Senator the Hon Mathias Cormann

Today we are announcing the way forward for the $8.5 billion Air Warfare Destroyer program, dealing with a range of unresolved structural and systemic issues that have remained unaddressed for too long.

When we came into Government we were confronted with advice about significant schedule delays and cost overruns in this program.

That was why in December 2013 we announced the establishment of an independent review into the Air Warfare Destroyer program.

Since then the Auditor General has also released a comprehensive review into aspects of this program, which also points to cost overruns at that time of over $300 million and various governance, capability and productivity issues.

The review led by former US Secretary of the Navy Professor Don Winter, has provided the Government with an independent assessment of the program's costs, schedule and quality of performance as well as identified a range of solutions.

The Review report identified several causes for the cost and schedule issues, including problems with:

• The initial program plan;
• Inadequate government oversight;
• The Alliance structure's capacity to manage the project and deal effectively with issues if and when they arose; and
• The performance and capabilities of ASC and major subcontractors.

The Government is totally committed to put this important Defence project back on track and to stop the growing cost and schedule overruns by implementing the recommendations for a Reform Strategy made by the Winter Review.

The Reform Strategy will:

• Improve shipbuilding productivity at the Air Warfare Destroyer shipbuilder ASC and its subcontractors BAE Systems, Forgacs and Navantia;
• Include the urgent insertion of an experienced shipbuilding management team into ASC; and
• After augmented shipbuilding capacity has been put in place, pursue the reallocation of blocks between shipyards to make the Air Warfare Destroyer program more sustainable.

The Government will immediately engage commercial and legal advisers to assist in implementing this Reform Strategy.

The implementation of the Reform Strategy will ensure that the Air Warfare Destroyer program returns to the effective and efficient delivery of this vital defence capability.

We are committed to working collaboratively and constructively with all stakeholders to ensure we realise both the national security benefits as well as the long term benefits of this program for the Australian shipbuilding industry in the most cost-effective and efficient way possible.

• Air Warfare Destroyer Program - additional information - 260 KB