Introduction
3.1
The Interim Report published by the committee in May 2021 contained considerable evidence that the Department of Defence was not suitably providing information to, not only this committee, but parliamentary committees generally. That report contained examples of answers to questions that were in some cases mis-leading and, in other cases, answers to questions that were simply just not provided because they were embarrassing to the Department.
3.2
Furthermore, the Interim Report detailed the ongoing saga regarding the request from this committee to receive a set of tendering and contract documents for the sovereign naval shipbuilding program. Documents ordered—not requested—by the Senate chamber through an Order for the Production of Documents had not been provided to the committee.
3.3
This chapter will provide an update on the question of Defence’s transparency and accountability.
Accountability to Parliament
Answers to Questions on Notice
3.4
As part of its powers, the committee has, as part of its inquiries, the right to ask witnesses for further information and regularly does so through Questions on Notice.
3.5
The committee acknowledges that the Department of Defence has been asked many Questions on Notice either verbally during hearings or in a written format and the Department has performed generally satisfactorily in terms of timeliness. However, the committee remains disappointed with some of the contents provided. Answers lack detail, and the impression is that only the barest of information is provided and deliberately so.
3.6
The first example: at the public hearing held on Friday 6 August 2021, the following interchange between the Department and the Chair of the Committee, Senator Chisholm, occurred:
CHAIR: Question on notice No. 134 confirms that life-of-type extension first-pass approval was given. The advice was provided to Defence in June. What date was first-pass approval actually given?
Mr Dalton: Again, what we were talking about before was the advice that went to government to consider the delay for the Hunter-class frigate program. I don't think we discussed a date that the government considered Collins-class life-of-type extension for first-pass approval, and I would have to take that on notice.
3.7
On 27 August 2021, the Department provided the following answer:
Senator Chisholm—The Department of Defence provides the following answer to the Senator’s question:
June 2021.
3.8
A specific date was requested by the Chair, and none was given. The response simply repeated what was already known—i.e. ‘June 2021’.
3.9
The Department was then again asked to provide the actual date, and on 28 September 2021, the required answer was finally given: 8 June 2021.
3.10
Why was it necessary for the committee to have to repeatedly ask for the same information—in this case a simple date for when first-pass approval was given? Why is the Department attempting to hold back such relatively low-level information? What does that imply about higher-level information requested by this and other parliamentary committees?
3.11
A second example: On 15 October 2021, the Department of Defence was asked about the break payment provisions for the Attack-class submarines.
3.12
On 26 October 2021, the Department provided their response which stated that:
As previously advised to the Committee, the break payment provisions in the Strategic Partnering Agreement were negotiated by the Commonwealth with Naval Group under conditions of confidentiality and are commercially sensitive. These conditions continue to apply after termination. For that reason, it would be inappropriate to publicly disclose the amount of the break payment and the specific circumstances in which an amount would become payable under the Strategic Partnering Agreement.
3.13
The committee then requested that the break payment provisions be provided confidentially to the committee with an assurance they would not be published. This request was sent to Defence on 27 October 2022.
3.14
Two requests for follow-up were sent in early February 2022. Eventually, an email was received on Thursday 10 February 2022 advising that the lack of response was being investigated. As of Wednesday, 23 February 2022, no further answers, or advice, have been received.
3.15
The Department appears to be unwilling to provide information to the committee as required. What the Department does not seem to grasp, is that it is not their decision as to what they do or do not provide the committee. That is the committee’s decision—not the Department’s. While the Department has the right to request certain information remain confidential—which in the vast number of cases parliamentary committees respect—they do not have the right to refuse the provision of information.
3.16
Outcomes such as these give little confidence that the committee it is being provided with the necessary evidence to allow it to perform its oversight role properly.
Testimony to Parliamentary Committees
3.17
And on a broader level, the committee notes the positive testimony of Defence officials given to the Parliament on the Attack-class boats almost right up to their cancellation.
3.18
For five years until June 2021, the general tone of Defence was that despite some problems, everything was on track. Marcus Hellyer from ASPI observed:
At Senate estimates hearings, Defence has consistently insisted everything is on track—for example, stating that the cost estimate has been steady at $50 billion (in constant dollars) for five years and the design is progressing well. It has conceded a few months’ delay here and there to some design milestones but suggested it could make that time up.
3.19
It was only in June 2021 that Defence finally acknowledged that the issues with the Attack-class and Naval Group were significant and that alternatives were being considered.
3.20
Marcus Hellyer further observed:
Defence’s assurances have minimal credibility in the shipbuilding space.
For years Defence assured Senate committees that the Attack-class would provide a regionally superior capability throughout its life, yet after the cancellation the prime minister stated that the Attack-class would have been obsolete almost the minute it went in the water and ‘we formed the very strong view, the unanimous view of all the Chiefs of our services and Defence Force, that this was a capability that was not going to meet our needs’.
3.21
This stands as a further example that Defence is not providing accurate information to this and other parliamentary committees.
SEA 1000 – the Attack-class: discrepancies in costings
3.22
Chapter 2 noted the article by Robert Gottliebsen in which he claims that the original French offer for the Future Submarine Project (FSP) was in the $20 billion – $25 billion range (in 2016 dollars).
3.23
This is one of a number of figures that have been bandied about in the past seven years.
3.24
As noted in the May 2021 Interim Report, at the Supplementary Budget Estimates 2015–16, Defence were called to answer questions on the FSP. On 21 October 2015, Secretary of the Department of Defence, Mr Dennis Richardson, and Deputy Secretary Strategic Policy, Mr Peter Baxter, responded to questions on the project’s cost by stating clearly that the cost of the acquisition was $50 billion in out-turned dollars—i.e. the cost that takes into account inflation over the period of the project:
Mr Baxter: Yes, you would have seen rough order of magnitude costs for the acquisition of the submarine program that takes up the remainder.
Senator CONROY: Fifty billion dollars for the acquisition of submarines?
Mr Baxter: The acquisition and some of the sustainment costs as well.
Senator CONROY: You said 'acquisition' before, so that is what I am trying to drill-down to.
Mr Baxter: It is an out-turn cost as well.
Senator CONROY: Fifty billion dollars for acquisition of submarines sounds a little high.
Mr Richardson: It is an out-turn cost.
Mr Baxter: It is on an out-turn cost basis.
Mr Richardson: It is inflation into the 2040s et cetera.
Mr Baxter: The last of the submarines is likely to be built into the 2040s.
Mr Richardson: For the last of the submarines—if they were built, say, in the early 2040s—it is the out-turn cost of what the submarines would cost in 2040 dollars.
3.25
However, in an answer to a Question on Notice from the then Chair, Senator Alex Gallacher, the Department of Finance reported:
Defence officials at the 21 October 2015 Senate Estimates hearing explained that details of the Future Submarine Program, including refined costs, remained subject to the outcomes of the then ongoing Competitive Evaluation Process. The classified funding provision which was not made public due to commercial sensitivities, was $78.9 billion (out-turned).
Cost estimates are updated over the life of a project to reflect movements in inflation and foreign exchange rates. Other than these movements there has been no real cost increase in the Future Submarine Program. The projected total acquisition cost for the Future Submarine Program in out-turned dollars is $88.5 billion (2020-21 Pre-ERC [Expenditure Review Committee] out-turned price and exchange).
3.26
Thus, there is a $38.5 billion dollar discrepancy between the $50 billion (out-turned dollars), reported by Defence in 2015 and the $88.5 billion (out-turned dollars), projected by Finance in 2020.
3.27
Moreover, the Department of Finance answer makes it clear that it was already known in October 2015 that the out-turned cost was $78.9 billion.
3.28
The committee noted in the Interim Report that, prima facie, the Department mis-led the Parliament.
3.29
Also noted in the Interim Report, Committee Member, Senator Rex Patrick, began, in June 2018, a Freedom of Information (FOI) process to discover what Naval Group's total price was for the contract. Two months later in August 2018 Defence formally blocked the request, and Senator Patrick sought an Information Commissioner review.
3.50
In August 2020, Australian Information Commissioner, Ms Angelene Falk, found in favour of Senator Patrick, ordering the Department of Defence to release details from Naval Group's successful bid documents.
3.51
In September 2020, Defence appealed Commissioner Falk's decision to the Administrative Appeals Tribunal (AAT), with Naval Group joining the proceedings.
3.52
In response to questions asked during a Senate Estimates hearing in March 2021, Defence confirmed it is covering Naval Group's legal expenses at the AAT.
3.30
Despite all of this, the Department of Defence claims that there was no blow-out of costs:
The total estimated cost of the program was $88 billion in out-turned dollars. This is the same estimate that the department took to government in 2016, adjusted for foreign exchange rate variations. There was no cost blowout.
3.31
The Parliament has been on told two different figures for the out-turned cost; $50 billion and $88 billion—a significant difference of $38 billion. The Parliament was misinformed either through error or by design. Furthermore, the original cost of the Naval Group proposal remains unknown.
3.32
Given this, and the fact that the Attack-class has now been cancelled, there should be no reason why the Parliament shouldn’t now receive a thorough explanation from the Department for the above discrepancies.
3.33
That the Department of Defence provide in a manner suitable for publication:
an explanation as to why the Department informed the Parliament that the cost of the Future Submarine Program was $50 billion out-turned when the Department of Finance already had put that figure significantly higher; and
an explanation for the claim that the original tender for the Attack-class was $20 billion—$25 billion range in 2016 dollars rather that the $50 billion that has since 2016 consistently been cited by both the Government and the Department.
Order for the Production of Documents: update
3.34
The Interim Report explained that, as part of this inquiry, Defence consistently refused to provide a series of documents related to the various naval shipbuilding projects. What began as a routine request for further information, turned into a particular saga which was recounted in that report. Since the Interim Report’s tabling, the following developments have occurred.
3.35
On Tuesday, 15 June 2021 the Senate passed Senator Patrick’s motion that the refusal of Defence to provide the Order for the Production of Documents (OPD) documents be referred to the Senate Privileges Committee.
3.36
On Monday, 21 June 2021, the committee received correspondence from the Senate Privileges Committee informing the Chair of the Senate Economics References Committee that the Privileges Committee is in the initial stage of gathering and considering evidence. Both Senators Alex Gallacher and Patrick provided submissions to the Privileges Committee.
3.37
On 12 August 2021, the Economics References Committee received correspondence from the Privileges Committee advising that an invitation from the Minister for core members of the Economics References Committee to review the un-redacted documents, in a secure location at Parliament House.
3.38
At the private meeting on 18 August 2021, the committee considered the proposal and asked the secretariat to liaise with the Minister for Defence’s office to assist in finalising the conditions under which the committee could access the documents.
3.39
After inexplicable delays and long negotiations, the Minister’s office eventually agreed to make available to the committee the requested documents and only in Parliament House. Furthermore, this message was only transmitted to the committee during the final sitting week in December 2021.
Committee comment
3.40
This chapter has provided an update on the transparency and accountability of the Department of Defence as canvassed in the Interim Report. The committee’s concerns as expressed in that report remain extant.
Defence’s continued obfuscation
3.41
The responses the committee has received from Defence remain disappointing in terms of their content. It appears that as little information as possible is provided to the committee, which is hindering the committee in conducting its oversight of Defence's activities.
3.42
The committee remains of the view that cultural change is needed in the Department of Defence’s accountability practices and its approach to its democratic responsibilities.
Costs of the now cancelled Attack-class
3.43
The above discussion illustrates the misinformation that has been circulating for years regarding the true cost of the now cancelled Attack-class. Given the large amounts of Australian taxpayer dollars under consideration, it is disconcerting to the committee that there isn't a clearer understanding on what was agreed to with Naval Group. More importantly: was the Parliament misled in October 2015 when the Department of Defence claimed the out-turned cost of the project would be $50 billion?
3.44
The committee awaits with great interest the Department's response to the above recommendation.
The Minister’s response to the Order for the Production of Documents
3.45
The Minister’s eventual agreement to give access to the OPD documents—but only under particular conditions—is disappointing to say the least. Again, the committee feels compelled to explain that these documents were ordered by the Senate chamber—this was not a request. The committee is entitled to see whatever information it sees fit—particularly if that has been ordered by one of the chambers of Parliament.
3.46
Furthermore, the Minister’s reply was delayed until the last sitting week of the Parliament meaning the window of opportunity to examine the documents is very short. The Minister would have been perfectly aware that the Parliament wouldn't be returning until February 2022, so unless Senators and staffers made special arrangements to travel to Canberra during January 2022, they would not have had the chance to see them prior to the February sittings and the calling of the election.
3.47
The committee can only conclude that this has been a deliberate and cynical tactic designed to limit access to potentially embarrassing information immediately prior to the election campaign.
Final comment
3.48
The committee remains dissatisfied with the provision of information from the Department and the Minister. The committee requests this material as part of its Parliamentary oversight role in service of the Australian people whom we represent. It is the committee’s right to request and receive this information—this is not a privilege that has been bestowed upon us by the Executive.
3.49
As the committee has yet to receive a response from either the government or the Department on the recommendations in the Interim Report, the committee repeats its recommendation that the Department of Defence re-examine its processes with regard to the provision of information to the Australian Parliament.
3.50
With the aim of increasing its staff’s awareness of their democratic responsibilities:
the Department of Defence re-examine its induction and training programs and corporate culture regarding its role as a department answerable to the Australian people through the processes of the Australian Parliament; and
report back to the Parliament on the progress it making on those induction and training programs.
Senator Anthony Chisholm
Chair
Labor Senator for Queensland