Defence's spending debacle

If you still have faith in the natural efficiency of government, there's a quick way to eliminate that.

Read the first dozen pages of the Australian National Auditor Office's report into the Defence Department's Lightweight Torpedo Replacement Project, which was released last week.

In the mid-1990s, Defence decided it wanted a new anti-submarine torpedo that could be deployed on frigates, helicopters, and patrol aircraft.  Phase 1 of this acquisition started in March 1998.

Twelve years and two months later, $391 million has been spent and there's still no torpedo.  The whole thing would be substantially over budget if they hadn't eliminated three of the five platforms the torpedo was originally supposed to be deployed on.

In fact, the auditor general has now pointed out the torpedo will never do what the Defence Department wanted it to do.

The audit catalogues the project's decade long history of poor planning, mismanagement, buck-passing, and careless decision-making.  The Defence Department thought they were buying an off-the-shelf piece of equipment, already being used by other countries, but it took them "several years" to realise that was "not the case."

Not a resounding success, then.

Certainly, some big government projects don't function as advertised.  The Rudd government has worked hard to remind us of that truism.

But the list of Defence projects that are over-budget and mishandled is pretty impressive.

The $16 billion F-35 Joint Strike Fighter is well on its way to becoming as iconic a debacle as the Collins class submarine.  The Seasprite helicopter was cancelled in 2008, because it was already running seven years late, and we'd already spent $1 billion on it.

The Wedgetail airborne early warning program is four years overdue.  The Tiger Armed Reconnaissance Helicopter:  also four years overdue, and mired in contractual disputes.

The upgrade of the M113 armoured personnel carriers are three years overdue.  The Auditor General found the M113 upgrade had been characterised by "poor project management practices;  ineffective project planning;  inadequately defined project objectives;  and technical problems".

Indeed, "poor" is a word commonly encountered in Defence audit reports.  A report published in March covering explosives procurement documented poor budgeting practices, poor lines of responsibility, poor contract management, and poor project administration.

Even a new program designed to cut down on waste -- a logistics information system to track Defence assets -- has blown its budget by 20 per cent and delayed three years.

It's almost as if Defence is constitutionally incapable of buying new stuff without being overcharged.

A McKinsey report earlier this year found Australia's military spending was among the least efficient in the world.  The consultancy compared the amount of money we spend with the amount of equipment we procure.  In a list of 33 major countries, we tied with the United States for worst at getting value for our Defence dollar.

Part of the problem is politics drives procurement.  Politicians want to buy Australian-made.

The McKinsey report noted those countries which tried to procure their equipment domestically tended to get worse value for money.  That's obvious here:  the Auditor General found a desire to support local industry meant the torpedo program was pushed ahead despite critical difficulties with the project.

You'd have thought the government would have learnt from the Collins class submarine fiasco, which was built in Australia to everyone's great regret.  But the government intends to build the next generation of submarines in Adelaide too.  In fact, two-thirds of the $100 billion expected to be spent on defence acquisitions over the next decade will be spent in Australia.

That's because politicians don't like to miss any opportunity to claim they're "creating jobs".

The bigger the problem is the easier it is to spend other people's money irresponsibly.  Reckless spending is common across all areas of government.  But it's especially common in Defence, where decisions about what to buy are based on guesstimates of the strategic environment 10 or 20 years down the track.

Yet once procurement programs are started, they're hard to stop.  One military insider told The Australian earlier this year, "to question the F-35 inside the Defence Department is a dangerous career move".

The Rudd government intends to clean up military procurement.

But don't hold your breath.  Ever since the Turana project -- a pilotless target aircraft for the Navy -- was embarrassingly cancelled in 1979 there have been frequent reviews into reforming Defence procurement processes.  They all find endemic mismanagement, and they all recommend greater accountability.

Defence procurements are highly technical, often secretive, and far removed from the eye of the taxpayer.  But the torpedo program makes the home insulation scheme look like the ideal model of policy development.

It would be delusionally optimistic to believe this is the last indictment of a Defence program we'll see.

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