Minister for Defence Materiel - ASPI: Defence White Paper - From the page to reality

Thank you very much for that introduction.

It is my great pleasure to be here today to discuss the new policies and initiatives the Coalition Government has launched that will fundamentally redesign the partnership between Defence and industry.

Could I first thank the Australian Strategic Policy Institute for organising this important conference to consider the implementation of the Coalition Government’s landmark Defence White Paper.

Earlier this morning you heard from the Minister for Defence, Marise Payne, on how the Defence White Paper provides a comprehensive long-term plan for the security of the Australia.

This White Paper delivers on our Government’s 2013 election commitment to return Defence spending to 2 per cent of GDP within a decade, delivering an additional $30 billion investment in Defence capabilities across the decade to 2025-26.

As Minister Payne commented, the challenge now is turning the words of the White Paper into reality.

A critical part of achieving this is building a new partnership between Defence and Industry. This is why, alongside the Defence White Paper, the Government has also released a Defence Industry Policy Statement.

The Statement sets the agenda for driving a transformational change in how Defence and industry work together to develop the advanced technology and equipment needed to support our future force.

This is what I would like to focus on today.

As a Government, we are determined to build a closer, more strategic relationship with industry to deliver better capability outcomes for Australia.

Underinvestment and volatility in Defence funding through Labor’s years in office has caused major challenges for Australia’s defence industry.

Our security depends on a strong and sustainable Australian defence industry – one that is technologically advanced and innovation-driven. This is vital to secure our safety and our prosperity in the decades ahead.

Australia has many companies, both famous and not so famous, that innovate and contribute their world-class capabilities to the Australian Defence Force.

We need to celebrate and promote their achievements more, and I just want to touch on a few of them today to illustrate what Australian industry is capable of.

Many of us here would be familiar with the success story of CEA Technologies, based right here in Canberra.

I have had the opportunity to see the work they are doing with their ‘Active Phased Array Radar’ to ensure our Navy’s ships are equipped with world-leading technology.

And just a few weeks ago marked a significant milestone for the CEA Team with the 100^th radar face being produced.

Australian industry is also showing world class innovation and expertise when it comes to the Joint Strike Fighter.

For instance, in Marand’s warehouse in Melbourne, extraordinary engine trailers are being built to support these aircraft.

But these are not ordinary trailers – they are high-tech, highly sophisticated pieces of equipment. There were around 700 specific technical requirements that needed to be met and they have twelve and half thousand (12,500) different parts.

Ultimately Marand have produced a trailer that allows engines to be easily transported and installed in any environment and under any conditions – both at sea and on land – with the support of just two personnel and with no external power.

And we are also leading the way when it comes to food technology. The CSIRO and University of Tasmania are partnering with the Defence Science and Technology Group to improve the rations provided to our military personnel.

At the Defence research site in Scottsdale, Tasmania, new Microwave Assisted Thermal Sterilisation technology – otherwise known as MATS – is being explored to test its application for providing shelf-stable and fresh-like meals.

Critically, the work being done now will also provide early access to exploit this emerging technology for broader industry and humanitarian uses.

As Minister for Defence Materiel I will be driving continued investment in new technologies that help build industry innovation and competitiveness, create economic opportunities and jobs for Australians, and support our nation’s defence.

But I know that innovation cannot be delivered in isolation.

A collaborative relationship between all parties is essential, and this is why the Government is transforming Defence’s approach to innovation and creating a seamless link between capability needs, smart ideas and capability outcomes.

Although innovation is central to the Government’s economic plan, the Defence Industry Policy Statement also changes how we see the role and capacity of Australian industry.

We are now creating an environment where industry truly is considered a Fundamental Input to Capability.

What this means is that industry will be considered a vital part of all capability considerations.

Industry has repeatedly called for an earlier and stronger voice across the capability life cycle.

And given the reliance on industry to achieve the capability solutions for the Australian Defence Force, this is both logical and sound.

Recognising industry as a Fundamental Input to Capability reaffirms our commitment to a stronger, more strategic partnership with industry, and to ensure Defence can better match the development of new capabilities with industry’s ability to deliver.

The Government has already launched proactive, tangible initiatives to kick-start this new era of partnership between Defence and industry and promote the need for industry innovation.

The growth of Government investment in Defence capability to approximately $195 billion over the next 10 years, includes a $1.6 billion investment to support Australian science and technology and innovation to provide advanced home-grown Defence capabilities.

This investment includes:

$230 million to establish the Centre for Defence Industry Capability, which will be headquartered in Adelaide;

$730 million to establish the Next Generation Technologies Fund; and

A further $640 million to fund an Innovation Hub.

The Centre for Defence Industry Capability will promote defence industry competitiveness, guide priorities across defence industry, and connect Defence capability with innovation.

The Next Generation Technologies Fund will ensure there is focused investment in areas of high potential to deliver game-changing capabilities critical to Defence and national security.

The Fund will build new collaborative research and development programs that bring together, with Defence, Australian industry, academia, and publicly funded research agencies.

The Innovation Hub will allow Defence and industry to work together throughout the capability life-cycle from initial concept, through prototyping and testing and introduction into service.

Through these initiatives we will ensure opportunities for competitive Australian companies are maximised to help deliver the new leading edge capabilities for the Australian Defence Force.

But even with these significant investments to support Australia’s defence industry, as Minister I also recognise that Defence must undertake urgent and fundamental procurement reform.

The First Principles Review of Defence, released last year, starkly highlighted this need.

The new Capability and Sustainment Group, established from parts of the former Defence Materiel Organisation, has been set an ambitious but worthwhile and long overdue reform process.

Defence’s leadership team have conveyed to me their strong commitment to this reform package, and I will work closely with them to help drive these much required changes.

Critically, the First Principles Review sets in place a new end-to-end capability development function to “maximise the efficiency, effective and professional delivery of military capability”.

In practical terms this means a lower cost solution both for Defence and for industry bidding for work.

It means that our Defence personnel are provided with the best possible equipment, at the best price, in the shortest amount of time.

At present Defence’s procurement and tendering processes too often see multitudes of companies spending hundreds of thousands of dollars, sometimes millions of dollars, preparing lengthy submissions.

This does not reflect what industry faces overseas.

While it is important such processes exist to ensure we are getting the best product, they can undoubtedly be conducted in a more targeted and efficient manner.

The First Principles Review identified an excessive amount of process and bureaucracy that detracts from what should be a focus on the final outcome.

It also potentially leads to the submission of unrealistic costings.

This often manifests later in the project’s life as delays and cost blowouts.

To achieve this, Defence needs to become a smart buyer.

This means moving away from a one size fits all approach and tailoring solutions based on the complexity of the procurement.

In some cases this may even mean outsourcing some of the technical elements to allow Defence to focus on project oversight.

Regardless of the approach the key is to engage with industry much earlier in the project in order to gain a better understanding of what industry is able to deliver and to help them understand what Defence is seeking.

From this a smart approach to procurements can be made.

And this means important improvements for Australian industry.

But not all of the action is on Defence, industry need to play their part and work with Defence.

If my early engagement with industry is anything to go by I am very confident that we have a defence industry sector craving change and very willing to support us on this journey.

So what does all this mean?

It means a more efficient Defence organisation operating in conjunction with a more efficient Defence industry.

This will lead Australian industry to be more competitive when it comes to winning future Defence work and even to look to expand internationally.

I am excited about the journey we have embarked on together to implement the fundamentally redesigned partnership between Defence and industry.

This partnership will strengthen our Defence capabilities, grow Australia’s industrial base, provide greater access to skilling and jobs, and increase access to export markets.

Can I thank ASPI again for the opportunity to speak here today.