States in 'destructive' rivalry for Commonwealth contracts

By Harley Dennett

February 27, 2018

It’s reminiscent of the crazed scenes in the United States where cities are offering deals that would drive their budget almost to bankruptcy to entice the country’s biggest online retailer — Amazon — to set up its second headquarters within their borders. The new site is expected to bring billions to the local economy of whichever city it picks.

While the scale may not be of quite the same magnitude, Australia’s state governments are also in fever competition — for the lion’s share of Commonwealth’s Defence industry contracts.

There have been billboards across Canberra — another Defence gift for the Airport-owning Snow family — and lengthy features extolling the national benefits of one state’s manufacturing over another in the pages of The Mandarin.

However, this battle over benefits for the local industry and economy has overshadowed the purpose for the procurement, warns at least one manufacturer, citing both the SEA1000 Future Submarine project and the upcoming Land 400 phase two decision due soon.

Gerry Wheeler, from Raytheon Australia, was the first manufacturer to front an inquiry examining the Bipartisan Australian Defence Agreement, which includes an agreed minimum level of defence funding:

“One of the unfortunate consequences of the nature of political discourse is the almost exclusive focus on industrial considerations of individual projects rather than a proper examination of the capabilities those projects are intended to provide,” he said. “The SEA1000 Future Submarine project is a very good example. Prior to the selection of an industry partner, public attention on the project was almost solely directed to the location of the construction activity rather than on the nature of the asset being selected or, indeed, what submarines do and why Australia needs a regionally superior submarine in the first place.

“This situation is compounded when individual state governments become involved in a political bidding war in an attempt to secure work for their respective state. The current LAND 400 competition is an obvious example where there is no rational conversation about the respective capabilities of the tenderers. Instead, there is simply a list of competing assertions about the number of jobs that can be created under particular bids. More often than not this is generated by politicians of all political stripes (both state and federal) as well as a parochial local media rather than by the defence companies themselves.”

Communities are set up for disappointment if exaggerated claims (Raytheon takes aim specifically at Queensland newspaper claims of a boom as big as mining). “To avoid such outcomes the rent-seeking behaviour of state governments should be discouraged, and greater restraint displayed by individual politicians and media backing one bid over another.”

Wheeler cautioned the inquiry that this state competition does not seem to be in the national interest. “There is one area of public dialogue on defence capability where greater bipartisanship needs to be achieved and that is between the various Australian states,” he said. “Few could deny that the level of rivalry between the states for defence work has become almost hysterical if not destructive.”

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