Nick Xenophon calls for watchdog to end ‘shocking’ history of bungled deals

Revelations of how much was wasted on the aborted French deal should trigger the end to Australia’s “shocking” history of bungling big contracts, the Senate hopeful says.

Nick Xenophon has called for an independent watchdog to ensure multibillion-dollar Defence cost blowouts become a thing of the past.

The former senator who has announced he will again run for the Senate, said the Defence Department had developed a “shocking” practice of bungling huge contracts.

“The latest news of $5.5bn wasted on the failed French submarine deal is bad news for aged care, health and all other sectors which are struggling for more funding,” he said.

“This is on top of a $3bn cost blowout for the F35 fighter jets, and another lazy $3bn thrown away on the botched Taipan helicopter project.”

Former Senator and Senate candidate Nick Xenophon. Picture: Tom Huntley

In the past month, the budget for cancelling the French submarine deal has increased from the $2.5bn already spent to a maximum of $5.5bn based on large compensation claims by the jilted companies. Mr Xenophon said parliament should have a Defence procurement oversight commission. The commission’s first job would be to monitor the $15bn in defence acquisitions in the coming year.

“The DPOC would have sweeping powers to oversee Defence procurement, and to monitor cost blowouts, with the power to compel Defence top brass and bureaucrats to answer questions and be accountable for their decisions,’’ Mr Xenophon said.

“It would also give protection to Defence whistleblowers over cost blowouts so that they could come forward without fear of retribution.”

The DPOC would be required to report to parliament and to have a standing role to recommend improvements on the procurement process.

“This watchdog would finally make them accountable, ensuring that our defence dollars are spent wisely, and to prevent the types of blowouts that deprive other sectors such as aged care and health of desperately needed funds,” Mr Xenophon said.

A US nuclear submarine during military exercises off Cartagena, Colombia, on February 28, 2022.

$5.5bn bill for non-existent French submarines

Defence experts have reacted with dismay at a new taxpayer-funded French submarine cost blowout which could take the total cost to $5.5bn.

The bill for the project has effectively doubled with federal budget documents this week revealing much more than had been declared.

The additional money became the focus of heated debate Senate Estimates committee probe on Friday.

Department of Defence officials were grilled about the aftermath of the axed project which began in 2016 and was to deliver a replacement fleet of conventional Adelaide-built submarines at a cost of $90bn.

Senator Rex Patrick. Picture: NCA Newswire/Gary Ramage

A cost to taxpayers of $2.5bn was already known, spending on developing the project so far, and before the budget this week the total cost was estimated to be $3.7bn.

But it has emerged that billions more funding has been put aside, to meet the compensation demands of companies jilted by Australia withdrawing from the failed project.

The Federal Government last year axed the project in favour of superior nuclear powered submarines, the design to be sourced either from the UK or the US.

Under sustained questioning in the committee on Friday from Senators for South Australia Penny Wong and Rex Patrick, Defence Department officials confirmed a total allocation of $5.5bn should be enough to compensate jilted contractors.

In response the Federal Government referred to previous statements which showed why the French submarines would no longer meet Australia’s strategic demands.

Senator Wong criticised the scale of the new costings during the committee hearing.

“We now have a situation where the taxpayer will pay up to $5.5bn for non-existent submarines?’’ she asked.

Deputy Secretary of the Department of Defence Tony Dalton replied: “The final negotiated settlement will be within that price, Senator.”

Australian Industry and Defence Network ceo Brent Clark said the industry had viewed the $2.5bn spending so far to be a large expense for little outcome, but said the $5.5bn was “a very big number”.

He called on the government to make sure Australian companies were compensated as well as the major international players in the contract like the French-owned Naval group.

AIDN represents more than 1000 Australian mainly small and medium defence industry companies. 

“I am hoping in that huge amount of compensation money is also going to factor in Australian companies which have spent money preparing themselves for the cancelled contract,’’ he said.

“Otherwise are we just going to be compensating a large multinational company owned by the French government.

“When they cancelled the contract the spending of $2.5bn so far was a huge number so this number is just unprecedented.

“It is a lot to absorb.”

University of Western Australia’s chair of defence studies Professor Peter Dean said the revelations made the failed French subs project the worst defence procurement disaster in Australian history.

He said the blame did not belong with the Defence Department but successive coalition governments dating to former Prime Ministers Tony Abbott and Malcolm Turnbull, and including the current Morrison government.

“This takes it to a whole new level. We are talking about $5.5bn and in the end this government has nothing to show for it,’’ he said.

“It has to be the worst defence procurement disaster in history in Australia.

“It is basically a national disgrace, when you think how much could have been spent on other defence capability or on hospitals and roads, teachers, the NDIS and many other things.”

Independent Senator for South Australia and former submariner Rex Patrick is also on the committee.

“What defence have been doing is grossly irresponsible,’’ he told The Advertiser.

“Social housing is missing out, education is missing out, while defence burns money for no outcome at all.”

Defence Department chief financial officer Steven Groves told the committee it was only “expected” the funding would be enough, but without final demands for compensation, could not be assured.

Negotiations with companies that lost major works are ongoing and could extend into next financial year, Mr Groves told the committee.