In the hot seat: Senate estimates issues for Defence raise serious questions

Senate estimates hearings will be held on the Defence portfolio on Wednesday, 6 November. Here are some questions we at Strategic Analysis Australia would like to hear answers to. Answers at the table by officials or the relevant ministers are often partial and not informative.

Carefully worded, formal questions on notice tend to get better results.

It’s not a comprehensive list; a lot of questions tend to be standing issues at estimates, such as ADF recruitment and retention and the gap between actual ADF numbers and its target, but even here, the “Defence Workforce Plan”, released on 5 November, has some data to focus questions on (quite a few, it turns out – see last section below).

Additional funding

The 2024–25 PBS shows that only $400 million of the $5.7 billion in “new funding” over the forward estimates is programmed for 2024–25. That $400 million is the only increase to 2024–25’s Defence budget since the 2016 White Paper was released.

• What is this funding being spent on?
• How will this funding accelerate the delivery of capability?

Tendering and contracting

The Australian National Audit Office (ANAO) has recently released a review of the tendering practices of the Australian Passport Office at the Department of Foreign Affairs and Trade (DFAT). Its conclusions are damning. It stated:

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• The procurements DFAT conducted through its Australian Passport Office did not comply with the Commonwealth Procurement Rules and DFAT’s procurement policies, and did not demonstrate value for money.
• Open and competitive processes were not employed.
• Procurement decision making was not sufficiently accountable and was not transparent. Procurement practices fell short of ethical standards.

The audit stated that, “DFAT did not employ open and competitive processes in the conduct of Australian Passport Office procurement. There were no procurements conducted between July 2019 and December 2023 by way of an open approach to the market.”

Recent audits of individual projects – like the security clearance program, contracting with Thales over munitions and the Hunter frigate procurement decision – in Defence have identified similar issues, but the ANAO has not conducted a portfolio or department level review of Defence procurement.

• What percentage of Defence’s procurements were conducted through an open approach to market?
• How does Defence manage the probity risks created by having embedded contractors recommending or endorsing procurement decisions?
• When were the last audits of Defence’s use of panels for procurement and contractor support?
• When were the last audits of procurement, panel use and contractor hiring practices by ASD, CASG and the Australian Submarine Agency?

Nuclear-powered submarines

The 2024–25 Portfolio Budget Statements say that $2,591 million in expenditure is planned for Project DEF 1 – Nuclear-powered submarines ($2,223 million in military equipment acquisition and $368 million in other inputs to capability) this financial year.

• What is that money being spent on? Can Defence provide a breakdown?
• How much of it is comprised of contributions to the US and UK’s industrial base?

The director-general of the Australian Submarine Agency has stated that the SSN-AUKUS submarine design is “70 per cent mature” and “live”.

• What project and design milestones has the SSN-AUKUS program successfully completed in the UK?

The United Kingdom government has signed a detailed design contract for SSN-AUKUS with BAE Systems. Australia is not a party to this contract.

• How does Australia ensure its requirements are addressed in the design?
• How are any differences between the UK and Australia’s requirements addressed?

BAE Systems’ submarine assembly hall in Barrow-in-Furness recently suffered a fire.

• How significant was the damage to the facility and submarines under construction in it?
• Are any schedule delays anticipated to those submarines?

Arafura Class offshore patrol vessels

The 2023–24 ANAO Major Projects Report stated: “The project is currently managing the following emergent risks: OPV 1 (Arafura) sea trials and IOR be impacted by structural fire integrity design safety.”

• How did Defence select a mature, in-service design that has fire safety design risks? Why were these issues not identified in the selection process?
• Has the design been modified to address those risks?
• Has Defence conducted an assessment of what needs to be done to the vessels to have them meet standards?
• How feasible is the necessary work and over what time frame?
• Is Defence planning to have the necessary remedial work done on the vessels and who will meet the costs?

Initial materiel release (i.e. delivery of the first vessel) was originally planned for December 2021. This was moved to January 2024 but does not appear to have happened yet.

Initial operational capability (i.e., first vessel able to conduct operations) was originally planned for December 2022. This was moved to August 2024 but does not appear to have been achieved.

• When are initial materiel release and initial operating capability currently planned for?

SEA 1180 was originally scoped to acquire 12 Arafura Class offshore patrol vessels with an approved budget of $4,789 million ($3,705 million for military equipment acquisition and $984 million for other project inputs to capability).

The contract with Luerssen Australia is $2,642 million (at 30 June 2023 according to the ANAO’ Major Projects Report).

As an outcome of the Independent Analysis into Navy’s Surface Combatant Fleet, the scope has been cut from 12 to 6 vessels.

• How have the approved budget and contract been reduced to align with the reduced scope of only six vessels (i.e. What is the contract cost now and what is the timeline for delivery)?
• Has the Commonwealth agreed to pay any compensation, penalties or damages to Luerssen Australia or any other companies in relation to the reduction to the OPV project?

General purpose frigates

The public 2024 Integrated Investment Program gives the planned budget for the general purpose frigate program as $11 billion over the decade to 2033–34. However, the full scope of 11 vessels will not be delivered by then, so $11 billion is not the full budget.

• How many vessels does Defence anticipate will be delivered by 2033–34?
• What is the total provision held in the IIP for the general purpose frigate?

Defence leaders have been quoted as saying Defence has not specified any requirements for the GPF and is seeking an “off-the-shelf” solution from industry.

• How will Defence evaluate industry responses if it has no requirements to assess them against?
• Has the government agreed to a set of high-level requirements for the GPF?
• If so, what are these requirements?
• The General Purpose Frigate project is selecting from in-service designs. How are lessons from the OPV experience around safety, fire risk and design certification being learnt and applied to the frigate program?

Henderson shipyard

The government recently stated that it will establish “a consolidated Commonwealth-owned Defence precinct” at Henderson in Western Australia. It also announced three years of studies into the work required to establish the precinct.

Few details were provided and those that were are confusing. The announcement said that “depot level” SSN maintenance will be performed at Henderson without defining what this is. Austal and CIVMEC already have ship construction facilities at Henderson; the relationship between their facilities and the Commonwealth-owned precinct is not clear.

• How will SSN maintenance be divided between Henderson and Osborne in South Australia? Will all SSN maintenance be performed at Henderson?
• Will the Commonwealth own the shipbuilding facilities in Henderson as it does in Osborne where Australian Naval Infrastructure owns the surface ship and submarine construction yards? Does this mean it will take over Austal and CIVMEC’s facilities?
• Will the general purpose frigate be built in a Commonwealth-owned facility? Or can the industry bidders for the GPF establish or acquire their own facility?
• What is the plan to do major works to create the new Henderson facilities in the midst of shipbuilding programs underway there concurrently without disturbing these current projects – such as CIVMEC’s OPV program and AUSTAL’s Army landing craft and future general purpose frigate construction?

Project JP 9102– Satellite communications

Defence has confirmed that the government has decided not to proceed with the acquisition of the satellite communications solution that Lockheed Martin was selected to deliver in 2023 after six years of planning and consultation.

Satellite communications had been programmed in the 2024 IIP with a budget of $5.2–7.2 billion over the decade to 2033–34.

This follows the cancellation of the National Space Mission for Earth Observation in 2023 and the omission of surveillance satellites from the 2024 IIP.

The prime minister has suggested that satellite communications was not a budget priority. Defence has also said that the solution selected only a year ago “would not meet strategic priorities”. Matt Keogh has talked about new technologies being available, and “multi-orbit” solutions.

• Defence spent a year rebuilding the IIP after the Defence Strategic Review to ensure it contained only affordable, high-priority capabilities. This involved cancelling $47.5 billion in planned capabilities. How is it that only six months after this new, comprehensive rethink and rebuild of the IIP was released that the JP 9102 solution is no longer considered relevant and/or affordable?
• How much has been spent on JP 9102 to date? Will the Commonwealth be required to pay cancellation or break fees?
• Does the government still intend to acquire a sovereign military satellite communications capability? When will it be operational?
• How can the public and industry have confidence in government announcements and procurement decisions given this overturning of such a recently announced decision?
• References to new technologies and multi-orbit solutions seem to be presented as new news that caused the cancellation, but alternatives to a small constellation of larger satellites have existed for years now, so how is this not evidence of a failed capability planning and procurement system?

Black Hawk helicopters

According to a Defence media release, the Army will have 12 Black Hawk helicopters out of a total planned fleet of 40 by the end of this calendar year. It is planning on declaring initial operating capability (IOC) this year.

The last of the 40 will be delivered by 2030, despite the government and the US stating that delivery would be accelerated.

• What is the definition of IOC for the Black Hawk helicopter project?
• Why will it be a further six years until all helicopters are delivered?
• What was the delivery schedule for all 40 helicopters before ministers, including Richard Marles, intervened with US counterparts, including Defense Secretary Lloyd Austin to accelerate delivery?

Guided Weapons and Explosive Ordnance

The current and previous governments have made multiple, repeated announcements on long-range missiles. These statements are repeated in the recent Guided Weapons and Explosive Ordnance (GWEO) Plan released on 30 October 2024.

However, they do not provide relevant schedule information.

• What ADF platforms will the Long Range Anti-Ship Missile be integrated onto? When will IOC be achieved for each of these platforms?
• What ADF platforms will the Joint Air-to-Surface Standoff Missiles with Extended Range be integrated onto? When will IOC be achieved for each of these platforms?
• When will IOC be achieved for Tomahawk integration onto the Hobart Class destroyers?
• When will IOC be achieved for SM-6 integration onto the Hobart Class destroyers?

On 16 January 2024, the government announced that:

“The Albanese government will ensure Australia starts manufacturing Guided Multiple Launch Rocket System (GMLRS) missiles from 2025, following the signing of a $37.4 million contract between Defence and Lockheed Martin Australia.

The contract will enable an initial batch of GMLRS missiles to be manufactured in Australia, which is an important first step towards establishing domestic missile manufacturing on a larger scale.”

However, the GWEO Plan stated that the location for the Australian Weapons Manufacturing Complex, which will manufacture GMLRS, will be decided in 2025 and the facility won’t be operational until 2029.

• How will the manufacture of GMLRS commence in 2025?
• What work will actually be done in Australia in 2025?
• When does Defence expect Australian-made components to be included in these GMLRS missiles?
• If Defence doesn’t yet know when this will be, when does Defence expect to know this answer?
• Who is doing the $320 million worth of studies to “evaluate the feasibility” of Australian companies supplying components for guided weapons mentioned in the GWEO plan? When will results be available?
• What happens after this evaluation of feasibility is done to turn the study into any practical results for Australian industry?

AIR 6000 Phase 2A/2B – F-35A Lightning II

The US government put a hold on accepting deliveries of F-35 aircraft due to the immaturity of the Tech Refresh 3 hardware. The hold has now been lifted and the RAAF is expecting delivery of its remaining nine aircraft.

• When will the RAAF have all 72 contracted aircraft?

The 2024–25 PBS stated that the total military equipment acquisition budget for the F-35A is $16,589 million, with $12,400 million spend before this financial year and another $370 million forecast for this year. That suggests the full $16,589 million will not be required.

• Once all 72 aircraft are delivered, what are the major remaining areas of scope still to be delivered?
• What is the current budget estimate for AIR 6000 Phase 2A/2B? Will the full approved budget be required?
• What air hours are being achieved by the F-35 fleet and at what cost per air hour? How does this match targets set for air hours and costs?

Recruitment and retention – the crisis continues

The new Defence Workforce Plan 2024 talks about “continuing the transformation” in Defence’s workforce recruitment and retention activities. There’s little evidence of actual transformational activities. This slightly updated version of current plans is much more continuity than transformation.

Workforce costs continue to rise even as the recruitment and retention crisis deepens. If Defence were to achieve its workforce targets, the budget required for this would likely be a new Defence budget pressure.

The ADF only grew by around 500 people in the years since 2016, despite funding and initiatives to achieve growth targets of around 5,000 service personnel.

That’s 10 per cent achievement of targets across an eight-year period, and that was despite pervious Defence leadership assuring us that workforce initiatives were also apparently “transformational” and would be effective.

• Given the continuing Defence failure to meet any recruitment and growth targets it has set and reset since the 2016 Defence White Paper, why should the public or Parliament have any confidence that the Defence leadership will now meet the targets it sets in this new plan?
• The former Chief of the Defence Force, Angus Campbell, told Parliament in his last appearance at estimates that he thought recruiting and retention were “turning the corner” and expected improved results to be available towards the end of this year – after he had left. Is this evident in the numbers you are seeing? What are the most recent numbers?
• The new plan said that “to stabilise, remediate and grow the permanent ADF workforce, the inflow must increase from approximately 5,500 per annum to 9,000 per annum over the coming decade”. That is an enormous increase that would be a step change to the last eight years. What factors tell you that this is “realistic” and “achievable” as the plan asserts, instead of fanciful and unachievable?
• Isn’t the ADF among the best paid military with the broadest remuneration packages in the world, with a more attractive package than the US and UK militaries, for example – including free healthcare, free dental care, cheap home loans, rental assistance, reunion travel arrangements and tax-free salary when deployed?
• Given this attractive financial package, why will extending the retention bonus for a few more years change much?
• Is the Navy still the service with the highest percentage of serving personnel saying they are planning to leave the military in the near future (Defence’s last publicly available survey had 29 per cent of serving Navy personnel saying they were seriously considering leaving)?
• Have you considered improving retention of junior and lower ranked personnel by cutting the number of senior military positions and delegating responsibility down to these highly trained, capable but more junior ranks? If not, why not? Because Australia’s military history has shown that it’s the initiative and drive of people below the senior hierarchy that has been a distinctive strength.
• If it is going to take to 2026 to “stabilise” the workforce, how transformational are the new initiatives?
• Do you expect having only one Collins submarine operational will affect the retention of crews for the submarine force?
• If the workforce targets continue to be missed over this and next financial year, will Defence begin to produce a new plan that doesn’t rely on meeting increasingly unrealistic targets to grow the ADF to 69,000 by the early 2030s and on to 100,000 by 2040?
• At what point, if the workforce crisis and failure continues, will Defence change course?
• Can Defence supply the committee with data on the critical trades that are most under pressure to recruit and retain necessary people? Which are most affected by current shortages and what are the consequences for deployments and exercising for each of the three services and their key formations and platforms?
• What are the remediation targets for these specific critical trades for each financial year between now and FY2028–29?

Michael Shoebridge is director of Strategic Analysis Australia. Marcus Hellyer is head of research at Strategic Analysis Australia.