Chris Burns is the CEO of the Defence Teaming Centre (DTC), and the national spokesperson for the Australian Made Defence campaign. He spoke to William Poole.
AMT: Firstly, what is the DTC and what does it do?
Chris Burns: The DTC was set up in 1996 by a number of small companies who wanted to be in the defence space. The contracts were big and there was a lot of work, but as individual companies, it was difficult because of the tender process. They realised by coming together, they could present as a stronger unit and win more contracts. And it was very successful. There were 24 companies in the initial DTC. Since then, it’s just grown. It’s now an incorporated industry association with over 200 member companies.
People think of the defence industry as people who build ships or maintain warplanes or make bullets. But it’s much broader than that. An air warfare destroyer (AWD) is just a hunk of steel until it has a trained crew on board, a maintenance base, logistic support and a command-and-control structure around it. To get those things coming together, people have to understand defence. In our membership you’ll find engineers and manufacturers alongside accountants, lawyers and HR companies, all supporting the companies that are building military hardware. For a small company, sometimes a lawyer can be more important than an engineer, because if you mess up one of the regulations or you breach security, you’ll never work in the industry again. When you look at our membership, it’s very diverse.
What the DTC does is help companies understand defence. There are four key areas we focus on: membership (members services and networking); advocacy; capability development; and skills development. We watch all the tenders, we put the tenders out to the members, and if we think a tender suits a particular company, we’ll go and say “We think you should look at this one, but you probably can’t do it all yourself. You’d be smart to meet up with this guy here and this guy here.” It’s about networking, business-to-business matching, providing opportunities for companies to get to know each other through events.
The Australian defence industry really only has one customer, the Federal Government, and companies don’t like to talk out about the customer. If they’re unhappy, they have to keep quiet. We advocate on their behalf. I in particular am a bit outspoken in keeping pressure on the Government to honour their commitments. We’ve been running a campaign of late called Australian Made Defence, raising public awareness of the importance of the defence industry, not only in terms of jobs, but investing the billions of dollars of defence spending back into the economy, and the security aspects of having a reliable defence industry..
Then we look at areas where we can develop companies. We run workshops on Lean manufacturing, Defence 101… anywhere we can help members to improve their businesses. And the fourth area is skills development. In a small state like SA, with only 8% of the population, having the skilled workforce is critical. While the workforce at GM Holden is very good, you can’t just take someone off the Holden line and put them into AWD construction. With some upskilling you can, but it’s not fully transferable.
We’re not a training organisation, but we look around at government grants for upskilling. There’s a whole bureaucracy around government funding for skills that just turns small companies off. We’ll talk to the Government about doing an aggregated group bid; we’ll go out to companies, see what they need, get them to commit to the training and to paying their portion of it. Then we’ll negotiate and sign the contract with the Government and with the training organisations, and we’ll put the pressure on the companies to make sure they send people along.
AMT: Your membership is mainly in South Australia. How important is defence in the state?
CB: With the loss of white goods, the slump in the resource industry, and the automotive industry going away, defence is critical for SA. It’s a lynchpin of the economy. SA is the ‘Defence State’ with 8% of the population but 25% of defence work. We are the only state government with a strategic plan for the defence industry. We have an objective of 37,000 jobs in the industry, generating $2.5bn into the economy each year, by 2020, which is going to be a big ask.
AMT: And how is that progressing?
CB: Their figures are that we have 27,000 in the industry in SA, generating $1.9bn a year. With work in the pipeline, it should be achievable, provided the Government doesn’t penny-packet all the work around the country. That’s not saying SA wants all the work to ourselves. The fact is the timber for the bunks on a submarine comes from Tasmania. Steel comes from other states, componentry comes from other states. It’s a national industry; it’s not about SA.
You might recall last August Tony Abbott came to SA and pledged $89bn for shipbuilding. The message was that’s all going to come to SA. But they wouldn’t break the figures down. So we did an analysis and said “Let’s break that $89bn up.” It was $50bn for submarines and $39bn for ships. The ratio normally is one-third for build, two-thirds for through-life support. And even if that one-third of build was in SA, not all of it would come here. For example, with the $8bn in AWDs, probably only $2bn comes to the SA economy. You still have to buy combat systems from overseas, modules are made interstate, goods gets made and shipped here.
We worked out that when you broke the $39bn on ships down, WA is going to get this much, SA is this much, NSW will get this much, this much will go overseas. And we did the same for the $50bn for submarines. We put out a media release saying “Firstly, SA companies: stop thinking you’re going to get all the $89bn. And other states saying South Australians are whingers trying to get all this $89bn; you’re going to get your fair share too.”
Abbott took offence to that because it was published in The Advertiser, on the front page. And they clutched a figure out that only $8bn was going to come to SA. So Abbott said “The DTC is providing false and misleading information. When I said $89bn for shipbuilding, that was for acquisition only. No sustainment or through-life support.”
I rang the Minister of Defence’s office and said “Are serious about this? You’ve just said you’re going to spend $50bn buying submarines, despite the German bidding company saying they can build 12 submarines in Australia for less than $20bn?” There was a pregnant pause on the other end of the phone, and I said “You’re getting gold-plated submarines.”
We just looked around the world. Let’s say the cost to build an offshore patrol vessel (OPV) is $0.5bn. You buy 12, that’s $6bn. You buy nine frigates – you can buy a frigate for less than $1bn, but let’s say that’s $9bn for frigates. That’s $15bn of your $39bn. Where are you spending the rest? You’re not buying any other ships. Abbott was using it to secure seats. All we did was to break it down.
That’s one example of the advocacy side. Even though we’re SA-based, we really want to get the message across that it’s a national industry. And isn’t it better to invest those billions of dollars in the Australian economy?
People often forget why we built Collins submarines in Australia. We were operating Oberon submarines, built in England. In the lead-up to the Falklands War, the British decided to phase out their Oberons and go to nuclear submarines. When the Falklands hit, they deployed their Oberons, and they had to say to Australia “Sorry we can’t give you spare parts, we’ve stopped making a lot of them and we need to corral all the spares we’ve got now we’re at war.”
We had our six Oberon submarines tied up awaiting parts. We had no submarines for defence. The Government of the day said “Never again. We will build our own submarines.” And the Cabinet papers specifically state they must be wholly built in Australia, we have to be part of the design from the outset. No hybrid build, no offshore build, and we have to partner to get a design we understand. What defied logic to us with the Abbott solution was: why would you build up this capability to build submarines and then give it away, effectively investing $50bn of taxpayer dollars in the Japanese economy?
AMT: That highlights the two sides of the issue: defence sovereignty, and investing in Australia by building capability.
CB: Yes. And it’s not the only time. The French didn’t agree with Australia getting involved in the Vietnam War, so they said “If you deploy your Mirages, we won’t give you spare parts.” So we never deployed Mirages. The Swedes didn’t agree with Australia getting involved in Vietnam and refused to supply parts and ammunition for our Carl Gustaf anti-tank weapons, so we weren’t able to deploy them either. This is not a one-off. We’ve learnt through history time and time again.
That’s what sovereignty is about. I was in the army and I was on the German Leopard tanks, based in southern Victoria, in Puckapunyal. The best thing on the Leopard was the heater. During a Puckapunyal winter, it was great to keep you warm. But when we moved to Darwin, we didn’t need the heater anymore. What German tanks don’t have is any cooling system. So how do you keep crews cool?
So a trial started, but to the day they were taken out of service there was never a cooling system, because we weren’t a part of the design philosophy. Every time they put something in there, it would throw the turret out of balance, or the electrics, or the hydraulics. Things wouldn’t work. Submarines are second in complexity only to spaceships so it’s crucial that we are part of the design process from day one, otherwise we don’t have sovereignty over it and have to keep going back to the OEM when things don’t work to our standards.
AMT: What would you like to see Government doing to help?
CB: We’ve campaigned hard for them to get into a design philosophy of continuous build. You might have heard of the “Valley of Death”. When we decided to build the Collins submarines, we were also going to build Huon mine-hunters in Newcastle, and Anzac frigates in Melbourne. We built up three workforces, built them as fast as we could to one design, and then let the workforce go. Then we decided to build the AWDs and fit out the landing helicopter docks in Williamstown, and we built workforce up again. So that’s your Valley of Death, where you lose the workforce and start again.
At the moment we’re going back into that Valley of Death. The Government has said they’ll build 12-20 OPVs starting in 2018. Submarines won’t start till about 2023-25, with frigates to be built in Adelaide starting 2020. Our problem is we won’t have a workforce in 2020. The end of the workforce for the AWD is basically 2018. So we need to pick up the OPVs. The Valleys of Death are when you get peaks and troughs in defence contracting.
With the continuous build philosophy you say “I want 12 submarines, but I’m not going to build them as fast as I can. I don’t have a capacity to design a submarine, so I’ll buy a design overseas and build the first four to that design.” It takes four years to build a submarine, but what you do is start one every two years. In that first 8-10 years you build the first four submarines to one design, and simultaneously you start rebuilding design capability in Australia. You take the upgrades in technology and what you learn from operating those first four, and upgrade the design, so the next four are more advanced. And you do the same for the next four.
By the time you get to 12 submarines, the Navy has the best, most up-to-date capability. You’ve rebuilt your design capability, so then you can design your own submarine. And that’s about 24 years. The life of a submarine is 20-25 years, so when you’re finishing number 12, you start number 13, and then you take number one out of the water, take the crew and put them on number 13.
It’s a short-term vision to just build 12 submarines very quickly. You’ll only have one design, because you won’t have the capacity to upgrade if you build them rapidly. You’ll have to get rid of the workforce, and then replace them in the future. Continuous build gives you a highly skilled workforce, because industry will invest up-front in the innovation and automation that makes you efficient. You also say to the unions: you’ve got surety of work now.
But you can’t just do it with Naval vessels. We need a national shipbuilding plan. Canada did this five years ago. They’ve got the longest coastline in the world, big demand for ships. Not just Navy, but coastguard ships, arctic explorer ships, icebreakers, fisheries enforcement, immigration, border protection. They looked at the next 30 years and the ships they’d need, and they worked out if they programmed it right, brought projects forward, extended some ships, they could keep two shipyards constantly operating on a continuous-build philosophy. They have a national shipbuilding plan, but it’s not run by Defence. It’s run by their Department of Industry. It reached out to every government department and state government; all political parties signed off on it, as did industry, and the unions. They keep 15,000 people employed in those two shipyards, and it’s generating $2.5bn a year for the Canadian economy. That would normally have gone overseas.
The Federal Government has been talking about a naval shipbuilding plan and we keep saying “The Navy’s very good at operating ships, but they don’t have the first clue about how to build ships.” The Department of Defence gets a four-year budget, and from their perspective, if they have $10m and they need 200 guns, and they go overseas to a factory that’s been making rifles forever, 200 guns will cost $10m. An Australian company that isn’t building rifles continuously will say $13m-$14m. Defence wants the best value for money. It gets nothing back if it invests in Australian industry. It’ll buy overseas. Whereas from a national perspective, you can get 200 guns and invest $10bn in the US economy, or you can pay $13bn and get 200 guns made in Australia, get all that innovation, get skills up, but also know that just under 40% of that money is coming back into the economy right from the outset in taxes. And the workers in the factory will invest in super, in real estate, in the retail market. But no-one in Defence is compelled to think about that. They just want the best value out of their four-year budget. That’s why we keep making mistakes. It has to be national plan.
AMT: What are your hopes for the future of the industry?
CB: The realisation of the importance of a national defence industry. If we got into long-term strategic thinking, we could start looking at exporting. Then you become globally competitive and your industry grows based on that. But if we keep lapsing back with these peaks and troughs, we’re never going to get anywhere. So the long-term hopes are a long-term strategic plan, continuous build, with the opportunity to export. The workforce will diversify into other industry sectors and take those skills with them, which makes those sectors viable too, and they can be getting into exports.
One thing we say to our companies is that if you aren’t diversifying, you’re not going to survive on defence alone. Companies in our membership might be doing 20%-40% of their work in defence, but they’ll be in at least two other sectors – infrastructure, resources, anything. And the beauty is that they’re taking those skills into those sectors.
The future for Australia is not manufacturing – it’s advanced manufacturing. Automotive is about high-volume, labour cost-sensitive, production-line automotive factory-type things. Defence is about low volumes, complex engineering, and almost everything is hand-made. That to me is the difference between manufacturing and advanced manufacturing. Where we can compete in the global market is advanced manufacturing. Not in manufacturing.