(Image: Gorkie/Private Media)

Did you hear the one about the defence frigate building contract with BAE Systems that was (allegedly) inflated by close to $5 million per year — about $30 million for the life of the project? Or the claim that French contractor Thales was paid an additional $46 million for work on the same project, apparently under questionable circumstances?

The claims were made by a whistleblower three years ago, according to a report in The Australian. The Department of Defence said it would investigate. Since then, nothing. Silence.

Crikey went back to defence this week to see what had become of the whistleblower complaint since 2019. The answer was still silence.

We have been prompted to look at Australia’s defence procurement for two reasons. First, Defence Minister Richard Marles’ revelation earlier this month that Australia’s major defence projects were running $6.5 billion over budget and (cumulatively) 97 years behind schedule. This, of course, is a ritual happening for defence ministers. As Crikey reported, there have been at least four separate government attempts to rein in defence spending. Good luck with that.

Second, we learnt from the trial of Bruce Lehrmann that, as senior adviser to then-defence industry minister Senator Linda Reynolds, he had gone to Friday night drinks at The Dock in Canberra where he had mingled with defence officials, intelligence officials and defence contractors. As evidence at the trial revealed, the night was soaked in alcohol, no doubt lubricating relationships between industry and defence contacts, without leaving an official record.

In the context of ever-ballooning defence contracts we should, surely, be alarmed.

The defence bonanza takes shape

The 2016 Defence White Paper and its promise of a $195 billion “investment” marked the beginning of a defence gold rush.  

“I cannot say this often enough: the high priority we are giving to defence is not just designed to maintain our capability edge, although that is our highest priority,” then-defence industry minister Christopher Pyne said at the time. “It is absolutely central to the Turnbull government’s broader economic plan.”

Australia was open for business, and like a local mayor gleeful about the opening of a new Bunnings in town, Pyne was ebullient when the USA’s Huntington Ingalls Industries (HII) — builders of the US Navy’s nuclear-powered submarines — announced it was coming to town.

This was “great news for our defence industry”, Pyne said. “HII is a world leader in defence industry, whether that be workforce development, fleet sustainment or naval-vessel design and construction.”

The industry publication Asia Pacific Defence Reporter covered HHI’s intentions this way:

‘We are opening the Canberra office to develop high-level relationships with DOD [Department of Defence], with the RAN [Royal Australian Navy], and also with industry to understand what their capabilities are today and what they need to be to support a continuous shipbuilding program,’ HHI’s vice-president of business development Jeff McCray said.

In 2017 Australian Strategic Policy Institute (ASPI) analyst Dr Mark Thomson compiled an extraordinarily detailed report on the cost of defence. He noted that the government had driven the development of the defence industry by setting up the Centre for Defence Industry Capability with co-chair Paul Johnson, former CEO of Lockheed Martin Australia. The government also established the Adelaide-based Defence Innovation Hub, funded at $640 million over a decade.

Then came the $730 million Next Generation Technologies Fund, which would bring “game-changing capabilities for the Australian Defence Force of the future”.

The honeypot of billions of dollars was indeed a lure for international defence contractors, as the ASPI report found:

  • Lockheed Martin Australia opened a new research and development centre in Melbourne
  • Rheinmetall Defence Australia signed a global supply chain agreement with the government
  • There were extensions of existing agreements with Lockheed Martin, Thales and Raytheon. 
  • US technology accelerator fund Techstars opened an office in Adelaide
  • Northrop Grumman announced it would invest $50 million in a centre at Badgerys Creek, NSW
  • DCNS (the French naval group), Austal and Lürssen established or expanded their Australian offices in Adelaide
  • Huntington Ingalls Industries set up in Canberra.

As ASPI noted, with a degree of understatement, “the focus on industry in government thinking will increase the influence of firms with a stake in the outcome”.

But what happened to accountability?

There is very little fourth-estate scrutiny on defence. In part that is due to the leaching out of reporting expertise generally and specifically the loss of reporters with specialised defence knowledge. At the same time, the Department of Defence’s well-known culture of secrecy makes it impervious, if not hostile, to journalistic inquiry. 

The online industry magazine Australian Defence has a name for the Department of Defence: Fortress Defence. 

Late last year, Australian Defence wrote of “the unprecedented clampdown on defence’s engagement with media”, which had been “imposed — or agreed to without explanation — by [then] defence minister Peter Dutton”.

“[This] has reinforced the importance of Senate estimates in prising information from sometimes-reluctant ministers, senior ADF officers, and bureaucrats. Especially bureaucrats,” wrote the magazine’s senior correspondent Julian Kerr.

“The spectrum ranges from hard-won insights into the progress or otherwise of multibillion-dollar programs to eliciting responsibilities — the latter an activity that occasionally resembles an episode of Yes Minister.”

Earlier in the year, a Senate committee heard evidence of new and restrictive media contact guidelines being circulated within defence, soon after Peter Dutton assumed the defence portfolio.

Responses to media queries were to be as brief and succinct as possible with answers limited to three paragraphs regardless of question complexity, according to information provided to Senator Penny Wong, then in opposition.

With the Department of Defence and contractors citing national security and commercial confidentiality as reasons to say nothing, the only avenues for accountability remain estimates committee hearings and the Australian National Audit Office.

As a new attack on defence spending, Defence Minister Richard Marles has outlined six new measures. They include an ostensibly new independent project management office, monthly updates to his office, early warning indicators on troubled projects, and an increased focus on “changing culture” and more ministerial summits.

Might the National Anti-Corruption Commission make inroads? Founding NSW ICAC commissioner Ian Temby told Crikey earlier this year that defence procurement was a prime area for investigation given the enormous sums of money involved.

One thing’s for sure. It won’t be a new willingness on behalf of defence to answer questions. Crikey is still waiting for the department for an answer on what it did with information provided by the whistleblower in 2019. 

We will let you know if it responds.

Crikey acknowledges the research work contained in “Confronting State Capture”.