Nicole Brangwin
Given the large number of defence capability announcements made
since the release of the 2016 Defence White Paper in February 2016, one
might be forgiven for losing track. This year’s Budget does not contain any new
announcements in addition to those already made prior to the Budget, so this brief
aims to take stock of progress in the ever-broadening defence capability
sphere.
The pace of major defence capability announcements made by
the Australian Government since the release of the 2016 Defence White Paper
suggests many of the proposed capabilities outlined in the Integrated
Investment Program which accompanied the White Paper have the potential to
be achieved.[1] Conversely, the speed at
which decisions are being made on expensive, complex, long-term projects
continues to raise concerns about the level of scrutiny applied by Cabinet and
whether some of these projects might potentially appear on the Projects of
Concern list.[2]
The overall cost attached to the Integrated Investment
Program was originally $195 billion over ten years to 2025–26.[3]
This figure was revised upwards in the 2017–18 Budget to $200 billion out to
2027–28.[4] The explanation for the
$5 billion revision was that it reflects ‘the best available information in
respect to project planning, delivery reality, cost estimates, phasing, and
other important judgments and assumptions critical to delivery of the capital
investment portfolio’.[5]
Defence has for some time been criticised for declining transparency
in its reporting of capability issues. The application of the two-pass approval
process to the major capital investment program is absent from this year’s Budget
and the program’s estimated budget for approved and unapproved projects is
indistinguishable as both streams are lumped together under the same line
item—Major Capital Investment Program over the forward estimates totals
$41,106.6 million.[6] Greater visibility of the
unapproved Major Capital Investment Program and associated costs not only
better informs an industry that is expected to ramp up to meet Defence’s
strategic requirements, it also allows the Parliament to scrutinise these
decisions on behalf of the public. The Australian Strategic Policy Institute
has monitored the level of transparency over the years and Marcus Hellyer
recently noted:
...there has been a significant decline in
transparency in Defence, particularly in its capital program. Defence isn’t
reporting project approvals in the annual report or additional estimates
statements in anything resembling a comprehensive fashion. And now it’s no
longer including a list of planned project approvals for the coming year in its
portfolio budget statement (PBS). So we can’t know what approvals are coming up
or whether they’re actually approved. That’s not to mention that there’s no
coverage at all of the information and communications technology (ICT) program.
It’s really an abysmal situation.[7]
Since the release of the 2016 Defence White Paper,
the Government has published a series of policies, plans and strategies with
specific funding figures attached. These include the:
- National Shipbuilding Plan worth $90 billion in new frigates
($35 billion) offshore patrol boats
($3–4 billion) and submarines ($50 billion), over $1 billion in shipyard
infrastructure modernisation and around $25 million towards skilling and
growing the workforce.[8] The re-profiling of $500
million in defence expenditure to financial year 2018–19 is said to help align
defence funding with projects such as the naval shipbuilding program[9]
- Defence Export Strategy establishes the Australian Defence
Export Office and an Australian Defence Export Advocate position (former
Defence Minister David Johnston was recently appointed
to this position), and provides $3.8 billion towards a Defence Export Facility
and $20 million per year to implement the strategy.[10]
This year’s Budget confirmed that $80 million over four years would be
allocated from existing resources, including $6.3 million per year to support
the work of the Defence Export Office. In addition, $4.1 million per year will
be allocated to expanding the Centre for Defence Industry Capability grants
program and $3.2 million to the Global Supply Chain program and[11]
- Defence Industrial Capability Plan establishes Australia’s
sovereign industrial capability priorities and includes various initiatives
such as the Naval Shipbuilding College (worth $62 million over three years) and
$17 million towards funding the sovereign industrial capability priorities
grants program.[12] This year’s Budget
confirms the $17 million figure over the forward estimates, totalling $68
million from existing resources.[13]
Defence’s Net Capital
Investment primarily relates to military equipment and is expected to reach
$3.8 billion in 2018–19 and continue to grow to $8 billion by 2021–22.[14]
Defence Cooperation Program
Under the Defence Cooperation Program (DCP), Papua New
Guinea (PNG) continues to receive the largest amount of funding, allocating $42.7
million in 2018–19, an increase of around $3 million from the previous Budget. The
ADF is assisting the PNG military with security aspects for the upcoming APEC
meeting, to be held in PNG November 2018.[15]
The DCP as a whole received a boost in this Budget, from $128
million in 2017–18 to $164 million in 2018–19.[16] This is mainly due to
the Pacific
Maritime Security Program for which Western Australian company Austal has
been contracted to build 21 Guardian Class patrol boats. PNG is expected to be
the first recipient of the new boats in 2018.[17]
Major acquisitions
As mentioned above, the list of projects slated for first or
second pass approval (and sometimes combined) under the Integrated Investment
Program has been excluded from this Budget. The Defence Annual Report
2016–17 noted that during that financial year:
...74 capability-related submissions were approved by
Government against an initial plan of 62 (as given in the 2016 Defence White
Paper). Fifteen of those submissions received first pass approvals, 31 received
second pass approvals, 15 received other types of Integrated Investment Program
project approvals, and 13 approvals were granted for submissions that provided
advice to Government on current and future capability.[18]
In 2017–18, the Portfolio Budget Statements for Defence
showed there had been 20 first pass approvals and 37 second pass approvals
(plus two ‘other’ approvals) during that financial year.[19]
The Portfolio Additional Estimates Statements for 2017–18 provided a minor
update showing three second pass approvals and two ‘other’ approvals (no first
pass approvals were noted).[20]
The Projects of Concern list was last updated in February
2018 when the Government announced the Air Warfare Destroyer and the Collins
Class submarine projects had been removed from the list.[21]
There are possibly four projects remaining, two of which are related to the
OneSKY civil military air traffic management system (CMATS).[22]
Defence is contributing to the Airservices-led OneSKY
project to develop a national CMATS. Airservices is expected to cover 57 per
cent and Defence 43 per cent of the acquisition costs of $1.2 billion.[23]
In the Budget, the Defence approved project expenditure component for phase 3 is
listed as $974 million, substantially more than 43 per cent of the total cost.[24]
This possibly accounts for the Government’s approval of an additional $243 million
earlier this year.[25] As the agreement between
all parties to the project was only signed in February 2018, following
protracted negotiations, Defence has so far spent $155 million and another $116
million is earmarked for 2018–19.[26] This project is still on
the Projects of Concern list but is expected to be reviewed in light of recent
progress.[27]
Naval shipbuilding
In February 2016, the Defence White Paper confirmed that
Australia would acquire 12 conventional submarines to replace the Collins Class
submarines (which cost over $500 million per year to sustain).[28]
In April 2016, DCNS (now Naval Group) from France was selected as the preferred
international design partner for Australia’s Future Submarine program.[29] The successful
design is the Shortfin Barracuda Block 1A.[30] Overall investment in the ‘rolling
acquisition’ program is worth $50 billion.[31] In this year’s Budget, the
Future Submarine Program is at phase 1B with an approved budget of $2.2 billion.[32]
The most recent announcement about Defence’s most ambitious acquisition was
made on 3 May 2018 and stated that the critical design work will be moved from
France to South Australia from 2022. Initial design work is ongoing.[33]
The Budget also notes that a decision on the Future Frigate
program is expected before the middle of 2018 and the Offshore Patrol Vessels
are to commence construction in 2018 as per the Naval Shipbuilding Plan.[34]
[1].
Australian Government, 2016 Defence white
paper, Department of Defence, 25 February 2016.
[2].
A Davies, ‘Defence
acquisition: kicking the can down the road’, Australian Strategic Policy
Institute, blog, 14 February 2018; D Watt, ‘Defence
budget overview’, Budget review 2017–18, Research paper series,
2017–18, Parliamentary Library, Canberra, 2017; D Watt, ‘Defence
capability’, Briefing book: key issues for the 45th Parliament,
Parliamentary Library, Canberra, 2015.
[3].
Australian Government, 2016
Integrated Investment Program, Department of Defence, February 2016, p.
9.
[4].
Australian Government, Portfolio budget
statements 2017–18: budget related paper no. 1.4A: Defence Portfolio,
2017, p. 117.
[5].
Ibid., p. 117.
[6].
Australian Government, Portfolio
budget statements 2018–19: budget related paper no. 1.4A: Defence Portfolio,
2018, p. 22.
[7].
M Hellyer, ‘2%
of GDP: just a hop skip and a jump away’,
Australian Strategic Policy Institute, blog, 9 May 2018.
[8].
Australian Government, Naval
shipbuilding plan, Department of Defence, 16 May 2017, p. 80.
[9].
Australian Government, Budget measures:
budget paper no. 2: 2018–19, 2018, p. 83.
[10].
Australian Government, Defence export
strategy, Department of Defence, 29 January 2018, pp. 17–18.
[11].
Budget measures: budget paper no. 2: 2018–19, op. cit., p. 82.
[12].
Australian Government, Defence
industrial capability plan, Department of Defence, 23 April 2018, pp. 8
and 64.
[13].
Budget measures: budget paper no. 2: 2018–19, op. cit., pp. 82–83.
[14].
Australian Government, Budget
strategy and outlook: budget paper no. 1: 2018–19, 2018, p. 6-48.
[15].
Asia-Pacific Economic Cooperation (APEC), ‘APEC 2018 Papua New Guinea’, APEC
website. The Defence Portfolio Budget Statements did not refer to APEC
specifically, rather it mentioned assisting PNG with its ‘Major Event Security
capabilities’. Portfolio budget statements 2018–19: Defence Portfolio, op.
cit., p. 118.
[16].
Portfolio budget statements 2018–19: Defence Portfolio, op. cit., p.
118.
[17].
Ibid.
[18].
Australian Government, Annual
report 16–17, Department of Defence, p. 123.
[19].
Portfolio budget statements 2017–18: Defence Portfolio, op. cit.,
pp. 117–119.
[20].
Australian Government, Portfolio
Additional Estimates Statements 2017–18: Defence Portfolio, 2018, p. 85.
[21].
M Payne (Minister for Defence) and C Pyne (Minister for Defence
Industry), Air
Warfare Destroyer project removed from projects of concern list, media
release, 1 February 2018.
[22].
Department of Defence (DoD), ‘Projects
of Concern update’, DoD website.
[23].
Senate Rural and Regional Affairs and Transport Legislation Committee, Official
committee Hansard, 26 February 2018, p. 109.
[24].
Portfolio budget statements 2017–18: Defence Portfolio, op. cit.,
p. 125.
[25].
Senate Foreign Affairs Defence and Trade Legislation Committee, Official
committee Hansard, 28 February 2018, p. 75.
[26].
Portfolio budget statements 2018–19, Defence Portfolio, op. cit.,
p. 125.
[27].
Joint Standing Committee on Foreign Affairs, Defence and Trade, Official
committee Hansard, 4 May 2018, p. 38.
[28].
Australian Government, 2016 Defence white paper, op. cit., p. 90.
[29].
M Turnbull (Prime Minister) and M Payne (Minister for Defence), ‘Future
submarine program’, press release, 26 April 2016.
[30].
Naval Group, ‘The Shortfin
Barracuda Block 1A’, Naval Group website.
[31].
M Turnbull (Prime Minister) and M Payne (Minister for Defence), ‘Future
submarine program’, op. cit.
[32].
Portfolio budget statements 2018–19, Defence Portfolio, op. cit.,
p. 129.
[33].
M Turnbull (Prime Minister), M Payne (Minister for Defence) and C Pyne
(Minister for Defence Industry), ‘Submarine
design to move to Australia’, media release, 3 May 2018.
[34].
Portfolio budget statements 2018–19, Defence Portfolio, op. cit.,
p. 130.
All online articles accessed May 2018.
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