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Fitzgibbon says failing defence contracts cou -

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TONY JONES: Now to our interview with the Defence Minister. Last Friday, Joel Fitzgibbon announced
the process for producing a new defence white paper as a blueprint for Australia's future defence.
The white paper is due to be completed by the end of this year and along with a shorter term
inquiry into air combat inquiry it will see hard decisions taken on a series of giant defence
contracts which the minister has identified as failing. Chief amongst them the $6.5 billion
contract signed by Brendan Nelson to buy 24 Super Hornet fighter planes as a stop gap measure.
Well, that issue figured prominently in talks over the weekend with the US Defence Secretary Robert
Gates. I spoke to the Defence Minister in Canberra earlier this evening. Joel Fitzgibbon, thanks
for joining us.


TONY JONES: What if any of the massive defence funding commitments made by the previous Government
are up for review in your new defence white paper?

JOEL FITZGIBBON: Our absolute commitment Tony is to continue with the 3 per cent real growth in
defence funding, an absolute commitment on that. It was a pre election commitment. We intend to
meet that promise. We've been left, of course, a defence budget in very, very bad shape. We've
inherited a number of legacy projects which are potentially going to prove very expensive for the
taxpayer. So really given all those problems, we're going to have to find savings within defence to
add to that three per cent real growth just to stay even.

TONY JONES: You've spoken openly about cost blow outs and failure to deliver, is it true you've
assessed that $23 billion worth of defence projects are at medium or high risk of failure?

JOEL FITZGIBBON: It is true Tony and look, some projects we might be able to redeem. We hope so,
because too much taxpayers' money has been invested in them to let them go by the wayside. There
are others that simply might not be recoverable. These are real difficult decisions for the new
Government. That's why I'm working through them thoroughly and carefully, but as quickly as

TONY JONES: What projects might not be recoverable?

JOEL FITZGIBBON: Well, of course Tony, I'm not in a position to announce that tonight even if I
could because we haven't finished the very solid work we're doing reviewing those projects. We're
doing it on a case by case basis. Obviously there've been a few projects that have attracted a fair
amount of publicity. Sea Sprite helicopters, for example, the Adelaide frigates are problematic
projects but it's a bit early to be coming to final conclusions and, of course, these will at the
end of the day be a matter for the National Security Committee of the Cabinet.

TONY JONES: But both of those projects are under review and could go, that's what you're saying?

JOEL FITZGIBBON: Oh those projects and many others are under review, and my determination is two
fold. One, first to deliver the capability to the Defence Force it needs to do its job efficiently
and effectively in as safe a manner as is possible, and two, delivering value to the taxpayers' for
their investment. And they're the two big considerations, and we have to match those against the
difficulties we face, and come to some conclusions. Some projects may not survive that process,
it's too early to say. Others hopefully are redeemable.

TONY JONES: But you're talking about the potential to lose very big projects, the frigates, the Sea
Sprite helicopters, two you've named.

JOEL FITZGIBBON: Let's do it hypothetically or theoretically. Sea Sprite helicopters, up to $1.5
billion of taxpayers' money already spent or committed. If we were to come to the conclusion that
project wasn't sustainable, then we'd lose the initial $1.5 billion it's not quite that high but
it's growing to that amount. In addition to that, we'd have to find an alternative capability to
fill the void. So these are big decisions and there are big risks here for the taxpayer. That's why
it's important that we don't rush out and make ad hoc decisions like the former government was
doing. We need to work carefully and thoroughly through these projects.

TONY JONES: Who do you blame for the bad decisions that have led to virtual failures of giant
defence projects? Governments don't make these decisions on their own?

JOEL FITZGIBBON: Well, they do Tony. These were strategic questions. First of all capability
decisions should be guided by your strategic framework and too often the Government was making
decisions on a political basis rather than following that strategic guidance. The Super Hornet
purchase is a perfect example. Because of the Government's own decisions, that is its heavy leap of
faith in the delivery schedule of the Joint Strike Fighter, while at the same time deciding to
retire the F111 early, it allowed a capability gap to emerge. Now Air Force advice was, "Look,
don't worry about that, it's too early to be concerned, JFS might catch up, do nothing". But in an
election year the Howard Government wasn't prepared to allow itself to stand accused of allowing a
capability gap to emerge, so it said to Air Force and the Defence Force generally, just go out and
find us an interim aircraft, at a cost of $6.6 billion.

TONY JONES: When you were looking at this last year you said you were going to examine what
actually happened in that particular contract and you actually said no due diligence was done. Have
you done that now? Have you looked at that? Have you examined what happened?

JOEL FITZGIBBON: I have Tony. There was no due diligence, there was no due process, there was no
comparative analysis with other aircraft. When the National Security Cabinet of the Committee under
John Howard instructed the Defence Force to fill the gap regardless or whether it was necessary or
not and to fill it quickly, really Air Force had one potential kit available. And that was an off
the shelf version of the Super Hornet which could be immediately purchased from the US Navy. No
consideration of the capital costs or the sustainment costs. And no real consideration of whether
it was really needed. And certainly no comparative analysis with other aircraft.

TONY JONES: Are you blaming Brendan Nelson or generally the Security Cabinet of the previous
Government? Obviously the Minister must have had a serious role in making this contract?

JOEL FITZGIBBON: I've seen a few examples where Brendan Nelson was actually, I suspect, rolled by
the National Security Committee. It's really hard to say where he stood on the Super Hornet
purchase. All I can do is blame collectively the National Security Committee of the Howard Cabinet.

TONY JONES: He certainly defended the contract to purchase the Super Hornets. He, therefore, will
carry some of the responsibility for that in your view, is that what you're saying?

JOEL FITZGIBBON: Well, he must, he was the Minister at the time. The National Security Committee
acts on his advice. He was the person who went out and made the announcement in some great fanfare
on the day the announcement was made, the purchase was made public. So this very much hangs around
the neck of one Brendan Nelson.

TONY JONES: It sounds like you're preparing the public to take the $400 million hit which will come
if the contract is cancelled?

JOEL FITZGIBBON: Oh not at all Tony. I've consistently said I will follow the advice of the experts
who are doing the capability review. If they come to the conclusion or recommend that the Super
Hornet isn't up to the job, I would have no hesitation in cancelling it. I hope, despite the lack
of due process which was undertaken, and despite the rushed and maybe premature decision, I'm
really hoping that the air combat review recommends that we retain the Super Hornet. In that case,
we will avoid a more than $400 million penalty and that cost is growing on a daily basis, and we
will avoid the sort of relationship strains you'd expect with our friends and allies in the United
States for cancelling that contract. So no one will be more happy than me if we're able to take a
decision to retain the Super Hornet, but I'll still be very, very unhappy about the deal that is
$6.6 billion. Which is very expensive for this aircraft, and I'll remain very unhappy about the
lack of process leading up to the decision.

TONY JONES: The Defence Secretary Robert Gates seemed to leave the door open for Australia to get
out of that contract without hurting the relationship with the United States in an interview
tonight with Kerry O'Brien. Is that the way you read what he said?

JOEL FITZGIBBON: Yeah well he's a good guy. He understands our situation and he said something
which I thought was very generous. This is a matter for the Australian Government. He's not going
to interfere. That's not to say, of course, Tony that his administration and the US Navy in
particular, wouldn't be concerned about a decision to cancel because see, the US Navy has entered
into a contract with Boeing to purchase. They've made commitments. The thing's coming off the
production line, so it's a pretty rude if you like thing to do to move in now and cancel the
project, and I'd be very, very happy if we don't have to.

TONY JONES: Now you've made the argument, however, last year that Australia has to rely, if
Australia has to rely on the Super Hornet, it will lose its strategic edge. That this is a fourth
generation aircraft the sure hornet and it would be effectively up against fifth generation
aircraft flown by regional powers. Which regional powers would have fifth generation aircraft and,
therefore, a strategic edge on Australia in the air?

JOEL FITZGIBBON: Well, in fact Tony, I've never said that. I've never been critical of the Super
Hornet per se.

TONY JONES: Well, you did say that actually, you said that very precisely to Monica Attard. You
described it as a fourth generation aircraft. You said other regional powers would have fifth
generation aircraft.

JOEL FITZGIBBON: Tony, I did describe it as a fourth generation aircraft and it is. I have said in
the past that many experts, some of them more worth listening to than others I have to say, have
described the aircraft as inadequate. You know the reality Tony, I'm not an air power expert.
That's why I've commissioned a panel of experts to have a look at the situation. But it is true
that a number of nations to our north, including some South East Asian nations are now gaining
access, as they grow in their wealth and their economic capacity, gaining access to Russian in
particular, fifth generation aircraft.

TONY JONES: Which countries are we talking about, in particular?

JOEL FITZGIBBON: Look honestly Tony I don't think it's necessary for me to go into those specifics,
but I can say this. Maintaining our air superiority to our north is one of the most critical
aspects of the defence of our nation and we have to make sure we get our air power capacity
absolutely right.

TONY JONES: Alright. On the fifth generation plane, the US won't sell us the F22. Do you still
intend to directly lobby members of the US Congress to try to get them to overturn the legal ban on
selling that aircraft to Australia?

JOEL FITZGIBBON: Well, I'm prepared to do whatever it takes Tony. Now in my private conversation
with Secretary gates he said, "Look, this is a matter for the Congress". I said, "Would it be
appropriate for me to go directly to the Congress?" He indicated he didn't see a problem with that.
Later on he's obviously reflected on it and thought no, probably I'm better off directing my
lobbying efforts to him. What he effectively said earlier on ABC tonight was he was, he was
effectively saying he was prepared to advocate on our behalf. I couldn't be any happier with the
situation than that.

TONY JONES: Could you see any reason why a close ally should not lobby with Congressmen who are
blocking this sale to Australia?

JOEL FITZGIBBON: No, I don't, but if Secretary Gates and I've got a good working relationship with
him and I trust him. If Bob Gates tells me that my prospects are greatest if I leave the lobbying
efforts effectively to him, I'm happy to take that advice.

TONY JONES: Onto Afghanistan, you've described the conflict as of critical importance to Australia
and to Australia's national interest. Do you believe Australian troops will be there fighting on
the ground at least for the life of this Government?

JOEL FITZGIBBON: I do Tony, it's a long term project. The big issue here is how quickly we progress
the project and quite frankly the progress at the moment is not good enough. We lack common
objectives, we lack an overall strategic and coherent plan, we're not doing enough in capacity
building on the non military side. We've got to build a justice system, we've got to strengthen the
Afghan national police. We have to get the Afghan national army to a critical mass and skill level
it needs to hold the military gains we've made. Lots to do Tony and we need a lot more people on
the ground if we hope to be successful.

TONY JONES: Which NATO countries are not pulling their weight in Afghanistan? You've pointed in
that direction, we know that Germany, Italy, Spain, for example, are not prepared to commit their
troops into combat areas. Are they the countries you're pointing the finger at?

JOEL FITZGIBBON: You've named a few Tony, I've found it not productive to be naming them. But
they're well known and there are a number of underperforming NATO countries. They signed up to this
project. We are a non NATO country with more than 1,000 troops in the most dangerous area of
Afghanistan. We're punching above our weight and I've made it clear on a number of occasions, we
can't be expected to do more when so many underperforming NATO countries are not prepared to do

TONY JONES: Canada has had 70 of its people killed in Afghanistan. It's now set itself an exit date
of 2011, because it can't get NATO reinforcements to support its own troops. Are you worried that
Australian troops will find themselves in that situation?

JOEL FITZGIBBON: Well, I am worried Tony that unless we get underperforming NATO countries to do
more and until we get a national coherent plan we will all struggle as nation states to hold the
support of our constituencies. That's the big problem the Canadians have at the moment. They've
lost more than 70 people. They're in a minority government situation. The war is unpopular, and
this is the appeal I keep making to our NATO partners and the Europeans in particular. If they
don't start muscling up, if they don't start carrying their share of the burden we will start to go
backwards and we will collectively start to lose the support of our local constituencies. When that
starts to happen Tony, we all find ourselves in trouble and what a tragedy it would be if all the
resources we've all collectively put into Afghanistan, if all the capability we've put in, if all
those lives were lost for nought in the end, it's just, you know, too tragic to imagine.

TONY JONES: A final quick question, you've also identified Afghanistan's $2.3 billion opium trade
as one of the keys to the conflict and the to the funding of worldwide terror. Can you understand
why after years of NATO intervention in Afghanistan so little has been done to do anything about
the trade or the cultivation of opium poppies?

JOEL FITZGIBBON: It's just another area where we don't have a comprehensive plan and an agreed
approach. We're wiping out opium crops and leaving peasant farmers without a source of income. What
that does, of course, is just feed them back into the arms of the Taliban and other insurgents. So
we need a military plan but we need a non military plan. We need to marry them together, and we
need to make sure they're comprehensive plans which include economic capacity building, making sure
these people have an alternative source of living before we destroy the only source of living they
currently have.

TONY JONES: Joel Fitzgibbon, it looks like you have your work cut out for you. On a fast learning
curve obviously. We thank you very much for taking the time to talk to us on Lateline.

JOEL FITZGIBBON: It's a pleasure Tony, thank you very much.