New government, familiar challenges

In a celebration of democracy, Australians went to the polls on the 21st of May, and elected a new Labor government. The peaceful passing of government is part and parcel of our great nation’s tapestry; so much so that it often goes unremarked. Yet, events in other parts of the world drive home how fortunate we Australians are to live in a robust, liberal democracy. 

As Thomas Jefferson put it so well, “the price of freedom is eternal vigilance”, and so, the defense of our great nation will be an important task for this government, as it is for all governments.

AIDN congratulates the appointment of the new government’s Defence team including the Deputy Prime Minister, the Hon Richard Marles, as Minister for Defence; the Hon Pat Conroy, as Minister for Defence Industry; and the Hon Matt Keogh, as both the Minister for Veterans’ Affairs and Defence Personnel; and the Hon Matt Thistlethwaite, as the Assistant Minister for Defence and Veterans’ Affairs. As our new ministers get settled into their respective portfolios, the question of how to foster Australia’s Defence industry will emerge.

AIDN is pleased that the Deputy Prime Minister has already set out some positive markers in this regard, with his recent statements that “Australia’s geo-strategic environment underscores the need for a robust, sovereign and internationally competitive Defence industry base,” and “That is why the Australian government is committed to building a genuine, long-term partnership with the Defence industry, large and small, both locally and internationally.”

AIDN wishes the government the best of success in achieving these laudable objectives.

Australia is fortunate to have a Defence Department that is staffed by experienced and responsible officers who are familiar with the issues involved in balancing matters on programs that are inherently complex. Decisions are made in ways that such officers presume is in the nation’s (or program’s) best interests, as they understand them. Even so, longer term observers of our industry will be aware that occasions arise where the Department’s behaviour can be at odds with the intentions of their political masters, such that policy outcomes sought may not materialise.

A case where a minister’s general policy intent was not realised is the Australian Industry Capability (AIC) program, proclaimed in the 2016 Defence Industry Policy Statement (DIPS). This document states: “Close collaboration between Defence and industry is critical to meet the challenges of the future and deliver the government’s ambitious program of works. The Defence and industry partnerships of the future will be instrumental in delivering and supporting the future ADF.”

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A key part of how the DIPS would accomplish this outcome was via the AIC program. The DIPS describes how prime contractors bidding for programs would be required to submit an “Australian industry capability plan” and goes on to state: “Once in contract, Defence will enforce the contracted Australian industry capability plan to ensure the benefits are realised.”

A straightforward statement of ministerial intent if ever there was one.

Yet, AIDN’s members consistently report cases where this mechanism has been sidelined or thwarted, with the apparent acquiescence of (rather than enforcement by) the Department. The result has been, contrary to the clear intent of the plan, that Australian industry has often been sidelined in favour of foreign suppliers. 

Defence initially responded to criticisms of the AIC policy by requesting that they be given time to implement the policy, and more recently it has undertaken “enhancements” to the AIC policy, supposedly to address the concerns expressed that the policy is fundamentally missing the mark.

Yet even the recent “enhancements” provide considerable leeway for prime contractors to move away from commitments made during tender to use Australian suppliers. Loopholes continue to exist, such as the ability to switch Australian-controlled suppliers for other “Australian” industry – with Australian being defined as “having an ABN”, hence allowing the substitution of a prime’s own Australian workforce. Other problems include allowing a very long process before any serious steps are taken; this process does not involve the Australian entity that has been sidelined. During this lengthy period, the sidelined Australian entity must make its case by some other means, without the cashflow benefit of the ongoing business that it was supposed to have attained, and all the while, is left further and further behind. It is possible that public servants that draft such processes don’t have the commercial experience to understand that businesses need to maintain cashflow while such issues get resolved. 

It is not overly clear as to whether the department’s tender evaluations really do prefer those tender responses that offered strong AIC plans.

The sorry saga of AIC paints a case where a minister’s clearly expressed intent for a broad policy outcome has been thwarted by the department’s desire to maintain freedom to behave otherwise. AIDN has repeatedly stated that the role of Defence is not to create an industrial capability, it is to provide the government with a Defence Force that meets the government’s requirements. Defence acquisition is the instrument used to provide the ADF with the goods and services it requires – to an approved schedule and cost.

Although the power of the elected representative to achieve a broad policy outcome can be thwarted, what about the power to achieve more specific outcomes, such as the ministers considering cases where Australian industry has been sidelined?

Unfortunately, even here, an activist minister may be stymied, with the department having many arguments at hand for why their approach cannot be challenged by a civilian. Security and strategic reasons may be proffered. Technological reasons or generic “risk” may be offered to validate the sidelining of an Australian business’ offerings. And if those avenues fail, legalistic arguments (e.g. confidentiality) may be raised to discourage any queries regarding any program.

AIDN is not suggesting any untoward behaviour on the part of the department. Departmental officers wish to progress with what they believe – based on their experience set – to be the best overall.

Nonetheless, as a parliamentary democracy, it is obvious that the department must be both accountable to and controllable by the ministers, who are the elected representatives of the Australian voting public. Ministers must be able to question and challenge – both in general and specific – the activities of the department,  and, as applicable, must be able to be modify their behaviour to fall in line with the ministers’ intent.

For this to work in practice, it is important to redress the natural imbalance of knowledge and familiarity with the business of Defence that exists between the ministers and the department.

Left unaddressed, the “familiarity gap” can lead to the department’s prevailing assumptions, factoids, and ingrained habits of practice being presented as axiomatic truths, rather than allowing them to be challenged.

Similarly, it is important that the ministers can access independent sources of information, particularly on matters of industry engagement, to be able to cross-check positions offered by the department. Industry organisations are one obvious source, and AIDN stands ready to assist in this regard. This is simply part of the checks and balances of an effective parliamentary democracy, where government activities are accountable to the public.

Previous ministers have found it challenging to shape the behaviour of the department, but that doesn’t mean it can’t be done. Indeed, regarding matters of industry engagement, it must be done.

To quote John F Kennedy, “We do these things not because they are easy, but because they are hard.”

Brent Clark is the CEO of AIDN National.