Senate Foreign Affairs, Defence and Trade Legislation Committee, , 5:32:14 to 5:59:49
Discussion covers potential radar interference from offshore wind farms and the review of Major Service Provider arrangements in defense procurement.
Topics: Renewable energy, Procurement, Integrity
Speakers: Chris Deeble AO CSC, Celia Perkins, David Pocock, Greg Moriarty AO, Tyron Whitten, Admiral David Johnston AC RAN, Hon Jenny McAllister, Hugh Jeffrey, John Reid PSM, Racheal Kuczma, Raff Ciccone
call. >> Thank you, Chair. Uh during the last sentiment estimates, I asked questions regarding the effects of offshore wind uh turbines on defense radar systems. Um the construction of offshore electricity that is mostly manufactured in China and owned by foreign companies would seem to be a matter of national security interest.
Just we'll just get the right people to
>> Senator, I'm sorry. Can I ask you to
um the construction of offshore electricity infrastructure that is mostly manufactured in China and owned by foreign companies would seem to be a national security interest. Would you
>> Uh Senator, um as I think we can camped uh at the last hearing, um the issues you're talking about are largely managed through the Department of Climate Change, Energy, the Environment, and Water. Defense is consulted closely as they've developed plans for offshore wind farms around Australia. And in those consultations, um, we we work, uh, uh, with our colleagues to understand and seek to mitigate any potential impacts for defense and defense operations. And that's really the the core of our role. Um and we work very successfully as sighting decisions are made to uh limit impacts to the places we operate uh and our really important um uh particularly maritime and air exercise areas around
>> Um in the last estimates I also referred to a document that was part of the FOI. I'm pretty sure you're aware of it. So in in that document um the department made it clear that they had not been included as a stakeholder and that and I quote the declared area overlaps almost entirely with a portion of the West Australia exercise area Waxer. If the proposal progresses this will require consultation with defense stakeholders to ensure both operational impacts and marine environmental impacts are managed. Um my understanding is that all types of marine radar are affected and there is no current solution. So has anyone in the department uh looked into the effects of offshore wind turbines on marine vessels?
>> Um I'll start and um Mr. Sarah might speak to um the consultation that did occur. So um uh that u you know prompted the normal um uh consultation between
I'm really quite deaf if you wouldn't
mind. >> Oh I'm sorry I'm sitting too far back so I can have your yell. >> I have a connection of the two tables where my chair is. >> Um that that correspondence you referred to then you know triggered the consultation and as I've said the consultation is is about how we mitigate those effects. So we are aware of the impacts of turbines on um navigation systems and other systems. And as I said, our goal with DQ is to um uh uh demonstrate our need so that sighting decisions can move those uh offshore wind farms away from where we operate. That's been the goal of of the work around the coastline.
>> Okay. Thank you. Um >> so you you are aware now that they do cause cause interferences. >> Yes. >> Y okay. >> And how long have you been aware can do
you say? >> Uh look I'm not the expert on the technical aspect. Certainly uh our teams who do this work uh bring engineering skills and they consult very closely um um across the Australian Defense Force with our capability managers and operational planners to ensure that we are investigating uh where we operate and the types of activities and capabilities we operate to really capture those technical requirements that are important to defense that will go into a broader piece of advice back to DQ.
>> Okay. Um, I'd like to table um a document that was part of a submission to um the Department of Climate Change, Energy, Environment, and Water um on the 28th of April 23. >> Sorry. >> You got a copy of that?
>> Uh I believe Yeah.
>> Oh, that one. Sorry.
>> I think we'll have to give a copy to the witness so they know what you're
so at the on page four at the bottom of the second last paragraph um and I quote the department has said wind turbines can interfere with radar at the Williamtown raft base and have asked for a 46 kilometer exclusion zone Is that correct?
>> Yes. >> Yep. Um >> well, sorry, that's what it says here. Um we absolutely negotiated and provided advice to DQ on the sighting of the Hunter or the Central Coast uh wind farm. We were mindful of operations at um both Raph Williamtown and the flying we do offshore there. I would need to take on notice precisely the advice on what that exclusion zone was. I wouldn't want to get that wrong for you.
>> Okay. Would there be a map of that sort of thing that would be publicly available? >> Um will will the department ask for similar exclusion zone from the West Australian exercise area, the Waxar?
>> Um look, let let me take on notice the precise advice um uh that we've worked through for the Waxer. Um but we have been working as DQ have done this work around the coast and and we routinely ask for um sighting choices and exclusion areas to preserve our operations and our exercise areas and um I'm not aware of that not being accommodated to date.
>> Y and I'm guessing on top of just exercise areas general security of the
baseline. So, so where our internal consultation um usually goes is what do we do from that side or in that area. So, it'll be an exercise area, but it might also be flight patterns. It might be um you know the case of RAF Williamtown, that's both an important um base for us. It's also an important civil airport. Um and we are absolutely minded of um you know our transit pathways and so forth in a maritime environment. So they're the kinds of consultation we take inside defense. I would say though there's usually a pathway whereby we can coexist and plan and and future proof defense operations against um the important energy um
I've referred to the US Department of Defense's map of the wind exclusion zone that covers the east coast of the US in past. I think I um gave you a copy at the last um estimates. Um currently we don't have a similar map for our West Australian coastline or probably the whole coast. Is the department considering mapping areas of the West Australian coastline andor the rest of Australia to produce a similar sort of map that you would want held exclusively for security and um exercise areas? Uh
Senator, what is certainly published is our current uh footprint which includes um exercise areas uh around the coastline that is available and on our website. Uh and we are very mindful um in our current and future operations about understanding how we manage security impacts adjacent to defense sites. I I think there's substantial differences in um Australian force posture and US force posture. Uh and as I said, we've been working now as this this particular proposal around offshore energy uh evolves. Um and we'll continue to do that work with
would the building of the the wind farm in Geograph Bay be a risk to defense um and not the the wax areas? I understand it as um an aircraft um exercise area, but is it also surface or subsurface?
>> It's air maritime. It's an air and maritime domain. Yeah.
>> Yeah. Would the impacts of that being built there impact surface or subsurface operations?
>> So, so our goal in providing defense input and advice on sighting would be understanding what those risks might be or how you can mitigate them through
>> Okay. Thank you very much. Thank you,
>> All right. Thanks a lot, Senator. Uh, now Senator PCO.
>> Thank you, Chair. Thanks for your time. This afternoon, I've got some questions about procurement. In last estimates, I asked you seven questions on notice, and you've not responded to five out of those seven, and I was just interested
>> Afternoon, Senator PCO. [clears throat] Um I think um uh we those uh are currently being considered um coming through the system but um I can't answer um at this point in time but I can answer any of the specific questions
>> So Mr. Steble so the the what I take away from that is that they were given to the minister's office for clearance and they're sitting
>> going through the clearance process.
>> Okay. When when did the department um complete those questions on notice? I'd
have to take that on notice, Senator.
Um, you surely knew though that this was the date of estimates and I assume got them to the minister's office
>> Um, Senator, we've been working closely. I'll refer to John Reed.
>> Senator John Reed, deputy secretary governance. Um, we've been uh working across the department to deal with all of the um questions on notice. we received in December. We had 184 in the department and another few hundred uh in the portfolio entities. Uh we have uh I think as at this morning uh tabled about 118 119 of the 180 and we're working on getting the remainder tabled as quickly as possible. Some of them just required a large amount of effort and obviously with Christmas standown only a few weeks ago it's been it's been difficult but we are confident that we'll get the remainder uh tabled as soon as possible.
>> Thank you Mr. Reed. Thank you for your work on on that. Um I want to move to some questions on the MSP agreement. Um uh which I understand is due to come to an end this year. And we see renegotiation of this agreement I think is a great opportunity uh to improve capability but also improve retained economic benefit. and we we've had a a back and forth over the last few years um about that uh and and the opportunity to give Australian companies greater access uh to the agreement agreement. Um so I'm interested what work is being done to ensure uh that the next MSP better captures the need to build uh sovereign capability here in Australia and actually ensure that Australian companies aren't missing out
>> So the you you're exactly correct. We have two arrangements. the DSS arrangement which provides for specific expertise on a short-term basis and the um major service provider arrangement which allows us to actually uh provide integrated work packages to support projects and other activity uh to occur. We've been um looking at the MSP arrangements working closely with the MSP providers as currently stands and industry more broadly including small to medium enterprise trying to understand how to best reshape the MSP to be able to deliver at several things including um best tapping into the resources that are available to support defense and also making sure that they represent better value for money that includes consideration of small to medium enterprise.
Thank you. And when will when will that be delivered?
>> We're looking at going to market this in the first half of this year and establishing the new arrangement in the latter half of next year. We have bridged that period of time with the extend arrangements while the MSP arrangement as it currently stands um has been finished. Those arrangements and the integrated work packages that currently exist um will continue um until their completion at this point in
time. So you're just you're extending um for the four uh consortiums until this work is done. >> Correct. >> Um do you envisage there being more than four when when the new MSP is
>> we're looking at all of those constructs when we go to market? We'll be assessing how how the industry responds and assessing a range of factors including how they're going to demonstrate better value for money. We want outcomesbased contracts in the majority of cases to achieve better value for money for defense. We'll be looking at the rates um that um companies in the MSP context and what we're calling the defense capability support uh program arrangements, how we get best value for money out of those. It will need to be a combination of some of those larger companies that currently provide MSPs and small tomedium enterprise across both of those arrangements. I'll just throw to um Rachel Kuzzma who heads up the Faz commercial for any additional comments.
>> Yeah, Rachel Kushman, best assistant secretary commercial. I think it's really important to us to ensure that we engage really thoroughly with the with the market about how to best achieve outcomes in this space. So the the intent is to actually do some really intense industrial engagement with people that are in the market both at the SMA level and others to ensure that we have a package of work that actually best supports defense and it provides value for money.
>> And what's what's the market telling you about the existing arrangements versus what they would like to see in the
>> I think we're having mixed engagements at the moment. Some people really like it, some people don't like it. Of course, it depends which side of the score you're on. And I think the thing that we're trying to drive is how do we get better responsiveness for value for money and how do we get better responsiveness for defense's needs. So we're really focused on how do we grow our capability and how do these partners that we select and we we rely on actually do that with our theme base through the life of the program. >> Okay. Well, >> so we're getting different advice. We're getting different kind of options and things to consider on what we can improve about the arrangements that we had in place.
>> Okay. Well, I'd urge you to consult widely because obviously the full consortiums will love the current arrangement, but what I'm hearing from um almost all Australian businesses that I deal with um in this space is that the existing arrangements, the four cons um consortiums uh have largely prevented the development of a sovereign um sort of defense base. And so I really think this is a great opportunity for for change and to actually um step things up as we go forward. So thank you for your work work on this. Um I wanted to go to uh the ANAO's um annual major projects report on the Department of Defense's acquisition which was released late last year and I found its findings pretty startling uh given where we're at. we're forever hearing about um increased tensions uh geopolitical issues. Um and then then we read of the 21 projects considered uh just eight were running on time and the average delay is around 2 years and the total delay across all projects is 404 months. Um I'm interested maybe maybe to you secretary firstly how how is this good enough and and how have we arrived in a situation where it's just not one one or two projects it's it's the vast majority of projects are running behind
>> well Senator I mean of course we're take you know making endeavors to improve the quality of the delivery that that we do and there have been some uh improvements which I'll ask Mr. deble to to talk about. Um there are a couple of projects which have some quite substantial slippage with schedule and those those do distort the um the overall uh statistics but some of the initiatives that the government have put in place the projects of concern work the work that the minister for defense industry has been doing with uh those particular projects has led to improvements in uh the relationship ship between uh the department and the and the and the companies that are delivering those those products and certainly the government is holding both the both the department and the um the defense industry partners that we have [clears throat] um to higher standards in in terms of improving uh our delivery but there's much more work to be done and I'll ask Mr. to be able to just talk about some of the uh not not not just the challenges but some of the some of the things that we have achieved that I think are quite worth commenting on
>> and I think um Senator um schedule is an issue and u we're working through those. I'd just like to talk about a couple of aspects of this. Um 20 of the 21 projects are what we call acquisition category one and two. They represent the most complex of projects. A CAT one in particular, seven of them, and 13 AAT 2 programs. So within the um NPR um review, there's significant complexity that we're talking about that we have to manage. 16 of those projects are with CASG, my organization. Uh five of those sit with um with NSSG. There is a mix of commercial arrangements that need to be considered in that context. So five of those projects are FMS projects where we're working with the US um and their industrial base to deliver those. We have three government to government. So these are cooperative programs within that. And there's 13 other contracting types mainly uh direct commercial sale where we're the contracting agent and working with that. Um there's nine projects of concern um and projects of interest two projects of concern and um seven projects of interest. So we are looking at these projects and applying additional work in particular the work that we're doing with projects of concern and projects of interest is really important on page 13 and I apologize I left the um the MPR back on my desk but I can summarize that uh pretty well from memory because this is important to my business and improving uh the business. It summarizes cost schedule and capability outcomes. You're exactly right. It describes the 21 months average delay to the programs. But as the secretary um um pined at the start, one of those projects, the SEMATS project is responsible for uh 23% I believe of that 404 over 97 um months that's late and that's being managed as a project of concern. The other area that we um is reported on is the finance. The this um NPR as per uh previous recent NPRs identified that all of the changes that have occurred from a funding perspective have either been standard budget adjustments or budget variations and or um additional approvements um approvals by government which add to scope. I think there is a um description in one area of the NPR that describes four key projects that have been subject to those scopes and that would include the Hunter program, the joint strike fighter program, the Growler program and I think there is one other program that fits within that regime. They're responsible in their own right for $35 million of additional money uh that has been approved in that context. The area that we have seen improvement is 97.7% of the capability is being delivered. 1.2% of that would be in serious doubt. 1.1% of that is um has some risk associated and we're working through that. >> But the area of significant um change is how do we improve on schedule? We have a number of different things that we're doing there. Clearly um out of the national defense strategy in 2024, it stated that our current approaches to acquisition and sustainment weren't going to be fit for purpose. Our ability to respond to the rapid evolving threat needed to change. We needed to adopt more agile ways of delivering um the outcomes. So we've been working on those programs to improve the current schedules. We're spending a lot of time on uplifting the schedules in every one of the projects, making sure that they have a sound basis, critical milestones, assessments can be made, and we're adding more tools to assist the projects in managing those projects. Um, as identified in the NPR, we've done a lot of work to actually improve risk management and risk and schedule delays go hand in glove. So, we're uplifting in that regard. We're applying across the program many different ways of approaching more agile delivery. So continuous capability um uh development and delivery, the application of more agile approaches to that is speeding up the way in which we deliver and consideration of minimal viable capability. Getting a fitfor-purpose capability to the field more rapidly than we would otherwise do. But that will require us to take on more risk. So again risk risk appetite we're doing a lot of work now in upskilling and we've established the defense learning academy where we're focusing primarily initially on project and program management and commercial skills though go they go hand in glove with the way in which we better manage projects and deliver on those projects within funding profiles within schedule and within capability. So we're very focused on cost, schedule, capability and the new approaches, more agile approaches into the future will have to um definitely focus as we're delivering in more agile ways on cost, schedule, getting war fighter capability more rapidly and then considering minimal viable capability and how we manage that.
>> Thank you, Steve. And I'm I'm really pleased to hear that. And one of the things you touched on there was uh risk. And from from what I've seen over the past few years, I think that seems to be an issue not not just in in um uh this department, but across the public service where there isn't really an appetite for risk. And so we're constantly playing it safe and that leads to all sorts of perverse outcomes. So I sort of welcome that and wish you well with with that. Secretary, you
>> parliamentarians too, isn't there? Just
double check.
>> Understand there's a role for parliamentarians understanding what risk >> what a risk appetite actually means if the parliament's appetite for risk is
>> I know I welcome the government taking bringing on the ambition in many areas.
>> but secretary you
>> just last question. >> Yeah for sure. Um
>> you mentioned uh about making uh people more accountable. Could you maybe give me an example of of how your senior leadership is being held more accountable on procurement delays and cost overruns?
>> Yeah. So certainly, Senator, so we we have >> um put into performance agreements clearer expectations of meeting schedule, cost and uh and and pursuing minimum viable capability. our ministers and the CDF and I have also uh made it explicitly clear to all of the group heads and service chiefs that they must look for minimum viable capability rather than the exquisite capability that would would um meet um would would be highly desirable by the uh the capability managers and the end users and minimum viable capability I think is is becoming embedded in the department as the the uh the default setting in terms of developing uh capability proposals and also the government has made it very clear that the its initiative um to work towards the creation of a defense delivery agency is very much driven by the uh the idea of having a a national armament's director with m much more authority to deliver the program as as he or she decides is the most appropriate. Um uh with all of the um the the constraints and we will be giving the National Armaments Director and the Defense Delivery Agency the autonomy and the budget autonomy to be able to make commercial more commercial decisions about program uh delivery. And that work is uh has been kicked off by the government. A a a task force is is underway and um we've been uh the first phase of that will will occur on the 1st of July this year with the idea that the full arrangements would be in place uh on the 1st of July 2027. So that's that is from my perspective a key initiative to empower delivery managers to take a commercial approach and a a riskbased approach to delivering capability uh on you know to cost and schedule.
>> Okay. >> Thank you. I've got some further
questions. >> We'll have to come back to you a bit later on Senator. >> All right. Uh Senator Cash