Editorial: The machine that goes ping | ADM June 2012

For those not familiar with the headline, it may be time to brush up on your Monty Python watching. For those not in the know, the conversation goes something like this:

Hospital Administrator: “Ah, I see you have the machine that goes ping. This is my favourite. You see we lease it back from the company we sold it to and that way it comes under the monthly current budget and not the capital account.”

[Everyone in the room applauds]

Hospital Administrator: “Thank you, thank you.”

In the case of Defence, as long as your machine is a core capability, it will continue to go ping under the Budget released last month. There are a few machines that have ceased to ping, some that will ping later than once thought and others will never get the chance to go ping. For the full Budget coverage, head to p46.

It seems that funding, both the timing and the level thereof, are the main talking points when it comes to Defence. Australia has watched on as Europe and the US have cut their budgets, some more savagely than others, safe in the knowledge that we are a golden market. Defence is doing business and spending money, more slowly than some would like perhaps, but still spending. And indeed they are still spending, but they will be spending $5.45 billion less over the coming four years than once thought.

This is the end of a decade of largesse that began with the September 11 attacks, continued with the wars in Iraq and Afghanistan and was also supported by regional work in Timor and the Solomon Islands. A lot of the improved security work that came in the wake of the horrific terrorist attacks in the US is paying dividends; Australia is at the tail end of operations in the Middle East and peacekeeping operations in the region are slowly drawing to a close as well. The big ticket items for each of the services are also on track. AWD and LHD for Navy, JSF for the Air Force and vehicles for Army are all on the go. Sustainment is getting more attention (and much needed funding), as it well deserves.

It’s easy to feel like Defence has funded the slim surplus that government is aiming to deliver. But there is light at the end of the tunnel. Hopefully this situation can be seen as an opportunity to streamline processes, focus on the capabilities and people that truly need the attention and get a lot of the behind the scenes work recommended by a series of reviews implemented and bedded down, ready for the next rush of work. Yes, a trough has begun. But preparation for the next peak must start now if both defence and industry are to be ready for the next wave. That work can start with the definition of what competition is. Minister for Defence Stephen confirmed to me at a doorstop interview straight after the announcement that the government was pursuing a Foreign Military Sales case for the purchase of 10 C-27J aircraft from the US that a competition had indeed been run although no detail was provided.

Of course, it takes time to organise an FMS case and these things are handled in advance so that the government can make an informed decision at the right time (the Romeo naval helicopter is a case in point) but even the timing of the announcement seems off. Record cuts to Defence on Tuesday and then announcing a $1.4 billion FMS case two days later is sending mixed messages to say the least.

The DMO’s own newsletter stated that the competition between the Romeo and NH-90 saw a cost reduction of 20 per cent in the final FMS arrangements. Shouldn’t the taxpayer be entitled to the same level of investigation for the Battlefield Airlifter? It’s not a matter of time. The Caribous were retired at the end of 2009 and the King Air fleet has been doing the majority of missions in the meantime. More C-17s have also come online, sharing the load, so to speak. The moral of the story is that the RAAF were hardly screaming for the aircraft. There were various guesses that the project was even going to be one of the casualties of the Budget this year.

ADM will be following the issue closely over the coming months as we seek to find out the government’s thinking on the project. It has serious implications for the future of the DCP process which is increasingly being bypassed for FMS deals that leave Australian industry wondering what they’re doing wrong.