Chapter 7 - Resourcing and effectiveness of the agencies
Defence Signals Directorate
The Defence Signals Directorate is Australia's signals intelligence agency. Situated within the Intelligence and Security Group of the Department of Defence, DSD provides both a vital Defence and national-level capability through the interception and reporting of foreign communications.
Signals intelligence has special intelligence value. It conveys directly the views of the target, in contrast to the second-hand accounts usually provided in humint reporting or the expressions of view or position in public statements or diplomatic exchanges. Supported by sophisticated technology and large elements of automated processing, sigint is also often the timeliest source of information for analysts and decision-makers. The national-level intelligence provided by DSD is important, and is becoming increasingly so as part of the government's overall response to global terrorism. But it is the key role played by sigint during war and other military operations that is the principal driver for the significant government investment in DSD - it has the largest budget and number of staff within the intelligence community.
DSD also has an important role in advising on and supporting information security practices across government. This role involves some significant challenges, including managing complex business relationships with information technology companies, and balancing security requirements against user needs in an environment in which government business is increasingly conducted electronically. DSD also maintains a number of high-security communications and IT systems.
DSD's current activities have their origins in the development of Australian military sigint capabilities during World War II. Following the war, Australia joined with Britain in the Commonwealth Far East sigint organisation with a headquarters in Melbourne. The Defence Signals Bureau was established in 1947, as part of the Department of Defence, with responsibility for maintaining a national sigint capability in peacetime.
In 1977, DSD assumed its current name, its status as a "directorate" within the Department of Defence reflecting Justice Hope's recommendations that DSD's important national role be given greater recognition. The relocation of DSD's headquarters from Melbourne to Canberra was completed in 1993 (the last member of the intelligence community to make this move). DSD's functions were subsequently defined by legislation with the enactment of the Intelligence Services Act 2001.
DSD's foreign partnerships, dating back to its wartime origins, have been a central factor in its development. Today these intelligence alliances remain strong, dynamic, and of immense value to Australia.
Today, DSD is a strong and capable organisation with a talented and highly skilled workforce and an impressive technological base. Its roles are clearly defined and it makes a unique and highly valuable contribution to Australia's intelligence effort. DSD has a sharp customer focus and sound business practices. The Inquiry found DSD to be well managed with a leadership that is closely engaged in the challenges of maintaining an effective sigint capability for Australia.
As part of the Department of Defence, DSD is subject to the Department's internal accountability arrangements. Director DSD reports to the Deputy Secretary, Intelligence and Security, and through him to the Secretary of the Department of Defence. Externally, its compliance with legislation and ministerial direction are monitored by the Inspector-General of Intelligence and Security, who also has responsibility for oversight of the propriety of its activities. Information on DSD is provided publicly and to parliament in Defence's annual report and its Portfolio Budget Statement.
The enactment of the Intelligence Services Act in 2001 added significant new elements to this accountability framework. Key functions of DSD were set out in that legislation together with requirements relating to authority for specific intelligence collection activities. The Act also provides for DSD's administration and expenditure to be subject to scrutiny by the Parliamentary Joint Committee on ASIO, ASIS and DSD. While DSD is subject to scrutiny by other parliamentary committees mandated to consider Defence, security constraints limit the information which can be provided to these committees. The Inquiry found that DSD has encountered no major problems in working under the provisions of the Intelligence Services Act.
The Inquiry received a small number of representations that DSD should be established as a statutory body in recognition of its significance as a national asset and its powerful intelligence gathering capabilities. These views were very much in the minority, and the Inquiry concluded that DSD was appropriately positioned in Defence. The importance of sigint support to military operations and the necessity of maintaining the closest possible links between DSD and the Australian Defence Force argue overwhelmingly that DSD should remain within the Defence portfolio. DSD's activities are well regulated by the Intelligence Services Act, and the Inquiry received every indication that national customers are being well served by DSD.
The Inquiry heard almost universal praise for DSD's performance from policy departments, from other members of the intelligence community and from within Defence. DSD is widely held in high regard for the sigint capability it maintains and the quality of the service it provides. Its response to the heightened pace of ADF operations and to counter-terrorism has been particularly noteworthy. DSD's efforts are closely focused on Australia's top intelligence priorities, with 92 per cent of its resources dedicated to issues in the highest category of requirements.
SUPPORT TO THE ADF
DSD has had a long-standing focus on effective support to military operations. DSD experience during the ADF's East Timor deployment in 1999 has been drawn on to develop enhanced support arrangements for ADF operations. These were utilised in Afghanistan and Iraq-related deployments to the Gulf. While much of the collection related to Iraq was by American or other assets, DSD performed a number of analytical and technical tasks in support of coalition forces, and provided a vital link to allied sigint organisations.
SUPPORT TO COUNTER-TERRORISM
DSD has made a strong contribution to the whole-of-government response to Islamic terrorism in South East Asia. Personnel committed to the counter-terrorism effort have risen significantly since 2001, and will rise further as a consequence of extra funding in the 2004-05 Budget. DSD's achievements have already been considerable, despite the significant adjustments necessary for DSD to understand the nature of this target and adjust its processes accordingly. DSD's close cooperation with relevant government agencies has been a key factor in its success.
GAPS AND CHALLENGES
Despite its successes, DSD has gaps in some key areas. The rapid rate of technological change and the increasing affordability of sophisticated technology have created both challenges and opportunities for DSD. Over recent years, technological changes have resulted in some loss of access by DSD, or in a limited ability to exploit collected communications. The Inquiry notes DSD's efforts to improve access to key intelligence targets, and finds there would be merit in a periodic external review of its performance against high priority and enduring targets.
The Foreign Intelligence Coordination Committee should commission with the Department of Defence, a periodic review of DSD's performance against top-priority targets.
As a large and complex organisation, DSD presents significant management challenges. Its staff fulfil a diverse range of functions, from highly specialised engineering and IT jobs to linguistic and analytic tasks. It manages a large investment programme, and is part of an interdependent international partnership. The Inquiry found that DSD's management and business practices provided a strong basis for the maintenance of Australia's signals intelligence capability. The inherent flexibility of DSD processes is impressive, as are the skills and dedication of management and staff alike.
The range and intensity of tasks DSD has undertaken over recent years, particularly in support of ADF operations and counter-terrorism, have placed heavy demands on DSD staff. While DSD has adopted a number of prudent measures to minimise stress, including the rotation of staff through high pressure areas, it must continue to manage problems such as potential burn-out with great care.
The Inquiry found the senior management structure within DSD stretched by the range and diversity of its responsibilities. The growth in staff numbers, and the additional responsibilities brought about by Australia's response to terrorism and a heightened Australian Defence Force operational tempo have not been mirrored by a corresponding strengthening of DSD's senior management team. The Inquiry recommends that this be remedied by the addition of two Senior Executive Service level officers to DSD's management complement.
The Department of Defence and the Australian Defence Force should strengthen DSD's management structure with the creation of a Deputy Director responsible for technical matters and a branch head responsible for collection and analysis.
DSD is the largest of Australia's intelligence agencies, both in terms of its annual budget and personnel numbers. Resources available to DSD have increased by around 60 per cent since 2000-01.
Resourcing is provided for DSD's operations through two mechanisms - through the Defence budget and supplementation through government-wide budgetary processes. While the former accounts for the bulk of DSD funding, it has received additional funding from government over recent years, including for counter-terrorism.
An increasingly large component of DSD's budget is allocated to its capital expenditure programme. DSD currently has four major projects which, in some cases, involve capital expenditure extending out over more than a decade. Together these projects will ensure access to required communications and the capacity to process the resultant intercept. These are supplemented by a large number of minor capital projects, typically targeted against specific challenges.
DSD is an impressive agency that provides a first-class sigint capability and represents a major national security asset for Australia. Its response to regional counter-terrorism has been excellent, and its support for Australian Defence Force operations highly valued. It is producing high-quality product with strong customer satisfaction levels. Its management and planning processes are effective and forward looking, and its investment programme well tailored to the technical challenges facing the organisation.