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The Hon. Greg Combet MP
Parliamentary Secretary for Defence Procurement

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Speech

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07 Nov 2008

PARLSEC81107/08

ADDRESS TO THE SUBMARINE INSTITUTE OF AUSTRALIA

“THE NATIONAL INTEREST – CHALLENGES OF A SUBMARINE BUILDING INDUSTRY”

CANBERRA 6 NOVEMBER 2008

**Check against delivery**

[ACKNOWLEDGEMENTS]

I would like to start tonight by acknowledging the role of Rear Admiral Peter Briggs and the Submarine Institute of Australia for their invaluable work. They have been enthusiastic participants in the public debate about our next generation submarine and I have found their contributions to have been enormously helpful in gaining a better understanding of the relevant issues.

As Parliamentary Secretary for Defence Procurement one key area of my work is planning for future major projects including the procurement of our next generation of submarines.

This program will be the most technically and technologically complex project ever undertaken in this country. It will also be a program that is vital for our future national security.

The Strategic Rationale for Submarines

As many of you would be aware the Government has engaged in one of the biggest reviews of our strategic environment and defence capabilities required for the future.

Although the new White Paper and Defence Capability Plan are yet to be considered and released by Government, I don’t think I will be revealing any secrets by saying that submarines provide an essential defence capability that we will need for the foreseeable future and beyond.

I can confirm tonight that the White Paper will clarify the operational role and capabilities required from our new submarines. This will determine the number and size of the submarines to be procured, as well as the systems and weapons that they will require.

To help make these judgements the White Paper will also closely review our strategic environment, and assess the potential for threats that might arise from the growing fleets of submarines and underwater warfare capabilities in our region.

As you would be aware the growing submarine capability within our region has already been the topic of public debate.

Dr Andrew Davies from the Australian Strategic Policy Institute has noted that:

Australia will soon face a region that has a much greater capability to conduct submarines operations… Submarines will be able to seriously threaten the operation of surface fleets and commercial trade.

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Sophisticated Russian and Western European designed submarines are proliferating into the region, with Bangladesh, China, India, Indonesia, Malaysia, Pakistan, Singapore and South Korea all acquiring or planning to acquire modern conventional boats.

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The rising major powers China and India are [also] working to develop indigenous nuclear submarines.

The Government is already very cognisant of these challenges. As the Prime Minister noted in his speech to the National RSL Congress in Townsville:

“The modernisation of Asian military forces is being characterised by significant improvements in air combat capability, and naval forces – including greater numbers and more advanced submarines”.

To help deal with this challenge the Prime Minister has said that:

“we need to ensure we are at the forefront of military technology development and acquisition”

And that this should include:

“An enhanced naval capability that can protect our sea lanes of communication and support our land forces as they deploy”.

The procurement of our next generation submarine will be central to this.

Collins Class Submarines

I would now like to turn to some of the challenges we will face in the construction of our new submarines.

Many of you will recall when the Collins Class was first mooted.  There was debate about whether they should be built in Australia and where.  There were doubts about our ability to manage such a project in Australia.  There were doubts about industry’s ability to design, build and modify submarines in Australia. Similar points are being raised now regarding our future submarine fleet.

However, the submarine project went ahead, and Collins submarines were successfully built in South Australia, with modular construction around Australia. Since then they have also been updated and modified locally.

Among all the controversy that surrounded that project, we should recognise and acknowledge the tremendous work that Defence and industry put in to the project. We should also recognise the first class management, professional and trade skills and the technology that form part of our indigenous submarine construction capability.

In fact the construction of the Collins Class required significantly more advanced manufacturing techniques than was prevalent in Australia at the time. The advancement in quality assurance and advanced manufacturing that came about due to the Collins build benefited the wider Australian manufacturing industry.

I would also like to acknowledge the role of some of my Labor colleagues in the Collins Class project. Labor has a history of being very supportive of submarines as a defence capability – indeed our defence policy under the Hawke Government favoured the introduction of submarines over other capabilities.

In Derek Woolner and Peter Yule’s recent book on the Collins Class project they noted the work of three Labor Ministers as being very important to the success of the project – Kim Beazley, John Button and Brian Howe.

Perhaps best known for his role was my good friend Kim Beazley who at the time was Australia’s youngest defence minister.

As Yule and Woolner note in their book

“Beazley was well aware of the strategic value of submarines holding the view that basically submarines are the poor man’s weapon to cause maximum angst to a bigger enemy.”

This was further evidenced when he instructed Paul Dibb, who was conducting a strategic review of Australian defence policy at the time that he had

“Open slather on investigations and the power to negotiate a consensus on force structure with Defence and the service chiefs and the only thing that was off limits was the submarine project – Beazley would not allow Dibb to revise the project objective, numbers or capabilities.”

They also noted his efforts to raise the profile of submarine arms within Defence and the community when they wrote

“He felt it was one of the components of the defence force that was habitually undervalued, and he recalls that at one stage he threatened to promote no more naval officers to flag rank unless the next recommendation was a submariner. It was not a coincidence that the first (and only) submariner to become chief of the navy, Ian MacDougall, was appointed by Kim Beazley.”

It is now a great for me, given our history in this area, to see Labor again involved in the development of our submarine capability.

The Collins project was not without trauma and delay along the way, but the Collins Class is now recognised as among the best conventional submarines in the world. They give Australia a formidable offensive and deterrent capability.

However, underwater technology and anti-submarine warfare have also moved on since the Collins Class was launched, and if we are to retain a technological edge, a new submarine platform will be required when the Collins submarines start to retire in about 2025.

Taking into consideration the time needed for capability definition and subsequent submarine design and construction processes, the project has to start now.

Replacement Submarine Project

In view of the importance and the potential technical complexity of the replacement submarine project, the Government has already announced the first major steps forward in this project.

Last month the Government announced funding of $4.67 million to conduct studies in preparation of a submission for consideration by Government in the second half of 2009.  These studies will cover diverse areas to provide a basis for understanding the international submarine industry, including potential new military-off-the shelf designs, how an Australian-build program might be supported, management of intellectual property, and commercial sensitivities.

The first stage of this will be market testing of foreign technologies and IP availability, with the next stage being engagement with Australian based companies.

The project will be known as SEA 1000 and the nucleus of a project team is currently being established. The project team will initially consist of 17 people but will expand considerably as the project grows. It will also be under the joint control of the Capability Development Group and the DMO. This will help ensure that we get both a capability and commercial view of the project right from the start.

Some funded studies are also proposed to gain an appreciation of how companies might approach specific design problems in order to encourage risk reduction.

To support early decisions on critical design aspects, some DSTO and company technology studies are also proposed.  These will cover areas such as battery technology and conceptual designs for weapons and payload handling and storage.

To help in developing and evaluating these studies and their results, it is intended to engage an internationally recognised independent submarine design consultant who will advise the project office leading up to the concept design phase in 2010-11.

A funded analysis of rates of effort against the project schedule and available workforce is planned in the next few months. This will help with an assessment of the Commonwealth’s workforce requirements and risks and identify risk mitigation strategies.

I have also been meeting with representatives of the United States Navy (USN) and the US defence industry about this project. Both the USN and US defence industry will play an enormously important role in the development of our next generation submarines. We will be working with our good friends closely on this project especially in the areas of combat systems technology – drawing on their extensive expertise. Their views and advice will be very important.

Submarine Construction in Australia

The Government is committed to supporting Australian industry involvement in this project. Submarines are not only of national security importance to Australia, but we think the ability to build them in Australia is also of national strategic importance.  This is why the Government has already committed to build the new submarines in Adelaide.

You will recall that when the Collins Class decision was made, the Adelaide facility was a greenfields site which had to start from scratch. Fortunately for the new submarines we will be able to utilise two decades of knowledge and experience developed in Australia. This will ensure that whoever builds the new submarines can tap in to an existing skills base.

The Government intends to retain the option of competitive bids for submarine construction, as historically, competition in general offers significant savings over sole source and hence better value for money.

To this end we are currently working with the South Australian Government to ensure that facilities currently under construction in Adelaide can be accessed in the future by the successful construction tenderer.

Workforce and Skills Shortages

This brings us to another significant challenge that will arise from the construction of the next generation submarines within Australia – that is the current workforce and skills shortages.

My colleague the Minister for Defence Science and Personnel discussed today the issue of skills shortages within the Navy. Tonight I will be focusing on the issues of skills within industry.

Currently the DMO manages about 230 major projects, each valued at over $20 million, and sustains about 100 fleets of equipment.  It does this with about 7,000 staff, of whom approximately 3,200 or 46 per cent are professionals such as engineers, technical officers, project managers and accountants.

Out in Australian industry, over 21,000 people are directly employed in defence activities, with another 10,000 indirectly employed, mostly in small to medium sized enterprises.  If you add these together, almost 39,000 people are currently employed in Australia on defence acquisition and sustainment activities.

On current projections (in advance of the White Paper and the new Defence Capability Plan), in the next ten or fifteen years, about 80 per cent of the ADF’s equipment will need to be replaced or upgraded.  This will mean that the DMO will spend about $100 billion on defence business, and it is expected that about 60 per cent of this will be spent in Australia.

Based on this in-country expenditure and current separation rates, over the next decade it is estimated that we will need a further 18,000 skilled personnel in the Australian defence industry due to increased demand and an aging workforce. If this problem is not addressed the ADF will face reduced capability.

In 2007-2008, it was estimated that defence industry needed about 1,680 new positions across acquisition and sustainment. However, only about 650 new positions were filled – a shortage of over 1,000.

One immediate consequence of this shortfall has been that industry has been unable to meet Defence’s requirements, resulting in a significant underspend by the DMO.

If we project defence industry’s need for new positions against current growth rates, the gap between workforce supply and demand only widens.  Clearly, training and skills development will need to be boosted.  This is not a problem that is specific to Defence, but applies across other sectors such a mining and resources which are competing in the same workforce pool.

The Commonwealth, in concert with the States and educational institutions, has already increased funding and the availability of training positions.  Just last week, the Government announced that starting in 2009, Defence will offer up to 1,500 Defence Technical Scholarships for students entering Years 11 and 12 who want to pursue a technical trade career. These Scholarships, awarded on merit, will help generate skilled technical tradespeople by helping students stay at school longer to build a better foundation for their future trade career. Year 11 and Year 12 recipients will receive $2,000 and $3,000 respectively.

Within the Defence sector, the Joint Training Task Force that was convened by the DMO and included representatives of federal and state departments, the ADF, universities and colleges and industry, has made a number of recommendations.

As I have foreshadowed on previous occasions, I would expect that the DMO’s Skilling Australia’s Defence Industry (or SADI) program will need to be reformed  to help overcome some of the skills shortages. Industry will also need to make greater investment in education and training if we are to maintain work in Australia.

Without doubt the workforce required for the future submarine will probably be the most advanced workforce the defence industry has ever required, if not also the largest. I’m hard pressed to think of any large project in the entire Australian economy that would require similar numbers of very highly skilled labour. It will pose a significant challenge to both the Government and the successful tenderer for SEA 1000. It would not be an exaggeration to compare it to the construction of the Snowy Mountains scheme.

As the SEA 1000 project progresses, we can expect that studies will be undertaken to assess workforce and skills requirements.  The specific steps that will need to be taken to develop the workforce capabilities and capacities required should then become clearer.

Of course, other current projects such as the Air Warfare Destroyers and the amphibious ships will greatly increase the demand for a skilled shipbuilding workforce in the meantime, and eventually provide an expanded skills base that can be applied to the replacement submarine project. The Government will have to assess the risk of any gap between the construction of the AWD and LHDs and the new submarine, and consider possible remedies.

It is clear that without a highly skilled, motivated, productive workforce complementing the world’s best project management SEA 1000 will not be able to be delivered. Just as the future submarine project will be a great vehicle to modernise industry and further improve our manufacturing capabilities it will also help generate a workforce that will be a national asset. It will truly be a nation building program unrivalled in our history.

Conclusion

I would like to thank the members of the Submarine Institute of Australia for your contributions to the public debate on future submarines.  The SIA has a corporate knowledge and expertise that just doesn’t exist elsewhere.

The Institute has already made significant contributions to advancing knowledge about the art of submarine warfare.  It has made submissions to various studies and reviews about future submarine capabilities and the role of industry, and not least during the recent Defence White Paper public consultation process.

I can assure you that your submission to the White Paper will be given careful consideration.

The Government welcomes the Institute’s role of informing and maintaining public interest in this project.  While we might not always agree on the way ahead, I look forward to continuing dialogue between Defence, Government and the Institute.  Thank you.

Media contacts:

Rod Hilton (Greg Combet):             02 6277 4771 or 0458 276 619

Defence Media Liaison:                  02 6265 3343 or 0408 498 664

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