In the last budget, which saw Defence take a hammering in terms of cuts (the details of which ASPI has covered in numerous documents and posts), little has been said about the sanctity of the ‘core capabilities’ which are said to be safe from current and future razors.
Tracking down the explicit list of core capabilities has proven impossible, for the plain fact that one does not exist. After navigating Defence Media Operations and liaising with the Minister’s office (read: nagging for over a week at frustrated people who know about as much as I do), no such list exists.
Instead, we have to trawl through the 2009 White Paper and extrapolate one from vague statements like ‘the Government must make careful judgements about Australia’s long-term defence needs. Such judgements are even more important in times of fiscal or strategic uncertainty’.
With that careful judgement mantra in mind, I’m going to hazard that the core capabilities are as follows:
- Joint Strike Fighter under the New Air Combat Capability (NACC)
- Air Warfare Destroyer (AWD)
- Landing Helicopter Dock (LHD) amphibious ships
- Future Submarine
- Land 400 and Land 121 vehicles for Army mobility
These projects have made the list as significant funds have already been committed and, in many cases, have begun construction, except for the Land 400 vehicles. Cancelling any of them would incur significant costs for Defence, both in dollar terms and in reputation. The Seasprite bogey still looms large in the minds of many. Spending over a billion dollars and having nothing to show for it, except red faces, isn’t an option.
In his previous role as AWD manager, now Defence Materiel Organisation CEO Warren King pointed out that the Australian public appetite for procurement failure is non-existent. Failure isn’t on if industry wants to build major defence platforms in this country ever again. Industry is expected to do what it has been contracted to do, on time and on budget. Defence will manage this process while being hamstrung by its own processes, which are the result of over a decade of procurement reviews. After all, if in doubt, a review will fix what ails the defence acquisition community.
Those processes will slow down what spending occurs. Already the budget-constrained nature of Defence plans is the talking point at every industry gathering, large or small. What this means for workforce, future program planning, capital investment and the company overall is being canvassed by both large prime companies and small to medium (SME) business. It’s not an abstraction either; many an SME has gone to the wall in the last few years as funds have become scarcer.
Consolidation and collaboration have become the hallmarks of the industry. The much-vaunted ‘value for money’ criterion that relies on competition is in danger of going unfulfilled, as there will be too few players to compete. The business case for competition between the larger players won’t be made—there are already cases where companies have decided not to compete as the contract is simply not worth their while.
And while the new White Paper is not a Defence industry policy paper, it will shape the economic landscape of the defence industry. The long lead times and the complexity of defence projects from both a technical and program management perspective mean that companies and people that move more into mining and resource industries or elsewhere may not want to come back.
In simple economic terms, demand is shrinking. Don’t be surprised when supply starts shrinking too. And when demand grows again, the lead times involved mean that supply can take a while to catch up again.
Katherine Ziesing is the editor of Australian Defence Magazine, an independently published magazine on Defence capability and procurement. She is also a board member of the Sir Richard Williams Foundation, an air power think tank.