Updated Sep 18 2012 at 12:10 PM
Hard to match defence dollars and strategy
by Duncan Lewis
My speech tonight pays homage to a distinguished predecessor of mine, Sir Arthur Tange, who was Secretary of the Department of Defence from 1970 to 1979.Tange was one of the last great public service mandarins who we may not see the like of again. Diplomat, strategist, and hard-nosedreformer, he was a man at the centre of groundbreaking reforms to defence administration in Australia.When the Whitlam Government came to power in 1972, Tange was tasked by defence minister Lance Barnard to merge the three service departments into one Defence Department.
He went about the task in his usual blunt way. In August 1973, he was invited to speak at the annual conference known as the Chief of General Staff's Exercise, which was attended by all of army's star-ranked officers. In his opening barrage, Tange attacked all three of the single services, criticising them for planning wars according to their own separate strategies, while taking a hearty swipe at their triplicated capability development systems.
We are now a much more joint organisation than we were in 1973. But we are still fundamentally an organisation that consists of four tribes: navy, army, air force, civilian. And in these tribal groups we still have differing viewpoints on how Australia's national security is best achieved. Let me emphasise that I see this as healthy. I'd be worried if we had a Defence Force where people weren't passionate about future capabilities and interests and didn't fight their "professional corners".Today we have had to reduce expenditure across the department whilst still maintaining a relatively high operational tempo. We've also got some difficult decisions to make with our future force structure over the next 20 years, as we retire platforms, bring new capabilities online and look at replacing others.Sir Arthur's maxim about matching dollars to strategy must perpetually ring in our ears. Our aspirations must match our projected budget and resource allocations. One of the hardest things for people to grasp is about keeping defence at the technological edge. Change and technological refresh is a constant for us. The most advanced equipment is the most expensive and represents the greatest level of risk, and that includes a risk of project failure. But that is a risk we have to take to stay at the leading edge. The cost of procuring and maintaining such equipment continues to increase, on average, over time, and that is something that is not going to change.And so as we write the new white paper, in my mind the equation is simple. We have to be able to talk dollars and strategy.Of course, to some people, that sort of talk is anathema. Strategy is sometimes taught as holy writ; as if it cannot be allowed to be sullied by money or reality.This is a mindset that we must change. We have seen in the past what happens when we have strategy that isn't matched by dollars.
I'm not saying that strategy shouldn't be bold, or ambitious. It certainly should be both of those things. But it also needs to be tempered by reality, affordability, and informed by the thinking and tasking of other government agencies. And that is the approach that we are taking with the new white paper.I know that we are a can-do organisation. We have to be, whether its providing support at short notice to other countries in our region when they suffer natural disasters, or looking after our own citizens in the event of flood, fire or other catastrophe.I'm very happy with the work that we have started on improving the professional skills of our APS workforce. We have got more to do inthis respect.
The Australian taxpayer quite rightly has a very low tolerance for cost blowouts and project overruns of the size that we have seen. But we have changed a great many of the ways we do business. We have a two-pass approval process for new acquisitions that was put in place by the Kinnaird Review in 2003.We have developed a five-year Defence Corporate Plan to ensure we pursue enterprise alignment. The corporate plan is supported by our Defence Annual Plan and a system of quarterly business enterprise reporting. Underpinning all of this is an enterprise risk management framework.We have just in the last four weeks re-issued a four-year Defence Capability Plan which aligns now with the four-year forwardestimates period, and provides industry with early information on project cost, goals and content. We will soon be publishing defence
capability guidance to cover the six years of the decade beyond the four-year Defence Capability Plan.We have embedded a process for independent review of cost, schedule and risk and contestability of proposals from the very start.Ministers of Defence have spoken of transferring the funding burden in defence from the tail to the teeth. I agree with them. In my opinion, we still have far too many functions which are duplicated acrossDefence, particularly acquisition, human resources management, finance, and information and communications technology. Structurally, we have to achieve a more appropriate balance between personnel, operating and capital funding. We need to look very closely at the size and shape of the department, particularly as we draw down our operations in Afghanistan, East Timor and the Solomon Islands.We need to restructure to reduce our overheads and materialise the necessary funding to provide the capability we assess we need. As things stand I don't think we are structured or postured appropriately to meet our likely strategic circumstances in future. Some of our friends and allies were decreasing their military spending.But other nations in our region are taking advantage of their continued economic growth to increase military spending and modernisation.
China is doubling its defence budget every five years, and, according to a recent report by the International Institute for Strategic Studies, India has announced a 17 per cent rise in defence spending this year.This creates a very interesting dynamic.Our alliance with the United States is one strategic anchor point for American engagement in the region, and remains the cornerstone of our strategic and security arrangements. In the 60 years since the alliance entered into force, each new global challenge has deepened our co-operation, leading to an ever stronger partnership grounded in our shared values.I would argue that the US presence has long provided an international public good. As economic and strategic weight shifts to the Asia-Pacific and the Indian Ocean Rim, or to what some now refer to as the Indo-Pacific, the alliance is only increasing in importance for our own security, and for the region's security and prosperity.As a number of countries in the region transition from concerns with internal security and nation building to become more outward looking, the importance and challenges of the maritime environment come into sharper relief. This environment is fundamental to their economic growth. Over time, as trade and opportunities for resource exploitation increase, the importance of the maritime environment grows, as does its potential as an arena for contestation and conflict.The sheer scale of our own resource development in Australia only adds to the significance of the maritime regions to our north and west. Over $190 billion has been invested in the extraction of offshore liquefied natural gas (LNG) in Australia's northwest. These projects have made Australia the world's fastest growing exporter of LNG, on our way to becoming the second largest by 2015.So the stakes for us are high.The management of competing economic interests will be a test of regional governance institutions and diplomacy. The challenge for policymakers will be to construct frameworks that support security for all in an environment of high inter-dependency.
In my view, we do this by engaging through regional architecture such as the East Asia Summit, the ASEAN Regional Forum and the ASEAN Defence Ministers' Meeting Plus. As we look to the next white paper, I am very conscious of the fact that our future as a defence organisation begins here. We face serious strategic and budgetary challenges. As I said in my introduction, our aspirations may not easily match the available funding, and we face a very expensive proposition over the next 20 years as many of the platforms in our current inventory reach the end of their notional life of type, and require either replacement or life extension. As the countries in the region prosper economically and increase their investment in new defence equipment, we are going to have to decide how to respond. The general longer-term challenge of maintaining a technology edge across the board will be increasingly difficult. In my mind, one way to mitigate risks to our national security is to work with regional neighbours and partners, participating in and fostering bilateral, trilateral and multilateral linkages, and building capabilities that will enable us to work together for mutual advantage. This future engagement will be built on our achievements of the past, and I think that we are extremely well placed in this regard.The second way we reduce our risk is by doing defence business differently. There is no doubt in my mind that we are going to have to change the shape of our defence organisation. We need to reform our enterprise to reduce administrative overheads and redirect money to creating military capability. We have come a long way since Tange 'harangued' the Services in 1973, but if we don't go further - much further - we run the risk of becoming irrelevant. As an eminent colleague of mine, General Pete Schumacher, former Commander of US Special Operations Command and Chief of Staff of the US Army, once said "History judges harshly those organisations that will not change."I can assure you that I am devoting my energies to the considerable task of building a defence organisation that will stand the test of the future, and, as Sir Arthur taught us, links dollars and strategy. Australian Strategic Policy Institute annual dinnerAugust 23 2012Duncan Lewis AO, DSC, CSCSecretary of Defence
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