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Thursday, 26 November 2015
Page: 9128

Defence Procurement

Senator XENOPHON (South Australia) (14:26): My question is to the Minister for Defence, Senator Payne. In June 2014 the government announced that the C1654 tender for two new supply ships would be restricted to an overseas build by either Navantia, of Spain, or DSME of South Korea. It is my understanding that the tender is now closed and responses are being evaluated by Defence. Noting that no further input can be provided to Defence by the tenderers and that I do not seek any indication as to how the tender is progressing, can the minister please advise whether any of the tenderers have indicated in their responses a willingness to include some block or module construction in Australian shipyards—that is, potential local content worth up to hundreds of millions of dollars?

Senator PAYNE (New South WalesMinister for Defence) (14:27): Senator Xenophon, I thank you for your question and acknowledge your particular interest in this area. The tender is indeed closed. It closed on 7 August this year. Defence is currently assessing those tenders and is planning to return to the government for consideration of second-pass approval in 2016. I can advise the senator that, obviously, Australian content will be considered as part of this assessment and particularly the ongoing support of the ships. Senator Xenophon, you acknowledged that the tender process is underway. So it is inappropriate for me to comment on the specifics of what the tenderers may or may not have indicated in their response.

Senator Xenophon has asked about a very key capability area. These current supply ships are in very urgent need of replacement. When we came to government, in 2013, their replacement was Navy's highest capability priority. The replenishment vessels are essential to support sustained and able deployments. The best advice to government from Defence at the time was that we could not build these ships in Australia in the time required without risking a very serious capability gap. So in June 2014 the government announced first-pass approval for the limited competitive tender process to which the senator referred because both of those tenderers had solutions based on existing designs, therefore helping significantly in terms of timeliness.

Senator XENOPHON (South Australia) (14:29): Mr President, I ask a supplementary question. Once the preferred tenderer has been announced, will the government put local block and module construction that is maximising local Australian industry participation on the table during contract negotiations and what weighting will the government give to an option that includes some block and module construction in Australia?

Senator PAYNE (New South WalesMinister for Defence) (14:29): Thank you, Senator Xenophon, for the supplementary question. I really do need to reiterate what I said in my initial response, and that is that we do have a tender process underway and there is a requirement in place for Defence to evaluate the responses submitted by both the tenderers.

As I said earlier, the potential for Australian industry involvement in the delivery of these new replenishment ships will be considered as part of the evaluation of the proposals that are received. What we have to do in that process as well is weigh that up against potential cost premiums and questions around delivery timetables and potential delays.

So I look forward to Defence coming back to government in 2016 with their proposed way forward—because we need to do this, basically, as soon as possible. We have the Success, which is almost three decades old and is increasingly expensive to sustain. As I said, Defence's best advice to government was that Australian build options could not have achieved the required schedule, but we will certainly consider the potential for Australian industry involvement. (Time expired)

Senator XENOPHON (South Australia) (14:30): Mr President, I ask a further supplementary question. Does the government at least acknowledge and agree that utilising Australian shipyards to build future supply ship blocks and modules will plateau the so-called 'valley of death' and assist in arresting the ongoing retrenchment of Australia's naval shipbuilding workforce around the nation?

Senator PAYNE (New South WalesMinister for Defence) (14:30): I thank Senator Xenophon. As I said, the potential level of Australian industry involvement in each of these proposals will definitely be considered as part of the evaluation of the tenders. But the fact is that the problem we are facing today is that the Labor government sat on their hands for six years and did nothing to even start the process to replace the Success and the Sirius. They did nothing at a point in time when it may have been possible to actually have an Australian build—absolutely nothing at that point in time. In fact, they did not commission one single naval vessel from an Australian shipyard in six years. That is where the valley of death came from—right across there. The Turnbull government will have a naval shipbuilding plan which will set out a pathway to help ameliorate Labor's valley of death. But, unfortunately, the only people who could have prevented it are right there. (Time expired)