









THE HON GREG COMBET MP  Parliamentary Secretary for Defence Procurement

www.defence.gov.au



Friday 6 June, 2008



Speech by the Parliamentary Secretary for Defence  Procurement as the keynote speaker at the   ‘Defence Teaming Centre Luncheon’  6 June 2008

South Australia

Check against Delivery

Ladies and gentlemen.

I am delighted to be here today in my role as the Parliamentary Secretary for  Defence Procurement to address Defence industry once again.  I would like to  outline a range of Defence initiatives to assist Defence industry, especially  those designed to address one of its greatest challenges, which is the current  skills shortage.  I also intend to provide an update on the status of the Air  Warfare Destroyer Project and highlight future opportunities for South  Australian industry.



This financial year alone the Government will spend approximately $4.7 billion  on defence procurement and sustainment projects conducted by Australian  industry. I have completed a trilogy of speeches on the defence budget over  the last month and urge you to look at these if you have a deep interest in the  budgetary process or indeed just suffer from insomnia.

By and large the vast majority of the projects undertaken by the DMO are  delivered on time and on budget.  However, as you would be aware there  have also been a number of these projects that have experienced some  problems.

Today I wanted to say a little bit more about one of these factors that has  influenced industry’s ability to deliver projects on time and on budget - namely  the skills shortage.

Despite Australian defence industry growing very strongly over the last five  years, it is true to say that the industry has not been able to keep pace with  the concurrent rise in project expenditure over that time.

Skills Issues

One of the factors influencing this has been the skills shortage.

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Since 2001 the defence industry workforce has expanded from 19,000 to  21,800 workers.

The defence industry is one of the most skilled workforces in the country, with  37% of the workforce being engineers or other professionals and the  remaining 63% are tradespeople and production workers.

Recently, the Government has pledged to continue the three per cent annual  real growth in the defence equipment budget for a further two years through to  2018.  This will require a corresponding growth in the workforce if we are to  sustain or grow the current level of Australian industry involvement.



Over the next decade it is estimated that we will need a further 13,700 skilled  personnel due to increased demand and an aging workforce. Of the 13,700, it  is estimated that a further 5,300 engineers or other tertiary trained workers  and 8,400 tradespeople and related workers will be required to meet the  increased demand.

Over the next 5 years alone, we will need to introduce into the defence  industry approximately 700 professionals and 1,170 tradespeople and related  workers each and every year.  I note that the South Australian Centre for  Economic Studies predicts a 65% increase in tradespeople required by the SA  defence industry over a 4 year period.

Lifting the level of the skilled workforce will be central to getting the defence  industry to deliver on time and on budget.

Let me make it also clear that if we do not meet this challenge and cost and  schedule risk increases, there will be a concerted push to procure more  acquisitions overseas. If we are to maintain a significant defence industry and  optimise Australian industry involvement to support ADF equipment  acquisition and sustainment, we must address these skill issues.

In addition, the Government is very conscious of the challenges that the skills  crisis presents not just to the defence industry but the Australian economy as  a whole.  That is why in the recent budget the Government provided $1.9bn  over the next five years to fund up to 630,000 new training places targeted at  current skills shortages.

The Government has also allocated $2.5 billion over the next decade to  establish Trade Training Centres in secondary schools.  There was also  $19.6m over 5 years for Skills Australia.

These are all general initiatives that are helping to address the skills crisis  following the years of inaction we had on this issue from the previous  Government.

In the specific area of Defence the Government is committed to continuing  programs to boost the skills of the defence industry such as the Skilling

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Australia’s Defence Industry (SADI) Program.  I am currently examining ways  to make access to the program easier, consistent with safeguarding the  spending of Commonwealth funds, and seeing if we can improve outcomes,  especially in the creation of newly skilled workers.

Recently I was pleased to announce a further four companies had signed up  to that program.

We have also begun the implementation of the recommendations of the  Defence and Industry Joint Training Task Force.  For example, the DMO and  BAE Systems led a team to Adelaide in March to highlight the opportunities in  the defence industry to recently redundant Mitsubishi workers - a direct  initiative designed to attract skilled workers to the defence industry.

The Government takes the skills challenge seriously and we are working hard  to do our part to address it.  I hope to makes some further announcements  about skills in the defence industry over the coming months.

I’ll finish on skills with one point which is that industry must lift its performance  on this issue. Government will assist, but industry needs to invest. At the end  of the day, individual companies must invest in training - I hear the occasional  complaint from industry that pulling workers out of their normal duties to

undertake training is a huge burden in terms of lost productivity.

I instead urge business to think of it as a key investment in the future  capabilities of their business. It is vital to increasing industry capabilities and  increasing the chance of winning future defence work. You wouldn’t give work  to suppliers who haven’t renewed their capital equipment in 20 years, nor is it

reasonable to allow firms to rely on a skills base that has been built up over  the last few decades, but now is in danger of not being renewed.

The skills agenda is not the sole responsibility of government, and as I said  before, if the Australian defence industry does not make this investment in  skills, then there will be a move by some for more acquisition work to be  sourced overseas. This is a situation we must do our best to avoid.

SA Major Projects

I’d now like to turn to the major projects that are currently being undertaken in  South Australia and the opportunities for further work.

I’ll start with the largest Defence project in Australia’s history, the $8 billion  contract to deliver three Air Warfare Destroyers (AWDs) to the Royal  Australian Navy.



As I stated publicly a couple of weeks ago, the AWD project is making good  progress.  The project recently completed its first major Design Review of the  ship and production of some Aegis equipment, which will form the core of the  combat system, has been completed in the United States (US).

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Here in Adelaide, the AWD Alliance has established its headquarters in the  AWD Systems Centre in Felixstow, where there are nearly 300 people driving  the project.  Building a team of that size, with its vast range of world-wide

experience is a great result for South Australia.

The AWD Alliance shipbuilding team has developed its build strategy and are  now analysing responses to their request for proposal for the construction of  hull blocks.  Building the three 148-metre hulls is the largest single project  task being undertaken in Australia and offers tremendous opportunity for local  industry.  Beyond the opportunities in the construction of these warships, are  the opportunities to support them during their 30-year service life.

The AWD project is a nation-building venture and Australia’s opportunity to  demonstrate our technological and shipbuilding capabilities to the world.  The  distribution of some of this work beyond South Australia to other States is  important to the Australian Government, because it develops the national  skills and infrastructure base within our economy.  This is important not only to  Defence, but important to the national economy as a whole.  It is also an  important risk control measure for the project because it removes the capacity  constraints that would challenge any single location in building three large

148-metre hulls in the timeframe required.

What is also essential to this project is the support of the Government of  South Australia.  Adelaide would not be leading the construction of these  ships without the drive and support of Mike Rann’s Government.  When I  visited Techport back in March it was clear to me how hard people are  working to fulfil the State Government’s commitment.  Construction of the  Maritime Skills Centre has been completed and work on the Common User  Facility is progressing quickly.  Soon we will all see a new shipyard.  Andrew  Fletcher and the team at DefenceSA are achieving great results.



Premier Rann’s support is not just limited to the AWD project. I know that in  his recent visit to the US, the United Kingdom and Spain, the Premier met with  key decision makers in companies such as Raytheon, General Dynamics,  General Atomics, Northrop Grumman, Boeing, BAE, Lockheed Martin,  Navantia, Ultra Electronics and QinetiQ.

These efforts were directed at maximising South Australian industry  participation in major projects either already gained, or on the horizon, from  the Air Warfare Destroyers project, to the Air 7000 programme, or joining the  JSF supply chain.

There is indeed a range of future work that South Australia will be well placed  to compete in. A quick look through the current public Defence Capability Plan  highlights the considerable amount of work that South Australian firms may be  involved in. In the next decade there is at least $30 billion worth of work where  some South Australian involvement may be expected.

Some of the projects include:

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Ã¢ÂÂ¢ The Future Submarine  Ã¢ÂÂ¢ Land 400, the multi-billion dollar replacement of the M113 and  ASLAVs.  Ã¢ÂÂ¢ Air 7000 Phase 2B, Maritime Patrol Aircraft.  Ã¢ÂÂ¢ Air 6000 - New Air Combat Capability

The one that will attract most attention is the Future Submarine. This will be  the largest defence procurement in our history and the most challenging.   Labor took to the last election a commitment to build the future submarine in  Adelaide. We have begun the early planning for this project.

This project will require all elements of the defence establishment to work  cooperatively to deliver this project. From the capability planners, the DMO,  the DSTO to industry itself, the lessons of the Collins class emphasise the  need for everyone to be working to a common purpose.

An important element of this project is the need to maximise competitive  tension within Adelaide to build the submarine, and on this issue the common  user infrastructure at Techport will be vital. Techport with its wharf and shiplift  will allow new competitors to establish themselves in the Osborne precinct

and bid for this work.

Conclusion

As you can see there are considerable opportunities for the South Australian  defence industry. Nevertheless there are great challenges as well. We must  address the skills challenge; industry must bear the burden for this response.  If we fail in this, continuing growth of the defence industry will be inhibited.

I’ll leave my comments there and am happy to take a few questions.





