The auditor-general has revealed that the Defence Department’s mismanagement of major projects has continued to worsen — as have its efforts to use national security to avoid accountability for maladministration costing taxpayers billions. And it’s in defiance of Defence Minister Richard Marles’ claim that Labor was bringing a new era of competence and transparency to the portfolio.
Two years ago the auditor-general revealed that Defence’s inability to manage projects designated as “Major Projects” meant it was running a total of 405 months late — especially as Defence drifted back to its bad habit of rejecting off-the-shelf purchases.
A few months after Labor was elected, Richard “call me deputy prime minister” Marles promised an end to the dysfunction that he blamed on the Coalition. “The problem under the former government was that defence ministers failed to provide the leadership needed to effectively manage those risks,” Marles claimed, promising that Labor would ensure “Defence can deliver the capabilities ADF personnel need, when they need them; and in doing so, to improve the defence of Australia” through greater accountability and monitoring of projects, including “providing troubled projects with extra resources and skills.”
An auditor-general report at the end of 2022 demonstrated the need for reform: it showed major blow-outs in the cost of Major Projects and Defence continuing to refuse to implement nearly a decade’s worth of recommendations from the Australian National Audit Office (ANAO) and the Parliament joint committee on public accounts and audit on better governance. Significantly, the report also revealed Defence was now using national security as an excuse to refuse to provide information, preventing the auditor-general from checking the extent to which project delays had worsened.
The latest ANAO report shows things have deteriorated further under Marles: the total project delay has blown out to 453 months and total budgets have blown out by 7.8% since final approval. Average project slippage has now gone over two years to 25 months.
While some of the cost blowouts are down to exchange rate movements, significant changes in scope or indexation, a major source of increased cost is Defence acquiring far more of some projects than originally approved. The F-35 is a good example. According to the ANAO, the F-35 project has had a “net increase of $13.7 billion, comprising $10.5 billion for 58 additional aircraft in 2013–14, $2.8 billion for exchange rate variation and $0.4 billion for price indexation”.
The F-35 will go down in history for its truly spectacular cost blowouts and delays — and for its poor quality. Nearly a decade on from Tony Abbott mugging and gurning in a cockpit, the plane continues to have a poor availability record and persistent maintenance problems, according to the latest Pentagon report. Just 9% of the US F-35 fleet is capable of performing the plane’s full mission capability. “The operational suitability of the F-35 fleet remains below service expectations and requirements,” the Pentagon report concluded. Similarly, here in Australia, the ANAO notes that the F-35 won’t deliver its purported capability as scheduled.
The F-35 is one of a dozen projects for which Defence refused to provide publishable information to the ANAO on the basis that it would “cause damage to the security, defence or international relations of the Commonwealth”. In 2021-22, Defence withheld information for just four projects. As the ANAO notes, this “provides a reduced level of transparency and accountability to Parliament and other stakeholders”. But Defence turned out to be too clever by half — because so many of the projects now had non-publishable slippage data, the ANAO was able to compile an aggregate assessment of project slippage without enabling individual projects to be identified.
Far from rectifying the Defence mismanagement of major projects that characterised the Coalition’s years in power, Marles has presided over both a decline in Defence’s performance and an increase in its eagerness to cover up its incompetence with claims of national security. Meanwhile, Labor is handing the department responsibility for Australia’s biggest-ever defence procurement and the introduction of nuclear-powered vessels for the first time. Will Defence invoke national security to hide cost blowouts and delays likely to result from AUKUS?
