Senator KETTER (Queensland) (15:12): I rise to make a contribution to what tragically appears to be another broken promise in the making by this government of twisted priorities. I rise to talk about the issue of the submarine program. Yesterday we had the economics committee's inquiry into naval shipbuilding release its second interim report, which focuses on Australia's Future Submarine project. I am privileged to be a member of the committee. The committee heard from well-respected and senior industry experts on the importance of our submarine building industry. They overwhelmingly told us that that building, maintaining and sustaining our new submarines in Australia is in our country's long-term economic and national security interest. The government has argued there would be a capability gap if a tender process were undertaken rather than their intended option of buying off the shelf. Over the course of the committee's public hearings, we heard from expert after expert that a competitive tender process should not be bypassed. Importantly, evidence to the committee also made clear that, if the government moved now to conduct a competitive tender process, Australia would not suffer from a submarine capability gap. But you do not have to take my word for that. What did the experts say on the need for a competitive tender? We have heard reference to Dr John White here today. He is a well-recognised expert in the field. He said: There are significant technical, commercial and capability gap risks invoked by prematurely and unilaterally committing to a preferred overseas, sole-source supplier. The Hon. Martin Hamilton-Smith, South Australian Minister for Defence Industries said: It just beggars belief that you would go with one provider without testing the market. Mr Chris Burns, Defence Teaming Centre, said: You will never know the true potential cost of a project until you get multiple companies to put their names to dollar figures on firm tender bids. And what did these experts say on the supposed capability gap? Dr John White said: There is still sufficient time available, with adequate contingency, for the competitive PDS to be carried out and to build the Future Submarines in Australia. When visiting our submarines in Adelaide I was filled with an overwhelming sense of pride at what we are capable of building, right here in Australia. As witnesses at the inquiry said, we can and we should continue to build and maintain our submarines in Australia. There are a number of experts who made similar comments. Mr Malcom Jackman, Defence SA, said: A vibrant and sustained naval shipbuilding industry of all shapes and forms is vital to our self-reliance. Retired Commodore Paul Greenfield said: The future submarine should be designed specifically for Australia and built here in Australia. A sail-away cost of $20 billion for 12 submarines built in Australia is entirely feasible, and Australian industry has much to offer in solving the truly unique engineering challenges. Mr Chris Burns, Defence Teaming Centre, said: Australian industrial tenacity and innovation turned the project around to the point where we now operate among the most capable conventional submarines in the world. It seems the government have tied themselves into strange knots in their wildly varying positions on this issue. At times, the dissenting report from the coalition senators contradicts itself. In one part it argues against a competitive tendering process due to lack of government oversight: In theory a competitive tender process can lead to the lowest price for government and potentially value for money. In practice, the contractor almost always has more information than the government about the costs and risks of a project. But then later on in the dissenting report they argue for a competitive process; then they argue against more oversight: Imposing direct managerial oversight by government would be counter-productive to maintaining these competitive efficiencies. Australia's future submarines are one of Australia's largest ever defence acquisitions and will be crucial for our national security for decades to come. I have visited the Collins class submarines at ASC in Adelaide and, unlike this government, I could not help but be impressed and incredibly proud of what we are capable of building in Australia. The experts are on board; the industry and the public are on board. It is time the government got on board. (Time expired) Senator CANAVAN: I will start by following on from Senator Ketter's comments. I do not think he quite understands the point we were making in the dissenting report. It is not that the coalition senators were against competitive tendering per se; it is just that those on other side are very naive about how contracting works in these situations. All they are arguing for is competitive tendering now, before a contractor signs; they are seemingly not concerned with what happens after a contract is signed. That is sometimes more important in situations such as this when you are looking at multibillion dollar deals—very complex and technical information. You must be sure about creating that competitive tension, or some kind of cooperative arrangement after a contract is signed. The majority report is silent on those issues. Clearly the other side do not get these issues. I note that Senator Conroy was saying that it would be a national disgrace if we followed our approach. But the only disgrace would be if we continued on with their approach. The Labor Party's approach was to cut the budget of Defence by $16 billion. The Labor Party's approach was to do nothing on these decisions for years, to make no decisions. In the evidence we got in the committee, the Labor Party made a big deal that they would spend millions of dollars on the submarine project, and all that did was create reports; more and more reports but no decisions on submarines needed for our future defence needs. Senator Ketter said there was some contradiction in the government senators' report. Actually I think there is a glaring contradiction in the majority senators' report. We just heard from Senators Conroy and Ketter how we need to have this 'open and competitive tender process'. And Senator Conroy is nodding—we need an open process. On page XIV, of their report it says: Given the evidence provided to the committee, particularly in relation to the inadequacy of the current Japanese Soryu submarine to meet Australia's needs, there does not appear to be any benefit in reopening this option for further consideration. So they have decided. We have decided— Senator Conroy: Don't misrepresent! Senator CANAVAN: That is a direct quote, Senator Conroy. The PRESIDENT: Order! Senator Conroy interjecting— Senator CANAVAN: You want an open and competitive process but you do not like the Japanese. What is wrong with the Japanese? Senator Conroy: The Japanese can tender. The PRESIDENT: Senator Conroy, you have had your contribution. Senator CANAVAN: Senator Conroy, there is something wrong. We heard questions earlier today on other matters; they are worried about the Chinese too. They are worried about the Chinese and the Japanese. Over here, we look to our north and we see opportunity: we see the ability to trade; we see the ability to have our defence needs met. Over there, all they see is risks and threats. They are the negative party about Asia and they are not willing to connect with it. What is wrong with the Japanese sub? We have had four hearings, I believe, on the submarine side of this report. We have heard from a few people. Yes, some of them are experts in their field. But we have not heard the evidence to make judgements like that, and that is why we need to remain open-minded about other options. The other thing their report did not do was quote Mr Warren King. They spent their whole executive summary, which is the reasoning behind their recommendations, and they did not quote from Mr Warren King once. Mr Warren King is the CEO of the Defence Materiel Organisation. He is responsible for the running of this project. I think all senators would agree that he gave authoritative and expert evidence to the committee. But they provided no evidence. In our report we did quote from him. Mr King was asked about what he found or what the situation was when the government changed. He said: 'I was worried about our lack of progress on Future Submarines over many years. I was worried about how we were going to break the deadlock of the—' Senator Conroy: But you have done nothing for 14 months. Senator CANAVAN: 'I was very worried about how we were going to come up with solutions to meet Australia's needs.' That was from the CEO of DMO. Senator Conroy interjecting— The PRESIDENT: Order, Senator Conroy! Senator CANAVAN: Apparently Senator Conroy does not take the CEO of DMO as expert evidence. Clearly they did not want to quote from that particular witness, but we know why: because he belled the cat on exactly what was left by the former government. But they refuse to acknowledge that now. There is another thing they refuse to acknowledge. We never hear anything from the other side about what we really need when we make these decisions. What we really need is a very clear focus on making the decision based on our defence needs. That is how we should make this decision. We should be looking at what we need to meet Australia's future defence needs and evaluating it on that basis. They want to stand outside inquiries with the workers, they want to shout solidarity, but they never really come to the crux of the matter that this is a multibillion-dollar decision for the future of our nation's defence. It is too important to be left to the Labor Party.