Mr Robert Salteri, CEO, Tenix Defence Pty Ltd

Robert Salteri is CEO of Tenix Defence Pty Ltd, the largest Australian-owned defence company. Tenix Defence contributes the lion's share of its parent company's $1 billion turnover and last year returned to the top of the ADM Top 40. He spoke to ADM's editor, Gregor Ferguson, in December.
PROFILE
Robert Salteri, B. Eng
An engineer by training, Robert Salteri began work in the mineral exploration business in Northern Australia before joining the family business, Transfield, now Tenix.
- Member of Australia's 12m sailing world championship team, Sardinia, 1984
- General Manager, Transfield Construction, Victoria, 1988
- Deputy CEO, AMECON, 1991
- Executive Director, Tenix Pty Ltd, 1997
- CEO, Tenix Defence Pty Ltd, 2001

ADM: What's been the highlight for Tenix in 2004?

Salteri: The ANZAC Ship Project continuing on its good form is obviously of great importance to us. We pride ourselves on making sure we keep a close eye on the things we are doing rather than getting carried away too much on the airy-fairy stuff. ANZAC has always been very important to us and with the last ship having been launched; we are nearing the end of quite a successful project, so that's a high.

The way the ANZAC Alliance is performing - it's achieving great milestones with Harpoon and the like; that's also very important, along with our relationship with Saab as part of that.

Winning Project Protector was also a big high for us - we were competing against five overseas shipbuilders, one of them being Blohm and Voss which was designer of the Anzac frigates, also Damen and Vosper Thornycroft and Singapore Technologies. They're all well-regarded and competitive shipbuilders from around the world and winning this project highlighted the fact that we are world-competitive in Australia. In my view we sometimes sell ourselves a bit short and tend to think we can get things cheaper overseas; I think Protector proves we can do things as cost-effectively here as anywhere else and still deliver good quality and good product. So that's obviously a big highlight for us.

The one that kept me awake at night was just trying to get DIDS under control - taking over all of the sites affected by DIDS and employing over 1,000 people in something like seven months was no mean feat while also trying to make sure the Department doesn't miss a step and the units are still receiving their kit when they require it. That was a big feat and we actually achieved contract commencement date on November 26, which was ahead of schedule by a couple of months.

ADM: I see there's been a bit of a moratorium on some of the change process in the Northern Territory.

Salteri: We're just working through that with the local industry and making sure they're aware of what is happening. We want to make sure we're using the SME's as best we can and getting the best result for the Commonwealth and local industry.

ADM: What has been your personal high point at the head of Tenix Defence?

Salteri: Obviously all those successes are highpoints from my point of view. But I suppose just watching the business and its people mature over the past 12 months, -seeing it all work smoothly is quite satisfying.

ADM: A lot of companies in the top ten of ADM's Top 40 recorded a slight drop in defence-related turnover - what do you attribute this to?

Salteri: I think some of it is cyclical - obviously programs come to an end. But if you remember there was a hiatus about two or three years ago when the government decided to go through another White Paper; that slowed down procurement dramatically and most of these projects take a while to then get up and running. So I think there's a combination of cyclical effects on the one hand and on the other a bit of a slowdown in the work that's been put out by the government. With the number of major ship programs that are running at the moment things will step back up again. There's also been a lot of procurement offshore as well - AEW&C is a classic example, together with the tanks and aerial tankers.

ADM: Tenix Defence has grown a lot through acquisition; what about the future, more acquisition or organic growth?

Salteri: If you look back at our history we've tended to do a bit of both and my guess is we'll continue to do that. We don't have anything particularly in mind - obviously when ASC comes up for sale we'll have a look at it, but we won't be the only ones. From our point of view we have to ensure we can add value to any acquisition that we make, but that's not our primary focus. Our primary focus is to make sure we win projects, and normally we can win them through organic growth.

There has been a push from Defence to use SMEs as much as possible and it is an initiative that we really want to support. We don't want to vertically integrate too much because we want the SMEs to survive - we see them as an integral part of the industry. I don't want to do everything. I want to be able to use SMEs, to use their fast footwork to help make sure I'm one of the better suppliers to the Department. I see our role really as being able to bring all these guys together using our good project management and technical skills.

We see ourselves as an organisation that's growing over the next couple of years. We've got ourselves in what I believe is a strong, stable position - we have about 500 engineers within the organisation, and about 250 project managers who are being accredited by the Institute of Project Management under a recently-signed MoU. We are taking the business through the CMMI process with two Divisions already accredited to level 2, so we're spending quite a lot of time and effort just enhancing the skills within the organisation which is an important part of the capability that will allow the Department to receive their product as and when they expect to receive it.

ADM: Aside from your very successful naval and patrol boat export business, do you have any other plans for significant international operations? For example, apart from Tenix Datagate you don't have a large footprint outside Australia.

Salteri: We've exported somewhere in the order of 60 or 70 boats around the world. We obviously have a number of offices overseas, in the Philippines and New Zealand, and we do some work offshore. We've tended to do more work domestically rather than internationally but as time progresses we'll be looking to do to do more programs offshore however, like Australia, most overseas governments want their work to be done locally and therefore if our aim is successful and we
ADM: That means securing partnerships and creating relationships with primes and subs in those target markets...

Salteri: That's very true - the LADS business is mostly all offshore, and we are chasing some hydrographic database projects in the UK at the moment based on what we've done here: they'll be modified and supported out of the UK rather than out of Australia - that's important. The other thing we're trying to do is sell some of our products into NATO - the Generic Threat Simulator for instance, and we may need to take that offshore as well.

ADM: How do you rate your chances of winning the AWD contract?

Salteri: Under the terms of the tender process I'm really not allowed to talk about this project!

ADM: Will Tenix bid for the Combat System Systems Engineer contract?

Salteri: Rather than me make a comment about the AWD program itself, let me just say that Tenix, under the Anzac Ship Project, really did both the CSSE-type role as well as the shipbuilding role. So both those areas, in our view, would not be unfamiliar to us.

ADM: Leaving aside the AWD program, which current and forthcoming projects do you believe will be important for Tenix in the future?

Salteri: There are the other naval programs that are running - we've got the Delos/Sirius bid in at the moment, to convert that tanker for replenishment at sea; the amphibious vessels is obviously another one that will have a major influence. We're also having a look at things like Land 121 and Network Centric Warfare, so there are a number of major programs coming up. We also have close relationships with some of the research agencies like DSTO, and we tend to do quite a bit of work with them as well as our own R&D - that's vitally important for us as well.

ADM: How much is Tenix spending on R&D - and why do you invest in R&D?

Salteri: It's a bit hard to put an exact dollar value on it - we budget for R&D and we spend something in the order of $5 million a year on R&D: some of it is direct dollars that we spend, some of it is work in kind - but we do a fair bit. If I were to add it all up and try and compare apples with apples we'd get close to $25 million-worth of R&D that we run through the organisation.

Why do I do it? Obviously so that at the end of the day I have products to sell, not just in-country but also in the export market. In Australia I can sell my project management skills and related capabilities and skills of the people I have in my organisation. But when you go offshore you have to go not just with your project management capability, you need to have product as well so that you actually have something that is tangible. Take the Philippines, for instance - if we didn't have a SAR vessel of our own design then we wouldn't have been selling to them, so I need to have those products to sell in export markets.

ADM: What's your view of the Electronics, Aerospace and NSR sector plans, and of the draft Land sector plan?

Salteri: We were a major contributor to all those plans and therefore we have signed off on them, so we're quite comfortable with them all. The NSR plan as you know has been put back inside the cupboard, but the other plans have effectively been implemented by way of the DMO going through its procurement processes.

ADM: What do you believe are the implications of the Land sector plan for Bandiana and for your operations at Wingfield?

Salteri: We have about five and a half years to go on the Bandiana program so there is still a fair amount of work there - our aim would be to renew it or to bring it under the DIDS contract as we go forward. At the end of the day the Department has an operating paradigm and we need to ensure as suppliers that we can support them in the way they want to be supported; as that paradigm shifts on a regular basis we have to be agile enough to shift with it.

ADM: How do you see your aviation business growing?

Salteri: The Tenix Aviation (formerly Rossair) part of the business is outside my direct control, it sits elsewhere in the Tenix Group, but in the military aerospace sector if you look at the way the Commonwealth is procuring its aircraft, they are tending to buy most of their aircraft offshore. If you take Air 9000 as a classic example, along with the Tiger, the tankers and AEW&C, their through-life support is obviously an area where Australian industry can benefit and be a part of these programs. And there is quite a large number of SMEs that will actually form very strong partnerships to take that forward. We in Australia could never afford to develop a JSF or an AEW&C from scratch, and we shouldn't - we should be using our resources to do the things we can do economically.

ADM: Do you believe acquisition reform is starting to happen? Have you seen significant changes since the Kinnaird Review?

Salteri: There have been some significant changes - the appointment of Steve Gumley as head of DMO, an industry person rather than somebody from within the department; the advisory board that Steve has working for him; there have been a number of very significant structural changes in the DMO, the prescribed agency that will occur in June 2005 - obviously that will be a key stepping-stone in taking the DMO forward from where it was a couple of years ago. My personal view is that it's a bit too early to see all that come to fruition at the moment, there still needs to be some water flow under the bridge before it all happens, but there are signs that it's all starting to work.