SYDNEY — The Albanese Labor government began its preparations for its budget rollout Monday, declaring it “is moving to rectify significant and systemic issues in the delivery of crucial Defence capabilities.”
The ministers said in a statement that at least 28 major defense programs here “are a combined 97 years behind schedule” and they are “at least” $6.5 billion AUD ($4.1 billion USD) over budget — apparently preparing the public for some cuts or signaling to Labor’s left that he’d like to make some.
“The Morrison Government’s investment in defence saw key projects blow out in both cost and time. Money was being flushed down the toilet while the former government regaled in how much they were spending on defence,” Defense Minister Richard Marles said in an Oct. 10 statement.
But non-partisan analysts here said there aren’t really any new issues highlighted in the statement issued by Marles and Pat Conroy, the minister for defense industry. The two ministers also held a press conference after the statement’s release. Defense acquisition expert Marcus Hellyer, who works at the largely government-funded Australian Strategic Policy Institute, took issue with the government’s math.
“The $6.5 [billion] ‘blowout’ figure is completely incorrect,” he said in an email. “It’s nowhere near that. Would be well under $1 [billion] — and would be more than offset by projects that have delivered under budget.”
The status of every program cited has been known for some time, Hellyer said. Combing through the budget documents released late last night, each is based on an already published official audit. Some programs do say the information is based on “advice” from the Department of Defense, but no new details are forthcoming for any program.
But the government has an argument to make, and Conroy offers the best quote on why this “blow out” has happened: “The former Liberal Government had six Defence Ministers in nine years and under this chaotic administration of the Defence portfolio they cut promised defence investments, failed to deliver projects on time and delivered platforms which can’t do the job.”
That Hellyer said, just isn’t so.
“It’s got nothing to do with ‘mismanagement’ or poor cost estimation,” Hellyer said. The F-35 went up in price because of a stronger US dollar. “The other one is the P-8A [maritime patrol aircraft], and the increase there was because the government bought more aircraft. We’ve gone from 8 to 12. If you buy more aircraft it costs more money.”
Politics is at the core of this, said Neil James, head of the Australia Defence Association. “They face two big problems normally, particularly under a Labor government. They have to cut, but they can’t do that now because they themselves have conceded we’re in a serious strategic situation,” James said. “And, even though they’ve just won an election, normally they’d be prepared to cut in their first year or so and then start being a bit more responsible. But they can’t do that this time.”
Labor must either give a larger slice of the federal budget to defense — which would be difficult given the sentiment of some elements of the party — or “come up with some big review that will try and justify not spending as much. Now I don’t believe Marles is willing to do that.”
For the record, here are the programs highlighted in the Marles statement as late and/or over budget:
- $44 billion Hunter Class Frigate program – start of construction delayed by four years and a $15 billion increase in expected costs, hidden from the public by the Coalition government.
- $1.4 billion C-27J Spartan Battlefield Airlifters – which were delivered four and a half years behind schedule and are unable to fly into battlefields.
- $3.7 billion Offshore Patrol Vessel project – running one year behind schedule.
- $356 million Evolved Cape Class patrol boats – running nearly a year late.
- $970 million Battlefield Command System – three years behind schedule.
- Several Defence Satellite Communications projects worth $906 million – running between two and four years behind schedule.
Though some of the numbers cited by the government are high, close watchers of Pentagon programs will find little to gasp at. A year or three behind schedule for a complex program is pretty common. And much of the last three years has seen global supply chain problems and workforces shortages driven by the COVID pandemic.
Conroy has pledged to make reforms that would improve things, and Marles and he ticked off a list in their statement. They will:
- Create an “independent projects and portfolio management office”
- Get monthly reports on “Projects of Concern and Projects of Interest”
- Set up “formal processes” and ‘early warning’ criteria for placing projects on those lists
Perhaps the vaguest commitment by the two ministers is to “fostering a culture in Defence of raising attention to emerging problems and encouraging and enabling early response.” On top of that, they say they will pump more money and people into “troubled projects.” Finally, they will convene “regular Ministerial summits to discuss remediation plans.”
While those may not sound like dramatic steps to longtime watchers of decades of Pentagon acquisition reform, Marles knows the stakes are high.
“We face the most challenging strategic circumstances since the Second World War — this, along with the serious pressures facing the economy mean we need to be more responsible about how we manage critical projects, particularly as we reach record spending within Defence as a per cent of GDP,” he said in his statement. “It’s not as though we can go onto the battlefield and overwhelm our adversary by waving a copy of the budget papers in their face.”
Or statements, for that matter.