Value for taxpayers must rule big defence projects

One bright spot in the Mid-Year Economic and Fiscal Outlook was the Morrison government’s control of spending. Over the next four years, real annual growth in spending will average 1.3 per cent; when Labor was in power, spending grew by 4 per cent a year, after inflation. Canberra’s footprint is substantial, with payments equivalent to 24.5 per cent of GDP. Getting value for taxpayers must always be front of mind, a line Scott Morrison has tried to drum into his top bureaucrats as he revamps the machinery of government.

A new report from the Australian National Audit Office shows slippage in delivery times and cost overruns in 26 selected defence procurements, such as the F-35 Joint Strike Fighter and the Growler electronic warfare fighters. The ANAO found the total cost of projects assessed has jumped to $64bn from an initial $40bn at so-called “second pass approval” by cabinet. The average delay across those projects was 2.7 years. The government is dipping into contingency funds to address cost blowouts that have arisen because of design alterations, disputes with contractors, currency depreciation and supersizing of orders, such as the addition of 58 aircraft in the F-35 program at an extra cost of $14bn.

It’s true every piece of homemade defence kit is more expensive and takes longer to build than equipment bought off the shelf. As we reported last month, the cost to build and maintain the new Attack-class submarines will hit about $225bn over their 50-year lifespan. Defence officials and the Morrison government previously had said the 12 new boats, in service by 2035 at the earliest, would cost $50bn to build and $50bn to sustain. But that was in “constant” dollars, which don’t account for inflation; the “out-turned”, or actual, dollars spent would be $80bn to build and a “rough estimate” of $145bn for maintenance. This is the largest defence acquisition in our history. Experts have questioned whether the 12 French-built boats — which will be the world’s largest and most expensive conventional subs — are a good fit for Australia, given their limitations in range and ability to stay under water compared with nuclear-powered subs. Chief of Navy Michael Noonan argues costs have not blown out and the program “will deliver the best possible submarine capability for Australia”. Still, taxpayers deserve to know the true cost of such acquisitions.

The next-generation submarines will be built, operated and sustained by Australians — an industry almost from scratch. But we face critical skills shortages that could set back delivery of submarines, frigates and patrol boats, causing a threat to ­national security. A Senate inquiry into naval shipbuilding capability has been told the quality of trades training for welders is “totally ­inadequate”, while the pipeline of maritime engineers will be insufficient to deliver the shipbuilding plan. Part of the latter problem is a shrinking pool of secondary students with sufficient achievements in maths and science.

The Morrison government must ensure it fills the skills gaps and works with the states to improve basic skills. Australia needs to spend more on defence, given new strategic realities and obligation to pull our weight. But it should not be a money pit for taxpayer waste. The ANAO report suggests officials and government need to lift their game by better initial estimates of cost and more thorough oversight and containment during project delivery.