The remarkable scandal that is the Department of Defence’s unethical awarding of a billion-dollar contract to Thales to operate munitions factories might seem like just another example of waste and inefficiency in defence materiel, albeit with the grace note of a Defence bureaucrat demanding a bottle of champagne from Thales before moving to the company themselves. But it’s also a glimpse of the future.
The scandal occurred in the space between the government as owner of a manufacturing facility and the corporation that was paid to operate it. That’s not very common, because governments by and large don’t own factories any more. But munitions have now been added to the lengthy list of items marked “Sovereign” or “Critical” or “Strategic”, for which the normal rules around economic efficiency and clear thinking are suspended. We must not buy munitions from overseas, we must be able to manufacture them here, no matter how much more it costs us.
That means that, after decades of steadily reducing the areas where governments directly intervene in activities like manufacturing, they’re now on the increase — meaning the Thales scandal is more likely to be repeated.
Look at the $900 million Commonwealth-Queensland contract with PsiQuantum to build a quantum computer in Brisbane. While it’s rather different to making explosives and putting it into bombs, that contract, like the one with Thales, was characterised by rotten procurement practice and a preference for going straight to a preferred supplier rather than finding out what other firms may have been able to offer, with an indifference on the part of governments as to whether a better deal could have been secured for taxpayers. And ultimately the PsiQuantum deal is motivated by the exact same mentality that drove the Thales scandal in Defence — government intervention in a “strategic” industry justifies skipping the need to secure value for money for taxpayers.
That mentality comes with reflexive laziness on the part of both bureaucrats and politicians, and a willingness to default to business as usual. The now-famous bottle of champagne demanded by the Defence bureaucrat is just a footnote to a pervasive institutional reluctance to alter the status quo. The Abbott government briefly gave thought to getting rid of the Mulwala and Benalla factories altogether, but in the end decided to keep them. Then Defence decided to just stick with Thales rather than change the status quo.
Defence told itself, and ministers, that there was no point going to the market to seek alternatives to Thales, as they were required to under the Commonwealth’s procurement rules, because they knew perfectly well already what the market could offer. The urge to default to business as usual was so strong that even Thales’ utter failure to provide a worthwhile response to a request for tender that the company itself helped write couldn’t prompt Defence to undertake any change.
Peter Dutton’s nuclear industry would even more perfectly replicate the conditions for the Thales scandal than PsiQuantum. One of the few details in the Coalition’s sparse policy offering is that “the Australian government will own these assets, but form partnerships with experienced nuclear companies to build and operate them”. Dutton’s department of energy — he’ll need one because he’d be taking the Commonwealth into the entirely new area of power generation — would have the same relationship with a corporation as Defence has with Thales, one of owning the facility but contracting a company to operate it. Let the bubbly flow — once the multibillion-dollar contract is signed, the successful company can expect to keep it going for decades, just like Thales is paid to keep making bombs at Benalla.
The other thing bureaucrats, and their friends at Thales, and in PsiQuantum, and Dutton’s putative nuclear contractor, can rely on is that the media will always move on rather than keep chasing scandals. The Thales scandal was well covered by Andrew Greene at the ABC, Ben Packham at The Australian and Shane Wright at Nine. It should be getting far more coverage and generating far more prodding of the government, especially given the size of the contract and grubby details like the bottle of plonk.
Both Defence and Thales are evidently hoping everyone will move on. Labor dropkick and Defence Minister Richard Marles completely dead-batted the issue yesterday, saying “my understanding is that the Department of Defence will be looking into this”. Thales told Greene it “is considering these matters as appropriate” and wouldn’t be commenting. It’s a good bet neither Defence nor Thales are looking into anything. They’re just waiting for journalists to stop asking questions so they can get back to business as usual.
All at the expense of taxpayers, naturally.
