Deep links between the private sector and Defence have been to the nation’s benefit. But it’s complicated. The department has expanded its toolbox to manage this ‘revolving door’

By Bernard Keane

Friday September 27, 2019

A MRH-90 Taipan with seven participants of Exercise Executive Stretch 2019 transits from HMAS Creswell on route to HMAS Albartoss. *** Local Caption *** The Defence Reservist Support ACT and SE NSW hosted seven executives between Sunday 02 June and Monday 03 June as a part of Exercise Executive Stretch 2019. Department of Defence.

BERNARD KEANE: CODE OF CONDUCT Former government employees with defence-related skills will end up working in defence-related industries, and that’s been a concern to some in the Australian community about the questions it raises about what leads up to the job offers. The Department of Defence has been refining its approach to this perceived conflict of interest.

For defence companies in Australia, there’s less of a revolving door between the Defence Department and Australian Defence Force personnel than an organic connection that fuses them into one greater military-industrial entity. But that’s not necessarily a bad thing: the deep links between private military contractors and uniformed and bureaucratic personnel are complicated.

The “revolving door” in defence has been front and centre in public debate since Christopher Pyne‘s decision to join major accounting firm Ernst & Young in an effort to help it catch up with its Big Four rivals in defence contracts. So far this year, KPMG has earned over $72 million in contracts with the Department of Defence. But those firms are dwarfed by the large US and European defence companies, which earn billions of dollars a year from taxpayers for providing military hardware and software, communications and IT systems, support and planning services. And that’s where traditional concerns about the “revolving door” between Defence and the ADF, and private industry, have focused — usually following high profile examples of former senior Defence or ADF staff moving to the private sector. The transition of the former head of what was then the Defence Materiel Organisation, Warren King, to the private sector, prompted questions to the then-Secretary of Defence, Dennis Richardson, in 2015 about Defence’s rules around a cooling off period. Richardson — without reflecting on King, who is now chairman of Navantia Australia, the Spanish shipbuilder’s local arm — admitted he wasn’t satisfied Defence’s existing framework for managing conflicts of interest was as robust as it should have been.

King, however, is only one of many examples.

  • Former Air Vice Marshal Chris Deeble is now chief executive of US giant Northrop Grumman in Australia. Former ASIO head and Liberal staffer Paul O’Sullivan is a director of Naval Group.
  • Former Lieutenant-General John Caligari is a director of German company Rheinmetall’s local arm (its managing director in Australia, Gary Stewart, had a ten-year stint in the RAAF in the 1990s).
  • Former Vice Admiral Chris Ritchie is a director of Lockheed in Australia, along with former Air Marshal Geoff Brown and former Defence Secretary Allan Hawke.
  • Former Defence minister David Johnston is a director of Saab Technologies.
  • The former SES band 2 officer responsible for Defence Industry Policy, Kate Louis, is now at the AI Group, in charge of its defence area.
  • Retired brigadier Rod West is Rheinmetall’s Director of Weapons and Ammunition.
  • Former Defence Materiel Organisation executive and Defence Band 2 Liesl O’Meara is Northrop’s Australia Legal Director.

In some cases, the route from Russell Hill to defence giants has been an extended and indirect path — Hawke, for example, was given a diplomatic posting after Defence, then became ANU chancellor, then was a go-to figure for major Commonwealth reviews while holding a number of directorships, before eventually joining Lockheed — less revolving door than a long-delayed homecoming. In other cases, however, the transition is swift enough to raise concerns, even if there’s no evidence of any impropriety or questionable conduct.

At lower levels, though, the transitions between the ADF and Defence and the private sector run into the thousands, to the point where it is difficult to distinguish between private companies and Defence and the arms of the ADF. A random sampling of the staff of major defence companies in Australia shows varying levels of “revolving door” between the ADF and the public sector generally, and the world’s biggest defence companies. We looked at a sample of about 800 people currently employed in defence companies in Australia, using Linkedin as a source, ranging from engineers and interns through to company directors and CEOs.

Just under a quarter of all of the sample had worked in Defence or the ADF or, in a small number of cases, in the wider public service. But the numbers varied significantly. Leidos, the entity that resulted from the merger of US defence giant SAIC and Lockheed’s information systems division: fully 35% of the Leidos staff sampled had a Defence or other public service background; one-third of Lockheed staff sampled had a Defence or public sector background. Thirty per cent of Raytheon’s staff were from defence, government or, in one case, a former senior Liberal staffer. But the European firms have lower levels of former Defence staff: just over 25% of those sampled from Rheinmetall had a public sector background, 24% of BAE staff (BAE acquired Australian company Tenix Defence a decade ago); Naval Group, which understandably has a strong French presence currently, has 14% former ADF or Defence staff, and just 8% of Thales staff, including a former British Army officer. Thales’ ranks instead appear to be filled with people who had spent, in many cases, decades with the company, or with ADI, the Australian defence firm Thales fully acquired in 2006.

Retaining skills that taxpayers funded

What does it mean to have — certainly for major US defence companies, and some European ones as well — such high levels of former Defence or army, navy and air force personnel? It illustrates the organic, almost seamless connection between defence and industry, between taxpayers and shareholders, between those charged with defending us and those who make money from defending us — and the extent to which defence policy in Australia, as is the case in virtually every other country, is also industry policy in action. And it represent a major loss of resources for taxpayers, who have often invested in years of training to give ADF personnel specialist skills required in operating military hardware and software, or managing military projects, only for foreign shareholders to benefit from those skills.

But from another perspective, the extent to which the ADF and Defence and industry seamlessly blend together is a good thing. Any Australian — whether former RAAF aircraft maintenance worker or former air vice marshal — is entitled to work where they want to maximise their opportunity, income and job satisfaction. Most of us tend to stay in one industry, or one broad occupation, during our working lives, even if we have half a dozen different jobs, so it’s understandable that people with defence-related skills will end up working in defence-related industries. After working for two decades in the RAAF, an engineer or avionics techie is entirely justified in wanting to do something different while using their specialist skills.

From an industry and taxpayer point of view, it’s also a good thing: it ensures specialist skills are not lost altogether, potentially pushing up the cost of projects and services provided by the private sector. As new Defence Minister Linda Reynolds recently noted, “Each year, around 5,500 to 6,000 ADF members leave the permanent Defence Force… It is an appalling and unnecessary loss of capability.” The aim is to keep that talent available, even if not serving. “Defence encourages those separating from Defence to consider a career in another area of the wider Defence workforce, including Defence industry, where their skills and experience may continue to contribute to the achievement of Defence objectives,” a Defence spokesperson told Mandarin Premium. Ex-ADF personnel, and especially veterans, also bring the perspective of users to the private sector — they’ve flown, maintained, fired, driven or steered the equipment being contracted for, and know how it should perform out in the real world, rather than in the factory or testing range. In fact, Defence says, “as part of skilling an integrated workforce, Defence enables secondments with Defence industry.”

From cooling off periods to up-front declarations

When it comes to managing movement at a senior level, though, it’s a different story. Senior public servants are subject to a 12-month cooling off period before they can lobby in relation to anything they dealt with in the last 12 months of their public sector employment. That restriction, in the Lobbying Code of Conduct, applies to ADF personnel at the rank of colonel and above. But former public servants and officers do more than just lobby when they move to the private sector. This is of course not a new issue — in 2012, the Department produced Defence and the private sector: an ethical relationship to guide staff. But Defence has indeed looked at the issue since Richardson’s comments in 2015, and in the last few weeks released a new Integrity Policy Manual covering the issue of conflicts of interest across a number of areas. It devotes a chapter to “Post Separation Employment”.

The manual requires Defence staff to report any job offer “that could lead to an actual, potential or perceived Conflict of Interest” to their manager and submit Letters of Notification if they are considering accepting such an offer, in order to put in place risk management strategies. Statutory declarations may be required, and “Defence Personnel should be immediately restrained from having access to Defence information relevant to their future role”; managers may contact the company involved to ask for restrictions on the role of the individual involved, or even not to employ them, or seek legal undertakings around their employment. And ultimately,

In a variety of commercial circumstances, especially instances where the employee was involved in writing specifications or statements of work, or negotiating tenders or contracts, Defence may exclude the company from consideration for specific contracts or activities should it employ the Defence employee/member in a related area of work or it is otherwise not possible to address the perception of a Conflict of Interest.

Defence managers thus now have more tools to deal with conflicts of interest in the endless stream of people between Defence, the ADF and the private sector. The willingness to use them, and the judgment about maintaining the balance between retaining skills in the broader defence-related workforce, and undermining integrity and the appearance of integrity, will be key to how fast the door into private sector employment spins in Defence.

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