Tipo de estudio 

The Defence Materiel Organisation’s (DMO) share of the 2008–09 Budget is $9.6 billion. DMO is responsible for the management of 236 major projects with a value of over $20 million each, and more than 180 minor projects.

Once again, as in previous years, Defence has large amounts of money for the acquisition of military hardware which it will be unable to spend and will have to reprogram to spend in later years. The 2008–09 Defence Budget has reprogrammed $1.066 billion of the Approved Major Capital Program to later years because of ‘unanticipated contractor delays’.8

, the Parliamentary Secretary for Defence Procurement, Greg Combet analysed the reasons for the delays, attributing approximately:

• 53 per cent to industry delays—‘including an inability to meet contracted milestones by

payment dates’

6. Geoffrey Barker, op. cit.

7. Patrick Walters, ‘Military budget going great guns thanks to China’, Australian, 17–18 May 2008, p. 11.

• 12 per cent to DMO processes—‘including administrative and contracting requirements’ • 28 per cent to issues related to the United States Military Sales System

• 4 per cent to ‘the unavailability of platforms for upgrades or work needed’, and • 3 per cent to ‘cost savings’.9

Mr Combet cited industry’s overestimation of its ability to meet schedules as a cause for some of the delays, but he also pointed to ‘significant capacity constraints within the economy’, specifically ‘in the area of skills and infrastructure’.10 Given that 80 per cent of the ADF’s warfighting assets will be replaced within the next decade, and that 65 per cent of the acquisition and sustainment budget of more than $100 billion will be spent in Australia, it is likely that reprogramming due to contractor delays will be a feature of Defence acquisition for the foreseeable future, as it has been in the past.

Delayed projects

The government has singled out four ‘projects of concern’ which have been experiencing industry delays.11

Wedgetail (Project AIR 5077—Airborne Early Warning and Control)

Project Wedgetail involves the acquisition and introduction into service of six aircraft, ’ of Australia’s surveillance, early warning and detection

capability. It was considered to ha

Government becam. A contract was signed with

Boeing in December 2000, and the first aircraft was to be in-service by early 2007. Boeing has attributed the delay to difficulties in integrating complex onboard electronics. DMO’s

the Howard Government that it would reserve its contractual rights in regard to liquidated damages. In February 2007 Boeing announced that the program had slipped two years. The new Labor Government has warned Boeing and other Wedgetail contractors that they need to meet production and cost deadlines.12 In the Defence Portfolio Budget Statements 2008–09, DMO has signalled that there is ‘still residual technical and schedule risk’ which could threaten Boeing’s current plans to deliver the first aircraft in March 2009.13

Tiger Armed Reconnaissance Helicopters (Project AIR 87)

Twenty-two Tiger Armed Reconnaissance Helicopters with associated support facilities are being acquired for the Australian Army from Australian Aerospace, a subsidiary of

9. Greg Combet, Speech by the Parliamentary Secretary for Defence Procurement: 2008 Defence Budget Briefing, 5 May 2008.

10. ibid. 11. ibid.

12. Dennis Shanahan, ‘Defence talks tough on US suppliers’, Australian, 27 February 2008, p. 5. 13. Australian Government, Portfolio Budget Statements 2008–09, op. cit., pp. 174–75.

Budget Review 2008–09

Eurocopter. Operational capability has slipped by two years, due to delays in the parent Franco-German program. On 1 June 2007, DM to Australian Aerospace, and Defence has also claimed more than $10 million in for th of training devices. The Defence Portfolio Budget Statements 2008–09 report that as at 21 April 2008, eleven helicopters and some associated facilities and systems had been accepted by the Commonwealth. The Commonwealth and the contractor, Australian Aerospace, entered into a formal dispute resolution process in October 2007 which is expected to achieve a resolution through a Contract Change Proposal and the resumption of payments by July 2008.14 On 22 May 2008, Mr Combet announced that a Deed of Agreement had been signed, resolving contractual issues between the Commonwealth and the contractor. This new Deed of Agreement ‘contains the basis for a Contract Change Proposal that transitions the current support contract to a performance based structure, to reduce cost of ownership to the Commonwealth over time’.15 All deliveries should be complete by the end of 2009.

Tactical UAVs (

In December 2005 the then Minister for Defence, Senator Robert Hill, Australia had been selected as the preferred tenderer to provide the IAI (Israeli Aircraft Industries) I-View 250 UAVs (Unmanned Aerial Vehicles) because it ‘offered the best value for money’. In mid-2006, the project reported that the in-service da . The in December 2006. The $145 million project will provide two Tactical UAV (TUAV) systems each of which comprise ‘four I-View 250 UAVs, two ground control stations, four remote video terminals and associated tactical support system’.16 The initial operating capability for the first TUAV is now planned for 2011.17 The project is now reportedly two years behind schedule and it has been suggested that ‘a deadline has been set of the end of next month [June 2008] for the problems to be addressed, otherwise the project will be scrapped’.18

Guided Missile Frigate upgrade (Project SEA 1390 - FFG UP)

The original scope of the FFG project was to upgrade all six FFG-7 Adelaide Class frigates. In mid 2006 the scope of the original 1999 contract was reduced from six ships to four. The

(ANAO) in

October 2007 which estimated that the delivery of the last ship will be delayed by four and a half years, until June 2009. The ANAO report ‘highlighted the ongoing difficulties caused by a prime contract which has limited the technical involvement of the Project Authority [DMO] and failed to sufficiently specify test procedures’.19

14. ibid., p. 180.

15. Greg Combet (Parliamentary Secretary for Defence Procurement), Progress on Project AIR 87 – Tiger Armed Reconnaissance Helicopters, media release, Canberra, 22 May 2008.

16. Australian Government, Portfolio Budget Statements 2008–09, op. cit., p. 173. 17. ibid.

18. Mark Dodd, ‘Spy plane joins list of troubled projects’, Australian, 17–18 May 2008, p. 2. 19. Julian Kerr, ‘FFG upgrade takes ANAO flack’, Australian Defence Magazine, Vol. 16(1),

Major Projects Report

DMO will produce the first of it planned annual ‘Major Projects Reports’ at the end of 2008. These reports will contain ‘data and analysis on the schedule, cost and capability of up to 30 major defence equipment projects’.20 The first report will be limited to nine selected projects, hopefully those of greatest concern. The Portfolio Budget Statements do not specify whether the projects will be assessed before or after final government approval (‘second pass’). In some cases, analysis of a project by ANAO before government makes its final decision might be quite useful. The production of a ‘Major Projects Report’ on Australian

projects is very similar to the

Ministry of Defence provides project summary sheets on 20 of the top approved defence equipment projects and the ten largest projects which are still in their assessment phases. These projects are then analysed by the UK National Audit Office on the basis of cost, time and performance.

Recruitment and retention