Referral
1.1
On 8 February 2017 the Senate referred the following matter to the
Senate Foreign Affairs, Defence and Trade References Committee (the committee) for
inquiry and report by 30 November 2017:
The impact of Defence training activities and facilities on
rural and regional communities, with particular reference to:
- economic, social and environmental impacts;
- consultation and communication with local government
and community organisations;
- investments in new facilities, infrastructure and
operations;
- utilisation of local suppliers and service providers
to achieve value for money;
- encouraging awareness of tendering opportunities for
rural and regional businesses; and
- any other related matters.[1]
1.2
On 13 November 2017 the Senate agreed to extend the reporting date of
the inquiry to 29 March 2018.[2]
Conduct of the inquiry
1.3
Details of the inquiry were placed on the committee's website at: https://www.aph.gov.au/senate_fadt.
The committee also contacted a number of relevant individuals and organisations
to notify them of the inquiry and invite submissions by 28 April 2017.
Submissions received are listed at Appendix 1.
1.4
To date, the committee has held seven public hearings: Port Augusta, Rockhampton,
Townsville, Darwin, Katherine, Bendigo and Wodonga, and undertaken two site
visits: RAAF Base Tindal and Puckapunyal Military Area.
Interim report
1.5
On 20 November 2017 the committee held a public hearing in Bendigo and
on 21 November 2017 the committee held a public hearing in Wodonga. A list of
witnesses who gave evidence is available at Appendix 2. As it has done
following other public hearings throughout this inquiry, the committee has
decided to table an interim report which focuses on the evidence received in
Bendigo and Wodonga. In addition to the public hearings, the committee also
undertook a site visit to the Puckapunyal Military Area in Victoria.
1.6
Submissions and the Hansard transcripts of evidence may be accessed
through the committee website.
Focus of the committee
1.7
This is the committee's fourth interim report for this inquiry. The previous
interim reports provide detail about the background to and policy framework for
the committee's inquiry. In summary, the committee is investigating how the
increased investment in defence through the 2016 Defence White Paper will
deliver benefits and opportunities for regional economies and communities.
1.8
In particular, the committee is looking at the existing relationship
between Defence and the communities surrounding Defence bases and whether there
are mechanisms in place to facilitate consultation and communication between
Defence, local government and local businesses. Another area of focus for the
committee relates to the experience of local businesses when seeking work with
Defence and whether there are factors inhibiting local small and medium
enterprises from tendering for Defence contracts.
1.9
While the focus of this report is on the issues raised at the public hearings
in Bendigo and Wodonga, this first chapter of the report provides information
about the defence presence and investment in Victoria.
1.10
Chapter 2 covers the evidence received in Bendigo and Chapter 3 details
the evidence received in Wodonga. Chapter 4 presents the committee's
conclusions and recommendations.
Acknowledgement
1.11
The committee thanks the organisations and individuals who participated
in the public hearings in Bendigo and Wodonga as well as those who made written
submissions. The committee also thanks the Department of Defence (Defence) for
facilitating the site visit to the Puckapunyal Military Area.
Defence presence, expenditure and new investment in the region
Defence investment in Victoria
1.12
In its submission, Defence provided detail about expenditure at selected
Defence establishments for 2014-15 and 2015-16. Table 1 and 2 below provide a
summary of expenditure at the Defence establishments in Puckapunyal and Albury
Wodonga as these were the two regions visited by the committee.
Table
1: Expenditure at Puckapunyal and Monegeetta—2014-15 and 2015-16[3]
| Fin. Year |
Military employee expenses $'000 |
Civilian employee expenses $'000 |
Sub total employee expenses $'000 |
Facilities Capital $'000 |
Facilities Operating $'000 |
Grants $'000 |
Major Capital Equipment $'000 |
Supplier Expenses $'000 |
Total $'000 |
| 2014-15 |
70,524 |
12,437 |
82,961 |
780 |
66 |
111 |
141 |
1,673 |
85,732 |
| 2015-16 |
72,892 |
10,705 |
83,597 |
4,369 |
96 |
84 |
134 |
1,830 |
90,110 |
Table 2: Expenditure at
Albury Wodonga Military Area—2014-15 and 2015-16[4]
| Fin. Year |
Military employee expenses $'000 |
Civilian employee expenses $'000 |
Sub total employee expenses $'000 |
Facilities Capital $'000 |
Facilities Operating $'000 |
Grants $'000 |
Major Capital Equipment $'000 |
Supplier Expenses $'000 |
Total $'000 |
| 2014-15 |
98,673 |
12,870 |
111,543 |
50,211 |
15,695 |
63 |
440 |
50,907 |
228,859 |
| 2015-16 |
102,195 |
10,830 |
113,025 |
1,861 |
17,585 |
76 |
800 |
24,200 |
157,547 |
1.13
Defence's submission also provided estimated cumulative expenditure to
30 June 2016 for a number of approved capital facilities projects by
state. The estimated expenditure in Victoria is provided below.
Table 3: 2016-17 Approved
Capital Facilities Projects—Victoria[5]
| |
Estimated cumulative expenditure to 30 June 2016 |
| Enhanced Land Force Stage 2
Works |
|
| Puckapunyal Training Area |
$1.9 million |
| Simpson Barracks, Watsonia |
$20.2 million |
| Defence Logistics Transformation
Program |
|
| Wadsworth Barracks, Bandiana |
$63.5 million |
| Air Traffic Control Complex Infrastructure Project, AIR 5431 Phases 2
and 3 and Fixed Base Defence Air Traffic Management and Control System |
|
| RAAF Base East Sale |
$0.5 million |
| LAND 121 Phases 3 and 4
Overlander Facilities Stage 2 |
|
| Puckapunyal Training Area |
$0.9 million |
Explosive Ordnance Logistics Reform
Program project
1.14
The Explosive Ordnance Logistics Reform Program (EOLRP) is a Defence
infrastructure project to address capacity and efficiency issues with Defence's
explosive ordnance (EO) network across 12 sites nationally. At a public hearing
for the Standing Committee on Public Works (Public Works Committee) on
29 September 2017, Defence provided evidence about the EOLRP project:
Defence's EO supply chain network is a critical enabler to
Australian Defence Force, or ADF, operations and training. This network provides
direct support to our troops, combat vehicles, aircraft and naval vessels,
amongst others, through the acquisition, transportation, storage, distribution,
handling, maintenance, return and disposal of explosive ordnance products.[6]
1.15
Under the EOLRP project, three facilities will be constructed in
Victoria, at Seymour, Hastings and Avalon.[7]
1.16
In its submission to the Public Works Committee, Defence outlined the
range of facilities it proposes to build at the various locations including:
administration building, ammunition process building, EO storage facilities,
non-EO storage building, hardstands, quarantine inspection facility, materials
handling equipment and civil infrastructure (such as vehicle and pedestrian
pavements to enable access to new facilities).[8]
1.17
As noted in the committee's third interim report, the EOLRP project is
one of three pilot projects in which a Local Industry Capacity Plan will be
trialled. At the Public Works Committee public hearing in September 2017,
Brigadier Noel Beutel, Director General, Capital Facilities and Infrastructure,
Capital Facilities and Infrastructure Branch, Department of Defence, provided
additional details:
In late August in Darwin the Minister for Defence announced
that the EOLRP project would be one of three pilot projects under which we'll
be trialling what's referred to as a local industry capacity plan, or LICP,
which under these contracts we're looking at, which are head contracts, will
require that potential tenderers have to provide a standalone tender schedule
response to show how they have engaged with local industry, how they have
identified capacity and capability for local industry to become involved as
either subcontractors or in the supply chain, as I said, but it is one of
three. The main reason we chose this project is that were across 12 sites and
we get a good spread on that.[9]
1.18
At the hearing in Bendigo, Mr Craig Patterson, Acting Director General
Capital Facilities and Infrastructure, Department of Defence, provided evidence
to the committee about how the local community will be engaged in the EOLRP project:
So as part of our consultation for the parliamentary works
committee processes we are expanding that to the industry capability networks,
local chambers of commerce and so on. If there is an established market sector
that would be keen on accessing, we would extend the consultation to those
areas, too.
The reliance on the local industry capability plan is for the
contractors to actively seek out the capacity and capability of the local markets,
and how they have sought to maximise those opportunities, which they will
provide back to Defence as part of their tender submission. It forms part of
the overall value-for-money assessment of their tender.[10]
2016 Defence White Paper
1.19
Defence provided evidence about investment in Bendigo outlined in the 2016
Defence White Paper:
The 2016 Defence White Paper provides for substantial
investment in Defence geospatial-related capability, including additional
workforce and enabling information systems. As part of the Australian
Geospatial-Intelligence Organisation, the Bendigo site will benefit directly
from this investment, including through the recruitment of additional personnel
over the next several years and additional expenditure on geospatial information
and production systems.
The 2016 Defence White Paper provides for workforce growth in
Bendigo from 95 to 126 positions by 2020. To help achieve this growth, AGO has
established a technical Traineeship in Bendigo which will commence in 2018. AGO
has attracted 20 trainees, who are currently undergoing the security clearance
process, and are scheduled to commence in two cohorts in January and April
2018. This investment in additional personnel will strengthen AGO’s presence in
Bendigo for the longer term.[11]
Value of the Defence sector in Victoria
1.20
Regional Development Australia (RDA) Hume highlighted the economic value
of the Defence sector for the Hume region, regional Victoria and across the
state of Victoria:
In 2016 [the] Hume Region accounted for 21% of total
Victorian economic value and 69% of regional Victoria's economic value which
highlights the significant contribution this region makes to the defence sector...
The Defence Sector is a significant employment contributor
within the Hume Region with 3,036 employed in the sector in 2016 which
represented 24% of Victoria’s total number of jobs for Defence in Victoria and
74% of total Defence jobs for regional Victoria. For the same period Defence
made up 2.5% of the 120,610 total jobs in the Hume Region.[12]
1.21
RDA Hume provided information over several years about the number of
Defence jobs in Victoria as well as the value added to the state from Defence
as shown in Table 3 and Table 4 below.
Table 4: Gross value added
($million) for Defence in Victoria[13]
| Period |
Hume |
Regional Victoria |
Victoria |
| 2012 |
$388.14 |
$569.47 |
$1, 811.54 |
| 2013 |
$387.99 |
$572.38 |
$1859.47 |
| 2014 |
$401.18 |
$587.14 |
$1,922.99 |
| 2015 |
$404.53 |
$584.68 |
$1906.10 |
| 2016 |
$436.55 |
$633.04 |
$2,094.37 |
Table 5: Number of jobs for Defence in Victoria[14]
| Period |
Hume |
Regional Victoria |
Victoria |
| 2012 |
2,889 |
4,068 |
12,173 |
| 2013 |
2,832 |
3,964 |
12,208 |
| 2014 |
2,859 |
3,940 |
12,315 |
| 2015 |
2,968 |
4,032 |
12,478 |
| 2016 |
3,036 |
4,092 |
12,681 |
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