Antinuclear

The culture of cosiness; the revolving door; and undue influence. The relationship between government and military industrial companies is just one strand of the evidence showing the urgent need for a national anti-corruption commission. “Undue influence” is a noted marker for corruption.

In a recent investigation we examined how the then $50 billion (now $80 billion) submarine contract was awarded to Naval Group, despite it being under investigation in numerous countries over probity issues, including bribery and corruption concerns.

The multinational weapons maker Thales has also exerted influence on successive governments. There has been considerable coverage of how Thales pressured federal Attorney General Christian Porter to censor key parts of the auditor general’s report into the procurement process for the Thales Hawkei vehicle. There is more to that story than the censored sections.

Then there is yet another key supplier to Defence, the UK multinational BAE Systems, which in 2018 won the $35 billion future frigate contract to build the navy’s nine new anti-submarine warships. The new contract was awarded even though there had reportedly been “long-running concerns” inside Defence about alleged inflation of invoices by tens of millions of dollars by BAE for its work on the navy’s elderly Adelaide-class of frigates (now decommissioned). An internal audit by Defence reportedly found BAE’s Adelaide contract “riddled with cost overruns, with the British company consistently invoicing questionable charges”. By May 2019, Defence had launched a fresh investigation.

Thales and the Hawkei: “Extensive industry lobbying”

A 2018 Australian National Audit Office (ANAO) report details the acquisition process for the Thales Hawkei vehicle, which was ultimately selected as the ‘light’ vehicle within a multi-phase procurement started in 2003 to replace Australian Defence Force field vehicles and trailers……….

In September 2013 the Coalition defeated Labor in the federal election.

In March 2015 Thales appointed Brendan Nelson – Liberal defence minister prior to Labor’s 2007 election win – to its “advisory board”.

Five months later, the Coalition government approved the Thales Hawkei acquisition and in October the contract was signed.

The ANAO report contains many significant revelations; the following are just some of the concerns raised:

• Defence did not make the government aware of the results of an economic study it commissioned from Monash University that found there would be limited regional economic benefits from the Hawkei project, and that Defence would be paying a substantial premium for it (p38). Governments make much of the importance of local jobs, yet the study noted that the jobs created in Bendigo would likely reduce job numbers by a similar number elsewhere, and the majority of Thales’ profits would end up with overseas shareholders (p39).
• Defence estimated the costs for an Australian option at $2 billion, some $700 million more than the two other options being considered (p33).
• Defence recommended the purchase of 214 extra Bushmaster vehicles from Thales, despite admitting there was little need for them. This was so Thales could keep its Bendigo plant operational while it was awaiting possible approval of the Hawkei. Four government departments opposed this plan – Prime Minister and Cabinet, Treasury, Finance, and Foreign Affairs and Trade. Nevertheless, the purchase went ahead and Defence’s expenditure rose by $221 million. This amount was not taken into account when the cost of the Hawkei was assessed at the next evaluation point, despite Treasury advice to do so. The national audit office says the alternative plan of closing and later reopening the Bendigo facility would have cost $33 million, less than one-sixth the cost of buying 214 unnecessary Bushmasters. (p41)<Once Defence dropped the JLTV option and moved into a sole source tender with Thales for the Hawkei it eroded most of its ability to exert pressure on price. It removed any remaining leverage when it sought government approval on the Hawkei prior to the completion of its negotiations with Thales. Defence records indicate that once Thales knew the government had approved the Hawkei it refused to negotiate anything further of significance.
  

  “Pressuring the Commonwealth”

  Seven independent expert ‘gate’ reviews of the Hawkei procurement were conducted between October 2010 and October 2017. The 2016 review commended the work that had been done to achieve acquisition approval, but noted there was a risk of a major failure by Thales (p58).

  The review also observed that, “Thales has already been successful in pressuring the Commonwealth to relax requirements and can be expected to do so again in the future if Thales fails to perform.” (p59)…..

• Despite widespread support for an increase in the ANAO’s funding, in the last federal budget its funding was cut, in what was perceived as payback for its politically damaging investigations like the ‘sports rorts’. There are calls to protect the ANAO from budget cuts by making it a parliamentary department.  ……….
  

  Defence investigates itself

  How “independent” or effective a review is it when a department secretly investigates itself and its contractors by appointing an existing contractor to conduct the review, does not make public the review’s existence or its terms of reference, and keeps any resulting report secret?

  Defence says the review found “no evidence” of inappropriate excess charges. This is despite three stories the same day in The Weekend Australian containing detailed allegations. So serious were the allegations, they were escalated up to Defence’s assistant secretary of fraud control who reportedly then referred several matters to the Independent Assurance Business Analysis and Reform Branch of Defence.

  Is Defence saying multiple audit and fraud officials, including at the most senior levels, all got it wrong?

  Are we being asked to conclude that senior Defence fraud officials cannot accurately identify inappropriate excess charges?

  It seems there is a serious problem then, no matter which way we look at it. https://www.michaelwest.com.au/department-of-defence-captured-by-foreign-weapons-makers-thales-bae/