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ESTIMATES COMMITTEE B
23/09/1992
DEPARTMENT OF DEFENCE
Program 3--Army
Subprogram 3.1--Combat forces

Senator TEAGUE --I notice there has been an amendment to note 2, on page 165. I have read the original and the new one, and I still do not understand it. Could someone clarify in particular what `Ready Reserve per capita' means? The statement continues, `The Ready Reserve per capita relates to the 394 full time Ready Reserve staff in 1992-93 and excludes 156 part time' and we are talking about staff years of 550 in the Ready Reserve in the Army.

Mr Lovett --The figure of 550 for the Ready Reserve that is presented in the table comprises two elements. There is an estimated staff year figure of 394, reflecting those personnel chargeable to permanent military force salaries, because they are on full time duty. There is a further estimate of 156 staff years for part time personnel, who are chargeable to Reserve salaries, leading to a total of Ready Reserve staff years of 550.

Senator TEAGUE --I see. What are the numbers of people involved in that 550 staff years?

Mr Lovett --We do not have the total number in the combat force readily available. We only have the staff year figure. We could obtain the total figure for you, if you wish.

Senator TEAGUE --Could I put that question on notice? Just to get the first part of your answer really clear in my mind, you are saying that the 394 full time staff years, that are statistically described here under Ready Reserve, are effectively ready reservists who are full time?

Mr Lovett --They are undertaking their first year of training on a full time basis; yes.

Senator TEAGUE --So that, whilst they of course are ready reservists, for the statistical purposes of your staffing, though, they are regarded as permanent.

Mr Lovett --They are presented as if they were permanent; yes.

Senator TEAGUE --That is what I did not understand. Thank you for the explanation. My question goes to the cost of the Ready Reserve program to the Army. Back on page 32, there is a figure given. It says--under the heading `Program 3--Army'--that `further implementation of the Ready Reserve' is $24.2m. There is reference to a figure of $12m on page 166, and $2.5m on page 167. I do not wish to confuse but, in the Force structure review last year, when there was an estimate given of operating costs, it was regarded as $16m. Can you tell me what is the actual cost this financial year of the Army Ready Reserve? And how do I make sense of these references on pages 32, 166 and 167?

Major-Gen. Fittock --I would prefer to defer to Major-General Nunn, on the cost of the Ready Reserve.

Major-Gen. Nunn --I would like, if I might, to change the question you have asked, Senator, by talking of the percentages of relative costs, because I think they directly apply to the end dollar estimates for the Defence Force. Reconciliation between the total data on page 32 and the later ones is going to be difficult without a little bit of cross-work. But at the original inception of the Ready Reserve, an estimate was made of the cost of the ready reservist versus the cost of a full time or permanent member.

That calculation was attempted on the basis of an individual. It was a direct personnel cost. It did not include, for example, some of the benefits and retention initiatives and so forth, which were later added to the reservist. That number, in an approximate sense, came out at 30 per cent. That was the driving force for the original estimates of costs of the Ready Reserve program.

As the program was further developed, it was obvious that the attempt to cost the individual was deficient in some of the operating cost elements. A better estimate was made which included a number of the operating costs--for example, the retention initiatives, the education initiatives and so forth, by then had been decided. The number was then raised on a second review to 42 per cent. But I would emphasise that both those numbers were based on an attempt to cost the individual reservist.

At that stage, we examined in a lot of depth the financial implications of those analyses and found them to be wanting. The only way in which we could effectively cost the Ready Reserve program as it began to develop, versus the--if I might call it--alternative of a regular component, was to look at equivalent combat capability. On that basis, an exhaustive financial analysis was done. For example, we took a fully manned 6 brigade and costed that out at approximately $145m, using fully full time members.

The equivalent ready reserve unit, including its regular component of approximately 700, costed out at approximately $75m. That is based on a number of years of build-up. And it is based also, on assumptions on turnover. On all of those bases, we have done the same for Army, Navy and Air Force and we have come to the assessments--which I think have been made public previously--which, if I can use the exact numbers, were 40 per cent for the Navy, 54 per cent for Army and 56 per cent for Air Force.

I would emphasise, however, that they are estimates and we will not know what the exact number is until we have had the number of years and seen the actual turnover, because all of those assumptions are based on equivalent combat capability and are based on assumptions on turnover. We know, for example, that at the moment our first year of turnover is approximately half that which was built into those numbers. We do not know what our second year turnover is, and we obviously will not know until towards the end of the second year and so on, through the years of the program.

We will continue to review. As has previously been advised, there will be a formal review some years into the program in order to look at our assumptions versus the actual results and to forecast the value of the program and its contribution to the force. I have not answered the question of equating the figures which are between the two segments. I would like to defer back to Army if appropriate, or perhaps this should be taken on notice.

Major-Gen. Fittock --Just to add further to that, the costs there on page 166, which has for reserves for 1992-93 an estimate of $46.703m which is a variation to the previous year, and that is broken up with some $37.9m being for the reserves and $8.7m being to the Ready Reserve. That is only a variation for the salary vote, and does not really put the total cost on there. That figure is not available in here.

Senator TEAGUE --Is the figure on page 32 the actual financial year's budget for implementation of the Ready Reserve--$24.2m?

Major-Gen. Fittock --It is a variation.

Senator TEAGUE --It is a variation?

Mr Lovett --That is the variation over the previous year's expenditure.

Senator TEAGUE --So we are still building up. I would like to come back to General Nunn's changing of the vocabulary, very usefully, to the percentage. I think the Minister, Senator Ray, first publicly put the figures of 40 per cent, 54 per cent and 56 per cent on 12 July. It is widely known that the original figuring was 30 per cent. A great deal of commitment was given to planning the actual endorsement of the Ready Reserve on the basis of it being a 30 per cent figure. It is now double that. I am still surprised that Vice-Admiral Beaumont, in the Estimates six months ago, gave the 0.56 figure across-the-board for the Ready Reserve. On B 6 of the Hansard of 27 March, he said:

I think the estimated cost at the moment is that a Ready Reserve at this stage is about 0.56 of a regular--full cost. Perhaps if Colonel Benton could expand a little on the costing model it may help.

On 12 July the Minister clarified that, and you have reinforced it in your remarks just now, the present figuring is 0.4, 0.54 and 0.56 for Navy, Army and Air Force ready reservists. You added that it could be even higher than that because of some of the variables that you discussed. How much higher do you think it could go?

Senator Robert Ray --I think it was explained in the answer that the variables are to do with turnover rate. Yes, it could go higher, but the evidence you have so far is that the turnover rate is in fact about half what we anticipated. So it is more likely to go lower than higher. It is all very well to have someone in full time training for a year, and work out what the turnover rate is there--that is pretty predictable. The real issue to knowing the success of this scheme is the second and third year out--after they do their 51 days a year. How well do they do it? How interested do they remain? How does their employer react? How is their studies program going? Those things are not easily calculable and therefore one cannot make an assessment. If you wanted me to take a guess; I think it will come in at about 54.

Senator TEAGUE --Across the whole Ready Reserve?

Senator Robert Ray --Across the Army. The reason that that 0.56 figure came up is that there is a tendency, when we think Ready Reserve, to think Army. That is the big one so far. We tend to talk Army, instead of across-the-board. The Navy reserve is far less because so far it has taken a lot more ex-regulars, I suppose that is the best way of describing it, into the system. The original figures given to me were somewhere between 0.39 and 0.44, as the estimated cost. They have risen above that by 10 per cent or 10 points, if you like. I will predict 54 for the future, based on the fact that the turnover rate is half what we anticipated. It may double in the future and therefore it will balance out and we will sit on 54. It may well just run at that level and will come in cheaper.

Senator TEAGUE --Thank you. General Nunn, you mentioned, with regard to Army, that the current cost is 42 per cent. But once we move into a part time Ready Reserve phase, that is the second and third year, the Minister's guess--I am not holding him to it--is 54 per cent. Can you reconcile this 42 per cent you have just given me with the possible 54 per cent outcome in a year or two?

Major-Gen. Nunn --The 42 per cent that I mentioned earlier was the second estimate, if I might call it such, of the cost of a generic ready reservist--Army, Navy or Air Force. It was based on a second attempt to cost an individual with some of the operating costs added. The costs that both the Minister and I were referring to--the 54, 56 and 40 for the individual services--are not specific year by year costs. They are program costs, over a number of years of running. They are a stable-state cost with turnover, with new entrants coming in each year and with old entrants leaving each year. They are an average over a number of years estimates. They are not a single year estimate.

Senator TEAGUE --Thank you for that clarification; it looks a reasonable context. It is a different context to this particular 1992 year when you have mentioned the 42 per cent. The question which I am tempted to ask, which you will probably rule out of order, Mr Chairman, is: if the steady or mature outcome was 54 per cent of a regular for Army, if that had been understood at the beginning rather than 30 per cent--

Senator Robert Ray --I do not know where the 30 per cent figure came from.

Senator TEAGUE --I could give you a number I have got here--

Senator Robert Ray --I am sure you have properly sourced it, it is just one that I am not familiar with. At the maturation stage of force structure review it was put to me as 40 per cent or 39 per cent.

Senator TEAGUE --I could quote your own words on 3 September 1991, in answer to a question on notice from Senator Durack. In referring to the report on the Ready Reserve program you tabled in the Parliament on 30 May 1991, you went on to say:

Following this refinement the estimated direct personnel cost of a Ready Reserve member is now assessed to be about 0.3 of a Regular member. However, as the Ready Reserve Program has no precedent, this estimate can only be validated with experience.

That is only one of many references.

Senator Robert Ray --The direct personnel cost is slightly different from the overall average cost--anyway, that is semantics.

Senator TEAGUE --Minister, if I could just repeat the point that I was making that if the Ready Reserve program were undertaken with a personnel or individual serving members estimated cost of 0.3, would it have been undertaken if the expectation had been on a broader context of 0.54? I know that is rather a hypothetical question--it is a policy question--but I must say I have grave doubts that it would have been undertaken if the cost was projected at 0.54 rather than 0.3.

Senator Robert Ray --In your own words, by quoting me back, you are talking about direct personnel cost of 0.3, not overall cost. The figure I had in mind was 0.4, an average of 0.4 across the three Services, and quite clearly higher in the case of Army and Air Force. That is although Air Force had not at that stage fully defined its future ready reservists, which are basically into airport protection. It would, of course, be virtually the same figure as the Army.

Would I still go ahead today? Yes, I would, personally. I regard having three fully-manned, fully-equipped Ready Reserve battalions as better than two under-equipped, under-manned Regular battalions. So I still assert and maintain my view that having--

Senator MacGIBBON --In that 6 Brigade you had 49 RQR, which was arguably the best reserve infantry battalion in the country.

Senator Robert Ray --Yes. I am still sticking to my view, and I am sure the Chief of the Defence Force would, that having three Ready Reserve battalions with a good readiness ability, fully-manned and fully-equipped is at least equal to having the two other Regular battalions, which were too often under-manned and under-equipped. I think people should give it a chance to work. I am on the public record and so is Gordon Bilney--to you people here and others--to say that if in two years time the Ready Reserve does not work and is not working it should be flicked. But it should at least be given a chance to be assessed to see it while it is working. This is not one of those dramatic decisions like, say, scrapping or not going on with an aircraft carrier--that cannot be reversed. There would be a bit of pain and a bit of awkwardness for the Minister--if I am the Minister--if I reversed it then. But I have said on the public record a couple of times that if the Ready Reserve does not work we might have to go back to the other system. But do not condemn it theoretically. I am sure you will have the opportunity to see, as I have, the ready reservists. When you do that, I am sure you will be most impressed.

Senator TEAGUE --Minister, I am not condemning anything theoretically--

Senator Robert Ray --I understand that.

Senator TEAGUE --I ask, finally, is there a projected time of evaluation at the end of two years of the operation?

Senator Robert Ray --We wrote into the Cabinet decision a review after three years--that is, from the start. In other words, we would have had three recruitments by then, and we would have had people serving part time for two years. Some people argued for one. I argued for two, because I think you have to see the various milestones: how it is progressing, what the retention rate is, and what the retention of skill level is after one and two years. After two years this first lot would have had one year's full time training and 102 days as part timers, to see what their level is.

Senator TEAGUE --When does that three-year period end?

Senator Robert Ray --I would imagine in January, three years from the first recruitment. So that takes us through to about January 1994 when you would start that review. You might start the preliminary stuff before it.

Senator TEAGUE --What is the cost, compared to a regular soldier, of a general reservist? Is it still 0.1?

Major-Gen. Nunn --We are currently adapting the financial model that we have prepared to do this exercise to the general reserve. The number will certainly come out below the 50 per cent that we are currently talking for a general reservist.

Senator TEAGUE --Do you mean for a ready reservist?

Major-Gen. Nunn --A general reservist will come out below the ready reservist at 50 per cent. I have to emphasise that the general reservist has a different readiness requirement, different training level requirements and therefore you would expect that. We are probably within a month of having some of that information available to us.

Senator TEAGUE --What does it look like?

Major-Gen. Nunn --Due to the nature of financial modelling, if you are not careful you can make an estimate and get into difficulties with it. I would prefer, if I might, to wait until we have got the results on the model.

Senator Robert Ray --Obviously he has learned about the 0.3!

Major-Gen. Nunn --The Minister may have an estimate he would like to give!

Senator Robert Ray --Pass.

Senator TEAGUE --So that is before Christmas. I imagine I could ask a question of the Minister, but if I could put on notice, what will be the specific outcome of the study with regard to this question? And even if it is an answer given to this Estimates Committee in November I would be glad if it could be taken on notice.

Senator Robert Ray --Could I just say that answering that question will be predicated on whether we have results in. I would rather not take that on notice if we cannot answer it before the Estimates Committee starts in November because we have a pretty good record of getting every answer in and to ask us one that we simply cannot get in might be difficult. Why do we not leave it on the basis that if we can get it in we will, if we have got the modelling completed by then.

Senator MacGIBBON --Just a quick non sequitur to tie up this Ready Reserve that just occurred to me. What is the designation of the battalions? Will they be the same--6, 8 and 9RAR, or are they Ready Reserve battalions?

Major-Gen. Fittock --The names are staying the same.

Senator MacGIBBON --So they will be RAR battalions?

Major-Gen. Fittock --Indeed.

Senator MacGIBBON --Thank you.

Senator TEAGUE --Concerning page 169, I just note that there are three areas in `Levels of preparedness' where we have not adequately achieved the levels required. Those areas are follow on forces, protective forces and logistic forces. There is a note of three lines on page 169 that says that this is the result of:

a combination of reasons such as overall resource constraints, manning imbalances and limited equipment holdings.

Can you clarify why we did not meet the levels required?

Major-Gen. Fittock --First of all, in answering that I should say that the preparedness theory that the ADF has adopted is still relatively new to the whole ADF, although Army before that had a readiness theory of its own which we follow. With the adoption of that, which from memory was in 1988, we have now developed the CDF preparedness directive and the reporting procedures associated with that, and we are developing the mechanisms to measure the achievability or otherwise of preparedness.

Because the setting of the preparedness levels were related more to what was desired rather than what we had, it is not surprising that in some areas there is a gap between what we have and what we are aiming for. I suspect that unless the strategic scenario changed dramatically there will always be a gap between those elements that are required at lower preparedness and where they are than any other circumstance.

I think what you see there reflects the reality of where we are as a result of the theory and the developing practice associated with it. We are studying the reasons why that gap occurs and where we can put resources to it so we will actually carry out the remedial action. But I would suggest that in some of the areas there will remain a gap between what we can achieve and what the requirement is.

Senator TEAGUE --I do not want to have a circular argument just chasing definitions, but one would have thought that lower priority for follow-on logistic forces, protective forces, would have been already built into the levels required. If that is the case, there is still a shortfall in terms of the level achieved.

Major-Gen. Fittock --Yes, there is a shortfall in the levels achieved because we have not attained all the goals that we are after. Those goals were associated with manpower levels, equipment levels and training levels, and we have not yet been able to put in the necessary resources to be able to achieve all those things.

Senator MacGIBBON --General, under ASP 90, is it not a fact that protective forces are one of the priority tasks?

Major-Gen. Fittock --They have a degree of notice associated with them.

Senator MacGIBBON --I understand that, but it is a designated priority task.

Major-Gen. Fittock --Yes, indeed it is.

Senator MacGIBBON --Therefore, Senator Teague's question is very relevant.

Major-Gen. Fittock --It is if you accept that before the theory we had everything at the minimum level of operational capability. There has always been a gap between the present level of operational capability and the minimum level of operational capability required by the preparedness theory. What we are able to do is define that more precisely. As we go through the further studies associated with the force expansion which is able to generate the data which demonstrates how that goes, then so we will be able to bring forward the sorts of propositions which in resource terms would remedy the gap. If within the defence organisation those resources are not available, obviously the decision has to come back to the readiness levels that we can actually sustain.

Senator MacGIBBON --Surely, under current strategic guidance and low level contingencies, protective forces are one of the fundamentals that we have to provide and they are not resourced. When will they be resourced?

Major-Gen. Fittock --I certainly cannot answer that in a specific way.

Senator TEAGUE --What we have been looking at is the performance outcome for the last financial year, and in a couple of pages there is an outlook for 1992-93. It is elliptical there, it does not say whether or not the inadequacy is to be redressed this financial year. But is there an attempt to redress that inadequacy this financial year?

Major-Gen. Fittock --It is an ongoing challenge to attempt to redress the gap between where we are and where we would desire to be to satisfy the preparedness objectives.

Senator Robert Ray --I think it would be a much better proposition to leave these definitions and be judged by the Senate and everyone else than just lowering the definition so we can meet it. The question is whether we defer resources from six above, to bring that one up and therefore deprive them of that, and Defence is always about, and the argument is always about, where you apply the resources and what the overall level of the resources is. Give me another billion dollars, I could do an awful lot.

Senator TEAGUE --I agree entirely that we do not want to fudge benchmarks by just the inadequacies of the present time, but are we able to objectively say that, with regard to these elements, we have inadequate provision?

Senator Robert Ray --We are saying the reason why the levels achieved are not matching the levels required is that we cannot devote sufficient resources to those two areas in particular, and to do so we might have to take it out of other areas mentioned there.

Brig. Ferguson --I want to make a point of clarification just in case there is any confusion. It is important that everybody understands that the ready deployment force, for instance, has its slice of logistic support. So that is an entity in itself which can deploy and which can be supported as you step down each element so the logistic force which is at the bottom level does not involve logistic forces which would be supporting a high priority element.

Senator TEAGUE --But it means that there are other areas of logistic support which are inadequate.

Senator MacGIBBON --The top of page 169 says that six battalions commenced an evaluation of a concept of motorised infantry. Surely the Army had the concepts of motorised infantry battalions established generations back?

Major-Gen. Fittock --Yes; but I think it is necessary to evaluate the present day concepts associated with the present challenges in front of the battalions.

Senator MacGIBBON --But is there not a motorised battalion in one brigade?

Major-Gen. Fittock --We have a mechanised battalion in one brigade. On the motorisation in Kangaroo 89, we motorised one of the companies of 6 Battalion as a trial and we are now motorising the whole of 6 Battalion to develop procedures.

Senator DURACK --On the top of page 170, you refer to the development of the air mobile company lift capability, assessed in Kangaroo 92. Could we be told what that assessment was?

Major-Gen. Fittock --The Blackhawk capability was deployed on Kangaroo 92 and performed very well. We are in the process of actually meeting our goal to have the whole of the company lift capability developed. I think it is to be demonstrated next month at a ceremony in Townsville, which recognises that we have actually achieved the goals necessary to have the whole company group lift active. From a point of view of tasking, Kangaroo 92 was an outstanding exercise. It certainly demonstrated that the concepts that we have to date are correct and it demonstrated that we are able to deploy the helicopters and work with them in a way which is operationally successful.

Senator DURACK --Did the Blackhawks stand the strain?

Major-Gen. Fittock --Yes.

Senator DURACK --No problems?

Major-Gen. Fittock --We have problems in supporting the Blackhawks. We have problems in coming up with the full potential of the Blackhawk, and that is why we have the Chinook proposals in train at the present stage. With the Chinook proposal, we will get much greater ability to use Blackhawk--we get greater reach out of the whole thing.

Senator TEAGUE --I have two more questions about the Reserve. I understand that the steyr rifle was to be, for the first time, distributed to the Reserve in April this year. Did that happen and what is the extent of the availability of the steyr rifle in the Reserve and in the Ready Reserve?

Major-Gen. Jeffery --Product numbers for the overall Army are slotted for 67,000, total. We have got 20,000 in service now and issues to the Reserve have commenced--specifically, to the regional Force surveillance units in northern Australia. There is a program of issue to other high priority units of the Reserve in train. I could get the dates and times of projected issue dates for you if you wished.

Senator TEAGUE --Could that be taken on notice? I would be interested to see what the specific figures are currently and what the projection is for this financial year.

Major-Gen. Jeffery --The Ready Reserve 6 Brigade in Brisbane was equipped with some 3,000 of the rifles in April this year, which caters for the largest lot. In July of this year, one commando regiment and 51 far north Queensland RFSUs received their steyrs. Issues to Norforce and the Pilbara regiment, which are also regional Force surveillance units, are currently in train. Issues to general reserve units, on lower degrees of readiness, will commence from June 1993.

Senator TEAGUE --In answer to a question asked in the March 1992 Estimates, indication was given that the general Reserve was scheduled to be issued with a new weapon in April. That was April 1992, and that has been put off until June 1993.

Major-Gen. Jeffery --I have stipulated that some Reserve units have been issued. April 1993 is the projected commencement issue date for the majority of general Reserve units.

Senator TEAGUE --I see.

Major-Gen. Jeffery --What we will do is put some pools of weapons into training groups within the various States so that the Reserve can get a bit of a looksee and a feel for the weapon prior to its general issue.

Senator TEAGUE --Thank you. My other question about the Reserve is this: the Force Structure Review assessed that the general Reserve's availability and resource and training levels generally precluded it from being able to operationally deploy in under six months. This, I think, is unacceptable. What improvement has been made towards that six-month figure?

Major-Gen. Fittock --I have already mentioned the provision of extra resources to the combat force for Reserve training this year. That was an extra $1m worth of training days to go to the Reserve. Also, associated with training within the combat force, because we recognise the requirement to continue to reinforce our ability there, we are doing an internal transfer of an extra $10m over and above what resources they have had previously to enhance the training capacity. That is for the total force of the combat force, not just for the Reserve itself, but no doubt a component of that will go to the Reserve.

Senator TEAGUE --I am glad to hear about those extra resources, but what is the current assessment of readiness for general Reserve deployment?

Major-Gen. Fittock --The readiness associated with the previous question really reflects the readiness state of the total force and also reflects therefore the components of the total force which are Reserve.

Senator TEAGUE --I see. So the readiness figure is still six months.

Major-Gen. Fittock --Not for all units. There are different units at different stages of readiness. The readiness things are all contained in the preparedness directive, which is classified information. If we go back to page 169, there are, for example, reserve forces in the surveillance forces where we say a high level of preparedness is required and a high level has been achieved. There are reserve forces in manoeuvre forces where it says a medium level of preparedness is required and the medium level has been achieved. So that is the way that we have reported it in the program performance statement.

Senator TEAGUE --On all of those, across the spectrum of readiness, has there been an improvement over the last 12 months?

Major-Gen. Fittock --It is too difficult to answer that as a general question. I would think that the implication of your question is whether all the general Reserve is on the same degree of readiness. As to whether there has been an improvement, I cannot answer that because that is not the way it is. There are elements of the Reserve on different degrees of preparedness. Within those things, I would suggest that there has been a gradual improvement across the board, as there is most years, but particularly in the last year because we have a greater manning stability than we have had previously. I would expect to achieve some increased preparedness in this next year because we are able to put some more resources towards it.

Senator TEAGUE --General Fittock and Minister, I wonder whether in the Estimates in six months time there might be some reference, when evaluating performance, to the question of readiness; to actually try to specify benchmarks and how it has moved.

Senator Robert Ray --I will be happy with that. Yes, I think you are quite right.

Senator TEAGUE --If it can be done.