In the first part ^[1] of this series, I discussed the high rates of ammunition expenditure in the war in Ukraine and emphasised that this is a question not just of expensive missiles but also of explosive ordnance—traditional, ‘dumb’ munitions, like artillery shells, unguided bombs and rockets, and small-arms and medium-calibre ammunition.

I should correct a detail in that first post where I mentioned munitions company NIOA’s Maryborough forge. This facility is now producing 155-milimetre projectiles for export. The firm is also contracted to produce 30-milimetre ammunition ^[2] for the Boxer vehicle, as well as 155-milimetre components ^[3] for the Australian Army under Land 17.

In my previous piece I noted that, while the term ‘explosive ordnance’ appears in the name of the Australian Defence Department’s munitions program (the ‘Guided Weapons and Explosive Ordnance Enterprise’, or ‘GWEO’), it doesn’t appear to have been part of the program’s original design and the focus remains on guided weapons supplies. In this second part, I identify some questions about our EO supply arrangement and identify some of the policy challenges.

As Defence leaders rightly point out, we can’t manufacture all the components, let alone finished munitions, our weapons platforms need. That means we face a constant task of balancing an assessment of where the greatest need is against the art of the possible. Where are the greatest risks that existing stockpiles and supply chains will fail us, and which of those risks can be addressed quickly?

Conversations with industry unsurprisingly convey a gamut of frustrations. One prominent view is that Defence needs to communicate a clear assessment of what guided weapons and ammunition are a priority. That assessment needs to be genuinely joint, and reflect a blunt appraisal of what response options the government considers non-negotiable. Put differently, the chain of logic needs to ultimately flow from broader preparedness settings. This also relates directly to the much-cited claim that Australia can no longer count on ^[4]10 years of warning time for a crisis or conflict in our region: if we have truly dispensed with that assumption, our approach to munitions should match.

The ammunition consumption rates observed in Ukraine cannot genuinely be described as ‘extraordinary’ because every major conflict forces militaries to relearn this lesson. The salient question here is: have the assumptions about expected consumption rates and quantities been interrogated against what is being experienced in Europe?

Even the US, with its enormous domestic small-arms industry, ran low on small-arms ammunition during the Iraq War ^[5], which was hardly of the same intensity as the fight in Ukraine. Some reports have suggested that the US is now ‘close to the limit’ ^[6] of what it can continue supplying ^[7] to Ukraine. They also say that expenditure has been higher than pre-war US planning assumptions.

In a genuine regional or international crisis, therefore, how valid is any assumption that the US or other key allies could stop-gap our ‘dumb’ munitions shortfalls? It seems highly unlikely that such overseas sources could be relied upon.

Another difficult-to-answer question goes to the realities of the surge capacity at Australian Munitions’ ^[8] Benalla and Mulwala facilities. These are crucial establishments: among other reasons, they are Commonwealth-owned facilities on Commonwealth land because a strict regulatory framework applies to manufacturers of guided weapons and explosive ordnance. But it means that the commercial custodianship of these facilities (Australian Munitions is a subsidiary of Thales) underwrites a critical national capability.

Is the Commonwealth equipped with the expertise and experience to engage in genuine due diligence about what these facilities are capable of producing should ‘the flag go up’? Our confidence in manufacturing capabilities that may lie dormant and unexercised in the Commonwealth-owned facilities, for example, should be low until proven otherwise.

And does the Commonwealth have a good understanding of what other (if any) facilities could be retooled under extreme circumstances to play a role in EO supply chains?

Conversations with industry also describe other frictions that policymakers are acutely aware of—like workforce. At this stage, the talent pool is shallow across relevant industry, and firms often have little choice but to shuffle staff among competitors, not to mention Defence, which can quickly become self-defeating. This is certainly true for players in the guided weapons industry, but it is also a constraint on those attempting to make progress on other munitions types.

There are no quick fixes for issues like this, but policy needs to be crafted that provides incentives for industry approaches that address some of the workforce challenges. For example, consideration could be given to some kind of preferential treatment for firms that can commit to and demonstrate that they are training and retaining their own workforces.

In sum, there is one open question and one reliable generalisation. First to the former: if ‘dumb’ munitions haven’t been prioritised by Defence to date because it was assessed that existing domestic sources will be reliable under pressure, is that assessment still valid? The answer may well be ‘yes’, and we can’t publicly scrutinise the question well because of the sensitive nature of the data, but it’s a question worth re-asking.

The reliable generalisation is that this costs money—lots of it. A 2016 Australian National Audit Office report ^[9] on Defence’s management of the Mulwala Propellant Facility found that between 1999 and 2015, Defence ‘paid $526 million for munitions produced by the Mulwala and Benalla Facilities, and has paid $1.874 billion in order to build, operate and maintain the facilities’. That is, Australia paid more than three times as much to maintain the Commonwealth-owned munitions facilities as it did for munitions acquired from them. The overheads are enormous.

In this light, the enterprise approach signalled in the GWEO is indispensable. Economies of scale must be sought to whatever extent they are achievable. Finding a way to join up the investments being made under the GWEO (in its at least superficially expanded form beyond guided weapons) and the traditional way that munitions are funded, through the services’ sustainment budgets, surely makes sense.

These issues go to the heart of the idea that credible defence capability must rest upon a coherent relationship with the national support base, as David Beaumont ^[10] and others have advocated. Among other things, the accountabilities for munition supply arrangements must be aligned between the different stakeholders inside and outside of the defence organisation.

There are a lot of smart people inside Defence working alongside industry on the GWEO Enterprise as a whole, and Defence’s leaders are anything but naive about the importance of ordnance, munitions and explosives to go into the weapons Australia purchases. Let’s hope the ‘EO’ part of GWEO is getting due attention.