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Wednesday, 12 October 1983
Page: 1660

Mr SINCLAIR(4.49) —The Opposition supports the letting of this contract to the Williamstown Naval Dockyard. I am afraid that the statement that the Minister for Defence (Mr Scholes) has just made to this House leaves more unsaid than said. It includes a number of passing references to past difficulties in ship construction in Australia. It refers briefly to recent changes in management and work practice at Williamstown and talks with hope about future co-operation between management, unions, the work force and the Government. There is little doubt that the report produced by Mr Ross Hawke of Broken Hill Proprietary Co. Ltd on the management and operation of Williamstown Naval Dockyard did set about a very considerable reassessment of the processes of operation of that dockyard. During the coalition Government days a great deal was done to revamp the Williamstown Dockyard in accordance with those recommendations. However, I am afraid that in this statement to the House very little has been said except that a hope has been expressed that all these things will work out. I understand the Minister's predicament and I trust that the confidence he is demonstrating in placing this order with Williamstown is fulfilled. Certainly it had been our hope that we would be able to reach this step.

However, I think a number of aspects need to be examined in relation to the upgrading of Williamstown, the undertaking of the construction and the actual constructional work. Firstly, I think it is of concern that, while $2m has been earmarked for management reform in this year's Budget, the Budget Papers identify only about $650,000 of this expenditure. Without going into the matter and taking the time of the House unduly, I refer the Minister to page 42 of the explanatory notes for the Department of Defence Support entitled 'Estimates of Expenditure and Receipts 1983-84'. Only $413,000 is identified under the heading 'Functional Dissection' as having been allocated for the dockyard this year. There is absolutely no basis by which the dockyard has any chance of succeeding in management terms unless the necessary funds are, in fact, spent. There are still very considerable problems in the work flow and it is essential that those works be undertaken.

The second matter that concerns me in relation to this project is the nature of the contract. In the instance referred to by the Minister of the construction of HMAS Success certainly there is the problem of the one-off building. One would be foolish to see a two-off building of ships which will not be completed until the 1990s as in some way immediately curing all the problems of ship construction because it will not do so. I think we should remember that with respect to HMAS Success one of the principal difficulties was the inability of the Royal Australian Navy to come to grips with what sort of ship design it wanted. The interminable amendments to the contract made it extraordinarily difficult for, in that instance, Vickers Cockatoo Dockyard Pty Ltd to know just what sort of ship it was building. It took protracted negotiations finally to settle on a determined contract figure.

With respect to these two FFGs, however, we should at least be told- unfortunately the Minister has not done so in this statement-whether the design will have the amendments to the near landing platform for helicopters that are part of 004, the last of the ship buildings in Darwin. Are the stabilisers to be fitted to this ship at the time of construction? Are the other modifications to the last 004 FFG design, including some of the fire fighting equipment and other facilities within the ship, to be in the contract at the time it is let? One would sincerely hope so. Certainly, it is true that the Navy must get its design finally settled before any contract is executed.

The second part of the matter, however, lies in the management and work practices within the yard. We are all only too well aware that in the report of the Auditor-General of September 1983 there was a series of comments all relating to the extent to which modifications need to be made to try to ensure that Australian design and building for the Department of Defence were conducted in a proper fashion. If we turn to page 25 of that report, which refers to the cost escalation factors that were identified with HMAS Supply, we see that there is criticism of the Department of Defence. The report states:

. . . the Department did not allocate sufficient or appropriately skilled resources to a major project that it knew would be complex and where the risks were clearly recognised in respect of such fundamental issues as design, production control and quality assurance.

Without wishing to reflect unduly on the construction of that vessel and some of the problems that I know were experienced, I believe that in building these ships we certainly need to take note of that admonition of the Auditor-General and ensure that sufficient skill is available. If the Department of Defence does not have it, at the time of letting of the contract it ought to employ consultants with those skills and ensure that in consultation with those outside consultants there is absolutely no risk of the cost escalation that occurred in the construction of HMAS Supply and with the vessel Success to which the Minister's statement referred.

Again in the Auditor-General's report we read on page 34 of suggestions regarding administrative arrangements. There is no doubt that effective project management and effective delegation of responsibility within the Department of Defence need to be improved on very significantly. The Auditor-General has suggested that a project director should be appointed for a project such as this and that he should, as the report states:

. . . have responsibility for the planning, execution and review as well as the success of a project in terms of its time, cost, and technical performance objectives

have status equal to or greater than line managers to enable effective allocation of departmental resources

act as the central authority for all technical and administrative decisions and for reporting to top management, and

have sufficient staff resources to achieve the project's objectives.

It will not be sufficient for the Minister to come into this House in six months time or 12 months time and tell us that the project is, unfortunately, looking as though it will already get into difficulties because there is not that sort of on the job supervision. Certainly, that has been part of the concept of the revamp of Williamstown Dockyard but it is not sufficient that the dockyard have responsibility or that the Department of Defence Support have responsibility. There is an absolute necessity for delegated authority and for somebody within the Department of Defence to undertake those tasks which the Auditor-General recommends in that section of his report. Finally, I think it is also necessary in that general field to take notice of the other criticism of the Auditor- General:

. . . the Department's project management practices for major projects covered by that review--

The one that was tabled in this House-

were unsatisfactory, contributing to: significant additional costs . . . the need for scarce resources to be engaged in rectifying project problems, and dimunition of the Defence capability . . .

I urge the Minister and his Department to take very careful note of those recommendations and to ensure that the delegation to a project manager is implemented as that report suggests. Unless that is undertaken I am most apprehensive as to whether this project will succeed, whatever the quality of the work undertaken at Williamstown. Let me say that there is little doubt that the work done there and at other Australian shipyards over the years has been of a high order. That is not the problem. The problem at Williamstown has been a combination of management, of industrial relations and the facilities generally in the work flow. I had hoped that those problems might well have been rectified as a result of the Hawke recommendations and the work that has been undertaken in recent years. I look forward to the Minister advising this House at a later stage when the formal agreement is signed so that we know to what degree the recommendations of the Auditor-General have been picked up.

One other aspect of this construction concerns me and that is the relations between the Department of Defence and the Department of Defence Support. In this matter I think it is absolutely imperative that the two departments find a way to overcome what too often tend to be magnified differences between them. At times one wonders whether they even think that they are working for the same government and have the same responsibility. It is not desirable that there be these divisions. The two departments must get their act together. I believe it is incumbent on each of them to ensure that a major project such as this does not founder because of a little inter-departmental squabbling. I am concerned too at some indication that in other areas the Department of Defence Support is moving in an independent way. If it moves away from control and supervision by the Department of Defence, again this project may not yield the local work or the opportunities the Minister's statement suggests.

For that reason I was most concerned to note this morning the announcement of a unilateral decision by the Minister for Defence Support (Mr Howe) with respect to the Philippines. That project would have enabled an exchange of technology. It was a project on which I certainly had discussions when I visited the Philippines not so very long ago. The whole emphasis of our defence aid is not towards the control of insurgencies within the Philippines but to give the Philippines some capability to work within our region to try to ensure that there is an oppportunity of repelling external aggression if it should occur. The opportunity, for example, to develop domestically some of the Bofors gun mountings being repaired within Australia seemed to me to be ideal to expand the work throughput which is so necessary if our domestic defence industry is to succeed.

It is also worth noting that the Philippines acquired some 12 Australian-made Nomad aircraft. It is essential that we find a place to which these aircraft can be sold. I think that the actions of the Minister for Defence Support (Mr Howe) threaten not only our general relations with the Republic of the Philippines but also our prospects of any future sales in that direction.

As far as the statement is concerned it seems to me that the letting of the tender to the Williamstown Naval Dockyard is to be commended. However, so many matters are unanswered in the execution of this contract. The degree to which the Williamstown Dockyard will be able to meet the task is a prime matter of concern for the Parliament, but it is also necessary that those who are involved in the supervision and the letting of the contract ensure in the course of construction that it is through no action or inaction on their part that the project should fail. It is a project which offers considerable opportunity for Australian domestic industry. One wishes it well and hopes that two very worthwhile ships will be constructed to add to the Royal Australian Naval fleet as a result of this decision by the Government.