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Tuesday, 1 December 2015
Page: 9443


Senator SMITH (Western AustraliaDeputy Government Whip in the Senate) (16:47): On behalf of the Joint Standing Committee on Foreign Affairs, Defence and Trade, I present two reports as listed at item 13 on today's order of business. I move:

That the Senate take note of the reports.

I seek leave to incorporate two tabling statements in Hansard.

Leave granted.

The statement s read as follows—

Joint Standing Committee on Foreign Affairs, Defence and Trade

Tabling Statement

Principles and Practice: Australian Defence Industry and Exports

Mr President—on behalf of the Joint Standing Committee on Foreign Affairs, Defence and Trade, I have the pleasure of presenting the Committee's report on the inquiry into Australian Government support for Australian defence industry exports, entitled Principles and Practice: Australian Defence Industry and Exports.

The inquiry was focussed on:

Identifying barriers and impediments to the growth of Australia's Defence exports;

How Government can better engage and assist Australian Defence industry to export its products;

The operations of the Defence Export Control Office; and

Assessing export support given to Defence industry by governments of comparable nations.

The Committee's starting point when preparing the report and its recommendations was accepting the evidence provided during this inquiry—and validated by recommendations of the First Principles Review—that there are elements of defence industry essential to Australian Defence Force capability.

Defence therefore has an obligation to identify elements within the defence industry that constitute fundamental inputs to capability, known as FICs.

Defence must then use available means to enhance and sustain the FIC-related elements of the defence industry that affect ADF capability, including through domestic procurement programs and enhanced support for exports.

Where exporting would assist to sustain or develop industry elements that are identified as FIC, support for defence exports should be viewed as a core Defence responsibility, in the same way as the Service Chiefs manage other FIC elements, which include training, personnel plans, facilities and doctrine development.

In the Committee's view, this would fundamentally change how the assessment of value-for-money should be approached within Defence's procurement process, particularly by establishing long-term partnerships with industry, rather than trying to achieve value for money through open competition as a default position. Many projects could deliver better value for money with long term partnering agreements.

The UK Government's management of complex weapons procurement and ship building which have been designed to establish ongoing relationships with suppliers, has demonstrated how partnering with industry can deliver savings to government, improved capability, innovation, unique products with export potential whilst maintaining UK sovereign capability.

The report contains 19 detailed recommendations. In summary, Mr President, the Committee has recommended:

Recognising the defence industry as the ninth fundamental input to capability and identifying the relevant elements of industrial competence and capability;

Reforming Defence's procurement approach such that long-term partnerships with industry which drive innovation become more common;

Increasing the level of support for defence exports where such exports will help sustain or develop a fundamental input to capability;

Providing assistance for Australia n defence exports based on a distinction between core and secondary .export focus.

Core export focus would apply to elements of industry output recognised as a FIC, where defence exports can help sustain or spread production costs. This support should extend to funding for research and development that supports exports that will have an impact on the associated FIC.

Secondary export focus would apply to those elements of industry output not recognised as a FIC. In such cases, Defence and other related agencies should provide assistance, where practicable.

Lastly, subject to acceptance of the Committee's core proposals, the Committee has recommended that Defence discontinue the Priority Industry Capability and Strategic Industry Capability programs, retain the Australian Industry Capability targets for procurement activity that do not involve an identified fundamental input to capability and continue to promote the Global Supply Chain scheme wherever possible.

Other recommendations included:

Revising the role of defence attaches;

Enhancing the role for the Australian Military Sales Office;

Tasking ADF personnel to attend trade shows and events alongside industry;

Having active ministerial advocacy on behalf of the Australia n defence industry; and

Improving processes within the Defence Export Control Office.

In conclusion, I would like to thank the many witnesses who gave their time to meet with the Committee and those who made submissions to the inquiry.

Mr President—I commend the report to the Senate.

Joint Standing Committee on Foreign Affairs, Defence and Trade

Tabling Statement

Principles and Practice: Australian Defence Industry and Exports Review of the Defence Annual Report 2013-14

Mr Speaker—on behalf of the Joint Standing Committee on Foreign Affairs, Defence and Trade, I have the pleasure of presenting two reports:

The report on the inquiry into Australian Government support for Australian defence industry exports, entitled Principles and Practice: Australian Defence Industry and Exports; and

The Review of the Defence Annual Report 2013-14.

I will give an overview of each report, beginning with the report on the inquiry into Australian defence exports.

The Committee accepts evidence presented—and validated by recommendations of the First Principles Review—that there are elements of defence industry essential to Australian Defence Force capability. Defence therefore has an obligation to identify elements within the defence industry that constitute fundamental inputs to capability, known as 'FICs'.

In the Committee's view, Defence must use available means to enhance and sustain the FIC-related elements of the defence industry that affect ADF capability, including through domestic procurement programs and enhanced support for exports.

Where exporting would assist to sustain or develop industry elements that are identified as FIC, support for defence exports should be viewed as a core Defence responsibility, in the same way as the Service Chiefs manage other FIC elements.

This would fundamentally change how the assessment of value-for-money should be approached within Defence's procurement process, particularly by establishing long-term partnerships with industry, rather than trying to achieve value for money through open competition as a default position. Many projects could deliver better value for money with long term partnering agreements, as shown by the UK experience.

The report contains 19 detailed recommendations. In particular, Mr Speaker, the Committee has recommended providing assistance for Australian defence exports based on a distinction between core and secondary export focus:

Core export focus would apply to elements of industry output recognised as a fundamental input to capability, where defence exports can help sustain or spread production costs. This support should extend to funding for research and development that supports exports that will have an impact on the associated FIC.

Secondary export focus would apply to those elements of industry output not recognised as a fundamental input to capability. In such cases, Defence and other related agencies should provide assistance, where practicable.

Lastly, subject to acceptance of the Committee's core proposals, the Committee has recommended that Defence discontinue the Priority Industry Capability and Strategic Industry Capability programs, retain the Australian Industry Capability targets for procurement activity that do not involve an identified fundamental input to capability, and continue to promote the Global Supply Chain scheme wherever possible.

Mr Speaker—today I also present the Committee's report on the Review of the Defence Annual Report 2013-14. I will discuss in turn the key issues that arose during the Committee's review.

The Committee considered personnel matters, including Defence's critical categories of employment, Project Suakin and Reserve Policy. Defence needs to ensure employees have task-specific competence for their role and the relevant experience. The Job Families Project, an approach used to monitor APS gaps in critical capabilities, needs to be further developed. The Committee has recommended that Defence collate and publish figures on Project Suakin.

The Committee examined a range of mental health issues in the ADF. The Committee recommends the Departments of Defence and Veterans' Affairs report on the progress and results of their mental health programs.

The Committee is concerned about the extent of unfunded liabilities in Defence estate and infrastructure and believes it is important to have visibility on the cumulative effects. Although the Committee does not expect Defence to include unfunded liabilities in its annual financial statements, the Committee recommends that Defence report more details of its unfunded liabilities.

The Committee is pleased by Defence's efforts on fuel farms and fuel management. To further this progress, the Committee believes Defence should actively explore options to engage and collaborate with industry. In addition, the Committee recommends enhanced reporting in future Defence Annual Reports on the Fuel Services Branch.

The Committee is also pleased with the long term improvements to Defence Housing and the quality of housing options available to ADF families. However, the Committee recommends Defence, in partnership with Defence Housing, prepare an effective community consultation and communication framework for future housing redevelopments.

More generally, the Committee found that reporting of performance could be more transparent. For example, reporting to Parliament on the Joint Strike Fighter needs to be more comprehensive and equivalent to that made available to the US Congress.

In conclusion, the Committee acknowledges the dedication and commitment of the men and women of the ADF and commends them on the outstanding service they provide to the nation. The Committee also recognises the work of the APS in supporting ADF personnel on operations. It should also be recognised that ADF personnel are supported by a strong network of family and friends, and the Committee expresses its appreciation for their sacrifice.

Lastly, I would like to thank the witnesses who gave their time to appear at hearings and those who made submissions to the inquiries.

Mr Speaker, I commend the reports to the House.

Question agreed to.