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Wednesday, 23 November 2011
Page: 9351

Senator MARK BISHOP (Western Australia) (13:32): I recently addressed the Senate on the subject of accountability in Defence, in particular the downstream consequences of the matrix model in procurement. I believe we need to re-examine the current structural divide between each of the services, the CDG and the DMO. I support the view that accountability should rest more with service chiefs and that there needs to be strong central strategic coordination and specialisation within the three services.

In the current system of checks and balances, contributions to capability are of course drawn from a number of interests. One of the drawbacks of the matrix model is that it dilutes skills within and between each of the silos. There is a common need in each service for highly skilled people. Often they are recruited by the services and then rotate throughout the ADF. This dilution breaks continuity, which is so vital in longstanding programs. It also makes it difficult to pinpoint any centre of excellence at all. For example, I am told that the expert on underwater sonar is not necessarily from Navy. In this case the expert is from the DSTO. Secondment and rotation have been going on for decades. They are part of a career path and part of career development. But this does put Defence at a serious disadvantage to industry, which is in fact a reservoir of skills. That is also the experience in the United States, where it is admitted that government officers are simply no match for the corporate sector.

Added to this has been an almost disastrous policy of skills attrition due to policies of outsourcing and centralisation. In my view the recent extension of the rotation policy to three years is worth while but, in time, will prove to be an inadequate bandaid. Life cycles for projects can span 30 years from specification. Project approval from concept can take a decade alone. This is true of submarines, ships and aircraft. I suspect that in the services, and in Defence as a whole, the technical skills base needs to be reinvented as permanent structures separate from general operation forces. The time has passed where rotation has much long-term value at all in an age of increasing specialisation. This is consistent with the need to return more accountability to the service chiefs.

Like many sectors in our economy, attracting the skills needed in Defence and, once the skills are attracted, retaining them over time is a huge problem. Defence needs plumbers, welders and fitters and a whole range of IT specialists, to name but a few. Most of all it needs highly trained engineers and experts in systems development and integration. It is this area of high-tech, of advanced specialisation, that I wish to address.

Defence is now reliant on high-tech information technology in almost every facet of the work in which it engages. It is in fact the weakest link; it is our Achilles heel. An enormous effort has been made in Defence and the DMO to improve process and administrative skills. Primarily, that has come from criticism by the ANAO of continuing administrative failure. However, failures in procurement and sustainment are more often than not attributable to inadequate product specification, development delays through immature systems planning, failure and difficulties in systems integration, systems failure in service and difficulties in upgrading technology through service and through lifetime. To a large extent this boils down to inadequate systems engineering and integration skills. The cancellation of the Seasprite helicopter program is a classic example of that failure. Coming to grips with the skills needs of Defence, though, is very difficult to gauge. Painting the complete picture is difficult, if not impossible. The Defence annual report is bereft of detail except in the area of civilian needs. The DMO annual report is equally brief. Its focus is on project management skills, estimating and contracting, and commercial skills—all, of course, useful and necessary, but not directly focused on high-tech skills. The approach of the Mortimer report is also bland. It is limited to the importance of training, without any diagnosis, programmatic approach or structure.

However, it must be said that some measures have been put in place. The establishment of the Skilling Australia's Defence Industry program, SADI, is producing some results. There is also the Industry Skilling Program Enhancement package. That includes a range of initiatives such as: defence industry innovation centres; scholarships; masters and post-graduate programs at the University of South Australia and grant programs including the Priority Industry Capabilities program. This all sounds good and supportive, but the real question is: is it comprehensive enough? Is it sufficient to address the high-end tech end of the skills spectrum?

Each of the services, I presume, has its own diagnoses derived from skills audits. RAAF openly acknowledged its epiphany stemming from serious failures many years ago. Much has been done to restore its technical shortcomings in the last 10 years. I am also aware that Navy conducted a study of its engineering needs in 2010. Following the report of Mr Rizzo into naval maintenance, it too has finally been shocked into action. The Rizzo report has certainly belled the cat. Given the litany of failures, one can only ask why it took so long. It is now almost as though the wheel has turned full circle. Now we need to ensure we do not re-enable past weaknesses.

At the heart of this entire discussion has been the continuing loss of skills. A submission by the Association of Profes­sional Engineers, Scientists and Managers Australia to a current Senate FADT inquiry on procurement makes a strong case for doing much more. APESMA identifies two recent assessments of this shortcoming. The first is the analysis of the UK Nimrod review, which identified systemic weaknesses in UK procurement in these areas: the undervaluing and dilution of engineering skills; the decline of the Ministry of Defence to be an 'intelligent customer'; inadequate professional status; constant organisational change; interservice rivalry; manpower shortages and loss of skills; and a lack of trained safety engineers. Each of those criticisms is largely relevant in Australia.

The second report is research by Professor Cook and Dr Unewisse of the Defence Systems Innovation Centre at the University of South Australia. The particular point of their paper is that systems engineering and systems integration training in Australia are manifestly inadequate—not just for project management but particularly in project development and specification. The initia¬≠tives I have summarised will certainly help. But, again, is there enough understanding? Is there enough emphasis on high-level systems engineering and high-level systems integration? It is surely doubtful, given the demands to be made by the capability program with a price tag of around $300 billion over the next 30 years, all involving the most sophisticated and complex systems imaginable.

In my view, more funding is needed at the tertiary level, perhaps through SADI, perhaps through other means. There also needs to be a widening of courses available at graduate and post-graduate level. Attractive incentives will sometimes assist in the retention of skilled staff. This will do much to aid continuity of work within the capability plan.

I commend this paper on its analysis to the tertiary sector and defence industry authorities. Unless the findings are heeded, our exposure to risk of technical incompetence and failure will continue year in, year out. There is no room for complacency that the current mining boom and its demand on skilled human resources will abate. It is clear the shift in world economic activity from the old world to our new world in the Asia-Pacific is permanent or of such duration that it is going to last for generations. The demand for high-tech skills, I believe, has been grossly underestimated, as have the same needs across the IT industry throughout the economy. If some think the mining boom is likely to be short lived, thereby easing the pressure, they should think again. Let me quote, at some length, from the August issue of ANZ insight:

Australia currently faces one of the greatest opportunities in its economic history. The shift of economic growth from the developed to the developing world is unleashing extraordinary forces in the global economy. Huge low-income populations across the developing world are demanding more basic necessities: minerals, energy, food and fibre. In particular, commodities such as iron ore, copper, coal, aluminium, gas, grain, protein and fibre are the central ingredients in the industrialisation and urbanisation of developing countries. Much of this is happening on Australia’s doorstep, in China, in India and in South East Asia.

The developed countries of the world have already created a middle class of nearly one billion people - yet well over five billion in developing countries are still to reach middle class income levels. This is not the stuff of a routine commodities “boom”, but rather a more fundamental global process already well underway that will see billions more people achieve middle class living—and it has decades to run.

So therein lies the challenge. Further, it should be noted that this growth will not be in mining per se but more widely spread across supporting industries. It is estimated, for example, that these industries alone will grow in value by $200 billion by 2030. Within that the mining software component is already running at an estimated $880 million per year. So that is the scenario and the context—and the competition—Defence is facing. The question then is whether current policies and programs within Defence are up to that challenge. Frankly, I doubt it.

The same applies to the entire education and training system. Defence, more than anyone else, should know that nothing is moving faster in the world than information technology. The demands of the Defence Capability Plan are simply enormous and, in my view, cannot be met by current efforts in skills development. Remember that ships and aircraft are increasingly technologically complex and that, in the final analysis, are just huge mobile electronic factories surrounded by and encased in hard metal. So, unless addressed now, failures over what are expected to be 30-year life spans could be catastrophic.