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Review of the Defence Annual Report 2009-2010

CHAIRMAN (Senator Furner) —Welcome. I declare open this public hearing on the review of the Defence Annual Report 2009-2010 by the Defence Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade. Today the subcommittee with inquire into a range of issues pertaining to the Defence annual report, including security of vital national assets in the north-west of Australia, border protection command, employment of ADF assets, ADF base security and the Defence Materiel Organisation.

Dr Watt —Thank you for the opportunity to appear before the committee. The CDF is on his way. He will not be very long. Do you wish to start proceedings without him or hold for a few minutes?

CHAIR —We will start, given the happenings in the Senate today. Although the subcommittee does not require you to give evidence on oath I should advise you that these hearings are legal proceedings of the parliament and therefore have the same standing as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard. Do you wish to make an opening statement to the subcommittee?

Dr Watt —No. I am happy not to. We were told you did not particularly want opening statements so, unlike our procedures with Senate estimates, we have not come prepared to do that.

CHAIR —For the future witnesses, as I mentioned, there will be divisions in the Senate today, so there will most likely be some minor disruption and at nine o’clock I will need to attend downstairs for the commencement of the Chamber and throughout the day there will be several divisions. We might, therefore, go to questions. Dr Jensen.

Dr JENSEN —I do not have any questions of witnesses at the moment.

Ms BRODTMANN —You made mention of the fact that you are trying to inject a cost conscious culture in Defence. I was wondering what that looks like, how you are progressing on achieving that and what the time line is?

Dr Watt —Just a point of clarification. I will ask Mr Sargeant, who is head of our Strategic Reform area, to join me at the front bench. Are you interested in what we are doing, what we are trying to achieve or both?


Dr Watt —As you might know, about two years ago when the government published the new Defence White Paper and the outline of Force 2030, which was a major capital re-equipment program, and set Defence’s budget for decades ahead, the government also required Defence to enter into a reform program which would produce cost reductions in Defence expenditure by $20 billion over 10 years. That is a fairly substantial amount, even with a budget of our size. It is a very substantial amount, when you realise that a large number of areas are off limits for cost reductions. For example, military manpower and costs of that manpower are set and we cannot reduce those in order to meet our savings targets or our cost reduction targets, so it is requiring us to operate very differently.

We have a number of specific cost reduction targets and specific cost reduction means which we are using, but the reality is that we will only achieve and sustain the cost reductions we are being asked to make if we change to an organisation which is much more cost conscious in what we do. That is not to say that Defence has not always been cost conscious in the past, but it has not been cost conscious enough. As part of that, it is not just a matter of cutting budgets and saying, ‘Live within your means.’ That is terrific and has to be part of any reform program, but does not give you the sustainability you need. That is why we are trying to make people more cost conscious. How do we do it? We encourage people to change their behaviour.

How do we encourage people to change their behaviour? The organisation has a major stake in Force 2030 and the new Defence organisation that that will produce, so there is something very attractive to every member of the Defence organisation in achieving our reform program. It is very attractive, and by and large our people are very well signed on, not just at senior levels but a long way down the track. It is that sort of sign. It is a series of budgetary measures that we put in place. It is a series of specific cost reduction approaches that we have adopted; for example, trying to reduce our travel budget. We are trying to reduce it both by travelling less and by being more cost conscious on affairs. Can we video com; can we not make the trip; can we send fewer people? These are not rocket science, but it is also a matter of generally making sure that people, before they do anything, think cost as well as thinking capability, effect or achievement. That is really what it is about. Mr Sargeant, would you like to elaborate?

Mr Sargeant —It is essentially asking people to make good choices about decisions they make to spend money.

Dr Watt —I would put it, to make better choices.

Mr Sargeant —Essentially, what we have now is great clarity on what we need to achieve in terms of Force 2030, and we have quite specific cost reduction targets across a range of reform streams. As a result of that, it means that right across the organisation people are looking at ways of doing things differently and doing them better. At the heart of cost consciousness is a desire for greater innovation and to achieve better outcomes using resources more effectively. As the secretary said, for example, in the travel area we are moving to different sorts of contracts which give us better fares, but we also ask people to make a choice about how many people might do the visit, whether they need to do the visit in the first place, whether there are other means and so on.

In other areas such as ICT there has been a lot of work to create a system where our technologies are more integrated. We have different sorts of contracts with industry and we get more capability out of the ITC systems, so what that leads to is more value, in the form of more capability, and more functionality, but it also means that we get more value in terms of greater efficiency and less cost. We are doing that right across the organisation. It is quite difficult because it means that you have to challenge ways of doing things that are familiar to people or which people are used to, so it is not just about process and decision making, it is also about developing a culture where you are really focused on what the organisation is about and you ensure that the decisions you make in work support that. That is the guide that we are asking people to adhere to.

Dr Watt —To set clear goals and targets, provide us with incentives, and to make it clear that we have no choice but to deliver, all of which the government has done for us. We have regular reporting to government. We also have the Defence Strategic Reform Advisory Board, which is a group of public and private sector people experienced in change management, including the secretaries of finance, Treasury and PM&C. They are there to help us when the going gets tough and to provide a bit of steel, just in case we might be thinking of not meeting our targets, which we are not. That is a pretty good set of arrangements for driving a reform program.

It is early days. This is a decade-long campaign. We are one and two-third years into it. We achieved our cost reduction targets last year. Looking on the basis of everything so far, we are certainly well on the way to achieving them this year and we expect to do that. The targets get harder to achieve. We are looking to make cost reductions of about $1 billion next year. I think in two years time it rises to nearly $2 billion, so the ski ramp comes up. The most important thing is that we have sign-on at senior levels. It is very true that major reform exercises do not tend to fail on the shop floor, they fail firstly around the boardroom table.

Senator IAN MACDONALD —I was interested to hear about cost cutting and both of you have mentioned transport, in particular. I fly from Townsville quite a bit on a direct flight to Canberra and I do not see too many of your people on that. I wonder what your arrangements are for travel within Australia?

Dr Watt —I can get something on that.

Air Chief Marshal Houston —One of the things that we are doing now, which is quite different from the past, is that we have extensive utilisation of vidcon. Very often, in the past where we would have to have a meeting with everybody present, we have used vidcon for operational activities where we look at what is happening. Myself, the Chief of Joint Operations or, indeed, service chiefs can vidcon into the ADF, so the requirement to travel, hopefully, has been reduced as a consequence of that. Communication is much more effective now.

Senator IAN MACDONALD —My point was not that they were not travelling. My point was that they were not travelling on the direct flight, which to me I thought would have been more cost effective.

Air Chief Marshal Houston —You are talking about military people?

Senator IAN MACDONALD —Yes. This is the Department of Defence.

Air Chief Marshal Houston —I can use myself as an example. Wherever there is a direct flight, I will go for the direct flight. For example, with Perth, I will always try to go for a direct flight. Brisbane, I will always try to go for a direct flight and, if I were going to Townsville, I would really want the benefit of a direct flight.

Senator IAN MACDONALD —My point really was: what are the arrangements? Do you have a contract with any company?

Dr Watt —Mr Lewis, head of our Defence Support Group can help you on that.

Mr Lewis —Defence has arrangements with all major airlines. We are part of the whole-of-government travel arrangement in relation to domestic and international air travel. As part of the federal government, we are also subject to the best fare of the day policy. As part of that policy, individuals making travel choices are to have regard to what is the best fare on the day. I usually find a degree of consonance between that and the direct flight. I would like to think where people are doing point-to-point travel from Townsville to Canberra, they would actually be taking the direct flight if that were the best fare of the day. I have seen cases where it is not the most cost-effective price, but then it is also open to travellers to have regard to what the impact on their business is, because often an indirect flight will have an effect. There will be a staging stop, probably at Brisbane or Sydney.

Senator IAN MACDONALD —It depends on the time of day.

Mr Lewis —Precisely.

Senator IAN MACDONALD —That is something I will talk to someone about privately later.

Mr Lewis —There is good information on particularly the Finance website in relation to the travel arrangements that all agencies are subject to.

Senator IAN MACDONALD —I know what they are. I am just curious as to whether they are being followed.

Dr Watt —If there is something that you would like us to follow up then we are happy to do so out of session.

Dr JENSEN —My concern is that you are talking about overachieving on this with some of this overachievement related to one-off costs and so on, but ultimately what a defence force is there for is to provide capability. When I have a look across the portfolio what I see greatly concerns me. For instance, at the time of the Queensland floods and the cyclones we had the HMAS Manoora and HMAS Kanimbla both out of service. At the moment we only have one submarine operational. There is all this talk about improving our Defence capability and improving the way we do things. I remember in 2003 I took a sea ride on one of the Collins boats. It was supposed to be for a few days, but it ended up being one day. At the time I think there were two or three boats in service. We now have one boat in service. To give you an idea at the time of the sort of problems that we are talking about, when I first went there for the sea ride it was delayed for a day because the search periscope was out and there was another boat going and doing operations so they had to swap out the search periscope to the operational boat. We then went for the sea ride. That night the forward bilge pump packed up, which was not a show stopper. The next morning the attack periscope went down, which was a safety issue, so we had to go back to base to replace that. On the way back to base the power supply for the combat system went down and when they were at base, in examining other things, they found that the emergency air lines were contaminated, which meant a purge and refill, which was over 24 hours.

What concerns me is that at that time we had two or three boats in service. We now only have one boat in service, so where is the improvement? It is all very well talking efficiencies, but capability, ultimately, is what the defence force is about.

Dr Watt —We can take this in two aspects. The CDF will pick it up and I might have something to say at the end.

Air Chief Marshal Houston —First of all, I would like to say that one of the key principles of the strategic reform program is that we conduct it without having any adverse effect on capability. I have been very scrupulous in making sure that does not happen. It is not only me, but Dr Watt and, indeed, all members of the Defence committee. There has been no effect on capability as a consequence of the strategic reform program, and that is our intent as we go forward. It is a fundamental principle that underpins everything that we do.

In terms of the issues that you mentioned with submarines, the first thing I would like to correct is that we do not have one submarine in the water at the moment.

Dr JENSEN —Operational.

Air Chief Marshal Houston —We have two submarines that are at sea at the moment doing things and it has been that way for quite a while. If you want to go through the detail of where our availability is at the moment, of course we like to protect that information, but I am very comfortable with where we are going. We have done a lot of changes to the way we manage the capability, thanks to Chief of Navy, the company that supports us with the sustainment and also the DMO. We have set up an integrated project office in Adelaide with ASC and, as a consequence of that, I think we are providing a much better management of a very complex capability.

I know with your background that you would understand that submarines are probably the most complex weapon system that we operate and our availability, as it is at the moment, stands in comparison with all other operators of submarines. We have benchmarked ourselves against other operators. I cannot go into detail there, but I can assure you that is the case.

Do we have unserviceability from time to time? The story you told is a case in point. Yes, we do have issues, but similarly we occasionally have problems with an aircraft. C130s are probably as robust a capability as we have, but I could give you an anecdote relating to one flight I did in Afghanistan not so long ago where we had a litany of unserviceability relating to a problem with the engine, which was eventually fixed by Rolls-Royce. If you stand back and have a look at how we are going at the moment with the capability, it is going well, and similarly with submarines; it is going well. I will now ask Chief of Navy to elaborate on my remarks.

Vice Adm. Crane —Perhaps I could paint the capability in broad terms that we aim to provide with six submarines and inventory. I would make the point that clearly we are never going to have six submarines at sea, and that is not the way in which we program that fleet, or indeed any other fleet, in our Navy. With six submarines and inventory, what we are broadly aiming for is to have, in Western Australia, four vessels that are broadly available. That does not mean that they are all going to be at sea. What it means is that they are broadly available to support my operational requirements, as well as my raise, train and sustain requirements.

Dr JENSEN —I think what you are describing is very similar to what the US Navy has. I am not sure if it is still the case, but certainly in the Cold War they would have one crew at sea, one working up and one where the boat was undergoing maintenance.

Vice Adm. Crane —Of those four that are in the west, our aim is to generally have two available at relatively short notice to be able to meet the requirements that I need to meet. As the CDF indicated today, we have two at sea. With the program I am scheduled to have a third one at sea in the very near future. It is coming out of a significant maintenance activity.

Dr JENSEN —Of those two at sea, would they be fully operational?

Vice Adm. Crane —Submarines are at different stages of operations, as indeed is any other naval unit. We have three levels, if you like, of operational capabilities. Firstly, we have what we call our marine skills, so the submarine can go to sea and do what it needs to do. We have another level that talks about unit readiness, which is an increased level. We then have another level which goes to mission readiness. We do not hold all ships—

Dr JENSEN —Obviously you cannot, because a mission is on a case-by-case basis. What I am trying to get at is whether the submarines and the crews are operational enough.

Vice Adm. Crane —They are at sea doing what they need to do. One of them has been working with a number of other fleet units in the west in a major exercise activity.

CHAIR —I am mindful of the time.

Dr Watt —I have an important point to make. The CDF mentioned the requirements of SRP, which are that we achieve our cost reductions without any effect on capability and safety. Every six months the CDF and I have to sign off to government that that is what we have done. Clearly, we are not going to sign off something where we have affected capability.

I would just make one point about our amphibious fleet. As an astute reader of public information, you would have seen the two-page piece of advice that the CDF and I provided to the Minister for Defence on the amphibious fleet. If you have read that, as I am sure you have, you would have noticed that the problems of unavailability of those ships were not problems that would have been traced to the last 18 or 20 months when SRP was in operation.

Mr BRUCE SCOTT —I have a couple of questions and probably some of them will flow on after the suspension. One was on people and the other one on the reserves. I will start with the reserves. It is about the high readiness reserves and how we are going with that. That is part of the question. The other thing is that I would like to acknowledge the work that the Defence did in the natural disasters in Queensland, and other parts of Australia for that matter. I have a question as to why, in parts of Queensland, the reserves were not called out—because I was getting calls to my office—during that period when the reserves were ready to go. It became a bit of a morale thing with them. They were not called out. You had towns being evacuated. They were ready to go. They train on weekends and would love to be there helping. They can in a civilian capacity, but were not called out. Comments to me from some of them said ‘We might as well go and join the SES’, so we will lose them as reserves. The comment also came back to me, scuttlebutt maybe, that it was because Defence did not want to pay them. I know there is a mix of questions in all of that, but it relates to reserves and I would like to pursue that line for a start.

Air Chief Marshal Houston —I can start off with this one. The first thing I would say is thank you very much for your recognition of our efforts over the Christmas period. I would point out that a lot of the initial response that we had, right across Australia, to floods in not only Queensland but also Victoria and Western Australia was provided by the reserves under the category 1 Defence assistance to civil community. In fact, I am very proud of the way the reserve units responded. In Victoria, for example, reserve units provided nearly all of the effort. That is just the way it fell out. In terms of Queensland, I got the first call when I was on my bike out the back of Canberra, not far from Tidbinbilla.

Mr BRUCE SCOTT —Pushbike or motorbike?

Air Chief Marshal Houston —Pushbike. We need to keep our weight under control in the Defence Force. Anyway, I was out there and I got the call. The request was specifically for helicopters. As we went through those first few days every request we got from Emergency Management Australia, who were representing the interests of the emergency services in Queensland, was for helicopters. The word we were getting from the Queensland government was that they had everything else under control. The number of helicopters grew, the number of air lifters grew, and all of those sorts of capabilities that only we can provide were brought on line. While this was all happening, there were elements of our reserves in Queensland who were providing that first response category 1 support, and all of that went well. When it came to evacuating places like Condamine and the work in the Lockyer Valley, it was all about helicopters and of course that is all wrapped up in the permanent forces.

CHAIR —I am sorry to do this, but we have to suspend subject to the Senate’s commencement. Pursuant to provisions of the Senate standing order 33(3), this hearing is suspended until the resolution to proceed is passed by the Senate. Thank you very much and I do apologise for cutting into an area that I have an interest in as well.

Air Chief Marshal Houston —We understand your business.

Proceedings suspended from 8.58 am to 9.08 am

CHAIR —We will resume. Once again, I apologise for the minor disruption, but be prepared for more of those throughout the day.

Mr BRUCE SCOTT —The CDF was answering my question about the reserves.

Air Chief Marshal Houston —That covered the start of the Queensland floods. In Victoria, reservists did it all, as indeed reservists did it all for the bushfires two years earlier. In regard to your questions about high readiness reserves—

Mr BRUCE SCOTT —From my point of view, it will not be a satisfactory answer that the Queensland government called out for helicopters, which I understand, but we have the 25th-49th out there. They train on weekends, they had been to Canungra for a fortnight a couple of months earlier, living in a jungle with only what is on their backs and they are saying, ‘We’re ready to deploy.’ One of the comments when the helicopters and other military assets were deployed as the floods got worse further east and the disasters unfolded was that—with great respect to all Emergency Management Queensland and those personnel on staff—there was always a comment, that I am sure you can appreciate, when the army was in town. There is another sense of comfort in a time of great natural disaster. It is not that the Emergency Management Queensland, the SES and all the other volunteers that were there—and they would be there to assist and not to control, obviously. I would like you to look at this and talk with Emergency Management Queensland for the future because it gets to that issue of recruitment and retention. You train these people. There are reserves out there. They are in a rural setting. They often feel isolated from the rest of the world, but they are a great asset historically. They felt that they might as well resign. We will lose those units and they will join the SES because they want to do something. They train for this, train to help in civil situations, and some of them have actually been part of the high readiness that have been into the Pacific Islands. I would like you to pursue that a bit further.

Air Chief Marshal Houston —I would be delighted to take the issue on board and perhaps we could come back to you, through the minister, with a response to what you have raised. I think it would be worth having a look at the aspects that you have raised because we hold our reserve in very high regard. In fact, we cannot sustain our current operations at the moment without the reserve. I will get General Symon to run through some of the things that are probably relevant to the question you raise, but rest assured, I and Chief of Army and, indeed, the whole Defence organisation greatly value the contribution of reserves and, if they have some concerns out there in your electorate and other areas of Queensland, I would like to take those concerns on board and come back to you, through the minister, in the fullness of time. General Symon will now explain Army’s contribution to the high readiness reserve.

Major Gen. Symon —All I wanted to do was to address your question about the numbers. I have some figures here in the month when the Queensland floods unfolded. In the high readiness reserve the figure was 871 in January of this year. The other figure that I think will be of interest to you is the number of high readiness reserves in that month that were on full-time service, which is 65. Those 65, in addition there would have been others preparing to deploy overseas, but as you alluded to, with the commitment in the Solomon Islands and in East Timor now being led by the reserve in ways that we have never done before, there are a significant number of people who have left their employment to go and do those deployments. As I said, 65 in that month were actually deployed overseas and then there were others who were going through mission rehearsal exercises, mission rehearsal activities and certification for deployment overseas. In percentage terms, there were a number of people who were on operations at that time.

The bigger point that you make about the competitive advantage that the reserve has, which is their connection to the community, their footprint in the community, is a competitive advantage to the regular army, in a sense, and we are very conscious of and very sensitive to that. There are plans, ###CHECK Plan Beersheba, which is a fundamental or the next sort of tranche of reform in adaptive army. This is one of the challenges that the chief has given us. How do we lever off that competitive advantage and make sure that people have job satisfaction to the maximum extent? At the end of the day when something happens there will always be a certain amount that will go and a certain amount that will not go, and those who do not go will be disappointed. There is no easy way to deal with that, but I accept the obligation that we have to make sure that we are using reservists to the maximum extent possible.

Mr BRUCE SCOTT —I would like you to take that up with whoever you can and perhaps in the discussions with the emergency management arrangements in future; you might have them post all of the natural disasters in Queensland.

Air Chief Marshal Houston —I would like to make one final point. Our operations in Afghanistan are also sustained by reserves. Just to give one example, with the last very successful rotation of the Special Operations Task Group, most of that was reserve, so I think that gives you an indication of just how much we value our reservists.

Mr BRUCE SCOTT —That does not answer my comments that these people are feeling left out when they could have been contributing. There is a morale issue and they are saying, ‘Why do we train?’ That is hence my comment and I think a reflection that I am the voice for those reservists out my way. The 25th/49th are a great historic reserve unit.

Air Chief Marshal Houston —As General Symon pointed out, Solomon Islands and Timor-Leste are reserve led, so we are in good shape with our reserves at the moment. I think employing them operationally has turned around what was a fairly serious situation back in 2005 when I came into the job.

CHAIR —Thank you for that. Before we go to Mrs Gash, the ABC has put in a request to record today’s proceedings. If no members of the committee or others have any objections to that, I will grant that.

Mrs GASH —I do not want to talk about cost or capability. I want to talk about cultural change and how you are progressing it. What are the shortcomings of cultural change?

Air Chief Marshal Houston —We have been on a cultural change journey for quite some time. I guess culture is something that you change slowly. The nature of the challenge is that it will always take time to change and bed down a culture. If I go back to when I first entered this organisation, we had four tribes. A lot of the time, particularly in the Russell environment—this is going back to 1985—the four tribes were fighting each other. There was a lack of cooperation and a lack of focus on the main game. I am pleased to say that the culture we now see in the Defence organisation is one where we all pull together. We are an integrated organisation and we have good relationships across the board. We do not have the tribal in-fighting that used to be a characteristic of the organisation say 10 or 20 years ago. Maybe not 10 years ago, but certainly 20 years ago.

That has come about because of a number of cultural programs that have been in place. Results Through People was something we did through the early part of the last decade. Each of the services, and indeed the public service, have had their own programs. In Air Force, for example, when I was Chief of Air Force, we had a values based leadership culture which required each member of the leadership team to sign a compact. We took that right down to the senior non-commissioned officers and, indeed, right down through the whole organisation. That values based culture that was demonstrated there was also replicated in other areas throughout the Defence organisation.

More recently, the Chief of the Navy has instituted his New Generation Navy program that has three pillars: organisation, culture and leadership. I would submit to you that the program has been highly successful in turning Navy around and creating the required leadership culture that is needed in Navy. I am very optimistic that long after I have departed that program will persist into the future and the fruits of that program will be evident for all to see.

At the same time, the Army has their Adaptive Army program, and again culture is an essential part of that, creating the right professional culture, the right values based culture, to ensure that the Army produces the right sort of people who can perform in the very challenging environments that we employ them in at the moment. Whilst we have had some hiccups along the way—

Mrs GASH —We have.

Air Chief Marshal Houston —Rather than focus on a minority or a particular instance, if you look back over the last 10 years you will see that the ADF has generally performed absolutely superbly with high levels of professionalism—

Mrs GASH —Could I just break in? Those hiccups that you are talking about reflect on us in our community and we have to deal with those hiccups, so it is very important that we know that there is a culture program in place to make some changes in there. I need to be assured that there are.

Air Chief Marshal Houston —When you have some time we would like to brief you in more detail on those issues because I think you would be pleased with the way each of the three services is approaching the business of creating the right culture. I have a number of leadership principles and essentially my second principle is to maintain and establish the right culture. I think you will find that that approach is embraced by every senior leader in the ADF and, indeed, is being cascaded down through the whole organisation. What we seek is the right form of values based leadership, leadership by example at all levels of the Australian Defence Force and I am confident that we are getting there. I am very impressed with some of our junior leaders that I observe in all three services in very challenging circumstances.

Dr STONE —I address this question to the CDF. Clearly, there have been some opportune moments during your needs with, say, fuel economies. The fact is that we have had a period with an inability to reduce fuel costs when attempting to make major savings to meet goals and so on, but I am wondering in relation to personnel costs. As you know, we have to have Defence Force remuneration packages very competitive with like jobs in the non-military economy, jobs for example in the health services sector, mental health sector and even in the Air Force sectors where there is alternatives for most of our positions. Given that we need to have more competitive salaries in lots of areas and given that there is also a retention rate, which is excellent now compared to years before—so it is not a case of a smaller workforce in the near future as you build up where you have the numbers in there—how are you looking to make efficiencies in personnel costs? I am very interested to hear what your plans are?

Air Chief Marshal Houston —First of all, in terms of personnel at the moment, we are in a golden era. As you observed, recruiting levels are around 95 per cent. In terms of retention, we are seeing historically probably the best retention we have ever experienced in the last 20 years. I think that is a consequence of the fact that the package and the environment we offer our people are deeply appreciated.

In terms of reducing personnel costs, one of the things that we are looking at, as part of the strategic reform program, is the support areas which are currently done by military people and contractors and basically creating those positions within the Australian Public Service. The reason we do that is, if you have a look at a military person and an APS person doing the same job, it is much more expensive to use a military person to do that job. Similarly, it is much more expensive to use a contractor. Part of our reform program is civilianising some of those support areas where the people are not required to deploy and where the changeover to a civilian position will not affect things like the Navy’s ship-to-shore ratio. We are basically wrapping all of those requirements into this and there is a small number of positions that will be civilianised. That is the main area where we are applying efficiencies in terms of military personnel.

Dr Watt —It is important to note that at the same time the overall numbers in the ADF are going to grow. While we are removing some military positions from the back office, for want of a better word, the overall ADF numbers are growing and there are plenty of opportunities towards the sharper end.

Dr STONE —We have had a lot of complaints. A lot of us in our electorates have become very aware of the reserves and the cadets, but following on from Mr Scott’s remarks, there is a sense that the reserves are not being recruited at the same rate as they were before and the cadets are not being given the same sort of support as before. Is there a conscious move to reduce the number of reserves recruitment into the future, or at least a smaller reduction in the types of reserves that you are going to recruit?

Air Chief Marshal Houston —No, quite the contrary. I find it interesting you have that perception. When I became CDF one of the first things that I attended was I went down to the Reserve Association meeting in Melbourne. That was within six weeks of taking over the job. At that stage the reserves were going out the door backwards. I think the main problem at the time was the fact that they were not being employed operationally and they felt that they were not being valued. I think we have turned all of that around by essentially creating the high readiness reserve, giving the reservists a mission in terms of things like the emergency in Victoria after the bushfires. The outfit that responded to that was a reserve brigade. It was commanded by the commander of the 4th brigade down in Victoria, and about 90 per cent of the people that were used on that operation were reservists.

Similarly, as I just discussed with your colleague, we are now employing reservists more and more on operations. That has been a huge bonus for us in that reserve morale is very high. I visited our reserves on operations and they absolutely love what they are doing and feel much more valued as a consequence. In other words, they are doing exactly what the permanent force is doing. I do not have the exact numbers now, but in terms of reserves on operations, I think we have about 1,500 people at the moment. I can come back on notice, if I may on this one, but I think the figure is around 1,500 reservists who are on continuous full-time service. We could not do what we are doing at the moment, operationally and indeed in some of the high priority activities in the raise, train and sustain area, without our reservists.

In terms of recruitment, what I have here is an indication that the assessment is that the recruitment into the reserve force has been strong and has risen from 2,540 per year in financial year 2007-08 to 2,629 in financial year 2009-10. I know if you compare the overall numbers from 2005 to the present, we have more reservists in the ADF now than we did then.

Dr STONE —I guess we will be discussing this in the next session when we talk about people in Defence.

CHAIR —Just before we go there, we have a couple of other questions on this matter.

Dr STONE —I will talk further then about the recruitment problems with the reserves, which we get every day. I think most of us in our offices know of the frustrations of the six months plus that it takes to get yourself recruited into the reserves and the losses along the way because people just despair of the time and so on that it takes.

Air Chief Marshal Houston —There is an issue that perhaps I should focus on and Mr Minns may help me here. We are doing wonderfully well in terms of recruitment at the moment. I get a lot of people who come up to me in the street and say, ‘I want to join the Air Force. Why can’t I join the Air Force?’ The reason is that we are full. In fact, we are over full. At the moment we are just over 1,300 above authorised funded strength and, simply put, we do not have the funding to accept anybody else into the ADF above our recruiting target. We have an embarrassment of riches and that also applies into the reserve force as well. It is wonderful to have this interest in the Defence Force, but you might just go back to your electorates and indicate to please continue to show the interest because I am sure that at some stage this situation that we are in at the moment will turn around and we will be pleading for these young people to join.

Mrs GASH —Is that just the Air Force?

Air Chief Marshal Houston —No, it is certainly the same with the Army and it is also evident in the Navy. Navy is doing much better in terms of recruitment and retention than it has done for a long time.

CHAIR —We have a question on notice from Mr Robert and then we will go to Ms Brodtmann quickly, before we move on to people in Defence Strategy.

Mr ROBERT —Dr Watt, you can take this on notice and get back to us. Can you indicate the impact of the SRP savings for the last two financial years if the Australian dollar was 75c, not parity?

Dr Watt —I can, but I will come back to you formally. The answer is Defence is, by and large, supplemented on a no-win, no-loss basis for the exchange rate, so the Defence’s budget is set on the basis of the exchange rate around budget times, around April. For 2011-12 we are set on an April exchange rate. If the exchange rate is stronger than we set then we get money back from the government, but if the exchange rate is weaker then the government provides us with additional funding, so there should be no significant impact on SRP funding. There are a couple of small exceptions in that, so that is why I will come back to you.

Mr ROBERT —Does that include DMO as well?

Dr Watt —Yes. The Defence budget is insulated, certainly in terms of direct effects, from changes in the exchange rate. That is not to say that you do not get some small indirect effects, which is why I am putting a small caveat on it, but no.

CHAIR —A very quick question and answer.

Ms BRODTMANN —I would like to go back to the cost-conscious culture. You mentioned that the KPI seems to be for savings, which is ultimately the bottom line. I am keen to talk about the culture and get a sense from you about the culture, because in Defence it manifests itself. A cultural change or non-change manifests itself in small ways, such as lanyards for each different agency, the mouse mats, the coffee mugs, the pull-up banners and a whole range of things. I am wondering how you are going to address that culture at the more grassroots level. You mentioned the fact that you have your senior management on board, which is great and really important, but how are you going to measure the change at that grassroots level and culture?

Dr Watt —I will ask Mr Sargeant to talk a little bit about this because he has given a fair bit of thought to it. I have a very simple view on what the cultural change will do to Defence, acknowledging that it is a long-term issue. It is not something that we will solve next week and it is not something that we will solve next year. It is also acknowledging that Defence has changed. I came to Canberra to rejoin the Public Service in 1985. The Defence organisation today is not the Defence organisation of 1985, nor should it be. I think what you get is a Defence organisation that is able to be responsive to government, live within its budget, be cost conscious and exemplify, in the Public Service case, the full range of APS values. That is what we are driving for, in my simple-minded nutshell.

How do you measure it? There are no easy measures of cultural change, but again Mr Sargeant can talk about those. One thing you need to remember is that cost reductions are actually reinvestments. We are reinvesting in ourselves. We will know that we have changed when we get those reinvestments. The more reinvestments we get, the more we will know we have changed, because you will not get them without the investment. I will pass over to Mr Sargeant.

Mr Sargeant —When we built the SRP it was part of a larger vision of a very different Defence organisation and ADF in the future. Part of that process of building it was to think about the cultural enablers, the underpinning building blocks, so we developed a set of strategic principles to really guide our thinking; they were to be efficient and effective; in other words, to do things smarter and to be accountable; to be accountable personally and professionally for the decisions you make, the things that you do and the way you use resources; to be capable to deliver the government’s intentions for the force and to be agile to develop contemporary work practices that are efficient, enable you to be able to do a better job; and to be integrated to join up the organisation so that it functions more coherently, as CDF was talking about.

We then developed a series of reform behaviours which we talked to the workforce about in terms of how you might think about your job and how you might do it. Those behaviours were around being innovative, being open to new ideas, to eliminate waste, to think about how the decisions you make today will affect tomorrow, to use the resources as if you owned them or as if they were yours because you actually use them in trust. Defence resources are given to the Defence by the government to achieve an outcome for the taxpayer, and so we use them in trust and have that obligation.

As we implement the SRP we have run a very comprehensive communication and change program that ranges from quite a heavy commitment by the CDF and the secretary to talk to the workforce all over Australia, in bases and workplaces, very directly. Other members of the Defence committee have done that, as well as other people in leadership positions throughout the organisation.

We also run workshops to really go into detail with people about how they might change processes and do things differently because that is quite hard, especially if you are immersed in something. It can be quite difficult to see that there may be other possibilities.

We survey the workforce to get a sense of how they are thinking about the SRP and how they are responding. Our survey results show that there is a very high awareness of the SRP and people understand what it is all about. The issue for us now is working with people to translate that into practice, so we are confident that we are at the right place for about 18 months into a 10-year program.

In terms of measuring it, we measure it through survey results, but we also measure it through the number of new activities that are occurring. Every week I get a report, which I circulate, which talks about new initiatives that have occurred, and how things have changed in workshops or in parts of the organisation around the country. My global measure of culture change is a rate of new things happening and the quality of those things that are happening, so over time I would expect that to increase.

The other thing is that we are seeing less expenditure, what I call discretionary expenditure. To go back to travel, people are clearly thinking more carefully about how they spend money and what they spend it on. We are seeing good results in that area, but I would expect that to increase as people start to understand that you have a resource and you have choices about how you can use it. If you want the capability that Force 2030 offers—and to pay for that we need to get $20.7 billion in cost reductions or, as I describe it, $20.7 billion in innovation—then that is the driver for good decision making and cost consciousness. That is a very powerful driver for culture change. It is long term, slow, complex and individually based because every person has to come to that understanding and start to think about how that is meaningful in the context of their particular workplace.

I have been in Defence since 1978 on and off, so I have seen all the cycles and I am actually quite optimistic. The reports that I get and the things that I see when I go out there really show that we are starting to make those changes.

Dr Watt —I would like to add one point. I like Mr Sargeant’s point about the rate of innovation. It is wrong to overemphasise the cost reductions, but they matter. The point is that we will not get those cost reductions without the cultural change, because the organisation will get another year or so into the program and all of a sudden discover that it cannot do it. That is why the cost reductions perform a very useful function. It is not just money, but they are an important measurement tool. Mr Sargeant’s example rated innovation, crude though it is, in terms of the number of new things that are happening or things that are being done differently. It is a very crude index, but a very promising one in terms of saying we are changing.

CHAIR —Thank you. We are now 25 minutes behind schedule so we will move on. Our next area is People in Defence Strategy. I have questions coming from Mr Robert, Dr Jensen and Mr Scott.

Mr ROBERT —Mr Watt, I have a question for you to take away on notice. Can you provide the committee with the number of EL1s, 2s and SESs, say from EL1 up, in the Public Service and their locations? For example, in Canberra, we have 2,300 EL1s and so on.

Dr Watt —I doubt we have that many.

Mr ROBERT —Moving on to the 2011 budget and looking at budget forecasts, it has the number of civilian APS in Defence rising by 12.6 per cent over the forward estimates, so by 2013-14 there will be 2,570 extra public servant civilians on top of the 2009-10—this is straight from the budget papers—whereas the military growth in uniforms will grow by 2.3 per cent over the same period. Can you explain to me what is driving a 12.6 per cent growth in civilian bureaucracy in the department, including DMO?

Dr Watt —I can. Mr Minns can elaborate on this. There are three principle reasons for that. First of all, the contractor shifting program. We are moving several hundred contractors to APS. The jobs still have to be done, but we are doing them in a cheaper fashion.

Mr ROBERT —How many contractors are being cut?

Dr Watt —Mr Minns will get you that figure over four years. That is the first point. Secondly, there is the civilianisation program of replacing civilians with military. Again, Mr Minns will be able to give you those numbers.

Mr ROBERT —Granted, but the military is also increasing by 1,331.

Dr Watt —They are. Effectively, that is moving people out of back office and support jobs into jobs that are more appropriate and that need to be done by military, but do not have to be done by military. That is the second thing. The third thing is what the government said with the white paper: ‘We want Defence to do a lot more, a great deal more’, and you cannot do that without some more people. Our workforce was benchmarked as part of the Defence budget audit, so it is not like these are just solely Defence issues. If we do not need those positions then we will not fill them. You would have also noted that we are currently well below our guidance for where we are supposed to be on the White Paper. We are not filling positions that we do not need and we are not filling positions unnecessarily. It is those three things that are the sole drivers of our workforce. I will pass over to Mr Minns.

Mr ROBERT —Before we go to Mr Minns, do you need the 2,570 positions over the forward estimates? You said that you would not fill them if you do not need them.

Dr Watt —At this stage we are below target. We make our judgements year by year.

Mr ROBERT —How much are you below target by?

Mr Minns —If we talk about next year, our projection was that we were probably not going to pursue about 462 roles. It will take me a while to find the exact number for this year.

Mr ROBERT —You were going to recruit 616 extra this financial year.

Mr Minns —In talking about this year our actual workforce against guidance is probably about 700 to 800 below the original plan. As well as the recruitment that was foreshadowed by the White Paper and SRP Implementation Plan, we have a turnover rate of about 7½ per cent in the APS, so there is a replacement recruitment activity as well.

Mr ROBERT —In 2011-12 the budget papers had 966 being added, so you are saying that you will be 400 or so below that as your revised estimate?

Mr Minns —That is our current understanding of it.

Dr Watt —These numbers will be firmed up as part of the budget.

Mr ROBERT —Of course. You are looking at a revision of about 480 less.

Mr Minns —It varies. It is quite different over the course of the year.

Mr ROBERT —You are reflecting that your forecasts are looking to be about 33 per cent—off the top of my head—less than what your forecasts were for 2011 and the forward estimates; is that a reasonable statement?

Mr Minns —In terms of the growth component, it is in that order.

Dr Watt —Again, we would like to give you an exact number rather than one that we have tossed around.

Mr ROBERT —I am happy to accept that. It is my understanding—and correct me if I am wrong, Dr Watt—that within the military with 52,000 or 57,000 there are six three-star generals. Within the civilian bureaucracy there are 13 deputy secretaries. Let us associate them together for the sake of simplicity. On a like for like, if we bump up the civilians in percentage terms, we have about 33 stars in the civilian ranks and we have six in the uniform ranks. Would you care to comment on the disparity?

Dr Watt —I do not think there is any relevance in the comparisons, because they are different jobs.

Mr ROBERT —Noted, but I think there is.

Dr Watt —You and I will have to agree to disagree on that point, I suspect. They are different jobs. When you look at the APS one point you need to acknowledge is that Defence is the entity with the biggest discretion over what it does in the APS.

Mr ROBERT —Absolutely.

Dr Watt —We spend nearly two per cent of GDP. You are not going to spend two per cent of GDP and you are not going to spend it well—and arguably, Defence does not always spend all this money well; I am not claiming that—you are not going to do it better without senior people. We have benchmarked our workforce. There has been an APS benchmarking done; it was APS wide. We find that, by and large, our jobs come up as very big jobs and you need senior people to do big jobs. That is the story with some of the Defence APS. Take some specific examples. We have the CIO who is a band 3. That is not usual in Canberra, although they do exist. This CIO came from the tax office as a band 3 where he did their IT work. He was the second commissioner. Defence also has the biggest and most complex IT system in the Commonwealth government, so it strikes me that you need a rather senior person to do that job.

We have a CFO who is a band 3, and again that is not usual in the Commonwealth. We have the biggest and most complex budget. As our budget is infinitely complex, we need a senior person to do that job. We have Mr Minns, head of our People Strategy area. He is band 3.

Mr ROBERT —A very good band 3, Mr Minns, may we say.

Dr Watt —I would say that absolutely.

Mr ROBERT —I do not disagree that we need senior people.

Dr Watt —Let me finish because this is important. Why have we got a band 3 on the people side? That came out of the Elizabeth Proust review which Minister Nelson launched into the Defence Department back in 2006 where she said—I think justifiably; I was in Finance at that time—‘Given the personnel and people issues you guys have, you need senior people to do it.’

Mr ROBERT —Back in the last 15 years—

Dr Watt —I can go through each of the band 3s in the Defence Department and tell you—

Mr ROBERT —And they are all preceded by a review, interestingly enough.

Dr Watt —Perhaps those reviews—

Mr ROBERT —We have a review and out pops the three-star in the civilian world.

Dr Watt —Perhaps those reviews are telling us something, and that is that they are big jobs and you need good people to do big jobs.

Mr ROBERT —A cynic would say that we have a review and the outcome is a three-star. I am not a cynic, luckily.

Dr Watt —I am pleased to hear you are not a cynic.

Mr ROBERT —You have made the point that Defence is very complex, and I agree, and to do it well we need senior people. Uniform fighting is incredibly complex and to do it well we need senior people, but they have 20 per cent of the senior people of the civilian world. The argument that we need senior people to run things is perfectly valid, but there is a huge discrepancy between the level of seniority we have in the uniformed complex world compared to the civilian complex world, which in my reading would mean an argument on senior people does not stack up.

Dr Watt —Let me put it to you this way. If Defence is going to deliver what it needs for government, it is going to do it because it has good senior people and large numbers of them.

Another point that I would make, and I do not particularly make this with any joy, is that you have made band 3 comparisons, but there are other comparisons that you can make. Incidentally, one final point that I will make is that when you look across the APS—and this is the right comparison—Defence, in terms of SES, is actually not the largest SES in the APS. I think it is about fourth. We do a big job and so do some other departments, but we are not the only people who need good people to do big jobs.

Mr ROBERT —I have one final question on civilianisation of the workforce to yourself and the chief. The chief made the point that it is more expensive to use a military person. I am quoting you, but the quote might not be quite right.

Air Chief Marshal Houston —No, that is true. If you take all the overheads associated with a military person, that is a reality. We can come back to you and give you the information on notice.

Mr ROBERT —That is where I am going. How do we know that? Have we gone back and checked? Have we gone back and looked at, for example, all the civilisation positions and the military positions five years ago, how many civilians now fill that function and then what the total cost would be? I am happy to go back five or six years, but you can just take a five-year point of view. Mr Minns, does that data exist? If we were to go back five years ago looking at the civilianisation of every position in 2005 and the cost of it, as in we took 100 military, created 100 civilianised roles, how many people at what cost have now filled those roles? Is that a piece of work that can be done?

Dr Watt —Let us see if we can find a way of giving you some data on comparative costs. I doubt that we would have that detail on individual positions, because to put it simply, apart from positions changing, people change. Let us see what we can give you by way of numbers of people who moved, a snapshot of that, and some idea of comparative costs per position then as opposed to now. It is going to be approximate.

Mr ROBERT —It would be interesting to see if we have gone back and checked. Are we actually sure that it indeed is accurate?

Dr Watt —When you look at the robustness of the comparative cost per person there is no doubt about it, but we will confirm that.

Mr ROBERT —Thank you.

Dr JENSEN —I have a question for Dr Watt and Air Chief Marshal Houston. You are both paid more than the Prime Minister and you have contracts. Can you tell me if those contracts that you signed for your positions have indemnification clauses?

Dr Watt —Certainly, all APS is subject to standard government indemnification for actions they take. I do not know whether, as the secretary of the department, I am any different from other APS officers. I suspect I am not, so I would have no more than whatever indemnification applies to everyone else. I believe that, but I will confirm this, that I would have no more indemnification than any other member of the APS. Again, I would need to confirm the exact nature of the indemnification, which translates loosely to if you are acting appropriately on government business then you have indemnification.

Air Chief Marshal Houston —I do not have a contract. I, along with the service chiefs and the vice-chiefs, are all statutory appointments. We are employed under the legislation that pertains to those statutory appointments. It is not a contract per se. It is an appointment for a period of time. I was appointed the first time until 4 July 2008 and this time I am appointed for another three years after that.

Dr Watt —I do not have a contract either. I am employed on the same terms and conditions as other portfolio secretaries.

Dr JENSEN —My point here is that when you make a comparison, for instance, between Defence and the civilian world, I would put it to you that if you were senior executives with let us say Woodside, BHP Billiton or Rio Tinto and there was as much trouble with their infrastructure projects as we have with projects going through the system, the shareholders would be screaming for your heads.

Dr Watt —That is a very interesting comparison. I will leave out the ‘screaming for your heads’ term, which is a touch pejorative. You have got to say that Defence has some problems with infrastructure and capability and we have not denied that. You also need to distinguish the differences.

I would make three points about this and I would direct you to Minister Smith’s speech to the AIG where he spoke robustly on this subject. If you had a look at the last part of that speech, which did not get much media reporting, it endeavoured to explain why Defence has problems with some of its capability projects. I think that it is capability projects that you mean more than infrastructure. There are three reasons. One, like it or not, is that Defence has to be on the bleeding edge of technology from time to time. We do not particularly wish to be there, but sometimes you have to sign on for a JSF, for example, because it is the best aircraft around. I know you are going to JSF later today and I know that you will find that we think we are pretty well placed on JSF in terms of cost and schedule because of what we have done.

Secondly, you also have to acknowledge that many of the problems that the CDF, senior Defence leadership, the Minister for Defence, importantly, and I deal with on a day-to-day basis are legacy problems. I do not mind legacy problems; you deal with them as they come, but when you look at our amphibious fleet it is not to say that everything that has happened in the last couple of years has been perfect with the amphibious fleet. When you look at it, it is predominantly a legacy problem and that is something that the minister—

Dr JENSEN —I do not disagree with you—

Dr Watt —I would like to finish because this is important. I think shareholders are clever enough to distinguish between legacy problems that a CEO is dealing with and problems that the CEO has caused. I would hope that the shareholders in BHP, Rio Tinto and so forth would actually give their CEO credit for dealing with a legacy problem, which is what we are currently trying to do.

The third point that is important to remember is when you start to reform an organisation, when you start to change an organisation and when you try to drive things through an organisation, what is the first thing you find? It is often problems that have been there for a while. Again, some of Defence’s recent projects have been problems that have been thrashing around in the organisation for a long while and have not been dealt with. The CDF and I are determined to deal with them and we are, but they get announced, there is publicity and that is all there is about it.

Air Chief Marshal Houston —Dr Jensen, I do not accept your benchmark. I think you should benchmark us against other Defence organisations around the world. I think that if you do that we stack up pretty well. At the end of the day there is a complexity about this business that far surpasses what happens in the corporate world. We have to meet many—

Dr JENSEN —Mr Marshall.

Air Chief Marshal Houston —Can I just finish?

CHAIR —Order! Let Air Chief Marshal finish.

Air Chief Marshal Houston —Essentially, you have a look at the business of the profession of arms meeting the requirements of the government. I think we do that very well. Now, because of the nature of the business, we have to keep up with technology, and perhaps where that is very evident is on the battlefield in Afghanistan where we see changes in the threat on a week-by-week basis and we have to basically meet that threat. That means that we need to have agility in the way we run capability, the way we respond and so on. I do not think that it is a valid comparison to compare us to a corporate entity. The comparison needs to be with other like organisations and if you do that we stack up pretty well. In fact, you can ask some of our allies.

Dr Watt —Dr Jensen, you will have a chance this afternoon when we come back to talk about Defence acquisitions and sustainment issues. I will sow a seed of thought for you. I know Dr Gumley is particularly passionate on this subject and he is right to be passionate. The benchmarking he has done suggests that the Defence capability project that he is responsible for, along with our capability development group for defining and delivering, are very complex projects by any means and certainly stack up extremely well compared with any other projects done in Australia.

I will just take the strategic reform program, which we have been going backwards and forwards on, because it is an important comparison. We have several senior private sector members on the Defence Strategic Reform and Advisory Board. They are people who have made major change programs in the Australian corporate world. We have them there just for that reason, because we need their expertise. They have said to us, quite openly and honestly, that this is as big and as complex as anything that they have seen. That is a sign of what the Defence organisation tries to do. It is not easy.

Dr JENSEN —What I will put to you is that there are a lot of organisations that are in very highly technical areas. They need to be extremely agile as well as extremely flexible in their response. The car industry, for example, has to put a product out there in a short period of time. The production engineering needs to be right up there. They have technical advances and they do it very quickly. What we keep hearing from Defence, with all due respect—and I remember this from when I was on the Public Accounts and Audit Committee—is that we will always have this recognition. We had these problems in the past, but guess what, they are all going right now. We are on the ball, we are doing our reforms and things are going well. Year after year we just keep hearing the same thing. Yes, we had problems in the past, but it is all right now. But at what stage do you actually have it all right now?

Dr Watt —I do not think that we have said that everything is hunky dory in the Defence organisation.

Dr JENSEN —It is pretty close to those statements. You can go through the Hansard and they will say, ‘Yes, we had problems with project X back then, but we are on track, on schedule and it is under budget.’ An example is the JSF, which I will go into later on today, but there are many other projects where you have a similar issue.

I want to get into some of the issues relating to the culture as well. My concern is that in Defence there is a culture of not accepting mistakes. The fact is that mistakes happen in life, so the natural propensity for someone where there is a problem in a program, a project or whatever within Defence and they are not really equipped to actually solve that problem, their natural human way of going about it—and I am not criticising them at all, because any reasonable person would do this within a culture of not accepting mistakes—is that they will attempt to fix that mistake themselves, because by acknowledging that mistake they are going to have a problem that is going to reflect on their record. We need to start adopting more. Air Chief Marshal Houston, being an aviator, you would certainly know this. The sort of philosophies we need are adopted in civil aviation around 40 years ago with regard to air crash investigations where you are not looking to ascribe blame, you are more looking to fix the problem and make sure that those problems never happen again.

CHAIR —Just before you answer, we have a photographer from AAP. I take it that the committee does not have any issues with having some photographs taken.

Air Chief Marshal Houston —I would like to go to the aviation bit. This is an area where we have had a stark improvement over the years. As a young guy I lost 60 people that I knew well in military aeroplanes over a 20-year period from 1970 through to 1990. How do I know that? I was part of a testimony for flying pay way back when, so 60 people in military aircraft over a 20-year period. Have a look at our Air Force now. The last time somebody was lost in an Air Force aircraft, an Australian aircrew, was back on Pulau Aur in Malaysia in April 1999. We have not had a single fatal accident in the Air Force since.

The point is that the organisation is going forward. The organisation takes account of the lessons learnt. I hate to use this and I have to touch wood because you raise something like this and unfortunately something happens, but that is unprecedented in air forces around the world. You find another one that has that sort of record.

Dr JENSEN —But if we talk about aviation, let us have a look at the Navy. Unfortunately we have had losses in the Navy, and certainly aircraft.

Air Chief Marshal Houston —Yes, we lost a Sea King, and we have lost Army aircraft.

Dr JENSEN —And a Sea Hawk.

Air Chief Marshal Houston —Yes, but what I am getting to is that our approach in airworthiness management has come a long way.

Dr JENSEN —I was specifically pointing to aviation as a case in point. The aviation industry in the sixties and seventies learned that they had to go into having a system of actually investigating these things that did not ascribe blame. If you started ascribing blame, you would have this attitude of—

Air Chief Marshal Houston —But we have the same approach. We look at everything in terms of not just who is the guilty person. We do not have a blame approach. We look at all of the factors that contributed to the cause of the accident.

Dr JENSEN —I think you are missing my point here. I just gave the example of the aviation industry, but what I was talking about was right throughout the defence network in all sorts of areas.

Air Chief Marshal Houston —Yes, but what I wanted to do was demonstrate to you that, if you look at it over a long enough period, this is an area where we have made huge strides. Instead of losing five or six aeroplanes a year, as we were back when I joined, we do not lose aircraft anymore. It is a huge step forward. It is a safer environment. It means that the capability is available for its primary use. The training is much safer and the maintenance is much better.

Dr Watt —Dr Jensen, you raised a very interesting point about human nature. I think in the Public Service generally—and I speak now as a public servant, not just as Secretary of Defence—there is a tendency for public servants when they face problems sometimes to not escalate them. I do not think that is necessarily because they cover them up. That may be on the odd occasion.

Dr JENSEN —No, I was not saying cover—

Dr Watt —It is a tendency for good people to say, ‘I’ve got to crack this problem.’ Quite often they do not appreciate they cannot. I have seen this happen on a number of occasions. The consistent message that I preach to my senior officers—and always have in finance and before—is that if there is a problem escalate it. If you cannot solve it, escalate it. Sometimes it can be solved higher up the chain. Sometimes it can be solved by going to the minister. Sometimes it can be solved by going to government, but quite often it will not be solved at your level. That is what we try to do.

You are right about a culture of blame. We should not have a culture that focuses overly on blame in Defence. We should have a culture that focuses on solving problems and particularly solving them early before they become real problems. I might come back to that in a moment. That is very much what the CDF and I try to establish. That is not to say people should not be accountable for the decisions, but first of all solve the problem and then work out the accountabilities. That is the way we try to deal with things. And hold people accountable—not blame them—for the decisions. That is sometimes a fine line, but you have to do both in this world.

I will come back and give you an example of the sorts of things we are now trying to do. For example, I am sure you have all heard in previous sessions of this committee about projects of concern, which are essentially where a project has got into trouble and intensive resources are applied to manage it out of trouble. That is a good program but it is a work-out program. It is there after the problem has well and truly occurred. What we are doing in Defence now is developing a series of what I call ‘sense and warn indicators’—early warning indicators—and we are starting to use them where a project is running off the rails. So, what is the first sign of a project running off the rails? Usually it is schedule slip—it is actually not cost—it is usually schedule slip. Something is lagging and it keeps lagging. We are trying to identify those projects early on and use them. This is still in the development stage, but we will have that in a few months time and that will allow us to look across our whole DCP and say, ‘Aha, something might be going wrong there. Is there a problem? Let’s look at it.’

Dr JENSEN —Is this something where you are going to have people who are independent of but integrated with the various projects and so on overseeing it? An example would be, let us say, expand the audit office and have auditors in there integrated with the project but who are independent of that project management, so that those problems can be identified early. People naturally, as we have agreed, will have a propensity first up to try to solve the problem themselves, which actually leads to greater problems further down the line.

Dr Watt —We have not thought about that particular line of inquiry. That is something that we will give some thought to. We have a small audit team and the problem is how do we stretch them, but it is worth some thinking. However, what we are doing is making sure that the CDF and I have much greater visibility—much better understanding—of each stage of the project so that we can, through our senior involvement, get a better sense of, ‘Hey, this is going wrong. Let’s have a look at this.’ That is what we are starting to do and have done really, I suppose, for the last 18 months, without as good a sense of warning indicators, through the Defence Capability and Investment Committee, which we both participate very actively in. Incidentally, some of the skeletons you are seeing currently in projects are things that have been thrown up through that process. We are finding problems. We need to find them earlier.

Mr BRUCE SCOTT —Mine goes to personnel. Of course, we acknowledge also the great loss of ADF personnel in Afghanistan and other deployments in Iraq. It is a loss to the nation and I think we should acknowledge it here at this Defence annual report.

It is important we not only acknowledge it in the parliament and the work that Defence does at that level in returning those who have been killed in action back to Australia and the appropriate supports from the Australian Defence Force at that time, and the people of Australia. I would be interested in how we are now dealing with the families and what sorts of entitlements those left behind get—a widow, children and so on. There are also those who get wounded—critically wounded in some cases—and there is obviously, in some cases, an ability to be rehabilitated, and others are going to be confronted with a life-changing expectation because of the injuries they have sustained, and perhaps they are no longer in the ADF, which leads to enormous problems mentally and also financially, and prospectively for the rest of their lives. I would be interested in the families of those killed in action and how we are dealing with that and what sort of support you are getting that they would receive, obviously, not only for the widow and the children and the veterans’ entitlements, which I hope are still as I remember them, but the other support behind the family. It is not just, ‘Well, here’s the card and here’s the letter.’ I think it is how they are, if I can put it this way, case managed. CDF, you and I might recall some of these discussions I have had in the past that I was very passionate about.

Air Chief Marshal Houston —Certainly.

Mr BRUCE SCOTT —Then we have the rehabilitation and life expectation and prospects for those who have been injured to the point that they may not be able to return to where they were in the ADF—maybe in a different part or not at all. So, a longish question but an important one.

Air Chief Marshal Houston —Perhaps I could start with those that are wounded. As you know, we have had a number of people who have suffered severe injury—amputations, loss of sight and the like. One of the things that we have been very careful about is ensuring that we give the full support to that individual, and then after the initial response, getting them back to Australia. Of course, we have a very well defined and a very effective aero medical evacuation system with the assistance of our allies. It goes from the hospitals in Afghanistan back through Germany—a very good American military hospital in Germany—and then eventually back to Australia. We give our people the very best medical expertise available. Once they are out of that they then go into rehabilitation programs.

The rehabilitation is in terms of physical rehabilitation, and if there are any mental health issues we also address those. In all cases we retain those people in the ADF. Some of those young people show incredible courage in coming back into the workplace in spite of some fairly traumatic wounds/injuries sustained in the combat environment. We support them to the very best of our ability. We have the Wounded Warrior program and a sports program. We have just sent a number of our people over to the United States to compete in a military Paralympics-type format. They came back with a bag of medals. They performed very well. They had a wonderful time, which is good for their morale. They are now back in their units doing a job.

I would like to reassure you that we do everything we can to return the individual to the workplace through a very effective rehabilitation program. It is certainly national best practice and I would say it would be close to being world’s best practice. We have put a lot of effort into it. If you want to get into the detail of that I can run you through it.

It is a very sharp focus, particularly for the Chief of Army and his people, and I think it is as good as it could be. If there is some idea that pops up, we grab it and we look at it. If it can be practically implemented, we implement it. I think that is reasonably okay.

In terms of the support to the families, you would be aware that when we lose somebody on the battlefield, unfortunately, we have a very well practised response mechanism. We look after the families in those first traumatic moments when they are informed about the loss of a loved one. It does not stop there. It extends for a long period through the Army, the Army units and also the Defence Community Organisation. The Defence Community Organisation has very highly skilled people who assist the families in their time of need. Our Army units have been absolutely sensational in the way they have provided support to bereaved families.

In terms of the benefits and those sorts of things, I will get Mr Minns to run through those, but I would just like to assure you again that we do everything we can to support those families, because they have suffered a great loss and it is up to us to look after them through their time of need.

Mr Minns —In the back end of 2010, with the Department of Veterans’ Affairs we ran a project called the Support to Wounded, Injured or Ill Project. The purpose of it was to do a gap analysis against best practice and look at the work of the single services, Defence as a whole, the Defence Community Organisation and the DVA, around the whole scope of reporting incidents, the welfare of people through our healthcare/rehabilitation, compensation and transition policies, and the whole way that we did it. The main learning from that review was that there was an opportunity for Defence itself, across its three services and its support agencies and the DVA, to create a more streamlined—I guess more seamless—service to the injured member in the family.

A series of actions was progressed as a result of that review in 2010 and a second phase is now being conducted specifically focused on those wounded during combat operations, and that work is going on now. We are trying to make it as easy as possible, if you like, for the end user of this whole system to get the support that they need. The work of this project reports to the Defence DVA Links Committee, which is chaired by me and a deputy secretary from the Department of Veterans’ Affairs. That is the first point I would make going to your issues. I have forgotten the second one.

Mr BRUCE SCOTT —Have we had many personnel injured in Afghanistan or on deployments? We know the numbers who have tragically lost their lives, but what sorts of numbers are we talking about in relation to those who have been injured and in the process of rehabilitation and perhaps may never return to the ADF? I am asking about career path or compensation issues in terms of how they adjust to a different expectation for the rest of their life. You mentioned paraplegics and so on. These are very severe injuries that will limit opportunities.

Air Chief Marshal Houston —In terms of the number of people we have in rehabilitation at the moment—

ACTING CHAIR (Dr Jensen) —Channel 7 is wanting to film. Is that all right with everyone?

Air Chief Marshal Houston —We have an awful lot of people in rehabilitation at the moment. We also have, obviously, all of the people who are injured in peace-time training. We are returning a large number of those people to the workplace. I do not know what the current achievement rate is, but I know not that long ago it was in the 90 per cent. We are currently, for example, administering and coordinating 1,852 active rehabilitation cases with mainly Army and Joint Health Command. That is an awful lot of people. We are getting most of those—I think it is over 90 per cent, but I would like to take that on notice and give you the precise figure—back to the workplace. Our whole focus is getting these people back to the workplace. Almost without exception they want to go back to doing what they did before. What we are finding is that, for example, we can return our amputees to service in the Army. We have an amputee serving in the Air Force. These individuals are inspirational people and they get back to serving in the service.

One of them is a commando. His ambition is to get back to doing what he did before. We will just see how it goes, but it is not beyond the realms in the future that he might be able to go and do that again. We are not denying that opportunity to him. It is a question of his being able to meet all of the standards required for that particular job. It is not the way it used to be, where somebody got hurt and was told, ‘You’ve got a condition here. You have to leave. You don’t meet our requirements.’ It is not like that at all. We retain these people and, wherever possible, we return them to the workplace. For example, if we had somebody who could never go back to being in the infantry, we will give them an opportunity to go into some other form of employment in the ADF. I think we have come a long way in the way we do things.

Mr BRUCE SCOTT —Turning to post deployment and people returning from operations, are there cases of PTSD manifesting themselves, which we have seen in past deployments, as we are well aware?

Air Chief Marshal Houston —Yes, post traumatic stress disorder is something that we see. It is something that we deal with and, again, it is something that we treat. It is quite normal for people who have a traumatic experience to suffer some form of post traumatic stress, and that is the way we treat it now. We want people to acknowledge, ‘Hey, I’ve got a bit of a problem here because I keep having these nightmares about this particular set of circumstances.’ We are basically treating them exactly the same way as we treat people who have been physically wounded. We rehabilitate them and we bring them back to the workplace. We give them all the support that they need. With the initiatives associated with the Dunt review, we have a mental health strategy and we are increasing resources and taking a number of other steps. I could run through all of those steps in detail if you wish.

Mr BRUCE SCOTT —I would be interested in whether we are getting cases of PTSD.

Air Chief Marshal Houston —Yes, we are.


Air Chief Marshal Houston —We actually get cases of PTSD in places other than the battlefield, believe it or not.


Dr STONE —There used to be a policy where if you could not be immediately deployed in the ADF then you were not able to stay in the ADF. Are you saying to us now that that policy has changed?

Air Chief Marshal Houston —What I am saying is that we will rehabilitate people to return them to deployable status.

Dr STONE —Even if, say, for example, I have permanent hearing loss or—

Air Chief Marshal Houston —Unfortunately, if you lose your hearing totally, clearly—

Dr STONE —But partially is usually the way it happens.

Air Chief Marshal Houston —that is very difficult. If somebody loses part of their arm, that does not necessarily mean they cannot deploy again in the future.

Dr STONE —So, has that policy changed?

Air Chief Marshal Houston —I will come back to you in terms of the policy, but our intent at the moment—and the practice that we are applying—is one where we return people to deployable status as best we can. The previous standards that applied no longer apply and we have changed the policy to that extent. But I will send you the policy, because we have changed it and our intent is to get all of those people back to the workplace and back to deployable status.

CHAIR —Thank you for those answers, Air Chief Marshal. Before we go to Mrs Gash, we do have Channel 10. I take it no-one has any issues with that? Thank you. Mrs Gash.

Mrs GASH —We have difficulty getting trained staff for cadets. Are any of those rehabilitated people being put into those jobs?

Air Chief Marshal Houston —We man cadets in the main with volunteers. If somebody were to choose to leave the Defence Force an option for them would be to contribute in cadets.

Mrs GASH —But it is not part of your policy to actually put some of these people there, whilst they are still being rehabilitated, given their expertise?

Air Chief Marshal Houston —Rehabilitation usually is a very intensive program.

Mrs GASH —I understand that.

Air Chief Marshal Houston —We do it in areas where there probably is not the option to put those people into cadets. But having said that, when somebody is being rehabilitated, we find out people who are in that program are totally focused on just that. They want to get back to where they were before as quickly as possible.

Mrs GASH —Can I send some people to you are keen to do this particular job? I have them in my local area. I will not go there, but I do not agree with you on that particular point. My question here is about the gap year. I understand the gap year has been extremely successful. I have some people in my electorate, too, who have been refused a gap position even though they had originally been promised one. The internet is still showing 147 places, yet they are being told, and I am being told, that the program has now been stopped. Can you explain to me what is happening?

Air Chief Marshal Houston —At the moment, Air Force is not taking anybody on the gap year; Air Force is full.

Mrs GASH —I understand Air Force is full.

Air Chief Marshal Houston —Army is taking some. Mr Minns can run through the numbers. We have cut back the gap program to take account of the fact that at the moment we are oversubscribed. It is a huge burden on us.

Mrs GASH —Sorry, I am going to interrupt you here. The internet is still showing 147 available places in the Navy. People have changed their positions, they have changed their careers and they have been offered a position already. Now they are told they can no longer take the gap year. I just want an explanation.

Air Chief Marshal Houston —I am not across the detail of the 147 issue, but we will come back to you on that.

Mrs GASH —Thank you.

Air Chief Marshal Houston —Perhaps you could elaborate on where we are at with the gap year.

Mr Minns —In 2010-11 we were looking to place 417 people in the gap year. That was down from 700. And essentially because we are over our average funded strength. Air Force was in the position where to generate the experience the gap year involved they were looking at compromising their normal training arrangements, and that was considered not really a sensible thing to do. Navy had a higher gap year intake originally, because it was significantly below its average funded strength two years ago. That position has changed quite a lot in the intervening period. I think—and I can get you this accurately—Navy is within 30 of its average funded strength. What is important about that is that, because it has grown its new recruits, its training system is full. If there is a limiting factor on Navy getting its workforce out into its operational areas, it is about the fact that it has a very high level of people in the training system. A key issue in their training system is getting people to sea. So, Navy in particular has had to rethink its use of gap year now that those circumstances have changed. In the context where our overall achievement was over 1,000 greater than our average funded strength should have been in this financial year and looking ahead to the next two, we are looking further at restrictions on gap year for next year—2011-12. I will speak to someone in Defence Force Recruiting during a break and try to get some clarity for you on the issues you have raised.

Mrs GASH —I have written to him. He is aware of the situation.

Mr Minns —It is not something that I would think would have occurred that is, where we have given people an offer and then we revoked it. I am very happy to take some details.

Mrs GASH —Apart from that—and I know the history of that; that is a personal issue, which I will not go into—the point is, why are you showing availability on the—

Mr Minns —Because it is a process that runs over the full financial year, Navy may still be looking to bring some people on at some point of 2010-11 for gap year. Again, it is something that I would have to get the detail on.

Dr Watt —We will check that and try to come back to you after the break.

Mrs GASH —It is misleading and it is causing a lot of confusion.

Dr Watt —The explanation of different financial years may have something to do with it, but we will confirm it.

Mrs GASH —Thank you.

Ms BRODTMANN —As to the Navy capability planned for the coming decades or so, you are doubling the number of submarines through the White Paper—eight new frigates. I know that Navy has had problems recruiting in the past, particularly for submariners, and you still have challenges on that front. You have these ambitions for Navy for the future. How are you going to staff the capability?

Air Chief Marshal Houston —Perhaps if I could just respond first. Recruiting for submarines has turned around. Chief of Navy will be able to give you some precise detail on that, but clearly that has to be the starting point. We have to start increasing the number of people in the submarine force.

Vice Adm. Crane —As Mr Minns was explaining, one of our challenges at the moment is that 23 per cent of my workforce is in the training force. The training system is under enormous pressure. In the submarine area I have been very pleased with the growth in the submarine workforce that we have been able to achieve over the last 18 months to two years. Indeed, in the last 12 months we have been able to train more submariners in a 12-month period than we have ever trained previously. That has been because of some very proactive work that has been happening in that community in advertising what they do and the work lifestyles in the submarine community. I am very pleased with how that is tracking at the moment.

I am not getting too relaxed, because as the CDF was mentioning earlier I think at some stage this is going to turn around. In particular, my technicians in the submarine community are a very attractive option for other parts of industry nationally and indeed internationally, so we need to pay a lot of attention to that. But at the moment I am very comfortable with how we are tracking.

I think one of the key issues when you look at the White Paper, and you look at the 12-submarine option, is that we should not look at 12 submarines meaning we need 12 crews. I think we have to be a little bit more dynamic in how we manage our crewing. We have in fact done that in the last two years. We have gone from a position where we used to have a single crew allocated to a particular submarine and it always stayed with that submarine. Now we have crews managed dynamically across the submarines that are available. A crew can move from one submarine to another submarine, and that offers us greater utility in terms of the match of crews to submarines into the future. We are looking at different ways of being able to do this, but the current prognosis that we are working on suggests to us that we can do this and we will be able to achieve it.

Dr Watt —It is important to remember that the submarines, of all the White Paper projects, have the longest delivery time. We have to design them, they have to be built and then they have to be delivered. This is an exercise well over a decade or more. Air Marshal Harvey, who is head of our capability development group, can talk further on that. Yes, there is some work to do on crewing, but equally there is a fair bit of time to do the work.

Ms BRODTMANN —I know there is quite a bit of time. I am not worried about that. It is just that there have been challenges in the past. I will not suggest there will not be challenges in the future. You are looking at potentially 700 new positions to fill that capability. I am just concerned that we have all this new capability coming online over decades, but will we have the people to staff them?

Vice Adm. Crane —Perhaps I could help with an example over the last two years. We have been able to grow the trained workforce in Navy by 1,000 people. At the same time my training force has dropped only two per cent. What that says is that we are able to churn out trained workforce, but at the same we are also topping up the training workforce. That gives me confidence that we have now, subject to our being able to bring these people through the training system, a very good foundation for the future.

Ms BRODTMANN —So, you have increased the number of people who conduct training; is that what you are saying?

Vice Adm. Crane —No, these are trained people.

Ms BRODTMANN —They are trained?

Vice Adm. Crane —That have come out of the training system as trained people and able to take up positions within the fleet and within Navy as trained people.

Air Chief Marshal Houston —One of the things we did in the White Paper was increase the size of Navy by 700—there was a net increase of 700—which helps Chief of Navy get this better balance between trained force and training force.

Vice Adm. Crane —If I could perhaps give you another example. It is a small thing, but I think it makes a big difference. One of the initiatives in growing the submarine workforce was we took the top 15 candidates from our recruit training school classes to Western Australia and exposed them to the submarine community. We showed them the submarine and they spent a week discussing submarines. Around 80 per cent of those recruits then decided they wanted to be submariners. It is a matter of exposing the capability to our people to get people to transfer, so I have some confidence we are on the right path.

Ms BRODTMANN —You are feeling confident that we will be able to staff that capability in the future?

Vice Adm. Crane —Yes, I do. As I say, we are going to need to keep the pressure on, and we will be challenged. When the workforce current separation rates perhaps change and our recruiting rates change—and I think they will—we will have ongoing pressures, but right now, as we look forward, we are confident we can meet the requirement.

Dr STONE —Thank you. Obviously, the Defence Force is keen to have diversity amongst its personnel, such as the non-defence workforce in Australia. I refer to men and women, different cultural and racial minorities, our Indigenous Australians and so on. I know Defence has tried to improve its retention rates of women. You do not, of course, allow women in combat roles but even in the roles where they are permitted I am interested to know what strategies you are employing now to ensure that women who also choose to have families are able to survive in their careers in the defence forces. How do you compare in your retention of women compared with other agencies or parts of the public sector, the banking sector or any other sector that you can name in Australia? In terms of Indigenous recruitment, what are the trends? I know NORFORCE has been successful and is an outstanding example of Indigenous participation. How are the trends going with recruitment of Indigenous Australians, say, from southern Australia? I know I am asking lots of questions at the same time. Also, in terms of the mix in the defence forces of people other than Anglo derived, how are we going, for example, with reflecting the mix of the Australian population? I am talking about the Asian Australian proportions, the Australians who are from the Middle East and who are not from a Christian background, for example? Can you explain to me where are we going and what the trends are. Finally, in terms of promotions, how are women faring in their promotions success compared with men in the defence forces in the areas that they are able to actually participate in?

Air Chief Marshal Houston —Perhaps I will take the last one first. We currently have one two-star officer who is a woman. By the end of the year there will be two. General Liz Cosson resigned and went across into DVA. We obviously regret that, but she decided that she needed to do that for a number of reasons—personal reasons, not career reasons. If we have a look at the number of one-stars, we have seven one-stars and we have—

Dr STONE —What percentage is that, though, of your one-stars?

Air Chief Marshal Houston —I will come back to you on that. We have 31 women who are at the full colonel rank. That is unprecedented. We are gradually starting to get more and more women through to the senior ranks.

Dr STONE —Can you give us those in proportions as a follow-up, thank you? I am not expecting you to have them on hand right now.

Air Chief Marshal Houston —I will come back to you on notice on that. As to the other thing that is happening, if you have a look at the intake that is coming into the Defence Force now, particularly if you go out to ADFA, you will see a much higher proportion of young women than perhaps we had in the past. Over the years you are going to see a gradual trend where women start to increase their participation level, particularly at the senior levels of Defence. Because we are not a lateral recruiting organisation, it all has to be grown from the bottom up, and that is one of the realities of our organisation, which is quite different from the corporate world or any other.

I have a women’s action plan. I am advised by a women’s reference group and as a consequence of that we have a number of initiatives running to look after women’s interests within the Defence Force, increase the level of participation and basically create flexibility of employment so that if they, for example, have a child, they can go away on maternity leave, return to the workforce and they do not suffer any detriment in terms of seniority because they have been away from the workplace for, say, 12 months. They come back and they re-enter where they left. They are in the same—

Dr STONE —Do they have part-time work options?

Air Chief Marshal Houston —Part-time options—all of those things are being looked at.

Dr STONE —They are being looked at; they are not as yet introduced?

Air Chief Marshal Houston —No, we have them. In fact, if you have a look at our policy for women—and in fact the employment of anybody, women, men, in the Defence Force—our conditions of service are better than just about any other organisation’s in Australia. We benchmarked against the organisation that won the Australian award and, in our view, our conditions exceeded what this particular company was offering in terms of the flexibility that applies. Are there some issues with that? Of course, you can have the best policy settings, but what you need to be doing is making sure that those policies are being implemented right through the organisation.

Dr STONE —That the culture of the organisation reflects it.

Air Chief Marshal Houston —That the culture is right. In all three services I would submit to you with the leadership team we have at the moment there is a very high priority being applied to increasing the participation of women in the workforce and looking after women if they have a special requirement, for example, have a child, have to look after a sick child or whatever it happens to be. I think we are a much more enlightened workforce than we were in the past. I could go into a lot of detail there, but given the length of your question I think you probably want me to go on to other things. I will get Mr Minns to fill in some of the detail.

If I could go now to the diversity of the workforce in terms of Indigenous participation, you referred to what happens in Darwin—NORFORCE is a very successful demonstration of what we can do where you have a large Indigenous population around you. We are very proud of that, but unfortunately, when you look in the wider ADF we are not getting the sorts of levels of participation that I would really like to see. But again we are deeply committed to increasing the level of Indigenous participation in the Defence Force.

Dr STONE —Do you have unique strategies? You have a women’s action plan. Is there an Indigenous action plan?

Air Chief Marshal Houston —We have a strategy. The secretary and I have a strategy to increase not just Indigenous participation in the ADF but also in the defence organisation, and we are very supportive of that. We go along every Indigenous People’s Day and throw our very strong support behind the strategy we have in place at the moment. It is a good question. Should we have a reference group? That is something we will have a look at.

The question was whether the ADF represents the community from whence it came. I think you are right; we are probably far too more towards the Anglo-Saxon side of the ledger. But again there are no barriers to anybody coming into the ADF. You will see, if you visit our people, that we are well represented by all of the ethnic communities in Australia. It is just that the levels of participation probably do not reflect the number of those people in our population.

Mr Minns —As to statistics and trends, there are 399 more women serving now than at the same time last year. It is now 7,873—13.6 per cent of the workforce. Broken down: in Navy, it is 18.5 per cent; Army, 9.7 per cent; Air Force, 16.9 per cent. To clarify why the Army number is lower than the other two, it is the effect of the restrictions on serving in occupations, which in Army’s case are infantry and armoured corps and some artillery roles within the combat engineer squadron. It is the size of those elements of the Army that create the statistical effect. In terms of Indigenous programs—

Dr STONE —Are we improving retention rates for women?

Mr Minns —It depends how you ask the question. We can get you some very detailed information about female retention rates versus male, but in broad terms there is a simple result that most of our workforce, both male and female, look to leave inside 10 years. It is an organisation where young people join, serve, have an experience and then tend to move out. The figures, I think, are 52 per cent of men leaving inside 10 years and 58 per cent of women. What we then notice, though, is that the women who stay beyond 10 years actually tend to stay longer than the men. There is a real issue about time of life and impact on family that is occurring.

The CDF’s women’s action plan has 30 initiatives. I will just give you the headings for them. They are in the areas of attraction and enlistment, mentoring, career management, workplace flexibility—going to the ability to use those policies—accountability and communication. The accountability issue is where we are trying to work on the culture such that—

Dr STONE —Harassment and—

Mr Minns —It is the harassment issue, but it is also the attitude of the local commander to being open to having flexible working arrangements, shared working arrangements or part-time arrangements—whatever it happens to be. So, we are seeking to make it an issue in the way that the services evaluate the performance of their emerging leadership. Are you actually supporting a flexible workplace which is leading to increased retention of women?

Air Chief Marshal Houston —That is what I was getting at. You can have the greatest policies in the world, but if you do not implement the policies right down to the lowest level you do not succeed. The policy has to be tied to implementation, and that is what we are trying to do.

CHAIR —Thank you for that. We might quickly move to pay and remuneration. I do have a question on notice from Mr Robert.

Mr ROBERT —I am sure you can take a quick question on notice. Could you provide an update on the PMKeyS upgrade to the new version of the software, including the CENRESPAY integration as well as where Defence is up to with its planning with respect to moving allowances and dropping them down from about $1,000 to a reasonable number. Take that on notice.

Mr Minns —Yes.

CHAIR —That concludes this section and, in doing so, I thank you for your attendance here today. If you have been asked to provide additional material would you please forward it to the secretariat. You will be sent a copy of the transcript of your evidence, to which you can make corrections of grammar and fact. As Hansard may wish to check some details concerning your evidence, would you please check whether the reporters have any questions before you leave? Thank you. I now formally suspend the hearings until 11 am. Thank you very much.

Dr Watt —Mr Chairman, just before you do, Dr Jensen asked me a question about independent involvement in project assessments. We do now have a gate system. We put projects through several gates at key points in their life. They have independent people on the boards and in fact I think we have independent chairs or we are moving to independent chairs. We can talk more about that this afternoon. I think the arrangement is that the CDF and I will be here until morning tea time and then our officers will stay on. Are you still comfortable with that arrangement?

CHAIR —That is fine. Thank you.

[11.03 am]