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Finance and Public Administration Legislation Committee
23/05/2018
Estimates
FINANCE PORTFOLIO
ASC Pty Ltd

ASC Pty Ltd

[09:03]

CHAIR: I welcome the Minister for Finance and the Special Minister of State, Senator the Hon. Mathias Cormann; Ms Rosemary Huxtable, Secretary of the Department of Finance; Mr Stuart Whiley, Chief Executive Officer and Managing Director of ASC Pty Ltd; Mr Jim Cuthill, Acting Chief Executive Officer, ASC Shipbuilding; and officers. Minister, do you wish to make an opening statement?

Senator Cormann: No, thank you.

CHAIR: Ms Huxtable, do you wish to make an opening statement?

Ms Huxtable : No, thank you.

CHAIR: Mr Whiley or Mr Cuthill, do you wish to make an opening statement?

Mr Whiley : No, thank you.

Mr Cuthill : No, thanks.

CHAIR: Senator Carr.

Senator KIM CARR: Can I begin by asking for some basic information on employment arrangements. Mr Cuthill, at the last estimates you indicated the ASC workforce was at 1,263, comprising 1,013 full-time employees—that included 13 apprentices—and 250 contractors and subcontractors. Could you tell us what the current number of permanent employees is?

Mr Cuthill : As at 5 May we have 1,279 employees, of which 1,008 are permanent and 271 are contractors. We have 11 apprentices, and that's down from 13 because an additional two have graduated.

Senator KIM CARR: Thank you. There was an announcement of 223 job losses on 23 April. What can you tell me about that?

Mr Cuthill : The 223 were people whose jobs were at risk. We have to put people at risk first, and that's in accordance with the enterprise agreements that we have. The first thing is declaring the numbers, and then we have a process that we have to go through where we then have to look for redeployments within the business. Since we issued that number of 223, we've been working very hard in that redeployment space. Working within the ASC group, and with Stuart and the submarines team, we now are looking at seconding 60 of the shipbuilding workers across to submarines for the full-cycle docking on HMAS Waller. That's consisting of five salaried staff and 55 non-salaried. That's for a period of nine to 12 months.

Senator Cormann: The context here is that the air warfare destroyer program is nearing completion. While the government has made a historic and substantial commitment to an $89 billion naval shipbuilding program to build 54 new vessels from Australian yards, including 12 submarines, 12 offshore patrol vessels, nine future frigates and 21 pacific patrol boats, because no decisions were made over six years of the previous Labor government, we are in this situation where there is not a continuous pipeline of work. That could have been avoided if the previous Labor government had made relevant decisions, but it was left to us to make those decisions. As the work on the air warfare destroyer program nears completion, obviously we are going through this transitional period, and the government, having made decisions in relation, in particular, to the procurement of 12 offshore patrol vessels, of course, will be in a position to start ramping up these employment numbers again.

Senator KIM CARR: Thank you. We can go over history, we can go over—

Senator Cormann: It's very important context, because I wouldn't want you to create a false impression with the way you are asking these questions.

Senator KIM CARR: I am looking for simple information at this point. If you want to get into rhetorical exchanges, I'm more than happy to take you on.

Senator Cormann: I have a suspicion as to why you are asking these questions. I'm just putting the context up-front.

Senator KIM CARR: Mr Cuthill, you have seconded 60 across. What's happening with the rest?

Mr Cuthill : The next process is with the salaried employees. Ten have now left the business, and we're finalising the remainder. We're looking at other redeployment opportunities at the moment. In terms of the non-salaried, we then go through a process. Once we have put the trades at risk, we then have to look at redeployments. Once we've investigated the redeployments, we then have an expression of interest out for voluntary redundancies, and we are right in the middle of that process now. Once we receive the voluntary redundancy expressions of interest, we then know whether there are volunteers or we have to force redundancies at that point. We're not quite there yet.

Senator KIM CARR: Can I get this clear: the redeployment process has now concluded, has it?

Mr Cuthill : We're still working through redeployments at the moment to see if there are any other opportunities.

Senator KIM CARR: How many more offers of redeployment have you—

Mr Cuthill : At the moment I can't say. We're still working through that process to see if there are additional redeployments.

Senator KIM CARR: But you've identified 60. At what point was that reached for the 60?

Mr Whiley : It's an initial 60. That number is evolving.

Senator KIM CARR: So it could be more?

Mr Whiley : It could be more.

Senator KIM CARR: When was the last one offered? What was the date of the last redeployment offer?

Mr Cuthill : I'm not sure on that. I would have to take that on notice.

Senator KIM CARR: Has it been some time?

Mr Cuthill : No, it is happening at the moment.

Mr Whiley : This week.

Senator KIM CARR: This week was the last offer of the 60?

Mr Whiley : Yes. HMAS Waller has only arrived now. The ramp up of Waller's FCD is occurring now. Those workers are actually coming across now.

Senator KIM CARR: How many of the remaining positions can be expected to be redeployed?

Mr Cuthill : We're still investigating at the moment.

Senator KIM CARR: You don't have a number? You're not certain?

Mr Cuthill : We're not certain on that one, no.

Senator KIM CARR: Are there any?

Mr Cuthill : We're still going through the process.

Mr Whiley : There will definitely be more. As the program goes through the full cycle document there are a number of peaks and troughs. We're looking to level load it. The initial 60 has been made on certainty of employment to try and give those employees as much certainty as we can, and those are the ones we selected first. As the work cycles through the full-cycle docking we will look to see what requirements or what demands there are on other trades based on the performance in the docking.

Senator KIM CARR: When will the redeployments actually occur?

Mr Cuthill : They've taken place already. A number of those have already happened.

Senator KIM CARR: How many of the 60 have already occurred?

Mr Whiley : The 60 will be completely over by about 6 June.

Senator KIM CARR: Thank you. When does the patrol boat start production?

Mr Cuthill : That's going to be later this year for us.

Senator KIM CARR: When?

Mr Cuthill : It will be in quarter 4 of 2018.

Senator KIM CARR: Is there no prospect of keeping any of these people on for that process?

Mr Cuthill : That's one of the reasons we're looking at the redeployments. If we can redeploy to submarines for a period of nine months, that ties in very nicely with bringing them back for the offshore patrol vessel program.

Senator KIM CARR: Of the 140-odd that remain, could you redeploy all of them?

Mr Cuthill : It's unlikely, and that's why we're now going through a voluntary redundancy process. Once we've finished that, the volunteers will leave and then we'll understand how many people have to leave.

Senator KIM CARR: How many voluntary redundancies are you offering?

Mr Cuthill : We put it out to all of the at-risk trade groups. There's an expression of interest that goes out.

Senator KIM CARR: So 140?

Mr Cuthill : Potentially. If we had 140 volunteers. We don't limit the number.

Senator KIM CARR: When did you offer those?

Mr Cuthill : I'm not sure of the actual date. I can take that on notice. It is part of the process that we work through.

Senator KIM CARR: If there were redeployments offered just this week, I take it that the redundancies were offered just this week were they?

Mr Cuthill : It was not very long ago. We have an actual process that we have to follow that's in the enterprise agreements, and we're following that to the day.

Senator KIM CARR: How long will they be open for?

Mr Cuthill : The expressions of interest?

Senator KIM CARR: Yes.

Mr Cuthill : I'm not sure on that one. I don't know the details on that.

Senator KIM CARR: Could you take that on notice?

Mr Cuthill : I can.

Senator KIM CARR: At what point do you then decide the compulsory redundancies?

Mr Cuthill : Once we've received the expressions of interest for the voluntaries and we know how many people it is, we will release those people, and then we'll know how many we need to let go through a forced redundancy.

Senator KIM CARR: But it could be up to 140?

Mr Cuthill : It could be. Unlikely, but it could be.

Senator KIM CARR: You've obviously get somebody that wants to leave.

Mr Cuthill : Yes.

Senator KIM CARR: You indicated to us on 27 February that the government had announced funding to retain 200 people for shipbuilding.

Senator Cormann: It was in the 2017-18 MYEFO—

Senator KIM CARR: December 2017?

Senator Cormann: We announced in the 2017-18 MYEFO, which was announced in December 2017, $29.4 million over three years from 2017-18 to support the retention and development of critical naval shipbuilding skills in the ASC workforce in support of future shipbuilding programs, including and in particular the offshore patrol vessels contract.

Senator KIM CARR: And secure 200 jobs at Osborne. That is the quote I'm referring to from you: 200 new jobs at Osborne.

Senator Cormann: The offshore patrol vessel project, I am advised, will actually create 400 direct jobs, and 600 in the supply chain.

Senator KIM CARR: All I'm doing is quoting directly from you on 11 December 2017.

Senator Cormann: I'm pleased that you're reading my—

Senator KIM CARR: 'Government secures 200 new jobs at Osborne'. That was a reference to joint press release from yourself and Minister Pyne. Does that remain the case?

Senator Cormann: That is what the funding has been provided for, and obviously it is funding that is provided to ASC for that purpose.

Senator KIM CARR: How does that fit with the announcement of the 223 job losses?

Senator Cormann: If it weren't for that, there would have been higher job losses, because over six years of Labor, zero vessels were commissioned from Australian yards. We are still trying to manage as best we can the disastrous consequences of the previous Labor government, who made not a single decision to commission a single ship from an Australian shipyard.

Senator KIM CARR: So this press release shouldn't be read as new jobs totalling 200 this year; it should have been read as something entirely different? Is that what you are suggesting?

Senator Cormann: It does secure 200 new jobs, because they weren't there before.

Senator KIM CARR: It says there are 100 scholarships. Where are they?

Mr Whiley : The process for the scholarships is underway. We provided a quote to Defence and we are in negotiation for what the scholarship and training package looks like. I was with Defence last week, and they've asked some clarification questions. We have to respond to those clarification questions. As I said, negotiations are underway. They cover three areas: operation, supply and technical areas.

Senator KIM CARR: When do the scholarships get taken up?

Mr Whiley : We anticipate they will probably commence early 2019.

Senator Cormann: The funding is available now, but ASC and Defence are in the process of identifying the skills needed and determining who exactly who will receive the training, which is the right way to go about this.

Senator KIM CARR: Can I get this clear: the funding is available now but the positions are not deployed?

Senator Cormann: This is in relation to the scholarships you were just asking about?

Senator KIM CARR: The scholarships specifically—

Senator Cormann: The funding is available now, but this is in the context of our having made a decision to procure $89 billion worth of naval shipbuilding capability. In that context of a continuous shipbuild we have to invest in the development of an appropriately skilled workforce. ASC and Defence right now are in the process of identifying the skills needed and determining who will receive the training. Both Finance and Defence continue to work with ASC on transitional arrangements for the shipbuilding workforce. Defence and ASC are working on reskilling priorities, including details of training providers and specific training packages. Finance, Defence and ASC understand that we need to manage all this carefully, and it's imperative that ASC's workforce can remain for the completion of HMAS Sydney, the third air warfare destroyer. These are all the different things we're working on, but we would be in a much better position if Labor hadn't failed over six years in government to commission a single naval ship from any Australian shipyard.

Senator KIM CARR: When you put this money down for the 100 scholarships, did you anticipate they wouldn't be available until 2019?

Senator Cormann: We anticipated, as with any announcement of funding, that the relevant organisations need to go through the process to ensure the money is spent efficiently, effectively and wisely. That is not unusual. We made a decision to make the funding available. ASC and Defence are appropriately working through a process to ensure the money is well spent.

Senator PATRICK: There was $29 million allocated to this, presumably across the scholarships and the saving of jobs. How much of that money that was appropriated or announced in that MYEFO statement—

Senator Cormann: As I indicated, $29.4 million was announced. That's page 141 of the 2017-18 MYEFO. That's to create up to 200 positions—

Senator PATRICK: And how much of that has been transferred—

Senator Cormann: If I might finish—within ASC Submarines for current shipbuilders working on the AWD program. Those are the new positions, and that helps with the redeployment strategy: up to 100 workers to support the Future Submarine program offers and fill vacant positions in the Collins-class sustainment workforce, and then scholarships to workers to support opportunities to acquire skills in the fields of operations management, computer aided design and engineering, and supply chains. As we've indicated, there is work underway between Defence and ASC—and between Finance, Defence and ASC—in relation to a number of related matters. I'm not in the best position to answer how much has been spent so far.

Senator PATRICK: How much of that money has been transferred from Defence to ASC?

Mr Whiley : At this point in time none of that $29.4 million has been transferred. We have to design the courses and the training development. We have to get the training provider on board. We've gone through a process to design all those courses and we're in that process. We provided the quote to Defence. They've come back with some questions. We have to clarify those questions and then we need to mobilise the training providers and the package of work, mobilise their equipment and the facilities—

Senator PATRICK: But you have people getting laid off, and there's a cost to that, both from an HR perspective and also loss of that skill to the organisation, yet there is money sitting there available to fund those positions and it's not being used. None of it has been transferred to you?

Mr Whiley : No funds at this point in time have been transferred to us.

Senator KIM CARR: That's clearly the point I was trying to make. Allocated in 2017—

Senator Cormann: December 2017 in the MYEFO, so it's five months ago.

Senator KIM CARR: not spent 2018. No offer has been made to anybody to take up the scholarship?

Mr Whiley : We have taken 21 people out of the shipbuilding business, permanently employed them to submarines, and we are funding that through the submarine business unit, and likewise with the 60 people, we funding those people—we have saved, if you like, 20 positions.

Senator KIM CARR: Of this $29.4 million, how much has been transferred to ASC?

Mr Whiley : As I said, nothing.

Senator Cormann: Just to confirm: 100 per cent of that funding is available today, but, as is proper process, a body of work is to be done to ensure we are very clear on what it is spent for, and that it is spent wisely, efficiently and effectively.

Senator KIM CARR: Those 223 workers could call on this money, couldn't they?

Mr Whiley : Not for the training. For us to deliver training—

Senator KIM CARR: That's one part of it. The whole amount of money was $29.4 million. Could that be called upon, so that these people don't have to lose their jobs?

Mr Whiley : To what end?

Senator KIM CARR: For the ASC. Could it be called on for that purpose?

Senator Cormann: But there has to be a purpose for which you—

Senator KIM CARR: Maintaining the capabilities of the ASC.

Senator Cormann: It has to be in the context of the work that's coming down the line, which is—

Senator KIM CARR: Why couldn't that be the case? Has management asked you for that support? Has there been any communication with ASC about maintaining their capabilities so that these 140 positions that have yet to be redeployed—223 minus the 60 you've redeployed—can be maintained?

Senator Cormann: Maintained doing what?

Senator KIM CARR: I've asked the question. Has ASC asked you for any support, given the money is available, to maintain the employment of the 140 people—

Senator Cormann: Has ASC asked who for support?

Senator KIM CARR: The finance department. Given the money is there, and you are the shareholder of ASC, have they asked for this money to be transferred so that these 140 people don't have to be shown the door?

Senator Cormann: The short answer is I have not been asked the question. The government has made the money available. It's money that comes out of the Defence portfolio. ASC and Defence are currently working through how that money is appropriately deployed. While the money is available to ensure we can create 200 new opportunities, including 100 scholarships, it is still in the context of pursuing a particular purpose, and not all people who have done work in the past will necessarily continue to work into the future when the work that they were hired for has come to a conclusion.

Senator KIM CARR: In respect of retraining for the new shipbuilding work, given you said the patrol boats are coming on within three months, has there been any request to call upon these funds to support that retraining?

Mr Whiley : Yes. As I said, we put in a survey-and-quote under the ISSC to access those funds, and we are in negotiations with Defence about the provision of the funding support. They've asked us some clarification questions on the basis of the package that we've put in, and we are in the process of answering those questions.

Senator KIM CARR: There doesn't have to be any redundancies.

Mr Whiley : Unfortunately, we can't take 130 people that are left and bring them into a training regime. It doesn't work like that. We don't have the capacity to deliver that training in that bulk. The package was designed to be delivered through the time phasing of the layoffs of the entire AWD process. It's not about making the first tranche lucky to get scholarships, and the ones that follow behind unlucky—if there are ones that follow behind. It's about how we phase the labour transition in such a way that we get best value for the nation and best value for those employees to keep their capability.

Senator KIM CARR: Am I correct in understanding that you've only got capacity for 100 in the training component of that package?

Mr Whiley : The scholarships were, basically, around 100, yes.

Senator KIM CARR: You can only give 100—

Senator Cormann: Which is precisely what we announced.

Senator KIM CARR: Sorry, is that the case—you can only take 100? You couldn't take any more than 100?

Mr Whiley : We couldn't take any more than 100.

Senator CORMANN: On the scholarships—which is consistent with what we announced.

Mr Whiley : But we are looking to take another 100 and save those positions into general, Collins related work—the type of work where they could do other tasks inside the Collins regime.

Senator KIM CARR: You can't find another 40 positions—given the scale of work that the minister has just referred to as coming through the pipeline?

Mr Whiley : I think there's also the nuance that it's not just about bulk numbers; there's also the nuance of trade, discipline and what have you in those numbers.

Senator Cormann: That's right.

Mr Whiley : We just can't take on 50 fabricators. We don't have—

Senator KIM CARR: How many people do you anticipate will have to go from the organisation?

Mr Cuthill : That's the process we are working through at the moment.

Senator KIM CARR: But you know the answer to that question.

Mr Cuthill : I don't know.

Senator Cormann: We don't know. And the point I would make again, which Mr Whiley touched on, is that it's not a matter of saying, 'We need 200 people with one type of qualification.' These are substantial, complex program with a very diverse range of skills requirements, and ASC and Defence are working through which skills are needed for future programs. Different skills are needed at different times for different aspects of the shipbuilding program, so you can't just make a decision, 'We want to keep 200 people of one particular skill set.' It has to be more sophisticated than that, and, given the substantial nature of the investment, it is not inappropriate to take a little bit of time up-front to make sure that the programs of training and redeployment are appropriately well-targeted.

Senator PATRICK: As a supplement to Senator Carr's question: you clearly have a fully-scoped plan in relation to the air warfare destroyer. That's playing out and you know exactly what work is involved with that.

Senator Cormann: Yes, it's coming to a conclusion.

Senator PATRICK: You've had substantial negotiations with Lurssen in respect of the OPV, and you've signed a contract now with that. You must have a plan in place.

Mr Cuthill : Not yet. We are in the final stages of signing the contract.

Senator PATRICK: But you've had substantial negotiations; you know what your work share is likely to be, and, having been in that situation before, when you are planning to enter into a program and into cooperation with a prime contractor, you know what workforce you are going to need. So you must have at least some idea about your workforce profile, otherwise you haven't planned the OPV properly.

Senator Cormann: You are right in relation to OPVs, because there is much more coming, but—

Mr Cuthill : The other part in this is Sea 5000. The announcement is forthcoming, and that could have a significant impact on—

Senator PATRICK: Notwithstanding that, you have definitive work on your books now, so you should know a workforce profile based on that definitive work that you have.

Mr Cuthill : On that definitive work, that was the announcement on the 223.

Senator Cormann: Senator Patrick, there is a very important point here. I know you have pursued this in the past, and I'm sure that you would support, and the committee would support, the fact that ASC does need to think about potential future scenarios, where they want to be in a position where they can secure work on other procurements coming down the line. So, to think about the skills requirements in the context of what they know, but also what they want to be competitive for in the future, I would have thought, is prudent planning.

Senator PATRICK: Yes, but normally you would have the definitive stuff and then you may have a provision for what you need to do if you win the Future Frigate—which I hope happens, for the build—and any other work that you have. You don't enter into these things unaware of what your workforce requirement is. That would be completely irresponsible as a shipbuilder. I know how the planning works; I've been there and I've done it. You plan that out before you even consider making an offer to a prime contractor.

Mr Cuthill : Like I said, with the work that we do have, we have done that planning, and on that basis we announced the 223 positions at risk. The positive part of that is that, of those 223, we have managed to redeploy 60. So it's not 223 we're going to be rolling off, it's a lesser number, and we're still working to try to find redeployments for some of those. Like I said, the next phase for us is Sea 5000. We would like to understand what that will mean from an ASC perspective.

Senator KIM CARR: There's something I can't follow. You said we'll need up to 5,000 people to build these vessels. Whatever the number—you can argue the toss as to how many—many thousands of extra people are needed to build these 54 vessels. We are laying off experienced shipbuilders at a time when there's work coming through within three months. Are you telling me we can't redeploy them or retrain them, with a budget of $89 billion? We don't have the capacity in this country to do that? That's what I'm having trouble coming to grips with. You seem to be confining your horizons to the hundred scholarships. The vocational education system in this country can't cope with that? You're laying people off in that environment? Why is that?

Mr Cuthill : We have to focus on the contracts that we actually hold—that is, AWD and, shortly, OPV.

Senator KIM CARR: But the patrol boats you do hold.

Mr Cuthill : We don't yet.

Senator KIM CARR: When do you expect to have that contract confirmed?

Mr Cuthill : As everyone knows, with AWD we've launched ship 3 and the AWD program will be ramping down over the next year and a half.

Senator KIM CARR: We're talking about building 54 vessels. You're saying that there's existing work there now. You're saying there's sustained work, full cycle work, that's required for the Collins. You're saying that there's work for the patrol boats, and two are to commence in that yard within months. You're saying there's a preferred tenderer on the frigates to be announced within weeks. And you're laying people off because you've made some assessment that they're not needed for the existing arrangements? I'm just trying to get an understanding of why you're doing that. Can you explain that to me? Why are these job cuts required, particularly given that the announcement was made in December, and especially given these contracts that are in the system right now?

Senator Cormann: I'll tell you why they're required—because Labor, over six years in government, failed to make decisions to procure a single ship from an Australian shipyard. The Air Warfare Destroyer Program, which was not started by Labor but started by the Howard government, is coming to completion, so ASC, as a responsible business, is making judgements to manage its business. The government has provided additional funding, which has created 200 new positions compared to the status quo, which include 100 scholarship positions. That obviously ameliorates the situation compared to what we inherited from Labor. But it is true that we would be in a better position if decisions had been made earlier, which they weren't.

Senator PATRICK: In fairness, you offshored the supply vessels—two ships being built in Spain—and you offshored the icebreaker, one ship being built in Romania. They could have filled that void.

Senator Cormann: I don't want to go back through the history.

Senator KIM CARR: You don't want to talk history now!

Senator Cormann: Then let's talk through the history. There were reasons why those decisions were made, which we've gone through in some detail. It doesn't take away that there were zero ships commissioned under Labor and 54 vessels—

Senator PATRICK: I'm not taking that away; I'm just adding some perspective to it.

Senator Cormann: commissioned under the coalition as part of an $89 billion program—

Senator KIM CARR: Can I get an answer to my question?

Senator Cormann: and we are in a better position now than we would have been. The naval shipbuilding workforce in Australia is expected to grow to around 5,000 by mid-2020. Once we're over the hump that Labor left behind we will be in a stronger position. We could be in an even stronger position, but we're doing the best we can in the circumstances.

Senator KIM CARR: I think those men and women who are 'over the hump' right now, who are faced with being shown the door right now, are entitled to get an answer to the question I asked. Why is it that those people are being laid off right now, given the scale of work that is being prepared in this country right now?

Mr Cuthill : We operate as a GBE, so we have to operate as a commercial entity. We have contracted scope. And in terms of keeping people employed, it is not just down to the budget; we also have to give them meaningful scope. And at the moment, even if we had the money, we do not have the meaningful scope to actually keep them employed.

Senator KIM CARR: Can I ask you again? We don't have the training facilities in this country. You say they don't have the skill sets for the specific tasks that you have in terms of the sustained work. Is that the proposition you are putting?

Senator Cormann: The proposition he put was very clear, that they have to make decisions based on the capacity to offer meaningful work as a commercially operating government business enterprise. We have provided funding to provide additional transitional assistance beyond what was otherwise available. That is government funding that obviously assists. But ASC as a business obviously has to make business decisions as a business, and they have got to make business decisions in the context of the work that is contracted now, the Air Warfare Destroyer and the OPVs, which are about to be contracted, and in the context of being competitive to secure future work. It is well understood what that is.

Senator KIM CARR: Has the department provided you with a cost benefit analysis of making these people redundant rather than retraining them or redeploying them?

Senator Cormann: The ASC as a government business enterprise, operating as a commercial business, has a board and management who are responsible for making these decisions at arms-length from the government. That is the same situation under our government as it was under your government, except that, under our government, we are giving them more work.

Senator KIM CARR: And you are giving them more money.

Senator Cormann: Under your government, you gave them nothing new. Under your government, they got no new contracts; they just continued to work on the Air Warfare Destroyer Program that the Howard government started. Under our government, they are getting the Offshore Patrol Vessels and they are in the running to get further work.

Senator KIM CARR: The ANAO has been scathing about the way in which the shipbuilding program is actually being handled. Has there been a cost benefit analysis undertaken in regard to forcing these people out the door rather than maintaining them either through retraining or redeployment?

Mr Cuthill : It is something we have certainly looked at, obviously. As an ongoing business with a high level of capability, our first intention would be to try to retain these people. In terms of the contracted scope and some of the timings, it is not possible. We have actually worked that through.

Senator KIM CARR: It is not possible to do a cost benefit analysis?

Mr Cuthill : No, I didn't say that; I said to retain them. We have done some costings on it but at the moment—

Senator KIM CARR: What's the findings on the costings?

Senator Cormann: Before we go there, just adding to this answer, you have got to remember, it was the government that made the decision to bring forward the Offshore Patrol Vessels to 2018 and the frigates to 2020, to try to address Labor's valley of death. What you are asking us to do is to keep people in position that have got nothing to do. That is what you are asking us to do and that is not something that a business operating commercially—

Senator KIM CARR: I am not asking you to do that. I am asking whether or not you are managing this program well. I want to know whether or not it makes sense to put people off that you have to re-employ, like experienced shipbuilders—putting them out the door—given that we have a range of contracts coming through the system, which you have acknowledged, within months. Does it make business sense to do that?

Mr Cuthill : For the OPV, we have those resources already. We don't need to bring anybody back in for that.

Senator KIM CARR: You don't need any more for that. Is that what you are saying? You don't need any more for sustainment and you don't need any more for the frigates?

Senator Cormann: You can't make a decision in relation to the frigates just yet. But in relation to the Air Warfare Destroyer Program workforce, as that project is coming to a completion, as Mr Cuthill has indicated, every effort is being made to redeploy those employees who are able to be redeployed into the submarine maintenance business. But, obviously, if further work comes on stream, and bearing in mind that the naval shipbuilding workforce is expected to grow to around 5,000 by the mid2020s, people will be recruited. But, in the meantime, you can't keep people sitting in a position painting rocks.

Senator KIM CARR: I never mentioned painting rocks. Do we have the training capacity—

Senator Cormann: You are telling us that—

Senator KIM CARR: That is not what I said at all.

Senator Cormann: we should keep people in position without anything for them to do. That is not something that makes—

Senator KIM CARR: That's not what I said. I asked you whether or not the vocational system in this country has the capacity to retrain 140 people. Given that they are experienced shipbuilders, have you looked at that?

Senator Cormann: ASC has been provided with $29.4 million over three years to provide 100 scholarships and 200 new positions all up that will help to deal with the transition that we are going through as a result of Labor not having commissioned a single ship during six years in government.

Senator KIM CARR: You have told us that the $29.4 million made available in December 2017 hasn't been called forward yet.

Senator Cormann: It is available and, as soon as the planning is completed, it will be provided.

Senator KIM CARR: After these people are off the premises?

Senator Cormann: There are up to 200 positions and 100 scholarships available, and they will be provided. They will be provided in a way that makes sense to support the broader naval shipbuilding program to make sure that we have the necessary skills to deliver those projects.

Senator KIM CARR: Minister, when were you advised of the decision to have the 223 jobs at risk?

Senator Cormann: I get courtesy announcements from ASC management just prior to relevant announcements being made in the public domain. That is done as a matter of course. These are decisions that are made at the level of the ASC business. These are not political decisions, as they shouldn't be. They weren't political decisions by our government nor under your government.

Senator KIM CARR: Could you tell me what date that was?

Senator Cormann: I'd have to take that on notice. I'm sure as a public statement it would be a matter of public record. It would have been on that day.

Senator KIM CARR: On that day?

Mr Cuthill : We consulted with the unions on 23 April.

Senator PATRICK: This may help, Chair. I had a question on notice on that and an answer has been provided. It says: 'In relation to the 223 jobs announced on 23 April 2018, ASC interim CEO Mr Jim Cuthill wrote to the Department of Defence and Finance on 16 April advising of the redundancies.'

Senator KIM CARR: Thank you very much, Senator.

Senator Cormann: So I would have been told around then.

Senator KIM CARR: Fair enough. I don't expect you to remember every piece of correspondence. Between 16 April and the public announcement, were there any conversations with ASC about the wisdom of their decision?

Mr Cuthill : We have ongoing discussions with Finance and Defence. A lot of work has gone into workforce planning with both departments, with discussions that involve us.

Senator KIM CARR: So the answer is yes?

Mr Cuthill : We were having discussions around 16 April, yes.

Senator KIM CARR: Was there a conversation about drawing down the $29.4 million?

Mr Cuthill : The 200 redeployments across the submarines was discussed. As a result, we now have 60 redeployments across to HMAS Waller for the full-cycle docking.

Senator KIM CARR: Was there a proposition put to the ASC management that the 223 jobs at risk need not be of that order because there was this money available?

Senator Cormann: I think we are going over old ground. What Mr Cuthill told you earlier is that they have made business decisions as to what jobs would be required and what jobs would not be required. They don't just keep people on without a proper purpose.

Senator KIM CARR: I am saying it would be within proper purpose. It is a proper purpose to actually maintain the capability.

Senator Cormann: But we are maintaining the capability, and that is why additional funding is provided.

Senator KIM CARR: The ANAO report says:

Defence has advised the Government of its assessment that the naval construction programs carry high to extreme risk. Key risks relate to the delivery of expected capability, program cost, ability to meet program schedules, and management of the industrial base.

Senator Cormann: In projects of this sort of magnitude, that is always the risk that we need to manage—as we had to manage in the air warfare destroyer program. Let me say, when we came into government, it had been extremely badly managed over the previous six years. This government worked together with the board and management at ASC to turn a very bad situation around, to the point where now the performance at ASC shipbuilding is absolutely exemplary. But there are always the sorts of risks that you described.

Senator KIM CARR: I take it from your interjection that you do agree with that assessment.

Senator Cormann: I agree that there are risks when you deliver a project of this magnitude.

Senator KIM CARR: Mr Cuthill, in your direct experience, do you believe that ASC shares the concern of the ANAO in those matters?

Mr Cuthill : Retention of capability is obviously key for future programs and the success of those future programs. That's exactly what we're trying to do at the moment with redeployments across to the submarine business: retain as much capability as we can.

CHAIR: Senator Carr, I should give Senator Patrick a go and then I'll come back to you.

Senator KIM CARR: Sure. I have a few more on this. If I can just be clear, as you are the shareholder, is it true that the ASC is currently subject to proceedings in the Fair Work Commission relating to the dispute brought by the AMWU over the management of the labour—particularly contract labour—at the submarine facility while workers with these skills are being made redundant at the ASC shipbuilding facility?

Mr Whiley : Yes, it is.

Mr Cuthill : There's an ongoing hearing.

Senator KIM CARR: Is it the case that the ASC announced the 223 jobs at risk before they'd actually explored the opportunities at the submarine facilities, including not using contract labour?

Mr Cuthill : As I said earlier, there's a process that we have to go through in the enterprise agreement, and we have followed that process to the letter.

Senator KIM CARR: In your view, you followed it to the letter.

Mr Cuthill : That's why there was a hearing, and the hearing is ongoing, so I can't comment further on that.

Senator KIM CARR: That is including the question of the use of labour hire. You're consistent with the agreement on the use of labour hire.

Mr Cuthill : We believe that we are consistent. There's an ongoing hearing, and I can't comment on the ongoing hearing.

Senator KIM CARR: When will you be able to identify exactly how many jobs will be lost before the OPV program commences in a few months time?

Mr Cuthill : As I said earlier, we're currently going through the process following the '223 at risk' announcement. We should conclude that within the next two weeks. It's a continuous planning process.

Senator KIM CARR: I'll come back. I have some other questions.

Senator PATRICK: I'd like to go to the matter of submarine sustainment, Mr Whiley, and the task that you were asked to do: to examine shifting that full cycle docking task that you do in Adelaide across to your facilities at Henderson. Are you familiar with that?

Mr Whiley : Are you referring to the tasking statement?

Senator PATRICK: Yes.

Mr Whiley : The original tasking statement was in 2016.

Senator PATRICK: So you have worked through and carried out a report on shifting.

Mr Whiley : Can I ask what the question was?

Senator PATRICK: I'm asking if you are familiar with the tasking statement involved with examining the shifting of full cycle dockings from South Australia to Western Australia.

Mr Whiley : We received a tasking statement from Defence relating to life of type extension. Part of that tasking statement was a question relating to the possible move of full cycle dockings to Western Australia.

Senator PATRICK: And there was a not-to-exceed contract for $4.99 million.

Mr Whiley : Yes.

Senator PATRICK: I presume not all of that $4.9 million was spent examining the shifting.

Mr Whiley : Very little of it was spent on examining the shift.

Senator Cormann: In fact, to be very clear, no decision has been made to shift. I think that what was happening here was looking at what some of the contingency planning should be in the context of the future frigates and submarines being built in South Australia. There has been no decision to shift, just to be very clear.

Senator PATRICK: I understand that—although I note that it has been discussed at cabinet.

Senator Cormann: I can't comment. I'm at a disadvantage because—

Senator PATRICK: You don't have to, because the FOI process revealed that some of the documents associated with the request had gone to cabinet.

Senator Cormann: I'm not sure that cabinet discussions are FOI, but anyway—

Senator PATRICK: Sure. I'm happy to see your point. I note that it was a not-to-exceed contract and that all the funds have been exhausted. That's been provided to me by way of an answer to a question on notice. So, I presume that that analysis has been completed?

Mr Whiley : No.

Senator PATRICK: It hasn't? So you've got a contract amendment in place, or are you going to absorb the price?

Mr Whiley : The tasking relating to the possible transition to full cycle dockings in Western Australia was put on hold, and we didn't deliver any work relating to that particular element of the tasking. So, all the deliverables related to that quote actually related to the life-of-type extension.

Senator PATRICK: So you've been paid the full amount, yet you haven't delivered the report?

Mr Whiley : We haven't delivered the report.

Senator PATRICK: How does that work? Normally you can't make a payment from Defence to ASC unless you have completed the work. That's the general way in which you manage—

Mr Whiley : Under the contract, we're allowed to reallocate funding for various aspects relating to the work, so money that was possibly identified for transition to WA was actually spent in life-of-type elements.

Senator PATRICK: No. I'm saying that, in order to invoice the full amount, you must have completed the delivery, and, in order for Defence to pay you, they must be satisfied the work and the statement of work has been completed.

Senator Cormann: No. What Mr Whiley said is that they were authorised under the contract to redirect part of the contract value from what you were asking about to other purposes. It was specifically the life-of-type extension work.

Mr Whiley : As you are well aware, that study—we were put on hold, for the freedom of information, so we did not deliver anything relating to that element of the study.

Senator PATRICK: When do you expect to deliver that?

Mr Whiley : As you are also aware, we were tasked under a letter in December last year to recommence that study work. We've recommenced that study work, and we delivered an initial draft discussion document to Defence in early May. We have had very high level preliminary feedback from that discussion.

Senator PATRICK: So Defence have an initial draft?

Mr Whiley : Yes—of our discussion document.

Senator PATRICK: So the plan was—in accordance with the FOI data—'given the need for this acceleration in other areas'—other areas of work—'let us plan to once again relax work on the study regarding moving the full cycle dockings with the intent for that study to be submitted as a draft in March or April 2018.' So, you only got to that in May, and it wasn't a draft; it was a discussion paper.

Mr Whiley : It was a draft discussion paper that set out the assumptions and hypotheses for the potential move.

Senator PATRICK: Good. I'm sure my staff have the FOI to Defence underway. That's fantastic. Obviously that was a contingency plan, as Minister Cormann said, to deal with the difficulties associated with a large amount of work taking place at Osborne. I presume you've done planning in respect of how to overcome that issue so that the work, as a primary option, can stay in South Australia?

Mr Whiley : Part of that discussion document, with the information we've done to date, has considered the hypotheses and the assumptions that we need to take into consideration in our analysis. Most of the analysis we've undertaken primarily relates to the facility in Western Australia and possible training requirements. That other piece of work is yet to be done.

Senator PATRICK: But you do intend to do some work to make sure that the FCDs can continue to be done in perpetuity at Osborne and SA, because there clearly is, in the view of the government, some impediment, or potential impediment, to that.

Mr Whiley : We will offer a very balanced view on the possible transition of—

Senator PATRICK: Are you doing a report of a similar nature to enable us to be fully informed about where the location of the full cycle dockings will take place?

Mr Whiley : As I said, we provided initial discussion documents to CASG to define the parameters of the report. We're waiting for that feedback. Once we've got that feedback, we can actually go to the essence of delivering or developing the actual report that's required to—

Senator PATRICK: Sure. But that report is tasked specifically with looking at shifting the work across to WA—the transition of all CCSM and maintenance activities to WA. Just to be clear, I'm asking you: are you doing work to retain the CCSM work that you're currently doing in South Australia? Are you undergoing a task to make sure that is achievable?

Mr Whiley : That is part of the basis of the hypothesis that we put to Defence.

Senator PATRICK: So both options will be included in that paper and are included in the draft paper to some extent?

Mr Whiley : Yes.

Senator PATRICK: I'd like to congratulate you on the OPV. Obviously you're still moving forward with that. I also congratulate you on the great performance with the 60 per cent improvement from ship 1 to ship 3. That's fantastic.

Mr Cuthill : Thank you.

Senator Cormann: It is very good, and it's very good of you to recognise it.

Senator PATRICK: In fact, it indicates to me that you are truly a strategic capability in terms of shipbuilding. Would you agree with that?

Mr Cuthill : I certainly think so, yes.

Senator Cormann: I agree with that too. The government agrees with that.

Senator PATRICK: Fantastic. So I can't imagine any reason why you wouldn't be involved quite extensively in the Future Frigate Program.

Senator Cormann: That's obviously a matter for a proper tender process, which is currently being conducted out of the Defence portfolio.

Senator PATRICK: Sure. I'm not asking whether he's going to win. I'm just presuming that he's put a substantial effort into winning that work.

Senator Cormann: I just wanted to make sure. I wouldn't want to create the impression that there is some sort of—that's got to go through the proper process.

Senator PATRICK: Sure, but you are of the view that you could, for example, serve to derisk the extreme- to high-risk program that is currently in play?

Mr Cuthill : I think we've proven we've got a very capable workforce that's capable of delivering complex warships to schedule.

Senator PATRICK: And it's in place at Osborne and perhaps would offer less risk than bringing in a new player.

Senator Cormann: You're putting him in a difficult position.

Senator PATRICK: No. I'm asking.

Senator Cormann: I think he actually was very generous in the way he answered that for you.

Senator PATRICK: I've asked him the question. He can make a PII if he wants.

Senator Cormann: I think he's actually answered it. You just repeat the same answers.

Mr Cuthill : I have. Obviously we're keen to play a major part in the Sea 5000 program.

Senator PATRICK: In the OPV work you did, clearly there was, as we discussed before, a whole bunch of planning that went into even making an offer to Lurssen, I presume. You had some sort of arrangement in place and you then were successful in securing that work with Lurssen. Would that be fair?

Mr Cuthill : Significant negotiations with Lurssen, yes.

Senator PATRICK: The same would have happened with the submarine, I imagine. I guess I need to now switch to Mr Whiley. I note that you had extensive discussions with DCNS prior to the CEP being announced. In fact, in a question on notice through the shipbuilding work of the economics committee, you've laid out a table of all the meetings that you had prior to the CEP being announced and then after. You had week-long workshops. You talked about future working relationships and so forth. Is it safe to assume you did some detailed work and presented an option to DCNS to partner with them?

Mr Whiley : We had discussions with all three participants in the CEP process. We had to remain agnostic in terms of our commitment to any of the parties. We really were supportive and driven by their questions, as opposed to offering up solutions. So, in the context of conversations—

Senator PATRICK: As a GBE, you're allowed to sell yourself to them, aren't you? You can try and grab as much of that work as you possibly can.

Mr Whiley : There were quite strong probity requirements relating to our engagement in that. We had to remain independent and agnostic in the possible selection process and the way we dealt with each of the three participants.

Senator PATRICK: Let's not worry about the other two, because they're out of the game. Just focusing on DCNS, is it fair to say you did a lot of negotiation and work towards partnering with them?

Mr Whiley : We certainly had discussions around possible concepts or models for operating into the future.

Senator PATRICK: Chair, I've got a document, which I've provided to the secretary, which I'd like to present to the witness. It's a document that has been tabled by Minister Payne in the Senate chamber in response to an OPD. We've done all the housekeeping there, I think. With your blessing—

CHAIR: You can proceed. Thank you.

Senator PATRICK: The document is DCNS's input to the CEP, saying what they'll do from an industry perspective. I want to go to page 15 of that document. For the benefit of Hansard, it is almost completely redacted. To be fair to everyone, I have an Information Commissioner review process underway. I will be proceeding to get more from this document, particularly if it involves ASC. That option's not being explored any more so it's not commercially sensitive. There's a title there 'intellectual property flow'.

Senator KIM CARR: That's all there is on the page.

Senator PATRICK: Yes, that's all there is on that page. Intellectual property flow has been nominated as a very significant element of the Future Submarines Program. Did you discuss mechanisms with DCNS for the flow of intellectual property on the assumption that you would be (a) a partner or (b) involved in the sustainment of the future submarine?

Mr Whiley : I'm not aware of any conversations we had regarding this aspect but I wasn't involved in every single conversation. I am not aware of that.

Senator PATRICK: But you are the acting CEO.

Mr Whiley : I was acting CEO. I'm not aware of any conversations related to this.

Senator PATRICK: Who in your organisation would be aware of the details of those conversations?

Mr Whiley : I think Jim Burnside would have been the person at the time.

Senator PATRICK: It he still with the organisation?

Mr Whiley : Yes, he's still with the organisation.

Senator PATRICK: It might be the case we might—

Mr Whiley : I can take the question on notice.

Senator PATRICK: Or we might get him to the naval shipbuilding inquiry hearing that's coming up shortly. On notice, could you please provide whether or not you had discussed an IP flow model where you guys were involved heavily as a partner with DCNS in the Future Submarines Program?

Mr Whiley : I will take that question on notice.

Senator PATRICK: I want to take you to page 50 where there's a diagram. In the diagram it talks about the anticipated employment outcomes from the Future Submarines Program. A lot of toner was used to print that because there is a lot of black in that document. The document is a bar chart. It talks about the anticipated employment outcomes for the Future Submarines Program. It says, '1,700 jobs ASC', and it lists a whole bunch of jobs that I would expect to be ASC jobs—naval architects, hull welders, electricians and so forth. I presume that diagram was inserted into this offer as a result of those detailed discussions you had?

Mr Whiley : No. I think that's DCNS's own assessment of the type of service they would engage with ASC in in terms of the offer. We had no involvement in putting this document together.

Senator PATRICK: Mr Wylie, it's not possible for you to suggest to me that in a role as a CEO keen to get work for your company that you would not have presented an option and talked with DCNS about possibilities.

Senator Cormann: It is possible, because that's what he's just done. Let's be very clear it's definitely possible.

Senator PATRICK: It is possible. I'm saying are you sure about that, Mr Whiley?

Mr Whiley : We were not allowed to align ourselves or offer any specific products with any of the three participants. We—

Senator PATRICK: Weren't allowed by who?

Mr Whiley : There were probity restrictions on the CP participants, mainly ASC in support of that. We had to be agnostic in support—

Senator PATRICK: There's a difference between agnostic and not providing information to a tenderer. That's a very different thing.

Senator Cormann: By rough context, before trying to be helpful, these procurement processes are managed by Defence. All of the aspects of the procurement processes, including the probity requirements, are a matter for the Defence portfolio. From an ASC point of view, our interest in this was that whoever the successful bidder was that there was an appropriate opportunity for the ASC to be part of the body of work. In that context, all of the various potential bidders did visit, as I understand it, because I asked the shareholder minister. I get asked for approval when people want to enter these premises. I certainly remember that I provided approval at various times for the various bidders, that were competing as part of this bid, that wanted to go and check out the ASC facilities and have meetings. But the evidence of Mr Whiley is very clear. On the representation of this particular graph, his evidence is it's not based on information provided by ASC; it is based on DCNS's own assessment. That is the evidence. Whether you think that is plausible or not, that is explicitly and unequivocally the evidence that we've provided.

Senator PATRICK: There were weeks of discussions. I can't imagine that the detail wasn't sorted out during those weeks of discussions.

Senator Cormann: That is what I'm saying, in an abundance of openness and transparency. Of course there was exchange. Presumably DCNS, in putting that graph together, would have based their assessment on information that they were able to ascertain in various due diligence and research operations. But it's not based, according to Mr Whiley's clear evidence, on any specific information that was provided by ASC as input into that document. ASC was to be agnostic in order to be in the right position to take on work, whoever the successful bidder was.

Senator PATRICK: So 'agnostic' means you make the same offer and the same information available to all of the—

Mr Whiley : We didn't make the same offer at all. We responded to the questions and the information requests by each of the parties and the support that they asked of us. They are very competent submarine builders. They walked through the site. They spent a lot of time with us. This is the first time I've seen this grant. I'm not surprised they've come up with that assessment. I could easily have come up with that going through DCNS's—

Senator PATRICK: You should be surprised, because Mr Clark gave evidence to the shipbuilding inquiry that he's going to consume the entire ASC. We've got a series of questions—I have them here, actually—and discussions, including from your chairman, Mr Carter, that suggest you're not going to be consumed. But that's the position of DCNS. They've not sought to sign up to a partnership with you for the build of the Future Submarine, have they?

Mr Whiley : No.

Senator PATRICK: Have they held any discussions along the way?

Mr Whiley : We had discussions with Naval Group's global CEO earlier this month about how we might possibly proceed into the future.

Senator PATRICK: Being a GBE, an independent organisation—and a highly capable one; one that built the Collins class submarines—I presume you'd be willing to tender for the build of the Future Submarine, were a tender to be offered?

Mr Whiley : We are more than happy to support Naval Group in whatever capacity.

Senator PATRICK: No, no. There's a design and mobilisation contract in place, not a build contract as far as I'm aware—I'll be asking Defence about some of that next week. There's presumably an opportunity here for you, an Australian company with great experience in building submarines, to be the builders of the Future Submarine. Noting our tender process that we go through here in Australia, I can't imagine that they would go to a build without tendering that. Would you respond to such a tender, noting your experience and the position you play in the market, if one were put?

Mr Whiley : I'm of the understanding they are going to be the builder of the Future Submarine. We will provide whatever support they require in terms of that capability.

Senator PATRICK: So you think they've got a contract to build?

Mr Whiley : I'm not sure where they are in terms of the contract details, but I believe they are going to be the builder of the Future Submarine.

Senator PATRICK: Minister, do you have a position on that?

Senator Cormann: Sorry?

Senator PATRICK: Mr Whiley's just explained that it doesn't appear the program will go to tender for the build of the Future Submarine, which I find remarkable because we haven't decided what the submarine is yet; we're still going through a design process.

Senator Cormann: It would be entirely inappropriate for me to comment, because it is 100 per cent the responsibility of the Defence portfolio to make judgements in relation to these matters. I'm the shareholder of the potential supplier of relevant products and services, which from time to time competes for relevant work. The procurement decisions in all aspects related to those procurement processes are a matter for the Defence portfolio.

Senator PATRICK: As the finance minister, isn't there a general principle that, with a fairly significant multibillion-dollar program, you would expect it to go to tender?

Senator Cormann: I expect that decisions are made for the right reasons and always focus on getting proper value for taxpayers. But I'm not aware of all of the circumstances in relation to the specific decisions that are being made here. These are entirely matters for the Defence portfolio. There might well be reasons that I'm unaware of from my perspective, so I won't be able to assist you with that.

Senator PATRICK: So you don't share the view of Mr Whiley. I appreciate that you're separate. He's the—

Senator Cormann: What I'm aware of is that the responsibility sits with the Defence portfolio and they would be best equipped to give you an answer on behalf of the government.

Senator PATRICK: You formed that view, Mr Whiley, by talking to the CEO of Naval Group?

Mr Whiley : I think I formed that view from what I've seen in the media and what-have-you and the conversations we have had with Naval Group. They have definite aspirations to be the builder of the class and they’ve asked us—potentially they're looking at—environment inside that responsibility.

Senator PATRICK: So they're a shipbuilder; they have an aspiration to build. You're a shipbuilder; I presume you've got an aspiration to build the future submarines as well. If you were given that opportunity and—

Mr Whiley : ASC's primary role in terms of submarines is supporting Collins in the first instance. Collins is the only submarine asset we have until well into the 2030s, and we would need to operate into the 2040s. Our primary role is to keep Collins viable for the nation.

Senator PATRICK: So you're not even looking to tender?

Mr Whiley : I didn't say that. What I'm saying is we have offered our services in support of their program to design and possibly build the future submarine class for Australia.

Senator PATRICK: I will go back to page 47 of this document. This will be one of my last questions for this document. It is also fully redacted except for the title, 'Working in partnership with Australian build and sustainment organisation'. If I were in DCNS, I would certainly consider ASC a prime partner in the future submarine program. Would it be reasonable—and based on your discussions prior to the CEP, which is prior to when this document went in—I note you had a meeting discussing future working relationships on 22 October, which was about a month before this document was put together. I imagine this is going to talk about use of shipyards, probably supply chain stuff—all the stuff you're good at. Are they the sorts of discussions you had with ASC? At any stage during the negotiations during your discussions with DCNS—noting that I don't believe it would be possible for them to claim a partnership without your authorisation—did you make an offer or agree to the principle of partnering with them should they win the tender?

Mr Whiley : At no stage did we make that commitment; however, we did provide them visibility of what an ASC partnership could provide via capability and what services we had and what we could offer to the program.

Senator PATRICK: Based on Mr Carter's responses to DCNS's consuming comment, and based on answers you've provided to the economics committee, you are absolutely of the view you will have a significant role to play in the future submarine program?

Mr Whiley : Personally, I think we'll have a significant role to play.

Senator PATRICK: By 'personally', I mean as the acting CEO.

Mr Whiley : Absolutely. I think—

Senator Cormann: He's not the acting CEO, by the way; he's the Chief Executive Officer. The government has appointed him.

Senator PATRICK: Congratulations. I must have missed that.

Senator Cormann: Sorry. The ASC board has appointed Mr Whiley which is a good position—

Senator PATRICK: Congratulations, that is good news. I'll go back to some other questions. There have been a number of redundancies over the last couple of years, significant redundancies, at ASC. I'm wondering if the structure of the executive of your organisation has also shrunk, commensurate to those reductions? Have there been any people that have been put off from the executive of your organisation or the senior management?

Mr Cuthill : Are you referring to shipbuilding?

Senator PATRICK: Yes, to shipbuilding.

Mr Cuthill : On shipbuilding, yes. I took over from Mr Lamarre in December, and in January we had a restructure. We are continuing to restructure the business in terms of business needs. We are constantly reviewing that. And the total numbers have reduced, yes.

Senator PATRICK: Can you, on notice, provide a profile of the current numbers of the executive level and senior management level over the last two or three years.

Mr Cuthill : It changes shape considerably, because obviously we form a fairly major part of the AWD Alliance, so we have operational and functional responsibilities, so it's not quite that simple.

Senator PATRICK: So you're saying if I got the data, I'd misread it—

Mr Cuthill : I can pull something together, but, as AWD ramps down, some of those AWD roles disappear and become functional roles, and vice-versa.

Senator PATRICK: Could you on notice attempt to do that for me?

Mr Cuthill : Yes.

Senator PATRICK: Put whatever information is required to make sense of the data.

Mr Cuthill : Yes, we can do that.

Senator PATRICK: I think that's about it from me. Thank you.

CHAIR: Senator Carr.

Senator KIM CARR: Minister, what is the current status of the discussions with Lurssen in regard to the OPV? You indicated the contract is about to be concluded.

Senator Cormann: I probably can't personally assist you. ASC and Lurssen, are currently finalising contract negotiations for the OPV, which is what Mr Cuthill previously indicated. I'm not sure whether you are able to—

Senator KIM CARR: Is ASC able to help me? Where do you stand in regard to the construction of the first two OPVs?

Mr Cuthill : The negotiations have been around the construction of the first two OPVs in Osborne, and, as I said earlier, we are in final negotiations and very close to signing a contract for the lead and the second ship.

Senator Cormann: The intention is for the first two OPVs to be built in Adelaide by ASC from the fourth quarter 2018, with 10 to be built at Henderson by Civmec and with Civmec to supply Australian steel for all 12 OPVs.

Senator KIM CARR: Have you been involved with the conversations with Austal?

Mr Cuthill : No.

Senator KIM CARR: None at all?

Mr Cuthill : No. We're just focusing on the build of the first and second ship. Austal were discussing with Lurssen around ships three to 12 in WA.

Senator KIM CARR: Given what matters have been in the public domain, when do you expect the contract for the first two vessels to be finalised?

Mr Cuthill : We're expecting it to be completed in the next four weeks.

Senator KIM CARR: You've indicated the fourth quarter for work to commence?

Mr Cuthill : Correct.

Senator KIM CARR: Does that mean you will actually start construction?

Mr Cuthill : Fabrication will start at the end of this year. And it ramps up, so it's not—

Senator KIM CARR: How many people are actually required for the OPV project?

Mr Cuthill : At the moment we're still working through with Lurssen some of the options. At the moment we've got plans; it depends which options get allocated into that contract.

Senator KIM CARR: So you don't really know yet. Is that what you're saying?

Mr Cuthill : As Senator Patrick said, we do a lot of detailed planning, so we understand in terms of scope what number of people are required, but in terms of what scope we will actually perform ourselves, that's not finalised at the moment.

Senator KIM CARR: When do you expect to have that matter resolved?

Mr Cuthill : As I said, we'll have the contract signed within the next four weeks.

Senator KIM CARR: So it would have to be resolved at that point?

Mr Cuthill : Yes. There are still further opportunities at that point, obviously, so discussions with Lurssen are ongoing, and we'd be willing to support in any way that we can on the remainder of the program.

Senator KIM CARR: Did I understand you correctly when we were talking about the future requirements? Were you suggesting to this committee that you weren't clear what employment opportunities would be arising from the Sea5000?

Mr Cuthill : Correct. We're not one of the tenderers for Sea5000.

Senator KIM CARR: So you don't know what it means in terms of flow-through work for the industry?

Mr Cuthill : No. Each of the designers has its own industrial strategy, and that's subject to the tender process, so that would be a question for Defence.

Senator PATRICK: But they were talking to you about that. In previous evidence, they've all talked to you.

Mr Cuthill : We have had engagement with all three designers, but, obviously, it's only limited engagement.

Senator KIM CARR: And you had conversation with Austal about that, didn't you? Wasn't there a partnership arrangement?

Mr Cuthill : Yes.

Senator KIM CARR: And what's happened to that partnership arrangement?

Mr Cuthill : The partnership still exists today.

Senator KIM CARR: And have you not been talking to the tenderers, exactly as a result of that partnership?

Mr Cuthill : As I said, previously, we've had positive engagement with all of the three designers.

Senator KIM CARR: But then it stopped?

Mr Cuthill : I think that was before my time as Acting CEO. That was with Mr Lamarre.

Senator KIM CARR: And it's now recommenced?

Mr Cuthill : Like I said, we have positive engagement with all three designers.

Senator KIM CARR: Since when?

Mr Cuthill : Since I took over in December. As far as I'm aware, from my experience, there is positive engagement with all three.

Senator KIM CARR: But you don't have any concept of what employment opportunities might arise?

Mr Cuthill : Not in any detail, no.

Senator KIM CARR: I see. Thank you very much, Mr Chairman. I'll leave the rest.

CHAIR: Are there any further questions for ASC Pty Ltd? If not, I thank you very much for your evidence this morning.