Defence has been warned it's not doing enough to stamp out possible corruption around military contracts, with a former minister blasting departmental officials over the handling of a billion-dollar munitions deal involving a gift of champagne.
A parliamentary committee has been examining findings from the auditor-general that revealed a defence employee handed over confidential information to weapons company Thales in 2016, before eventually joining the French-owned business.
In June, an Australian National Audit Office (ANAO) report detailed "unethical conduct" involving a 10-year contract for Thales to run two Commonwealth munitions facilities, prompting the Department of Defence to refer the matter to the corruption watchdog.
Under questioning, defence department assistant secretary Ben Wright told the Joint Committee of Public Accounts and Audit his integrity team investigated the matter before referring it to the National Anti-Corruption Commission (NACC).
"The individual involved was quite upset about the issues that he had caused and in his words it was a poorly worded email and a joke. We don't consider it to be something that is acceptable."
Last week in Senate estimates, defence officials confirmed the Thales matter was still being investigated by the NACC, after Defence Industry Minister Pat Conroy last month declared his department had found no evidence to substantiate the claims.
Former defence minister Linda Reynolds, who served in the role between 2019 and 2021, said she had taken an intense interest in the ANAO's scathing findings earlier this year about probity in the department.
"When I read this audit report and remembered what had actually come up to me in the [ministerial] brief it almost made me feel ill at what I was told and that is very consistent with the advice that is in this report about what went to a different minister in 2017," Senator Reynolds said.
"The fact is you are now issuing new contracts to the same company (Thales), so this is why this is so important I think for your organisation because you've inherited a smell, a big smell."
Deputy Auditor-General Rona Mellor told the committee she remains concerned about defence not accepting her organisation's recommendations, particularly regarding long-term military procurement contracts that involve "strategic partners" in industry.
"There is an ongoing concern about whether recommendations, implementation is embedded in the culture … so there's a really big challenge ahead for defence," Ms Mellor told the committee.
"There are these big international contractors that do very important heavy lifting in defence specialist military equipment and munitions, and we are reliant on them because of their specialisations but how do we actually form the appropriate distance in our relationships?
"There's a real risk that you get captured by the provider, whether it's in incumbency in turning contracts over or in the nature of relationships that you form," she added.