Issues raised with the committee in Wodonga
Introduction
3.1
This chapter summarises the main issues raised during the committee's
hearing in Wodonga and includes an overview of the economic, social and
environmental impact of Defence activities in the region. Key areas discussed
with the committee were: communication and engagement mechanisms, challenges
experienced by small and medium businesses as well as opportunities to increase
the capacity of local businesses to tender for Defence contracts.
Albury Wodonga Military Area
3.2
The Albury Wodonga Military Area (AWMA) consists of the Gaza Ridge
Barracks and the Wadsworth Barracks East Bandiana sites, Latchford Barracks
Bonegilla, and Wirlinga. The Bandiana site is situated five kilometres east of
Wodonga.[1]
3.3
Defence provides the following information about activities on the site:
The AWMA's largest resident unit is the Army Logistics
Training Centre (ALTC) which consists of a formation headquarters, four trade
training schools and a training development group. The Army School of Ordnance
is responsible for all supply, administration and finance training and also
delivers specialist training in petroleum operations. Training is conducted at
a purpose built facility at South Bandiana which includes a simulated fire
fighting facility.[2]
3.4
In their submission, the City of Wodonga and AlburyCity Council noted the
Defence presence in the region:
Defence have a strong presence in the region with the
Latchford Barracks located in Bonegilla and Gaza Ridge Barracks located at
Bandiana in Wodonga. The Army Logistic Training Centre is headquartered at
Bandiana, providing effective logistic training to a large proportion of the
national army. Retaining existing operations as well as considering
opportunities to expand operational and training activity is greatly
encouraged. Defence also own a large site of some 370ha in the primary
residential growth corridor for Albury at Wirlinga, with a further 109Ha held
at Ettamogah.[3]
Economic impacts of Defence activities and facilities in the region
3.5
Evidence to the committee detailed the economic contribution of Defence
activities and facilities in the region. The joint submission from Albury and
Wodonga councils detailed these impacts:
On an annual basis, Defence injects an estimated $536 million
into the Albury Wodonga economy derived from approximately 1,426 direct jobs.
Combined with indirect effects, the sector outputs $945 million and sustains a
total of 2,750 local jobs. In terms of annual value add activity, it contributes
$386 million directly, and $593 million in direct and indirect value-added
activity. Defence personnel and their families rent a number of local
properties, send their children to local schools, and make use of
entertainment, healthcare and other facilities.[4]
3.6
In addition, Councillor Anna Speedie, Mayor of the City of Wodonga, advised
the committee that there are 400 independent contractors contracted to the Army
locally.[5]
It was noted that the Defence presence in the region 'also plays a pivotal role
in providing opportunity for other contractors et cetera to provide services to
both the logistics and the training facilities'. [6]
3.7
Ms Alice Jones, First Assistant Secretary, Service Delivery, Department
of Defence advised that, at the time of the hearing, Spotless, the prime
contractor operating at the Bandiana base, currently employs 131 local staff. Subsequently,
Defence provided additional information about the number of people employed
locally:
Based on the payroll date of 17 November 2017, Spotless has
advised that they have the full time equivalent of 111.75 permanent employees
in the Albury Wodonga Military Area, which includes Bandiana.
Spotless has also advised that there are 252 individual
sub-contractors in the Albury Wodonga Military Area. It is not possible to
accurately ascertain the volume of work undertaken solely in Bandiana
(Wodonga), as these sub-contractors may also undertake work at Wagga Wagga,
where there are other Defence facilities covered under the contract.[7]
3.8
Furthermore, Defence advised that Broadspectrum employs 186 staff in the
AWMA performing the following functions: firefighters (24), logistic personnel
(stores trades) (21), and tradesman, clerical and stores (141) and Wilson
Security sub-contract to Consec, who employ a total of 55 staff who all live
locally within the Albury Wodonga area.[8]
Social and community impacts of Defence activities and facilities in the
region
3.9
Councillor Speedie described the 'ripple' or 'multiplier effect'
experienced in the community from the Defence presence in the region:
In terms of understanding the ripple effect into the
community, the transplanting of families into the community means that there
are schools involved, so there are teachers hired, and then there's everything
that goes with the school, and then there's the shopping. So understanding and
unpicking that is actually pretty complicated, because the multiplier effect is
so significant.[9]
3.10
Councillor Kevin Mack, Mayor, AlburyCity Council, highlighted the
positive impact that Defence activities have on the education sector in Wodonga
as a result of Wodonga TAFE securing a number of Defence contracts. Councillor
Mack also emphasised the strong tertiary education sector in the region, noting
that Albury Wodonga has two universities and two TAFEs which is 'a great
opportunity for [the Defence Force] to access that level of education without
having to go online or go off-site'.[10]
3.11
Similarly, Mr Mark Dixon, Chief Executive Officer, Wodonga TAFE outlined
the positive social impact that the Defence presence has in the region with
particular reference to the education sector:
The obvious benefit to the TAFE is a significant amount of
fee-for-service revenue and the TAFE, particularly a regional TAFE, relies on
that revenue in many ways to do some of the things that we don't make money out
of in terms of the community value courses that we run. The criticality and the
partnership that the TAFE has with defence certainly works both ways, and it's
certainly critical to the long-term viability and sustainability of regional
TAFEs not just in Victoria but everywhere.[11]
Current social connections
3.12
Similar to the evidence provided in Bendigo, the committee heard about
existing opportunities for social connections between Defence and the broader
community. Councillor Speedie advised that, at the invitation of the local
commandant, she has attended welcome events at the Defence base:
In terms of things that are set engagements, we have a
welcome afternoon and we're looking to move it off base and into town so that it's
about really integrating that thinking about actually living in this community.[12]
3.13
Councillor Speedie noted that members of the Defence force establish a
connection to Wodonga and surrounds over a period of time:
The other thing that we seem to experience back here—and I
think part of that is because their training starts here and then they're
usually returned here at least once during their term of engagement—is that we
have a lot of people move back here and settle. A lot of people from Wodonga
and Albury and around the region have moved back once they're retired from [the]
Army. That's anecdotal, from speaking to people.[13]
Fostering further social
connections
3.14
The committee heard evidence about the importance of building on
existing relationships to foster further social connections between Defence and
the broader community.
Community use of Defence facilities
3.15
As highlighted at the Bendigo hearing, witnesses in Wodonga noted difficulties
accessing facilities located at Defence bases. It was suggested that
facilitating public access to such facilities would benefit the community. Councillor
Speedie explained:
Two fantastic things that they have on the base are museums—a
light horse museum and an Army museum. Having just recently visited Canberra,
I'd say this is pretty close to that. It is one of the best collections that
the Army has; that's how they recognise it as well, but it's actually behind
the gate. Given the changes after some terrible incidents in the last few
years, people can't just drop by and visit that facility. It's a real shame
because it could actually add further to our economy but also facilitate the
sharing of history and a mutual understanding and support for our Army and our
Army personnel, when you go and see some of the equipment, some of the history
and some of those stories. It is a very significant opportunity for our
community but also for the wider nation. Singleton [Australian Army Infantry Museum
in New South Wales] has just, for want of a better description, liberated its
museum, and it's, again, proving a huge success.[14]
3.16
Councillor Mack explained that community access to facilities on the
base has become more challenging with the advent of increased security at
Defence bases.[15]
While it was accepted that ensuring the security of Defence bases was
paramount, it was suggested that there are actions that could be taken to
'integrate a little bit better':
I think the more we insulate these opportunities the less
opportunity the community has to access the true story of war, and not everyone
has access to Canberra and has the available income to visit the Australian War
Memorial—which, I might add, is quite a highlight. But the stuff that we have
locally is quite significant, and I have had a number of discussions with Army
personnel both here and in Canberra about the opportunity to liberate that
facility here, because I see a wonderful tourism asset there and a wonderful
opportunity for Albury-Wodonga. Accompanied with the Bonegilla Migrant Museum
are two treasures that this community has and certainly could add value further
into the future.[16]
3.17
When discussing opportunities to facilitate access to facilities located
within Defence bases, Councillor Speedie suggested that when new facilities are
being built, consideration should be given to locating services outside the
perimeter of the base:
We had child care and basic kinder services on the barracks
and it used to be that the community could access those. If you lived out that
way you could actually access them. But because of the security change they've
been removed. So where, as you said, a new facility is being built I think the
thing you'd learn the quickest is to put any of those types of assets outside a
perimeter, where they could be accessed and you could actually share those resources.
You wouldn't put a fantastic oval that could potentially be used by a whole
community behind your major fences et cetera; you'd be thinking about how you
might integrate that into your community, even though it's an Army asset.[17]
Defence use of land and planning issues in the region
3.18
AlburyCity and Wodonga councils highlighted some planning issues with
respect to current use of Defence land, with particular reference to land
directly beside council land. It was noted that although the Commonwealth Government
is exempt from complying with the Wodonga Planning Scheme, the current use and
future development of Defence land in the council area 'may impact the safety
of residents'.[18]
3.19
The submission also noted that Defence own a significant section of land
on the NSW side of the border which 'lies within the primary residential growth
corridor for Albury':
AlburyCity encourages the Department of Defence to study
potential long term de-commissioning and disposal of this site given the location
in the heart of the city's major residential growth corridor.
If medium to long term infrastructure, land asset,
development or training plans were voluntarily communicated to both councils,
there may be opportunities to collaborate, and/or ensure our planners can appropriately
respond to developments that impact decisions on density sizes, noise,
investment attraction efforts, safety and a range of other variables in nearby
locations.[19]
Communication and engagement mechanisms
3.20
The committee received evidence about the level of communication between
Defence, local councils, regional organisations and the community.
Communication between Defence,
local councils and regional organisations
3.21
Councillor Speedie explained that when a base logistics facility was
upgraded in 2016, it resulted in a positive economic contribution due to the
local jobs it created. It was noted that Wodonga council became aware of the
redevelopment at the same time as the broader community.[20]
3.22
Councillor Speedie noted the importance of councils being informed about
current and planned activities at Defence facilities to enable planning for the
provision of adequate community services and facilities. It was noted that
Wodonga is a fast growing region with very few vacancies in the school system
and less than two per cent rental vacancy rate.[21]
In light of this, Councillor Speedie explained that it can be challenging to
provide adequate services at short notice:
If we don't work more collaboratively and more collectively
then how can we appropriately support our Army personnel but also that growth
so that we make sure they are located in great areas where they can access
schools and services?...If we need to make spaces available then it puts
pressure on all of those other services. It doesn't mean that we can't or that
we don't try our very best to facilitate that, but it certainly makes it
challenging.[22]
3.23
The pivotal role that the local base commandant has in fostering
positive relationships with communities located around Defence facilities was
also raised with the committee:
[W]e certainly highly value the Army as part of our
community. They are part of our community. I have noticed...that the relationship
that is formed is pretty dependent on the commandant of the day and the local
government as well, absolutely. But I think there's more that could be done for
both sides to win, based on that relationship. I would like to clarify that the
current commandant, Andy Maclean, is absolutely excellent. We have a terrific
relationship and he's very engaged, but it would be terrific if we could do
more.[23]
3.24
Representatives from Regional Development Australia (RDA) Hume advised that
currently there are no established communication mechanisms between their RDA
and Defence but that this is an area where the RDA could play a greater role:
It's a field where I think we can play a role in that there
are people on base who are tasked with liaising with the community. There is a
community that wants to be liaised with but something is breaking down in the
communication...
Going from a clean start, I think we would have to start in a
different place. We've got to form the connections with the Department of
Defence in Canberra, for a start, as well as on the base; it is the full chain.
I imagine communications within Defence are quite rigid—and that's because they
would have to be. It is the degree of flexibility around that with particular
campuses that needs to be understood.[24]
Role of council to facilitate
communication with local business
3.25
AlburyCity and Wodonga councils explained the role they could play in
assisting local businesses if they were informed in advance about Defence's
capital works and training activities:
If councils were informed in advance of Defence's capital
works and training activities they could assist in circulating subcontractor
opportunities to local businesses to provide fair access to all stakeholders.
To enhance the outcomes of Defence activities in the region, strong pathways of
communication need to be established between Defence, local councils, businesses
and other stakeholders.[25]
Informal networks and communication
with Defence
3.26
The committee received evidence about communication with local bases
that occurs on a more informal basis. Ms Debbie Lane, Business Development
Manager, Office of Regional Development, Department of Premier and Cabinet, New
South Wales, explained that she recently met with the base commandant at the
AWMA who has extended an invitation for the Defence Murray Riverina Alliance
members to attend an open day at the base in 2018. The Alliance has also
participated in meetings at the Wagga Wagga base with BAE, the prime contractor
on the base.[26]
3.27
Mr Dixon noted that communicating with Defence is challenging largely
due to 'the complexity and size of the Defence training establishments and some
of their operational bases'.[27]
Mr Dixon noted that with respect to training establishments, the local senior Australian
Defence Force officer may be available to comment on training activities, but
the broader operational activity of Defence in the region is reported back
through central units in Sydney or Melbourne.[28]
Emergency management consultative
forums
3.28
With particular reference to emergency management, the committee heard
examples of consultative forums comprising representatives from Defence, local
government and other agencies, that are operating effectively:
...[T]here appears to be strong, existing communication between
Defence and council in a fire prevention and emergency management capacity
through established local committees. For example, The Municipal Fire
Management Committee meet quarterly to discuss fire prevention mechanisms and
the Municipal Emergency Management Planning Committee meet at the same
frequency to discuss emergency management issues. These groups are key to
ensuring the ongoing safety of the community and allowing stakeholders to
forward plan for any natural or preventable issues, and Defence’s ongoing
participation is valued.[29]
3.29
This issue was also discussed in more detail with Councillor Mack:
In terms of emergency services
in both Albury and Wodonga, they do have regular briefings in relation to a
whole host of issues, whether it be fire seasons, whether it be security alerts
or whether it be responses to incidents on Army base and how that looks in
terms of the protocols. So they work pretty closely with the police, fire,
ambulance and emergency services, but in terms of the offering to councils,
councils are feeling much the outer rim in relation to that type of information
and that sort of behaviour.[30]
Communication between small and
medium enterprises and Defence
3.30
The committee received evidence that there are limited opportunities for
SMEs to communicate directly with Defence. Witnesses noted that much of the
information they find out about Defence opportunities occurs through informal
networks, individual professional contacts, and utilising contacts that current
staff may have with Defence as a result of previous employment.
3.31
Mr Michael Pope, Chief Financial Officer at Australian Target Systems
(ATS), a live-fire target system business located in Albury, explained that ATS
has an existing relationship with Defence which facilitates discussion about
what services Defence are seeking and what ATS may be able to offer. ATS then
communicates directly with other businesses about potential subcontracting opportunities:
What works for us at the moment is direct engagement with
Defence as to what they are seeking and what we can offer in our area of
expertise. I did speak about the PSI [prime systems integration] function, which
is a concept that has been looked at within Defence and is still being looked
at. I really see companies like ATS, who already have a firm relationship with
Defence, as being a conduit through the PSI function to be able to bring SMEs
into the game.[31]
Consultation to develop tender
documents
3.32
Another issue raised with the committee was the level of engagement
Defence has with industry when developing its tender documents. Business
representatives provided examples of Defence tender documents that are developed
seeking goods and services that may not present the best value for money as the
requests are based on old practices or equipment that has been superseded.
3.33
It was suggested that Defence would benefit from engaging early with
industry when developing tender documents to ensure the project requirements
specified in the tender documents are consistent with industry standards. Mr
Raymond Bertazzo, Managing Director, Bertazzo Engineered, provided an example
of a tender document being issued by Defence requesting a large number of
aluminium targets which appeared to be largely based on previous requirements, not
taking account of the latest industry developments.[32]
3.34
Mr Pope provided an example of a large Defence tender which included
items that, in his view, were not relevant in the current environment and suggested
that more engagement with industry may have secured a better result:
We had a good example last year...where a large tender came out
for targetry...There were literally tens of thousands of items that really
weren't relevant in the current range environment that were being tendered for.
Some of it was actually old technology. We tendered for this and we lost to a
supplier that went direct to Asia, because a lot of this stuff was basically
pieces of cardboard or plastic that can be cheaply produced. Really, it's
disappointing because it's not only, in our opinion, not effective use of
taxpayer money but certainly not the right equipment that Defence were looking
for on their ranges. So there is that gap of communication.[33]
3.35
Mr Pope also advised the committee that Defence does engage with ATS but
'not so much when it comes to the tender process'.[34]
3.36
The committee asked Defence on notice to provide information about
whether there is engagement with industry to develop tender documents. At the
time of reporting, the answer had not been received.
Communication with prime
contractors
3.37
Mr Dixon suggested that an area for improvement in communication relates
to how prime contractors communicate with smaller businesses.[35]
3.38
When discussing what level of communication base managers may have with
local businesses, Ms Alice Jones, First Assistant Secretary, Service Delivery,
Department of Defence advised:
It is the prime's [prime
contractor's] responsibility to deliver the service and sub out the work as
they see fit or desire. I would want my base manager concentrating on
administering the base and supporting the senior ADF officer because there are
a lot of things that go on a base so I wouldn't want them, to be honest, to be
distracted from doing that. Their role is to make sure the base is safe, that
the maintenance and the state works are up kept, and that the functioning of
the base meets the capability needs of the services and the groups that are
functioning at that base.[36]
Barriers faced by local businesses
3.39
The committee received evidence about the challenges experienced by
small and medium enterprises (SMEs) that seek work with Defence and prime
contractors.
Documentation
3.40
Ms Debbie Lane explained that the length of time and volume of paperwork
required to secure a Defence contract is often prohibitive for SMEs. As a
result, many local businesses will not deal directly with Defence but may be
operating somewhere else in the supply chain:
We tend to find that many of our local businesses will be
somewhere in the supply chain but not dealing directly with Defence. There are
a lot of issues dealing directly with Defence around security and even
documentation and time lines with contracts. A lot of small businesses simply don't
have the cashflow that will allow them to do that. They are at some point in
the supply chain...There's an awful lot of work that must be done up-front. The
documentation is very expensive and it could take over a year and a half or
maybe longer. A lot of small businesses don't play in that space.[37]
3.41
Mr Klaus Baumgartel, Regional Manager Murray Riverina, Industry
Capability Network noted the complexity of the tendering process:
In my opinion, one of the problems is the complexity of the
process. It's always been an issue. I remember when they [Defence] first
tendered the bases out some years ago, probably about 12 years ago now. Every
prime that came in had a form you had to fill in just to enter the process, and
some of those were 20 or 30 pages long. Doesn't it make sense that somebody
generates at least a standard form of maybe the first 10 pages—all the
information's the same—and allows that to be put together with the specific
stuff you want at the back? Things like that can simplify a process, rather than
people having to do all this paperwork. It really puts people off. It's one of
the reasons that SMEs don't get involved. It's just too hard.[38]
Security clearances
3.42
Another challenge for SMEs raised with the committee related to the
security clearances required to work with Defence:
Security's an issue because individuals need security
clearance. A company may have one or two people who have that. If they happen
to be on holidays they can't go in and do the job, which makes them liable to
contractual issues. As far as the people working on site is concerned, most of
them would be working for significant contractors.[39]
Complexity of the system
3.43
Mr Michael Pope explained that it can be challenging to understand where
funding allocations sit within Defence:
As far as the procurement side goes, we struggle to find
where those buckets of money sit. Defence is so complex in the way it
structures its procurement at various levels—basing what's in Canberra, versus
what's been allocated to the primes versus what's sitting inside in the EMOS [Estate
Maintenance and Operation Services] contracts. In this current financial year,
our understanding is that, with the EMOS contracts with the primes, there is a
$60 million underspend at the moment between now and the balance of the
financial year. A lot of that money within EMOS is not just for operations and
maintenance; it's money that is actually earmarked for procurement of equipment
and also the things that we've been talking about. But to actually get access
to those funds is a real process. We're in the process of [at] the moment of
putting proposals through to the primes so that they can submit our concept and
proof of concept so that those funds can be accessed and those ranges can be
updated to give Army the sort of training that they're looking for.[40]
3.44
Mr Peter Gray, Deputy Chair, RDA Hume also highlighted challenges
experienced by SMEs:
And it's not all plain sailing for business either,
especially for small to medium sized businesses. Some can adapt to the Defence
environment quite well—which is very demanding, I would think—but others just
wouldn't be interested or couldn't do it. They think they might like to, but I
imagine they would find it too difficult.[41]
Training opportunities and support for
SMEs
3.45
The committee received evidence of existing training opportunities to
assist SMEs to seek work with Defence.
3.46
Ms Lane explained that the Defence Murray Riverina Alliance runs training
workshops to support SMEs:
We've run some training
workshops. One of them is '101 doing business with Defence' that looks at all
of the introductory information and gives an overview of Defence and how to
engage with Defence. We have a follow-up one 'Tendering for Defence'. We had
duMonde [training and consulting firm] deliver that workshop to the members and
that was around how to identify opportunities within Defence and AusTender was
a large part of that. I have encouraged all of our small and medium businesses
to make sure that they are on AusTender and getting the alerts. Anything that I
see I'll send through was well.[42]
3.47
As noted in previous interim reports, the committee is aware of advisory
services and industry organisations that provide assistance to SMEs to increase
their ability to engage with the defence industry. In response to a question on
notice, RDA Hume advised:
In the past twelve months Regional Development Victoria
[Victorian Government agency] has assisted one business in the Hume region.
Regional Development Victoria facilitated a grant application
with one business to improve their capability in support of Defence related
product produced for a third party.
In addition Regional Development Victoria has engaged with
two organisations to support their efforts to build capability/capacity in
order to assist the region's defence sector.[43]
3.48
Mr Chris Deighton, Director of Pentarch, an organisation specialising in
the disposal of munitions and other hazardous goods and the supply of
ammunition packaging, told the committee that, in his view, information about
Defence requirements and the procurement guidelines needs to be emphasised
better by advisory services providing support to SMEs, as well as building
relationships:
In terms of contracting with Defence and how to generate
business with Defence, what seems to be lost with a lot of the advisory
services around the place and the interlinking of these advisory services with
SMEs is: what's required by Defence; what are their procurement guidelines? We
spend a lot of time with relationships...we are in the door talking to
people—financial investigation services, ANAO, the Directorate of Ordnance
Safety—to find out what sails their boat. These people have very, very big
charters as far as their roles are concerned, so you have to find out where
your business sits relevant to where the opportunities are likely to come from.[44]
Information about local sourcing and understanding the benefits
3.49
The committee inquired about the availability of information about what
goods and services Defence sources locally and whether there is an
understanding of the regional impacts of Defence activities undertaken at
bases.
Availability of information about
what is sourced locally
3.50
Evidence provided to the committee indicated there is not a good
understanding of the volume of goods and services that Defence sources locally.
Mr Baumgartel advised:
As far as local supply is concerned, there are a lot of
people who supply into the bases indirectly...probably via Spotless or ESS [part
of Compass Group], who do the catering contract. There is very little
visibility to that purchasing process. They have their own procurement people.
They have national contracts with people that they have to abide by, so there
are some things they will not buy locally, because they're obliged to buy them
on a national contract. While they're allowed to do that there will not be an
opportunity for local industry. I think there are policy directions that might
make it easier for local companies to get in. There's always a price penalty.[45]
3.51
Mr Baumgartel suggested that it would be useful for an audit of what is
sourced locally to be conducted:
I think it would be very useful to try to audit what is
sourced locally—to try to find out what actually is sourced locally. Something
like a dry-cleaning contract for a military base is a lot of money. There are
little things like that which you would hope would be done locally, but we
don't know. Do they buy their meat supplies locally? I believe they do in
Wagga; I don't know about here. But again it would be something worth knowing.
Even if you just look at the 20 top expenditures or something like that, we
have no idea. That's the problem. We have no information.[46]
Requirements on Tier 1 contractors
3.52
On the question of whether prime contractors should be required to
source capability locally in the region, Mr Baumgartel suggested that the
requirement needs to be 'not necessarily to source it but to seek it. If the
local capability is very much more expensive, I couldn't honestly say I would
recommend they use that'.[47]
Departmental information about the broader
regional impact of Defence activities
3.53
The committee sought information from Defence about whether there are
any details available about the regional impact from activities at Defence
bases. Ms Alice Jones, First Assistant Secretary, Service Delivery, Department
of Defence advised:
Our previous responses to questions on notice had been that
we're not able to easily break down our subregions. As we mentioned yesterday,
[at public hearing in Bendigo] if things are paid on credit card, the company
on the invoice may be based somewhere different to where a service is
delivered. The chief financial officer has said that our systems aren't
designed to collect that kind of detailed information. We also think that it's
going to be difficult for us to do that, and the onus is on business to give us
more information as well.[48]
3.54
On notice, Defence provided the following information about the
information they have about the regional impact of Defence activities:
Notwithstanding Defence’s commitment to develop metrics
regarding regional expenditure on estate construction projects, Defence does
not track expenditure within the corporate financial system on the vendor
activity by location of the production, or the delivery of goods and services.
To capture such information would require a significant impost on industry to
identify where all goods and/or services under the contract are being produced
or delivered. In addition Defence’s existing financial information systems
would require significant investment to be able to capture and report this
information...
Defence does not undertake economic impact studies on the
impact of the projects on the local community. State or local government
agencies may undertake these assessments. Defence is willing to contribute,
through the provision of publically available data, to the conduct of a thesis
by another agency, on the economic impact of Defence expenditure on the local
community.[49]
3.55
When responding to a question about whether Defence is able to measure
regional impact based on information currently available in the system, Defence
advised that their priorities have been in other areas:
[W]e focus on defence business, procurement, doing our
services, improving them, supporting the warfighter and our mission statement.
At this point in time, it would be fair to say that that probably hasn't been
one of our biggest focuses. We do focus though, as you have heard, on engaging
with the community. You have heard we do that well in some places and not so
well in others so we are trying to improve that. But, yes, I would say we do
not spend a lot of time focusing on that at the moment.[50]
Benefits of utilising local
suppliers and businesses
3.56
As an example, the committee received evidence from Mr Deighton about Pentarch's
operations to the committee:
Pentarch's business is based in two locations primarily—one
in Oaklands in southern New South Wales and the other in Wangaratta in
Victoria. Our head office is actually in Melbourne. We have approximately 36
people employed across all three areas. At the business in Oaklands, which is
approximately 100 kilometres to the west of Albury, we deal with the disposal
of hazardous materials for the Department of Defence—that's the Army, Navy and
Air Force. In Wangaratta we manage the inventory of ammunition packaging for
the Department of Defence. We have about 980,000 boxes currently in cycle
around Australia. We collect them, bring them back, refurbish them and recycle
them.[51]
3.57
Mr Deighton advised that Pentarch 'is very much involved with local
industry' and that each year, his organisation provides a 'family tree' to
Defence detailing the businesses they engage with to conduct their business. Mr
Deighton explained:
In Wangaratta we have 91 suppliers, 55 of whom are local. In
Oaklands we have 98 suppliers, 58 of whom are within 100 kilometres. We are
absolutely involved in the local economies, and our social impact is known in
both locations, as I think we're considerable contributors to both
environments. Wages and salaries for the two locations are between $2 million
and $2.5 million per annum. In Oaklands, a town of 300 people, their wages are
between $600,000 and $1.4 million depending on the workload. In Wangaratta, the
packaging contract we have completes in 2020, and we are expecting that, if
Thales maintain their position with regard to Benalla, we are likely to get an
extension to that contract through to either 2026 or 2031.
Basically, we are a true SME within this location and are
utterly involved in everything that goes on.[52]
3.58
Further to this, Mr Deighton also emphasised the benefits gained from
using local businesses:
They [local businesses] live in our backyard—absolutely. Any
local supplier of a product or service is living with you. It is so different
to having stuff made out of Melbourne. In fact, we have encouraged two primes
around Wangaratta to use us—to use local suppliers. We have encouraged them to
give us work that they formerly put in Melbourne, and we have educated the
local suppliers. We have the advantage that we have some very strong
management. I have a couple of engineers, one who is the former head of
engineering at Thales, who is in his semi-retirement. He has overseen the
standards that we can actually produce to. We are able to go into engineering
firms and restructure their businesses. [53]
3.59
Mr Deighton noted that a number of the companies they work with are 'too
small to get ISO accreditation' and many 'have cash flow issues'.[54]
In many cases, Pentarch assists the smaller companies by covering their start
up costs, equipment needs and act as a liaison point with Tier 1 contractors.[55]
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