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Foreign Affairs, Defence and Trade Legislation Committee
24/10/2018
Estimates
DEFENCE PORTFOLIO
Department of Defence

Department of Defence

[09:02]

CHAIR: I now welcome the minister, Senator the Hon. Marise Payne, Minister for Foreign Affairs, representing the Minister for Defence; Mr Greg Moriarty, the secretary of the department; Chief of the Defence Force, General Angus Campbell; and officers from Defence. Minister, do you wish to make an opening statement?

Senator Payne: No, thank you. Good to see you here in that role.

CHAIR: Mr Moriarty?

Mr Moriarty : No, thank you.

CHAIR: General Campbell?

Gen. Campbell : No, thank you.

Senator WONG: I will start with the public reports about the agreement or the arrangement between Australia and Fiji regarding the Blackrock Camp in Nadi. I want to get some sense of the process leading up to and resulting in that decision and then I'd like to understand the arrangement for the execution of that understanding.

Mr Hamilton : Just to summarise the announcement, on 22 August 2018, as you know, former Prime Minister Turnbull and the Prime Minister of Fiji announced Australia's redevelopment of Blackrock Camp. The intent of this redevelopment is for the camp to become a regional hub for police and peacekeeping training and pre-deployment preparation. It will deliver enhanced capability development and stronger interoperability between our Defence Force and the Republic of Fiji military forces.

In the broad, our work with countries in the region, including Fiji, was foreshadowed as part of the white paper in 2016, where we said that we would do a lot more in our part of the region in terms of our Defence Cooperation Program, in terms of capacity building and capability support, in terms of the training that we do in Australia for personnel from the region, making sure that the Australian Defence Force and the department are more active and regionally engaged. This sort of activity is very much in line with what we set as part of the white paper that was reiterated in the—

Senator WONG: Can I just stop you, Mr Hamilton. I've read the white paper and I think we all understand that. I actually want to put questions about the process leading up to the announcements. Who approached whom? I'd like to get some sense of whether we were we approached formally by Fiji, whether we raised this with them and who handled the negotiations. Perhaps If you can just give me a bit of a sense of the process leading up to the prime ministers'—plural—announcements, Mr Jeffrey.

Mr Jeffrey : The issue of Blackrock Camp has been a longstanding ambition of the Fiji government.

Senator WONG: Sorry; a longstanding?

Mr Jeffrey : Ambition to develop the Blackrock facility. We had been in discussions with Fiji in a bilateral context in terms of developing that facility. We had engaged in some initial planning over the period of the last two years or so. I'll need to get the precise dates for you. As a result of those discussions and the invitation from the Fiji government for Australia to help construct the facility and work with them on building the facility, the decision was taken, as Mr Hamilton outlined.

Senator WONG: When did the invitation occur, as opposed to—

Mr Jeffrey : I'll have to take that on notice—

Senator WONG: Approximately?

Mr Jeffrey : in terms of when there was a specific invitation.

Senator WONG: I'm sorry, I was referencing what you said, Mr Jeffrey.

Mr Jeffrey : In the sense that this had been an issue of how we would work together on Blackrock, it's been an issue where we've discussed it on a number of occasions. As you could appreciate, we speak to our Fijian counterparts all the time. So the discussions on how we develop the facility have been going on for quite a while.

Senator WONG: All of which I accept. You just said that there was an invitation to engage in the way we have determined to do so. That is a good thing. I'm not criticising it; I'm just trying to get a sense of when that occurred. Do you need to take that on notice?

Mr Jeffrey : Sure. I'll take that on notice.

Senator WONG: In terms of these discussions, was there a formal Australian negotiating group or discussion group? Were these informal discussions at the portfolio level?

Mr Hamilton : Yes. We've had discussions with Fiji led by officers from the Department of Defence—they've been held over a period—building on the establishment of a permanent adviser position at Blackrock. So we have had someone at Blackrock for some time.

Senator WONG: A DoD person?

Mr Hamilton : Yes, that's right.

Senator Payne: As a trainer.

Mr Hamilton : Yes.

Senator Payne: I announced some time ago the construction of the humanitarian support supplies warehouse and the positioning of a peacekeeping training ADF member. I think that was at the end of last year, if I remember—

Mr Hamilton : November 2017.

Senator Payne: That would be the end of last year then, if I remember correctly. The conversation has, of course, continued since then.

Senator WONG: DoD lead, I think you said, but I assume that there was representation from other departments.

Mr Hamilton : Yes. We've been closely engaged with relevant departments, including the Department of Foreign Affairs and Trade, through this process.

Senator WONG: Is there currently an intention to develop a written agreement or heads of understanding that outlines the arrangement?

Mr Hamilton : Yes. That would be the usual practice for us in undertaking to cooperate with a country on a project of this scale.

Senator WONG: What do you want me to call the document? I'm going to ask a few questions about it.

Mr Jeffrey : Typically, it would be a memorandum of understanding.

Senator WONG: Who's taking the lead in the Australian government for drafting that MOU?

Mr Hamilton : The Department of Defence.

Senator WONG: Where is that at?

Mr Hamilton : It's at its very early stages. The announcement was made only very recently. We've had a number of engagements at officials level to start that process.

Senator WONG: Time frame?

Mr Jeffrey : I think it's too early to give you a time frame. We'll be negotiating—

Senator WONG: Has the government indicated some time frame for conclusion of the MOU?

Mr Jeffrey : No is the answer.

Senator WONG: What can occur in terms of implementation, if anything, prior to the completion of the MOU?

Mr Jeffrey : In terms of implementation, it's difficult because we've just gone into the off-season, which is when the cyclones come.

Senator WONG: Correct.

Mr Jeffrey : So it's very difficult to begin construction on any significant work until the on-season, which is spring next year. But obviously we are keen to move forward as quickly as possible. I will look to travel to Fiji probably in November to begin just the typical discussions that you would have about agreeing the text for the MOU.

Senator WONG: So at this stage you can't tell me any possible timeframe for concluding the MOU; is that the evidence of the government, that they don't have a timeframe for this?

Mr Jeffrey : I don't wish to give an arbitrary deadline but an MOU is not a hugely complex document.

Senator WONG: I just want to know what you're working to. I'm not trying to make a political point; I just want to know what you're working to.

Mr Hamilton : We're still working on the exact scope of the works. Clearly that will have an impact on the MOU itself. As soon as we're in a position to provide you with more information, we'll do so.

Senator WONG: Can you tell me about the scope of works then?

Mr Hamilton : As I said, that is still being discussed in detail with Fiji. Clearly whatever we do will be in accordance with what they think they will benefit from. That is the first principle of this work. So it will be pre-emptive for me to speculate on that.

Senator WONG: But I assume that we've got various construction works that will need to commence.

Mr Hamilton : That's right. There will be construction works and engineering works. We will need to look at, presumably, the security of the facilities. We will need to look at how many people Fiji thinks that it will need to accommodate in the facilities, and that will have an impact on the size of the accommodation. There are road works. There's a wide range of elements of what could be the final form of the camp. It's important that we work through those methodically with Fiji.

Senator WONG: Consistent with Mr Jeffrey not wanting to give me a time, you haven't got any suggestion as to when this work might actually commence?

Mr Hamilton : Planning has already commenced—

Senator WONG: No, the actual work.

Mr Hamilton : No, I can't give you a precise date.

Senator WONG: I'm not asking for a precise date. I'm happy with a highly hedged date or time frame.

Mr Hamilton : As Mr Jeffrey said, following on from the cyclone season, we hope to have people on the ground commencing initial activities, but what exactly those will be and how they will roll out is obviously subject to both discussions with Fiji but also the condition of the ground itself and the local conditions.

Senator WONG: Mr Moriarty, I just want to know: are we likely to see movement next year?

Mr Moriarty : It would be my intention that we can commence some early work during 2019. As you're probably aware, Fiji has had a long-term intention to develop the Blackrock Camp. They've had some initial ideas. We've already had some people go over and talk to them about what might be achievable, what phases. So that work needs to be turned into design and then we would obviously need to follow normal procurement processes in accordance with Fiji's laws and regulations. But I would like to see some work commence next calendar year.

Senator WONG: Presumably that assumes the finalisation of the MOU, which I think Mr Hamilton or Mr Jeffrey said was not a complex document. Correct?

Mr Moriarty : We would hope that, for the previous work that Senator Payne had already agreed with her counterpart, we should be able to try and crack on with that work while the MOU is being negotiated. That was, I think, already an undertaking from the Australian government that we would be doing some activities there.

Mr Hamilton : I might just add to what the secretary said: obviously we have a significant level of presence in Fiji. We are regularly deploying our people there on a range of issues. So we have a very good base level of knowledge that we can build on as we take this forward.

Senator WONG: Can I ask about the budget provisioning for this, please, whoever can help me with that? Do I stay with you two or do I need someone else at the table?

Senator GALLACHER: While you're finding the other person, could I just ask: given that half of Fiji's military are deployed overseas in the UN and it's a significant source of income to Fiji, how does that situation tie into your plan?

Mr Moriarty : Some of this flows from discussions that our ministers and prime ministers have had with the leadership in Fiji where they have again said that, as you identified, peacekeeping is a particularly important part of their international presence and they have said that this camp will become a regional hub for police and peacekeeping training. Our intention is to work with the Republic of Fiji military forces to build skill sets around peacekeeping in particular. But also we'll be looking to reach out to New Zealand to work with us. They have a very longstanding relationship with Fiji and, again, are very keen to enhance Fiji's peacekeeping capabilities. Also, as you know, in the past we've provided Bushmaster protected mobility vehicles; they've been sold to Fiji to support Fiji's UN peacekeeping mission. So it is a really important part of what they want to do and they've asked us to help work with them to build peacekeeping capability.

Mr Groves : Senator, there isn't any specific provision at this point in time for Blackrock but, obviously, we will look to provision it once the final negotiations have been finalised. The intent would be that Defence would fund it from within the Integrated Investment Program overall.

Senator WONG: The Integrated Investment Program: is that what used to be DCP?

Mr Groves : Yes.

Senator WONG: Right. Everyone changes names.

Senator Payne: Isn't that what it is in the Defence white paper?

Senator WONG: Why do governments do that? We should just stick with the same name, I reckon.

CHAIR: I'm with you, Senator Wong.

Senator WONG: DSD, ASD, CASG. Anyway—

Senator Payne: The unity ticket: Abetz-Wong.

CHAIR: Yes.

Senator Payne: Put that in Hansard.

Senator WONG: You would be surprised on occasion. As long as it's not social policy, on occasion there actually is. Just remind me: over the forward estimates—you may not have been asked this before, Mr Groves—what did you call it?

Mr Groves : The Integrated Investment Program.

Senator WONG: What's the total provisioning for the Integrated Investment Program over the forward estimates?

Mr Groves : For Blackrock?

Senator WONG: No.

Mr Groves : I'd have to get that, but I think our capital program itself is roughly around $10 billion and growing per year. I'd have to get the numbers.

Senator WONG: Sure. Can you come back later and table for me—this is what I would like—what you can give me about the forward estimates and the medium term for the Defence Integrated Investment Program; is that what it is? Also I'd like to understand, of that, what has already been allocated. How do you budget it; how do you account for it?

Mr Groves : I can actually provide you with the numbers.

Senator WONG: No. I'd like it in writing because I'm going to ask—

Mr Groves : If I may, it's outlined in detail within the PBS across the forward estimates, both looking at our capital program, which starts at $10.4 billion for 2018-19 and going up to $16.165 billion—

Senator WONG: The additional estimates statement or the budget estimates statement?

Mr Groves : I'm referring to the budget estimates, which is the last published—

Senator WONG: I'm asking for 'to date'. Can I be clear about what—

Mr Groves : There is no other published estimate.

Senator WONG: This is Senate estimates and I'm asking you for it—

Mr Groves : Yes.

Senator WONG: so perhaps you could let me finish my question before you tell me that you can't do it. I assume that you budget within this very large taxpayer-funded component in various categories. So I assume that you have an overall provision. Tell me what the sub-categories are. Tell me how you process through your allocation of moneys under the program.

Mr Groves : The overall nature of the Defence budget is as outlined in the Defence white paper and that sets the provisioning, I guess, over the forward estimates and beyond. What we publish within our portfolio budget statement, which was the last published document—

Senator WONG: I asked you a different question. It would be good if you could answer my question. I'm asking a question about how you process your accounting of this. I understand how you prepare a PBS.

Mr Groves : Yes, and I was getting to that, Senator.

Senator WONG: Thank you.

Mr Groves : The high-level provisioning is as outlined in the Defence white paper. There is then a process whereby we go through various passes of different components within the Integrated Investment Program, considered by our Defence Investment Committee, which has membership of the Department of Finance and Prime Minister and Cabinet on it, before it then goes for cabinet consideration. There are various stages of consideration through that process: either gate 0, gate 1 or gate 2, depending on the robustness of the estimates. As government considers those various components through that process, the funding, I guess you would say, is released from the provisioning which is outlined in our forward estimates and becomes what we call an approved project.

Senator WONG: Approved.

Mr Groves : Up until that time, those that haven't been considered by government would be considered an unapproved project.

Senator WONG: Do you account separately for the unimproved projects to keep track of what's going through the process so that you know if you've got too much coming through the gate, as it were?

Mr Groves : Yes, we do.

Senator WONG: You said 'various passes'. I think the nomenclature might have changed since I was finance minister, so it's no longer first pass, second pass, and you talked about gates.

Mr Groves : It could be like gate 0, which is just the initial release of funding. Gate 1 would be some more detailed cost estimates and a further release of funding over the preliminary stages of a project. The second pass, to use the language you're familiar with, would be more of an RFT, potentially, type quality costing that would then be considered.

Senator WONG: I'm conscious that some of this is confidential, but I'm trying to get a sense of the flow. I will come back to Blackrock, but I'll just ask about this broader systemic issue. What are you able to give me around total forward estimates and what is in gate 0, gate 1 and gate 2 in terms of quantum?

Mr Groves : I don't have that level of information; I'd have to take that on notice. But certainly across the capital program, we would be able to give some broad-level estimates of where different components are up to through that process.

Senator WONG: I'd appreciate that. I assume that you may wish not to disaggregate that into 'project'.

Mr Groves : Correct.

Senator WONG: What I'm looking for is quantum.

Mr Groves : Yes.

Senator WONG: I assume that you budget beyond the forwards for the purposes of the investment plan.

Mr Groves : Absolutely.

Senator WONG: So give me whatever you can give me. What I'm trying to get is: here it is and here is the quantum of each component at each phase.

Mr Groves : Yes. We can do our best.

Senator WONG: I would appreciate that. If you give me that, we won't have to ask so many questions.

Mr Groves : At high level, would you be happy with just the split between approved and unapproved rather than where some of these projects may be through various gateway processes or past processes?

Senator WONG: I would prefer the latter because it's more granular but, if there are sound reasons why you can't give me that, we can have that discussion when you do.

Mr Groves : Obviously it might need to be at a very summarised level in some cases.

Senator WONG: Sure. I'm not interested in making too public things that we don't want made public; I understand that. Blackrock has not gone through any of these yet, obviously.

Mr Hamilton : No; that's right. It's very early in the process for Blackrock and includes working with Fiji on the scope, which will have an impact on the final cost of the Blackrock facility and how much we need to proportion for it. As the CFO said, this will be funded from within Defence's budget. We've always said that our plans will be adjusted in line with emerging priorities and this is clearly an emerging and important priority for us, so we'll prioritise it accordingly.

Senator WONG: Do you have any ballpark figure?

Mr Hamilton : I don't have a ballpark figure for you.

Senator WONG: Do you have one in your head that you're not telling me?

Mr Hamilton : No, I do not have one in my head that I'm not telling you, Senator.

Senator WONG: How about you, Mr Moriarty? You're good at this.

Mr Moriarty : No; but I think we'd be looking to make a substantial investment. This is a very important facility for Fiji. I think it will be a centrepiece of Fiji's future military training. But, as I said, it hopefully will play a regional law enforcement and peacekeeping role. We want to do it properly. As you know, infrastructure in the South Pacific needs to be built in a way which withstands the elements and the weather. So I would prefer us to do something proper and well designed that will last many years rather than something that's done quickly and needs to be fixed up in two or three years time.

Senator WONG: Mr Groves, just coming back to something you said: you said 'capital only'. What other components in the plan are there?

Mr Groves : The other large component of the Integrated Investment Program is what we label as sustainment—that is, sustainment of all of that capability. That's similar sorts of numbers.

Senator WONG: On notice, can I have that as well?

Mr Groves : Yes, noting that it doesn't necessarily go through the same processes.

Senator WONG: It doesn't have the same; it's more like—what do you call it?—operational funding?

Mr Groves : Yes, and to support the major capital acquisition capability. Some of it does go through a first- and second-pass process where it's associated with an acquisition capability.

Senator WONG: So it's not a quantum threshold; it's a—

Mr Groves : It's more attached to the project, I guess.

Senator WONG: It's attached to a project. But I assume that what we're talking about here is primarily capital upfront.

Mr Groves : Once negotiations are sorted on what the facility would look like, it would have both an acquisition component and a sustainment component, depending on where the negotiations land on who would support the facility. As I said at the start, we would look to be funding that and reprioritising within the Integrated Investment Program.

Senator WONG: How much of this can you get to me before the end of the day, Mr Groves?

Mr Groves : I'm sure that we can probably give a high level of information fairly quickly.

Senator WONG: I'd appreciate that; thank you.

Vice Adm. Johnston : Senator Wong, I might be able to help you. Just in terms of those broad numbers associated with the Integrated Investment Program, over the decade, at a high-level view, we have six capability streams. Over the decade, for the air and sea lift stream, $14 billion; intelligence, surveillance, reconnaissance, electronic warfare, space and cyber, $38 billion; key enablers, $44 billion; land combat and amphibious warfare, $30 billion; maritime and anti-submarine warfare, $64 billion; and strike and air combat, $31 billion. That's in the investment profile over the decade.

Senator WONG: I think the information that I'm asking for from Mr Groves is within that: what expenditure is at which stage of the process? Thanks very much. I'll move to PNG and the proposed Lombrum Naval Base at Manus. Can you tell me about the status of these discussions?

Mr Hamilton : We do have plans to increase cooperation at the PNG Defence Force base in Manus Province and that includes around $5 million worth of wharf and shore-based infrastructure upgrades. That's being taken forward under our Pacific Maritime Security Program.

Senator WONG: This is not under the investment plan?

Mr Hamilton : No. This is separate funding within Defence that's allocated for our international engagement activities.

Senator WONG: Activities.

Mr Hamilton : That includes all of our engagement with PNG. I think, in total, it is around $40 million in 2018-19 for all of our Defence cooperation with PNG and that includes a range of support to PNG, including, as I said, that wharf upgrade.

Senator WONG: I'm asking about the Lombrum Naval Base, though, and what discussions are occurring or have occurred. There's been some reporting in relation to the base. Is it only the wharf? Is that what you're saying?

Mr Hamilton : There is that current program in relation to our current engagement on that wharf. Yes, we are doing work on the ground at the moment. We also have an ongoing engagement with PNG around what else we can do to support them. That was flagged in the white paper as part of our enhanced engagement in the region.

Senator WONG: I think we previously assisted with the construction of this wharf decades ago; is that right? No? Mr O'Neill is reported as saying 'very interested in working with Australia to redevelop the Lombrum Naval Base as a joint facility, prompting a scoping mission by Australian defence officials'. That's what I'm asking about.

Mr Moriarty : That's correct. The Papua New Guinea Prime Minister has said to our Prime Minister, and to the former Prime Minister, that it is a priority for him, and that he wants to develop the defence and broader security relationship. We have had officers from the department visit Manus in recent months. I'll get you the dates.

Mr Jeffrey : On 28 to 30 August we had officers from the department—

Senator WONG: Was that you?

Mr Jeffrey : No.

Senator WONG: Others?

Mr Jeffrey : Others.

Mr Moriarty : Again, through our defence cooperation talks, through engagement between the prime ministers of both countries, there's clearly an intention to do more there. Defence is working more at the operational level to see what might need to be done, what sort of scope of works might be able to be developed, depending on what the agreed purpose was. But all of that will be in accordance with the wishes of the Papua New Guinea government and very much in line with what their Prime Minister might agree with our Prime Minister.

Mr Hamilton : We're also gifting PNG four of our new Pacific patrol boats. That will require investment and engagement to make sure that they have the facilities and the capability to support those vessels. That's part of the discussions that the staff who were in PNG and who did visit Manus in that period that Mr Jeffrey mentioned were talking about.

Senator WONG: What else was—

Mr Jeffrey : Senator, you were asking about the wharf. There are two issues here. One is—

Senator WONG: I was asking about what we have done in the context of Mr O'Neill's public statement, which has been reported, as to the redevelopment of the naval base. Do I infer from what people are responding with that you're only talking about the wharf and not a broader set of works?

Mr Hamilton : No.

Senator WONG: Or do I infer that you just didn't want to answer that last bit?

Mr Moriarty : The wharf is an important part of the base. When our team visited, they looked broader than at the wharf.

Senator WONG: Thank you.

Mr Hamilton : Our engagement with PNG through the Defence Cooperation Program is not just about the patrol boats—that is an important element; that's why we're spending the money on the wharf—

Senator WONG: I understand that.

Mr Hamilton : There's a wide range of things that we can do, including in response to requests from PNG about more engagement.

Senator WONG: Can you tell me what we have done as a consequence of Mr O'Neill's public request and discussions with former Prime Minister Turnbull? You've told me, Mr Jeffrey, that there was—I can't recall how you described it—a scoping visit?

Mr Jeffrey : Scoping.

Senator WONG: From 28 to 30 August.

Mr Jeffrey : A scoping visit to Manus Island.

Senator WONG: Have there been other discussions since 28 to 30 August?

Mr Jeffrey : In the course of normal bilaterals, our post has been engaging very closely with its PNG counterparts on what they would like to see developed on Manus Island.

Senator WONG: Tell me about progress on the broader redevelopment that Prime Minister O'Neill has flagged.

Mr Jeffrey : I would only say that discussions are ongoing and this will be a decision for prime ministers.

Senator WONG: Discussions are ongoing at which level, ahead of the prime ministers' meeting? I assume that the next time they'll meet will be at APEC; is that right?

Mr Jeffrey : I think that's when they're next scheduled to meet; yes, that's correct.

Senator WONG: At which level are discussions occurring as between 28 and 30 August until APEC; who's engaged?

Mr Hamilton : We're engaged at all levels.

Mr Moriarty : I'm intending to visit Papua New Guinea next month.

Senator Payne: I met the week before last with Prime Minister O'Neill—

Senator WONG: I saw that.

Senator Payne: and with foreign minister Pato and Minister Mirisim, who is the defence minister—a range of members of the cabinet, obviously.

Senator WONG: Including on this issue?

Senator Payne: Including on a range of issues, yes.

Senator WONG: Yes, including on this issue?

Senator Payne: We discussed a broad range of issues.

Senator WONG: Is there any engagement that you can tell me about, General or CDF? What do I call you now?

Senator Payne: General.

Gen. Campbell : The only participation in your line of questioning that I've had was that I was in attendance with the foreign minister at one meeting, but as an attendant rather than as a participant. I didn't say anything.

Senator WONG: The strong, silent type in the corner!

Gen. Campbell : Always!

Senator WONG: Was that in the meeting that you were describing?

Senator Payne: Yes. I would never describe the Chief of the Defence Force as an attendant, however.

Gen. Campbell : Thank you.

Senator WONG: I didn't say that.

Senator Payne: No, I'm correcting his own language.

Senator WONG: I said that he was the strong, silent type. Is it anticipated that there might be an announcement on this issue at APEC?

Senator Payne: That's a matter for the government.

Senator WONG: In other words, yes. Can I ask about the initial approach? Obviously, what has been reported publicly is Prime Minister O'Neill's public statements. Was there a private approach prior to those reports, specifically on the broader redevelopment? Let's not get sidetracked down the wharf discussion again.

Mr Moriarty : I'm not aware of anything specific, but I know that this is an issue that Prime Minister O'Neill has raised with Australia on a couple of occasions.

Senator WONG: Would it be correct to characterise the public request as an indication of requests which had been made privately over some time by the PNG government?

Senator Payne: I wouldn't characterise it like that.

Senator WONG: Can you tell me how you would?

Senator Payne: I've only been in this role for a relatively short period of time, as you know. But, given the closeness of our relationship and given the significance of Australia's engagement with Papua New Guinea, we are always discussing the opportunities we have to partner together across a broad range of activities, and they are as diverse as you can possibly imagine. I reopened, with Grand Chief Sir Michael Somare, the Papua New Guinea gallery and museum last week, which was refurbished with significant support from Australia. From that, to the largest defence cooperation program we have, the breadth of the relationship, the breadth of our engagement, is very significant. There is constant discussion between both our representatives in Papua New Guinea—our High Commission, led by Bruce Davis, and the Defence Cooperation Program, led by the defence attaché in Papua New Guinea—and the conversations are many and varied.

Senator WONG: Mr Jeffrey, are you responsible for drafting the MOU in relation to this particular project?

Mr Jeffrey : My staff will be involved in it, yes, and Defence legal.

Senator WONG: Tell me what the status of that draft is.

Mr Jeffrey : We haven't begun drafting an MOU. An MOU is the end stage of the process, as you would know.

Senator WONG: What have you done; what has happened?

Mr Jeffrey : Scoping visits.

Senator WONG: Scoping visits. What have you got in writing?

Mr Jeffrey : As in an official document or a treaty between the two countries?

Senator WONG: No; just in terms of your internal work after the scoping visit. Has there been a brief to ministers or is there an internal working document that starts to scope what the MOU would have to address?

Mr Jeffrey : The scoping study is trying to understand what the PNG government would like to see developed on Manus, and that's what the internal discussions focus on.

Senator WONG: So 'scoping studies' is the appropriate phrase?

Mr Jeffrey : Yes, a scoping visit to understand. It's both to look at the territory on the ground and to consult with PNG officials, both within the defence force and in the government.

Senator WONG: There has just been the one meeting, in the context of the—

Mr Jeffrey : It's the same—

Senator WONG: In the context of the scoping study. I always have an issue with the phrase 'we are in constant contact' because it's actually not possible to be in constant contact. Leaving that aside, I understand what people are saying—ongoing and regular et cetera. I'm not asking about that. I'm actually asking about the work phase associated with scoping the potential redevelopment. I'm asking how many meetings have occurred in respect of that. I think your answer is at least one meeting, which is the scoping visit of 28 to 30 August. I'm asking what other meetings have occurred between Australian officials and PNG officials.

Mr Jeffrey : With respect to any development on Manus Island?

Senator WONG: Correct.

Mr Jeffrey : I would posit that there would be a number of daily bilateral contacts, but I can take on notice—

Senator WONG: That was well diverted, Mr Jeffrey. How about we focus then on the Lombrum Naval Base redevelopment? Is that how we described it? Yes, that's how the PNG government described it.

Mr Jeffrey : I can take on notice whether there have been any additional meetings.

Senator WONG: What have you been involved in?

Mr Jeffrey : I haven't been involved in direct conversations.

Senator WONG: What about people in your division?

Mr Jeffrey : My Pacific branch is involved in discussions with the PNG government, but not on a day-to-day basis; that happens through our post in Port Moresby.

Senator WONG: But on this issue?

Mr Jeffrey : On this issue; that's correct, yes.

Senator WONG: Has this matter been to cabinet?

Senator Payne: We're not intending to comment on matters that have come to cabinet.

Senator WONG: It's actually quite normal to talk about timing.

Senator Payne: I'm not going to do that.

Senator WONG: That's inconsistent with what the Senate has required. We can have a fight about that tomorrow when we talk about Israel and Jerusalem, and about cabinet. The date on which something went to cabinet is asked and answered; not the content of the discussion or the content of the submission. Has there been a cabinet decision in respect of this?

Senator Payne: I'm not going to comment on matters before the cabinet.

Senator WONG: You will be pleased to know that I have no further questions on either of those two matters. I'm now turning to the South China Sea. Chair, do you want me to break off for a while?

CHAIR: All right. We will go to Senator Macdonald.

Senator IAN MACDONALD: I'd like to ask some questions on PNG, if I could, while we're on that.

CHAIR: Yes, of course. I indicate to other colleagues, should they have follow-up questions that align with what a particular senator is pursuing, that they should—with all the courtesies observed—seek to ask supplementary questions.

Senator PATRICK: I seek to ask a supplementary to Senator Wong's questions.

CHAIR: Senator Macdonald and then Senator Patrick.

Senator IAN MACDONALD: With the proposed extension of the base at Lombrum, is there such a thing as a PNG navy?

Senator Payne: There's a PNG defence force.

Gen. Campbell : The Papua New Guinean defence force has a maritime element. It has two locations where it is ported. Its main base facility is Lombrum base, on the eastern tip of Manus, in Manus province—that's to the north of the northern coastline of Papua New Guinea—and it has a smaller facility in the harbour in Port Moresby. It utilises four Pacific patrol boats that were gifted by Australia in the Pacific Patrol Boat Program, and some small landing craft.

Senator IAN MACDONALD: Do you have any idea of the number of maritime defence personnel from PNG?

Gen. Campbell : I'll ask whether one of my colleagues is aware of that, as I'm not; otherwise we'll take it on notice.

Mr Hamilton : We'll take that on notice.

Senator IAN MACDONALD: Is the base that is proposed to be redeveloped, or to be further developed, the home of some of the patrol boats? Do you have any idea of the approximate number of personnel there?

Gen. Campbell : It is the home of the maritime element; it's the principal location for the maritime element. The Pacific Patrol Boat Program is now transitioning in time into the Pacific Maritime Security Program, and the Guardian class patrol boats will be progressively gifted to nations in the Pacific region. That's why our interest is in seeing, in parallel with those vessels, the appropriate development of infrastructure to support them and the training relationship in the Defence Cooperation Program to seek to steadily build local capacity across the Pacific in maritime surveillance work and the utilisation of those patrol boats. That's why Lombrum gets into the conversation. It's the principal area of activity for the maritime element of the Papua New Guinean defence force. I do not know the number of Papua New Guinean defence force personnel who are stationed at Lombrum base.

Senator IAN MACDONALD: That island comes up regularly in another committee that I'm involved in. You say you're at the scoping study stage and that there have been no budgetary allocations yet, but is there an understanding of any contribution from PNG? I appreciate that the PNG economy and government are not in a flash financial position, to put it nicely, but is there any talk about contributions by PNG to any work that might happen at the base?

Mr Moriarty : Certainly. Papua New Guinea does maintain and develop the base under current arrangements, but the upgrade to the wharf was an additional activity that Australia was going to fund under the Defence Cooperation Program. Papua New Guinea was going to pay for some associated infrastructure around the wharf. But the idea of a development in line with Prime Minister O'Neill's comments is what we will work through over the coming months. My expectation is that, should the Australian government agree to something, we would take the lion's share of the funding, but Papua New Guinea would contribute, as they do already, to the maintenance and sustainment of that base.

Senator IAN MACDONALD: I appreciate that any answer to this might have to be sensitive, but is there any indication of other nations, particularly China, contributing to defence activities of the PNG Defence Force?

Mr Moriarty : Papua New Guinea does have a security relationship with China. We see that in the lead-up to APEC, where China has provided some assistance to the PNG authorities. China has had some defence visits to Papua New Guinea in its normal affairs. Prime Minister O'Neill has said that he views Australia as Papua New Guinea's primary security partner, but it is an independent sovereign state and it will conduct its affairs as it sees fit. From a defence perspective, we see Papua New Guinea as a very important security partner for us. We would like to remain Papua New Guinea's primary and principal security partner. There has been a long history of engagement with the Papua New Guinean Defence Force, and it is our intention to work appropriately and sensitively with Papua New Guinea to continue to meet their defence and security needs.

Senator IAN MACDONALD: Thank you. Finally, a broad question about the Pacific Patrol Boat Program. In Kiribati, for example, the patrol boat has allowed them to manage their fisheries and has given them an income, which is now the biggest government income for Kiribati. They are now in surplus because of the money they've got from fishing licences, which has been enabled by the Pacific Patrol Boat Program. How is the program going across the whole of the Pacific? I'm conscious that in some island states the boats don't work because they don't seem to have petrol. But the program continues to be supported and maintained and perhaps enhanced. It's obviously a very important program, and well received by Pacific Island states.

Mr Hamilton : Yes. Senator, you have given a good summary of how important it is. That's why we're going to invest more in Pacific security through the Pacific Maritime Security Program—around $2 billion over the next 30 years—recognising the importance of providing vessels for countries in the region to provide for their own security. The program includes replacing the patrol boats that we've already gifted to them. In total, we will be constructing 21 of these vessels; two for Timor-Leste, with the other 19 to go to 17 countries in the region. We'll also provide for enhanced aerial surveillance in the region to support monitoring and surveillance of the economic territories of those countries, which is critical to their economies. We'll also help support enhancements to regional coordination, including through the Pacific Islands Forum Fisheries Agency. We see it as a high priority for us. We're working closely with the individual countries, but also with regional coordination mechanisms to make sure that what we deliver through that program is in the interests of those countries, puts their interests first, delivers a sustainable capability that they can use over time to protect their own resources, and delivers benefits in terms of skilling the personnel in these countries so they can operate those capabilities.

Senator IAN MACDONALD: Minister, in the many contacts I have with Pacific Islanders, the Pacific Patrol Boat Program is universally loved and respected and they are very grateful, as you know.

I appreciate that observation. I had the chance, in my previous capacity—twice this year—to see its power and strength in action. Once it was in New Caledonia, as part of the large humanitarian assistance and disaster relief exercise that the French run, Croix du Sud. Countries who are participating and who have patrol boats brought their patrol boats to that exercise activity—Vanuatu, for example. Secondly, when Indo-Pacific Endeavour 2018 was making its way through the Pacific I was in Tonga in Nuku'alofa to see HMAS Adelaide and HMAS Melbourne welcomed by the two Tongan Pacific patrol boats, plus their own landing craft, and escorted into the harbour in Nuku'alofa. It was a very impressive sight. His Majesty's armed forces were supporting that process. We do not underestimate its value, the pride they take in it and the strength it gives, for all the reasons you've observed.

Mr Hamilton : Can I correct the record? I think I gave you the wrong number for Pacific countries that will receive patrol boats: 10 Pacific countries will receive vessels. We can give you the breakdown of how many vessels per country. As well as Timor-Leste, additional countries will also receive aerial surveillance services.

Senator IAN MACDONALD: Thank you.

Gen. Campbell : I'm advised that there are approximately 400 members serving in the Papua New Guinean Defence Force Maritime Element.

Senator IAN MACDONALD: Thanks, General.

Senator PATRICK: I have a supplementary on Senator Wong's line of questioning; and I direct this at you, Secretary. To give you context, the last time this was raised it was with Mr Richardson. In the Defence Integrated Investment Plan there is a cash flow diagram. At its very top level it says: 'This is how we're going to expend the money over the next 10 or 20 years.' Former Senator Xenophon at one stage asked the PBO to do a check on that cash flow diagram and, highly unusually, Mr Richardson refused to give the information to the PBO. It was brought up with the then minister, Minister Payne, who talked briefly to former Senator Xenophon, but couldn't give a direction to the secretary in relation to it. If I were to ask the PBO to do an analysis on that—and it's an important oversight analysis, examining the robustness of your cash flow—would you not be inclined to support the PBO?

Mr Moriarty : I would want to consult with my Minister, Senator.

Senator PATRICK: My understanding from the conversation with the previous minister is that it was something the minister couldn't direct the secretary to do. The context is that it is important to have some level of oversight. The PBO wasn't going to give any data out that you might have passed across to the PBO. There's a strong MOU in place between Defence and the PBO. It was astounding that they wouldn't provide the PBO with enough information to validate that cash flow. Perhaps I will put in a request myself to the PBO and we will see what happens this time around. That's the context, if you get something from the PBO. Thank you, Chair.

Senator WONG: Moving on to the South China Sea, I want to go to Mr Ciobo's comments in an interview with Mr Speers earlier this year where he was asked, 'It's a's pretty simple question. Should China be landing long range bombers on a disputed island in the South China Sea?' Mr Ciobo said, 'Well, that's a decision for China.' Senator Payne has previously made clear, as diplomatically as she could, that obviously that was not an indication of Australia's position. But, given that Mr Ciobo is now in the defence portfolio, I want to get assurances that someone has briefed him about what our position on the South China Sea is.

Mr Hamilton : Our longstanding position on the South China Sea is we don't take sides on the range of competing territorial claims. We have very strong interests in regional peace and stability, which includes: respect for international law, unimpeded trade and the freedom of our navigation and overflight in that part of the world. We strongly oppose the use of intimidation or coercion to advance any country's interests, and we have consistently urged claimants to refrain from provocative actions, and to take steps to ease tensions and build trust.

Senator WONG: I am familiar with those lines. I think I used them myself, because it's a bipartisan position. I just want to be clear. I think it's already been conceded, and I don't propose to traverse the ground again, that Mr Ciobo did not correctly articulate Australia's position. Has he been briefed about our position in the South China Sea now that he is a minister in the defence portfolio?

Mr Moriarty : Minister Ciobo has been briefed on a number of issues in the defence portfolio, particularly those relating to his responsibilities. He has also been briefed more broadly on defence policy and strategy on operational matters. Without knowing, myself, specifically what he has been briefed on with this topic, I would be confident that Minister Ciobo is very aware of the government's policy on the South China Sea.

Senator WONG: Senator Payne, are you now confident that he will not make the same mistake again?

Senator Payne: Senator Payne: I am confident, Senator.

Senator WONG: Thank you. There were some reports about some interactions, and I'm trying to use as neutral a term as possible, between Australian naval vessels and the Chinese Navy in April. I have a report from the ABC—but my recollection is that it ran more widely—about an interaction between HMAS Anzac, Toowoomba and Success, from memory. We know how professional our armed services are, and of their adherence to relevant international law and conventions. Can you give me any information about accuracy of the reporting of this interaction; in particular, the adherence to the norms and practices of the Law of the Sea?

Mr Hamilton : It is correct that during the period March to June we did deploy Anzac, Toowoomba and Success into the region. I don't have that media report to hand, but the reports I have seen have are that the engagements between foreign military vessels, including China, and Australia have always been professional in nature. The Chief of Navy is at the table.

Vice Adm. Noonan : Yes, there have been a number of activities over the last three years that have seen naval task groups deployed in the South China Sea, and on all occasions the conduct of those vessels has been in accordance with the international rules for avoiding collisions at sea.

Gen. Campbell : Senator, the article you are referring to speaks of 'robust and polite but robust'. We have seen routinely professional interactions between our ships and other nations' naval vessels in the South China Sea.

Senator WONG: There is the assertion, or the public comment in there, from the defence ministry from China which suggests that the reports in Australia are different from the facts. I wonder if you can cast any light on that.

Gen. Campbell : I would refer you to the Chinese defence ministry.

Senator WONG: That's a good answer.

Mr Moriarty : There's an article that talks about the confrontations. According to the professional judgement of the Chief of Navy, I don't think that Australia would describe what happened as a confrontation.

Senator WONG: Fair enough. Vice Admiral, I think your evidence earlier was: Australia's actions, as we would anticipate, were consistent in accordance with—I think the phrase you used was—'norms and conventions of international law'. Was that the case for all parties involved in these interactions?

Vice Adm. Noonan : Yes. On all occasions the ships involved were transiting in accordance with the rights of innocent passage for international norms and the conduct of the manoeuvre of the vessels was consistent with international regulations for preventing collisions at sea, of which Australia is both a signatory and has codified in national law. There was nothing that was challenged that any of the Australian vessels undertook that would be inconsistent with those regulations.

Senator WONG: I said 'other parties'?

Vice Adm. Noonan : Other specific parties—I'm not aware of any interaction that Australian vessels have had that's been inconsistent with those regulations.

Senator WONG: Sorry, I don't remember which defence minister it was, Senator Payne—whether it was you or Mr Pyne; I think it was Mr Pyne; but I think this is consistent with Mr Hamilton's evidence about the deployment of Anzac, Toowoomba and Success—the defence minister said that Australia had increased the pace of navigations through the South China Sea. Can you give me some more detail about that?

Mr Hamilton : We also have a current deployment, which started in September and runs through to November, of Melbourne, Stuart and Sirius, including a deployment to north-east Asia, a number of port visits. Sorry, the earlier visit was in that direct media report but yes, we do continue to conduct activities. We also continue to conduct maritime surveillance flights as well.

Gen. Campbell : I'll just ask the Chief of Navy to speak to the continuum of our activities over the last few years.

Senator WONG: I think that might be a sensible way to approach this.

Vice Adm. Noonan : We've had an incremental increase of the activity of naval ships in the South China Sea over the last five years consistent with the expansion of our task group operations, with obviously the introduction into service of the landing helicopter dock ships.

Senator WONG: Meaning your task group?

Vice Adm. Noonan : That's right. In 2014, for example, we had a total of five ships operate in the South China Sea for a total of 43 days. In 2015 that increased slightly to six ships with a total of 84 days. In 2016 we saw a total of seven ships operate in the South China Sea for a total of 102 days. In 2017, which was the inaugural year of exercise Indo-Pacific Endeavour, we saw a total of eight ships operate in the South China Sea for a total of 254 days. And to date we've had eight ships operate in the South China Sea for this year with a total of 60 days. Obviously I'm not in a position to talk about future operations.

Senator WONG: No, I'm not going to ask you, other than I assume you're tracking towards some target of number of operational days?

Vice Adm. Noonan : Not tracking a specific target, we're just looking at increased operations in terms of our task group activities.

Senator WONG: I appreciate that.

Gen. Campbell : Senator, could I add to that some context?

Senator WONG: Yes.

Gen. Campbell : This reflects not that we're more present in the South China Sea only but rather we are more present in engaging with partners throughout the region in an area which transits one-third of the global shipping traffic and is the natural route between Australia and our large trading partners in North Asia—China, South Korea, Japan, the ASEAN nations which we work very, very closely with and, indeed, have interactions with and deployments that include both the South-West Pacific and South-East Asia. So you're seeing increased port visits, increased PASSEXs, coordination of naval activity, that is building a network, a community of participation, cooperation, developing interoperability and so forth, all emerging from that key theme of the Defence white paper on increased international engagement.

Senator WONG: Yes, I appreciate that. I actually was going to follow up the multi-flag operations the minister talked about in his interview—which I think is consistent with the answer you just gave—but before I come to that, Vice Admiral can I just—

CHAIR: Senator Patrick has—

Senator WONG: I won't be long on this topic, if I can. I'm nearly finished.

CHAIR: Yes, of course. You've got the call.

Senator WONG: The numbers you gave me, are they calendar year or financial?

Vice Adm. Noonan : They are calendar years.

Senator WONG: Just on this then Mr Pyne—it was Mr Pyne—says that we have in recent times increased our pace of navigations through the South China Sea in terms of multi-flag operations. I wonder if you could just correlate for me some of the data you've just given me about operational days—sorry, I can't remember the metric you used—and multi-flag operations?

Vice Adm. Noonan : The data that I provided was in actual terms of deployment days, acting in that region. And when we talk about the South China Sea and the presence of our naval ships in that area, we are talking about transits, regional exercises and named operations, and these exercises extend from north of Singapore, east to the Gulf of Thailand, west of the Philippines and south to Taiwan. So it's a very broad area. The majority of the exercises are conducted in the vicinity of Singapore and the Malaysian Peninsula and in the area of the Philippines where we've had patrol boats operating in specific operations that have been assisting the Philippine Navy and country with respect to countering terrorism activities in the south of the Philippines. I'd have to take on notice any breakdown of those specific figures to specific operations or exercises.

Senator WONG: Can anyone explain to me what the minister was referencing when he talked about increasing the pace of navigations through the South China Sea in terms of multi-flag operations?

Senator Payne: I'm happy to take that on notice.

Senator WONG: Thank you. Others may have questions. I'm trying to choose my words carefully. Some of these operations or some of these deployments are not the easiest. So thank you to you and all your people.

Vice Adm. Noonan : Thank you.

CHAIR: Senator Patrick had a supplementary.

Senator PATRICK: Just a direct supplementary perhaps to the Chief of Navy or to CDF: one presumes that when you're conducting these PASSEXs in the South China Sea clearly there are risks associated with that. Do you believe the risk of Australia conducting these PASSEXs or the RAAF or RAN exercising freedom of navigation rights is a much riskier proposition when not part of a US arrangement, ie, that if China wanted to make a point, it is easier it make a point against perhaps a smaller ally than it is against the United States?

Vice Adm. Noonan : I can't speak on behalf of the air operations but certainly in terms of the conduct of our ships that are operating, transiting through that South China Sea region, the conduct, as previously described, is always in accordance with COLREGS, and I've got no reason to think or there's no evidence to suggest that there has been any increased risk when we've been transiting or operating either as a single task group of Australian vessels or in fact when we've been operating with other vessels of a different flag. In all cases the commanding officers of our ships operate with safety in the forefront of their minds, and we have not had an incident that has been as a result of anything but adherence to the COLREGS, as I've described.

Senator PATRICK: In response to what you're saying, clearly there would be safety in numbers, particularly if you've got a country like the United States in convoy with you. Surely that presents less risk than Australia doing something unilaterally?

Vice Adm. Noonan : The risk of an unsafe seamanship evolution really comes down to the nature of the actual task and the transit. In some cases where you've got a single ship transiting, it is the safest way to transit.

Senator PATRICK: Sorry, I'm not referring perhaps to collisions but simply: if China wanted to make a point in some way it might be more inclined to do that in response to a country like Australia conducting a PASSEX rather than the United States, which clearly has a lot more clout that sits behind it.

Senator Payne: I don't think you can expect the Chief of Navy to speculate on the motivations of any other nation in this region or elsewhere. I don't think that is something which you can ask the Chief of Navy to do.

Senator PATRICK: Surely when you do any operations, Minister, they are planned?

Senator Payne: Of course they are.

Senator PATRICK: And all the risks associated with any activity that the ADF does?

Senator Payne: Of course they are, and I expect, as does the defence minister expect, that to be a business-as-usual approach. But I don't think that the approach that you're taking this morning in that question is necessarily one that you can expect the Chief of Navy to engage in here.

Senator PATRICK: The parliament has some responsibility in respect of these sorts of activities because they could lead to conflict.

Senator Payne: Yes, but you are imputing, as far as I can see, motivations to a particular nation, particular nations.

Senator PATRICK: To be fair, I think you'd appreciate that China has made overt and very public statements about how it views these PASSEXs.

Senator Payne: There are multiple claimants in the South China Sea, you know that—multiple claimants. Australia doesn't take a position on any of those claims. We go about our business in an appropriate way. The ADF goes about its business in an appropriate way and circumstances are managed in that context.

Senator PATRICK: Say, Brunei, which has a claim, hasn't publicly stated that it has a concern with countries exercising any particular freedom of navigation through their waters. Really there has been a lot of attention from China in relation to US passages; hence the question directed to specifically that. It is not a hypothetical. They have made a lot of noise about this.

Senator Payne: And we have consistently said—I have, the Prime Minister and the Minister for Defence have said—we encourage all those who are working in, participating in, the region to contribute to the security and the stability of the region. We've raised concerns about militarisation of features. We have said we don't think that contributes to security and stability. A number of those comments have been made as part of the discourse on these issues. But I think the approach in the discussion that you are pursuing here this morning is one which puts the Chief of Navy in a difficult position, and I'm not sure it's helpful.

CHAIR: I've allowed a lot of latitude with a supplementary on this. That's unless Senator Wong is—

Senator WONG: I just had one more, I suppose, sub-topic on this. Can I just finish that and then I'm happy to hand over to others? Is that okay, Senator Abetz?

CHAIR: Yes. Or do you want to go through until 10.30 when we break?

Senator WONG: No, I think there are other colleagues who have questions. Certainly Senator Carr has. I am just happy to finish one more component on this, which was Mr Pyne flagging joint exercises—I can't recall exactly the noun that was used—with France in his press conference of 24 September.

Mr Moriarty : The minister has indicated that he would like to strengthen our defence relationship with France, and that might involve more activities in our region. As you know, we already have substantial interaction with the French armed forces in relation to the South West Pacific. We do a lot of good work around humanitarian and disaster relief operations. They've had a number of vessels visit Australia. During those visits we've conducted, I think, some activities. Chief of Navy might be able to elaborate. I think the minister has said that Australia is open to conduct more defence activity with France.

Gen. Campbell : I just wanted to add that it's important for us to, I think, think of France as a neighbour. It is present in the Pacific, and it has been for many, many years.

Senator WONG: And something they will tell you often, if you talk to them.

Gen. Campbell : And, importantly, they help in humanitarian assistance and disaster relief and building cooperation and behaviours of cooperation in the Pacific, in French Polynesia and broadly in the Indo-Pacific. They are a constructive partner in this region.

Senator WONG: Certainly.

Gen. Campbell : Increased activity is beneficial for Australia, for France and for the region.

Senator WONG: We agree with that. I'm actually just trying to work out what lies behind the press statement, that's all—whether it's a statement of a declaration of intent consistent with the high-level propositions that you've outlined and that way of thinking about the region and engagement, or whether there's actually a process in train to enable that to occur and planning associated with that. In fact, to be fair to Mr Pyne, I think he talked about it in the context of, again, multi-flag operations. His quote was:

We are looking forward to doing so with France in coming years, in terms of a group working together in one particular formation that is multi-flagged.

Is that the only context in which this kind of cooperation is set up?

Vice Adm. Noonan : If I may, Senator? We have a specific and defined navy-to-navy relationship with the French navy, which has been in place for a number of years now. As part of that dialogue, we continually look for opportunities to interact with France. Clearly, we have much to learn from them in terms of the experiences that they've had in the region. They've been here for a long time. Clearly, as we work towards shared capabilities, we look to interact with their navy. Most recently, they were out here for Exercise Kakadu, and they were interacting with not just Australian ships but ships from the 14 nations which were represented during that exercise. So it is part of an ongoing and expanding relationship between our navies.

Senator WONG: I appreciate that, and that's a good thing. But, just to be clear, what the minister is referencing is the broader framework you've outlined, CDF. There's not a specific operation—

Gen. Campbell : I don't believe there is. I think it's a matter of opportunity.

Senator WONG: Where we can?

Gen. Campbell : Where we can, and acknowledging this growing relationship between the two navies, centred around the submarines.

Senator Payne: Could I just add? In answer to Senator Macdonald's question I was talking about the Pacific patrol boats. Exercise Croix du Sud, which is the humanitarian assistance and disaster relief exercise which the FANC run, is a really good example of that. We deployed HMAS Choules to that this year. It's a multi-nation event. The operations room for that was peopled by Japan, Australia, the UK, France, Papua New Guinea: all of the Pacifics who were participating. It was a really interesting engagement.

Senator WONG: Thank you. Thank you, Chair.

CHAIR: Senator Carr.

Senator KIM CARR: Thank you very much, Mr Chairman. I would like to ask some questions on the Defence Trade Controls Act. Do we have the relevant officers here? Who is responsible for this?

Mr Hamilton : Defence industry policy fits within my group. Dr Kearnan is responsible for the particular division that runs industry policy.

Senator KIM CARR: Thank you. Dr Kearnan, you're First Assistant Secretary, Defence Industry Policy?

Dr Kearnan : That's correct.

Senator KIM CARR: Thank you. Mr Hamilton, you're Acting Deputy Secretary, Strategic Policy and Intelligence?

Mr Hamilton : That's correct.

Senator KIM CARR: Thank you. I am interested in the review. Minister, has Dr Vivienne Thom's review been completed yet?

Senator Payne: I understand it has been completed, yes.

Senator KIM CARR: Can you advise me how long does the minister have following the receipt of the review—I take it the review has now been received by the government?

Senator Payne: I believe so.

Mr Hamilton : That's correct.

Senator KIM CARR: What was the date of the receipt?

Mr Hamilton : 19 October.

Senator KIM CARR: Thank you.

Senator KITCHING: Sorry, what was that date?

Mr Hamilton : 19 October.

Senator KIM CARR: How long does the minister have, following the receipt of the review, before releasing it or tabling it in the parliament?

Mr Hamilton : It's required to be tabled in both houses within 15 sitting days.

Senator KIM CARR: What date will that be then?

Mr Hamilton : I will check that and come back to you.

Senator KIM CARR: Does the minister intend to meet that requirement?

Mr Hamilton : I'm confident the minister will meet the requirement.

Senator KIM CARR: It is a legislative requirement, is it not?

Mr Hamilton : Yes, it's in the act.

Senator KIM CARR: That's right. Can you just confirm the date on which 15 sitting days expires? I thought it was 14, by the way, but nonetheless.

Mr Hamilton : My advice is 15, but I will check the number of sitting days.

Senator KIM CARR: Can you confirm that it is because that might be important, given how many sitting days remain this year.

Mr Hamilton : Yes, we will check that.

Senator KIM CARR: I take it sitting days are different in the House and the Senate.

Mr Hamilton : We'll look at both houses.

Senator KIM CARR: Thank you; if you would, please. How long do you think it would take to be able to provide me with that information?

Mr Hamilton : I will look to provide that as soon as I can.

Senator KIM CARR: It's a fairly routine inquiry. I wouldn't have thought it'd take too long. Thank you. Minister, in the last round of estimates, when I raised this matter, you indicated to me that submissions would close on 31 May. I don't think I've misrepresented you on that.

Senator Payne: I don't have the Hansard with me, but I'm confident you're not misrepresenting me on this occasion.

Senator KIM CARR: On this occasion.

CHAIR: An important caveat!

Senator KIM CARR: It's very generous of you, Minister! The defence department made a submission on 8 June. That's the date I have. That's correct, isn't it?

Dr Kearnan : That is correct.

Senator KIM CARR: Why did the department make a late submission?

Dr Kearnan : The department was undertaking consultations. The consultations were quite broad, both within the department and in the broader whole of government. It was taking longer so we engaged Dr Thom and requested an extension, and Dr Thom granted that.

Senator KIM CARR: Thank you. Who approved the final form of the submission itself?

Dr Kearnan : That was the former of Tom Hamilton, Scott Dewar.

Mr Hamilton : That was the former acting deputy secretary in my position.

Senator KIM CARR: Can you tell me who that was?

Mr Hamilton : Mr Scott Dewar.

Senator KIM CARR: And he is the person who signed off on that?

Mr Hamilton : That's correct.

Senator KIM CARR: Thank you. You indicated that there'd been consultations about that submission. Who with?

Dr Kearnan : There were consultations, both internally and externally, in the department. Internally it was with the Capability Acquisition and Sustainment Group and with Defence Science and Technology Group. Externally it was, from memory—and I will probably have to confirm this for you—the Department of Home Affairs, Prime Minister and Cabinet, Foreign Affairs and Trade, the Australian Research Council and the department of industry. I think that's all, but I'll just confirm.

Senator KIM CARR: Thank you. You say that within the department itself you consulted with capabilities and defence science. Were there any indications within those groups that there might be a problem with the submission?

Dr Kearnan : No, there wasn't a problem with the submission. The submission had whole-of-Defence agreement to it.

Senator KIM CARR: Whole-of-Defence agreement. I'm surprised by that because in the previous estimates I actually indicated to you that I had asked a few of the agencies about the operations of the act and that the ARC, for instance, had indicated that there'd been no breaches of the act. And, in fact, on a question on notice, the defence department itself acknowledged—I think it was question No. 18—that there'd been no incidents of noncompliance with the Defence Trade Controls Act by universities or research organisations. Is that correct?

Dr Kearnan : That's correct.

Senator KIM CARR: How does that fit with the assertions made in the submission then?

Mr Moriarty : As you point out, and as the officers have said, we've had very good cooperation in terms of the operations of the act. Dr Thom's review was to consider whether the act is appropriate for Australia's current and future national security challenges. I think that our submission and the work of the agencies, as you would understand, needs to look at the rapidly evolving international and national security context in which the act is operating. It is appropriate, while we acknowledge very good cooperation with the institutions at the moment, to see whether it is appropriate for our current and future needs.

Senator KIM CARR: Mr Moriarty, I understand the point you make—the distinction you make—but this submission is, in fact, misleading because it says there's a high level of compliance. It's not just a high level; there have been no breaches. It's not quite the same as 'high level', is it? The submission makes a statement which is misleading.

Mr Moriarty : I wouldn't—

Senator KIM CARR: The Minister for Defence at the time made a statement to this committee at the last hearings consistent with that and the defence department subsequently put a submission to the inquiry which was inconsistent with what the minister had actually said and inconsistent with the position that had been put to this parliament, as at December last year, in regard to the operations of the current act. How do you reconcile that inconsistency, given your assertion that there'd been widespread consultation—obviously not with the minister and obviously not with the ARC, despite what you've just said, because they gave quite specific and contrary evidence to this parliament, which you didn't seem to know about at the last round of estimates because you had to take the questions on notice but subsequently confirmed that evidence? Perhaps you could come back with an answer because I've got a few more questions to pursue on this question.

Proceedings suspended from 10:30 to 10 : 46

CHAIR: I call the committee to order and call Senator Carr, in continuation.

Senator KIM CARR: Have you been able to find out what the day was for the legislative requirement for the report to come back to the parliament?

Mr Hamilton : We've confirmed 15 days, but we are checking—we want to make sure we get it right—what that means in terms of dates for tabling.

Senator KIM CARR: My understanding is that it is this year?

Mr Hamilton : We will check and confirm. We want to get that right.

Senator KIM CARR: Going to the question of the consultation, given the contradictory nature of the submission and what the evidence was before this committee, other parliamentary committees and statements made by the minister, how do you reconcile that?

Mr Moriarty : I'm very comfortable with the language that the department used that there had been a high degree of compliance. For the benefit of the committee, there have been three instances of non compliance; so it is not correct to say that—

Senator KIM CARR: Do you want to correct your evidence; is that what you're telling me now?

Mr Moriarty : What I'm saying is that the latest information that I have been given is that there have been three instances of possible non compliance.

Senator KIM CARR: Perhaps you could detail those, because this is a correction of the evidence presented to this committee, as late as estimates question No. 21.

Mr Moriarty : No, I don't wish to correct the record. The answer that the department provided was that Defence has not identified any incidents of non-compliance with the Defence Trade Controls Act by universities or research organisations.

Senator KIM CARR: What's the clarification that you would like to make?

Mr Moriarty : That there have been three instances or issues of non compliance that are being investigated. I'm prepared to say—the answer, I think, is self-evident—that those are not by universities or research organisations.

Senator KIM CARR: You have issued how many licences? Was it 130?

Dr Kearnan : How many licences?

Senator KIM CARR: You have issued how many permits for exports of controlled goods or technologies?

Mr Hamilton : More than 160 permits for exports of controlled goods and technology.

Senator KIM CARR: That's the current position. You made how many assessments?

Mr Hamilton : 200 assessments.

Senator KIM CARR: That's another update on the figures?

Mr Hamilton : Yes. We continue to make assessments as universities—

Senator KIM CARR: No, the 200 assessments was the last evidence you gave me. That's the evidence that you presented as of last December. You're now saying—repeat the number.

Mr Hamilton : More than 160 and more than 200.

Senator KIM CARR: 160; okay. That's to 20 different organisations; is that correct?

Mr Hamilton : Correct.

Senator KIM CARR: That's universities and research agencies?

Mr Hamilton : Yes.

Senator KIM CARR: In those assessments you have found three from non-universities and non-research agencies that you thought might be breaches?

Mr Hamilton : Senator, let me be very clear. Those numbers that were provided for over 20 different research organisations and universities and the more than 200 assessments and more than 160 permits are in relation to universities and research institutions.

Senator KIM CARR: I see.

Mr Hamilton : There are, of course, other applications, assessments and permits outside those entities.

Senator KIM CARR: The act, therefore, you say, needs to be broadened, on the basis of the submissions that have been subsequently made through the Academy of Science, the Academy of Technology and Engineering, the Australian National University, the University of Adelaide, the University of New South Wales, the University of South Australia, the University of Southern Queensland, the University of Sydney, the Association of Australian Medical Research Institutes, the Group of Eight, the Queensland University of Technology, Science and Technology Australia, Universities Australia, the University of Technology Sydney, the Australasian Research Management Society, the University of Wollongong, the University of Melbourne, Northrop and Saab—all of which are making the point that the defence department, in their submission, their late submission, was in fact seeking an overreach in terms of its powers?

Mr Hamilton : We're aware of the views of those organisations that you mentioned that were made to an independent review. I would make the point that, in implementing the current act, we have a very good relationship with those institutions. All of the advice I have is that we worked very collaboratively with them in implementing the current act. As it was an independent review, we thought it was important that Defence place on the record our views about how strategic circumstances have changed since the act, and put some ideas to the independent reviewer in relation to how we thought the next version of the act could be adjusted. That was the basis for our submission. We are aware of the views put by other organisations. I can tell you that, whatever the government decides to do, and whatever act is passed, we will continue to work very closely with those institutions in implementing new legislation, should new legislation be brought forward.

Senator KIM CARR: You specifically say that you need to have what is described by the research organisations I have referred to as a 'significant departure from the current system which was developed and agreed through a process of comprehensive consultation with the sector'. For instance, the Academy of Science describes it as:

unilateral ability to prohibit, control or regulate any technology, irrespective of its status as a listed technology and the ability to suppress publication of any given research activity. Such a regime would create enormous uncertainty, with no ability to determine whether a technology would be allowed to be developed, deployed, communicated or exported.

Similar sentiments are expressed by Universities Australia. You're saying that the circumstances have changed to the extent that the defence department is justified in—as, for instance, Universities Australia says—'repudiating the compromise position struck by the steering group in 2015'?

Mr Hamilton : I'm saying that we are responsible for national security. We are very concerned about some of the developments in our strategic environment. It is critical for us that we have a healthy and secure research and development sector. That's vital to Australian Defence Force capabilities. That is why we thought it was important to put our views in to the independent review. I can tell you that, in responding to that independent review, we will work with the universities on our response. Our position, where we're coming from, is about the importance of protecting Australian technology and maintaining the Australian Defence Force's capability edge.

Senator KIM CARR: I understand that that's your claim. Universities Australia describe it, for instance, as:

Coupled with the other proposals, it provides the regulator with the ability to arbitrarily decide to control supply, export or publication of any technology, whether specified in the DSGL or not, and to enter premises almost immediately to enforce its decision. Such extensive powers are incompatible with the free conduct of research and inquiry and threaten the ability of universities to carry out research in the public interest.

The defence department is seeking extraordinary powers—extraordinary powers—in terms of the way in which this country operates. You say there was widespread consultation about such a submission?

Mr Hamilton : I'm saying there will be widespread consultation in relation to the response to the submission.

Senator KIM CARR: No, not in response; I'm saying in terms of the submission itself. For instance, can you tell me this: when did the defence export controls working group last meet?

Dr Kearnan : I will have to check when the last meeting was.

Senator KIM CARR: I'm told it was 22 February 2018; is that correct?

Dr Kearnan : That was at the time of the last estimates.

Senator KIM CARR: Has it met?

Dr Kearnan : I'll take that on notice.

Senator KIM CARR: Thank you. Was the defence export controls working group consulted about this submission?

Dr Kearnan : I have explained the consultation process.

Senator KIM CARR: Yes. I didn't hear them on your list of groups.

Dr Kearnan : No.

Senator KIM CARR: Why not?

Dr Kearnan : Because we undertook consultation through engagement with the departments that I have already run through.

Senator KIM CARR: What does the defence export controls working group actually do?

Dr Kearnan : I will get some detail on that. I will take that on notice. They look at export control issues.

Senator KIM CARR: Isn't that the group that actually does the liaison about the operations of the act?

Dr Kearnan : We had developed the submission. It was distributed to the agencies that I have run through, as our consultation process. I would note that the submission was a Defence portfolio submission, so it was a submission from a Defence perspective.

Senator KIM CARR: Yes, but it happened to involve the operations of our entire research community, and you agree there have been no breaches involving that research community—our universities or research agencies—throughout the operations of this act. But you didn't consult the group that's permanently in station to actually liaise with the defence department.

Dr Kearnan : I would note that the submission that we made stated that we would have to do quite extensive consultation with affected groups, subject to the views of the independent reviewer, what the independent reviewer would be putting to government, and government decisions. Reinforcing Mr Hamilton's comments, we're very committed to working with and engaging with the university sector.

Senator KIM CARR: I am sure you are. I can see that, because you haven't spoken to them before you put the submission in. You work with them after decisions are made; is that what you're telling this committee?

Dr Kearnan : Defence undertakes extensive engagement with the university sectors. We have extremely good relationships. We have undertaken quite a lot of outreach activities.

Senator KIM CARR: I can see that's all past tense.

Dr Kearnan : We do it regularly.

Senator KIM CARR: That's got nothing to do with this submission, in which you're seeking the most extraordinary overreach in terms of the powers of the defence department to enter premises, to seize materials and to prohibit research. The fundamental principle, in terms of our international engagements, is to get that balance right, which is what the defence minister at the time said to us was the purpose of this review—to make sure that balance was correct. You immediately subverted that by putting this submission to the review, without talking to the people who are directly affected; is that correct?

Mr Moriarty : No, we would not accept that characterisation.

Senator KIM CARR: Let's just look at it then. What additional resources are required if the defence department was actually granted these far-reaching powers?

Dr Kearnan : I would note that this is an independent review and it is yet to be determined what the outcome of the independent review is.

Senator KIM CARR: I understand that. But you must have had an assessment, given that you've asked for these powers, of what it would cost the Commonwealth to actually grant you these powers?

Dr Kearnan : Defence already undertakes a monitoring function in this space.

Senator KIM CARR: But nowhere near what you're asking for.

Dr Kearnan : Again our submission did actually acknowledge that this would be administratively burdensome on the scale that has been described in some of the other submissions. This is actually about very specific technologies that may be of application to ADF capabilities; so it's not about all technologies.

Senator KIM CARR: I'm sorry, Doctor, but that's not what the submission actually says.

Mr Moriarty : No, but surely judgement would be exercised about what technologies might come to our attention. As we engage with the university sector across so many areas of cooperation there are from time to time technologies that we understand are of particular interest for military applications or broader security applications. We are certainly not seeking a role for the department in an intrusive, across-the-board, deeply inappropriate involvement in the work of universities and researchers but there are some areas where we are concerned about the possibility of those technologies being used or not being harnessed effectively for the capability edge of the Australian Defence Force.

But I don't accept that we would seek a massive increase in the resources so that we could go and interfere in or engage across a whole range of faculties across a whole range of institutions. There would be a judgement exercised that would often be based on discussions with other agencies about what particular technologies we were concerned about and what evidence there was of potentially emerging challenges. That is how we work with the universities now. We would seek, of course, to have a cooperative and mutually respectful relationship with all those institutions. I don't think it's correct to say that we would need a huge increase in resources because we would be seeking some blanket right to enter any faculty at any time on any campus.

Senator KIM CARR: It would appear that you're now repudiating your own department's submission. Perhaps you could clarify one thing for me: what exactly is it that you say are the new threats that need to be considered? You make some assertions here that new challenges initially have arisen in the national security environment over the past two years. Can you specify what they are?

Mr Hamilton : I'm not going to go through a list of specific technologies. The white paper released in 2016 said that one of the biggest challenges that we face in our environment is the pace of technological change. Technologies are changing faster than we previously had anticipated, new technologies are coming online. They have defence applications. Some of them have, potentially, dual use applications in relation to weapons of mass destruction. We have no interest in overburdening the universities, but I come back to the point that—

Senator KIM CARR: And they're currently covered. That's all currently covered by the current law.

Mr Hamilton : In our view, it is important to take the opportunity of an independent review to make sure that the protections for those technologies that we rely on to fight and win future wars are adequately protected. That's what we've taken the opportunity to do with an independent review. The reviewer will draw her own conclusions and we will work very closely with the universities in formulating a response to how we take forward making sure that the technologies that they develop are protected for them and for us.

Senator KIM CARR: It says here that, in order to effectively protect certain technologies assessed as important to security and defence capability, the Australian government needs the ability to regulate access and transfer of military dual use and sensitive technology where the recipient's intentions may be prejudicial to the interests of Australia and its allies. What's wrong with that in regard to the current operations?

Mr Hamilton : I think the submission stated our concerns that we do not have the ability to prevent the transfer of technology to a foreign entity where there's reason to believe that that technology transfer would be prejudicial to Australia's national interests.

Senator KIM CARR: Then you say that either way, a government should have the ability to determine whether access to such technologies by foreign entities is in the national interest; the Defence Department should be taken on trust. Is that what you're saying?

Mr Hamilton : It's one of our core responsibilities to make sure that we assess technology to make sure that it is used for the benefit of Australia and to make sure that Australian technology does not fall into the hands of other countries.

Senator KIM CARR: So the current regime doesn't provide you with that power?

Mr Hamilton : As I said, an independent review is an opportunity to assess whether additional protections are required, given the pace of technological change and given developments in the research sector.

Senator KIM CARR: The current arrangements with the universities' research agencies, on the evidence—given that there've been no breaches—are working well?

Mr Hamilton : The current arrangements are working well. As I said, we have a very constructive relationship with universities in implementation of the current act.

Senator KIM CARR: Are you surprised by the reaction of the universities and the research agencies to your submission?

Mr Hamilton : I would not characterise my reaction that way.

Senator KIM CARR: How would you describe their reaction?

Mr Hamilton : I read them closely to make sure that I understood the position and concerns of the entities that put in submissions.

Senator KIM CARR: I'm sorry, what does that mean?

Mr Hamilton : It means that I paid close attention to the views of other institutions that put in recommendations and submissions to an independent review.

Senator KIM CARR: And they reacted quite strongly to you?

Mr Hamilton : Yes, it was a strong reaction.

Senator KIM CARR: You were given an opportunity to make a further supplementary submission to repudiate those assertions. Why didn't you take that up?

Mr Hamilton : My view is that this is an independent review by a very eminent individual who would balance the views of all those other entities. We will consider the independent reviewer's recommendations and take them forward.

Senator KIM CARR: Who made the decision not to make a further supplementary submission in response to the overwhelming rejection of the Defence Department's bid for increasing powers in this area? You were invited to make a further supplementary submission, were you not?

Dr Kearnan : We decided that we were very comfortable with the first submission and that a second submission from Defence would not have changed the position that we put in with the first submission.

Senator KIM CARR: So you stand by what you say?

Dr Kearnan : We do.

Senator KIM CARR: Is that the proposition?

Dr Kearnan : Yes.

Senator KIM CARR: You stand by what you say?

Mr Hamilton : Yes.

Senator KIM CARR: And you don't regard it as a mistake to have actually made that submission?

Dr Kearnan : No.

Mr Hamilton : No.

Senator KIM CARR: There was, in fact, a breach that I'm aware of that you haven't seemed to have picked up and that's the one with CSIRO and Pakistan.

Dr Kearnan : The one that was discussed at the last estimates?

Senator KIM CARR: With Pakistan.

Dr Kearnan : That didn't actually relate to the legislation that we're talking about today.

Senator KIM CARR: It did.

Dr Kearnan : That related to Customs.

Senator KIM CARR: No. Actually I think you'll find that it was related to this legislation but in the very early days. How many of these events have actually related to China, which seems to be the centre of this interest here?

Mr Hamilton : We'll take that question on notice and get a response to you as soon as we can.

Senator KIM CARR: I'm told that the only area in which there had been a concern was actually with Pakistan. Is that correct?

Mr Hamilton : The act relates to international obligations in relation to a range of technologies and international regimes. They're not country specific. As I said, we will take that on notice.

Senator KIM CARR: Since you don't regard this submission as a mistake and you stand by it, what assessment has been made in terms of the consequences of adopting these powers in terms of the effect on investment—in terms of these intrusive regulatory capacities of the Defence Department in regard to universities and research agencies?

Mr Hamilton : We'll obviously consider implications for maintaining a healthy research sector in responding to the review's recommendations.

Senator KIM CARR: I will leave it there.

Senator KITCHING: I've got some questions on this. I might table a document which is an affidavit in support of a criminal complaint in the United States District Court. I think we've got copies.

Senator Payne: I'm sorry, what are you tabling?

Senator KITCHING: It's an affidavit from an FBI special agent, Mr Bradley Hull, in support of a criminal complaint. The case is the United States of America v Xu Yanjun.

Mr Hamilton : I'm not aware of that.

Senator Payne: The chair has seen it, has he?

Senator KITCHING: Yes. It's from a public source. It's actually on the Justice Department's website. You're most welcome to have a look at it first.

Mr Hamilton : Could we have a copy of that paper?

Senator KITCHING: I think copies are coming.

Senator Payne: We're the last to see it, not the first.

CHAIR: Copies are being circulated. Prior to it being tabled or anything else being done with it, I'd be interested in any feedback on it. This gives people the opportunity to go through it and, whilst that is happening, I will give the call to Senator Patrick.

Senator PATRICK: I've just got a few different topics to talk about and perhaps I can do so at a high level first. General, I have a question regarding an article that was in the Northern Territory News on 22 August 2018. The article is titled 'Fuel reserve concern downs Pitch Black jets'. In the context of general concerns right across the parliament—and a number of reports have been generated on this—the bottom line is that the article asserts that Defence, in the context of this very large international exercise, ran out of fuel on the last day. The paper was sceptical about a response that had come from Defence. I would just like to get some details from Defence about what happened in respect of fuel supplies during that exercise.

Gen. Campbell : Thanks for the question. I am not familiar with the article but I understand the issue that you're raising and will turn to the Chief of Air Force, who was clearly the service chief running that exercise.

Air Marshal Davies : This was the biggest Pitch Black exercise that we had run since we started in the eighties. There were 16 active air forces involved, 140 aircraft, and it was quite a complex Pitch Black. As we got towards the back end of the two-week exercise it became clear that our 95 per cent mission success rate had generated all the learning objectives that we had set. We could have flown the last night wave, the single wave that was not flown during Pitch Black, if we had chosen to. But with a conference, if you like, on what we would achieve with the last night wave, it was considered that it was better to allow the nations to begin their preparation for their return home during that evening and next morning. So we did not fly the last night wave. It is not true that we could not have flown the last wave of Pitch Black.

Senator PATRICK: Obviously it is an area that might have some sensitivity but would you be prepared to provide the committee, noting that it's a single instance and it's historical, some details on the fuel reserves that were available locally in support of that exercise? From my days in submarines, we always had a reserve that we weren't allowed to go under. Were you close to that reserve? Had you passed through that reserve? Do you have any details on that here?

Air Marshal Davies : I don't have specific numbers on the fuel reserve. We did not and do not set, to my knowledge, a number or numbers of litres, if you like, available. What is a factor here though is that one ship that was due to arrive during the Pitch Black period was late leaving Singapore. So the amount of fuel in a reserve context or a reserve number was lower than it would have been if the ship had been on time. But that was not a direct influence on the decision to not fly the last wave.

Senator PATRICK: You would be familiar with a predecessor of yours, Air Vice Marshal Blackburn.

Air Marshal Davies : Yes.

Senator PATRICK: He has persistently raised this issue. These are the sorts of things that he has described in the past. We sometimes are running on a knife's edge in terms of our fuel reserve, and that lends support to his analysis of the situation.

Gen. Campbell : I might start first. I think the comments made by Air Marshal Davies clearly have responded to the claims being made erroneously in the newspaper article. From my perspective, it speaks to an exercise that could continue if the exercise value was there to continue, and it was judged not to be. A ship was late from Singapore. A newspaper conflates the two to make a false claim. You're now speaking more broadly—

Senator PATRICK: I am.

Gen. Campbell : about national fuel holdings, and they are certainly sufficient for Defence's current and expected needs.

Senator PATRICK: But the fact that the Chief of Air Force has raised a concern or was cognisant of the fact that a ship had arrived late tends to give weight to the idea that we don't have sufficient reserves. How long does Pitch Black run for? It's a couple of weeks, isn't it?

Air Marshal Davies : It's two weeks for the actual exercise and then some nations choose to come a little early to get some individual training scenarios done prior.

Senator PATRICK: My concern is that, just in general, if we were called upon to respond to a relatively low-level conflict or some event, we're cognisant that during an exercise that involves a similar number of aircraft a ship arriving or not arriving from Singapore can make some difference.

Gen. Campbell : I think if you look more broadly, nationally, Defence represents, across all fuel types, about one per cent of national usage per annum: one per cent. So, in your question as to some emergency contingency that is beyond current and expected needs which are fully satisfied, I think there is a sufficient capacity and there are multiple lines of fuel supply potential, so I'm not expressing concern.

Senator PATRICK: But we've had a situation, as I recall, in Victoria where we had a refinery problem and some people in Victoria ran out of fuel. If your strategy in association with fuel security for the Defence Force relies on the civilian supply, that's not a suitable remedy, in my view, because we have reasonable difficulties in that space. I know that Minister Frydenberg is looking at some of this now, but to rely on something else that's quite fragile is perhaps not the best idea.

Gen. Campbell : Would you like to offer some views, David?

Major Gen. Mulhall : As well as being Commander of Joint Logistics, I am appointed as Head of the Defence Fuel Supply Chain. Initially I'll just pick up on the point from the CDF. Defence's requirement against the national consumption of fuel is one per cent. With respect to marine fuel, for example, it's 0.5 per cent. Regarding this notion of how much stock we actually have, our assessment is that we have significant holdings and it is sufficient for our defence purpose. I understand the point that Air Vice-Marshal Blackburn and you, Senator, make concerning the reliance upon international supply chains. I note that the department of energy is leading a review now on liquid fuel security. Defence is very well consulted in that. Equally, the Department of Home Affairs is doing the national anti-security assessment, and obviously the work by Energy will inform that work. We are satisfied that our needs are being listened to and we're satisfied that we have sufficient holding. In terms of our current holding, we have sufficient reserve stock, which distinguishes us from the civilian market. The civilian market tends to work on a more just-in-time arrangement; we have reserve stock.

Senator PATRICK: Just to close that off, perhaps it's possible to provide some ideas, on notice, as to what was available in the Darwin area at the conclusion of that exercise in terms of quantities for that specific situation.

Major Gen. Mulhall : Sure.

Senator PATRICK: While the Chief of Air Force is here, I'll just move to the Growler incident in the US. I note that a report has come out in relation to the Growler. The report suggests that the aircraft engine had a component that failed after, I think, 147 hours. I think the aircraft is a write-off; is that correct?

Air Marshal Davies : That's correct.

Senator PATRICK: Do we intend to replace it? I think we had 11; is that right?

Air Marshal Davies : No. We had 12—

Senator PATRICK: Twelve and now 11.

Air Marshal Davies : G models, 12 Growlers. The question of whether we replace the Growler will go through a normal Defence acquisition process. We'll determine the need, the cost and the timing and that will enter a normal capability development cycle.

Senator PATRICK: So in those circumstances where you've got an aircraft engine component that had only done 147 hours—and I don't think it's disputed that that was the cause of it—what obligation does the engine manufacturer have in the way of a warranty or in covering a loss?

Air Marshal Davies : We're going through that process now. The report is out and we have clear indicators. We are engaging now with the engine manufacturer because there are opportunities for us to explore that, but I don't have any practical parts yet to offer you in that this is guaranteed or that we have a particular element that would be agreed to at this point. We will continue to do that though.

Senator PATRICK: Last time around—just sticking with aircraft, the F-35, seeing as I've got your attention—we were looking at selling an F-35 to Canada, I think it was.

Air Marshal Davies : Perhaps I can correct you there; it's an F-18.

Senator PATRICK: Sorry, F-18. I did that last time, didn't I?

Air Marshal Davies : Yes. It's a little bit early to sell the F-35s.

Senator PATRICK: Yes, that's true.

Senator Payne: We might get them here first.

Senator PATRICK: The F-18s, sorry. There was no indication as to what we would receive for those fighters. Have you got any indication this time around?

Air Vice- Marshal Roberts : We're currently still in negotiation with the Canadians this week and next week and we have not agreed on the details of the sales price. We have agreed to sell them 18 Hornets and seven non-flyable classic Hornets and also a number of parts and ground support equipment. We anticipate that the sales agreement will be finalised by March next year and we will include then the delivery to Canada. But that is the subject of negotiations at the moment and we are still yet to agree on a price and the condition of the aircraft.

Senator PATRICK: I won't press that, if you're negotiating that. Can I ask you questions about Triton? Are you good on that?

Air Vice- Marshal Roberts : Yes.

Senator PATRICK: The first Tritons are expected to be introduced in mid-2023. Six aircraft are planned and I believe that there will be an operation in around 2035 out of Edinburgh. What are the milestones between now and then in respect of getting those to an operational status?

Air Marshal Davies : As you're aware, Air 7000 is the project. It is in two parts. It is a family of systems between the P8 Poseidon and MQ4 Triton. The P8s are well through their cycle now and arriving at Edinburgh and being used. We have gone through the first part of approval for Triton, which allows us to start building the infrastructure and start then acquiring aircraft. Over the next couple of years there will be that gradual engagement with the United States navy and Northrop Grumman and, through CASG, approval and acquisition of more aircraft to arrive at our 2023 time line.

Senator PATRICK: Perhaps on notice then, because CASG has project plans in relation to this, you can lay out some of the milestones and some dates, just broadly, so that I can keep a watch on that as we proceed.

Air Vice- Marshal Roberts : Just in terms of the project plan at the moment, the approval at the moment is only for the first aircraft and the construction of facilities, so the project is only planned to that level. It will be planned in more detail as we get the approvals for the additional aircraft. At the moment it's only the early stage of the project that is planned. I think those milestones are fairly clear and we have the dates on which we intend to achieve our capability. So there isn't a lot more detail that you would get in terms of a CASG project plan at the moment.

Senator PATRICK: I've worked inside CASG and I know that, in the lead-up to these projects being approved, there is a mound of documentation and there is a mound of consideration in respect of how you bring something into service.

Air Marshal Davies : We'll take that on notice and get back to you.

Senator PATRICK: Thank you very much. Do you intend to operate that as a separate squadron?

Air Marshal Davies : Yes. The construct of 92 Wing, the wing that has operated P3s up to this point, is under consideration at the moment, but our intention at this point is to have a separate squadron for the Triton, yes.

Senator PATRICK: The total acquisition cost, I believe, was going to be about $3 billion, and I think the minister might have said that in the chamber. There have been some more media reports about that, talking about a total project cost of seven billion, so I presume that includes acquisition and sustainment. Can you just clarify where we're up to in terms of the cost of that?

Air Vice- Marshal Roberts : The project costs that were announced included acquisition and sustainment for the initial period of operations as well, so that was correctly identified in the media.

Senator PATRICK: Just to be clear: that's the 6.9?

Air Vice- Marshal Roberts : That is correct, yes.

Senator PATRICK: It is my understanding that you're looking at getting a seventh Triton. That's not included in that cost?

Air Marshal Davies : The initial construct of Air 7000 was up to seven aircraft. At this point we have government approval for only one aircraft and the infrastructure. We will come back to government then in increments and get decisions over the coming years.

Senator PATRICK: There was the crash of a Triton at Point Mugu in California last month. What was the cause of that accident?

Air Vice- Marshal Roberts : They're still investigating the cause of that accident and we're yet to have the final accident report released to us.

Senator PATRICK: Perhaps similar to the Growler, is it possible to have that released? Will it be released publicly once the report is concluded?

Air Marshal Davies : We will be able to release a form of report and whatever we're able to release, so we will do that. But at the moment it's still with the United States navy. We don't have that report yet.

Senator PATRICK: Do you intend to imbed RAAF personnel into the US as a mechanism for training and gaining experience with these aircraft?

Air Marshal Davies : We've had a very positive and strong relationship with the United States navy both through our P3 operations into P8 and that will occur again for Triton. Our initial training has already commenced in Jacksonville, Florida. That will certainly continue until we have our own ability to operate Triton in Australia. We have now transferred our training across to Australia for P8. In terms of long-term imbedding of staff, we have an ongoing exchange program with the United States navy. That would be the most likely outcome for both P8 and Triton for us to understand and learn from each other's operation.

Air Vice- Marshal Roberts : In addition to that, because this is a cooperative program with the United States navy, we have nine people embedded in their organisations, ranging from engineers, logistics officers, pilots and DSTG and public servants. It is part of the agreement that we actually embed our people in their organisation to gain a level of technical understanding of the capability and its future developments as well.

Senator PATRICK: Thank you; that was very helpful. I might switch to the secretary now in relation to the SPA for Future Submarines. I don't want to go down to the lower levels; I want to deal with this at the high level. It's in the public domain. There have been some difficulties in that space. I've gone on record saying that I support Rear Admiral Sammut in making sure we get the right deal, no matter how long it takes—so I'm not being hostile here. But someone also described it this way to me: to get relief, the SPA team goes across to Brexit because it's a bit simpler. As this matter has been escalated, I presume that Admiral Sammut has been working face-to-face in negotiations. As he's reached difficulty, I imagine that the normal process would be to escalate this up to you and perhaps up to the minister. Can you describe that escalation if any has occurred, what contact has occurred and what support the very top echelons of Defence have been giving to Rear Admiral Sammut?

Mr Moriarty : Certainly. Admiral Sammut remains the head of our negotiating team and has been involved, even in this last week, in extensive negotiations with our French partners. The negotiating team updates me at least weekly on the progress of the negotiations and the remaining issues that need to be resolved or closed. They're also providing very regular updates to the minister. The minister met recently with his counterpart from France, Minister Parly; they talked about some of the remaining issues. The negotiating team has been given strong mandates to reach a settlement as quickly as possible. I'm comfortable that the escalation mechanisms the government has put in place allow us, when there are points where the negotiating team needs a political mandate or a steer from ministers, to receive guidance quickly.

Senator PATRICK: Just because I want to stay 'high'—I have questions for Admiral Sammut later—I ask: has there been any exchange or letters or any calls between, perhaps, you and your counterpart in France?

Mr Moriarty : Not in the last couple of months—

Senator PATRICK: But there has been previously?

Mr Moriarty : I had a visit to France in June and then, subsequent to that visit, there was an exchange of letters between me and the relevant French ministry, but there hasn't been any correspondence since then.

Senator PATRICK: From your briefings, what is the current status? Are we moving towards resolving some of the issues at play, or is it still bogged down?

Mr Moriarty : Progress is being made, but these are tough negotiations.

Senator PATRICK: I understand that.

Mr Moriarty : The naval group are tough negotiators and I would like to think we're tough negotiators as well.

Senator PATRICK: You have my full support to make sure that we get the best outcome.

Mr Moriarty : On a couple of issues there were points of difference; a couple of those have been closed. There are still some challenging issues, but I'm confident that the negotiating team is making progress.

Senator PATRICK: Thank you. I'll leave it there.

Senator STORER: I would like to ask some questions regarding energy and liquid fuel security; my apologies if we have already touched upon this issue in previous questions. I would like to understand the position of Defence on liquid fuel security in terms of the status of provision of fuel for Defence and generally to the Australian population.

Air Vice- Marshal McDonald : I'll soon be joined by Major General Mulhall, who looks after fuel inside Defence. As has been provided previously by the Chief of Defence Force, the Defence Force has sufficient fuel for its needs, if you look inside the notion that Defence uses one per cent of the fuel that is consumed in Australia on a yearly basis: three per cent for aviation and 0.5 per cent for diesel. The amount of fuel that is used in Sydney Harbour in seven days equates to that used by the Royal Australian Navy in a 12-month period. We also have the Liquid Fuels Emergency Act, if required. Defence has sufficient fuel for its needs.

Senator STORER: If conflict were to break out in the region and our international fuel supply were cut off, how long would that be the case?

Gen. Campbell : Before my more expert colleagues to my left go into any detail, I want to express a concern with this question. You will say, perhaps, that with a small contingency we will have capacity; with a larger contingency we will have capacity—a minor war, a major war, a global conflagration. The concern I have is that, when you go down this path, you naturally seek to build and build until you declare, 'Aha!'—but there's no 'aha' moment. Over to the experts.

Major Gen. Mulhall : I certainly echo the CDF's comment concerning anticipated rate of effort against what we characterise as a conceivable range of scenarios. We've done extensive modelling over time through the Fuel Network Review and through other contingency modelling and we remain satisfied that we have either in our current holdings sufficient stock to meet need or, with appropriate warning time, the ability to increase our stock holdings to be able to meet that range of contingencies. There are certainly some extreme scenarios—consistent with CDF's point—that would be challenging, but again they are extreme scenarios.

Senator STORER: Are you able to express it in terms of days of fuel reserves that the ADF has itself made contingency for?

Major Gen. Mulhall : I'd begin by addressing the current holding that we have. In broad terms, our tanks are about half full. That meets our current need, and then some. Then we have the capacity, within the holding we have currently, to double our capacity. That's before we start relying on the commercial market and commercial options more broadly than that. Certainly if industry were to upscale, there would be a price. But we have other means, such as holding fuel on water either in transit from refinery or, indeed, holding it afloat within Australian ports. It's hard to be able to give you an answer about days by virtue of the rate of effort. How much demand do you wish us to be able to measure against?

Air Vice- Marshal McDonald : If you take it out to the most extreme and you cater for that, you'll be holding fuel that you won't be able to turn over or use, and fuel does go stale. So there's a balance point to be had between what is the extreme case and what is manageable and sustainable, and we're at that manageable and sustainable point.

Senator STORER: The US military is investing in hybrid and electric non-combat vehicles to help reduce liquid fuel dependency. Is the ADF looking into hybrid or electric non-combat vehicles in this regard?

Gen. Campbell : Broadly speaking, we are interested in that technological development, but it is at its early stages. Our Chief Defence Scientist might like to speak more fulsomely on this issue.

Dr Zelinsky : Is the question about fuel cells specifically, or hybrid?

Senator STORER: Hybrid and electric non-combat vehicles.

Dr Zelinsky : Certainly we are now seeing developments occurring in the commercial vehicle sector, but it is yet to propagate into the military sector. We are looking at power and energy systems for all Defence platforms and at how to move towards more efficient things, but also you have to have reliability and serviceability, et cetera. So we're maintaining a technology watch, as the Chief of Defence Force said, and we haven't made any decisions to do any substantive programs in the area.

Senator Payne: I note for the record that Dr Zelinsky is departing Defence—I wouldn't say for 'greener pastures' but, at the very least, for other pastures. Notwithstanding that he may be asked other questions later when I'm not here, I wanted to place on the record my thanks to Dr Zelinsky for his leadership of the Defence Science and Technology Organisation and the work that he's done over many years; it's very much appreciated. Alex, you go with our best wishes.

Dr Zelinsky : Thank you, Minister. That's much appreciated.

CHAIR: I think on this occasion I can be brave enough to say that I speak on behalf of all Senate committee members: we agree with you and thank you.

Senator Payne: Thank you, Chair

Dr Zelinsky : Thank you, Chair.

Senator STORER: Are there other initiatives the ADF is looking at in terms of moving away from liquid fuels?

Gen. Campbell : As the Chief of Defence Science noted, it is early days—a watching brief. In static facilities, the utilisation of solar power and so forth, one of our big challenges is that, whether it's ground vehicles or other forms of military equipment, we're often seeking to move a very heavy weight. A ground armoured vehicle might be 30 to 45 tonnes and that presents challenges that the science hasn't quite caught up with—the domestic car, yes, in things like the Tesla electric car, but not quite the armoured vehicle. We are very keen to see any form of high-density sustainable fuel solutions that can power our air, land and sea capabilities. So, you're not speaking to an organisation uninterested in the issue; it's the science and technology that's not quite there yet for our needs.

CHAIR: Before Senator Kitching starts, is there any issue with the affidavit that Senator Kitching seeks to table?

Senator Payne: It's understood that it's a public document.

CHAIR: In those circumstances, we consider it tabled.

Senator KITCHING: I draw your attention to the affidavit of FBI special agent Mr Bradley Hull and, in particular, to paragraphs 4 to 7. The case involves a criminal complaint made against Mr Xu Yanjun, who is a deputy division director of the Jiangsu province Ministry of State Security for the People's Republic of China. It states, 'MSS, the intelligence and security agency for China, is responsible for counterintelligence, foreign intelligence and political security, and MSS has broad powers in China to conduct espionage, both domestically and abroad.' I come back to the Defence Trade Controls Act. Given Mr Hamilton's statements around the importance of maintaining national security and protecting Australian universities and companies, is it possible that clandestine technology acquisition techniques are also being directed at Australian companies and universities?

Mr Hamilton : Thank you for that. On the document that you tabled, we are broadly aware of media in relation to that. I would characterise that more of an issue around espionage, not just one about export controls. We do acknowledge that foreign entities have the potential to use investment as a vector for sabotage, espionage and foreign interference. As you would probably be aware, the government has announced a package of measures to protect the sovereignty of Australia from foreign interference, through a range of measures that target foreign activities that are coercive, clandestine or deceptive in whatever context that they may occur. That's work that the Department of Defence doesn't lead. That's the responsibility of Home Affairs. They work very closely with us. They also work closely with intelligence and law enforcement agencies, which obviously will put a limit on the amount that we can talk about the particulars of some of these issues, but we are aware and we are concerned about it.

Senator KITCHING: I draw your attention to the paragraphs under the heading 'Probable cause', starting at paragraph 14, which just detail the methodologies of acquiring information. Could I ask you: do you think the DTCA is adequate for this task, that is, to counter clandestine technology acquisition?

Mr Hamilton : I haven't had a deep read of this document. I think the government approaches the security of information and technology through a number of ways. The DTC Act is one way. Its focus is on preventing the export of that technology, but also of course we have a very strong framework of counter-intelligence and counter-espionage where it touches on Defence's interests. We, on the Defence trade control side, work very closely with that side, but I can't go into any details.

Senator KITCHING: I understand.

Mr Moriarty : I think as the Director-General of Security, Duncan Lewis, said recently, the intelligence threat to this country is high and he's put on the record that it's at historically high levels. Export of sensitive technologies is part of that but industrial espionage and more general espionage challenges are always prevalent. We are very conscious in the department that with the recapitalisation of the Australian Defence Force, and particularly bringing on more modern advanced platforms, networked platforms, that does present us with some more intense challenges. We are aware that what the government is doing with the recapitalisation of the Defence Force is of interest to a number of countries and non-state actors as well. And we've got some good frameworks in place with Defence security, including with our other partner agencies—Home Affairs, ASIO, the Australian Federal Police—and our international partners to try and put a very strong protective framework around that. I might just ask Defence security to brief the committee on some of the good work that we're doing but also possibly touch—

Senator WONG: I'm really happy if you wish to do that. To the extent to which that is responsive to the senator's question, do we need to traverse broader areas, Mr Secretary?

Mr Moriarty : It is a matter for the committee.

Senator KITCHING: If the minister is happy, I don't mind having a private briefing, if that's possible, on this. But I think the answer that it's part of a framework including dual-use technology is adequate. I would seek a private briefing, if that could be made available.

Senator Payne: I'll raise that with the minister and—

Senator WONG: That would be Defence or Home Affairs?

Mr Moriarty : The framework that we have—we could outline, subject to the minister's views, how we interact with the other appropriate agencies.

Senator WONG: Fine.

Senator KITCHING: I very much appreciate it.

Senator Payne: That would be for the committee.

Senator KITCHING: Yes. Could I maybe ask: will the new economic espionage provisions apply to situations—and I appreciate you have only just received this affidavit and it's certainly not the whole court file, but it is online—like this?

Mr Hamilton : We would have to have a careful read of the court document.

Senator KITCHING: Maybe that can be part of the—

Mr Hamilton : The other point I'd just make is: if it is before the court in the United States, we would be very careful about what we commented on. But we will have a look at how our frameworks, including trade controls but also security frameworks, apply generally and we will bring that into the briefing, should the minister agree to do so.

Senator KITCHING: My final question is: do we have investigatory capacity? Do you think that's necessary? I think we will see it in the review, but would that be necessary?

Mr Hamilton : In relation to trade controls?

Senator KITCHING: Yes.

Dr Kearnan : We do have long-term monitoring capacity. That only applies to part of the DTC Act at the moment. The monitoring, which is interim search powers, may be performed by authorised officers. Under the act the powers only apply to the Australia-US Trade Corporation Treaty parts of the act at the moment—part 3 and part 6 only. Extending the application of these powers to part 2 is something that Defence has put in its own submission. Obviously it's an independent review, and that's subject to the independent review balancing all points of interest and concern in this space.

Senator KITCHING: Can I confirm one thing, Mr Moriarty? The new capacity build will take into account this kind of activity, particularly dual-use in technology?

Mr Moriarty : That is something that we're focused on but it's not just dual use. The framework that we've got—

Senator KITCHING: Will cover a broader—

Mr Moriarty : is broader.

CHAIR: Deputy Chair, I think you are on.

Senator GALLACHER: If I can just go back to the navigation exercises, in particular in the Taiwan Strait—is someone able to answer that? It was reported last week that the missile frigate sailed through the Taiwan Strait on 28 September. That was in the Australian on 18 October. Can we get a sense of the purpose of that exercise?

Gen. Campbell : Are you speaking of HMAS Melbourne's transit through the straits, leaving a Chinese port visit and heading towards activities in Korea, Japan?

Senator GALLACHER: Do those dates line up with that exercise, 28 September?

Gen. Campbell : I'll hand-off to the Chief of Navy.

Vice Adm. Noonan : Yes. HMAS Melbourne has been deployed in the South China Sea region for approximately six weeks now, undertaking a number of activities, including a port visit to Zhanjiang in China, and as part of her transit through the region she undertook the transit that you described.

Senator GALLACHER: That's in concert with other navies? Is that quite a normal activity?

Vice Adm. Noonan : Yes, it is. It's a normal activity. During her deployment she has undertaken a number of port visits in the region and exercised with vessels from a number of regional navies.

Senator GALLACHER: Those navies are, what, Taiwan—

Vice Adm. Noonan : Typically she has interacted with vessels most recently during the Korean international fleet review, where there were vessels in a fleet review from the US, China, Russia, Korea, obviously, and a total number of 14 vessels.

Senator GALLACHER: Without giving up any of your operational plans, in general terms how often do we pass through that strait?

Vice Adm. Noonan : With respect to the increased presence that I described earlier, we've regularly got ships operating in the area. Currently we've got two minehunters deployed to north Asia. We've got two frigates and a tanker operating in the region at the moment. I would suggest that it's an increasing presence that we've got there. So 'regularly' would be my categorisation of that.

Senator GALLACHER: What sort of communication would you have with either China or Taiwan about this particular trip—before, during and after it occurred?

Vice Adm. Noonan : During a transit through the South China Sea in the international waters, there's not a particular requirement to—

Senator GALLACHER: No protocol or anything?

Vice Adm. Noonan : Not when transiting through international waters. From time to time we have been challenged by Chinese vessels in accordance with international norms to exchange identities and to exchange pleasantries, and it's a courtesy to sometimes ask what the nature of the transit might involve. And in those instances we would respond by indicating that we're operating in international waters in accordance with international law and norms, and that would be the extent of the interaction.

Senator GALLACHER: You mentioned a challenge. What is it? Someone says, 'Who goes there?' How does that work?

Vice Adm. Noonan : Typically it's a call that's made over a radio circuit on an internationally recognised channel. In this case we've had challenges from China, which have been reported, to basically seek an understanding of what the purpose of the transit might be and to establish the identity of the transiting ships.

Senator GALLACHER: And, presumably, you just say, 'I'm in international waters and I'm going from A to B.'

Vice Adm. Noonan : That's generally the context of the verbiage. We will identify ourselves as an Australian warship, conducting innocent passage in international waters in accordance with international law of the sea.

Senator GALLACHER: That's basically the end of the matter, is it?

Vice Adm. Noonan : Typically that's the end of the matter. We've not seen any aggressive language, it's always very courteous, and typically they thank us for—

Senator GALLACHER: That was the case in this instance?

Vice Adm. Noonan : That's correct, yes.

Senator GALLACHER: If I can move to Saudi Arabia and question 111 which I had on notice in respect of exports of—I think I've attributed it to the wrong section—I was talking about exports to Saudi Arabia and you've come back and said there weren't any under the relevant act. We are now saying that Defence replied to some questions on notice on exports to Saudi Arabia in the last round of estimates, QoN 111. I take it from the answer that the exports approved to Saudi Arabia are listed in part 1 'Munitions List of Defence and Strategic Goods List' but do not overlap exports covered by the Arms Trade Treaty. Is that a correct assumption of the answer to that question on notice?

Mr Hamilton : Sorry, I will just track down the response to the question on notice. But our export control framework that we use is not just in relation to arms trade treaties, it also includes an assessment against criteria in legislation involving international obligations, human rights, national security, regional security and foreign policy. That assessment includes consideration of whether there is an overriding risk that the exported items could be used to commit or facilitate a violation of international humanitarian law or human rights law.

Senator GALLACHER: I'm not trying to be difficult here. Your answer says that the Arms Trade Treaty annual report only covers conventional weapons. And in your answer, you say that Defence has not released details of export approvals due to commercial-in-confidence considerations. Exporters do not advise Defence whether they proceed to export after receiving the export permit. Then it goes on to list the Arms Trade Treaty and all the issues in there about battle tanks, armoured tanks, armoured combat vehicles, large-calibre artillery systems. Then it goes on to say that the munitions list of Defence strategic goods contains 22 categories of military equipment technology. What have we been sending to Saudi Arabia? That's all I'm trying to identify. It's not a secret, is it? How many exports were approved for Saudi Arabia in 2017?

Mr Hamilton : In 2017, there were seven physical exports and three what we call 'intangible exports'. Under the Defence Trade Controls Act, 'intangible' means 'information'.

Senator GALLACHER: Do we know the value of those exports?

Mr Hamilton : We do not release that information.

Senator GALLACHER: So you don't release the value. Can a taxpayer find out what they were in any way, shape or form?

Mr Hamilton : As per the response to the question on notice, we don't release the details of export approvals due to the commercial-in-confidence considerations.

Senator GALLACHER: So you're not going to release the value of them and you're not going to tell anybody what they were?

Mr Hamilton : Broadly, the government's export strategy released earlier this year said that the government would consider a framework for transparency of defence exports. That is a framework that we are commencing work on. It's a complex issue that requires us to balance that commercial-in-confidence nature with the government's commitment to transparency. We're working on that at the moment.

Senator GALLACHER: How many exports have been approved to Saudi Arabia for 2018 to date?

Mr Hamilton : To 19 September, three physical exports, and zero of those intangible exports.

Dr Kearnan : I've got more up-to-date numbers. As of 23 October, it was four physical exports and zero intangible exports.

Senator WONG: Four?

Dr Kearnan : Four.

Senator GALLACHER: Do any of those have any implications for arms treaty obligations?

Mr Hamilton : Each and every export is considered very carefully against all of our obligations and export control provisions. So we consider them all against the relevant criteria.

Dr Kearnan : I just note that the Arms Trade Treaty is a DFAT responsibility. They do the reporting on the Arms Trade Treaty. We do, obviously, engage with DFAT on all of these sorts of issues.

Senator GALLACHER: So you let DFAT know what to report to the treaty organisation?

Dr Kearnan : DFAT have the lead on the Arms Trade Treaty, so they obviously have the understanding of the conventional arms that are covered in that treaty. I think you have the list there—

Senator GALLACHER: Yes.

Dr Kearnan : starting with 'battle tanks' and ending with 'small arms and light weapons'. Obviously they will ensure that Australia is meeting its Arms Trade Treaty obligations. Which exports might fall into that category obviously get run through DFAT.

Senator WONG: Can I just clarify something? You might have given Senator Gallacher the definition of 'intangibles' before, but can you just repeat it?

Dr Kearnan : Intangibles?

Senator WONG: That's what you said before. I thought you used the phrase 'intangibles'.

Mr Hamilton : I said three and zero intangible and Dr Kearnan then updated it.

Senator WONG: Yes. I am asking for the definition of 'intangible'. I might have missed it in the evidence.

Mr Hamilton : My very high-level definition is that it is information rather than physical goods.

Senator WONG: Thank you.

Senator GALLACHER: You also said there were no exports of conventional arms under article 2 contained in exports to Saudi Arabia. Your advice to DFAT is that you haven't had any exports that are covered by the arms treaty—tanks and that sort of thing?

Dr Kearnan : That's correct.

Senator GALLACHER: And you're not able to go to the other stage and say what the other list is, which is, I presume, munitions and so on. You can put it pretty simply. Saudi Arabia is involved in providing air support for the effort in Yemen. Are we sending them things to drop out of the sky?

Gen. Campbell : Senator, did you suggest 'our' effort in Yemen? We're not in Yemen.

Senator GALLACHER: No, the Saudis.

Gen. Campbell : You said they're providing—

Senator GALLACHER: They're responsible for air support. That's what they told us when they were in the parliament a couple of weeks ago. The Saudi delegation said that.

Gen. Campbell : The conflict in Yemen?

Senator GALLACHER: Yes. So I'm just probing to see whether we're supplying munitions that have been used in that effort.

Mr Hamilton : Senator, as I said before, in considering and approving exports, we have a longstanding framework of considering those exports. That includes considering legislated criteria around human rights, national security, regional security and foreign policy.

Senator GALLACHER: I'm happy with the answer you're not going to tell me. That's fine. Mr Pyne told the Land Forces conference in September that Australia was looking to sign a formal defence industry agreement with Saudi Arabia. Has work started on such an agreement?

Mr Hamilton : While the government has signalled its intent to conclude a memorandum of understanding with Saudi Arabia, discussions are only in the very early stages and are not a priority at this time.

Senator GALLACHER: Are you able to tell the committee whether it was an initiative of Saudi Arabia or Australia?

Mr Hamilton : I will take that on notice.

Senator WONG: Because you don't know or because you want to get instructions?

Mr Hamilton : I want to get a correct answer for you.

Senator GALLACHER: What is the expectation about this agreement? When will it be finalised and how many people are working on it?

Mr Hamilton : It is at a very early stage and it is not a priority for us at this time, so I do not have a date for you.

Senator GALLACHER: So you have no expectation of a completion date. How many people are working on it?

Mr Hamilton : As I said, it's not a priority.

Mr Moriarty : There is a team in the department that looks at this sort of work. It's not appropriate or sensible to say we have one person or two. The people that might be looking at this from time to time would also be looking at agreements that we might have with Japan or South Korea.

Senator GALLACHER: Thanks very much. That's all.

CHAIR: We have until 12.30, which I have suggested we allocate to the Labor Party.

Senator WONG: Thank you. I'll try and work through a few things.

CHAIR: Senator Wong.

Senator WONG: Following up on Senator Gallacher's question: you were asked a question, Mr Hamilton, which was, 'When did work on this agreement begin?' You read your brief in response, which is fair enough. Can I re-ask the question because you didn't actually answer that.

Mr Hamilton : Could you repeat the question, please?

Senator WONG: The minister makes the announcement or the statement, for want of a less defined, definite term, and Senator Gallacher says, 'When did work on that agreement that the minister has referenced begin?' You then say, 'It's not a priority now.' The question still stands, though: when did work begin? Was it prior to that statement?

Mr Hamilton : Yes. We were aware of the possibility of an MOU prior to that statement, but I will take the specifics on notice.

Senator WONG: Are we talking months, weeks, years?

Mr Hamilton : I'll take it on notice, Senator.

Senator WONG: When did it become not a priority?

Mr Hamilton : It is not currently a priority.

Senator WONG: That is not my question. When did it become not a priority?

Mr Moriarty : The logic of the question is that at one stage it must have been a very high priority. I don't know that the minister or we would categorise it as that.

Senator WONG: When were you advised this wasn't a priority? When does that become Defence's understanding of the government's position?

Mr Hamilton : As the secretary said, we work on a number of MOUs—

Senator WONG: Mr Hamilton, you gave evidence that this was not a priority. I accept that. I'm asking you: was it identified as not a priority before the minister made his statement in September or after?

Mr Hamilton : I'll take that on notice.

Senator WONG: Okay. You just said there was a team in the department working on this. When did that team—

Mr Hamilton : There is a standing team that looks at all MOUs that we work on. For example, the MOUs that we spoke about in the Pacific—

Senator WONG: I understand that. In terms of that team, were they given responsibility for this MOU prior to the minister's announcement?

Mr Hamilton : I will check and take that on notice.

Senator WONG: If not, when were they?

Mr Hamilton : I'll take that on notice.

Senator WONG: Can I quickly do Myanmar and then I need to do one other thing, if I may. I have some specific questions about our defence relationship with Myanmar and the training component of that relationship. What I wanted to understand was our vetting process. Can you tell me if we have—and, if so, what they are—vetting procedures to ensure any attendees have not been personally implicated in the range of human rights abuses which have been reported and documented and in relation to which Ms Bishop, Senator Payne and I, and the Labor Party, have made comment?

Mr Hamilton : In relation to the specific individuals that the minister has announced targeted sanctions on—

Senator WONG: No; that's not my question. I'm not actually trying to trip you up here. We have limited defence training, I think, in relation to—

Mr Hamilton : It's a very modest program.

Senator WONG: A modest program, yes. That has been traversed already publicly. I think the minister—either this minister or the previous minister—has answered that. I'm actually trying to understand, for the purposes of that program, whether we vet participants as against the Australian government's stated position—and it is a bipartisan position—of concern regarding human rights abuses in Rakhine State.

Mr Jeffrey : Regarding the question about vetting procedures in the context of our Defence Cooperation Program with Myanmar, obviously we have sanctioned individuals now. That was part of the foreign minister's announcement. Those individuals are now on our Consolidated Sanctions List. That precludes our engagement with them in any way, shape or form. It obviously has implications in terms of financial assets and other matters. Regarding our Defence Cooperation Program engagement with Myanmar, in terms of the Myanmar security forces and military forces, we don't impose, and we have not yet imposed, specific vetting procedures for the types of things that we do, such as talking to them about human rights, talking to them about how a professional military manages itself and talking about how we adhere to civilian controls. The question of whether we should ensure that those messages are not communicated to those who may have been involved in the atrocities that you're discussing is a question that the department would see as just not quite—our objective is to talk to them about how a professional military behaves.

Senator WONG: I understand.

Mr Jeffrey : If they are involved in circumstances that we would not approve of or indeed would condemn, does that invalidate talking to them about the things that we want to talk to them about?

Senator WONG: There is a separate policy question, which I was not proposing to traverse now, as to whether engagement in these circumstances continues to be meritorious. There is a long discussion that could be had about that, and I appreciate that it's not necessarily simple, for the reasons you've outlined. If you have people who are personally implicated, I think there is a question about whether or not they should be, I suppose, benefiting or participating in training engagement provided by Australia. Do I understand your answer to be that, as yet, the government, the defence department, has not considered or is not proposing any vetting procedures for participation in defence training with Myanmar?

Mr Moriarty : At the moment we do not have a vetting procedure. You would be aware, Senator, that on some occasions we engage with a number of countries where there are issues about who participates in training or who might come on an activity. That is subject to a discussion. Sometimes countries change their views about who might or might not participate in particular activities. But at the moment the Department of Defence does not have a vetting procedure in place in relation to our activities with Myanmar.

Senator WONG: Can I go to the statement issued by the Foreign Minister and the Prime Minister on 16 October 2018, described in the first paragraph as an 'important announcement in support of Australia's interests in the Middle East'. I have a few questions in relation to Defence's involvement in that announcement. I understand from evidence provided earlier this week by PM&C that the first time PM&C became aware of this was via a phone call from an adviser in the Prime Minister's office on the morning of 15 October, which was the same day that media were briefed ahead of the announcement the following day. When and how did the Defence Department first become aware of these announcements?

Mr Hamilton : Immediately prior, on 15 October, Defence was advised of the government's announcement of the measures. On receipt of that announcement, that gave us the time to direct a review to make sure that we had the appropriate measures in place for our personnel deployed in the region. We conducted that review, which assessed that the force protection measures remained appropriate. This is, as you would appreciate, something that we do on an ongoing basis to make sure that our personnel have the protections they need. We did that on the 15th.

Senator WONG: I'm happy to talk to you about the force protection measures but I haven't moved off the 15th yet. Who was called, and by whom, on the 15th?

Mr Hamilton : I received a call from the Department of Foreign Affairs and Trade late on the 15th.

Mr Jeffrey : I received a call from the Department of the Prime Minister and Cabinet mid-afternoon on the 15th.

Senator WONG: Were you the first person—

Mr Jeffrey : I believe so.

Senator WONG: Aren't you privileged? Was that Mr Hayhurst?

Mr Jeffrey : That's correct.

Senator WONG: Sorry; I forgot his title.

Mr Jeffrey : First Assistant Secretary.

Senator WONG: FAS.

Mr Jeffrey : I'm the FAS for International Policy, so we obviously—

Senator WONG: You talk to each other all the time.

Mr Jeffrey : Yes.

Senator WONG: His evidence on Monday was that he got the call. He then called DFAT and advised them. So is it your evidence that he called Defence at some point after that?

Mr Jeffrey : That's correct.

Senator WONG: Whereas you were separately advised, Mr Hamilton, but later from DFAT?

Mr Hamilton : Yes, that's correct.

Senator WONG: Did you have any advice from the Defence Minister's office?

Mr Jeffrey : The Defence Minister's office did call one member of my staff to indicate that there may be an announcement in relation to our defence attach—

Senator WONG: When was that call?

Mr Jeffrey : That was mid-afternoon too.

Senator WONG: So mid-afternoon on 15 October, that is, the day before the press conference—but obviously media were briefed that night or later that afternoon because it appeared in the papers the next day—Defence is first told of the defence attaché element of the announcement.

Mr Jeffrey : That's correct.

Mr Moriarty : Over a long period with the current Defence Minister, but also with the previous Defence Minister, an Israeli defence attaché in Australia and an Australian attaché in Israel had been discussed.

Senator WONG: So where had it been discussed?

Mr Moriarty : The current Foreign Minister had raised it with me on a number of occasions over the previous 12 months. The current Defence Minister had also raised it in conversation—

Senator WONG: Had it got to the stage of you providing a submission to the Cabinet, Mr Moriarty?

Mr Moriarty : No. We had provided advice to the minister.

Senator WONG: Thank you.

Senator Payne: You wouldn't provide a submission the Cabinet about the location of individual defence attachés.

Senator WONG: In the context of a very large shift in bipartisan foreign policy, this was an element that you say was discussed. Had there been a formal decision prior to this, prior to being advised on the afternoon of the 15th?

Mr Jeffrey : As the secretary and the Foreign Minister said, the request that Australia appoint a defence attaché to Israel has been longstanding—

Senator WONG: That wasn't my question.

Mr Jeffrey : This is an issue that's known to us. This department provided advice to our minister on that issue.

Senator WONG: When?

Mr Jeffrey : It was in September—I'll get the exact date for you. We consulted on that advice with the Department of Foreign Affairs and of course with our post in Tel Aviv and our wider diplomatic network.

Senator WONG: Did you have any knowledge that this decision was pending prior to being advised, Mr Jeffrey, or that this decision had been made, or was even being actively considered?

Mr Jeffrey : I knew the issue was being actively considered because obviously we put up advice to the Minister.

Senator WONG: But you were first advised of the decision in the terms you described to me, which was 15 October?

Mr Jeffrey : That's correct. I was indeed not surprised because we had provided advice.

Senator WONG: When did you become aware, Mr Moriarty?

Mr Moriarty : On the 15th—

Senator WONG: Hang on. This is of everything? So you're talking about the defence attach and you're trying to cover the government's tracks, which is very brave of you, but it doesn't stand up to evidence that has been given here or in other committees or in the press conference. But leaving that aside, when were you first advised that the government had made a decision, first in relation to the defence attaché in Tel Aviv?

Mr Moriarty : On the 15th.

Senator WONG: And how did you become aware?

Mr Moriarty : I spoke during that afternoon and evening with officers of my department.

Senator WONG: So did Mr Jeffrey tell you?

Mr Moriarty : Yes, we spoke during that afternoon.

Senator WONG: When did you first become aware the government was reviewing Australia's approach to the JCPOA?

Mr Moriarty : On that day.

Senator WONG: When did you first become aware that the government was changing the longstanding bipartisan position about the location of Australia's embassy?

Mr Moriarty : I became aware that the Prime Minister was intending to make some comments on that issue on that day, on the 15th.

Senator WONG: Did you have any knowledge prior to that day—the day on which media were briefed—that the government was considering such a move?

Mr Moriarty : I did not.

Senator WONG: Can I go back to your opening answer, Mr Hamilton, which was in relation to force protection. Obviously, this is a volatile area of the world. Did you describe it as 'force protection measures'?

Mr Hamilton : That's correct.

Senator WONG: I think you said that on announcement you immediately proceeded to review force protection measures; is that right?

Gen. Campbell : Senator, I might take the question. Our force protection measures for ADF personnel deployed on operational settings all over the world are—and I mean this literally—on a daily basis, continuously reviewed and adjusted, subject to the circumstances relating to any particular mission. The government's intention to consider policy changes with relation to the issues that you've raised was passed through our policy divisions into Joint Operations Command and out to our operational settings and the commanders to factor those considerations into that continual process of ADF force protection arrangements. That happens today. It happens tomorrow. It happens every single day, everywhere the ADF is on operations.

Senator WONG: When were commanders notified?

Gen. Campbell : On that day.

Senator WONG: I'm trying to get a time-frame.

Gen. Campbell : It would be later that day.

Senator WONG: When did you become aware, CDF?

Gen. Campbell : I was not involved in this information process because I was on an international flight, and the Acting Chief of Defence Force at the time, Vice Chief of Defence Force, David Johnston, was engaged. So my awareness was when I got off the plane in Washington, in terms of the issues of the mechanisms of advising into our operational settings for force protection considerations.

Senator WONG: Do you want to add to that?

Vice Adm. Johnston : I was the Acting CDF at that time. I reinforce CDF's comments; I became aware that night and the force protection review was directed to occur, which we do very dynamically.

Senator WONG: Sure.

Vice Adm. Johnston : It does not take us long.

Senator WONG: I just wanted to get the time.

Vice Adm. Johnston : The time for the direction?

Senator WONG: I think I asked when commanders were notified. When did you first become aware?

Vice Adm. Johnston : I became aware the evening of the 15th. The direction for the commanders went out on the morning of the 16th.

Senator WONG: Before or after the press conference?

Vice Adm. Johnston : Before.

Senator WONG: But after the media had been published because, obviously, that media was available—certainly the front page of TheAustralian was—the night before.

Vice Adm. Johnston : If that is the timing of the announcement, then yes.

Senator WONG: Do you have any concerns that the advice to commanders to initiate a review of force protection as a consequence of this decision was advised to commanders in the field after media were advised?

Gen. Campbell : Senator, could I adjust the way you have phrased that?

Senator WONG: You can adjust in your answer. I am not going to change my phrasing.

Gen. Campbell : Senator, I think you were expressing it incorrectly: advice of 'additional issues' to be factored into the consideration of force protection.

Senator WONG: Correct.

Gen. Campbell : It was not force protection on this issue in isolation. They never are. In that regard, the force protection measures that are in place across our operational theatres proved to be very adequate for that additional consideration.

Senator WONG: Okay. I was going to come to that, insofar as you can tell me. I'm happy to call it 'additional issues', if you would prefer that. But you would agree with me it is a pretty substantial additional issue—making a decision about where an Australian embassy is located in the context of the Israeli-Palestinian conflict; is not a smallish issue.

Gen. Campbell : I'm not going to comment on its significance; that's not my space.

Senator WONG: Sure.

Gen. Campbell : But I do note it was an expression by the Australian government to 'consider', as opposed to 'decide'.

Senator WONG: I know they keep using those words, but I'm not sure that's how it's been messaged internationally.

Gen. Campbell : That's a good point, Senator. I understand that.

Senator WONG: Can I ask the question again then using the nomenclature you prefer. Do you have any concern that these additional issues were only communicated to Australian commanders in field after media had already been advised?

Gen. Campbell : I'm not concerned for the force protection of our people. I am comfortable that they remained at all times safe and that measures in place were appropriate.

Senator WONG: Is this normal practice? If these sorts of announcements are made which should be taken into account in terms of force protection measures, would you have such late notice, or would you usually be advised earlier?

Gen. Campbell : As you say, these issues of significant policy question don't necessarily arise frequently, so I couldn't say that I have precedent or example. But I'm very comfortable that we have exercised our duty of care to our people, and that they were then, and remain now, as well protected as their duties and their responsibilities in operational settings allow.

CHAIR: Is the team within Defence looking after the MOU assigned to look after the Middle East region as a whole? Is that correct?

Mr Hamilton : From a policy perspective, that is correct; from the legal framework, it is also correct.

CHAIR: Thank you. So it is not a team which is solely responsible for the MOU; they do have other activities?

Mr Hamilton : That's correct.

CHAIR: Can I confirm that the MOU forms a small part of the work that the team will undertake, and that it's not a priority for the team?

Mr Hamilton : That's correct.

CHAIR: Thank you. We will see you all back after lunch.

Proceedings suspended from 12 : 30 to 13 : 30

CHAIR: It being the allotted time, I call the committee to order and welcome everybody back after lunch. Prior to going to Senator Di Natale, I understand the officials have some answers to questions that were posed before lunch.

Mr Hamilton : Earlier we provided some advice to Senator Macdonald's questions on Pacific Patrol Boats. I advised that in total 21 boats will be provided but I wanted to clarify the countries that will receive those vessels. Twelve Pacific island countries will receive them and, in addition, Timor-Leste.

Senator DI NATALE: Minister, I will start with you. How would you characterise the nature of Australia's current relationship with the Saudi government?

Senator Payne: Australia shares the significant international concerns about the reported events inside the Saudi consulate in Istanbul. It has been important that the death of Mr Khashoggi has been confirmed. That is a step towards accountability, a step towards transparency. However, it is only a step, and we continue to hold very serious concerns. We have joined with a number of our international partners and condemned the killing of Mr Khashoggi in the strongest possible terms. There is, as you are aware, an investigation under way, and we will be watching that very, very closely. I have spoken directly with the Saudi ambassador here in Canberra and conveyed Australia's views and concerns to him, as has our ambassador in Riyadh raised our concerns directly with the government.

Senator DI NATALE: I'll come to that in a moment, but do you accept the characterisation that journalist Jamal Khashoggi was murdered by the Saudis in what was a premeditated and sanctioned attack inside the Saudi consulate in Turkey because he was a critic of the regime?

Senator Payne: Is that your characterisation?

Senator DI NATALE: I'm asking if you accept that characterisation.

Senator Payne: I don't know whose characterisation it is? Is it your characterisation?

Senator DI NATALE: I'm putting a characterisation to you and I'm asking do you accept that?

Senator Payne: I'm sorry. I wouldn't agree to accept every element of your characterisation without looking at it closely.

Senator DI NATALE: Well which part don't you—

Senator Payne: I have made it very clear this is an horrendous situation, that it is an appalling act. We are very concerned by these developments and we are watching very closely the process of the investigation.

Senator DI NATALE: You made those general statements. Let me, perhaps, then put to you the specific parts of that characterisation.

Senator Payne: Just to clarify, I am here, of course, representing today the Minister for Defence.

Senator DI NATALE: And I am going to move to issues relating to defence.

Senator Payne: But I am happy to answer in that capacity or my own.

Senator DI NATALE: Specifically, do you accept it was a premeditated and sanctioned attack?

Senator Payne: There is an investigation under way, and I do think it is important for the processes that apply to that investigation to be allowed to operate. However, the material that is publicly available to Australia and to the international community would suggest that it was most certainly carried out in the way that you characterise.

Senator DI NATALE: Perhaps, just moving on from the murder of Jamal Khashoggi, and going to other issues of the Saudi regime, is Defence aware of the recent report by UN that's categorised Yemen as the world's largest humanitarian crisis?

Mr Jeffrey : I don't have the copy of that report with me, but I've seen media reports in relation to that.

Senator DI NATALE: Are you aware that this United Nations report concluded that most of the civilian casualties in Yemen are a result of air strikes by the Saudi-led coalition?

Mr Jeffrey : Again, I don't have the report with me. If you have the copy at the table, it would be useful, thank you.

Senator DI NATALE: That strikes me as a conclusion that should be something that you're familiar with. You're familiar with the fact that most of the civilian casualties in Yemen are a result of air strikes by the Saudi-led coalition?

Mr Jeffrey : I'm aware of the report and aware of its conclusions.

Senator DI NATALE: Good. Are you aware the UN report also said there was strong evidence of violations of international law by the Saudi-led coalition as a result of their air strikes in Yemen?

Mr Jeffrey : I'm aware of that reporting too. I haven't read it directly that UN report that you reference but I've seen reports elsewhere.

Senator DI NATALE: Given we've seen the murder of a journalist in the Saudi consulate in Turkey because he was a critic of the Saudi regime given that Yemen is a humanitarian crisis, largely at the hands of the Saudi-led coalition, as evidenced by the UN report and given that Defence has a role in helping the Department of Foreign Affairs and Trade and the government form a view as to whether a country should be subject to sanctions, are you currently considering a recommendation around sanctions to the Saudi regime?

Mr Hamilton : I think that would be a matter for the Department of Foreign Affairs and Trade. We would expect them to consult and we will be involved in that process.

Senator DI NATALE: Is it correct that Defence has a role in helping DFAT and the government form a view as to whether a country should be subject to sanctions?

Mr Hamilton : As I've said, we would expect to be consulted as part of a process involving sanctions.

Senator DI NATALE: Okay, so you do have a role. The question I'm asking you is: given the evidence I've just put to you, are you proposing through any dialogue with Department of Foreign Affairs and Trade to recommend there be sanctions directed at the Saudi regime?

Mr Moriarty : The advice that we would provide to ministers for the government to consider would be appropriately confidential. We are aware of the UN report. We're aware of what has been publicly available in relation to the murder of Mr Khashoggi. Departments are engaged in considering these issues. Advice will be provided to ministers, and the government will make a decision.

Senator DI NATALE: I'm not asking you about the advice. I'm asking whether you're considering recommending sanctions, whether you think that sanctions would be appropriate given the grave violations of international law and now the murder of a journalist who was a critic of the Saudi regime?

Mr Moriarty : When we provide advice to the government through our ministers, we'll take into account all of the known facts.

Senator DI NATALE: Well, we know what the facts are. The UN has handed down its report. We have a relationship with the Saudi regime, one that also includes a number of export licences granted to that regime. Are you currently considering sanctions or at least a recommendation of sanctions towards that regime?

Mr Moriarty : I'm not going to go into the advice that we might provide to government.

Senator DI NATALE: Can I just ask, have you actually read the UN report, Mr Jeffrey?

Mr Jeffrey : I haven't read the whole report but I've read elements of it.

Senator DI NATALE: I noted it was just passed to you a moment ago. Prior to that, had you made yourself familiar with the UN report?

Mr Jeffrey : Not every page, but I had, as I said, read elements of the report.

Senator DI NATALE: What elements of the report were you aware of?

Mr Jeffrey : I was specifically led to the report by a news article in the New York Times which made very similar references to the one that you had just mentioned earlier.

Senator DI NATALE: You read some media reporting of the report, not the report itself?

Mr Jeffrey : That's right. Then I accessed the report itself.

Senator DI NATALE: What's actually preventing the department from issuing the strongest possible response to this horrendous breach of the rule of law? What more evidence do you need? Given the role of the Saudi regime in Yemen and now given the admission after initially lying about their involvement in the murder of Jamal Khashoggi, what more do you need before you would consider sanctions against this regime?

Mr Moriarty : Ministers have made clear that the government will consider the full range of possible ways in which to respond. I think ministers have already said something. The Prime Minister has said something. I think when our ministers and the Prime Minister have said something, it is not necessary, and in fact, I think quite possibly inappropriate, for bureaucrats to then comment on the same subjects.

Senator DI NATALE: Can I ask you, Minister, whether you are giving considerations to sanctions against the Saudi regime?

Senator Payne: We are not going to pre-judge the outcomes of the investigation results, but all options are on the table.

Senator DI NATALE: Would the Saudis' record on human rights, which is a consideration when considering formal sanctions against a regime, be a factor in the decision that you make?

Senator Payne: You have just adverted to the processes of considering the application of sanctions and they are issues that would be considered.

Senator DI NATALE: Let me ask you specifically about defence exports. At budget estimates in May, you confirmed to my colleague Senator Whish-Wilson that the total number of licences granted for defence exports to Saudi Arabia since 2016 was 18. I understand that may have been more than just that year. I understand in responses you gave earlier today that you confirmed there were 10 licences approved in 2017 and four in 2018. Is that correct?

Mr Hamilton : That's correct.

Senator DI NATALE: Is it correct that there was also a licence issued in the last month?

Mr Hamilton : Let me take that on notice and check the timing of those licences.

Senator DI NATALE: I understand from evidence you provided this morning that was a comment that was made, so you should have that available to you.

Dr Kearnan : We'll have to take that on notice and get you the exact timing.

Senator DI NATALE: Could you, perhaps, do that by the end of the session? I imagine that would be very easy information to access, thank you. In May this year, the defence industry minister met with United Arab Emirates' foreign minister here in Parliament House. Have there been licences granted for defence exports to the UAE?

Mr Hamilton : Sorry, can you repeat that question for us?

Senator DI NATALE: Have you granted any export licences to the United Arab Emirates?

Mr Hamilton : Have we granted any export licences since that meeting?

Senator DI NATALE: Since that meeting.

Mr Hamilton : We'll take that on notice to make sure we have the timing right.

Senator DI NATALE: I mean Since that meeting and anything that predates that meeting as well.

Mr Hamilton : Alright, Senator.

Senator DI NATALE: Have any of the arms sold by Australia to Saudi Arabia and the UAE been used in or to assist by air strikes by the Saudi-led coalition in Yemen?

Mr Hamilton : As I advised this morning, we do not release the detail of the exports on commercial-in-confidence grounds. However, as I also advised this morning, we do consider each and every export on a case-by-case basis to make sure that it's in line with our obligations, including a very detailed assessment in relation to human rights, including whether there is an overriding risk that the items could be used to commit or facilitate a serious violation of international humanitarian law.

Senator DI NATALE: Well these are defence exports. What we're witnessing in Yemen is the world's largest humanitarian crisis according to the UN. We've seen a number of civilian casualties as a result of Saudi air strikes and we are selling weapons to the Saudi regime. How is it possible that they haven't made a contribution to the actions of the Saudi regime in Yemen?

Mr Hamilton : The way that we assess these applications involves consideration of how they will be used and whether that use would be likely to contravene our international obligations and commitments.

Senator DI NATALE: Can you say categorically now, given what you've just said, that any of those defence export licences have not been used in the conflict in Yemen? Because surely that would be in breach of what you just outlined there?

Mr Hamilton : No. Military equipment, by its nature, will contribute to the capability of a military force and will often contribute to a conflict. We assess the specific applications to see whether they will be used and whether that use will be likely to contravene our international obligations. If we think there is a likelihood or possibility of that occurring, we will not approve the permit.

Senator DI NATALE: You've just acknowledged that, by its nature, the export of military hardware contributes to the capabilities of a regime. This is a regime involved in a conflict in breach of international law yet you continue to issue licences to this regime. How is that possible?

Mr Hamilton : As I advised, we put considerable effort into assessing these applications on a case-by-case basis.

Senator DI NATALE: Are you concerned that granting these export licences is contributing to the atrocities in Yemen?

Mr Hamilton : We are very concerned in relation to current events. We take them into account in our assessment applications.

Senator DI NATALE: What does 'taking them into account' mean?

Mr Hamilton : It means that when we consider an application, we consider all relevant current information around the likely use of the item that's been exported and we form a judgement based on that consideration, based on consideration across a number of agencies who are able to provide us with insights into that technology and how it will be used.

Senator DI NATALE: If that's the assessment, you should be able to provide a categorical guarantee that no exports have contributed to the conflict in Yemen. If that is the process that you undertake, you should be able to offer that guarantee.

Mr Hamilton : If we assessed that what was being exported would be used to commit human rights abuses, then I do not expect we would export it.

Senator DI NATALE: So you are saying, unequivocally, that the exports, the defence hardware that have been sold to the Saudi Arabian regime, have not contributed to the slaughter that is going on in Yemen right now?

Mr Hamilton : I don't think that's why. Can you put that in the form of a question?

Senator DI NATALE: That was a question.

Mr Hamilton : As I've said, exports of military equipment, by their nature, contribute to the capabilities of the country to which they're exported, but we look at each and every one of them and undertake that assessment to make sure that exports are in line with our international obligations, which include an assessment of whether they could be used to commit serious violations of international humanitarian law or human rights law.

Senator DI NATALE: I note that you're still unable to provide us with that guarantee. Let me ask you then, in the wake of the murder of Jamal Khashoggi in the Saudi consulate, Germany has suspended arms sales to Saudi Arabia. Given that Germany has now suspended arms sales to Saudi Arabia, will Australia do the same?

Mr Hamilton : That's a matter for government to suspend sales.

Senator DI NATALE: Minister?

Senator Payne: As I said to you, all options are on the table.

Senator DI NATALE: Have you inquired about the details of the announcement that has been made from the German government?

Senator Payne: I have most certainly read about the details of the announcement that has been made by the German government, of course.

Senator DI NATALE: Have you spoken specifically to anyone within the German administration?

Senator Payne: I've spoken with a number of colleagues, most recently in Brussels, and this week as well. I'm not going to go into the details of conversations with my counterparts.

Senator DI NATALE: Not in light of this announcement?

Senator Payne: Yes, I have had relevant meetings in light of those announcements. I'm not going to go into the details of my conversations.

Senator DI NATALE: Has Defence received any inquiries from Australian exporters, in the wake of this brutal murder, seeking to confirm that Australia is still doing business with the Saudi regime?

Mr Hamilton : I'm not aware of any questions along those lines.

Senator DI NATALE: Sorry?

Mr Hamilton : I'm not aware of a question along that line.

Senator DI NATALE: Have you received any inquiries from Australian exporters since this issue came to light?

Mr Hamilton : As I said before, we will check the timing of those applications and get back to you.

Senator DI NATALE: I'm not asking about applications; I'm asking about inquiries about the Australian government position.

Mr Hamilton : No-one has asked me in relation to the Australian government position, and if they did I would say that's a matter for government.

Senator DI NATALE: Minister, just to confirm, you are saying today that the issue of the Saudi arms trade is something that the government is considering and may, in fact, be open to ceasing?

Senator Payne: I am saying that we absolutely recognise that this is an extremely serious situation of the highest order of magnitude and that we are examining the progress of the investigation. We are working closely with our partners and allies in close consultation. We're not going to prejudge the outcome of the investigation, but I can be very clear and say, as I have said to you twice now, that all options are on the table in terms of Australia's prospective response.

Senator DI NATALE: Of course, it's not simply contingent on the investigation towards the murder of Jamal Khashoggi. There is also the issue of the blatant breaches of international law occurring in Yemen. Is that also part of your consideration when reflecting on the relationship with the Saudi regime and the continuing sale of weapons to Saudi Arabia?

Senator Payne: Yes, and it has been for some time. As I have said previously and as my predecessor had said on more than one occasion, we have been continually urging the parties to the conflict to respect international humanitarian law, to minimise civilian hardship and to allow immediate and unimpeded access for humanitarian agencies to support affected communities. We have strongly supported the work of the United Nations Special Envoy, Mr Griffiths, to bring the parties to the conflict to a peaceful resolution, and it has been an ongoing approach that Australia has taken so, yes, that is part of that consideration.

Senator DI NATALE: Earlier today you acknowledged that the department is working on an MOU with Saudi Arabia to establish a formal agreement to trade weapons of war. You confirmed that that continues to be a part of this government's policy. Is that correct?

Senator Payne: The Minister for Defence has been pursuing this matter. I don't have further details on that in front of me, but I am happy to take any further questions you have on that, on notice. The officials did answer a number of questions on that from Senator Wong and, I think, Senator Gallacher earlier. We are happy to answer further questions if you have others.

Senator DI NATALE: My question is: is the government's current policy to continue establishing an MOU with the Saudi regime to sell weapons?

Senator Payne: My understanding is that that discussion has been underway. Its current status is a matter for the Minister for Defence, and I will take those matters on notice for you.

Senator DI NATALE: You say that you are gravely concerned about the atrocities occurring in Yemen right now and yet you're continuing to try and formalise a defence export agreement, an MOU, with the very regime that's responsible for perpetrating these international breaches of international law and continuing to commit these atrocities? Those two positions aren't consistent.

Senator Payne: When I said to you earlier in relation to the issues surrounding both recent events and, as you have also referred to, the issues in Yemen, we are very concerned by these developments, I expressed the seriousness of my concerns in response to your questions and have said that we have all options on the table. That is the current position of the government.

Senator DI NATALE: Does the government accept the UN conclusion that there have been breaches of international law in Yemen at the hands of the Saudi regime?

Senator Payne: We certainly accept the UN report in terms of the detail that it has provided in relation to the humanitarian impact of this conflict. As I have spelled out to you, we are strongly supporting the work of the UN Special Envoy, Mr Griffiths, and I have made very clear—just to make sure that the language I use is consistent so that there is no cause for confusion—we are strongly urging the parties to the conflict to respect international humanitarian law, to minimise civilian hardship, to allow immediate and unimpeded access for humanitarian agencies to affected communities in need, because you are quite correct—the UN report identifies the absolute gravity and seriousness of the situation.

Senator DI NATALE: With respect, the UN reports makes it very clear that there have been breaches of international law and my question was a very straightforward one: do you accept that conclusion?

Senator Payne: I believe that would be the view that we adopt.

Senator DI NATALE: Thank you. I just want to get this absolutely clear. We have the murder of a journalist in the Saudi consulate in Turkey. The Saudi regime have lied consistently about their involvement, and now, reluctantly, they are admitting that they have been involved; although it appears their involvement goes all the way up to the Crown Prince. They are responsible for the worst famine in 100 years, are using the weapons of war to commit atrocities of a scale not seen before and they are using the support of countries like the United States of America and Australia to give cover to those human rights atrocities. At what point does the Australian government take a stand, join the international condemnation directed at the Saudi regime and immediately put an end to arms sales to the Saudis and impose sanctions on that brutal regime?

Senator Payne: The Australian government, with our partners and our allies, as I have said to you in this discussion previously, is in a position of placing all options on the table because of exactly the issues that you have raised. It is a matter for government consideration and that is what we are doing.

Senator DI NATALE: I look forward to some prompt action from the government and so do many Australians who are appalled by what's going on right now. I understand I've only got a couple of minutes left, so I'm just going to go to a different issue and that is the issue of military cooperation in Myanmar. What is the current extent of the Australian government's defence cooperation and engagement with Myanmar?

Mr Hamilton : I can give you an overview of our defence cooperation with Myanmar. At a high level, it is a very modest cooperation program involving, this financial year, around $257,000. That's limited to cooperation in non-combat areas, providing training in relation to humanitarian assistance and disaster relief, peacekeeping and English language training. Our training provides us with the opportunity to emphasise the appropriate use of military force and the importance of the adherence to international law, and also has provided us with the opportunity to raise and have direct conversations with Myanmar in relation to concerns that we may have. It's also kept under very close review, as all of our international relations, to make sure they're in our national interest. Again, as I summarised at the start, it is a very modest relationship.

Senator DI NATALE: What are the projections for spending over the next year, in the forwards?

Mr Hamilton : I'll see if my colleague, Mr Jeffrey, that has for you.

Mr Jeffrey : We don't have projections for the forwards.

Senator DI NATALE: That's fine. About $400,000 was spent in the previous financial year. Is that correct?

Mr Jeffrey : That's correct.

Senator DI NATALE: We've heard today that Australia doesn't vet those people who take part in our training, which is, I have to say, astonishing. I presume that means you can't actually rule out that some of the people who are involved in that training were not involved in crimes against humanity and potentially genocide?

Mr Jeffrey : As I indicated to Senator Wong, your question presupposes that you see value in us limiting opportunities to talk about adherence to international humanitarian law, about how to professionalise their armed services so they understand adherence to rule of law, distinction between civilian governance and the military. From my perspective, Australia has a lot to contribute in the region, and projecting our values and the strength of our institutions with countries in the region is something we probably should do more of, not less.

Senator DI NATALE: With respect, my question presupposes that there is no value in engaging with people who have committed atrocities against men, women and children, and that there is no value in dialogue with individuals who have slaughtered young children. Do you see value in dialogue with those individuals?

Mr Jeffrey : The way our defence cooperation program works is that we engage at an institutional level.

Senator DI NATALE: That's my point. The point is that, because you engage at an institutional level, you can't guarantee that Australian money isn't being used to train, facilitate and give cover to people who have perpetrated these atrocities.

Mr Jeffrey : I think your characterisation of our program is incorrect.

Senator DI NATALE: Why is it incorrect?

Mr Jeffrey : You just said it was to provide cover for those who have committed atrocities. That's certainly not the intention.

Senator DI NATALE: I'm not saying it is the purpose or intent, but it may be the outcome, because you can't guarantee that human rights abusers aren't the beneficiary of Australian funding.

Mr Jeffrey : Again, that suggests that our funding benefits those in the security forces in Myanmar outside of the realms of discussions on humanitarian law, human rights and professionalisation. If you think that those discussions benefit those individuals in any way, I would suggest to you that the benefit is something we are trying to encourage.

Senator DI NATALE: It depends on who you have the discussion with. Last question—

CHAIR: No, I'm sorry, we have gone way over time. You can come back later on.

Senator DI NATALE: You won't give me one more, so I don't have to come back?

CHAIR: Alright, that's a deal.

Senator DI NATALE: That's the first time I've had a win against Senator Abetz. That's remarkable. Can we get that in Hansard?

CHAIR: This is for this year, isn't it—that you won't be coming back?

Senator DI NATALE: I understand that the UK, the US and the EU have suspended defence engagement and cooperation with Myanmar. Why is their position on this different to the Australian government position, and what magnitude of human rights abuses would be required for the Australian government to consider suspending military assistance?

Mr Moriarty : The Australian government has a very different perspective on its engagement with all of the members of ASEAN.

Senator DI NATALE: It sure does.

Mr Moriarty : The government will make its decisions about the type of relationships it has and the extent to which it engages with defence cooperation based on an assessment of its own interests and balancing the very important issues that you've talked about today. At the moment the government has decided that the maintenance of a very limited defence cooperation engagement with Myanmar serves Australia's interests and would potentially help with the professionalism of the armed forces in Myanmar.

Senator WONG: CDF, we were having a conversation before the lunch break about the fact that the media were alerted to a change in Australia's foreign policy which was required to be communicated to your commanders as part of the force protection process you go through. I asked you whether it was usual—I'm sorry, I can't recall exactly the words, but I think the gist was, was this normal practice that the media were advised before you? You answered very professionally. So I'm going to ask you this question: would you prefer that your commanders were made aware of significant foreign policy decisions before the media?

Gen. Campbell : I am very comfortable that our active mechanisms of force protection review, consideration and adjustment achieve their objective and continue to achieve their objective in giving our people the best circumstances to achieve their missions and return home safely.

Senator WONG: I have no doubt as to your professionalism. I'm asking is it better practice for you to be advised before the media?

Gen. Campbell : Yes.

Senator WONG: Thank you. I have one final set of questions on the JCPOA review. I wasn't able to get any clarity—I'm not criticising officers, I don't think the decision has yet been made—from PM&C about the conduct of the JCPOA review. Can anyone from Defence tell me anything you know about who will conduct the review, who will lead it, any processes associated with it? Or are they all matters still awaiting decision by government?

Mr Moriarty : To the best of my knowledge they are still being considered by government. We are not aware of who will conduct the review or the terms of it.

Senator WONG: Is there a decision-making process, an IDC or some version thereof, that Defence is involved in on that, or is it still not yet at that point?

Mr Moriarty : It's not yet at that point. I expect that all of the national security departments and agencies will have an opportunity to help do some work on this review.

Senator WONG: All departments will have the opportunity?

Mr Moriarty : There will be issues relating to the review. Defence has had the opportunity, through the Secretaries Committee on National Security, at various points in time to talk about the JCPOA. There are mechanisms within the national security bureaucracy for advice to be provided to our ministers.

Senator WONG: I could have lots more questions on that, but let's move on, because we've got a lot of topics. Just one final question: You referenced discussions on NSC. I won't ask you about the content of those, but I am going to ask you whether or not the decision to review the JCPOA was a decision of cabinet?

Senator Payne: I'm sorry. I wasn't actually ignoring you. I thought you were asking the question of—

Senator WONG: Well, I'm just asking generally.

Senator Payne: I'm not sure if it was in response to a question from you; it may have been a response from a question from Senator Moore; but I said that the government's decisions to review these aspects of Middle East policy were handled at the appropriate levels within the government. I understand you asked some questions of Minister Cormann on this yesterday or this week as well.

Senator WONG: Minister, can I just make this point: given the criticism, which is not just from the Labor Party, about the way in which this decision was made, as well as the content of the decision, surely it would be in the government's interests and, frankly, in the interests of demonstrating good government, to confirm that the matter was considered by the cabinet, if indeed it was?

Senator Payne: I think the Prime Minister has indicated that the cabinet was consulted, yes.

Senator WONG: That's careful and different wording. Anyway, it's your choice. If it didn't go to cabinet, that speaks for itself.

Senator Payne: The Prime Minister has indicated that the cabinet was consulted.

Senator WONG: He has not said, and neither have you, and nor has the Leader of the Government in the Senate, that it was a decision of the cabinet and it overturned very many years of bipartisan policy. I don't think some weasel words about talking to people after a decision has been made cuts it, frankly.

Senator Payne: Senator, you have consistently presumed a position. The approach that the government has taken is of a review of a number of aspects of policy—

Senator WONG: I know you keep holding to that.

Senator Payne: without prejudice, as the Prime Minister said.

Senator WONG: You will be pleased to know I'm moving off this topic and going to the division of ministerial responsibilities. First, I want to understand whether or not the charter letters have been received from the Prime Minister post the change in the cabinet and the change in the Prime Minister?

Mr Moriarty : Yes. Charter letters have been received.

Senator WONG: When did you receive them?

Mr Moriarty : I would need to take—

Senator WONG: This is post Minister Morrison becoming Prime Minister, I'm asking.

Mr Moriarty : Yes.

Senator WONG: Since that and since you have I don't know how many extra ministers—I will come to that shortly—you have received charter letters—

Mr Moriarty : We're just getting the date.

Senator WONG: Is that in respect of all ministers in the portfolio? That would be Mr Pyne, Mr Ciobo, Mr Chester, and I'm not sure to what extent they are provided to assistant ministers. It has slipped my mind whether they get them or not.

Mr Moriarty : My understanding is that the Prime Minister wrote to the Minister for Defence, and the Minister for Defence has communicated to the other ministers in the portfolio.

Senator WONG: So Mr Pyne gets to allocate responsibilities within the portfolio allocation?

Mr Moriarty : I understand that the Prime Minister may have given some broad communications on his intentions, and then he has directed that some more detailed discussions take place between the minister and colleagues.

Senator WONG: When you say 'I understand', Mr Moriarty, have you seen the letters?

Mr Moriarty : I have.

Senator WONG: Because they go to who is doing which bits of the job, so it is important, I would have thought, for the department to be aware of them?

Mr Moriarty : Certainly. The department is in communication with our various ministers to support them in their particular areas of work and responsibilities.

Senator WONG: How has the allocation of responsibilities been communicated to you? You keep using the verb 'I understand', so how do you understand? Have you got a copy of the letters? Has it been reduced to some other document that indicates allocations within the portfolio decision-making structures?

Mr Moriarty : The minister provided me with a copy of the charter letters. Officers in the department have extrapolated from that and provided advice to officials on which ministers would be taking forward particular responsibilities.

Senator WONG: When you say 'charter letters', does that mean the initial framework charter letter from Mr Morrison to Mr Pyne and the letters that Mr Pyne wrote as a consequence to the other ministers in the portfolio?

Mr Moriarty : I don't understand the question.

Senator WONG: I understood you to tell me that Mr Morrison wrote to Mr Pyne one letter, which sets out a bit of a framework, and then Mr Pyne, consistent with that, communicates the more granular allocation to other ministers in the portfolio. If I misunderstood that, please correct me.

Mr Moriarty : The Prime Minister has communicated with all ministers, then more detailed communications have been conveyed from the defence minister.

Senator WONG: That wasn't my understanding of your evidence earlier, but I accept I may have misunderstood that.

Mr Geering : The Prime Minister wrote to ministers setting out their charter responsibilities in line with the AAO. Subsequent to that, the Minister for Defence has been in consultation with his colleagues regarding specific responsibilities within the portfolio.

Senator WONG: When you say the Prime Minister spoke to ministers, who in this portfolio got a letter from the Prime Minister?

Mr Geering : The four ministers within the portfolio.

Senator WONG: All four of them. Can those be tabled?

Mr Geering : That would be a matter for the Prime Minister.

Senator WONG: Can you table something which tells me who is doing what? That's not a matter for the Prime Minister; that's a matter of good government. You've said yourself, Secretary, that you've got charter letters; you don't want to table them—I don't want to have a fight because I want to keep asking questions; they are then extrapolated into decision-making arrangements, authority arrangements et cetera within the department. Who has got what and where is that outlined? Is it on the website? Is there some internal document? Can you table something for the committee?

Mr Moriarty : There is an internal document, and I will take on notice whether it can be made available to the committee.

Senator WONG: All right. You were getting a date on the charter?

Mr Geering : We are just getting you a date on that. Sorry, I didn't bring it with me.

Senator WONG: No, no, that's okay. You can come back on that. And, on the subsequent consultation within the portfolio as between the Minister for Defence and other ministers, do I take that to be more granular, more detailed arrangements?

Mr Geering : We weren't a party to those discussions.

Senator WONG: So how did you become aware of decisions as a consequence of those discussions?

Mr Geering : Advice from ministers.

Senator WONG: How?

Mr Geering : Written advice.

Senator WONG: Written advice—from the chief of staff, from ministers, a letter to the secretary? How does that—

Mr Geering : I'd have to take it on notice, Senator. I can't recall specifics.

Senator WONG: What do you mean?

Mr Geering : I can't recall. You asked who sent the advice. I'd have to check.

Senator WONG: Yes, I'm asking how the department was advised about which minister was making which decisions. I can come back to this, but I think this is—

Mr Geering : I can't recall who gave us the advice.

Senator WONG: But it was written advice from the political office level to the department?

Mr Geering : Yes.

Senator WONG: You are going to take that on notice. Mr Moriarty is going to take on notice what you can give me that actually tells me who is responsible for what. Correct?

Mr Moriarty : Yes.

Senator WONG: Was there any consultation as between the department and the minister's office or the ADF and the minister's office in relation to the changes to ministerial arrangements or the settling of ministerial arrangements?

Mr Moriarty : Could you repeat the question, Senator?

Senator WONG: Was there any consultation as between the department and ministers or the ADF and ministers in relation to the settling of these arrangements—the ministerial responsibility arrangements? Did they talk to you before working out who was going to do what?

Mr Moriarty : The defence minister and other ministers in the portfolio had conversations with the department about their particular responsibilities, but the closer discussions between the defence minister and his colleagues about those duties are not ones in which the department participated.

Senator WONG: Okay, thank you. Now, as I understand it, under the previous arrangement the Minister for Defence Industry was the most senior defence minister in cabinet. Is that still the case?

Senator GALLACHER: Hansard doesn't get a wry smile.

Senator WONG: Yes. I'm just asking.

Mr Moriarty : I'm not aware of the cabinet precedence list.

Senator WONG: It's not cabinet precedence. There is a cabinet precedence issue, but that's a different issue. This is actually who's the senior minister. If you have two cabinet ministers for a portfolio, there's usually one coordinating minister or one who leads the budget submission process. Who is that?

Mr Moriarty : There is a portfolio minister. In the current circumstances, Minister Pyne, as the Defence Minister, is the portfolio minister.

Senator WONG: Thank you. Does Mr Ciobo need to seek approval from Minister Pyne or his office before any announcement—any particular announcement or any level of announcement?

Mr Moriarty : Not that I'm aware of.

Senator WONG: Are you aware of that?

Mr Geering : No, I'm not.

Senator WONG: So who is actually taking the lead on defence industry policies—Mr Pyne or Mr Ciobo?

Mr Moriarty : Well, the Minister for Defence is responsible for bringing forward major capability submissions in consultation with the Minister for Defence Industry, but there are other issues where the Minister for Defence Industry has the lead but would consult with the Minister for Defence.

Senator WONG: So, with anything to do with major acquisition, major procurement of capability et cetera, the portfolio minister has carriage. What does Mr Ciobo actually have responsibility for?

Mr Geering : What we might do is take it on notice and get you a more detailed split of those responsibilities.

Senator WONG: Okay. Can I go to shipbuilding, please. You will have to bear with me, because obviously this was canvassed quite a bit in this committee before I came into this representing responsibility. My questions first relate to workforce and to the Naval Shipbuilding Plan, and in particular to a question that Senator. Gallacher asked, Q111, the answer to which was filed this morning. Do you have that? I will ask this question and perhaps we can get a copy to you. I will quote it to you:

The Naval Shipbuilding Plan estimated that demand for naval shipbuilding and sustainment workers would reach a peak of around 5200 direct jobs in 2026. Current modelling of shipbuilding workforce needs, including numbers, classification of skills categories and trends, remain consistent with this estimate.

I want to ask a process question first, which is: who is doing the modelling?

Mr Chesworth : The work to undertake the studies for the segments of the shipbuilding workforce is being undertaken within the department—and the information that we use there is directly from our program managers—and also there is further work being undertaken by the Naval Shipbuilding College.

Senator WONG: Okay. I want to know what this current modelling is, though. You referenced it in an answer, and you're referencing it, frankly, in order to refute a proposition that where the workforce is is not consistent with the trajectory required for the 2026 peak. Can I just put aside for the moment that argument, which I'm sure we're likely to have at some point, certainly with Senator Patrick here and the questions the Labor Party has. But can you please provide us the modelling that you're relying on to give this answer?

Mr Chesworth : The modelling for the 5,200 was done in the context of the Defence white paper, and I understand it was undertaken by RAND Corporation.

Senator WONG: No, no, that's not the answer. The answer is current modelling, which—say we're going back to the white paper—suggests to me that what you're saying is that the current trend, the current work you're doing in assessing what's happening to the workforce, is consistent with the 2026 peak that's outlined in the answer.

Mr Chesworth : I don't wish to be at cross-purposes, Senator—

Senator WONG: Well, can someone give this gentleman a copy of this answer? You've got it?

Mr Chesworth : Yes.

Senator WONG: Can you look at the last paragraph on the first page and tell me what you say it means.

Mr Johnson : The 5,200 direct number is, for all practical purposes, unchanged.

Senator WONG: I'm not asking questions about that; I'm asking questions about—

Mr Johnson : About the modelling.

Senator WONG: I'm asking questions about the current modelling, and the question is in the context of Senator Gallacher's question, which is asking about the current numbers. You gave an answer that talked about current modelling. I want to know what that is and what the numbers are.

Mr Johnson : In April, when this answer was submitted, the number was 5,200 direct.

Senator WONG: No, no. Sorry, I don't mean to be rude, but that is not a responsive answer to the question.

CHAIR: If Mr Johnson can finish his answer.

Senator WONG: Sure, and I'll ask it again. It might be quicker if we just got to the point.

Mr Johnson : And the basis of that answer was the estimates of workers direct—this is a direct number—necessary to conduct four programs: Pacific Patrol Boat, offshore patrol; and what at the time we called future frigate; it is now called Hunter class and the Future Submarines. There was not substantially new information at the time of that answer. Since then, the Hunter class has been designated as a type 26 basis, and we are working with BAE to get more current information—'updated' would probably be the right word.

Senator WONG: And? What's the answer to that—the updated information?

Mr Johnson : Our next meeting on that subject is the defence and shipbuilding industry forum. We've had that forum working since 2015. The last meeting was in July. The next one is on 29 November, and we're expecting updates from all of the primes at that point. That will be the first time we've had all primes designated.

Senator WONG: Well, this isn't working, is it? So how about we try the question a different way. Tell me what the workforce is now? So 5,200 is the objective by 2026. What do you say the relevant workforce is now?

Mr Johnson : The ASC submarine number is about 1,100 in round numbers—

Senator WONG: I thought their evidence yesterday was 837 permanent employees. I'm assuming you are adding contractors.

Rear Adm. Dalton : The number that was testified by ASC yesterday was the number 850, which is the Air Warfare Destroyer workforce.

Senator WONG: I will check that. The advice I had was this was the total number of permanent employees; you're saying—

Rear Adm. Dalton : No. It was the total number of permanent employees in the ASC Shipbuilding company, which is separate from the ASC submarine sustainment business.

Senator WONG: I used to be their shareholder minister—I understand that.

Rear Adm. Dalton : I'm sure you do, Senator. What Mr Cuthill said yesterday was in relation to ASC Shipbuilding, and that is 850, and those workers are largely deployed on the Air Warfare Destroyer program.

Senator WONG: So we can do apples and apples and this can take less time, we've got a 5,200 figure. I'm trying to understand what you say the figure is now.

Mr Johnson : And we're building that number for you. So 1,100 plus 850—1,950. The next program, Pacific Patrol Boat—

Senator WONG: Hang on. It's not 1,150. I don't understand that. Where are you getting the 1,150? Is that 850 plus 300?

Mr Johnson : Well, we have five programs.

Senator WONG: Yes. Take me through them then: 850—

Mr Johnson : 1,100 ASC submarines.

Senator WONG: So it's 1,100 in total or 1,100 plus the 850?

Mr Johnson : On ASC submarines, 850 ASC Shipbuilding—

Rear Adm. Dalton : About 200 at Austal for the Guardian class patrol boats, which is replacing the Pacific patrol boats.

Mr Johnson : The next program is the Offshore Patrol Vessels.

Rear Adm. Dalton : And that number is starting to build. It's sitting at about 70 now. It will build to around 400 once the program is up and running.

Mr Johnson : And the last program is the Hunter class program, which is just ramping up, having selected the prime on 26 June.

Rear Adm. Dalton : So, at the moment, there are less than 200 involved in the Hunter class frigate, but that number will grow by about 2026, and we expect that number to be, in terms of direct employees, around 1,500.

Senator WONG: So do you want me to add this up or are you going to give me a figure?

Mr Johnson : It's about 2,400.

Senator WONG: Okay.

Mr Johnson : And then the Future Submarine program, here in Australia, still ramping up, is—Admiral Sammut might correct me—is around 80, so we'll call it 2,500. We expect another 1,000 on the Future Submarine direct.

Senator WONG: We're still talking about current jobs. Can we just—

Mr Johnson : Well, I just totalled that at between 2,400 and 2,500.

Senator WONG: Can I ask questions about that now, please?

Mr Johnson : Yes.

Senator WONG: Without getting into a political argument about where particular vessels should have been made, et cetera, I'm interested in understanding whether your judgement is that we've bottomed out and are now on the increase. The then minister last year said, 'The valley of death is over.' This was Mr Pyne in October 2017. There have certainly been some additional job losses announced since that time, I think a couple of hundred in ASC last April, another 90 in August and then some more last week. I want you to tell me: are we out of the valley of death, are we still in it or is there more to come?

Mr Chesworth : We're working closely with ASC. We are looking to redeploy workers where possible. It is possible that there could be further reductions. We generally receive advice from ASC, usually just prior to when those announcements are going to be made, but we're working very much on transition so that we can maintain the capability that these workers hold. We also have instigated, through the Naval Shipbuilding College, a workforce register so that workers who may be leaving leave their details so that their skills and capabilities are available. The expectation is that when the Hunter class frigates contract is underway, the workforce figures will rise again.

Senator WONG: Mr Chesworth, I would ask a few questions. Can you explain to me if it was intended that in the 5,200, which is in the Navy shipbuilding plan, that you would include the submarine workers whose primary focus is sustainment? Because you have in how you've built the figure. If that's what was intended, let me know.

Mr Johnson : Well, yes. The naval shipbuilding plan estimates by 2026 there will be 5,200 workers directly required for Australia's naval shipbuilding and sustainment workforce.

Senator WONG: Okay. Are you telling me it was a figure you always anticipated would include those men and women currently working in ASC on sustainment?

Mr Johnson : I'm only struggling with the world 'always'. Over the last three years this has moved a little bit, but, yes.

Senator WONG: When you arrived at the 5,200 figure, I am asking whether that very large component of your 2,400, which is the 1,100 on sustainment at ASC—and it's quite a distinct workforce, as you would know—was intended to be included in the 5,200? If it wasn't, then you're actually a long way behind.

Mr Johnson : I'll take that question on notice.

Senator WONG: You don't know?

Mr Johnson : I'd like to go back and review the records exactly. We started our conversation with current, and of course this is very much about semantics and precision.

Senator WONG: No, it's not about semantics. It is about being accurate about your workforce requirements. When I looked at page 65, for example, of the plan, I understood there to be a distinction between those building and those sustaining. So when I read the 5,200, I did not understand it to include workers currently involved in sustainment. If you can point me to where the plan demonstrates that I'm incorrect, I'd welcome that.

Mr Chesworth : As Mr Johnson said, we'll go and get that information. But if I could just make one point: we are in the rollout process, we are in the implementation process. We are constantly looking at strategic workforce issues. We're doing so in collaboration with the primes and with SMEs in the supply chain. When the 2016 number of 5,200 was put out, that was the best information available at the time. The work that we have done suggests that it's not too far off the mark, but we see this as ongoing work. We will continue to work with the primes, not only to understand the total workforce numbers, but also to understand the laminar aspects of the skills requirements within that.

Senator WONG: Sure. I understand you might want to revise the 5,200. I'm just asking whether or not you really are telling us that the 5,200 was always going to include a very substantial workforce, an established workforce that has been there for many years working on sustainment. That's not how I read the plan, and if that is the case then that is the largest component of what you are describing as the workforce tracking to the 5,200. If you need to come back and say, 'Actually we think the 5,200 is a bit off for these reasons', we'll listen to that, obviously, and we'll question you about that. But I'm making a different point, which is that of a very large chunk I didn't understand that part of it. You are going to take that on notice because you're not sure—correct?

Mr Chesworth : We'll take it on notice. It is two to three years old, and we would just like to go back—

Senator WONG: Sure. Can I just come back to the Naval Shipbuilding Plan, which I think is consistent with your evidence, Mr Chesworth, where you said it is possible there will be further reductions. Paragraph 4.16 of that plan says:

South Australian shipbuilders will need to increase their workforce by some 3600 staff from anticipated minimum levels in 2021 …

I infer from that—and, please, if I have inferred incorrectly, this is the opportunity to explain it to me—that actually this says ASC is going to drop further over the next couple of years before there is an increase in the workforce, under the government's plan.

Mr Chesworth : Senator, that is a correct inference. But there have been some decisions made since—and I'll seek advice from Rear Admiral Dalton as well—since this plan was put out that may impact on the extent to which jobs are impacted at ASC.

Senator WONG: Okay. So, what do you say is the date for the minimum level, and what do you say it is?

Mr Chesworth : I don't know the answer to that, Senator.

Senator WONG: You're working on trying to make sure this sector of the economy gets the workforce of 5,200 by 2016—insert caveat that you might want to amend that figure; I accept that—so what do you say is your working assumption about what happens at ASC between now and 2021? Is it still that we'll lose more jobs?

Mr Chesworth : As I indicated previously, that is possibly the case. We do rely on advice from ASC, but we work closely with ASC as well. We are also looking at other issues such as whether workers can be deployed into other areas of the shipbuilding program, such as the infrastructure build around Osborne South and Osborne North—I would put a caveat on that. Sometimes the skills aren't directly related—

Senator WONG: Correct.

Mr Chesworth : we're looking at a net figure there—but sometimes they are. Also, I think there are other decisions that may come forward in the next few years that could impact as well.

Senator GALLACHER: You've given us a baseline figure of 2,500, but 1,093 of those are in Collins sustainment. That's for the answer that was given yesterday—that's correct?

Mr Johnson : Yes, I said 1,100; I think that's close enough.

Senator GALLACHER: If you take 1,100 off 2,500, and that component there is projected to reduce, is that your evidence today? Reduce to what?

Rear Adm. Dalton : Senator, some of those numbers are also in Western Australia. We did include some of those workers that are building patrol boats in Western Australia. It's well known that the Air Warfare Destroyer program is winding down. This weekend, the Chief of Navy will commission the second of the air warfare destroyers into service in the Royal Australian Navy. The third and final air warfare destroyer, new ship Sydney, is in the water at Osborne now. It's in a fitting-out phase. It is sitting at around about 84 per cent complete. When we say ASC, in my world, I talk about ASC Shipbuilding, which is a different entity to ASC Group. So the submarine sustainment workers are in ASC and the shipbuilders are in ASC Shipbuilding. The testimony yesterday from the chief executive officer of ASC Shipbuilding, Mr Jim Cuthill, was there are about 850 workers employed on AWD—on that final ship. The work on that final ship will largely be complete by the end of next year.

Senator GALLACHER: I don't think there's any debate about that. I'm just trying to draw a line from 2,500—

Rear Adm . Dalton : And there is no debate about that. The number will reduce.

Senator GALLACHER: 1,400 is going to go down to what?

Rear Adm . Dalton : That is a matter for ASC—

Senator GALLACHER: before it leaps back to 5,200?

Rear Adm . Dalton : It is a matter for ASC Shipbuilding. It's a commercial matter. We have a contract to deliver the ships. They need to employ the right number of people with the right skills and the right trades to deliver those ships. The number of people, clearly, will reduce.

Senator GALLACHER: I don’t think there is any debate here. We're just looking at raw numbers. What is the number at the bottom of the valley of death before things kick in?

Rear Adm . Dalton : Again, that's a matter for ASC Shipbuilding.

Senator WONG: Except that you have identified anticipated minimum levels in the government document, so you must anticipate some. There must be some quantitative assessment behind that anticipated minimum level. You could just take 5,200 and take 3,600, if you wanted. Is that the number?

Rear Adm . Dalton : We've said that the Offshore Patrol Vessels program will employ around about 400 people directly in the shipyard. At this point in time, we plan to start building the first offshore patrol vessel on 15 November. That's in about three weeks. So that workforce is ramping up now. That's a workforce that will be made up of workers from Western Australia and workers from ASC Shipbuilding. What that final mix of those numbers is is again a matter for Western Australia and ASC Shipbuilding. Our expectation is that there will be about 400 people employed on the Offshore Patrol Vessels program. For the future frigate program, which is now the Hunter class frigate, we're in negotiations with BAE Systems Australia. We expect that we'll have a contract complete with them before the end of the year and we'll start doing prototyping on the frigate program in 2020. The employment profile that BAE will need to employ for that, they will do through ASC Shipbuilding, because as part of that frigate program ASC Shipbuilding will become a wholly owned subsidiary of BAE Systems; they will ramp that workforce up. So, at the same time as the first two of the offshore patrol vessels will be being built in South Australia in 2020, prototyping for the frigate program will begin with a view to actually commencing work on the first frigate in 2022. So there will be—but the actual dip in the workforce is a matter for those three entities to come to a conclusion on what makes sense for them to keep that workforce going across that period. So you've got Air Warfare Destroyer coming to a close at the end of next year; you've got Offshore Patrol Vessels commencing construction in South Australia next month; and you've got prototyping commencing on the frigate program commencing in 2020.

Senator GALLACHER: So, it's possible we could go from 2,500, including 1,100 in sustainment, down to a figure of 400. Is that correct? And then it would start off with the—

Rear Adm . Dalton : Well, it would depend on when the Air Warfare Destroyer program is actually complete. We're looking at some work that we might put into the third ship, and the modifications to fully integrate the new Seahawk, so that might extend the time that we keep Sydney in South Australia just a little bit, and we are working our plans through that. But you've got a process where the end of 2019, in the beginning of 2020, the Air Warfare Destroyer program will complete. But in 2020, the prototyping work on frigates will commence. I'm not sure what the actual workforce number will be across that period.

Senator PATRICK: Chair, I just want to point out that Defence aren't working with exact numbers in respect of all of those programs.

Mr Johnson : No, not exact. Of course not. We just explained why they're not exact.

Senator PATRICK: I understand. But you do know numbers. They've been provided to you by ASC Shipbuilding?

Rear Adm. Dalton : They are a projection, again.

Senator PATRICK: Sure. I think anything in the forwards is a projection, as Senator Gallacher was asking for the projection.

Rear Adm. Dalton : I'm not trying to beat around this. I'm just trying to say there are these three programs, there's a transition between these three programs, and the numbers of workers will be—there will be a number. The issue that we have to consider is not only the number of workers, but the trades that those workers are in. Right now, on Air Warfare Destroyer, we're talking about largely electricians and systems technicians. When we start work on OPVs, we'll be talking about welders and boilermakers.

Senator GALLACHER: So that just adds complexity to managing the labour force, because the skills of the electricians may not be needed at the start. They'll move off into the economy somewhere else. How do you get them back? Clearly, though, we're going to reduce the number of workers by dint of a contract finishing and another one not starting until a while later.

Rear Adm. Dalton : The three contracts will overlap. They will actually all overlap.

Senator GALLACHER: But it's not going to help the workforce continuity.

Rear Adm. Dalton : The amount of work will go up and down a little bit over the next two years. We won't get to a steady state in the shipyard until the frigate and the submarine are both production. They won't reach a steady state with a mature workforce until 2025-26.

Senator GALLACHER: Are there any plans to alleviate this dip in employment, the retention of skills—what are you planning to do there? Because you might have an ambit of 5,200 jobs, but you can't find them because everybody's choofed off to the other sectors of the economy.

Mr Johnson : Yes. There is a robust range of programs that we're doing. The one that we talked about at the last estimates was Defence requested, and then was given permission for a $29.4 million programme. It's been called many things, but the original name, and the one that I use, is it's a targeted retention programme for critical skills. Mr Whiley testified yesterday, and his conclusion was that we are going to retain about 150 people in that program before the end of the year. My personal estimate is a little higher. A couple of examples: he told you yesterday 27 people had moved from the air warfare destroyer to submarine programs in a permanent status. He alluded to—he didn't say the exact number—but we brought 66 tradespeople over with key skills. We've had them in the submarine program. It will vary by person, of course. But in round numbers, it's about 10 months. They're starting to flow back now.

Senator GALLACHER: I have some very specific questions on that. So if I just run through them, and you can just tick the box. Before we get to that, it wouldn't be unreasonable to conclude that there could be up to three years of declining employment opportunities under the current scheduling plan?

Mr Johnson : The numbers are going to go down before they go up.

Senator GALLACHER: Alright. I don't want to hang anyone for that.

Mr Johnson : The thing that we pause about a little bit is the when. The when is very much driven by decisions made by the companies involved and not the Commonwealth officials at the table. It will happen, but will it be 2021; will it be late 2020; will it be early 2022? It's difficult to gauge, but you certainly have the right sense.

Senator GALLACHER: The Naval Shipbuilding Plan has, amongst other things, said mature age workers could potentially fill vital foreman and middle manager roles, or supervise the training of the future generation of shipbuilding workers. What work has been done on that commitment? It's about a year since that was given.

Mr Johnson : I started to explain that. Mr Whiley testified—

Senator GALLACHER: I'll ask the three questions. What work has been done on the commitment? How many mature age workers have been employed to fill foreman and middle management roles? And how many mature age workers have been employed to supervise the training? That's the sense of it.

Mr Johnson : I didn't quite get the last part. Did you say mature age?

Senator GALLACHER: Yes. So there are three questions about mature-age workers, which are mentioned in the Naval Shipbuilding Plan. What work have you done on commitment? How many mature-age workers are to fulfil foremen and middle-management roles? How many mature-age workers have been employed to supervise the training of future generations of naval shipbuilding workers?

Mr Johnson : That level of detail could only come from ASC. They testified yesterday. To answer your question, I'll have to take it on notice and get the answer for you.

Senator GALLACHER: Sometimes when we ask ASC they send us elsewhere. You're going to take it on notice. Thank you.

Mr Johnson : Did you wish for the rest of the spectrum of how we're doing?

Senator GALLACHER: Those are the specific questions. How many mature-age workers have been employed? How many were employed to supervise? How many were employed as foremen and middle managers? If you don't have that, I think we'll wait for that on notice. The plan says:

The Naval Shipbuilding College will engage with the National Facilitator—

for the automotive Skills and Training Initiative—

to ensure automotive workers can also take advantage of the opportunities in the naval shipbuilding industry.

Once again, it's been over a year since that statement was made. What form has that engagement taken?

Mr Johnson : It's been over a year since the statement was made, but the contract was only let this year. It was a few months ago, at this point. We have started the process of the piloting courses. The first courses, as you might expect, were entry level. The next phase is the courses you're discussing. They'll pilot in early 2019 and then we'll start filling them with students later in 2019.

Senator GALLACHER: When I go on to the next question—how many?—the answer is nil, because it's just started.

Mr Johnson : It's still in start-up.

Senator GALLACHER: The Naval Shipbuilding Plan points out:

Women are currently under-represented in the naval shipbuilding workforce. The Government is investigating options to promote greater representation of women. A national communications strategy to encourage workers into the naval shipbuilding industry will be undertaken.

That's the plan. Once again, that was a year ago. Can we identify the options that have been identified to promote greater representation of women in the naval shipbuilding workforce?

Mr Chesworth : There are a couple of aspects that we're bringing into play to respond to that. Firstly, in the broader education and training sphere, which is, of course, the responsibility of the Education and Training portfolio, which we have a significant interest in, the focus on science, technology, engineering and maths for women has been strengthened. Within the Department of Defence, we actually have a secondee from that portfolio to provide us with advice on those issues.

Secondly, in relation to communicating the national naval shipbuilding enterprise into the future, I guess there's some initial work that's been undertaken to show that something has to be done to address the perceptions of what shipbuilding is about. You'd be pretty familiar with photographs that show people in singlets in bad conditions, but that isn't necessarily the case. We have so much of it tied up in research and development, design and engineering. Certainly, most recently, there was a presentation put forward by Civmec in Perth regarding the new shipyard that they are establishing. It's an indoor facility where the ships are built with office space and all of the requirements of a good thinking and engineering space under the one roof, which would lend itself more to inclusion for the whole population.

Senator GALLACHER: I'll just rip through these. How many people have worked on the investigation of a greater involvement of women in the shipbuilding workforce? What has the budget been? What is the budget for the National Communications Strategy? What are its goals? How will you know whether you have succeeded or not?

Mr Chesworth : The response to that is that there is no distinct budget. We regard it as business-as-usual work that we are turning our minds to. So we're talking about not only the secondee from the Department of Education and Training but also the broader national effort for women in STEM which is dispersed not only across the Commonwealth government but in states and territories as well. Can I just finish your last question which was in relation to communications strategies? At the moment that is in a nascent form and work is continuing on that. But, again, it's part of the ongoing work at the Defence department.

Senator GALLACHER: You haven't set any particular goals for your efforts here?

Mr Chesworth : I think the key goals will be, and are subject to change, increasing the awareness amongst Australians of an ongoing national naval shipbuilding enterprise that will have impact right across the country.

Senator GALLACHER: We go to the Naval Shipbuilding College. At the last round of estimates, Mr Chesworth, you said the college would begin enrolling students in August. Do we know how many have been involved?

Mr Chesworth : If I could just back it up a little bit. The process has been that the college has been engaged in piloting a few programs and these programs have been around hull welding, pipe welding and a third one—

Mr Johnson : Electricians.

Mr Chesworth : Electricians. They were chosen specifically so that we could test these particular training modules against the way in which the education system was currently working. At the moment—

Senator GALLACHER: Could I really butt in? I'm getting pressure from the chair, appropriately so. He's got a timetable to run. I've got a list of questions and you're answering questions I'm not asking. I appreciate that that's in an overabundance of helpfulness, but if I could just rip through these questions and you say yes, no or on notice we might go a bit faster. How many students have been enrolled—10, nil?

Mr Johnson : Only pilots at this point.

Senator GALLACHER: Are there no students?

Mr Johnson : There will be students next year.

Senator GALLACHER: Is the previous level and work experience of those students known or is that a work in progress?

Mr Johnson : It's expected to be a spectrum of early workers from the primes and out of school.

Senator GALLACHER: Okay.

Mr Johnson : The middle management that you referred to is later in 2019. We'll pilot that so that's about a year away.

Senator GALLACHER: So the initial stage of the college operation is focused on establishing clear demand metrics, a network of approved providers to ensure efficient supply options, commencing communication activities to support awareness of shipbuilding as a career of choice. Have those clear demand metrics been established

Mr Chesworth : The clear demand metrics are being established but—

Senator GALLACHER: They haven't. Are they available?

Mr Johnson : They're not available at this stage.

Senator GALLACHER: Can you tell the committee what communication activities have been undertaken, and how much you have spent and budgeted for in this financial year and next?

Mr Chesworth : Communication activities have been focused on one-on-one interactions with a range of stakeholders including primes, SMEs and particularly focused on the TAFE sector. So this is about building relationships and goodwill for what is essentially a new entity. In relation to the amount of money that's being spent, did you mean the amount of money on communications activity or the college as a whole?

Senator GALLACHER: Yes. What communication activities have you undertaken and how much have you spent or budgeted for in this financial year and next?

Mr Chesworth : So far for the college as a whole this year, there has been A$4.07 million, and US$3.71 million. The contract is—

Senator GALLACHER: Not on comms though?

Mr Chesworth : That's not on communities; that's in total. If you want on communities, we will have to take that on notice.

Senator GALLACHER: Thank you, that's excellent. I'll give you three more questions so you've got a sense of where we're going. Can you point to me where the ongoing funding for the college appears in the budget papers? What is the average cost for a student at the college and who bears that cost? On notice, Defence provided an answer to the committee about the national shipbuilding institute with a whole list of existing training providers. What does partnering mean in this context?

What is it that the NSI provides in this context that those providers could not on their own? They are all the questions.

Mr Johnson : Yes. If I understood that question, we can answer that. The NSI is more of a coordinator and broker of training. It is not a traditional school with a traditional cost per student, as your questions would suggest. So other organisations across the Commonwealth will be certified to do these courses. The first step is to ensure the course of instruction meets the needs of shipbuilders, and we have a mechanism for doing that. We have three courses that have passed through that and then they get distributed. We get certified instructors and we start the courses for those in 2019 and we just keep building that capability.

Senator GALLACHER: Where is the cost per student and where is the funding in the budget papers?

Mr Johnson : There won't be a clear answer on that. We'll have to take it on notice, so we can at least—without using your time here—put it in perspective so you can get a full summation.

Senator GALLACHER: So the average cost of the student can come back on notice. The budget paper, where does the funding—

Mr Chesworth : We'll come back on the budget paper. The cost per student—students are usually funded by their employer and also through the TAFE system.

Senator GALLACHER: And if you could take on notice what that expected cost will be.

Senator PATRICK: I want to ask some questions on workforce, continuing from that, and then I'm going to go to submarines—just to facilitate logistics. Very simply, in 2016 Senator Conroy asked a question in relation to recruiting strategies and so forth and got an answer back saying defence is currently developing a strategic workforce plan. Is that plan still being developed?

Mr Chesworth : The plan is being worked on. That is something that we are working on, not only across government but with the industry as well. It remains a document that is advice to government. I expect that it's not going to be something that we just generate once; it's going to be a living document that we have to continue to work on.

Senator PATRICK: It's 2½ years underway, and I presume you're now in a much better position with all contracts having been let to sort of bed down some of the numbers?

Mr Chesworth : Certainly, once the contracts were let we were able to get some granularity around that. But there are more than the expected numbers of employees from the shipbuilders and there's always further work to be done to understand supply chains. As well as that, I guess the key enablers, the enabling services, the industries and the research that needs to be done to make this happen. We don't see it as necessarily just being the shipbuilders, it's whole supply chain, but there's the second and third tier that feed into the naval shipbuilding enterprise as well.

Senator PATRICK: Fantastic. Noting it's a living document, I understand why you would do that. Can you provide the latest version to the committee please on notice?

Mr Chesworth : I will have to take that up with ministers. It is a policy document and—

Senator PATRICK: There's nothing that fetters a policy document being provided to a committee and, indeed, advice. I'm well familiar with Odgers. Of course, you can make a public interest immunity claim.

Mr Chesworth : I will take it on notice.

Senator PATRICK: Thank you. Moving to submarines now. I notice Rear Admiral Sammut in the back. Good afternoon, Admiral.

Rear Adm. Sammut : Good afternoon, Senator.

Senator PATRICK: Just very quickly on the Strategic Partnering Agreement, you were here when I asked some questions about support above you. There was some media suggesting that the negotiations had hit a bit of a roadblock, and I understand that you have full support of people in this building to make sure we get the right outcome for that. Are we in a better position now than we were a month ago, just broadly? I don't want to go to the details.

Rear Adm. Sammut : I wouldn't give credence to media reports that negotiations have broken-down. They've been ongoing. As we've made the point already today, this is a very complex contract. We're contemplating an agreement and terms and conditions that will apply to the various program contracts to design and deliver the submarine out to the 2050 time frame. We always envisaged that would be a difficult process. At times we thought we would move faster through this. I recall that I did advise during Senate estimates earlier this year that we were hoping to conclude by the middle of the year. But the secretary also made the point that we were ensuring that, as we concluded those negotiations, we were going to ensure that the appropriate allocations of risks were in the contract, so that the interests of Australia could be protected at the same time as striking an equitable agreement that will last both parties over the duration of the contract. I would say that we have continued our negotiations. There have been some difficult issues that we have confronted. We are progressively getting through those and, indeed, we are in a current negotiating period this week and have been since 8 October.

Senator PATRICK: You will go back to that tomorrow I presume?

Rear Adm. Sammut : I will resume that tomorrow.

Senator PATRICK: This can be part of a normal negotiation. Has there ever been a point where people have walked away and said, 'We need to cool off. We need to back off a bit.'? Has it ever got to that point?

Rear Adm. Sammut : We've taken a break from negotiations during sessions to consider positions put forward by each of the parties, that's been a natural part of the process and that has occurred. It is important that we take time to consider things deeply before we respond to them. I would just consider that part of a normal negotiation process, and, again, in the context of this being one of the most complex contracts we've negotiated in defence.

Senator PATRICK: Thank you. Moving to schedule, you recall that there have been some discussions about the steel plan and the AIC plan. Can you give me an update on where we are with that, noting that there is still an order outstanding in the Senate for production?

Rear Adm. Sammut : I do acknowledge that order, Senator. We are working with the minister's office now to have those plans released and tabled in the Senate.

Senator PATRICK: So you've completed them, you are just looking at what needs to be redacted?

Rear Adm. Sammut : We've already done all of that. It is going through the process now of finalising a release to the Senate.

Senator PATRICK: Alright, so it's close. At estimates in May you gave me some milestones. In relation to the submarine platform, there was a concept study review that was due to be complete in September this year. Can you please advise was it complete and was it successful?

Rear Adm. Sammut : No. We didn't complete the concept studies review. The concept studies review was intended to be part of finalisation of the concept design, which we always wanted to achieve in the last quarter of this year. We will be doing our concept studies review in November. We've done that because it's important that we finalise the concept design and ensure before we commit more resources to the program next year, as planned—not this year—that we have a concept design that we are confident will meet the requirements of Navy in a balanced design, such that we don't have to do any more design rework down track once we commit more resources. The concept studies review will take place in November.

Senator PATRICK: I'm wondering why you've provided an answer in July that said September when in actual fact it's November. So something has happened in the last few months?

Rear Adm. Sammut : We did not achieve entry criteria for that review—

Senator PATRICK: Which is code for they weren't ready or you weren't ready?

Rear Adm. Sammut : No. We were not happy that we had sufficiently met all of the entry criteria to exit the review successfully. The issue there would be that we don't want to enter a review if we know we're not going to exit, as you would understand.

Senator PATRICK: I understand.

Rear Adm. Sammut : It's important that we take the time though to get the concept design done properly now. We did allow ourselves time to do extra work this quarter before we proceeded into applying more resources, because we knew that getting the concept design right would be important. We are on track to complete the concept design, as I said, in the last quarter of this year. Which means then, as we move into further stages of design next year and there will be more design resources being applied, more personnel being involved in the design effort, again we have a balanced design that we can take forward that meets Navy's requirements.

Could I just add that what that also does is it works in tandem with the finalisation of the function and performance specification. I know you're familiar with that. We transition, at the same time as we conclude the concept design, from the preliminary function of performance specification to the function and performance specification which will define the way design proceeds now out to CDR. So they're activities that happen in tandem. We balance the concept design; we make sure that the key requirements can be met; and they can be met within a balanced design as we move forward.

Senator PATRICK: So can you just confirm for me, the PDR was for March 2020?

Rear Adm. Sammut : Yes.

Senator PATRICK: Do you think that that will still be hit?

Rear Adm. Sammut : Do I believe it will still be held?

Senator PATRICK: Held at that day.

Rear Adm. Sammut : Yes, I do, because we're taking the effort now to make sure the concept design is right before we embark on further design. May I also say that we provided those lists of milestones to you in a response to a question on notice. We said that PDR would be March 2020 and critical design review would be in June the 2022. Those dates have not changed. What has changed is the nomenclature that Naval Group uses to define those milestones. I wouldn't like to be accused down track that things have slipped because nomenclature has changed.

Senator PATRICK: As long as we can track the names.

Rear Adm. Sammut : The name now for preliminary design review will be a system functional review. That takes place in March. PDR becomes critical design review, to conclude in June 2022. That still marks the end of basic design.

Senator PATRICK: What about the system requirement review, which is due for March next year? Is that going to shift?

Rear Adm. Sammut : No. at this stage we still believe we should be able to hold to that date. It may move right a couple of weeks, but at this stage we're still aiming for March.

Senator PATRICK: In respect of the combat system, did the system requirements review conclude in September?

Rear Adm. Sammut : It successfully concluded on 3 September.

Senator PATRICK: Therefore you anticipate that the system definition review will take place in February?

Rear Adm. Sammut : Yes, take will take place in February.

Senator PATRICK: Fantastic. Are there any other milestones in accordance with your original plan that have not been met?

Rear Adm. Sammut : No, not at this stage.

Senator PATRICK: I think that covers off on schedule. There was a report in an international magazine that was suggesting that 2032 was not going to be the first submarine completion date—it was going to be 2034. Has that come from Defence anywhere?

Rear Adm. Sammut : No. I'm not sure what the source of that report is, and it's not in accordance with our current integrated master schedule.

Senator PATRICK: I will now go to cost. You will recall the conversation we had at the last estimates where we looked at, to paraphrase, $50 billion was the acquisition cost for the complete program. $50 billion was the estimate for sustainment. ASPI did some work on out-turning that. Did you disagree in any way with their assessment of the rough out-turn costs?

Rear Adm. Sammut : Not the rough out-turn costs. I won't say they're precisely that figure, but in terms of the rough out-turn figure, yes.

Senator PATRICK: I know there has been some confusion in that. I am interested in the integrated investment plan. You put this as greater than $50 billion.

Rear Adm. Sammut : Out-turned.

Senator PATRICK: Yes, out-turned. If you go with ASPI's numbers it's actually $79 billion.

Mr Johnson : Based on the assumptions they made.

Senator PATRICK: I understand they're not your assumptions, but you accept that they are not widely wrong. Noting that Integrated Investment Program came out—that was, from memory, in April 2016—after you had received cost information from the CEP, and noting that it's out-turned, $50 billion versus $79 billion is almost $30 billion. To put 'greater than $50 billion' is a gross underestimation; it was an indication to the public as to the cost of this program. You would agree $30 billion is—well, if you had said, 'Greater than $75 billion,' or, 'Greater than $70 billion,' I think you could be forgiven, but I just wonder how you got to the point where you decided to say, 'Greater than $50 billion,' noting the CEP had concluded.

Rear Adm. Sammut : The CEP hadn't concluded as the Defence Integrated Investment Program—

Senator PATRICK: Sorry, you had numbers from all of the—

Rear Adm. Sammut : It was published on that date—sorry, I beg your pardon, it was released on that date. The figures were being worked into that plan well ahead of that. At that stage we were still assessing the various figures that were coming in from the participants. You will recall that we sought some additional information as part of the CEP process in early 2016. We were taking account of all of that information and, regardless of the figures that were coming in, we wanted to do our own assessment of those figures and make sure that we had total program costs. Whilst we were confident that it was greater than $50 billion out-turned, we didn't have what I would call figures that we wanted to be public on at that stage. All I can say is that that was the figure that was entered into the public Defence Integrated Investment Program. The point I would make is that the costs of the program have not changed since completion of the CEP and the allocation within the Defence IIP, which is not publicly releasable, has not changed for the program once the costs of the program were established after the CEP.

Senator PATRICK: In the IIP, there's a line item—not the combat system; you've cleared that up as included in the $50 billion—for weapons and it has a number of $5 billion next to it. What are we doing on the weapon front that costs $5 billion?

Rear Adm. Sammut : That's a projection at this stage based on the inventory for the weapons that would have to be increased for the Future Submarine.

Mr Johnson : Over a long period of time.

Rear Adm. Sammut : Yes, over a long period of time.

Senator PATRICK: But those numbers do not include sustainment?

Rear Adm. Sammut : I believe it does include the ability to expand our capacity to sustain a larger number of weapons, turn around a larger number of weapons, which we would need for a submarine fleet that is double the size we have today.

Senator PATRICK: But we're not planning to go beyond Mark 48 torpedoes and harpoons? I remember in 2009 there was talk of cruise missiles. That, I think, disappeared in 2016.

Rear Adm. Sammut : Yes. We haven't completed all of the views about potential weapon suites for the submarines. It certainly includes the Mark 48 torpedo or the future variants of that weapon as we move forward. This funding would contemplate what we may need to do in terms of a missile inventory for the boat down the track, considering the life and age of the harpoon weapons system as it is today.

Senator PATRICK: But just in simple terms, a Mark 48 is probably $2.5 million or something of that order, so $5 billion just seems really excessive. On notice, could you perhaps offer an explanation of how you came to that number, please?

Rear Adm. Sammut : We'll take that on notice and get back to you.

Senator PATRICK: Thank you. You have also provided some sort of breakout of what is included in the $50 billion. I'm not after commercial-level detail, but if you could give some indication like, 'Submarine, $20 billion; shipyard, $3 billion,' or just some rough order of magnitude that shows the make-up, because otherwise we end up with mischaracterisations and people saying the submarine is $50 billion, where I don't think that's the case.

Rear Adm. Sammut : It certainly isn't, and that is a claim that has been the in the media—that the $50 billion is the contract with Naval Group of France. That is a figure that was more in the range of $20-25 billion, as an example. There are other breakdowns there that we could provide.

Senator PATRICK: If you wouldn't mind, because I think it would actually be helpful to the discussion that takes place, in a very positive way.

Rear Adm. Sammut : Another thing to understand is that the $50 billion also includes contingency for this program as well. I want to be careful about how much I indicate of the contingency I carry for this program. It is not intended as something we necessarily must use. It is to account for the uncertainties that arise in a program of this nature.

Senator PATRICK: No, I appreciate that number would be a little bit sensitive. Have you worked out life-of-type extension costs for Collins?

Mr Johnson : That work continues. We formed a core team. We will first develop what we think the scope of work will be and then we'll price that and take that to government. That's still a year to 18 months of work. There are no surprises. There is no one thing that prevents us from life-extending. Of course, you would appreciate that we don't have to decide the number for a long time; what we have to do is get the engineering started, because the engineering is almost the same for one as it is for six.

Senator PATRICK: Sure. I just want to go back to a schedule question that you just reminded me of. At the conclusion of the design and mobilisation contract, which has technically concluded, you were going to be in a position to have selected key equipment. Are you at that stage?

Rear Adm. Sammut : The key equipment has been selected. We are concluding our negotiations with the supplier of that equipment—or, I should say, Naval Group is. The Commonwealth is involved in making sure that there are approved subcontractor deeds, which are undertakings from those key subcontractors to the Commonwealth—even though they are subcontractors of Naval Group—about matters concerning IP, cost transparency and Australian industry capability.

Senator PATRICK: Sorry, what I'm mostly interested in is whether we have selected key equipment and to what level—sort of main motor, battery. What have you selected?

Rear Adm. Sammut : At this stage there are five key pieces of equipment. We've narrowed down selection of the DC switchboard, the main motor, the diesel generators and the weapon discharge system. We still have some choices at this stage about the supplier of the main battery, considering a range of factors there.

Senator PATRICK: I note in one of your answers you said that, at least in the first submarine, you would use lead-acid cells. It's problematic in my mind, and I'll give you an opportunity to address my concerns. Firstly, it is quite an old technology. There is now a Japanese submarine at sea commissioned with a lithium-ion battery. That aside, the energy density and the weight and size of a lead-acid cell is quite different to a lithium-ion arrangement. You can't just one-for-one these things because there are different voltages after you connect all the cells together. I know you're trying to manage risk, but you would appreciate that it is a 2032 submarine that is supposed to be regionally superior. I note that you're not getting AIP and lithium-ion was one of the reasons why you might not want to get AIP—

Rear Adm. Sammut : I don't think we've ever offered that as a reason why we won't get AIP.

Senator PATRICK: Sorry, say that again.

Rear Adm. Sammut : The fact that lithium-ion was an option was not a reason why we have necessarily ruled out air-independent propulsion. As I've tried to explain on many occasions, we would look at all of the technologies available, balance that up against what the roles of the submarine are and what its mission profiles would be to determine what is the most appropriate technologies to support that. In the case of AIP, we've looked at what is available and we have not seen the power density and generation necessary to meet the requirements for our submarine. We would regard a battery as a form of air-independent propulsion and, on a number of occasions, as we have looked at this it has made more sense to carry more fuel and more battery capacity to do that.

Senator PATRICK: Sure, I understand.

Rear Adm . Sammut : When it comes to a lithium-ion battery, I understand the points you make. We find we are, at this stage, probably still on the cusp of that technology from our perspective. We have not seen it at sea in operations—proven on operations in submarines. That's not, of course, to suggest that Japan or other countries have not achieved important milestones with lithium-ion technology. We continue to look at lithium-ion technology. We have completed building a facility to test lithium-ion batteries within DST. DST is our partner in technology assurance as we go through the Future Submarine Program and is heavily engaged with us in assessing, at this stage, what lithium-ion technology could offer us in terms of its maturity and so forth. We do have to, at some stage, finalise the design of the boat to enable it to move to the next phase of design and keep schedule without knowing, at this stage, that we have a lithium-ion technology that is proven, that we will know with high levels of confidence will meet our capability needs in the future. It makes much more sense for us to develop a submarine, at least in the first batch, that has a lead-acid capability which we know will meet our requirements, with the promise, of course, that if lithium-ion technology continues to improve and its maturity is such that we believe it is safe to employ in the Future Submarine, we have a boat that has the margins to be able to incorporate that technology in the future.

Senator PATRICK: Sure. Why, for the lithium-ion, do you take a very conservative approach but, for the propulsor, you take a very nonconservative approach?

Rear Adm . Sammut : Because the propulsor is proven technology. We have seen it at sea in submarines. We do understand the science behind it, and DST is here today to explain that further if the committee requires. These are technologies we have seen at sea. They are technologies that we can model. And, as I said, being proven out at sea, we know how to implement them. Lithium-ion technology, we have not seen as sea used on the scale that is necessary for the missions that our submarine needs to do.

Senator PATRICK: But you may be able to see it on sea on a Japanese submarine and—

Rear Adm . Sammut : We haven't seen that submarine at sea on operation.

Mr Johnson : Nor have we seen it operate for an extended period of time.

Senator PATRICK: But nor have you seen a propulsor on a conventional submarine. There is a significant difference between—

Mr Johnson : The source of power doesn't matter.

Rear Adm . Sammut : The source of power that powers the propulsor doesn't matter. The physics of a propulsor, regardless of what's propelling it, are well-known and well understood.

Senator PATRICK: Look, I'm happy with that. I might come back to the propulsor knowing that DST are here. The cost of the Submarine Advisory Committee, it looked like there was someone in there was getting paid $700,000 for an 18 month contract. Have I misread that in your answer?

Rear Adm . Sammut : Are we talking the naval shipbuilding advisory board or the Submarine Advisory Committee?

Senator PATRICK: I mean the Submarine Advisory Committee. And you've said that the contract value for the Submarine Advisory Committee members varies between $317,000 and $742,000 over the contract term of 18 months. That's in answer to question—

Rear Adm . Sammut : Yes, if you are quoting the answer back to me, it would be correct. I am not questioning your recount of our answer. I would only say that we have a range of people on the Submarine Advisory Committee of varying experience and—

Senator PATRICK: The question goes to> is there any one person getting a contract of $742,000 for 18 months' work?

Mr Johnson : So what we're doing in this discussion is taking a couple of facts and extrapolating from them inappropriate—

Senator PATRICK: No, I'm asking you to rule it out, actually. If you say, no, if it's three people, that's fine.

Mr Johnson : I do rule it out.

Senator PATRICK: Okay.

Rear Adm. Sammut : Senator, just to be clear, you've quoted a contract value there.

Senator PATRICK: I have, yes.

Rear Adm. Sammut : And what's the value that we—

Senator PATRICK: It says the contract value for Submarine Advisory Committee members varies between $317,250, GST included, and $742,500, GST included, over contract terms of 18 months.

Rear Adm. Sammut : And they would be the contract values.

Senator PATRICK: For individuals?

Rear Adm. Sammut : For individuals on the Submarine Advisory Committee. I've given you a range there, and that means that the highest paid member is—

Senator PATRICK: Is on $742,000 for 18 months.

Mr Johnson : No.

Senator PATRICK: Hang on, I got a yes and I got a no.

Rear Adm. Sammut : What it says is: that is the contract value—

Senator PATRICK: Yes. It's travel and other things?

Rear Adm. Sammut : That is the contract value. It doesn't mean that we will necessarily spend that amount of money on that person.

Mr Johnson : Exactly.

Rear Adm. Sammut : We have set a contract value, and we do this so that we don't set a low contract value, exceed the contract and then have to recontract the person or make what would be in fact a contract change, a proposal to amend.

Senator PATRICK: It's still a very high rate.

CHAIR: We have now gone over time and, because of my terrible chairmanship, I've been told that we are going to blow out the Department of Defence further. So those associated with ASD and Defence Housing, I'm sorry to inform you—it being my melancholy duty to inform you—that you will be required after the dinner break. We will try to truncate it and make up time with the rest of the evening's agenda. Before we adjourn, Mr Moriarty?

Mr Moriarty : Thank you, Chair. I just inform the committee that the department received copies of the Prime Minister's charter letters on 18 October via email from the minister's office.

CHAIR: Thank you. I thank the minister for her attendance. I understand after the break we will be graced by the assistant minister, Senator the Hon. David Fawcett, for his first appearance.

Proceedings suspended from 15:32 to 15 : 45

CHAIR: I welcome Senator the Hon. David Fawcett, who is an assistant minister in the portfolio. Congratulations on your appointment, welcome and might I add, not before time. It's great to see you here. CDF, I understand that you had an answer?

Gen. Campbell : I do indeed, Chair. It's in relation to the question earlier with regard to fuel holdings and Exercise Pitch Black. My response is that Exercise Pitch Black 2018 concluded on 21 August. The fuel stock available on that day was 2.5 million litres. Flying waves of aircraft during the exercise typically consumed between 0.5 and 0.7 million litres per wave. Sufficient fuel was available to support a final wave of night flying, had exercise staff decided to proceed with that activity, which, as you know, they did not.

Senator FARUQI: Good afternoon and thank you very much for coming in. I have some specific questions related to PFAS contamination. Has Defence bought back any contaminated or affected properties as yet around Defence properties where PFAS contamination was occurring?

Mr Grzeskowiak : No.

Senator FARUQI: So there has been no buyback at all yet?

Mr Grzeskowiak : Correct.

Senator FARUQI: Is there a buyback program that is being considered?

Mr Grzeskowiak : The government on 7 May this year released a statement about the position. One of the points in the statement was that, having considered all of the evidence available from health experts, environmental experts, evidence from the environmental investigations that Defence has conducted and other sources, the government has decided that there will be no property buyback scheme at this time.

Senator FARUQI: Is that because Defence considers that there is no impact of PFAS on communities living around the affected areas?

Mr Grzeskowiak : It was a decision of government following a review of all of the information available at the time, as I said, from environmental investigations, from the expert health panel, from enHealth, the Environmental Health Standing Committee, which is the peak body in Australia for health advice. You may or may not be aware that their current advice is that there is no consistent evidence that exposure to PFAS chemicals presents a human health risk. There's no evidence that exposure to PFAS chemicals is linked to any human disease, but as a precaution, because the chemicals do bio-accumulate in the human system, then exposure should be minimised.

Senator FARUQI: How is that being minimised?

Mr Grzeskowiak : In the Defence case—and I can only talk about the Defence case—wherever we're running investigations, we seek to quickly understand what possible exposure pathways might exist. Where we identify those, and the most common one in some places is through consumption of water that might contain PFAS—usually that would be bore water from the ground—Defence immediately provides alternative sources of drinking water. Usually that's in the form, initially, of packaged water. But, at several places, we have, for example, connected properties to town water to ensure that there is a ready supply of water without PFAS contamination. In some places, we have installed rainwater tanks into properties, as is appropriate depending on the nature of the property. That process of breaking exposure pathways, mainly through the provision of clean water, has been the first action that we've taken at the relatively few sites where people were actually consuming groundwater.

Senator FARUQI: There is no pathway through soil contamination that you have considered?

Mr Grzeskowiak : We've done investigations at a range of sites now. We've got 21 investigations ongoing. Five investigations have completed. We've seen a range of transmission paths for the PFAS chemicals. The most common path is through either surface water, through drains or river systems; or through groundwater, the way water might move underground. Of course, that depends, critically, on the complex hydrogeology of the site that we might be at, so it's different in every place—which is why we need to employ the expert consultants that we do to do very detailed analysis at the sites that we're looking at.

Mr Birrer : Just building upon what Mr Grzeskowiak said, we follow a nationally agreed framework for the environmental investigations, the national environmental protection measure for contaminated sites, which is agreed between the Department of the Environment and Energy and state and territory governments. That includes a human health risk assessment, where the consultants recommend that that's necessary because of the circumstances of a particular site. The human health risk assessments look at identifying all the potential exposure pathways for humans. As has been said, the predominant exposure pathway for humans to PFAS is through drinking contaminated water, which is why the steps Mr Grzeskowiak has outlined to break that exposure pathway have been undertaken as a precautionary principle and undertaken at the very start of the investigation, again, as a precautionary principle. Other exposure pathways including—you mentioned soil, so aspects like dust and dermal exposure through skin are also considered as part of compiling the human health risk assessment, but they show to be much lower exposure risk pathways when compared to drinking contaminated water.

Senator FARUQI: You've said buy-back is not an option. Is there anything else that is being done for those contaminated properties, given, of course, that PFAS has a very, very long period where it doesn't break down?

Mr Grzeskowiak : Defence has moved in many areas to start remediation. We're generally focusing on what would be referred to as source areas. At a Defence base—mainly airfields are affected—source areas would typically be areas where firefighting training was historically conducted. We've started to excavate some of those areas to remove soil that contains PFAS. We've also excavated surface soil from around six kilometres of drains on two Defence bases, one at Williamtown and one at Oakey, because we found that there were low levels of PFAS in the soil of those surface drains. But, obviously, as it rains—the drains are stormwater drains—water flows through and it might collect PFAS and take it off the site. We've started to clean up.

Senator FARUQI: What's happening to the soil that you've excavated?

Mr Grzeskowiak : There are two ways of dealing with that soil, and it depends, critically, on the level of PFAS that might be in the soil. We follow all state and territory regulations. If the levels are very low, then, within various states and territories, the legislation allows us to have that soil taken away from the site and disposed of through due process in accordance with local state and territory regulations.

Senator FARUQI: Is there anything happening in New South Wales, especially around Williamtown? Has soil been excavated there?

Mr Grzeskowiak : Yes, at Williamtown we've excavated around three kilometres of soil from the drains. That soil was taken off the base and disposed of through a process that was approved of by the New South Wales Environment Protection Authority. We're currently excavating the firefighting training area at Williamtown. Because that soil has higher concentrations of PFAS, because it's from one of the source areas, we're actually storing it on the base in a different location, in what I'd refer to as an engineered facility which seeks to ensure that there's no leachate coming out of that stockpile and back into the ground.

Senator FARUQI: What's going to happen to that stockpile?

Mr Grzeskowiak : We're investigating options at the moment for how we clean the soil. In the process of removing PFAS from the environment, the industry that deals with this is more advanced in the ways of cleaning water than it is in the ways of cleaning soil.

Senator FARUQI: How far away are you from a solution for that soil?

Mr Grzeskowiak : On a Defence base in South Australia, we're actually trialling a soil cleansing plant. That's in the process of being constructed at the moment by one of our industry partners. I expect that trial to start early in the new year.

Senator FARUQI: When will it finish?

Mr Grzeskowiak : It will run for around three months. There will be an element of setting to work and an element of understanding how well that plant is working. The company installing it will need to tune and refine their plant. I would hope that, by around April or May next year, we'll have good results from that plant. If that proves to be an effective mechanism, then we would seek to look for opportunities to start using technology like that elsewhere on Defence estate and start to actually pull PFAS out of the ground through soil cleansing, as well as through the water cleansing we're already doing. We've currently cleaned something like 1.3 billion litres of water of PFAS using water treatment plants.

Senator FARUQI: Could you provide a list on notice of where that has happened and how many litres in each location?

Mr Grzeskowiak : We can. I could tell you that now.

Senator FARUQI: No, that's all right; I'm running out of time, so on notice will be fine. How much compensation has Defence paid to communities who are suffering the contamination?

Mr Grzeskowiak : Defence is working with communities that are affected. Early on, particularly at Williamtown, when fisheries were closed by the New South Wales authorities, there was a financial assistance scheme put in place. That was really to ensure that those people whose livelihoods depended on fishing in Fullerton Cove, who could no longer fish, because of restrictions put in place by the New South Wales government, could continue to have some income.

Senator FARUQI: Has there been any compensation paid apart from that?

Mr Grzeskowiak : The total cost of that financial assistance scheme is around $2.2 million.

Senator FARUQI: Has there been any other compensation paid?

Mr Grzeskowiak : As well, Defence has been assisting communities through the provision of a range of services—community liaison services, mental health services and the like.

Senator FARUQI: Could you provide a list, by year, site and type of recipient—as an individual or company—of those that have been paid that money? I can put that question on notice as well.

Mr Grzeskowiak : Apart from the financial assistance scheme, which was to the fishing industry and some associated industries, we wouldn't provide details, because they're private and confidential.

Senator FARUQI: I'm not asking for the names of the individuals; I'm asking whether it was provided to an individual or a company.

Mr Grzeskowiak : We can provide some details of the financial assistance scheme.

Senator FARUQI: Great. The National Toxics Network, in, I think, their submission to the inquiry, alleged that the Department of Defence had given away out-of-date firefighting foams which contained PFAS to other firefighters. Is this report correct?

Mr Grzeskowiak : I'm not aware of that happening. We've had a look at this. What has been talked about is something that may or may not have occurred a long time ago. I can't verify that.

Senator FARUQI: You can't verify that. So you haven't tried to verify if there has been firefighting foam that has been given away by the Department of Defence that may have caused contamination somewhere else?

Mr Grzeskowiak : I can't validate that is—

Senator FARUQI: Don't you think you should investigate that?

Mr Grzeskowiak : We have investigated it. What I'm telling you is that I can't find evidence that that has occurred.

Senator FARUQI: You can say, 'No, the Department of Defence hasn't given away any firefighting foams that contain PFAS.'

Mr Grzeskowiak : I've learnt from experience that it's impossible for me to know everything that ever happened in the Department of Defence. I can't find any documentary evidence that firefighting foams that were time expired were given to somebody else.

Mr Birrer : Your question implies that we're the source of all the foams with PFAS.

Senator FARUQI: I'm not implying that. I asked the specific question about an allegation that was raised that the Department of Defence may have given away firefighting foams.

Mr Birrer : I think it's important to note that there are lots of organisations—civil air ports, civil firefighting organisations and operators of large-scale fuel and petrochemical facilities—that have also used these foams, historically.

Senator FARUQI: Were there any leftover firefighting foams containing PFAS in recent times which the department had to dispose of?

Mr Grzeskowiak : Yes. We've done some audits in recent times to see if there was any legacy of the product. It was a product called 3M Light Water. We made a decision in the department to move away from it in the early 2000s. We have found some drums of those products. Where we found it, we've quarantined it and it's stored, waiting for appropriate disposal.

Senator FARUQI: Is there a way to appropriately dispose it?

Mr Grzeskowiak : There is, yes. As I said before, the technology exists for removing PFAS from water or in a liquid foam.

Senator FARUQI: These are liquid foams?

Mr Grzeskowiak : Yes. It's a liquid product.

Senator FARUQI: Can I know how much there is of that?

Mr Grzeskowiak : I'd have to take that on notice.

Senator FARUQI: If you could, that'd be great. Also take on notice the location of where they are.

Mr Grzeskowiak : I'll take that on notice.

Senator McCARTHY: If I could just take you to the town of Katherine: why is the treatment plant at Tindal being installed before the second treatment plant in the Katherine township?

Mr Grzeskowiak : As I said before, Defence is moving in to starting to decontaminate a range of areas. One of those is at the base at Tindal. We made our decision to procure water treatment plants to install on the base many months ago. As you may have read, the first of those plants is in the process of arriving and should be operational early next year, with a second plant to follow some months later. Obviously you're aware that Defence moved quickly, just over a year ago, to put in a water treatment plant onto the town bore. It treats about a million litres a day of the town bore, which feeds into the Katherine water supply, mixed with the water from the river.

It's the Northern Territory Power and Water Corporation that is running a parallel process to look at long-term solutions either to treat the existing bore or, in fact, to drill a new bore in a part of the aquifer that doesn't contain any PFAS, which they were looking at early on. The first thing that had to happen before a decision could be made was that the Northern Territory Power and Water Corporation did a lot of research and evaluation to see what their preferred solution was. After their consideration, they advised us that their preferred solution was to put a larger water treatment plant on the existing bore. They're looking at a plant that will treat up to 10 megalitres per day, which is 10 times the size of the existing plant there and also more than double the size of the plants that we would put on the base at Katherine to treat water around the old firefighting training area. These are running as two parallel processes. We've worked closely with the Northern Territory Power and Water Corporation on this.

Senator McCARTHY: Is this as a result of an agreement between Defence and the NT Power and Water Corporation?

Mr Grzeskowiak : Yes. We have worked closely with the Northern Territory Power and Water Corporation. We've said that we will fund the acquisition and installation of a water treatment plant on that bore.

Senator McCARTHY: Would you be able to table the agreement between Defence and the NT Power and Water Corporation about how the water treatment plant may be funded?

Mr Grzeskowiak : I couldn't table any agreement here. We just work closely together on this. Northern Territory Power and Water have not yet got to the point where they have signed a contract with a company to provide a plant. Defence has offered to fund the cost of that. Power and Water are still working through their own process of necessary approvals to be able to do the works and install that plant. There would be environmental approvals and a range of other local planning approvals. My advice is that the process is still on schedule for a new plant to be installed around the end of 2019, which I think is what Power and Water have been saying for quite a long time is their planned date for installation. So nothing that is going on at the moment in terms of negotiations between ourselves and Northern Territory Power and Water would delay that. That sort of negotiation is not on the critical path at the moment.

Senator McCARTHY: You say you won't be able to table the agreement here. Are you still able to provide some detail if you take questions on notice in relation to that?

Mr Grzeskowiak : I will have a look and see what we've got. We've been having meetings and we exchange correspondence.

Senator McCARTHY: It is for this committee, though.

Mr Grzeskowiak : I will see what I can provide.

Senator McCARTHY: In terms of the costs, what parts of the project are attributed to and will be paid by Defence? And please, by all means, take this as a question on notice.

Mr Grzeskowiak : Yes, I will take that on notice. We are still in negotiations with Northern Territory Power and Water on the detail.

Senator McCARTHY: And what are the ongoing costs of running both treatment plants each day?

Mr Grzeskowiak : Yes. It will be difficult for me to provide a Defence view of that. We are not close to the conversations that Northern Territory Power and Water are having with ECT 2, which is the American company that would provide the plant. Northern Territory Power and Water would be the authoritative source for a view on the ongoing costs of running the particular plant that they are looking at acquiring, which is significantly bigger than the plants we've acquired thus far.

Senator FARUQI: Just a quick yes or no question: Does Defence believe that all the PFAS and PFAS-related products on its bases have been fully accounted for now?

Mr Grzeskowiak : As I've said in this place before, we have had, in the last few years, two very hard looks, particularly for the legacy product, the old 3M light water. We think we've discovered any of it that might be left, and where we do, we quarantine it. We haven't purchased any of this product for more than a decade, but it is really hard for me to put my hand on my heart and say I know we've found every last possible drop. But we've made every effort we could.

Senator FARUQI: Is that effort still going on or not?

Mr Grzeskowiak : Well it is.

Senator RICE: I've got 10 minutes and I've got three topics. So starting with the Maribyrnong Defence site which I note that Defence announced on Thursday that they've pointed agents to sell the land and are calling for registrations of interests from purchasers who have had the experience and capability to re-mediate and develop the site. Firstly, has there been any registration as yet by interested parties?

Mr Grzeskowiak : We went to the open market late last week, as you've described, with what is phase 2 of a three-phase process.

Senator RICE: Yes.

Mr Grzeskowiak : I'm not aware that we've had any registrations as yet but then I haven't gone looking to see if we've had any registrations as yet. Initially companies will register and we will assess the ability of those companies in terms of their track record in having the capacity to develop a site of this scale, their track record in being able to manage the decontamination of the site of this scale, and obviously their financial bona fides. Towards the end of the process there will be essentially initial bids coming in from those companies that register that we invite.

Mr Birrer : The registration of interest closes on 19 November, so we wouldn't have an indication until after then.

Senator RICE: How does the registration of interest fit with the fact that we haven't yet got a site remediation strategy by the Victorian planning authority and the Victorian EPA? I note the statement of policy intent with regard to planning, which is still pretty underdeveloped as well. So there is still a lot about the development of the site which is still very much up in the air?

Mr Grzeskowiak : That's exactly right. And this is phase 2 of a three-phase process. By the time we get to phase 3, we will have narrowed down the field of credible industry players—and it's at that point we'll be asking for their formal offers for the acquisition. By then we would hope that the Victorian Planning Authority would be further advanced in its planning. Obviously it is of benefit to all of the players involved that the planning constraints, the expectations of the environmental regulator in the state of Victoria, would be as widely known as possible so that the sale can get the best value from the site.

Senator RICE: When do you expect that to be, when you're making that decision?

Mr Grzeskowiak : The articulation of planning constraints and the like are a matter for the Victorian government.

Senator RICE: Yes, but what's your time line that you need to have those articulations of the planning constraints and you need to have the remediation strategy outlined?

Mr Grzeskowiak : As Mr Birrer mentioned, the registration of interest process runs for more than a month. There will be a deal of work then for us to assess what we've got there. We'll be well into next year before we're actually approaching the market for final bids as part of phase 3—so it gives plenty of time for the relevant Victorian authorities to articulate their final constraints.

Senator RICE: So we're looking at sometime in mid-2019?

Mr Grzeskowiak : That sort of order. But I wouldn't like to put a fixed date on it, because it does depend to some extent on what we see through the registration of interest process.

Mr Birrer : And we've made this quite an iterative process, where we've sought information from industry about what they want in terms of planning. We engage with the Maribyrnong City Council and the Victorian government throughout it, so it's quite an iterative process. And the reason we're going through these steps is, as you were suggesting there, making sure that, when people come to the final bid, it can be informed by the planning considerations.

Senator RICE: I'd like to move on because I've got two more issues I need to cover in my short time. The second is in regard to Defence's planning for sea level rise. I've recently become aware that in the United States, the US interagency sea level rise task force has identified a number of levels for global mean sea level rise to guide planning, including what they call high scenarios of two metres by the end of the century, and an extreme scenario of 2½ metres. I understand the Pentagon uses the one- and two-metre scenarios for its estate planning. What is Defence using?

Mr Grzeskowiak : We do a bit of thinking about sea level rise. We actually had a report written, probably in 2012, looking at the issue. That told us that, at least for a fair while, there's no real issue that we need to worry about. But if we look in a 50- to 70-year horizon, there may well be issues that we'd need to look at.

Senator RICE: Have you tested the defence estate against a two-metre scenario?

Mr Grzeskowiak : I don't think we've tested it against a specific scenario. The report we had written was more of a look at what the current predictions were for sea level rise in the 50- and 50-plus-year horizon.

Senator RICE: What levels were you looking at then?

Mr Grzeskowiak : I can't recall whatever the levels were that were predicted at that time.

Senator RICE: Could you take that on notice—

Mr Grzeskowiak : I could take it on notice.

Senator RICE: as to the planning that's being done. In particular, if you're not planning for a two-metre sea level rise, as the Pentagon are, why not?

Mr Grzeskowiak : I will take that on notice.

Senator RICE: My third area was about redress for LGBT people being discharged from the services. It's my understanding that a policy brief detailing the historic discharge and discrimination of LGBT+ service members in the Defence Force that was written by Associate Professor Noah Riseman was sent to Defence Minister Payne and Veterans' Affairs Minister Chester on 25 September. Has Professor Riseman's policy been brought to the attention of the department?

Ms Greig : We have been considering Professor Riseman's submission.

Senator RICE: Who has seen the policy brief? Who is considering it?

Ms Greig : Within the department?

Senator RICE: Yes.

Ms Greig : People Group, obviously. And we have been speaking with a number of people within the department—for instance, those in headquarters ADF. Clearly, the ADF need to form a view.

Senator RICE: Specifically, is the department looking at delivering a national apology to LGBT-plus ex-service members or implementing an appropriate redress scheme?

Ms Greig : We are considering the submission. Part of those considerations are certainly a context from 2012. The then General Hurley CDF did make a more general apology for Defence ADF and also APS employees who had suffered mental or physical abuse.

Senator RICE: What are the time lines that you are looking at in terms of this consideration, and when do you think Defence will have done that consultation and worked out what an appropriate way forward is to recompense and to redress and apologise for people who were so unfairly discriminated against?

Ms Greig : I think we would need to come back to you on notice with that time line.

Senator RICE: On climate and national security: does Defence see climate change as a national security risk?

Mr Hamilton : Yes. The 2016 Defence white paper did talk about climate change as one of the issues that we would need to consider as part of our Defence planning.

Senator RICE: Do you agree with many security experts that, in fact, climate change constitutes an existential risk?

Mr Hamilton : I would characterise it that climate change is one of the many significant risks we need to consider in Defence planning.

Senator RICE: How does Defence then currently undertake assessment of the risks in relation to climate change?

Mr Hamilton : We look at a number of issues that climate change will have bearing on. That includes looking at its impact on countries in our part of the world and implications for Australian Defence Force operations in the future. We also look at climate change and its implications in relation to planning for our own force posture within Australia and our basing, as discussed previously.

Senator RICE: Have you got a particular area of work, a particular strategy, of how you're going to be dealing with it?

Mr Hamilton : As with all of the strategic threats that we face, we keep it under close review. There are a number of parts of the organisation that work closely together to make sure that we have taken into consideration in our planning an understanding of the potential impacts of climate change.

Senator RICE: I'm presuming that Defence has looked at the report of the recent Senate inquiry into the implications of climate change for Australia's national security?

Mr Hamilton : Yes, I would assume that the department has done that.

Senator RICE: Do you have any response to the committee recommendation that the Commonwealth government develop a climate security white paper or a similar planning document, to have a coordinated, whole-of-government response to climate change risks?

Mr Hamilton : I understand that the government has responded to that Senate committee report. Let me just check for you. In any event, a decision to do something like that would be a matter for government.

Senator RICE: But Defence presumably would have some input into that and some thoughts as to what ought to be done, in terms of the implications for defence and national security.

Mr Hamilton : That would be a hypothetical, based on the assumption that the government did decide to do that.

Senator RICE: Do you have any response to the committee's recommendation that the Department of Defence establish emissions reduction targets across stationary and operational energy use and report against these in its annual report?

Mr Moriarty : We'll comply with government policy on those matters.

Senator RICE: So Defence doesn't have any view, even though you accept that climate change is a huge risk?

Mr Moriarty : As a government entity, we will comply with Commonwealth regulations in relation to all of those environmental and other policy matters.

Senator RICE: So does Defence have targets?

ACTING CHAIR ( Senator McGrath ): Senator Rice, I might cut you off there. Time is over and I will hand back to Senator Wong.

Senator WONG: Thank you very much. I'm returning to Future Submarines. I will attempt not to re-traverse too much, but I haven't been part of these estimates before. At the February estimates of this year Vice Admiral Griggs said that he was confident that the SPA would be signed midyear. Mr Moriarty, you then said, 'If I could add, the admiral says he is confident it will be done by the middle of this year. I share that confidence.' Then, subsequently, I think in the May estimates, you, Rear Admiral Sammut, said that, 'your full expectations'—so, we've moved from confidence to expectations, have we?—'is that the SPA'—can I call it the SPA? Or would you like me to call it something else?

Rear Adm. Sammut : No, SPA is fine.

Senator WONG: 'would be signed by the end of the year'. I am just giving the opportunity, now that we have got the next estimates, to work out if we are going to say something different?

Rear Adm. Sammut : We were discussing this earlier during this session. We are working towards trying to conclude our negotiations by the end of the year so that we will be in a position to sign by early next year. I mentioned in testimony earlier this afternoon that this is a complex contract. What we're endeavouring to do is ensure that we have terms and conditions agreed before we continue further with this particular contract that will cover all of the program contracts, that will cover the design and the delivery of the Future Submarine out to 2050. That has involved a lot of discussion with Naval Group to ensure we contemplate the various events that could arise over the life of such a long program and to ensure that the contract is such that it can handle those without interruption to the progress of work.

Senator WONG: Given that at each estimates this year you've given evidence where the date has slipped, I'm just wondering whether, if we're not in election or caretaker mode by the next estimates, we're likely to have more slippage?

Rear Adm. Sammut : I would not expect that we would have more slippage.

Senator WONG: Are we at expectation or confidence?

Rear Adm. Sammut : I said I would not expect, so I guess that's an expectation.

Senator WONG: Are you not confident anymore, Mr Moriarty?

Mr Moriarty : It is my expectation.

Rear Adm. Sammut : As negotiations have progressed, we have finally come down to the remaining issues of importance. I believe we have a good view of what they are. The work before us now is just to make sure we can close on those in a way that we end up with an agreement that serves both parties equitably over the long life of the program.

Senator WONG: Obviously it is a very important agreement—the largest procurement in the nation's history. We have slippage in the time line which has been quite substantial, and before the finalisation of the SPA we have an election next year. That's not necessarily your concern, but I am asking for an assurance that you will continue, as I assume you are, to be focused on ensuring that the agreement covers those issues, both in terms of breadth and depth, that are in the national interest, and there would be no compromising on that in order to meet political timetables?

Rear Adm. Sammut : Of course. That's been my mandate and our priority throughout these negotiations. That perhaps explains to some extent why, while we had hoped to conclude all of our negotiations a bit earlier than now, we haven't, because we continue to make sure that we are acting in the interests of Australia as we strike what is an equitable and fair agreement with Naval Group for the delivery of this major program.

Senator WONG: I will come back to some detailed questions about the negotiations, but can I come for a minute to the Future Submarines Program. I'm sorry that I'm not fully across this and I promise I will be by next time. The Future Submarines Program, which the SPA is obviously a part of—what is the total cost of that project to date?

Rear Adm. Sammut : As we've explained—

Senator WONG: I'm sorry. You can keep saying that. I couldn't attend and I apologise for that. I am going to have to keep asking you these questions again. I don't need that lead-in every time.

Rear Adm. Sammut : $50 billion in constant dollars is the cost estimate for the Future Submarine Program.

Senator WONG: I didn't ask that. I asked the total cost to date. I want the cost of the project to date and in this financial year and some breakdown as to internal and external advice and payments to Naval Group, both Australia and France.

Rear Adm. Sammut : At this stage our approved budget, including contingency, is $2.7 billion, which covers work out to 2022—not all of that work; we will be applying for approval to release more money from the IIP provision for this project.

Senator WONG: I'm sure Mr Groves will come back with the overall figures, but in terms of this, when you say approved, that means actually approved and released from the IIP but not necessarily paid—is that right?

Rear Adm. Sammut : That's right. I'm talking about a budget here, not our expenditure.

Senator WONG: And costs to date, which will be lower than the $2.7 billion, I assume?

Rear Adm. Sammut : It is. At this stage and for this phase of the program, our costs to date have been $501 million—in fact $502 million if I round appropriately.

Senator WONG: Can you give me the time frame for that? When does that start from?

Rear Adm. Sammut : Phase 1B commenced as we selected France and moved into our work with Naval Group and Lockheed Martin Australia for delivery of the program.

Senator WONG: If I have the two dates from the down selection—is that right?

Rear Adm. Sammut : From April 2016.

Senator WONG: Can you give me the components of the $501 million? How do you account for it?

Rear Adm. Sammut : How do we normal apportion that across the various areas? For platform design—I'm talking about the work we do with Naval Group for the design of the platform—$227 million. Work on the combat system, $62 million. On infrastructure work that we've done, $13 million. Work other than design, which would include things such as the work on our workforce—I have a large contracted workforce, as an example, and other activities—$136 million. That's within CASG. We also have money apportioned to DSTG and the CIO Group.

Senator WONG: This is still within the $501 million?

Rear Adm. Sammut : Yes, this is within the total budget of $501 million. The figures I just gave you add up to $438 million, if you've done the sums as I've read those out. The remainder of that has been work conducted by DST on our science and technology program and work done by CIO Group in delivering IT infrastructure for the program.

Senator WONG: So whatever the difference is between that and the $501 million is the only remaining—

Rear Adm. Sammut : Yes. That's to DST and the CIO Group.

Senator WONG: I think you've answered this, but just to confirm: payments to Naval Group, which is both the France and Australian entity—I assume there are different legal entities?

Rear Adm. Sammut : They are different legal entities; however, the work we do is really with Naval Group France, and they have Naval Group Australia conduct that work.

Senator WONG: I'm just asking an accounting question. Is the $227 million the totality of the work?

Rear Adm. Sammut : That's the totality of the work on the platform.

Senator WONG: So nothing further has been paid to Naval Group other than the $227 million between April 2016—

Rear Adm. Sammut : That's our CASG expenditure to date. Forgive me—that's as at 31 August 2018. That would have been, as I said, from the time frame that we selected Naval Group and then subsequently selected Lockheed Martin as the combat system integrator.

Senator WONG: You also said, 'I have quite a large team of contractors' or words to that effect—which is the $136 million?

Rear Adm. Sammut : That's part of the $136 million. There are other things there. For example, we did some establishment of the resident project office in France that we have at Cherbourg and other activities that go towards the administration of the program.

Senator WONG: In terms of your project team, I am going to ask you negotiating group questions. Can we talk about those who are engaged on the Future Submarine Program—is that the SEA 1000?

Rear Adm. Sammut : Yes.

Senator WONG: How many personnel are there?

Rear Adm. Sammut : There are 212 of us in total. That's a combination of Australian Public Service, Australian Defence Force—although there is only three of us in the Australian Defence Force—and contracted personnel.

Senator WONG: Can you give me the breakdowns again?

Rear Adm. Sammut : The Australian Public Service figure is 88, and there are three ADF members. Then there are 121 secondees.

Senator WONG: Secondees from within the APS?

Rear Adm. Sammut : No—secondees from industry that I have under contract working for me on the Future Submarine Program.

Senator WONG: So they are contractors?

Rear Adm. Sammut : They are contractors.

Senator WONG: Are they accounted for under the $136 million?

Rear Adm. Sammut : Yes.

Senator WONG: I might need to ask a bit more on that on notice. Can I go to the negotiating team for the SPA. Are they included in the numbers you just gave me, or they are separate?

Rear Adm. Sammut : That should be our total number of secondees and so forth.

Senator WONG: No—your negotiators. Presumably we've got a team of negotiators trying to negotiate the strategic partnership agreement—correct?

Rear Adm. Sammut : Yes.

Senator WONG: In terms of who employs them and who pays them, are they accounted for in the numbers you just gave me?

Rear Adm. Sammut : Yes.

Senator WONG: So they are a subset of this?

Rear Adm. Sammut : Yes.

Senator WONG: Tell me how big the subset is. Who is on the negotiating team?

Rear Adm. Sammut : I have myself as the lead negotiator. I'm supported by an adviser providing strategic negotiation advice to us. I'm supported by an industry specialist. We have two lawyers from our law firm involved in those negotiations and I have another contractor who is supporting us with more detailed work as we develop and conclude the statement of work. They're joined by two members of the APS, a one star and a band two. They're my core negotiating team.

Senator WONG: Have you added to that core negotiating team a range of legal advisers, for example?

Rear Adm. Sammut : The legal advisers I mentioned are from our legal firm. There are two legal advisers. That negotiation team reports to a negotiation reference committee.

Senator WONG: Who is on the reference committee?

Rear Adm. Sammut : The reference committee involves the deputy secretary of capability, acquisition and sustainment group, currently Mr Greg Divall; Chief of Navy; I have Mr Brendan Sargeant, the former chief operating officer of the department, as the chair of that committee; Mr Ron Finlay, who is also a member of the Naval Shipbuilding Advisory Board, and Dr Elizabeth Taylor.

Senator WONG: I think you've provided all this, but on notice can I have a list of the negotiating team—if you don't wish to identify personnel I'm happy with them to be identified by their band, by their status—both ADF, DOD, other APS staff and contractors?

Rear Adm. Sammut : I can indeed. I think we've already had a question on notice where I have provided that information. I will provide you with the current composition.

Senator WONG: There has been talk about there being a lot of lawyers involved in this. Can you tell me how many lawyers are engaged in the negotiations?

Rear Adm. Sammut : In my negotiation team? I have legal advice of two lawyers from our law firm, and one of the APS members is providing legal advice as well.

Senator WONG: I think you answered a question from Senator Patrick, or perhaps Senator Gallacher, in relation to the design and mobilisation contract—correct?

Rear Adm. Sammut : I've answered many questions. Was it this session?

Senator WONG: I'm told that while I was out of the room you indicated that the delay in the SPA was not particularly troublesome because the work could continue under the design and mobilisation contract. Do I understand that to be the position?

Rear Adm. Sammut : Yes. Work continues under the design and mobilisation contract.

Senator WONG: Hasn't that expired?

Rear Adm. Sammut : No, it hasn't expired. We set up the design and mobilisation contract back in September 2016 to commence work with Naval Group on the design of the submarine. Understanding that it would take time to negotiate the strategic partnering agreement, we set up the design and mobilisation contract such that we could extend that contract to continue work on the design of the submarine. Work is continuing under the design and mobilisation contract. What I was explaining earlier is that we are completing the concept design of the Future Submarine and further work can continue under the design and mobilisation contract until the strategic partnering agreement is in place.

Senator WONG: When did you extend it?

Rear Adm. Sammut : We've extended it on several occasions to take account of—

Senator WONG: The delay in the negotiations?

Rear Adm. Sammut : No, I wouldn't say delay in the negotiations. The different phases of work we've done. We've done it under three steps. It has accommodated delay in the negotiation, I'm not denying that. What I'm saying is that we've done it in steps to take account of the various design phases, because they all involve different statements of work, and we have to make sure that those statements of work are right for the work that is ongoing.

Senator WONG: Have you been asked at these estimates to give us the dates on which your extended that contract?

Rear Adm. Sammut : No.

Senator WONG: There you go. I'm original.

Rear Adm. Sammut : I would like to check these, but from memory, we extended in late last year. It would have been in October.

Senator WONG: In each of these discussions there are two relevant dates, aren't there—the date on which it is extended and the date on which it was due to expire and then was extended beyond that date. Do you see what I'm saying?

Rear Adm. Sammut : The extension takes place before expiry, obviously. We don't allow it to expire.

Senator WONG: So in October you extended—

Rear Adm. Sammut : As it was about to expire, or before it was due to expire.

Senator WONG: This is 2017.

Rear Adm. Sammut : We extended it in October. That covered the work to complete what we called up until the preliminary system requirements review—in fact, the systems requirements review for the submarine. We extended in March.

Senator WONG: You extended in October 2017 from when to when?

Rear Adm. Sammut : We extended from October until March.

Senator WONG: Then in March you extended it again?

Rear Adm. Sammut : In March we extended it again until September.

Senator WONG: September 2018?

Rear Adm. Sammut : Yes. In September we extended again until the end of October to get us to what we were hoping to be the end of the concept studies review. We're about to extend the design and mobilisation contract again, and we're just giving consideration to how long we will extend that, based on our assessment now of—since we're getting to the end of the negotiations for the strategic partnering agreement as to when we can have the first contract under the SPA in place.

Senator WONG: So the end of October is, what, next Wednesday?

Rear Adm. Sammut : Yes.

Senator WONG: So when is that decision going to get made?

Rear Adm. Sammut : It's being made now. We're getting the statement of work together for the activities that will need to be done, and of course that extension will take place so that the contract remains on foot.

Senator WONG: And it's a contract that keeps being extended—this will be the fourth extension—because of the delay in the agreement?

Rear Adm. Sammut : At this stage, we are having to accommodate the delay in the strategic partner agreement, but, as I mentioned to you before, we have set up the contract to be easily extended so that work on the Future Submarine program can continue as we continue to conclude the strategic partnering agreement with Naval Group.

Senator WONG: And the cost of each of these extensions?

Rear Adm. Sammut : It depends on the statement of work that we put in place.

Senator WONG: Do you want to go through them then?

Rear Adm. Sammut : No, I don't really want to go through them. In fact, I'll have to take it on notice as to the cost.

Senator WONG: I'll possibly need to rephrase the question.

Rear Adm. Sammut : What I can say is that the current contract value, based on the extensions of the design mobilisation contract, is $340 million.

Senator WONG: I am going to ask you about this. Do you have the cost of each extension here?

Rear Adm. Sammut : I don't have it with me. I can take that on notice and provide it.

Senator WONG: The $340 million is the current cost?

Rear Adm. Sammut : The current value of the contract.

Senator WONG: To date?

Rear Adm. Sammut : To date.

Senator WONG: Taking into account the three extensions but not the fourth one, which is imminent?

Rear Adm. Sammut : That's right.

Senator WONG: That's fair?

Rear Adm. Sammut : Yes.

Senator WONG: What was the original cost?

Rear Adm. Sammut : That would have been the first statement of works that we did.

Senator WONG: Yes, what was the original cost?

Rear Adm. Sammut : I can't recall what it was for that first period of work.

Senator WONG: Surely someone knows.

Rear Adm. Sammut : I will get a figure for you. What I can say is that it was intended to be able to cover up to $600 million worth of work. That was the announcement at the time when we negotiated the design and mobilisation contract.

Senator WONG: Rear Admiral, I can't make comment about whether the delay is reasonable or whether the extensions are reasonable. We're not doing that work. I hear your evidence on that. But I think people are entitled to know what the cost to taxpayers is of these rolling extensions. I think that is a reasonable question. So I would like to get that if someone can provide that later in the hearing, perhaps.

Rear Adm. Sammut : We'll endeavour to do that. There is no problem in providing that information. What I can assure you is it's the cost of doing the work to design the submarine. There has been no additional cost to extending this. It is the cost of work to do functional analysis, to do feasibility studies, to pass through each of the milestones that Senator Patrick was asking me about, such that we are progressing the design of the submarine and doing work to deliver the program.

Senator WONG: I think that evidence is there's no additional cost, but I have to say what it does look like—and very few programs in government get this kind of capacity to go back every period in time to get a bit more money to extend a contract because some related project is being delayed. These are substantial sums. Anyway—

Rear Adm. Sammut : That is all taking place under an approval from government for the work that we have advised government is taking place.

Senator WONG: As I understand it, your evidence therefore is there is it might look administratively a bit messy because we've got a delay and we keep having these rolling extensions, but there's no additional cost to taxpayers. Is that what you're saying?

Rear Adm. Sammut : That's what I'm saying. It is the cost of doing the work.

Senator WONG: Can I just draw a distinction then between what is budgeted in the IIP—

Rear Adm. Sammut : The IIP, Integrated Investment Program.

Senator WONG: and the actual real cost of the project? Can you assure us that, even in the absence of the SPA, all of this work would have been contemplated under that agreement?

Rear Adm. Sammut : Yes.

Senator WONG: I suppose then the cheeky question might be: why do you need the SPA?

Rear Adm. Sammut : We won't be able to continue work indefinitely under the design and mobilisation contract.

Senator WONG: Correct. So when does that—

Rear Adm. Sammut : because there will be increasing levels of design. We need to complete the basic design. We then need to do the detailed design and build the first submarine. We then need to build the next set of submarines. At some point in the future there may be a technology upgrade. The SPA contemplates the terms and conditions to do all of those activities, not just design work. So the SPA has in it terms and conditions that we can use to insert into those different program contracts down track.

Senator WONG: I understand that.

Rear Adm. Sammut : And we can implement those program contracts quickly and efficiently because we have negotiated terms and conditions up front.

Senator WONG: When do you think you will reach that natural end point to what is reasonable under the design and mobilisation contract? You yourself have just said—

Mr Johnson : He acknowledged that it's 608.

Senator WONG: So hang on—you think it's $600 million?

Rear Adm. Sammut : It will be within the first half of next year, as we conclude things like system requirements review for definition design, which is the next phase of design that we enter. We enter into that next year and we begin to ramp up resources on the program. That will be early next year. We talked about March earlier as being the date that we're setting for the systems requirements review for definition design, which is a defined phase of the design process. Because we know what these design phases are, we understand what is in the statement of work there, and therefore we can be understanding that what we're paying for is the work that would have been done to get the design to that particular point.

Senator WONG: I'm glad that you responded in the way that you did, Rear Admiral, because at least you focused on the work. I would say, Mr Johnson, that just because the money has been appropriated doesn't mean it has to be spent. The purpose is spending it on the capability.

Mr Johnson : Absolutely,

Senator WONG: I don't agree, and I don't think it is the Rear Admiral's evidence, that we know that the end point of that contract is when all $600 million has been expended. We know that contract has expired when the work that should have been done under it has been done.

Mr Johnson : I can only agree.

Rear Adm. Sammut : Could I just add one thing to an answer? I omitted that Ms Rebecca Skinner, the current chief operating officer of Defence, is a member of the negotiating reference committee.

Senator WONG: That's fine. I thought you were going to add to it on notice anyway.

Rear Adm. Sammut : I will give you the full list.

Senator WONG: On sustainment, we had a bit of a discussion about this earlier. I don't know the extent to which you discussed this with Senator Patrick. Can you tell us what arrangements for sustainment are being included in the agreement?

Rear Adm. Sammut : There are no arrangements for sustainment of the Future Submarine in the agreement. The strategic partnering agreement is an agreement and covers the program contracts for acquisition.

Senator WONG: Has the Government or has Navy or the ADF indicated who is being assumed to be the entity providing sustainment to the Future Submarine?

Rear Adm. Sammut : There are no assumptions about the sustainer of the Future Submarine. The decision is not required on that for the next eight years. What, of course, is a necessity is that sustainment takes place in Australia with sovereignty as we move forward. That is an important part of the strategic partnering agreement, the acquisition contract, to ensure that the transfer of technology takes place such that there is always the ability, not only to build the submarines in Australia, but to sustain them with sovereignty throughout their life.

Senator WONG: What is the view about whether or not the builder should also be the entity sustaining submarines?

Rear Adm. Sammut : There is no particular view about the builder having to be the sustainer of the submarine.

Senator WONG: In terms of sovereign capability, as I understand your earlier answer the only policy imperative or policy decision that has been made is that it has to be done in Australia?

Mr Johnson : Sustainment?

Senator WONG: Yes—sustainment.

Rear Adm. Sammut : In terms of sustainment, yes.

Senator WONG: Is there anybody with the capability to do this other than the ASC?

Rear Adm. Sammut : I'm not sure what the industrial landscape will be eight years from now.

Senator WONG: So what is ASC's involvement in terms of discussions of our sustainment of the Future Submarine?

Rear Adm. Sammut : We haven't entered into any discussions with anybody on sustainment of the Future Submarines, Senator.

Senator GALLACHER: Mr Whiley did mention that he had held discussions with you about sustainment—

Rear Adm. Sammut : Sorry, Senator, I can't quite hear you.

Senator WONG: Mr Whiley indicated, I think, in the Finance estimates, that discussions had been held. That's why we were pausing.

Rear Adm. Sammut : I have not had any discussions with Mr Whiley on sustainment of the Future Submarine.

Senator WONG: Has anybody in your group?

Rear Adm. Sammut : Not that I'm aware of, Senator.

Senator WONG: Senator Gallacher will move to something else shortly, but I think I've finished on this point for now, you'll be pleased to know, Rear Admiral. Thank you for your patience if I retraversed anything. I wonder if Mr Groves was going to return to the table to give me the answers that I was looking for earlier today?

Senator PATRICK: Could I ask a supplementary while you wait for that?

Senator WONG: Sure.

Senator PATRICK: Rear Admiral Sammut, there has been an ASPI paper that has looked at the transition from one submarine to the other. They've come to the conclusion that sustainment decisions should be made early. Indeed, Mr Whiley, yesterday, indicated that, because of a lack of retention, he's struggling to retain the very, very qualified engineers that he has because of uncertainty about the future of ASC Submarines. He went on to say that he believes that that may lead to a situation where Collins is put at risk. Within what I've just said there, I'm sure it would concern you if he had that view. Is there any plan by government to shift that sustainment decision left of the eight years that you just told the committee

Rear Adm. Sammut : It is of the order of eight years, Senator, that we would have to start making decisions about sustainment. At this point, ASPI has presented its view. We're still in the process of designing the Future Submarine. We haven't got through concept design at this particular point. A decision on sustainment needs to be made in the appropriate time frame. I understand the testimony provided by Mr Whiley. What I will say is that there remains a lot of sustainment work for ASC when it comes to considerations now about the life-of-type extension for the Collins class and the remaining FCDs that are to be done before those life-of-type extensions take place. I note that Mr Whiley spoke about a number of people who have left ASC. These figures, at this stage, would reflect to me—I don't wish to underrate the concerns of Mr Whiley. It certainly is important that we retain a competent workforce for the sustainment of the Collins class, and ASC continues to perform that work well.

Senator PATRICK: Would you give him an opportunity to meet with you, because his evidence was concerning? He's looking at it from a different perspective to you. He understands his business perhaps better than you do, as you understand submarines better than he does. Surely, with that evidence put, that he's concerned about his company, it would invoke the need to at least have a chat with him?

Mr Johnson : Senator, I meet or talk with Mr Whiley virtually every week. My next meeting with him is tomorrow at 10.

Senator PATRICK: Fantastic. Thank you. Sorry, Senator Wong.

Senator GALLACHER: If we could go to the future frigates—the Hunter class? All the people that can answer questions on that are present? By way of preamble, the ANAO report into naval shipbuilding and defence started an internal review program in late 2016 which found the compression of the time lines presented an extreme risk. Is someone able to address areas in that space?

Rear Adm. Dalton : Which bit are you after?

Senator GALLACHER: When you get a briefing, particularly on projects that end up being projects of concern, timetables are the biggest risk that Defence always get wrong. You either say you're going to do something in a time and it overruns, or now there's a compression of a timetable here. That has presented itself with a statement that it looks to be an extreme risk. What were the steps you took to separate the infrastructure part of the project from the shipbuilding part? That's one of the steps you took?

Rear Adm. Dalton : There are a number of risks in the shipbuilding program, Senator. They are under review all the time. The ANAO accurately reported that Defence had assessed an extreme schedule risk to the future frigate program. That's largely associated with—originally, the intent was to start construction of the first future frigate in 2020. If you look at what we were trying to do in that period of time, especially if you wanted to incorporate some changes to the reference ship design, such as including the world-leading Australian designed and manufactured CEA phased array radar and incorporating the Aegis combat management system to make those ships compatible with our air warfare destroyers and our key strategic allies, that did generate an extreme risk for us. After a conversation with government, it was agreed that we would move into a prototyping phase in 2020 and commence construction on the first frigate within 24 months of commencing prototyping. We gave ourselves some more room in the schedule, and that is the way we're addressing that particular risk.

Senator GALLACHER: Okay, but you also separated out the infrastructure part of the project from the shipbuilding part of the project?

Rear Adm. Dalton : The important thing to note is that the air warfare destroyer was a distributed build. It was built in four different shipyards and consolidated at Osborne. The facility at Osborne is not what we would call a vertically integrated shipyard; they don't have all of the things that you would normally expect to build a ship from start to finish in the one site. If we were going to build those ships in one site at South Australia, we would need to do some work on the facilities, and we did. As you can see, the first stage of ASC separation was to lift the facilities element out of ASC and create a new government business enterprise, it's known as Australian Naval Infrastructure. Through Australian Naval Infrastructure—

Senator GALLACHER: Sorry for butting in, but we're going to run out of time in the section. I want to be very specific and get answers to the particular questions I have. When was the decision made to separate infrastructure from shipbuilding?

Rear Adm. Dalton : I think that was done in 2016, Senator, but I'll get that confirmed.

Senator GALLACHER: Did you go to market for the tender for the infrastructure work?

Rear Adm. Dalton : That was a matter for ANI, the GBE that now controls it. They did go to market. They selected a managing contractor, and that managing contractor is Lendlease.

Senator GALLACHER: You announced Lendlease on 12 October 2017?

Rear Adm. Dalton : ANI did; we didn't.

Senator GALLACHER: Sorry, I'll rephrase that: the government announced Lendlease as the managing contractor on 12 October. They then went ahead and tendered out some work packages. When did work actually start on the site?

Rear Adm. Dalton : I suspect I do have that date, Senator, if you give me a second to have a look, otherwise I can take it on notice. We're looking it up if you want to keep going, Senator, in the interests of time.

Senator GALLACHER: How much has the government spent on that contract to date?

Rear Adm. Dalton : To date? Again, that's a matter for ANI. We know that they're—

Senator GALLACHER: I'm asking how much the government spent. Who does that go to? Does that go to Senator Fawcett?

Rear Adm. Dalton : It's a matter for Finance, Senator.

Senator GALLACHER: It's a very circular thing, estimates, isn't it! 'Go to the next department.'

Rear Adm. Dalton : It's being constructed using equity—

Senator GALLACHER: Usually you go to the day before's estimates to get the answer! Okay. Thank you. So, you can't answer that?

Rear Adm. Dalton : I could take it on notice. I can tell you how much the planned spend for the Osborne South shipyard is, but I couldn't tell you exactly how much they've spent on that to date.

Senator GALLACHER: I'm trying to get this time line straight.

Senator PATRICK: Is this seriously coming from Finance's budget? Surely that comes from the Defence budget?

Rear Adm. Dalton : It's an equity injection, Senator. That's money that comes from the government through Finance, and Defence then pays a return on equity over the life of the program. So, it doesn't come off Defence's bottom line, but ultimately we pay a return on equity across it, and that will be the same method that we use for the submarine yard on Osborne North.

Senator GALLACHER: While this work was going on, was the tender for the future frigate still open?

Rear Adm. Dalton : Yes, Senator.

Senator GALLACHER: And then you announced that BAE was the successful tenderer on 29 June this year?

Rear Adm. Dalton : Yes, Senator.

Senator GALLACHER: On 1 June, Ministers Pyne and Cormann put out a release saying that 48 per cent of the piles required for the Osborne development had been driven in. I'm just trying to work out when the project was approved. If you've got 48 per cent of the piles already driven in in Osborne—how did Lendlease know where to put them, if they didn't know who would be building the future frigates?

Rear Adm. Dalton : The design of the shipyard is agnostic to the ship.

Senator GALLACHER: Agnostic? Completely agnostic? It doesn't matter what design of boat you get?

Rear Adm. Dalton : We're designing a shipyard that should be able to produce any form of complex surface combatant up to about 10,000 tonnes. We don't want to lock ourselves in to one particular shipbuilder for life, so the design of the shipyard, which is quite different from the design of the submarine construction yard, is done agnostic to the builder.

Senator GALLACHER: So there's no correlation with the successful tenderer in the end and the shipyard? It could be built to build anything and fit any design?

Senator Fawcett: If you recall, the paradigm shift that the government has brought in with the Naval Shipbuilding Plan is the concept of a continuous build—so, multiple classes of ships over time—which allows us to get a steady drumbeat of work so that we can get efficiencies in our workforce. The design, by its very nature, has to be agnostic to the actual ship.

Senator GALLACHER: So the infrastructure there—I think that word 'agnostic' is probably the best description—isn't reliant on—

Senator Fawcett: It's suitable for a range of ships in that class.

Rear Adm. Dalton : That's correct.

Mr Johnson : It sounds like you're interested. The next level of detail is that all three tenderers have to comment on the design. Back to your point: while the yard is in progress, it's not completely built. At this point, with BAE selected, they do have the opportunity to adjust some of the details.

Senator GALLACHER: I just want to digest that. So it's not completely agnostic; it's almost agnostic, is it?

Senator Fawcett: The underlying concept is agnostic. But, clearly, if you can optimise it for the next nine ships, then that is an ideal outcome.

Senator GALLACHER: All right. If we can go to prototyping and some start dates. Senator Carr asked Mr Gillis some questions about risk and timing, and I'd just like to explore a bit of that, in light of the tender now being complete. Presumably we've got the right officers. In response to a question from Senator Carr about Defence advice about extreme risk in the program, Mr Gillis said:

The first risk mitigation strategy is to commence in the Future Frigate production prototyping in 2020 to demonstrate the ship design, shipyard processes and workforce are production ready.

Mr Gillis then said:

…specifically, the start date of 2020 was considered to be a high-risk strategy. That's one of the reasons why government undertook, on the basis of advice, to establish a period of up to two years' worth of prototyping, to 2022, which is good practice. It is international best practice to do prototyping. So we've added an additional period to ensure that we mitigate the risk.

Do we take it that that means the government will not meet its commitment to construction in 2020? What's prototyping in construction? How does that work?

Rear Adm. Dalton : Prototyping is a standard part of naval construction; it's done quite commonly. We saw it in the United Kingdom with the Queen Elizabeth Class aircraft carrier. In a brand new shipyard, you want to make sure that the designer-builder's computer system is compatible with all the computer-controlled machines. You want to be able to build skills in the workforce in that new shipyard before you start construction on the actual ship itself. We're planning to build five ship blocks as part of the prototyping activity. Depending on how those blocks go, we'll start off with relatively simple ship blocks without a lot of curves in them.

The fifth block that we will build will be a very complex block, to build the skills and the workforce, to test the flows through the new shipyard and to test the connection between the designer's systems and the shipyard systems. If that build of that fifth block goes well, there is a reasonable chance that we will be able to incorporate that into the first ship. But at this point in time, we are planning on building five blocks as a demonstration that the shipyard is working and that we're building the skills in the shipbuilders to be able to deliver on the program. In effect, you are commencing construction at prototyping. You're just not building blocks particularly that will go necessarily into the first ship. We plan to do that within 24 months of actually commencing prototyping.

Senator GALLACHER: If we were to refer that evidence and compare that to a media release from April 2016 where the government announced that the future frigates will start being built by 2020—it's joint release by the then defence minister and the Prime Minister, and presumably a cabinet decision—is your evidence consistent with that media release, or is that—

Rear Adm. Dalton : I think that media release dates back to 2016. I think we're consistent with that, that we will still commence construction in 2020, but we will commence construction by prototyping. As I testified just before, one of the reasons why we're moving into a prototype phase is to control those risks. At that stage, as we started to look at the reference ship design and the amount of change that we wanted to make to it, that had created an extreme schedule risk if we were to commit to building the first ship in 2020.

We are demonstrating a lesson learnt from the Air Warfare Destroyer Program where we commenced construction when the design wasn't as mature as we would have liked, and that did create issues for us in the management of that program. I think this is a rational, sensible step to take to manage the risks in the program, and the government has agreed with us, and we have got that period now of prototyping. That gives us two more years, effectively, to mature the design before we actually commit to start work on the first ship.

Senator GALLACHER: Presumably advice was given to the government about that announcement in 2016. Was it you that provided that advice, Rear Admiral?

Rear Adm. Dalton : No.

Senator GALLACHER: Would anybody know the timing of that advice? When was that advice provided? Presumably it was before this prototyping decision.

Rear Adm. Dalton : Yes, I expect. We could go back and have a look at that and take it on notice, if you like.

Senator Fawcett: If you do remember the context though, Senator, at the time people were concerned about the valley of death, because of the lack of any orders of ships. One of the reasons that the Future Frigate was being brought forward was to create opportunities for workers to retain those skills. If a key risk reduction activity is working on these prototyping blocks to avoid the problems we had with AWD, it still achieves that objective of creating meaningful work that reduces risks and leads to a better quality capability for the ADF. So I think it's quite consistent with what was announced in 2016.

Senator GALLACHER: We understand that in the second half of 2016 an internal review was conducted into the Future Frigates program, which identified all sorts of risks associated with the time line. What were the original factors that prompted that review?

Rear Adm. Dalton : We conduct ongoing reviews into our programs all the time. There is an independent assurance review. In 2016, those independent assurance reviews were called 'gate reviews'. They are a normal part of the way defence manages complex projects.

Senator GALLACHER: When did you first become aware, or when did the department first become aware, that there would be extreme risk in the program due to the time line? Was that 2016 or earlier?

Rear Adm. Dalton : That predates me. I would have it take that on notice, but I think it certainly was in that period of time.

Senator GALLACHER: Senator Fawcett, there were no political issues in the run-up to an election that pre-empted these statements and media releases about going ahead with the 2020 timetable?

Senator Fawcett: I think as I said before, the context was very clearly the fact that there was widespread concern around the fact that there was a valley of death due to a lack of orders, and bringing forward the Future Frigates program to 2020 was a clear attempt to actually create work to develop capability of the ADF.

Rear Adm. Dalton : And at this point we will be working on constructing ship blocks in the new shipyard in 2020.

Senator GALLACHER: I'll ask the same question in a different way: at the time of that release, was the government aware that they wouldn't be able to keep the promise that was being made about construction?

Senator Fawcett: As I've said, the government is keeping a promise, because the intent of bringing it forward was to make sure that we avoided, to the greatest extent possible, the valley of death. There will be workers engaged in productive work in risk reduction activities in a shipyard on the Future Frigate program.

Senator GALLACHER: I suppose, the best case scenario is that it was a risky decision, at least if you look at it in hindsight.

Senator Fawcett: It was not as risky as not ordering any naval ships for six years, which created not only a capability shortfall but also the valley of death.

Senator WONG: How does this stack up to [inaudible] which was not a decision of the previous government.

Senator Fawcett: It stacks up with not ordering the ships which created the capability gap and the pressures that the ADF filled.

Senator WONG: We've managed to avoid this, and people have answered questions, but we can have a discussion about the fact that they were full when we were in charge and not full when you were in charge. We can both play this game, but could we just—

Senator PATRICK: [inaudible]

Senator WONG: Correct. But, could we just answer the question, perhaps.

Senator Fawcett: We were getting on very constructively until Senator Gallacher was trying to make political points out of that. The comment that you've just raised there goes again to the lack of understanding that the ships that were filling the shipyard were the ones that were commissioned by the Howard government—

Senator WONG: Yes, and which we had to fix up the execution of those contracts. Let me tell you, we had to fix it up. Full credit to the workers—not the Howard government—who actually ensured that those constructions were fixed up after being in a right royal mess, because of the way in which you constructed the contracts. Anyway, if we can just get on with the estimates, that would be good.

Senator Fawcett: Which is exactly why it's a positive thing that we're doing this risk reduction activity as opposed to barrelling down the same path of AWD where the first blocks were actually intended to be in the ships.

Senator GALLACHER: Can you point us to another program where prototyping is being undertaking? Are you saying it's world's best practice? Where are they doing that?

Rear Adm. Dalton : I've already pointed to one for you. In the United Kingdom they used prototyping in the Queen Elizabeth class aircraft carrier. There are several other examples that I can take on notice to provide for you.

Mr Johnson : We started the US DDG-51. We started the Virginia class submarine. We started the Columbia class submarine.

Senator GALLACHER: Is the UK example the aircraft carrier that went back to base for a $30 seal or something?

Rear Adm. Dalton : That's the aircraft carrier they currently have just commissioned in service.

Senator GALLACHER: So the UK and Virginia classes?

Rear Adm. Dalton : And the US. It's a common thing in shipbuilding programs.

Senator GALLACHER: I'd like to ask about the successful tender. Did all the tenderers provide industry content plans?

Rear Adm. Dalton : They all provided Australian industry content strategy.

Senator GALLACHER: Is it possible to see those? Can you table those industry content plans?

Rear Adm. Dalton : They are commercial in confidence. I would have to go and have a look at what we can table. Once we have the head contract in place, there will be an Australian industry content plan, which will be a public plan.

Senator GALLACHER: There have been commitments. We've seen a commitment from the head of a bid team of a 65 per cent to a 70 per cent Australian content. Are those sorts of statements accurate?

Rear Adm. Dalton : We're in negotiation right now with the preferred tenderer. The preferred tenderer, ultimately, as part of that contract, will have an Australian industry capability plan, which will be a contractual deliverable against which they will be assessed. It will be something that they have to deliver under the contract.

Senator GALLACHER: That doesn't stack up with the 90 per cent commitment we had on submarines. How much weight does it go into your decision-making?

Rear Adm. Dalton : In what sense?

Senator GALLACHER: What are you thinking? Is the higher the Australian content, the more preferred outcome? What are you looking for? Are you looking for the maximum or just a range?

Rear Adm. Dalton : The request for tender was deliberately structured to seek to maximise Australian industry content, noting that we have to balance that against the funding that we have available and the schedule that we need to deliver upon. All of these things have a balance. The Australian industry content will be delivered across the life of the program. One of the key things that we're trying to deliver under the frigate program is the commencement of a continuous shipbuilding program for complex surface combatants in South Australia. There'll be elements of that over time where the Australian industry content will increase. Part of that will be that we're developing an Australian design capability. That's a key output, because we want to be able to have Australians designing the ship that follows the frigate program.

Senator GALLACHER: How does it stack up with the Australian content on the air warfare destroyers and the Collins class?

Rear Adm. Dalton : On the acquisition side of the air warfare destroyer, we achieved around 60 per cent Australian industry content. That's about what they said they would deliver, and I think that's a reasonable benchmark. There are some things that we will never have the volume to justify building in Australia. They are things like maritime gas turbine engines. We're never going to buy enough of those to justify setting up a production line for that.

Senator GALLACHER: What about the Collins? Was that benchmark established?

Mr Johnson : For the Collins program, the construction acquisition program, we went back in time using the task force, when Marc Ablong was in charge of the task force, and tried to reconstruct it, because there were a number of claims. It ended up not being very reconstructible. I can tell you that, depending on the year, the sustainment of the Collins varies between 82 and 86. Clearly it's a sovereign capability. I would also like to repeat or re-emphasise what Rear Admiral Dalton said: it's a blend of starting early and having sovereign sustainment and, along the way, maximising the opportunity for Australian industries to be competitive and participate.

Senator GALLACHER: But the short answer is you can't reconstruct the content measure?

Mr Johnson : Not for the Collins construction. There's a generally accepted value—

Rear Adm. Sammut : There is a generally accepted value, and that was 70 per cent.

Senator GALLACHER: How did you assure yourself that this 65 per cent and 70 per cent was the maximum possible in this bid?

Rear Adm. Dalton : We ran a competitive process where clearly Australian industry content was valued highly. When we looked across at what the three bidders offered, in that competitive environment, balancing it against the risks that we wanted to start prototyping in 2020 and work on the first ship in 2022—and it is a nine-ship program—that's the number that they came up with. When we assessed it, we looked at the deliverability of that.

Senator GALLACHER: So you're confident—

Senator PATRICK: So the tender said 50 per cent?

Rear Adm. Dalton : No, it didn't. It said we want to maximise the Australian industry content. As a guide, we said we would expect that you would perform better than the air warfare destroyer and achieve greater than 50 per cent.

Senator GALLACHER: Will the industry content be signed off in the contract?

Rear Adm. Dalton : There will be an Australian industry content plan delivered under the contract.

Senator GALLACHER: Will you have the sign-off on the supply chain? In other contracts you might have had the final sign-off on the supply chain. Is this true?

Rear Adm. Dalton : In what sense do you mean 'sign-off'?

Senator GALLACHER: To maximise this content that we're looking for.

Rear Adm. Dalton : We will hold the prime contractor responsible for delivering on the Australian industry content plan.

Senator GALLACHER: Just on that thought: what penalties or consequences will be in place to make sure that you can hold the contractor to it?

Rear Adm. Dalton : There are a range of clauses already in the standard Defence contracting template that will flow into the head contract for frigate program.

Senator GALLACHER: What's the most obvious one? What's a penalty or consequence of not honouring the contract?

Rear Adm. Dalton : The negotiations for that head contract are ongoing now. I don't want to get caught up in a range of things that might be subject to the actual commercial negotiation that's happening right now.

Senator GALLACHER: But there are acquitted contracts that would have had agreed parameters and consequences and/or penalties.

Rear Adm. Dalton : Absolutely.

Senator GALLACHER: So it's quite a normal feature of your—

Rear Adm. Dalton : It's a normal feature of the way we contract.

Senator GALLACHER: You can hold people entirely to account on these agreed parameters?

Rear Adm. Dalton : We will hold them to account to achieve their Australian industry content. That might mean over time that that changes and it might mean different vendors are under different commercial circumstances, but we will hold them to achieve the Australian industry content.

Senator WONG: I'm asking about the information, Mr Groves, you were going to come back with. I also want to quickly touch upon the two per cent commitment and the tracking towards that.

Mr Groves : With the chair's agreement, there's a document that I would like to table. It's a two-page document that I think will go towards answering Senator Wong's question.

Senator WONG: So this is against the IIP?

Mr Groves : Yes, this is providing a view across both our capital program and our sustainment program. The capital program across the forward estimates is split between what is approved and what is unapproved. This was at the time of the last published budget estimates, so this would have been back in May. Obviously, this program is continually being updated and, on the publishing of additional estimates, these numbers will reflect some changes as things get approved and as we continually manage across the Defence budget.

Senator WONG: Which table in the PBS is this either replicating or disaggregating?

Mr Groves : It's disaggregating to a degree tables 4 and 5 on page 22.

Senator WONG: I thought so. So you've just put in there 'approved' and 'unapproved', essentially?

Mr Groves : Yes, I was trying to give you that sense across the forward estimates around what that split is.

Senator WONG: That's very useful. I appreciate that. I'll come back to that on notice, if I need, but I think that's clear. Was there something else you wanted to say?

Mr Groves : Yes, that's tabled.

Senator WONG: Thank you. Can I ask you or whomever about the progress against the white paper two per cent commitment? I just want to give you the opportunity to explain to us the difference between the forward estimates appropriations now as compared with the white paper. For example, for current financial year, there was a white paper figure of $36.769 billion, but now it's $36.532 billion. That difference continues over the forward estimates and there is a cumulative reduction, I suppose, between the white paper publish figures and the current forward estimate figures of about $5 billion to $6 billion. Can you just explain to me why that is the case?

Mr Groves : Yes. I will start off on that. We are still on track to meet the two per cent commitment by 2020-21, when you include the Australian Signals Directorate appropriation as part of those calculations, because that was part of Defence at the time of the white paper. Now it's a separate appropriation. On your question around the movements, I don't have a table with me that compares the white paper and what the current forward estimates is showing, but, as you would be aware, there's a variety of changes that get applied to our budget in each budget round, including foreign exchange updates and operations funding, which is on a no-win, no-loss arrangement. All those sorts of things get applied. I know there has been some movement.

Senator WONG: Yes. Could we do this on notice?

Mr Groves : Yes.

Senator WONG: Could you look at the white paper forward estimates provisions or numbers and the current forward estimates? And perhaps you could outline the drivers of the variations?

Mr Groves : Yes.

Senator WONG: Are they parameter variations? Are they changes in policy decisions? Are they increases in estimated costs—those sorts of things?

Mr Groves : Yes, and it could just be things like, as there has been—as we've discussed already today—some slippage in some of the programs and money moved out of the forward estimates.

Senator WONG: It would be useful to me if you could make sure that we are clear what is a parameter variation and what is an estimates variation, and the drivers of each of those.

Mr Groves : Yes, we can do that.

Senator GALLACHER: Can we accept this document as a document of the committee, Senator McGrath? All done. So tabled.

Senator WONG: Have we gone to the various Auditor-General reports yet?

Mr Moriarty : No.

Senator WONG: I want to speak about the Hawkei procurement. I have some questions about that. First I would like to go through the process and chronology of the DOD's engagement with the Auditor-General in relation to this report. This is about the protected mobility vehicle light—the Auditor-General's report No. 6 of 2018.

Ms Skinner : I will ask the head of our fraud and audit area, the area that deals directly with the ANAO, to go through that chronology for you.

Senator WONG: Can we start at the beginning, not with a general statement about why the government is right, please?

Dr Clarke : The audit began in March 2017. In terms of communications with the ANAO about our concerns about the audit, that commenced in August 17. Between March and August the ANAO were conducting their field work and preparing their preliminary analyses. We then communicated again in October 2017 when they provided us with their preliminary report preparation papers. We then had two communications in December 2017, initially on the proposed report for that audit and then a draft final report. We then communicated again in January 2018 on a revised draft final report. We provided some additional feedback in April 2018 and then we provided final advice in August 2018 on the version of the report that ultimately became the public report.

Senator WONG: There is obviously quite a lot of interaction. The chronology I had associated with this was the appendix H to the Auditor-General's submission to the JCPAA about issuing the section 37 certificate. They truncated the chronology you just gave me a little. The first provision of the proposed audit report to DOD for comment was November 2017. I think what you've described to me is a series of subsequent interactions.

Dr Clarke : Preliminary and subsequent communications.

Senator WONG: But going through to the end point of the discussions with you, the Auditor-General's submission to the Joint Committee of Public Accounts and Audit—the assertion is made that all national security issues had been worked through with the DOD in the course of the audit. That's at page 6, paragraph 4.

Ms Skinner : I think we should just be very clear about how you can categorise classified material. There is a process with all of these that we make sure that there is no classified information within the report. I think we should be clear that that can be separate from the content of the report creating a national or security issue, as the Attorney's—

Senator WONG: Hang on. You are immediately going to the defence of the Attorney's certificate. I haven't asked you about that. I'm asking you whether you agree or disagree with the Auditor-General's assertion that all national security issues had been worked through with the Department of Defence, as is asserted at page 6 of the submission to the other committee.

Ms Skinner : My understanding is that we were comfortable that anything that was classified had been removed from the report.

Senator WONG: Comfortable that anything classified had been removed from the report?

Dr Clarke : Just to clarify: by May 2018, all security concerns that we had raised with the ANAO had been addressed.

Senator WONG: Thank you, that's clear—all security concerns that DoD had raised had been addressed.

Dr Clarke : Of a national security nature.

Senator WONG: I have the Hansard here, but I haven't had time to tab it. Did you give evidence, Dr Clarke, that characterised—actually, can I go back to your evidence just then. Did you say it was May 2018 that the DoD's national security concerns had been dealt with?

Dr Clarke : Yes. In early May 2018 the Auditor-General released a proposed interim redacted report. The content of that addressed the national security issues that we had raised with them. The Auditor-General didn't actually table that version of the report, but the changes that he'd made to that report flowed through to the final report that was tabled in September.

Senator WONG: Okay. But those redactions did not include the redactions which are the subject of the certificate?

Dr Clarke : It did include some of the redactions that were part of the certificate.

Senator WONG: Okay, so we're clear: the May 2018 version we've got had certain redactions. The certificate issued by the Attorney-General included some of those.

Dr Clarke : Indeed. If it helps, the Auditor-General's report reproduces the certificate at appendix 5.

Senator WONG: Yes, but, so I can understand it conceptually, the certificate extended the redactions beyond those which had been agreed to be redacted as a consequence of the discussions between you—in other words, DoD—and the Auditor-General.

Dr Clarke : Yes.

Senator WONG: That's reasonable. The chronology that the Auditor-General has provided is that Thales Australia was provided with a copy of the proposed audit report in November 2017 and then made an application to the Attorney-General in January 2018. Correct?

Dr Clarke : I'm not aware of exactly what occurred with Thales. That is a matter for Thales.

Senator WONG: Did they ever talk to you?

Dr Clarke : Not in relation to this certificate matter.

Senator WONG: Why did they not raise the issues with you as opposed to going directly to the Attorney-General at the political level?

Dr Clarke : There's a bilateral relationship here.

Senator WONG: I got that.

Dr Clarke : The Auditor-General was auditing the Department of Defence and its management of this acquisition project. As part of that activity, the Auditor-General also gathered evidence from Thales Australia and, as I understand it and as is reproduced in the Auditor-General's chronology, he released extracts of that report to Thales Australia as part of his natural justice process. That triggered Thales Australia's interactions with the Attorney-General.

Senator WONG: But they went straight to the Attorney-General; they didn't come to the Department of Defence and say, 'We think there's national security information that we want redacted'?

Dr Clarke : No.

Senator WONG: At any point have they done so?

Dr Clarke : No.

Senator WONG: Straight to the political level?

Ms Skinner : We might just confirm the arrangements or the engagements that Thales would have on a regular basis anyway with our Capability Acquisition and Sustainment Group project team, as it may well have been part of conversations that they had. I think we should just clarify that. I think Dr Clarke's talking about the formality of the process.

Senator WONG: No, I think Dr Clarke's talking about what he knows, which is what he should talk about, not what he doesn't know about. Correct?

Dr Clarke : I can only talk about what I know about.

Senator WONG: That's good. I like it when officers do that.

CHAIR: C'mon, let's get on with it.

Senator WONG: No, he's been good—answering clearly.

CHAIR: That is high praise coming from you.

Senator WONG: Well, I think public servants should answer clearly and not play politics, so it's good when they don't. When did DoD become aware that Thales Australia had made application to the Attorney-General?

Dr Clarke : We became aware when the Attorney-General sought advice from the Minister for Defence Industry and the Minister for Defence in February 2018, so that would have been on 19 February 2018.

Senator WONG: So, at the time you had resolved all issues with the Attorney-General—sorry, with the Auditor-General. There are too many generals in this conversation! This was in May 2018. You were already aware of the Thales approach?

Dr Clarke : By May 2018 we were, yes.

Senator WONG: Okay. Did you take into account their approach in resolving the issues with the Auditor-General?

Dr Clarke : The request for advice from the ministers came to us on 20 February—so, the day after the ministers received the request from the Attorney-General. We prepared that advice and provided that to the ministers in March, on 16 March.

Senator WONG: But the scope of the certificate goes beyond the concerns that Defence raised with the Auditor-General?

Dr Clarke : In the end, it was the decision of the Attorney-General. He took into account advice from a wide range of sources, I presume.

Senator WONG: Who else gives him advice on what constitutes national security?

Dr Clarke : I do not know what other sources of information he drew upon. All I can comment on is the advice we provided to our ministers.

Senator WONG: Sure, but I think we've established that the scope of the certificate goes beyond the concerns that Defence raised.

Dr Clarke : It may well do, yes.

Senator WONG: I thought we had established that, but perhaps I should be clear. Do the redactions go beyond the redactions that you sought?

Dr Clarke : The redactions go beyond national security issues.

Senator WONG: Okay, the redactions go beyond national security issues.

Dr Clarke : That's correct.

Senator WONG: Okay.

Dr Clarke : If it helps, the head of power that the Attorney-General was applying is set out in the Auditor-General Act, section 37, and he applied two heads of power. One was that, in his opinion, disclosure of certain information in the report would, firstly:

…prejudice the security, defence or international relations of the Commonwealth—

that's section 37(2)(a); secondly:

…it would unfairly prejudice the commercial interests of any body or person—

which is section 37(2)(e). They are very broad.

Senator WONG: You're saying to us that there are redactions which were not necessary for national security reasons but were judged by him to be necessary for the commercial position of an entity?

Dr Clarke : Commercial—and broader security, defence or international relations of the Commonwealth.

Senator WONG: Okay. But we've agreed that the redactions go beyond the concerns raised by Defence?

Dr Clarke : The redactions go beyond the national security concerns raised by Defence.

Senator WONG: Okay. Did the scope of your concerns change between November 2017 and May 2018 to take into account the Thales issue?

Dr Clarke : We provided a range of feedback. The feedback has been very consistent all the way through. We were concerned that the report would negatively impact on this sovereign industrial capability. That information was consistently provided, as I said, from August 2017 onwards and it formed the core of the advice that we provided to our ministers.

Senator WONG: Do the redactions go beyond the core of that advice?

Dr Clarke : No.

Senator WONG: Is it your understanding that the original request from Thales for the report to be redacted was due to concerns of unfair prejudice to their commercial interests?

Dr Clarke : It is a matter for Thales. I've never actually—

Senator WONG: I'm just asking what your understanding was.

Dr Clarke : I've never actually seen the Thales application to the Attorney-General.

Senator WONG: Did Defence advise their minister on the Thales request for redaction?

Dr Clarke : We were asked for our advice on—

Senator WONG: In relation to the Thales request?

Dr Clarke : It was in response to the Thales request.

Senator WONG: When was that advice provided?

Dr Clarke : The Defence advice to the ministers was provided on 16 March 2018.

Senator WONG: Was that advice consistent with the position you eventually came to in May 2018 as to Defence having resolved all national security issues with the Auditor-General's report?

Dr Clarke : I believe in April 2018 we identified some further national security issues and advised the Auditor-General accordingly.

Senator WONG: And he deleted them?

Dr Clarke : And he deleted them.

Senator WONG: Correct.

Dr Clarke : As per the usual practice that we have with the Auditor-General.

Senator WONG: If you didn't have any further concerns as at May 2018, why did the certificate need to be issued?

Dr Clarke : That's a matter for the Attorney-General.

Senator WONG: Can anyone explain it to me?

Dr Clarke : There is JCPAA inquiry looking into this whole process.

Senator WONG: Yes, I know. What it looks like to me is you say, 'Here are all these national security issues and they're all resolved.' Then a company goes to a minister, and all of a sudden there's redaction beyond what you, from a Department of Defence perspective, deemed needed to be redacted for national security reasons. Can someone tell me if that's wrong?

Ms Skinner : I think Dr Clarke has pointed out the broader point, which, as mentioned earlier, is potentially separate from classified information being in a report around sovereign industry capability.

Senator WONG: You keep using that phrase 'classified material'. He doesn't. He uses 'national security'. He's very clear in his evidence to this committee.

Dr Clarke : By way of clarification—and perhaps I'm being a public servant here, a nerdy public servant—

Senator WONG: I like nerdy public servants—

Dr Clarke : When I talk about national security, I'm referring to those things that I would consider to be classified.

Senator WONG: You're saying it's something different now, Ms Skinner, is it?

Ms Skinner : No. I think there are two aspects. One is it is important for us, with all of our work that we do with organisations like the ANAO, that we ensure that the report can go comfortably into the public domain, so we continue to work with them to remove classified information. I think the point around this broader point against the certificate—that the certificate goes to security, defence or international relations of the Commonwealth, and as Dr Clarke—

Senator WONG: And the second limb, which I put to you is more likely to be the limb that mattered. It doesn't bear scrutiny. If you've got a situation where the Department of Defence says, 'Yep, tickety-boo, we've resolved our national security concerns that are in this report.' And then a company comes along, goes straight to the political level and says, 'I want a certificate because—originally they say a commercial-in-confidence issue. Then they get redactions beyond what the Department of Defence has requested from the Auditor-General. It seems to me that it's pretty difficult to argue there are national security issues there. I think you can argue that the second limb of 37(b) applies, was it?

Dr Clarke : It's 37(2).

Ms Skinner : Dr Clarke pointed out that we continue to make a point around industrial capability right down to May. So I think that remains consistent with what we've said.

Dr Clarke : Just to clarify, it was right down to the period leading up to the tabling of the final report.

Senator WONG: Your point around—capability? What did you call it?

Dr Clarke : Sovereign industrial—

Senator WONG: Your point around sovereign industrial capability didn't result in you making any further requests beyond May to the Auditor-General for redaction?

Dr Clarke : The Attorney-General issued a certificate—

Senator WONG: Correct.

Dr Clarke : in June, which effectively resolved that issue, because it prevented the publication of certain material that, in our view, would have negatively impacted on this sovereign industrial capability.

Senator WONG: But you gave me evidence before—when did you first raise the sovereign industrial capability head of concerns—

Dr Clarke : The concerns that we had that went to the negative impact on this sovereign industrial capability were first commenced to be raised in August 2017. We've consistently raised our concerns about the impact of various aspects of that report since then.

Senator WONG: I thought we agreed earlier, however, that the redactions went beyond what you requested?

Dr Clarke : Yes.

Senator WONG: Thank you. I just have this question, then. Mr Pyne gave an interview earlier this week, on Monday, and he said:

The Attorney-General did it because myself, as the Minister for Defence Industry, and Marise Payne, as the Minister for Defence, asked the Attorney-General to act under the legislation to ensure the national security of the country.

Dr Clarke : Yes.

Senator WONG: Is that right?

Dr Clarke : I believe that is what he said.

Senator WONG: Well, is that consistent with the evidence you've given today?

Dr Clarke : I don't see any difference, Senator.

Senator WONG: You don't?

Dr Clarke : No.

Senator WONG: The redaction by the minister goes beyond the national security redactions that you requested.

Dr Clarke : Making clear that when I was referring to national security—maybe I misspoke—it was relating to classified information.

Senator WONG: Okay. So, he's talking about something else?

Dr Clarke : Broader national security—

Senator WONG: We've got a different broader—

Dr Clarke : Security, defence and the international relations of the Commonwealth.

Senator WONG: Were you aware that the minister would ask the Attorney-General to act?

Dr Clarke : Senator, we provided advice, and then the ministers acted on that advice.

Senator WONG: Were you aware that he had done so, or were you aware that—how did you become aware of the decision that your minister made to request the Attorney-General to do so?

Dr Clarke : We were advised by the minister's office that they had signed a letter.

Senator WONG: Did you prepare the letter?

Dr Clarke : We drafted a letter, yes, Senator.

Senator WONG: Was it changed in the office?

Dr Clarke : I would have to take that on notice, Senator.

Senator WONG: I'm done on this, I think.

Senator PATRICK: I've just got a few quick questions on submarines.

CHAIR: You'll go through until five to six?

Senator PATRICK: That's correct.

Lt Gen. Burr : Chair, if I may, while we're waiting for submarines. Just in relation to Hawkei, I'd like to put on the record that this is an extremely capable vehicle that will bring enormous degrees of protection and mobility to our Army. At the end, we will have 1,100 of these vehicles. It builds on the proven design of our Bushmaster protective mobility vehicle, which has been incorporated into the Hawkei. As we know, that vehicle has saved a lot of lives in Afghanistan, so there's great confidence in our Army with this vehicle. Thank you.

Senator GALLACHER: Is the Chief of Defence Force still advertising the Hawkei on the streets of Canberra!

Gen. Campbell : Thank you very much, Senator Gallacher. As you know, Senator, from one of the earlier estimates hearings, for a period between January and Anzac Day of 2017, I had the opportunity to use one of the early production Hawkei vehicles to enable members of parliament, senior leaders in Defence and industry and international visitors to see what was being produced here in Australia—to great interest. Let me assure you, so I don't get more letters on it, it was to absolutely no loss of ADF capability. The vehicle went back into the preproduction line and off to the units.

CHAIR: I'm glad that has been said.

Gen. Campbell : Thank you.

Senator PATRICK: I'm still waiting for submarine people to come to the table.

CHAIR: They are coming. Good. Your time starts now.

Senator PATRICK: Thank you. Rear Admiral Sammut, you will recall a discussion between Senator Xenophon and your good self, in respect of periscopes, back in 2017. It relates to a BAE contract that was sub-let to Thales to provide periscope tubes. You said that the first tube would arrive in December 2017 and the second tubes would arrive in December 2018. Did the first tube arrive in December and are the others on schedule?

Rear Adm. Sammut : The first tube arrived in March 2018, as opposed to December of 2017. That was due to quality issues with the ingot that was used to machine those tubes. That led to the delay. At this stage, we're on track for delivery of the other tubes in December. At this stage that remains on track.

Senator PATRICK: I will move very quickly now to a conversation I had with Senator Cormann yesterday about the golden share arrangement that is being used for SEA 5000, whereby the work for SEA 5000 is been done by ASC Shipbuilding, which will become a subsidiary of BAE, but at the end of the project the subsidiary of BAE will return to full government ownership. Is that a model that is being considered for SEA 1000?

Rear Adm. Sammut : The short answer is no, it's not.

Senator PATRICK: Short answers are good, I'm not sure I like the answer, but thank you.

Rear Adm. Sammut : I won't go into arrangements that we have that go into detail. We can offer, with the Minister's approval, a private briefing to the committee on other arrangements we have for sovereignty. I can say, at a high level, there are sovereign assets for this program that will remain the property of the Commonwealth. There are certain elements around the constitution of Naval Group Australia that ensure we can operate and sustain the submarine with sovereignty into the future as well. I would like to leave those details to a private briefing, with the permission of our minister.

Senator PATRICK: The other discussion that took place yesterday with Mr Whiley, was to do with the submarine infrastructure review team, looking at how to facilitate the build of the Future Submarine. He confirmed at a very top level that there have been discussions, that ASC North, where the current full cycle dockings are done on submarines, that area may be required for the Future Submarine build. Can you confirm whether there's discussions taking place with Defence in that regard?

Rear Adm. Sammut : I can confirm that we have developed a number of options for the submarine construction yard. We've looked at the way that we best optimise construction of the Future Submarines. We have looked at some of those options. We've also mentioned in the past in Senate estimates that we are continuing to investigate how we can best manage the ongoing sustainment of the Collins class alongside the build of the Future Submarine so that we ensure that we have efficient production of the Future Submarine in a shipyard that is best suited to coming down the learning curve and getting maximum efficiency in the build, alongside the requirement to ensure that we can continue to sustain Collins. No firm decisions have been made on those as yet.

Senator PATRICK: I've seen some documents relating to basing of submarines where it was talked about FCDs being shifted to WA.

Rear Adm. Sammut : Options.

Senator PATRICK: I understand, but I'm just joining a few dots. I have now seen a study that's been done by Defence to shift it, and now I'm hearing that ASC North may well be the site for construction of the Future Submarine, which would be inevitable ending to full cycle dockings in South Australia.

Rear Adm. Sammut : Depending on which options are taken. It wouldn't say that it's just the ASC North site that ASC currently occupies. It will be a larger area of the Osborne precinct that will be required for the construction of the Future Submarines.

Senator PATRICK: Perhaps on notice, could you provide what the list of options are, just at the very high level?

Rear Adm. Sammut : We'll take that on notice. To the extent that we can provide the information, we certainly shall.

Senator PATRICK: Thank you.

CHAIR: Very good. Well done, Senator Patrick. We'll have to take back what I said. You are an honest man. Let that be on the record, on this occasion.

Senator GALLACHER: So, basically, the Naval shipbuilding plan carries forward figures from the 2016 Integrated investment program released with the white paper of:

…priority capability enhancements, obsolescence management and fleet sustainment investment valued at $2.6 billion (out-turned) for approved and unapproved projects and $6.7 billion (out-turned) for the continuation of the sustainment effort over the remaining life of the Collins Class submarines.

Is it possible to get an update on those figures? Have they been updated from 2016?

Mr Johnson : The short answer is yes, but you want the details. The next phase of radio upgrade has been approved, as has the next phase of sonar upgrade. If you just give me a second, I'll find the numbers for you. It's about $700 million, in round numbers.

Senator GALLACHER: I know Senator McGrath has been waiting very patiently, and I've got a page and a half to get through, so I don't want to get bogged down in minute detail that I'm not asking about. I'm asking whether there is a broad change to the $2.6 billion and the $6.7 billion.

Mr Johnson : No, those numbers remain consistent.

Senator GALLACHER: That's fine. If the answer is no, can you tell us what, if any, of that investment has been drawn down over the two years since the Integrated Investment Program?

Mr Johnson : The next increment started installation in the Waller full-cycle docking, which began around 1 July. This being October, very little of it's drawn down, and I'll give you the details in an answer.

Rear Adm. Sammut : Sustainment, of course, would have been drawn down. The figures there were for the sustainment cost as well as the upgrade cost, so that would include capital improvement as well as ongoing sustainment. You would expect that, since 2016, we would have been operating sustainment of the Collins class, and the annual figures for that are of the order of about $590 million to $600 million.

Senator GALLACHER: That's what the budget papers tell us—the cost for the Collins sustainment for 2018-19 is $592 million.

Rear Adm. Sammut : Exactly.

Senator GALLACHER: So that $592 million represents this year's portion of the $9.3 billion in the Integrated Investment Program?

Rear Adm. Sammut : Yes.

Mr Johnson : And my answer was about the recently approved upgrades that you also asked about.

Senator GALLACHER: Yes, I think sometimes my questions provoke an answer I'm not looking for. This financial year, what is the balance of enhancement, obsolescence management and investment compared to continued sustainment?

Mr Johnson : Well, the Collins acquisition project totalled $104 million and the Collins sustainment $592 million, for a total of $700 million. So that's about 14 per cent in round numbers.

Senator GALLACHER: Okay. Go back to the $592 million. Is that a typical year? Is that expected to carry through?

Mr Johnson : It is, and the largest single component, as you'd expect, would be our contract with ASC.

Senator GALLACHER: For us to maintain our current capability, we'll need to have six submarines available. Is that correct?

Rear Adm. Sammut : Not six submarines available. There are six submarines. As you would be aware, as we did the Collins transformation program, that was based on making sure that we could have two available for operations from three sometimes four available to the fleet commander, with the remaining two in longer term maintenance. That's the sustainment cost to maintain that level of output.

Senator GALLACHER: Given that sustainment schedule we would have six submarines available. We currently plan for a construction tempo of a submarine every two years, when they first come in in the early 2030s, is that correct?

Rear Adm. Sammut : It's a delivery rate.

Senator GALLACHER: A delivery rate.

Rear Adm. Sammut : At this stage our planning is around a two-year drumbeat, yes.

Senator GALLACHER: Trying to marry all that together, and I know it's a fair way away, we would expect the sixth Future Submarine to come into service in the mid-2040s?

Rear Adm. Sammut : Excuse me, just let me make sure I get my sums right, forgive me—42.

Senator GALLACHER: Is that when the last Collins would come out of service?

Rear Adm. Sammut : That will depend on decisions that the government will make about the number of Collins class submarines to be life extended.

Senator GALLACHER: If we expect to spend $592 million a year in today's dollars keeping your six Collins class subs in the water through to the early 2030s that would be about $9.47 billion in today's dollars. Is that right?

Rear Adm. Sammut : If you were doing the maths and simply multiplying out the sustainment costs. We would have to take account, of course, of the costs of life of type extension, and just to be clear that would be additional to sustainment costs.

Senator GALLACHER: Doing that rough mathematics, how does $9.47 billion in today's dollars equate with $9.3 in out-turn dollars? What is an out-turn dollar? Is that a future dollar or is that a—

Mr Johnson : It's a future dollar escalated by today's rule at 2.5 per cent. It depends which year you're picking and how many years if you're adding.

Senator GALLACHER: We budgeted for a 9.3, that's inclusive of an inflation figure? If we did the maths on 592 it wouldn't stack up, so is that an underestimation of what we're really going to be looking at?

Rear Adm. Sammut : I think you've assumed that it's going to be six boats out to that time frame, so there would have been assumptions made about how many boats. But the actual number of boats to be life extended, as I said, will be a decision for government based on what it views to be the capability needs into the future, depending on its assessment of the threats at the time.

Senator GALLACHER: So you're saying that the retirement or the new boats and the lowest sustainment cost have been factored into that 9.3 out-turn dollars?

Rear Adm. Sammut : The 9.3 would look at what plans were in 2016 for extension of the Collins class.

Mr Johnson : To which year?

Rear Adm. Sammut : To whichever year that was going to be. What you have said is that if you kept six in service until a particular date you end up with a larger figure. The assumption wasn't necessarily that we would keep six in service to a particular date when those figures were reached.

Senator GALLACHER: The retirement of the number from six down to five down to four, is that available to be tabled, how you calculated that figure?

Rear Adm. Sammut : We will have to take that on notice.

Senator GALLACHER: The investment plan did take into account all of these factors—

Rear Adm. Sammut : The investment plan would detail what's required to—

Senator GALLACHER: Is that a private document? Is there any commercial-in-confidence or is it—

Rear Adm. Sammut : What it would say about what level of capability we will have in future years in terms of the submarine capability—

Senator GALLACHER: We're just interested in the dollars, whether you got those dollar figures correct?

Rear Adm. Sammut : Again, that would depend upon the number of submarines in service and again—

Senator GALLACHER: But you've made assumptions on that surely, because that's how you ended up with 9.3.

Rear Adm. Sammut : Exactly. As to whether those assumptions reveal what level of capability the government will have in service at a particular point in time, we need to make sure we assess that properly to ensure that it doesn't undermine security considerations.

Senator GALLACHER: Am I reading your answer to a question on notice that the out-turn 2.6 billion in the integrated investment plan is all that is required to keep six Collins class submarines upgraded to a regionally superior standard over the next period—two or three decades?

Mr Johnson : I think we've already taken that question on notice. Because of the level of detail, to give you a precise answer we'll have to see exactly how it was worded.

Senator GALLACHER: If each new regionally superior submarine would cost us $4 billion in today's dollars, but upgrading our existing submarines to regionally superior would cost us less than half a billion out-turn dollars, is that a fair price in the market?