Sights set on defence dollars

Almost $8 billion worth of defence spending is coming up in the next 10 years and WA appears ideally positioned to secure a large portion of that, as Noel Dyson reports.

THE Western Australian Government is targeting new defence spending, expected to be worth about $8 billion over the next decade, and has hired a consultant to help get it.

Jacob Svdrup has been hired for about $90,000 to help provide intelligence on forthcoming defence contracts and to help the Government develop short, medium and long-term plans for securing defence work.

While the Government does not expect to get the full $8 billion, it has set its sights on $2 billion of it.

The State has already done well in terms of defence contracts in the past few months. A consortium including Austal won the $500 million Armidale class patrol boat contract and the Tenix-Saab consortium won the up-to-$100-million Anzac frigate weapons upgrade contract. In addition, the $5 million Anzac support centre will be built in Western Australia.

With 50 per cent of the Australian naval fleet’s home ports in Western Australia, major ship building defence contractors Tenix, the Australian Submarine Corporation and Australian Defence Industries all have operations here to service those vessels.

Tenix’s Henderson yard is currently working on the HMAS Darwin.

The bulk of defence work the Government is chasing is in the naval area.

The State has, what it considers to be, a competitive advantage in this area with a number of companies having proven defence expertise around Cockburn Sound, and, in particular, the $200 million Australian Maritime Complex.

That complex has been designed to target three areas – defence, oil and gas work and civil engineering.

However, one of the major hurdles for WA is that key decisions are to be made on the three major naval contracts coming up this year. An election focus for Western Australian politicians ahead of the early 2005 poll and strong lobbying from main competitor South Australia could influence WA’s ability to win contracts.

Successive WA Governments have targeted the defence dollar, their main weapon being the $200 million Australian Marine Complex.

State Development Minister Clive Brown told WA Business News the Government was not concentrating on defence spending alone.

“The reason for the three-pronged approach from the AMC is that defence work and oil and gas work and civil work are all lumpy,” Mr Brown said.

“By combining all three we can smooth out the work flow.”

The main contracts coming up in the naval area are replacements for fleet oilers the HMAS Westralia and HMAS Success, the construction of three amphibious ships and three air-warfare destroyers.

The amphibious ship construction contract could also involve the construction of a large dry dock facility – an investment estimated to be worth between $80 million and $100 million.

None of Australia’s major defence ship building contractors – Tenix, Australian Defence Industries, the Australian Submarine Corporation or Forgacs – has a dock large enough to handle the 22,000 to 23,000-tonne vessels without some investment being made to enlarge them.

The air-warfare destroyers contract, while the largest with a price tag of around $6 billion, could ultimately be spread among manufacturing facilities in various States. The ships will probably be built in a modular way.

A dream scenario for WA would be to win the contract to build the amphibious ships and to pick up some of the modular work for the air-warfare destroyers.

The amphibious ship contract would require the construction of a dock facility that could later be used for civil ship building work. The dock, if WA was chosen, would most likely be built around the AMC because there is plenty of space for it.

Winning some of the high technology module work for the air-warfare destroyers would also bring handy revenue to the State.

With international defence industry technology player Raytheon as a major tenant of the AMC’s technology precinct, the pitch for the high technology work is much stronger.

Australian Defence Industries’ operation in WA is based around information technology, so it could win some of that high-end work.

It is expected the HMAS Westralia replacement will be achieved through the purchase and conversion of a second-hand double-hulled tanker.

The South Australian ASC looms as a major competitor for WA and three of the Federal politicians to have input into a decision on those contracts – Defence Minister Robert Hill, Finance Minister Nick Minchin and Foreign Affairs Minister Alexander Downer – are all from that State.

With the Collins Class submarines all completed and now considered assets of the Australian fleet, the ASC is now trying to turn its hand to ship building.

Defence analysts say the ASC had a strong argument for the air-warfare destroyer contract, citing its already highly qualified workforce as well as the political pressures that could come into such a decision.

Adding spice to that is the question over ASC’s ownership. Leighton Contractors has been rattling its sabre loudest, but WA companies such as Austal Ships, Clough Limited and even Wesfarmers are understood to be interested.