What Defence isn’t telling us
20 Feb 2017|

Image courtesy of Flickr user Samuel King Jr.

I was invited to appear last week at a hearing of the Joint Standing Committee on Foreign Affairs, Defence and Trade Committee Review of the Department of Defence Annual Report 2015–16. The review is an annual exercise when the Defence Annual Report is tabled, but I took the opportunity to make some comments about Defence’s reporting more generally. Mark Thomson also gave evidence, and a transcript of the entire session will appear in the Hansard in due course. Here’s my introductory statement.

Thank you for the opportunity to make some comments this morning. As you will have seen in my short written submission, I have some concerns about the quality and quantity of information in not just the annual report, but in Defence’s reporting more broadly. The lack of transparency in Defence public reporting is lamentable.

Let me begin with an illustrative example. I’ve been following and commenting on the progress of Australia’s acquisition of the F-35 Joint Strike Fighter for 11 years now. Working from public information I can’t tell you some of the most basic facts concerning our purchase, such as the phasing of purchases, the expected cost of each batch of aircraft, the cost of initial spares and auxiliary equipment. Instead, I can tell you the total number of aircraft we expect to purchase and an indicative in-service date. The planned total cost is a single imprecise aggregated figure. As a result, I won’t be able to tell you whether our acquisition processes are on track, or if the planned costs are being realised in practice.

However, if you were to ask me for details regarding the corresponding plans for the US Air Force, I would turn to the extensive budget materials provided through the Pentagon’s Comptroller. Looking at the Air Force Justification Book Volume 1 of 2, Aircraft Procurement, I could tell you, for example, that they expect to acquire 48 aircraft in each of 2019 and 2020, rising to 60 in 2021. The flyaway unit cost in each of those years is expected to be $102.4 million, $99.3 million and $94.5 million respectively. I can also tell you the weapon system cost (which lets us simply work out the cost of initial spares and support equipment), the phasing of spending on long lead items, the cost of engines and other major equipment. Incidentally, the volume with those figures is one of 34 volumes of USAF budget documentation alone.

That’s extremely useful information, and it allows for the compilation of time series of data which makes a rolling assessment of the program’s status relatively easy to do. In the period 2006–2011 it was clear that costs were rising steeply and production was being deferred. It wasn’t a pretty picture, but it was an accurate one. It was also at odds with the upbeat assessments coming out of the project office at the time. That’s why data is critical if officials are to be held to account. I’m happy to say that the data sets from 2012 tell a very different story of a program in which costs are now steadily tracking downwards and production is ramping up. I’ll table a copy of my most recent summary analysis of the F-35 program, so you can get a feeling for what I mean.

And as a technical aside, the costs given in the US budget papers are in out-turned dollars, but I can convert them to same year dollars by referring to the deflators for procurement in one of hundreds of tables of financial assumptions in the ‘Green Book’ that accompanies the budget papers each year. Perhaps Mark will like to say more about the usefulness or otherwise of out-turned dollars with no indication of the underlying assumptions—the ‘greater than $50 billion’ figure quoted for Australia’s future submarine is an example of how misleading and unhelpful that practice can be.

Let’s compare and contrast the American F-35 data with the corresponding information available regarding our most expensive program in the form of the future submarine. We have a single cost bound—not a number—and an indicative delivery timeframe that spans 20 years from ‘around 2030’ to ‘around 2050’.

One of the reasons that Defence often invokes to explain the paucity of information it releases is the need to protect the government’s negotiating position during contract negotiation. As a taxpayer I have some sympathy for that argument, and that would be reason enough to not disclose the Department’s thinking during the Competitive Evaluation Process. But we now have a chosen designer, and Defence should soon have a timetable and milestones for the detailed design process. It’s hard to see the justification for keeping those numbers and dates secret—if it’s good enough for the Pentagon’s jet fighters, nuclear submarines and aircraft carriers, it ought to be good enough for us.

I suppose I should pay some service to the subject at hand today and comment on the Defence Annual Report. Let me make one request—that the tables of costs of supporting the various capabilities which was last seen in the 2006–07 annual report be reinstated. It was extremely useful for calculating through life cost estimates and for monitoring the resources being consumed by various force elements. Among many other things, it enabled me to spot and write about the under-resourcing of Collins submarine sustainment a couple of years before the nadir of submarine availability that embarrassed Defence and successive governments, and which made the Coles review necessary. Avoiding embarrassment (or, more accurately, deferring it until the Audit Office gets at it) seems to be a key performance indicator in formulating defence reporting.

It makes me think that too often the lack of detailed defence information in the public domain isn’t to protect official secrets, but to protect officials’ secrets.

I look forward to your questions and discussion.