretty good. And how do we give them enough time? I think that the answer to that is by spending more time on more projects up front doing preliminary studies and indicating to industry what we are interested in, and that is exactly the direction we are heading in.

Senator SCHACHT —So you are not interested in going back to a variation of the old offsets program?

Mr Jones —No, to me there is a big sticking point right at the beginning, getting these people weaned off their normal suppliers and getting them introduced to, and getting to know and build relationships with, Australian suppliers. If they can get over that hurdle, it is our experience that they get some pretty good results, so we are putting our efforts mainly into those areas.

Senator SCHACHT —In those major contracts which accept that technology is coming from Western Europe and North America, do you write, say, into the terms of the contract, about appropriate technology transfer to Australian firms?

Mr Jones —Let us go back. We set targets for what we would like to see in a particular project for Australian involvement, and we set qualitative goals of which areas of technology we give priority to, and we then sign these people up to achieve those in a contract. In other words, there will be liquidator damage if they do not achieve them. Associated with that, there will be a complex set of documents describing the intellectual property that is transferred, who owns it and who has rights to use it—all part of how we are going to build and maintain that capability for a long period of time. So it is all woven together.

Senator SCHACHT —In recent years, have any major foreign companies bidding for some of the projects squealed or whinged about these requirements?

Mr Jones —I think owners of intellectual property who feel that they have invested in it are seldom keen to share it with others. I think most of them see it as a requirement, a necessary precondition, for doing business in Australia.

Senator SCHACHT —They accept that that is now a precondition?

Mr Jones —I think so, yes.

Senator SCHACHT —That, in the Defence culture, this is a precondition, and that, if they bid and want access to our hundreds if not billions of dollars, this is a natural way of doing business in Australia?

Mr Jones —Yes.

Senator SCHACHT —On the other issue about quality, having reached the international standards for quality ASO 9000, is that an automatic sign that an Australian firm has reached your quality standards?

Mr Jones —I do not quite follow your question.

Senator SCHACHT —As you said before, if a manufacturer is bashing metal, but he is a good basher of metal and has gone through the quality assurance program and has been granted ASO 9001 or one of those—

Mr Jones —In this case, ASO 9002 or 9003.

Senator SCHACHT —Is that automatically recognised by Defence that that firm obviously has certain quality and values that make it easier to be considered as a bidder?

Mr Jones —Yes indeed. To turn it on its head, we would normally be fairly reluctant to go with someone who did not meet those standards, or, if it were a new firm, we may give them a grace period after the contract award to get that certification. Having said that, that is only part way up the ladder; it is a starting point. You really have to investigate a whole lot of higher levels of their capability for particular technologies and things like that.

Senator SCHACHT —Do you have a measure for that, a generic measure for the next levels up from the ASO 9001, 9002 and 9003 to say to firms: Defence has given you a certain certification that means you can bend metal properly for the submarine, or that you can make bullets that work?

Mr Jones —We do not have a formal program of an industry[hyphen]wide nature. There are a number of techniques that are used in different sectors of industry. For example, in the software industry there is a range of international standards that are applied that demonstrate the degree of capability of a company in a general sense. We would look at that as part of our evaluation.

Senator SCHACHT —Do you have Australian firms coming to you and saying that they have successfully supplied you with a product in terms of a contract, but are also now bidding to supply a similar product to a foreign country and that they want you to verify that those levels with Defence have been reached? Do you provide them with a letter of quality or a letter of assurance?

Mr Jones —The first thing is that in years gone by we were one of the authorities who gave people quality assurance certification. We have moved out of that, and it is all pretty much third party accreditation. If you are trying to sell into Europe and you have ISO 9002 for a particular sort of capability, that would be accepted anywhere you like. I might ask Dr Kearns to talk a little about the scheme we have for endorsing products that are produced in Australia to meet our defence needs and in encouraging other countries to take a strong interest. You would appreciate that selling Australian products to foreign defence organisations is perhaps one of the more difficult things that you can embark on.

Senator SCHACHT —I recognise that completely.

Dr Kearns —This is one of the initiatives that is being rolled out, from the Defence and Industry Strategic Policy Statement, which we hope to complete at the end of this calendar
year. It relates to the defence product endorsement scheme. There are essentially two halves to this. One of those is the ability to certify, to look at and to provide some form of advice on a product that a company is presenting. The other part is to be able to give some form of accreditation or endorsement of the company itself based on our dealings with them. That initiative is pursuing both of those avenues. As I have said, I hope that by the end of this calendar year we will have an endorsement scheme that we can talk to in detail.

Senator SCHACHT —That endorsement scheme—and we will not have ISO 9000 because that is theirs—will be Australian Defence 1000, Australian Defence 2000, or something like that. It will be a number or a designation that will be easily identifiable. People will know that, when you get to a certain level of it, the following things have been achieved by referring back to the original manual.

Dr Kearns —It may not have the level of differentiation of numbers that you get with, say, the ISO 9000 system. One option for us is to provide a simple logo accreditation with some supporting text, that is, a description of our dealings with the company and what we can say about them, rather than to run a more elaborate machinery which involves accreditation to finely differentiated levels.

Senator SCHACHT —Have you had discussions with Standards Australia about accreditation?

Dr Kearns —I do not know about direct discussions with them. We have certainly discussed the product endorsement scheme publicly and with industry, including through the Defence Export Outlook Seminar earlier this year. I cannot directly answer your question on that.

Senator SCHACHT —And the same with organisations like NATA? Have you discussed this with NATA, who are in laboratory certification, who provide a certification as well?

Dr Kearns —I am not sure about that organisation. We certainly have had discussions with our internal testing and evaluation establishments about how they can support this process.

Senator SCHACHT —They accredited to NATA, aren't they?

Mr Jones —Often they are.

Senator SCHACHT —So if a large or a small firm, a subcontractor or a main contractor successfully provides a product in a procurement or acquisition and meets your requirement, apart from whether they have ISO 9000, there will be a generic Australian Defence Force stamp with the rising sun to go on the letterhead. Is that right?

Dr Kearns —We will look at the rising sun option, but we had not thought about that. Certainly, one of the—

Senator SCHACHT —It is not a bad one, actually. It cleaned up a couple of other countries in two world wars. Why not?

Dr Kearns —We had a public discussion session earlier this year, and we are still looking at the options for that. But we are looking at a single symbol, with supporting text, rather than a more elaborate system.

Senator SCHACHT —I understand that. Would you make sure that that is registered as a trademark or as an intellectual property, through the trademarks office or elsewhere, so that no[hyphen]one can abuse it?

Dr Kearns —Yes, I think that would be very important.

Senator SCHACHT —Obviously it will get pinched if you do not. Maybe in the annual report, if I may suggest, Mr Jones, there should be some comment on the issue of Australian
content in these various acquisitions. I think it would be useful for the Australian public to see that all these billions of dollars are not automatically going to buy things off the shelf from America, Western Europe or somewhere.

Mr Jones —I think you will find in our annual report some rough aggregated statistics of the spending on capital in Australia and outside. But I take your point. We will see what we can do in this year's annual report to be more specific.

Senator SCHACHT —Good.

Senator HOGG —I want to go back to an issue raised by Senator MacGibbon in respect of Air 87. I want to touch on an article that appeared in the Australian Defence Business Review of 14 February. Whilst I understand that this was prior to the RFP closing, I think it is germane, and I would be interested in your comment. There are just a few paragraphs, but bear in mind that the time at which the article was written was prior to the RFP closing, as I understand. The article is by Trevor J. Thomas and states:

Defence's current approach to the Air 87 acquisition has been to issue a broad[hyphen]based Request for Proposals, which has seen prospective tenderers respond with a wide range of capabilities and options spread across a wide band of costs.

With the `air' of an uncapped project having gone to the heads of some prospective bidders, Defence is understood to have received proposals for upgraded and uprated armed reconnaissance helicopters that extend from roughly $18 million to $25 million a unit.

Mr Jones —That sounds like after the proposals had come in, in that case.

Senator HOGG —I thought it was prior.

Mr Jones —We might see if we can get someone to check the date.

Senator HOGG —We can get someone to check the date, but it is at or around about that time anyway.

Mr Jones —It sounds like the person who wrote that felt they had some knowledge of what was offered by the different contenders, and that must be right at the point or after the—

Senator HOGG —The article goes on to state:

Defence had planned to use the RFP responses to devise a short[hyphen]list of 3[hyphen]5 firms who would be asked to respond to draft RFTs, originally expected to be issued in May, followed by a final RFT in August. This now appears to be slipping to the right.

News filtering through Canberra earlier this month suggests Defence is planning—via the application of a combination of cost and technical exclusion parameters—to roughly halve the field of Air 87 bidders for issuance of the draft RFT. From Defence's point of view, this will substantially reduce the work load in advancing the RFT.

Because such an action is based on assessments of information contained in wide ranging RFP's responses—and not hard[hyphen]nosed RFT responses—industry is right to question the efficacy of the whole process. After all, companies have replied with proposals, not tender responses.

Mr Jones —That really comes to the point that I raised earlier about why we go through a process like this. I do not agree with Trevor's comment that we were looking for three to five firms. I think any number, probably from two to four, would have been satisfactory.

Senator HOGG —I believe the point of the article is that the goalposts were shifted; that it was an uncapped project, having gone to the heads of some of the prospective bidders.

Mr Jones —They are his views. Senator MacGibbon may have a different view. I do not believe the respondents saw the project in that light. Indeed, while there was a band, if you like, of capabilities—in other words, we did not specify it had to be a 2.73 tonne helicopter
that did exactly these things; there was some room in width—the respondents were invited to meet the things we had specified, and it was a very detailed list of things. This was quite a substantial exercise they went through in the RFP. It was not a response of a couple of pages. It was a big heap of paper.

Senator HOGG —But this was not an RFT, though?

Mr Jones —No, but it was quite a substantial document nevertheless, and that was the point about the 15 per cent I was talking about with Senator MacGibbon. We wanted to make sure that, when people responded to this RFP, we were not putting them to the whole cost of an RFT but that they had done enough research and they had been honest enough with us so that we could have a reasonable degree of confidence in what they were offering. It was recognising that not the same accuracy was required as with an RFT.

Senator MacGIBBON —The implication of what you are saying is that there was a very precise specification they had to meet so that they could realistically tender and be within 15 per cent of it at the end of the day.

Mr Jones —I would not have said `very precise'. I would have said a substantial specification. You have got to think about why we want to do this process. We have two ways of doing it and we used both methods in different projects. Sometimes, we work out what we want and we go out to industry and involve everyone in a lot of time and expense and pick a winner; sometimes we miss the mark. It is generally accepted that it is better to take it in a couple of stages. Indeed, one of the common questions I got from industry when we were going through this was, `You are really going to have a short list, aren't you? It is not going to be a Clayton's short list where you will leave five or six in the process?' In other words, industry in general was keen for us to narrow down the field to those people we really thought had a chance of winning at the end of the day. Remember, they are going to spend in excess of $10 million tendering for this process, so they do not want to go into this and be a stalking horse. They want to feel they have a reasonable chance of winning at the end of the day. In a sense our RFP process is, in the end, all about that: eliminating those we really think, at the end of the day, are not going to come across the line first. And that is exactly what we did.

Senator HOGG —I may well have been outside when you were answering part of Senator MacGibbon's question, so I apologise for that. How many RFPs were received?

Mr Jones —We had six responses, and we narrowed that down to three people after the end of that process. I could point out to you that they were allowed to offer various options within the structure. In other words, there was an inference that we were not concerned about price, that there was a lot of variability or something.

Senator HOGG —So price was not an issue?

Mr Jones —Price is always an issue for us.

Senator HOGG —But not the dominant issue.

Mr Jones —Some people may claim they do not have a good enough understanding of what the price is because we do not release the approved project costs. Indeed, at that stage there was not such a thing as an approved project cost. It has only been approved in this year's budget. The point I am trying to make there is that, if they were concerned that in some way or other they had breached one of the thresholds or were becoming less competitive, they had the option—and indeed many of them did—to give us some options. In other words, to say, `I can provide this capability, but for another so many dollars I could provide that capability. You choose.' Many of them chose to do that, some more than others.

Senator HOGG —When is the draft RFT?

Mr Jones —We will probably go with a draft RFT, but that is uncertain. That is Trevor Thomas speculating on our process. That is not an authorised version of what the Department of Defence plans to do.

Senator HOGG —No, that is why I am asking. What is the timetable?

Mr Jones —We still have to do some work assimilating the results of the RFP answers. We will need to then finetune and issue an RFT later this year. That is all we are saying at this stage.

Senator HOGG —So that maybe puts a final RFT into next year?

Mr Jones —No, that is what I mean by finalise.

Senator HOGG —You will not go through that process?

Mr Jones —Our current plan would be to issue the final RFT later this year. Whether we choose to issue some preliminaries, as we do in many projects, we have not made up our minds yet.

Senator HOGG —Thank you.

Senator MacGIBBON —Just on that RFP, if the process is carefully done, it is of great advantage to us. Furthermore, the funding of studies beyond the RFP can lead significantly, by risk elimination, to a lower final tender price. The key to the whole question is: how well are they done? That is the point of it.

Mr Jones —Yes. Unfortunately, the people who go through the hurdle to the next stage are all very happy, and the people who do not are generally pretty unhappy.

Senator HOGG —I always accept that. I have seen that now on a number of occasions in various issues that have come before this committee. The losers out of the process, obviously, do not like losing. No[hyphen]one likes losing, and you can understand that.

Mr Jones —Often, their Australian representatives, who have beefed up their view of what is the best way to bid, may not have got it exactly right and there is an issue then between different parties.

Senator HOGG —I was not trying to get it down to the individual bidder's level; I was just looking at the overall process. But you have answered my question. The other two questions that I want to ask are very brief. Do acquisitions ensure that all new defence equipment is Y2K compliant? If you do, how long has the system been in place that will ensure that new purchases are Y2K compliant?

Mr Jones —The general issue of handling Y2K compliance across the Defence portfolio is handled by the Defence Information Systems Group. They are coming up later, so they can talk to you about that. In respect of my part of it, the acquisitions program, we have had—

Senator HOGG —It is your part that I am interested in.

Mr Jones —With respect to the things that I am responsible for getting, we have Y2K clauses in all our current contracts. Quite how long they have been there, I am not sure, but when people became aware of an issue we modified our clauses. The real issue is with respect to things we have in progress.

We have a very extensive program—indeed, government wide, there is a big program—going through in great detail all the systems, equipment and sub[hyphen]components and getting compliance. In our case, of course, it is not a matter of me saying I have complied; I have to get that
certification out of industry—in some cases, tiers and tiers of contractors. It has been a long, complicated process, but we are pretty much there. I am down to about 15 of my 200[hyphen]odd projects where I still have some issues remaining. None of those issues at this stage appears to be critical, but we still have some work to do on a number of them.

Senator HOGG —Is it possible to find out which projects are still affected?

Mr Jones —I do not have a list with me.

Senator HOGG —You can take that on notice.

Mr Jones —We have a target of 30 June to report to government about where we stand. At some time after that, perhaps at the next hearing, if you like, I could talk to you about the ones that we are still working on.

Senator HOGG —I believe the answers are due by the middle of July, so if you take the question on notice, you can supply me with an answer at the appropriate time.

Mr Jones —In the middle of July I can give you a view of where I am in the acquisition area. To preview that, I point out that there are some things that are still in the delivery phases, so I cannot actually test them until later this year.

Senator HOGG —I accept that. The other question goes to the role that acquisitions plays in regard to the disposal of surplus defence equipment or equipment that is going to be replaced. What role do you actually play?

Mr Jones —In general, that is a role for Support Command Australia, which is another group. For example, we get involved where a trade[hyphen]in is involved in negotiating the contracts and terms and conditions. You heard earlier today about the C130J, where we are trading in a number of the E models. That is handled by my organisation.

Senator HOGG —Are there guidelines that you are required to operate under?

Mr Jones —Yes, there are general rules about disposal and who can write off assets and who can authorise disposal in the department.

Senator HOGG —Is that a lengthy piece of paper? Is it readily available?

Mr Jones —There is a defence instruction that would cover it.

Senator HOGG —If you could take it on notice and supply me with a copy of it, that would be helpful. I have other questions on program 9 which I will put on notice.

ACTING CHAIR —To clarify, Friday, 16 July is the date for answers.

Senator HOGG —That more than fits in with my request. I understand we are due to take a break. Could I indicate before we do so that it is my intention to put a number of questions on notice as we come to various programs. In particular, in program 12, I will not ask any questions but will put them on notice.

ACTING CHAIR —Group 12.

Senator HOGG —Group 12. Also, defence housing, wherever that falls.

ACTING CHAIR —That is right at the end.

Senator HOGG —That is all.

ACTING CHAIR —We will now take a 15[hyphen]minute break, at which point we will take together outputs 20 and 22, and group 1.

Proceedings suspended from 3.36 p.m. to 3.51 p.m.

Senator HOGG —In the defence cooperation area, I want to focus on Indonesia. I have a substantial number of questions, so if you are patient, we will get through them as quickly as we can. The first thing I want to refer to is Natuna Island in the South China Sea. This was an issue that I raised a couple of years ago. By way of background, in estimates in June 1997, I raised an article which had appeared in Flight International magazine, which reported that Australian and Indonesian defence officials had been working together to develop a defence strategy for the Natuna Island and nearby offshore gas projects. The Flight International article said that the discussions emerged from an Australia[hyphen]Indonesia force structure planning seminar in 1996. Defence sources were quoted as saying:

. . . the Indonesians want to use this project to begin their planning processes to overhaul their whole defence infrastructure and its coordination.

When I asked about this, Mr Behm at the time told this committee that Australia:

. . . was conducting a cooperative program with Indonesia on the surveillance of the Natuna islands as part of a cooperative relationship that we do have with Indonesia. In [April 1997] a small team of Australian defence officials and specialists visited Indonesia to help develop concepts of operations for the defence of those islands and the associated gas fields. This followed a request from Indonesia itself.

Mr Behm hastened to add that this activity was not directed at any third party and that it was not intended to put Australia in any position with respect to other countries' claims in the South China Sea and associated or adjacent waters. The Natuna islands are an undisputed part of Indonesian sovereign territory, as I understand it. Is that correct?

Mr Behm —That is our understanding.

Senator HOGG —But the same is not true, however, in respect of the neighbouring offshore gas fields. Is that correct?

Mr White —My understanding is that some of the territorial seas that would, under the law of the sea, go with the Natuna islands, so to speak, are also claimed by other claimants in the South China Sea—in particular, China. I am not quite sure to what extent that actually covers gas fields. Allan might have more detail on that.

Senator HOGG —I will be a little more precise. Is it correct that in 1993 China published a map of territorial claims which included the Natuna D[hyphen]Alpha gas field, which is 225 kilometres north[hyphen]east of the island group?

Mr White —I cannot specifically confirm that fact but I do recall the publication of the same map that I believe you are referring to.

Senator HOGG —So whilst we might not be able to agree on the precise details, in broad terms—

Mr White —There is an issue there.

Senator HOGG —Indonesia has disputed this claim, has it not?

Mr White —I would expect so.

Senator HOGG —In early 1996, Indonesia conducted a major defence exercise around the Natuna islands and the associated gas fields. They also, I understand, continued to assert their claim to sovereignty over the gas fields by conducting air and naval patrols in the area. Has China renounced or withdrawn its claim to the gas fields?

Mr White —Not that I am aware of.

Senator HOGG —Mr Behm told us, on the occasion that I asked those questions a couple of years ago, that a small team of Australian defence officials and specialists visited Indonesia in April 1997. Who were the people that were involved in that mission?

Mr Behm —Sorry, could you say that again?

Senator HOGG —Yes. On that last occasion, you told me that a small team of Australian defence officials and specialists visited Indonesia in April 1997.

Mr Behm —That is correct.

Senator HOGG —Who were the officials in that mission? Were they ADF officers or civilian officials? And who represented the Indonesian side?

Mr Behm —I will have to take it on notice. I cannot tell you the precise names.

Senator HOGG —All right. If you take that on notice, I can accept that, because that is—

Mr Behm —I simply cannot remember who they were.

Mr White —If it helps, Senator, my recollection is that they were primarily personnel from the Defence Science and Technology Organisation.

Senator HOGG —Were they ADF officers, can you recall, or civilian officials?

Mr White —I cannot recall.

Senator HOGG —All right. Take that question on notice and get back to me. I understand that with the passage of time one would need to check that. What areas of the department were involved—and I think you have just alluded to the fact that it was the Defence Science and Technology Organisation?

Mr White —Yes, but perhaps not them alone. Again, that will need to be addressed at the same time as the other question.

Mr Behm —I am pretty sure that there were several different elements of our organisation involved in that team. I cannot remember the precise composition of the team, which is why I would rather take it on notice than run the risk of misleading.

Senator HOGG —I do not want you to do that. This is something to which I would like reasonably precise answers. I would like to know what specifically was DSTO's contribution to that mission, if you could take that on notice. Did the specialists involved on the Australian side include people with expertise in long[hyphen]range surveillance, such as the Jindalee radar system? I would like that information, please.

A subsequent article in July 1997 reported that the discussions between Australia and Indonesia resulted in the development of a draft strategy for the defence of the Natuna gas fields. It was reported that the strategy put forward options for airborne and maritime patrols and also looked at placing a self[hyphen]protection capability into the gas field itself, possibly in the form of air defence radars and surface[hyphen]to[hyphen]air missiles aboard the production platforms. Other elements were reported to include the development of strategic level surveillance capabilities, including the use of very long range radar and satellite surveillance. Does Indonesia presently possess these sorts of capabilities—that is, very long range radar and satellite surveillance?

Mr White —To my knowledge, no.

Senator HOGG —The then Assistant Chief of the ADF for Force Development, Air Vice Marshal Rogers, told this committee there was no plan to sell a Jindalee type of radar system to Indonesia. Was there any discussion or consideration on any ways in which Australia might assist Indonesia in maritime surveillance in the South China Sea?

Mr White —Before answering that question, can I just put a bit of context here, Senator?

Senator HOGG —Yes, you may.

Mr White —The main focus of the exchange we had with Indonesia on the Natunas took place in the context in which Indonesia's armed forces, after many decades of primary focus on land warfare and on internal security, were beginning to shift their focus to thinking more clearly about the defence of the archipelago from external attack, the defence of Indonesia's very extensive and very economically significant exclusive economic zones, the impact on ABRI's or TNI's responsibilities of the law of the sea as it came into force and all that sort of thing.

At the same time, ABRI or TNI was also taking more interest in the systematic, I might even say scientific, approach to force development which we have developed over the years in Australia, drawing on the principles and practice of operational research and so on, in which DSTO plays a very important part.

So, to a significant degree, the purpose of our interaction with ABRI on this issue was to provide us with an opportunity to assist Indonesia in its thinking about not just the Natuna islands issue specifically, although that was a particular problem that they wanted to address, but in using that, if you like, as a laboratory or a test case for developing with Indonesia a better understanding of how Indonesia might go about the defence of its own territory and maritime areas and how it might use these scientific and systematic approaches to force development of its own forces.

We saw there being significant Australian strategic interests in that precisely because of the strategic interests we have in the stability and security of Indonesia and in the capacity of Indonesia to protect and defend its own territory. And, of course, that is a perception of our interests which underlay the agreement to maintaining security which was signed by the previous government and the policy of successive governments towards Indonesia over many years. I am sorry my preamble has extended. I have forgotten what the particular question was.

Senator HOGG —The question was: was there any discussion or consideration of any ways in which Australia might assist Indonesia—

Mr White —Okay.

Senator HOGG —in maritime surveillance in the South China Sea?

Mr White —Yes. In the context that I just laid out, we were not looking at establishing any specific, if you like, combined operations or anything like that to actively assist Indonesia in the day[hyphen]to[hyphen]day surveillance of its South China Sea territories and claims. We were looking at helping them develop the sorts of conceptual frameworks in which they could make those decisions by themselves. I should also say, though, that we have with Indonesia a number of maritime surveillance exercises—

Senator HOGG —Yes.

Mr White —which help develop Indonesia's maritime capability. Of course, we provided, some years ago now, a number of Nomad aircraft—quite a number of Nomad aircraft now—which are an important part of Indonesia's maritime surveillance capability, and we do have arrangements for maritime surveillance cooperation in the Timor Gap and the waters between the archipelago and Australia. So there is quite a lot of cooperation in the maritime surveillance area, and it is, indeed, a natural focus of our defence collaborative activities, as we are both islands and all of that sort of stuff. But, from my recollection, no part of the
Natuna process involved us looking at specific joint operations or combined operations in maritime surveillance.

Senator HOGG —Right. So we did not actually participate in the drafting of a strategy with the Indonesians.

Mr White —From my recollection of the process, the most accurate way to describe it would be to say that we assisted Indonesia in building a strategy or developing a strategy for improving its surveillance and protection of its maritime areas. But I do not think there was any suggestion that we would be undertaking specific operations with Indonesia to help it implement that strategy. It was more a matter of us giving them what you might, in commercial terms, call a consultancy.

Senator HOGG —One of the issues that arises from that is this: in the discussions or in the talk surrounding Natuna Island and the gas fields, was there any consideration given to, or did we raise the possibility of, the possible establishment of a Jindalee facility on Natuna Island, linked to the JORN network in Australia to cover air and sea movements in the South China Sea?

Mr White —I would not want to mislead you by giving you a flat `no' to that when you say `was there any consideration given'. All I can say is that has certainly been no part of any, what you might call high policy, consideration. If it was, it was purely incidental to the main thrust of the enterprise.

Senator HOGG —Has any consideration been given to that concept by Australia?

Mr White —Not that I know of. I also make the observation that it does not quite work—never trust me on physics—by the physics of the OTHR system because you do, as I am sure it has been explained, require quite a substantial skip distance before you start getting much useful data. An OTHR on the Natunas would not provide you with much data about the EEZ itself.

Senator HOGG —Thank you. What was the ultimate outcome, therefore, of these discussions and studies in regard to the Natuna Island gas fields, in your view?

Mr White —My understanding of the outcome was that we did indeed help Indonesia to learn more about the way in which we plan defence issues in Australia, the way we go about force structure planning. We also provided a very robust and tangible indication of our commitment to serving shared strategic interests in the way that is set out in the agreement to maintain security.

Mr Behm —Once that particular study visit was completed, our side wrote a report, of course, which is not tantamount to the Indonesian plan. They would have taken their findings and done with those findings whatever they thought necessary. I would simply comment that the arrival only a few months later of the economic crisis in Indonesia and everything that followed from that has really put it on the back burner and it has not resurfaced in any of our more recent discussions on maritime surveillance questions at this point.

Senator HOGG —Is that right?

Mr Behm —So far as I am aware.

Senator HOGG —Yet it seemed to be a fairly important issue back then. There is just one other issue.

Mr White —I just want to make the point that it was an important initiative, but it was only one of a lot of things that we have going on in the Indonesian relationship. It is very big dynamic relationship.

Senator HOGG —I accept that. I accept that it is only one of the things going on, but it does seem to me to be a fairly significant issue.

Mr White —Yes, it was very significant.

Senator HOGG —You have taken on notice those who comprise the Australian mission. Is it possible to say who represented the Indonesian side in the discussions? Again, on notice if that is it possible.

Mr White —We might wish to characterise it a little broadly, but we can certainly give you some indication—perhaps not individual names but a broad indication.

Senator HOGG —I accept that. Thank you for those responses there. I now want to move on to maritime surveillance in East Timor. What assistance do we provide to Indonesia in respect of maritime surveillance in the South China Sea—and, indeed, Indonesia's own territorial waters throughout the Indonesian archipelago? I am not talking so much now about exercises; I am talking about assistance. Do we provide assistance?

Mr White —Do you mean in terms of actual operations?

Senator HOGG —In respect of maritime surveillance in the South China Sea and also in Indonesia's own territorial waters throughout the Indonesian archipelago.

Mr White —In terms of Indonesia's territorial waters, I do not believe we would be providing any direct assistance beyond the provision sometime in the past of Nomad aircraft and assistance provided through the transfer of skills through some defence cooperation program activities and exercising. In the Timor Gap we have arrangements under the treaty where we undertake joint maritime patrol activities and share maritime surveillance information. That is specifically in the area of sea where Indonesia and Australia have agreed to split the difference.

Senator HOGG —In the Timor Gap.

Mr White —It is under a special arrangement. I think that is the scope of it.

Senator HOGG —So the arrangements that are in place, if any, are for that special area of cooperation in the Timor Gap?

Mr White —Yes. I am trying to draw a distinction between actual operations in the Timor Gap, where we have a special interest because we share sovereignty—that is probably the wrong way to describe it legally, but that is the practical effect—on the one hand and, on the other hand, the assistance we might provide Indonesia in developing its broader maritime surveillance capabilities, but not providing operational activity in surveilling their own territorial waters.

Senator HOGG —What assistance does Indonesia provide us in respect of the tracking of vessels such as the recent cases of ships carrying illegal immigrants which might be heading through the Indonesian archipelago to make landfall on Australia's shores?

Mr White —There is some level of liaison and cooperation in tracking suspected illegal immigrant vessels through the archipelago. I am not aware of the details of how that is managed.

Senator HOGG —Can detail of that be made available? Given some of the sensitivity, I am not asking for the impossible.

Mr White —Can I take on notice that we will provide such details as we can? That is obviously a fairly sensitive matter.

Senator HOGG —Yes, that is what I would expect, Mr White. Do we provide Indonesia with satellite imagery relevant to maritime surveillance?

Mr White —I think I can give a straight no on that.

Senator HOGG —Last Friday's Australian newspaper reported a briefing of the press by Indonesia's information minister, Mr Yunus Yosfiah. The information minister said that General Wiranto had reported concerns that new weapons were being smuggled to pro[hyphen]independence guerillas in East Timor. General Wiranto was further reported as saying that the Indonesian armed forces had checked about the movement of ships and helicopters that had been detected near East Timor by satellite surveillance. Our Department of Foreign Affairs and Trade was reported by the Australian as saying there was no Australian connection with these sightings. From where and from whom would Indonesia obtain satellite information concerning shipping movements near East Timor? Do you have any idea?

Mr White —I do not know, but I make the observation that satellite imagery is pretty widely available on the commercial market these days.

Senator HOGG —On the commercial market?

Mr White —Yes. That is an observation of mine, and I do not know whether they have the satellite imagery.

Senator HOGG —Could such imagery be provided by a provider in Australia, other than defence, if defence were not providing it?

Mr White —Possibly. That would be mere speculation on my part. It might be through an Australian provider but it would not be an Australian satellite.

Mr Behm —There are certainly providers operating out of Singapore.

Senator HOGG —Out of Singapore?

Mr White —Yes, and other parts. It is a global market.

Mr Behm —You can buy that stuff virtually anywhere.

Senator HOGG —Can you confirm that Indonesia approached Australia to check about maritime movements in the vicinity of East Timor at any stage?

Mr White —Yes, I can.

Senator HOGG —If so, when, and what was our response?

Mr White —We have been aware for some time, through it being raised by the Indonesians, that they have had concerns about unauthorised helicopter flights over East Timor, which the Indonesian government and armed forces have suspected may have been providing weapons or perhaps other support to pro[hyphen]independence forces in East Timor.

Senator HOGG —Was there concern only about pro[hyphen]independence forces? What about pro[hyphen]integrationists?

Mr White —Our impression was that their concern was primarily with pro[hyphen]independence forces. We are also aware, from what they have told us, that there was some concern that these unauthorised helicopter flights might be originating in Australia. That was also, of course, a concern for us for two reasons.

Senator HOGG —Can you put into context when this happened?

Mr White —I cannot give you dates, I am afraid, but this chain of events has been unfolding over one or two months. East Timor is a continual focus of attention, and so it all tends to run into one another. Those concerns of Indonesia's were of concern to us for two reasons. The first is that, if it were the case that aircraft operating out of Australia were supplying weapons to pro[hyphen]independence or any other forces in East Timor, that raised the possibility of violations of Australian law under what is called—if I remember rightly—the foreign incursions and recruitment act.

The second is that it would constitute a significant irritant in the relationship between Australia and Indonesia, which we would be at any time keen to avoid, but I guess we are particularly keen to avoid that at this very sensitive time in the history both of Indonesia and of Indonesia's relationship with East Timor. We, therefore, went to some trouble to ascertain and assure Indonesia that, to the best of our knowledge, these aircraft were not operating out of Australia.

Senator HOGG —Pardon my ignorance, Mr White, but would it be a long[hyphen]range helicopter?

Mr White —It would be a big helicopter. In technical terms, it would need to be at least a medium helicopter to carry even a relatively small load that range, but that is not impossible. However, as was reflected in the comments of General Wiranto in the cabinet meeting that were reported to the media by the cabinet secretary—quotes of whose comments you have been referring to—there was also concern as to whether these aircraft might be operating off ships in international waters in the Timor Sea. Indonesian armed forces approached us to ask if we were aware of ships operating in those international waters which might be the source of such flights. We had a look at that and the answer was that we were not aware of any.

Senator HOGG —So no evidence was found?

Mr White —Yes.

Senator HOGG —What sorts of means did we pursue to ensure that nothing was there? Was it aerial surveillance?

Mr White —The usual means.

Senator HOGG —The usual means! I get your message. The usual means told us that there were no helicopters, or other light aircraft for that matter, leaving Australian shores?

Mr White —Yes. Our focus was on ensuring that there were no aircraft operating out of Australia providing this material or ships operating out of Australia supporting helicopters and whatever. I would not want to claim omniscience for our usual means. It is conceivable that such things were happening without us being able to keep track of it, but we certainly worked pretty hard.

Senator HOGG —No, but it could be said that every reasonable effort was made to ensure that this was not taking place and that, at the end of the day, the result that you came up with was negative.

Mr White —Yes, that is correct.

Senator HOGG —I interrupted your earlier response because you said that the Indonesians were concerned about the pro[hyphen]independence forces. Just going back to it, did you not find it strange that they were only concerned about weapons going to the pro[hyphen]independence forces?

Mr White —No.

Senator HOGG —I would not find that strange either. Is the situation we have just been through an ongoing inquiry on your part to ensure that this is not taking place? If so, what is the likely length of your observation?

Mr White — We certainly do not regard this as a closed file. We will continue to take an interest in ensuring that there are no prima facie breaches of Australian law taking place through unauthorised flights between Australia and East Timor. I could not characterise the exact current state of the watch, but we certainly regard it as an ongoing thing.

Senator HOGG —What will trigger it not being a closed file? Another request from the Indonesians?

Mr White —I guess we will continue to take an interest in this issue as long as it continues to be a concern to the Indonesians. I cannot foresee how long that might be. It is fair to say that the particular Indonesian concern about this is a reflection of the fact that the situation on East Timor is very tense and complex and anxieties are easily generated on both sides.

Senator HOGG —Yes, I accept that. That is why I am asking the questions. Is the department aware of any evidence of arms smuggling into East Timor by pro[hyphen]independence forces? If so, when, and is this a matter of concern for Australia?

Mr White —I would not want to claim encyclopedic knowledge of that issue. I am aware of reports or allegations of arms smuggling to pro[hyphen]independence factions in East Timor. I am not aware of what I would call hard evidence.

Senator HOGG —Without pinning someone down, where are the reports or allegations from? Are they within Australia or external to Australia?

Mr White —I have seen no reports or allegations of arms smuggling from Australia into East Timor.

Senator HOGG —Have reports of arms smuggling surfaced from within Australia?

Mr White —From outside Australia.

Senator HOGG —Sources external to Australia?

Mr White —Yes.

Senator HOGG —Thank you. Is the department aware of any shipment of arms or military equipment into East Timor by or for the pro[hyphen]integration militias as opposed to the pro[hyphen]independence forces? If so, do you know when this happened, what are the details, and is this a matter of concern for Australia?

Mr White —It is a matter of concern for Australia. The government has consistently urged that reductions in flows of armaments and disarmament of the factions in East Timor are very important parts of any peaceful way forward for East Timor. We are aware of supplies of weapons to pro[hyphen]integration factions, including by elements of the Indonesian armed forces.

Senator HOGG —Do we know when this happened, in broad terms?

Mr White —I cannot give specific dates, but it has continued to occur.

Senator HOGG —Would you be in a position to tell me the frequency and over what period?

Mr White —No, I would rather not go into that detail.

Senator HOGG —Would you be able to say if this is of recent times, or are we looking at occurrences that are substantially further back in time?

Mr White —Of recent times.

Senator HOGG —Have we expressed concern to the Indonesian government as a result of this?

Mr White —Yes, we have.

Senator HOGG —At what level have we expressed the concern?

Mr White —Very high levels.

Senator HOGG —I want to raise the defence cooperation plan for a moment. In a speech to the Royal United Services Institute in December 1996, then Defence Minister McLachlan referred to defence cooperation with Indonesia. He said:

. . . we have put practical flesh on the bones of the 1995 Security Agreement with Indonesia through the recently established 10 year Defence Cooperation Plan. This outlines a rolling program of cooperative activity for the next decade which reflects the needs of both our countries.

What is the nature of this document?

Mr Behm —It is a rolling plan. It consists of four major categories and about 80 things on the list which would be implemented progressively over the next 10 years. It is simply designed to give a sense of forward direction to what is a pretty complicated defence cooperation relationship.

Senator HOGG —And is that a public document readily available or is it of a sensitive nature?

Mr Behm —It is sensitive.

Senator HOGG —I can understand that.

Mr Behm —It is a bilateral document, but I do not see why it should not be provided to this committee.

Senator HOGG —Thank you. I would welcome it under those circumstances. Is it a memorandum of understanding as such, or some other document?

Mr Behm —No in the technical sense. It is simply agreed between the two sides at the departmental level—between the headquarters of ABRI and our own headquarters. It is not a technical memorandum of understanding, but it does indicate what we are proposing to do, so we both understand the same thing.

Senator HOGG —It is a document which shows the spirit of cooperation—if I can describe it as such—between ourselves and the Indonesians?

Mr Behm —That is correct.

Senator HOGG —Do we know when it was signed or agreed to?

Mr Behm —To the best of my recollection, it was agreed at the meeting that we held in about October 1996.

Senator HOGG —Do we know who signed it on behalf of Australia and on behalf of Indonesia?

Mr Behm —I do not believe it was signed as such.

Senator HOGG —It is not a signed document?

Mr Behm —No, but it was agreed on the Indonesian side by General Wiranto and on our side by the then minister. It took place at the annual ministerial meeting.

Senator HOGG —Apart from the very brief reference in Minister McLachlan's speech, was there any other announcement of this agreement?

Mr Behm —You are testing my memory. I think the minister did issue a press statement at the conclusion of that meeting, and it was in that press statement, but I cannot swear to it.

Senator HOGG —If you can take that on notice and confirm it one way or the other with me, that would be fine. I have asked if the committee can be provided with a copy of that document. I think you have given us a general outline. What was the rolling program of cooperative activity contained in the document?

Mr Behm —I will provide you with the document, Senator. I cannot at the moment give you chapter and verse because it is quite an extended program.

Senator HOGG —All right. What benchmarks were set for the development of the bilateral defence relationship?

Mr Behm —If I could interpret your question as meaning the purposes of the bilateral defence relationship, I am not sure that we have set specific benchmarks. There are things we are going to do and we propose to do them at a certain time. If that is what you mean by benchmark, then each one of the items in the program has an achievement date to it. But basically they are all designed to do two things. They are designed to enhance the quality of the bilateral relationship between the two defence forces and to enhance the professionalism of the Indonesian defence forces.

Senator HOGG —And is it subject to ongoing review?

Mr Behm —Yes, it is.

Senator HOGG —And update?

Mr Behm —Yes, it is.

Senator HOGG —So it is a moving feast, in one sense?

Mr Behm —That is correct.

Senator HOGG —Whilst the defence cooperation plan would provide the basis of the relationship, it is an ongoing updated document.

Mr Behm —That is correct. There were a few huge obstacles put in the way of the implementation of that program simply because of the economic crisis that then beset Indonesia probably harder than it beset anybody else in Asia. So we have not achieved the plan at exactly the rate we might have anticipated at the end of 1996.

Senator HOGG —So the implementation of that defence cooperation has not necessarily followed the plan that was agreed to?

Mr Behm —That is correct.

Senator HOGG —Has there been an attempt to get the plan back on track?

Mr Behm —Perhaps I will put it slightly differently: it is not so much that the plan has fallen apart; it is simply that some of the—

Senator HOGG —It might be a poor choice of words by me, Mr Behm.

Mr Behm —It is not so much putting it back on track. What we are trying to do is to implement those bits that we can implement according to the schedules that we have decided upon and to look at ways of implementing the others either by redesigning them so that they are less expensive or simpler, or by relocating them so that there is less cost in doing them.

Senator HOGG —Thank you. The Department of Defence's submission to the Senate Foreign Affairs, Defence and Trade References Committee inquiry into policy towards East Timor sets out a number of areas in which Australia is engaged in defence cooperation with
Indonesia. I presume you are aware of that submission. Under defence science cooperation, the current areas of cooperation are stated to include integrated communication technologies, chemical analysis and detection, GPS accuracy, HF propagation and aircraft investigation techniques. The stated objective of this activity is to demonstrate the role of defence science and technology in rational and integrated capability development and acquisition processes. Precisely what are we doing with Indonesia in relation to integrated communication technologies, chemical analysis, GPS accuracy and HF propagation, which is high[hyphen]frequency radio propagation? Can you tell the committee some of the details about these projects? What are the objectives and what are the time frames and costs involved?

Mr Behm —Could I take those on notice? You will get completely frank answers. I simply cannot give them to you off the top of my head. I do not run that committee myself. It is a specialist committee and it engages specialists both from our defence science organisation and from the scientific branch of the headquarters of TNI, in Jakarta.

Senator HOGG —Yes, thanks, Mr Behm, I accept that. I also note that we are engaged in cooperation in the areas of communications, electronic warfare and information technology. The Defence submission states that projects include development of secure communication links between the ADF and TNI, electronic warfare database training and a planned ADF[hyphen]ABRI Internet home page. With regard to secure communication links, it is stated that these will be between Australian Defence headquarters, MABES, ABRI, Surabaya and Headquarters NORCOM. Can you clarify precisely who will be linked up with whom?

Mr Behm —My belief is that the links are in place. Again, I will give you a written response as to who precisely is in link with whom.

Senator HOGG —Good. What sorts of communications are involved?

Mr White —To go to the philosophy behind that, our aim has been to make sure that in a whole lot of different ways, over quite a few years now, we build up, amongst many other things, the capacities for communication in the broad between the Indonesian armed forces—TNI, as they are now called—and the ADF. This initiative was very much part of that broad philosophy. It was designed to make sure that the operational level commanders of the two forces had the capacity to communicate with one another in a secure way to ensure that, should circumstances arise in which we needed to undertake combined operations, or, for that matter, should circumstances arise in which we needed to de[hyphen]conflict our own separate operations, then we would have appropriate, secure communication links and the established protocols and procedures and all of those things which are very important to military command and control in place so that we could communicate effectively rather than, so to speak, having to ring one another up on the public phone system.

Senator HOGG —It can be just as good sometimes!

Mr Behm —Air Vice Marshal Nicholson can probably provide that detail that you were looking for a moment ago.

Senator HOGG —Good. On the sorts of communications that are involved?

Mr Behm —Yes.

Senator HOGG —Thank you.

Air Vice Marshal Nicholson —It began as a commercial[hyphen]grade secure link between maritime headquarters and the headquarters of Eastern Fleet in Surabaya. That was successfully operated for a couple of years. It was then extended to operate between Headquarters Northern Command and the headquarters of KODAM 9, the 9th military region, based in Denpasar, Bali.
The intention was to extend it between Headquarters ADF, here in Canberra, and MABES TNI—MABES just means headquarters. I am not sure that that last link has actually been put in place. The other two links have been and are used occasionally, infrequently. It is an off[hyphen]the[hyphen]shelf, commercial cryptographic set to enable secure telephone and secure fax, using the normal telephone system.

Senator HOGG —They are secure `hotlines', if I can call them that, between the ADF and the Indonesian military?

Air Vice Marshal Nicholson —They are not quite hotlines, Senator—you have obviously not had to make a telephone call to Indonesia!

Senator HOGG —There is always someone who puts a little bit of light relief into our proceedings, and you have done it.

Air Vice Marshal Nicholson —It is using the telephone system. It has an encryption device at both ends. The encryption device is a commercially available device.

Senator HOGG —Will the type of device allow for not only secure forms of transmission of voice from Australia to Indonesia but other forms of communication as well, such as fax?

Air Vice Marshal Nicholson —Telephone and fax.

Senator HOGG —Email?

Air Vice Marshal Nicholson —Technically, yes, although that has not actually been done.

Senator HOGG —So none of that has been done. Will it be used for transmitting strategic and maritime surveillance capabilities?

Air Vice Marshal Nicholson —No, it has not been. It is being used, as Mr White explained, to de[hyphen]conflict shipping movements, to arrange exercises and to enable planning staffs to talk with one another.

Senator HOGG —What is the purpose of the establishment of a joint ADF[hyphen]TNI home page?

Mr Behm —Transparency from both points of view. It is to make sure that the things that we are doing—that is, Indonesia with respect to us, and ourselves with respect to Indonesia—are open and that people can have a look. Such a home page we have prepared.

Senator HOGG —Is it up and running?

Mr Behm —I think it is, but I will have to confirm that with you. I have seen it.

Senator HOGG —If you can confirm that and also the number of hits on the home page, that would be interesting to see. I would imagine that it would be a popular home page, given the sensitivities that are around the area at this stage.

Is this form of public association appropriate in light of the Indonesian military's human rights record in East Timor and elsewhere?

Mr White — That goes to, if I can put it this way, a long[hyphen]running issue in the management of the defence relationship with Indonesia which I addressed in response to an earlier question. Successive Australian governments have for a long time sought to balance the two priorities of building a strong strategic relationship with Indonesia and with Indonesian's armed forces that serves Australia's strategic interests, on the one hand, but also expressing our views on a range of issues about human rights and the proper role of militaries in civil society, on the other. We have for a long time made a point of making clear to Indonesia and to TNI in particular, through many aspects of our defence relationship, how we conduct ourselves and of drawing to their attention points where we think they could be doing better. The Australian
government as a whole has for a long time had a very strong focus on making very clear representations on human rights issues, including, of course, in relation to East Timor.

The last year or so has been a particularly complicated one in Indonesian history, and in ABRI's history, for that matter. There have been some challenges in managing that over the last year. On the one hand, I think it would be fair to say that ABRI, now TNI, has taken in some ways quite remarkable steps towards becoming—viewing the Indonesian political situation as a whole—a politically neutral and constructive partner with other elements of Indonesian society in seeking to genuinely reform the Indonesian political structure. I think the success and relative peace of the election campaign and the elections that we have seen over the last couple of days is, amongst other things, a testament to the success with which ABRI has done that. The ADF and Defence, and Australia as a whole, I think, are happy to have been involved in that in a small way by undertaking a very active dialogue with ABRI, at this very exciting and demanding point in ABRI's history, about the way in which armed forces in democratic societies work and function and so on.

It has never been part of our performance agreements that we would succeed in persuading ABRI to become a defence force just like the ADF. Obviously, the role of ABRI in Indonesia's political life is something for the Indonesians to work out themselves, and that will always look a bit different to us. But we are at least satisfied that there has been a very active debate within ABRI about its role and that many of the key participants in that debate have got what we would regard as very compelling and valuable ideas about the way in which that should evolve. As an example, through the conference hosted by CDF and PANGAB in March in which Mr Behm played a very important role, we have helped to foster and promote that dialogue. So on that side I think you could say that there are a lot of very encouraging signs, albeit in a very complex situation, and that the defence relationship between Australia and Indonesia and the military[hyphen]to[hyphen]military relationship between the ADF and ABRI have made a useful contribution to that.

On the other hand, in relation to East Timor itself, there are significant difficulties. We believe that Indonesian armed forces have been actively engaged in support and in encouraging the pro[hyphen]integration movements and that that has contributed significantly to the security problems in East Timor. That has been the subject of repeated and very high[hyphen]level representations by the Australian government to Indonesia.

Senator HOGG —Thank you, Mr White. The Defence submission notes that we are adjusting our bilateral exercise program with Indonesia to accommodate a diminished Indonesian ability to support combined exercises and that we would like to expand our cooperation in areas of mutual interests, such as maritime surveillance. What are our plans in regard to maritime surveillance and what potential is there for increased cooperation in this field?

Mr Behm —The reason for some shrinkage within the activities program I touched upon earlier: it is the availability of funds and resources to the Indonesian armed forces themselves. Were you to wish so, I could probably provide you with details about which ones have actually come off and why. But the fundamental point to make, I think—

Senator HOGG —I will take you up on that.

Mr Behm —Sure. The fundamental point to make, though, is that we are looking for those areas where cooperation between Australia and Indonesia serves to reinforce those very important developments that have taken place over the last couple of years that Mr White just
alluded to—that is, the professionalism of the Indonesian armed forces in looking to their own external defence.

Maritime surveillance is one area in which we have an internationally benchmarked expertise and one in which the Indonesians are well able to develop a capacity which works both in their interests and in our interest as well. That is why we focused particularly on the maritime surveillance field. The things we are doing most particularly are in the development of maritime surveillance concepts and doctrine, and that very much is the sort of professional work that underpins that kind of activity.

Senator HOGG —Thank you, Mr Behm. I have still got quite a few more questions to get through. I now want to turn to the joint exercises with Kopassus and the Sunday program. I know that these were touched on before, but I have some quite specific questions in this area. Last year, the government announced that joint exercises involving the SAS and Indonesia's Kopassus special forces had been deferred by mutual agreement. Minister Moore stated that—and I quote:

. . . the Exercises have been deferred in the light of the budget cuts imposed by the Indonesian Government on ABRI training and by ABRI's priority requirement for restructuring of Kopassus.

Minister Moore's announcement made no reference to concerns about human rights abuses by Kopassus personnel as a factor in the decision to suspend exercises. Why not?

Mr White —Because the factors uppermost in the government's mind in that set of decisions were the ones he described.

Senator HOGG —Two weeks ago, the Nine Network's Sunday program reported that captured East Timorese pro[hyphen]independence guerillas had been press[hyphen]ganged as involuntary participants in the combined SAS[hyphen]Kopassus special forces exercise Night Komodo in 1994. In its response to the Sunday program's questions, the department stated that exercise Night Komodo involved basic conventional infantry skills training such as patrolling in Indonesia and that this exercise was not used to provide instruction on counterinsurgency operations, guerilla warfare or ambush training. Why would the SAS and Kopassus, the special forces of both countries, merely engage in `basic conventional infantry skills training'?

Mr White —It would not be proper for me to attempt a detailed military answer to that question, but I think the aim of that exercising is to share some of the skills that special forces use. The point about the answer we gave there was to demonstrate that we are careful not to share skills that we believe might be sensitive if used in internal security situations.

Senator HOGG —It raises the issue that the SAS and Kopassus are competent in such basic skills as patrolling. What justification would there be for such a modest exercise? Why would they have not engaged in a more substantive special forces exercise in Indonesia? That is the issue.

Mr White —Again, I am not in a position to give a detailed response on the technicalities of training.

Senator HOGG —Would you like to take that on notice?

Mr White —I would prefer to give an answer in this form—that is, I think you would find the special forces would regard patrolling, particularly as it is done by special forces, as a pretty refined art and something on which one could spend a great deal of time usefully exchanging views and experiences. So I would not read from that that the exercise was of no value.

Senator HOGG —Does the department stand by its claim that the exercises were not used to provide instruction on any skills which would be relevant to low intensity conflict, counterinsurgency operations or ambush training?

Mr White —Yes.

Senator HOGG —The department's response to the Sunday program admits—and I quote:

There were some East Timorese members of TNI involved in instructing SASR personnel on survival training. They appeared very much part of the training cadre at the Training Group.

When did the department, the ADF and the SAS first learn of allegations that pro[hyphen]independence East Timorese have been involuntary participants in a joint exercise with Kopassus?

Mr White —I do not know that we have yet learnt that. We first heard that that was being alleged to the makers of the Sunday program when the Sunday program put the questions to us.

Senator HOGG —My question was: when did you first learn of the allegations? I have been very careful in the wording that I have used, Mr White.

Mr White —We learnt of the allegation when the Sunday program put its questions to us, I would guess in the week before they went to air. I would not be precise about the date.

Senator HOGG —That is fair enough.

Mr White —I should say that is when I first learnt of them and the people working with us in the headquarters first learnt about it.

Senator HOGG —Were such reports a matter of concern?

Mr White —Had the allegations proved to be correct, they would have been of significant concern.

Senator HOGG —What steps were taken to investigate the allegations?

Mr White —I could not give any detail as to what steps the very capable officers who work for me went through, but I would expect that they would have gone to the special forces and said, `Does this look right to you?' The answers that we provided the Sunday program that you have described are based on their responses.

Senator HOGG —What inquiries and representations were made to Indonesian authorities and what was the outcome?

Mr White —We did not go to Indonesian authorities.

Senator HOGG —You did not?

Mr White —At least not to my knowledge, but I would be fairly confident of that.

Senator HOGG —If you can check that for me, that would be helpful.

Mr White —If we did go to the Indonesian authorities, I will let you know.

Senator HOGG —Yes, thank you. The Sunday program also raised questions concerning the visit of Colonel D.J. (Di) Harris of the Defence Intelligence Organisation to Dili in 1997. How often have DIO personnel visited Dili and East Timor?

Mr White —I cannot give you a precise answer to that.

Senator HOGG —Could you take that on notice?

Mr White —I would be happy to take that on notice.

Senator HOGG —If there were a number of visits, could you identify the purpose of the visits?

Mr White —It would be possible to identify them in generic terms.

Senator HOGG —Yes, I understand that.

Senator WEST —Do I understand that those allegations have not been taken up?

Mr White —I am sorry?

Senator WEST —You have not asked about the allegations; is that correct?

Mr White —We inquired specifically of our own special forces, as I understand it, about those allegations and pressed the answers to ensure that they were correct. I was satisfied that we got sufficient clarity and precision in the answers we had received that it was not necessary to clarify them with Indonesia.

Senator HOGG —In its response to the Sunday program, the department stated:

Successive Australian governments have considered it in Australia's national interests to have intelligence exchanges with a variety of countries, including Indonesia. In accordance with longstanding practice on intelligence matters, the Government will make no further comment except to say that the DIO has never provided information to foreign governments or agencies on that country's political or other dissidents.

This statement appears to be a very narrow assurance. It relates specifically to information on political or other dissidents in Indonesia. It does not appear to exclude the possibility of broader exchanges of assessments on internal security issues. Presumably, Colonel Harris discussed internal security issues when she visited the military headquarters in Dili. Did she?

Mr White —I am not in a position to say in detail what Colonel Harris discussed in Dili but I am in a position to say that we do not exchange internal security information with intelligence partners—information relating to the internal security of the country with whom we are speaking.

Senator HOGG —So DIO and/or ADF officers would not have discussed the internal security situation with the Indonesian military when visiting East Timor?

Mr White —They would not have exchanged intelligence on the internal security situation.

Senator HOGG —Intelligence?

Mr White —Exchanged intelligence.

Senator HOGG —Would a DIO officer be able to learn anything of value if they were not prepared to give at least something of their own—and, by implication, Australia's—assessment of the situation?

Mr White — Quite possibly—very skilled people.

Senator HOGG —Would we also rule out the provision of information of any external support for dissidents?

Mr White — I cannot say. I do not recall an issue in relation to Indonesia in which the issue has arisen. If I can take it a step further, you would infer from my answer that we would be very hesitant to.

Senator HOGG —Would we withhold information concerning the purchase or smuggling of weapons to assist internal groups?

Mr White — That would depend on the circumstances.

Senator HOGG —Would we withhold information relating to financial assistance for internal dissidents?

Mr White — Again, that would depend on the circumstances. If I can say it again to make the point: we will be very cautious about exchanging such information.

Senator HOGG —Can the department assure the committee that our defence intelligence agencies have never provided Indonesia with any assessments or information relevant to internal security issues in Indonesia?

Mr White — Yes.

Senator HOGG —Thank you very much, Mr White. Thank you very much, Mr Behm. That ends my questions on that issue.

Senator WEST —Can you tell us where the defence white paper is up to?

Mr White —Yes. Mr Moore, the minister, has announced that the government intends to produce a white paper. I believe, as part of that announcement, he indicated they intended to publish it in the year 2000. We are undertaking some preliminary work on the structure, content and methodology of that document. It will draw on a great deal of work we have been doing over the last couple of years to refine the strategic guidance that was contained in the strategic review published in 1997 by this government. It will also, of course, reflect some series of quite important changes in our strategic environment since then. So it is quite a big and complicated process.

Senator WEST —When in the year 2000?

Mr White — I am not in a position to say that; we are not sure.

Senator WEST —How many people so far are assigned to the task of developing the white paper?

Mr White — We do not have a specific white paper team at this stage. It is not clear to me whether we will adopt that managerial device on this occasion. We have done so in the past and we may do that. For the time being, naturally, the work that we are undertaking at the moment is of a slightly broader scope. Most of the work is being undertaken in the SPP division of Air Vice Marshal Nicholson's part of the headquarters. I am quite deeply involved in it myself.

Senator WEST —At this stage you do not know whether there is going to be a team approach or not?

Mr White — No, I am sure it will be a team approach. It is a question of whether bureaucratically we will actually assemble and identify a separate team.

Senator WEST —Will the white paper be unclassified or will there at least be an unclassified version published?

Mr White — The clear intention is to publish a white paper which will, of course, be unclassified, so to speak, by definition. Our current planning is that that public document will be based on a volume of classified work. It is not yet clear to us whether or not that classified work will be brought together in the form of one document to, if you like, produce a classified version of the white paper we actually publish, or whether that classified work will be left at a less integrated state and the point at which it will be brought together will be in the white paper. Certainly, there will be a lot of classified work underlying it.

Senator WEST —I expected that there would be. That is why I was asking whether there was at least going to be some unclassified stuff.

Mr White — My understanding of the government's recent planning is that there will be a substantial unclassified published document.

Senator WEST —Can you outline what high level bilateral defence discussions or reciprocal visits occurred during this financial year—that is 1998[hyphen]99—and what ones are planned for the financial year 1999[hyphen]2000?

Mr White —Do you mean across the board?

Senator WEST —You may want to take that on notice.

Mr White —Yes, please; there are a lot, with almost every country in the Asia[hyphen]Pacific region and with quite a few outside.

Senator WEST —I am happy for that to go on notice. What countries do we currently have exchange programs in place with?

Mr White —Do you mean long-term exchanges of military personnel?

Senator WEST —Yes.

Mr White —We will take that on notice, too, if we may.

Senator WEST —And the numbers of personnel that are sent and how many we receive? Do we have public servants go as well?

Mr White —Yes, we have some civilian exchanges with some countries, so we can cover them as well.

Senator WEST —I think I would like that as well, please. I am interested in the number of personnel we send and the number that we receive back, and what the total costs are to the ADF of those exchanges, if that is possible. Are there any costs involved?

Mr White —There are certainly costs that flow from salaries and the costs of the posting. Whether one would want to include in the cost the full salary of the person, I guess, would be an issue for the accountants to debate. Anyway, we will get some indicative approximations.

Senator WEST —And whether it is a cost, because you have actually got someone coming back in to fill that position.

Mr White —Of course, what we will not capture there is the very great benefit we get from exchange positions in terms of giving people some really good experience and exposure to the way other people do business, sometimes in quite different and exciting circumstances.

Senator WEST —This one will probably have to go on notice, too. The minister is not here. With regard to ministerial travel, Minister Moore seems to have been fairly busy since he took up the position as minister and I would like for the committee a list of overseas trips the minister has undertaken since October, who accompanied him on those trips—that is, staff and Defence personnel, et cetera—whether the trip was undertaken as a result of a formal invitation by the country visited, whether it was initiated at our end, who the minister had formal meetings with while overseas and the total cost of the trips. I do not expect you to have that material stuck in your back pocket.

Mr White —We can undertake to take that on notice.

Mr Tonkin —We will take that on notice.

Senator WEST —That is fine. Can you also tell me what senior ADF officers were summonsed to Canberra on 1 June this year for a meeting with regard to leaks from the Defence Force. That arises out of an article in the Courier[hyphen]Mail on Wednesday, 2 June.

Mr White —If I can perhaps just put a gloss on the question, Senator: I do not think `summonsed' is the right verb.

Senator WEST —Okay; were they dressed down?

Mr White —`Summoned' might be better, but my understanding is that no[hyphen]one was called from outside Canberra. It was a group of the one star band 1 officers and above from within the Canberra area.

Mr Tonkin —That is correct.

Senator WEST —So whoever wrote the story for the Courier[hyphen]Mail did not quite get it right.

Mr White —It does sometimes happen.

Senator WEST —Yes.

Senator HOGG —Are you saying that about the Courier[hyphen]Mail , when Senator MacGibbon and I are both from Queensland?

Senator MacGIBBON —I am not a Courier[hyphen]Mail supporter.

Senator HOGG —Neither am I, so that is two of us.

Senator MacGIBBON —Something we agree on.

ACTING CHAIR —Are there any further questions, Senator West?

Senator WEST —Who requested the meeting?

Mr Tonkin —The meeting was called by the Secretary and the Chief of the Defence Force.

Senator WEST —And why was it called?

Mr Tonkin —The meeting was called to reinforce the central importance that both the Secretary and the Chief of the Defence Force place upon the maintenance of appropriate standards of probity and security and the handling of classified and sensitive public documents.

Senator WEST —Why was it felt necessary to give a reminder to officers of such a senior level that this was needed?

Mr Tonkin —Because of a perception over recent times. There had been reports in various media sources alleging to quote from Defence commentary or Defence documentation. There was no intimation in the briefing that anyone present was in any way involved in that, but the concern was that we must all be aware of the importance of maintaining an appropriate attitude towards the preservation and protection of classified material. So the opportunity was taken by the Secretary and the Chief of Defence Force in a very brief gathering—I think it was about 10 minutes in duration—to remind people and to encourage them to remind their staff of the importance of maintaining high standards in that area.

Senator HOGG —In shorthand, are you saying there was leaking?

Mr Tonkin —In shorthand, I am saying that there was an opportunity to remind—

Senator HOGG —No. Look, Mr Tonkin, in shorthand, you are saying there were leaks that the department were concerned about and therefore they got the senior officers in. I wish you would speak in English terms for us: it is much easier. That sort of speak does not become you.

Mr Tonkin —I was working so hard on that expression.

Senator HOGG —I know. It does not become you; it is not a good straight bat.

ACTING CHAIR —Further questions, Senator Hogg? Senator West?

Senator WEST —Did any action follow the meeting?

Mr Tonkin —No particular action.

Senator HOGG —Were the AFP called in?

Mr Tonkin —Perhaps I could clarify. If there is any suggestion of a leak of a classified Defence document—to be direct and straight—

Senator HOGG —Yes; thank you.

Mr Tonkin —then, most certainly we will take every necessary step that we can to ascertain the source of any such leak and to utilise the resources available within Defence, the Australian Federal Police and other agencies to find out the person guilty of such a leak. If we find a person guilty of such a leak, then the full force of the law will be applied to the prosecution of that offence, which is an offence under the Crimes Act.

Senator HOGG —I recall some time ago there was an AFP officer attached to the foreign affairs department because they were having trouble with leaks—they obviously leak like a sieve over there—and they had someone there in house. Is it the case that there is an AFP officer stationed within Defence for this purpose or—

Mr Tonkin —No.

Senator HOGG —Not on a permanent basis. That is fine.

Senator WEST —Let me get it clear who was at the meeting. It was one stars and above.

Mr Tonkin —And assistant secretaries and above.

Senator WEST —And only those who were in the Canberra region?

Mr Tonkin —Yes.

Senator WEST —You did not bring any military personnel from Sydney or Melbourne?

Mr White —No, but the CDF did speak to a number of commanders outside Canberra and asked them to pass the same message to their people. If I can just add to what Rob said, one of the points here is that we do very much see security as a feature of the culture of the organisation. The purpose of the Secretary's and CDF's address was not simply, so to speak, to bawl people out but to remind them that it is their job to work with their people in such a way that the security culture of the organisation is strengthened and reinforced.

Senator HOGG —How often would this sort of reminder be delivered—on a regular basis or as needs require?

Mr White —I think it would be fair to say as required.

Senator HOGG —As required.

Mr Tonkin —I have just been reminded that the same message was also issued in a circular to all staff signed by the Secretary and the Chief of the Defence Force. So it is a public thing that we wish to take this opportunity to remind people of their obligations.

Senator HOGG —I am not trying to mock that; I am just trying to look at the frequency with which it might be delivered.

Senator WEST —How was the message delivered to the senior one stars and above and equivalents outside? Mr White, I think, made the comment that it was delivered—

Mr White —I do not know the details. I know the Chief of the Defence Force did ask a number of commanders outside Canberra to deliver that message, so to speak, directly to their people. But, as Mr Tonkin said, the message was also delivered to the whole Defence organisation through a Defence circular.

Mr Tonkin —Through a Defence circular. The intention also was, of course, that the message delivered by the Secretary and the Chief of the Defence Force was to be cascaded
down by the managers and commanders present at the briefing to their chains of command and management structures.

Senator WEST —On page 132 of the PBS, under `Goal 4: Enhanced national support', one of the dot points says:

. concluding agreements and other arrangements with key elements of Australia's civil transport infrastructure for improving ADF access in contingencies.

What arrangements has Defence currently got with civil transport providers for contingencies and what are you hoping to have in place by the end of this process?

Air Marshal Riding —Beyond the contract we have with Qantas for our travel, both international and domestic, we have no formal agreements with the airlines to provide support in a contingency. There are ongoing discussions between Defence headquarters and both Qantas and Ansett to establish memorandums of understanding between us so that, when a contingency breaks, we have got the basics of an agreement, certainly with all the terms and conditions and legal issues—contractual issues—sorted out so that we can quickly turn on whatever transport support is required in that particular contingency.

Senator WEST —Are you trying to improve the access and contingencies or are you quite happy with what—

Air Marshal Riding —We are trying to facilitate the process so that we can very quickly come to a contractual agreement to provide that support.

Senator WEST —Have there been problems in the past?

Air Marshal Riding —There was a comment made by Qantas, in fact, regarding the recent transport of Kosovars to Australia that, had we had such an agreement in place, we would have much more quickly been able to put in place the appropriate contracts—matters such as insurance, et cetera. All of those things can clearly be sorted out before the event, rather than when the event occurs.

Senator WEST —Thank you.

Senator MacGIBBON —On that point, agreements are one thing, but surely it is about capability, is it not? If we did have a crisis somewhere where we had to evacuate fairly large numbers of people, what is the scale of the support that we could get at short warning from the civilian infrastructure?

Air Marshal Riding —I think it would depend on the scale of the contingency and the urgency of it. And we would have to deal with that at the time.

Senator MacGIBBON —Presumably, the international carriers have forward commitments with respect to their schedules that they simply would not be able to break readily.

Air Marshal Riding —That is correct.

Senator MacGIBBON —So what are you looking at—one or two 747s being available, or are you looking at half a dozen? Have you any handle on that side of it?

Mr White —To draw on our own experience, of course in terms of assisting the Department of Foreign Affairs and Trade in exercising their consular responsibilities—for example, in relation to difficulties in Indonesia just over a year ago—they did, with our help, I might say, charter aircraft, including from Qantas at very short notice, and Qantas were able to provide, I think, all of the aircraft we wanted at the speed we wanted them. On that occasion at least, Qantas was able to come to the party quite well. There is, of course, an element of risk in that.
On the other hand, it is a very cost[hyphen]effective way of providing the capability rather than attempting to maintain it ourselves.

Senator MacGIBBON —Of course.

Senator WEST —In regard to goal 6, on page 132, what arrangements are HQ ADF going to implement to improve your performance in supporting the CDF, the Secretary and the Defence Executive? You have got `assessing our capabilities against requirements', `implementing arrangements to improve the Defence Headquarters' performance in supporting the Chief of the Defence Force, the Secretary and the Defence Executive' and ensuring other things. Why was it felt necessary to put this in here about arrangements to improve performance?

Air Marshal Riding —The arrangements, structure and processes of the Australian Defence Force headquarters were reorganised as a result of the Defence Reform Program, commencing in mid[hyphen]1997. It was always intended that, after two years, we would undertake a full review of that arrangement to make sure that it met our objectives of efficient, effective support to the CDF and the secretary. Our view has evolved to the point where we believe we can do it better, and there is a project entitled `ADHQ improved performance project' which is analysing culture, processes and organisational structure, with a view to bringing the results to the secretary and CDF by the end of this month.

Senator WEST —Is that an indication that you have failed at present, as a result of the DRP?

Air Marshal Riding —No. We came from a situation, we significantly improved it and we believe we can go further in that improvement.

Senator WEST —The way I read this I thought things must have not been going according to plan and you needed to improve it.

Mr White —A desire for improvement is never an admission of failure.

Senator WEST —It might not be an admission of failure, but it can sometimes be an indication that things are not as shipshape as you would like them to be.

Mr White —They are not as good as we would like them to be, but it does not mean they are not pretty good.

Mr Tonkin —We have always said that the Defence Reform Program would be a continuing process and that we would continue to evolve our systems. That is precisely what we are doing.

Senator WEST —That is very good. I am glad to hear it. What is it going to cost you to do this?

Air Marshal Riding —I do not believe it is going to cost us anything significant.

Senator WEST —Maybe you want to take it on notice, but I would interested to know how you are going to improve the performance without it costing you anything. What are you going to do, precisely?

Mr White —We do not expect an expansion of the resources used in the headquarters. Any costs will be in the cost of transition, and I do not imagine they will be very great.

Mr Tonkin —The construction of the building where the headquarters is located is designed to allow for organisational change without any need for repartitioning or anything else. So we can change the way we organise ourselves and the processes at essentially nil cost.

Air Marshal Riding —I would simply add that there is a consultant assisting us with the study and there is clearly a cost associated with this service.

Senator WEST —Who is the consultant? How was the consultancy awarded? How much is it going to cost? What is the length of the consultancy?

Air Marshal Riding —We will take that detail on notice and provide that information to you.

Senator WEST —Thank you. Can you provide a breakdown of your contribution to outputs, as outlined in table 4.1, as well as your estimated figures for the budget for out years?

Mr Lewincamp —Senator, these questions were put in a similar form yesterday. The breakdown of contribution to outputs is on page 22, as it is for the other outputs and groups. We are going to take on notice your request for a breakdown of things over the forward estimates but, as I explained to you yesterday, it is unlikely we will provide that information and we will give you an explanation of why not.

Senator WEST —Thank you.

[5.20 p.m.]