Keynote Address: Defence + Industry Conference
(Source: Australian Department of Defence; issued June 22, 2004)
Keynote speech by Senator the Hon. Robert Hill,
Australian Minister for Defence,
At the opening of the Defence + Industry Conference
Canberra, June 22, 2004



Good morning and welcome to the 2004 Defence and Industry Conference.

Today I address this conference for the third consecutive year, and look with deep satisfaction upon the enormous progress achieved in the Defence and industry partnership over that time.

It seems almost unnecessary to point out that our strategic circumstances are subject to ongoing change. However, this fact presents Government and the national industry support base with a range of novel challenges.

We have moved from the brutal but simple realities of 20th century warfare to the more complex realities of conflict in the information age.

We have to prepare to confront and defeat a whole new range of antagonists. Let me provide just a few examples.

The emergence of a class of failed and failing states has placed a premium on light, sustainable and effective forces able to deploy rapidly to enforce peace and stabilize conditions of security. Australia has contributed to such operations in Somalia, Rwanda, East Timor, Bougainville and the Solomons.

As well as light and deployable forces for lower level contingencies, our services must also be given the combat weight to fight and win in major conventional conflict.

The requirement for firepower and mobility will drive decisions such as the recent selection of Abrams Main Battle Tanks to replace our ageing fleet of Leopards.

It must be understood that capability is not an either/or proposition – we must maintain forces capable of success across the spectrum of conflict.

The existence of rogue states poses another challenge. These regimes seek access to weapons of mass destruction and are characterized by their willingness to flout international standards of the legitimate use of force.

They often hold their own populations to ransom, threatening even greater horrors if we do not accede to their demands.

Time and technology do not stand still. Ballistic missile systems, once the monopoly of superpowers, are now within reach of a number of erratic dictatorships. Rogue states and terrorists alike are actively seeking out weapons of mass destruction, be they nuclear, chemical or biological.

Australia, together with its allies and neighbors, is investing in a multi-layered strategy to deal with these threats.

Investment in, and support for, anti-ballistic missile technology is necessary to both deter and if necessary defeat such an attack.

The Proliferation Security Initiative has attracted the support of over 80 countries in its efforts to prevent the movement of the ingredients of WMD. Australia is heavily involved in developing international cooperative interdiction capabilities by land, air and sea.

Terrorism remains our greatest immediate concern and we have invested substantial sums in improving our counter terrorism capabilities.

Unfortunately, not everybody understands that these strategic imperatives that exist in the real world must be matched by appropriate capability.

Any suggestion that we should aim to defend Australia just in Australia is naive and dangerous. Similarly, underestimating the value of our key alliances is most unwise.

For the first time for a long time there seem to be substantial differences between the major parties in Australia on issues of strategic assessment and capability needs. On defence and security the voters will be facing a real choice.

However, strategic concepts, no matter how sound, are of little value without the right tools. Industry is the indispensable partner with the armed forces and the Government in our contract to serve and protect the Australian people.

Hence, we have reviewed and updated the Defence Capability Plan (DCP) to take into account our changed circumstances and the need to project power in the information age.


THE DEFENCE CAPABILITY PLAN

The updated DCP that was released in February this year confirmed the Government’s ongoing commitment to the strategic funding of defence capabilities.

Its implementation will result in an Australian Defence Force that is more capable of both defending Australia and supporting our friends in the region and further afield.

The DCP involves an approximate thirty percent increase in major capital expenditure. This poses in turn major challenges to Defence and industry alike.

Industry must be prepared to deliver projects on time, on budget and to the specified capability.

For its part, the Government is delivering on its side of the bargain.

The 2004/05 federal budget allocated $3.8 billion for Defence capital investment – a figure that will rise to $4.3 billion in 2005/06, and $4.6 billion the following year.

To put this into practical perspective, let me briefly emphasize the magnitude of some of these projects.


AEROSPACE

In April I announced that the Military Transport Division of the European Aeronautic Defence and Space Company (EADS), teamed with Qantas Defence Services, had been selected as the preferred tenderer for the Royal Australian Air Force’s fleet of new air-to-air refueling aircraft.

While the aircraft will be constructed in Europe, four of the five will have refueling modifications installed and integrated by Qantas in Brisbane. Qantas Defence Services will also conduct through life support of the aircraft in Australia.

Over the life of the program, the value of the work to be undertaken by Australian industry and the associated technology transfer exceeds $500 million.

A more recent development is the Government’s decision at the beginning of this month to invest $326 million to acquire two additional Airborne Early Warning and Control aircraft.

This additional investment represents about 10 per cent of the original contract price but will result in a 50 per cent increase in capability.

In addition, increasing the size of our order to six aircraft means that four of the Wedgetail aircraft will now be fitted-out in Australia, creating around 170 new jobs in Brisbane.

Australian industry can expect to undertake more than $80 million of work on the project. There is also expected to be a further $75 million worth of associated export work for Australian industry.

The single most influential aerospace acquisition in the coming decade, however, will be the replacement of our fleet of combat aircraft.

With capital and support expenditure approaching $16 billion, this project will determine the face of the Australian Defence aerospace sector for many years to come.

The Government’s investment in the Systems Development and Demonstration phase of the Joint Strike Fighter project has given the Australian industry unprecedented access to the supply chains of a global aerospace platform – and in this case, the largest defence industry program the world has ever seen.

At this conference last year, I announced Australia’s first JSF contract, and since then, 12 Australian companies have won work on JSF.

Australian contracts are valued at over US$40 million to date. I am also aware of several new contracts having been awarded in the last few days and I hope to announce details shortly.

This success to date demonstrates the benefits of the strategic partnerships that have formed between the Government and industry under the Team Australia banner.

Australia has also secured access to the JSF data library and is now starting to see the fruits of patient efforts to win work in the ‘intelligent systems’ of the aircraft.

All this has been achieved within the first 18 months or so of joining the program, and well in advance of an acquisition decision and contract.

We look forward to ongoing opportunities for future work, particularly in the higher technology areas of JSF - but commitment and persistence are required, as there is no guaranteed work share.


SHIPBUILDING

Let me now turn to the ambitious plans for shipbuilding in Australia.

The Defence Capability Review introduced changes in the scope of the naval shipbuilding program and increased projected expenditure by between $1.3 billion and $1.8 billion.

Following this, the Minister for Finance and I commissioned Mr. John Wylie to review competitive arrangements for the naval shipbuilding sector and the proposed sale of the Australian Submarine Corporation.

Last month the Government accepted Mr. Wylie’s recommendations providing for a pro-competitive market in the sector, paving the way for the start of the biggest naval shipbuilding program Australia has seen.

I am pleased to say that all of Australia’s naval shipbuilding capability will be fully utilized in the delivery of the Air Warfare Destroyers (AWD), the Amphibious Afloat Support ships and the replacement tanker that make up the new naval build program.


--Air Warfare Destroyers

An estimated $4.5 to $6 billion will be spent on the build phase of the AWD program alone.

We plan to call for tenders for the AWD build later this year, with a preferred tenderer to be identified by early next year.

Tenderers for the AWD contract will be asked to bid on the basis of an alliance relationship with the Commonwealth.

An alliance contract will reflect all of the key commercial principles that will govern the relationship, and will rely on providing incentives to achieve superior outcomes both in financial and operational terms.

The more specific terms of the AWD alliance framework are currently being developed by Defence and its commercial adviser, Mr. Wylie.

I look forward to this framework providing a long-term relationship contract where the risks and rewards of such a large and complex project can be shared equitably among the parties.

This project will provide massive opportunities for Australian industry to participate at both the prime and subcontractor levels, create new Australian jobs and skills, and strengthen Australia’s strategic industrial base.


--Amphibious Ships

Together with the AWDs, the Amphibious Ship Program constitutes what is perhaps the most challenging naval construction program in our history.

In March this year, the French group Armaris and the Spanish group Izar responded to a request for information with top level detail of their Landing Helicopter Dock (LHD) designs for the Amphibious Ships.

Defence’s appraisal indicated the need for further work to balance capability, cost, design maturity, and risks for building the ships in Australia.

Government will shortly consider Defence’s advice on the next steps. However, it is likely that Defence will continue to work with Armaris and Izar in a competitive risk reduction activity that will, among other things, assess the suitability of the companies’ respective LHD designs for the ADF.

This will include release of a Request for Tender for construction in Australia, to support a source selection decision for the design.

We plan to select the designer in mid-2005 and finalize selection of the builder or builders by late next year.

Importantly, this timing is compatible with the government’s decision to tender the AWD ahead of the Amphibious Ships and will not delay the 2010 in-service Date for the Amphibious Ships.


--Westralia Replacement

As I announced earlier this month, Defence has purchased the “Delos”, a new double hulled, environmentally sustainable oil tanker to replace the ageing Westralia.

The innovative acquisition strategy resulted in the timely purchase of the brand new vessel on the open market by Defence and has resulted in the purchase of a very capable base ship on which to build the Westralia replacement project.

The base ship was acquired ahead of schedule, in line with new tanker build costs, and under the assigned Defence budget.

The Delos is capable of 16 knots fully laden and will be capable of refueling the Navy’s current and future fleet drawing on its cargo capability.

It will have crew accommodation for 60 to 80 personnel, will be helicopter compatible, and will have the latest Navy communications fit out including military satellite communications.

The replacement tanker will be modified so that it has the latest technology and equipment capable of refueling a range of Navy vessels, including the ANZAC and guided missile frigates and the new AWDs that will enter into service from 2013.

By the end of this month it is expected that the Delos will leave Korea and commence a period of warranty and shakedown operations prior to sailing to Australia.

During the third quarter of this year, an Australian based designer will be engaged to commence design activities and in 2005 an Australian shipyard will be contracted to undertake the conversion work.

The decision to undertake the modification in Australia will create jobs and consolidate the high-end and specialized skills of our naval shipbuilding and repair sector.

Indeed, it is a testament to the capability of Australian industry that this design and modification work will be done here.

Defence remains on track to deliver the replacement oiler capability in 2006 in accordance with the in-service date set out in the Defence Capability Plan.


ELECTRONICS

There is much afoot in the Electronics sector, which has traditionally presented as one of the more challenging areas for both Defence and industry.

We saw last year the successful launch and activation of the MilSatcom and the outstanding achievement of the controversial JORN over the horizon radar network being commissioned into service.

The long-deferred Vigilaire air defence network has now entered contract, and the far-reaching JP 2072 Battlespace Communications project has gone to tender.

The Battlespace Communications project will continue the roll-out of modern communications infrastructure to high readiness land formations and units to redress urgent capability shortfalls and enhance communications systems.

In response to a request for tender released earlier this year, four parties have submitted tenders. A preferred tenderer is expected to be announced in August and contract signature is expected by the end of the year.

Project Sea 1442, the Maritime Communications and Information Management Architecture Modernisation project will be tendered later this year.

This project will provide the foundation for the network centric roadmap in the maritime environment by enhancing the ADF’s maritime communications capability with the introduction of the Maritime Wide Area Network in our FFGs, ANZAC frigates, amphibious ships and HMAS SUCCESS.

LAND

I am pleased to announce today that the Government has given first pass approval for Phase 3A of Project Overlander, the multi-billion dollar project to replace the Defence Force’s fleet of field trucks and trailers.

The ADF’s current fleet of Mack, Unimog and Landrover vehicles is approaching the end of its economic life, and the plan is to replace these vehicles with a fleet of several thousand new generation military trucks and trailers.

An invitation to register interest was issued to industry late last year. A shortlist of companies will be invited to respond to a request for tender to be released next year. This shortlist will be published within the next few days.

It is expected that there will be significant opportunities for Australian industry to contribute to this project.

While I expect Australian companies to be strongly represented on the shortlist that I mentioned earlier, there will be particular opportunities for local industry, including SMEs, to manufacture trailers and shelter modules, and provide the through-life-support services required for the new vehicle and trailer fleet.

The Government’s decision to proceed with Project Overlander completes the Government’s plans for a massive upgrade of our land forces.

As I said earlier, earlier this year the Government announced that it would buy the Abrams main battle tank. The contract for these tanks will be signed very soon with the US Government.

The Bushmaster vehicles have successfully passed their last reliability trials, and we expect this excellent vehicle to enter full scale production in coming months.
The latest ASLAVs were recently rolled out in Darwin, and are a valuable component of our presence in Iraq.

The upgraded M113s have been successfully demonstrated and the project is on track to deliver a top quality vehicle on budget and on schedule.

Together, these projects represent a massive boost to the land mobility and protection of the Army.

They will generate significant benefits for local industry and create jobs across regional Australia.

We also look forward to export opportunities flowing from these projects.

There is already overseas interest in ADI’s high speed engineer vehicle and the Bushmaster vehicle manufactured in Bendigo.

General Dynamics has an international turret manufacturing facility in Adelaide and Tenix’s Albury/Wodonga facility is well positioned to contribute to international M113 upgrade programs.


SUPPORTING INDUSTRY IN COMMERCIALIZING TECHNOLOGY

I mentioned earlier that we have turned our attention to what we consider to be the genesis of the capability development cycle – our research and development capability.

As many of you will know, last year I commissioned an independent consultant, Mr. Robert Trenberth, to review the external engagement activities of the Defence Science & Technology Organisation (DSTO), and to assess how these activities impact on the creation of national wealth.

I have now studied Mr. Trenberth’s report and I have accepted the major recommendations of his review.

He found that DSTO does indeed engage willingly and creatively with industry and research partners to build Defence capability and transfer technology.

But at the same time the review made a number of recommendations that would improve DSTO’s collaboration and interactions with industry.

DSTO will set up a Technology Transfer Advisory Group that will provide the organization with commercial, market and funding advice on the commercialization of its intellectual property and transfer of technology to industry.

The Advisory Group will be established through a competitive tendering process and industry will be represented on this expert body.

In addition, a Defence Science Access network will be established to help industry, especially small and medium enterprises, to better understand DSTO research priorities and to give DSTO a better insight into the research capabilities of Australia’s most innovative firms.

The popular Capability and Technology Demonstrator program will also undergo some changes to encourage increased participation from industry.

For the first time small and medium enterprises will be able to access seed money to develop their proposals into full Capability and Technology Demonstrator bids – something many of them find hard to do now.

I am pleased to release an unclassified version of the Trenberth Report and a brief summary of the agreed implementation plan.

These are available from the DSTO help desk in the exhibition area.


GROWING INDUSTRY INTO GLOBAL MARKETS

I have already mentioned the Government’s efforts to assist Australian industry to engage effectively with global supply chains. However, this focus is not limited to those supplying to our own forces.

Austal is part of the consortium led by General Dynamics, which was one of two tenderers down-selected by the US Navy to develop prototypes for the Littoral Combat Ship project.

Austal’s aluminium trimaran design is being developed for the possible construction of over 50 Littoral Combat Ships for the US Navy.

Other Australian companies have proposals for inclusion of Australian equipment in the competing prototype being developed by the Lockheed Martin consortium.

Nautronix is another example of an innovative Australian company which has begun securing contracts to supply the Nautronix Acoustic Subsea Hydro Acoustic Information Link to US Navy programs after successfully completing the US Foreign Comparative Test program.

Australia’s bids into the Littoral Combat Ship program have been aggressively supported by a Defence and industry partnership under the Team Australia banner.

This campaign will now be broadened from the Littoral Combat Ship to embrace the broader range of maritime opportunities in the US market and elsewhere.

Australia’s niche capabilities in technologies ranging from scalable phased array radar to underwater acoustics, from close-in support weapons to missile decoys, have potential applications across multiple new platforms being developed for the US Navy and Coastguard.

The future looks bright for those companies willing to look beyond our own immediate needs to those of our friends and allies.

In this regard, I intend to raise a number of industry issues with my US counterpart at the AUSMIN discussions in July.

This includes the LCS program, where we would like to see more Australian technology being considered, not only in terms of the Austal design, but also the applicability of that technology for core and mission module systems.

I will also take up the issue of proposed restrictions on the leasing of Australian High Speed Vessels that have been provided for evaluation by the US by both Austal and Incat and discuss potential participation by Australian companies in the US Theatre Support Vessels project.


CONCLUSION

I commenced this address by establishing that the industrial support basis must support our strategy and adapt to our ever-changing security requirements.

It is with some satisfaction that I look back upon the reforms achieved in how we go about planning our acquisition, implementing it, and working with industry to ensure the capacity to deliver it.

In this context, you may forgive my indulging in a just little politics.

With the next election looming the electorate will have to consider the policy alternatives offered by the Coalition and the Labor Opposition and what they mean for defence and defence industry in particular.

I mentioned earlier strategic differences. But there may also be substantial differences on defence industry issues.

For its part, the Coalition has committed to the $50 billion DCP, which is the most comprehensive and ambitious plan to improve ADF capabilities since World War II. The Government is serious about delivering the projects in the DCP on time and on budget.

We have tackled the grueling task of DMO reform and established proper commercial disciplines for new projects.

We have introduced 10-year acquisition planning.

We have now finalized the sector plans.

We will redouble our efforts to grow Australian Defence contractors.

We are yet to hear the Opposition’s alternatives.

I have pleasure in officially opening the conference for 2004.

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