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Address to the Department of Defence Senior Leadership Group, Canberra

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Stephen Smith MP

Minister for Defence


to the

Department of Defence

Senior Leadership Group

Hotel Realm


26 November 2010


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Thank you for that introduction.

I’m very pleased to be here at your Senior Leadership Group Meeting.

Can I formally thank the Secretary of the Department, Ian, and the Chief of Defence Force, Angus, as I did in Parliament yesterday, for the work they have done to date for me as Minister.

As I have told many of you and I have said publicly, I wanted to work in this portfolio precisely because of the all important work that we do in the national security space and at an important time strategically for Australia.

Can I also thank you, the Senior Leadership Group, for the work that you do in our national interest, working to protect and enhance our national security interests.

It is very important that we talk about our priorities and the expectations and responsibility on you as senior Defence leaders.

There are major challenges associated with accepting leadership and responsibility in Defence: implementing Government policy, conducting difficult and dangerous operations, managing major reform and difficult and complex capability projects.

Dealing with all of this will be required in the period ahead, within the external parameters under which we now operate.

I have been Minister now for some 10 weeks, enough time to form some initial conclusions and I thought it was timely to give you, the Senior Leadership Group, a read out.

I propose to be frank.

Speaking to you today reflects my view that a team approach is very much required to meet our challenges.

The same team approach with which my Ministerial colleagues and I approach our responsibilities: the Minister for Defence Science and Personnel Warren Snowdon, the Minister for Defence Materiel Jason Clare and the Parliamentary Secretary for

Defence David Feeney.

On the first sitting day of this Parliament, your Ministerial and Parliamentary team met formally with the Defence Committee, something we will continue into the future.

Defence is a big and complex organisation. It is critical to the full range of our nation’s national security interests.

It is an organisation that is barely matched in size and complexity in Australia.

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You are, of course, familiar with the statistics, but it is always worthwhile reminding ourselves what we have responsibility for:

• We have 80,000 people in our permanent military and civilian workforce and some 25,000 Reserves • We have a budget of nearly $27 billion this financial year • On current planning, we will receive over $100 billion over the 2010-11 to

2013-14 period • We own over 390 properties, over three million hectares of land, 25,000 buildings, 6000 other structural assets and 150,000 plant and equipment


• We currently have over 200 major acquisition projects and programs and more than 120 minor acquisition projects underway, and • More than 80 percent of our war-fighting assets are planned to be replaced or upgraded over the next 15 years.

This size and complexity translates into our Ministerial portfolios.

In the last ten weeks or so, I’m told I have received nearly 550 submissions. In 2010 to date, the Minister for Defence, John Faulkner and I, received 2,200 submissions, not including submissions to portfolio Ministers and copied to the Minister for Defence.

In 1998-99, I am told the Minister of the day received 690 submissions.

These submissions that I receive cover a vast range of diverse issues from Navy’s central canteen board Annual Report to Operation SLIPPER.

Each of these submissions has to be treated as deserving of full and proper consideration, which is what my Ministerial colleagues and I give them.

These submissions must therefore provide Ministers with all the information and all the analysis needed to make sensible and informed decisions in our national interest.

If submissions do not provide Ministers in the first instance with quality information and assessment, then even more work must be done and more time lost before a Ministerial decision can be made.

Quality and timely advice is important because together we face very considerable challenges.

The recent Parliamentary debate on Afghanistan and the recent successful NATO/ISAF summit in Lisbon have again crystallised Afghanistan as our single biggest operational challenge.

But it is not our only challenge. It would be a fundamental mistake for us to proceed on that basis.

Afghanistan and our other operational commitments, whether it’s East Timor, Solomon Islands, Sudan or Operation RESOLUTE, can and do stretch us.

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While a proper focus is on our operations, critical initiatives to prepare us for the future are implementation of the Defence White Paper, Force 2030 and the Strategic Reform Program.

Implementation will challenge us fundamentally, because implementation of these initiatives is a key Government measure of Defence success or failure.

And this is before we bear in mind that the Government is committed to returning the Budget to surplus through fiscal responsibility measures, such as holding real growth in Government spending to two percent a year until the budget returns to surplus.

Our Defence Budget equates to 7.6 percent of Australian Government outlays. It is equivalent to 1.9 percent of Gross Domestic Product.

In addition to this funding, Defence also receives additional funding for operations on a no win/no loss basis.

With the Government’s commitment to three percent real growth for Defence sitting above the Government’s expenditure cap and with additional supplementation for operations, Defence places significant pressure on the Government’s fiscal strategy.

As a consequence we have a responsibility to and we must ensure that the Defence dollar is wisely spent on priority items, and that it is seen to be spent wisely. This particularly applies to procurement and capability.

For the first time in many years, perhaps for the first time in the modern era, real parameters have been imposed around us: by the White Paper, by the Strategic Reform Program and by our capped Budget. We need to understand this at every

level, not just Ministers, the CDF, the Secretary or the CEO of Defence Materiel.

Together they also give us a great opportunity. More than ever, what we now need to ensure is that we have the internal discipline, the internal rigour and the accountability to meet our objectives.

We are not alone in this. As you would have seen recently, the United States and the United Kingdom, two of our closest partners, face similar issues and challenges in their own way.

The challenge for us is to be more efficient, more effective and better at what we do. And we can only do that together.

There are historically a range of difficult areas in Defence and problems in procurement is a major one.

We need to significantly improve the whole of Defence’s performance in procurement and delivering capability outcomes that the National Security Committee of the Cabinet has approved and agreed to fund at a particular level.

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We cannot, for example, amend the scope of a project agreed to by the Cabinet without prior approval, nor can we fail to advise Government in a timely way about project implementation or project difficulty. This applies in particular where hard judgements have to be made about allocation of funds.

The Minister for Defence Materiel and I have already added to the Project of Concern list.

Minister Clare and I will announce later today that project AIR 5418, the acquisition of the Joint Air-to-Surface Standoff Missile (JASSM), has been added to the Projects of Concern list. This listing is not primarily because of industry delays or cost increases. It is because of our poor management, our failure to keep Government properly and fully informed about the Project and its difficulties.

Having said that, risks to capability in that Project remain.

I have already asked that Defence review the effectiveness of its management of major projects, and Defence will use the JASSM project as a case study for improvements in this area.

Over the last 10 weeks I’ve seen suggestions or reference made to “One Defence”.

When dealing with the Diarchy, with the Secretary and the CDF, and the CEO of the DMO, of course I’m dealing with “One Defence”.

I’m not confident, however, that below the Diarchy I get a “One Defence” view. Rather I often suspect I get a view from a silo.

This can occur, for example, when Ministerial submissions have not been properly considered across the portfolio. This is often exacerbated by not being presented in a timely way or where the appropriate meaningful consultation with external agencies has not occurred.

We need to operate as “One Defence” inside “One Government” with better accountability and better consultation internally and externally. And I need to get a “One Defence” view no matter where I tap into the senior leadership group.

In the procurement area of course we’ve made changes in recent times. These have seen some improvement, through the enhanced first and second pass arrangements and the projects of concern process. But we need to do more. We need to instil much greater rigour and individual and institutional accountability to our consideration and management of major projects, procurement and capabilities. I will have more to say about that in the New Year.

Some of what I have talked to you about today will require we change the way we work.

We need to avoid the same mistakes, to learn our lessons and apply greater rigour, accountability and responsibility to substantially improve our performance for the future.

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We must all accept accountability for the work we do. Failures in accountability arrangements damage Defence, weaken Defence's performance and make us less efficient and less effective.

The Secretary, the CDF, the CEO of the DMO and I are very seized about the importance of enhancing our accountability arrangements. And that is going to be done for a single, singular reason. Our responsibilities are great and our accountability and our judgement must match that.

Our responsibilities go directly to the heart of our national security interests, to protect and defend the national security interests of the Commonwealth. And accountability and judgement go hand in hand with that.

Next year Government will consider the Black Review into Accountability to sharpen our accountability regime.

In the last ten weeks or so I have begun to grasp the sheer size, complexity and importance of our task in Defence.

I have travelled to Defence bases, visited our forces in Afghanistan and held many meetings, including with some of you.

In the course of these activities, I have been very impressed by the dedication, professionalism and skills that you and your colleagues have demonstrated.

Many of the things I have said to you today have also and already been said to me by people in this room. A number have also made the point that a feature of Defence is the strength of the individual people and the good work they do and I share that view. Our problem is that our frameworks do not always allow us to translate this good individual work into the best possible “One Defence” outcome for Australia.

That’s what we need to work on.

I believe very strongly that with our joint efforts, your leadership and the skills and dedication of the Defence organisation, that together we can meet these challenges of the future.

Thank you.