Mark Bishop (WA, Australian Labor Party, Shadow Minister for Defence Industry, Procurement and Personnel) Share this | Link to this | Hansard source

If we return to April, May and June this year, there was a lot of topical discussion about various platforms being purchased by the government. In particular, there was a series of decisions with respect to helicopters—MRH90s, Tigers and Seasprites—all of which seemed to have much delayed delivery dates, overrunning costs and ongoing problems in getting the intricate internals of the particular platforms installed, implemented and then working according to the original contract specifications. That discussion was quite interesting at the time, but as always it went off the public agenda, so it is a timely moment to return to the issue of the government procurement policy in respect of those particular platforms. So tonight I want to address Defence’s procurement of those three helicopters: the Seasprites, the Tigers and the MRH90s. I state at the outset that this really should have been a winning trifecta for Defence, but the government has lost the race to deliver any of those helicopters, any of those three platform purchasing sets, on time and within budget.

Let us look at the government’s form on the purchase of the three different platforms across our services. The Army is waiting for 22 Tigers for its ground forces and another 12 MRH90 helicopters essentially for troop-lift purposes. The Navy needs 11 Seasprites for its Anzac frigates. It is fair to say that none of these projects over the last five to seven years have kept on track in any respect. Let us start with the Tigers. Earlier this year, the ANAO released a report on the Tigers project that made a number of findings. It said that we have a fleet of helicopters that remain flawed in their contract design; that officials flouted tender guidelines when purchasing the craft; that buying the Tigers off the shelf—meant of course to save money and be much cheaper in the long run—could end up costing at least another $110 million; and, finally—that old friend—that there had been continuing inadequate oversight of contracts in this area.

Defence officials admit that time slippage has caused the Tigers project to run some 18 months behind the original schedule. They also agree that fast-tracking the tender process—from six months to six weeks, believe it or not—could expose them to a possible multi-million-dollar blow-out in through-life costs. I hate to say it, but the Tigers project is the project of which Defence is most proud. But the Tigers are not the biggest loser in this trifecta. That honour belongs to the purchase of the ageing Seasprites. This has been such a disaster that the Minister for Defence, Dr Nelson, threatened to scratch the entire project earlier this year. His choice was to either bin the project and lose $1 billion, which of course gives a new meaning to the idea of sunk costs, or gamble on a quick fix with millions more dollars in extra funding.

At one stage, Dr Nelson was looking at suing the contractors over the problems with the sprites. He should have read the fine print of the sprite contract before he spoke because, as was later disclosed, the government had negotiated away its rights to liquidated damages in exchange for some ‘benefits’. Of course, those benefits were to be delivered into the future and again, unfortunately, they never materialised. That is life, I suppose.

The sprites, as those who are interested might recall, are now three years behind schedule; cannot, will not or do not fly in bad weather; have blown out in costs to the tune of $150 million; and, we are latterly advised, have notched up another reported 40 identifiable deficiencies. When unveiled three years ago, the Seasprites were hailed by then defence minister, Robert Hill, as: ‘the most advanced maritime aircraft in the world’—not a bad rap. The plan was to buy the copter frames from the US—the frames date back to 1963 and some even have battle scars from the Vietnam War, so they are proven and road tested—and fit them with state-of-the-art equipment inside. Yet, just three years on, the sprites have ground to a virtual halt, only being used for simple tasks such as the delivering of stores. The frames are too small to fit all the contracted specifications for which they were bought.

Number three in this discussion tonight, the late starter in the race, is the government’s acquisition of 12 MRH90 copters. The European version of this particular platform has tested the patience of several governments over there, and I bet this copter causes our government a lot more problems into the future. The MRH90 is meant to be a copter that can sit 20 soldiers at a time, has a 900-kilometre flying range and is equipped with electric blade fold. The good news so far is that these copters have 20 seats. It remains to be seen, however, how many fully-equipped Australian soldiers it will carry.

What the copters are also missing is the important electric blade fold. That was one of the original selling points of this craft and one of the points that made the craft most attractive to our defence procurement people. But now, some years afterwards, it transpires that this blade fold is an optional extra and the government is going to have to pay much for it further down the track. Not only that, a new MRH90 squadron was meant for delivery next year—2007. The expectation was that all 12 copters would be ready for delivery by 2008. It is now apparent that we will not receive the squadron until 2008 and, finally, we will not receive all 12 copters for delivery before October 2009. So again, in respect of the MHR90s, there are further and continuing blow-outs in time of delivery.

Let us hope the project does not face cost blow-outs in the same way through-life support costs threaten to blow out the Tigers contract. We do know that Defence is committed to paying just over half of the contract against a series of milestones. I hope these payments can be more vigorously tested than similar milestone payments associated with the Anzac frigate refits. Trying to gauge the progress of these milestone payments at Senate estimates, I was told, of course, that this information could not be delivered because it was ‘commercial-in-confidence’.

So much for a winning trifecta in respect of the purchase of these three different platforms. Let us look at the form. Two of the purchases were supposedly risk minimised for being ‘off-the-shelf’, that is, they are proven and tested, are not custom made, can be delivered and have a record that suggests they should be able to be used. That was the Tigers and the MRH90s. They were meant to have been bought by Defence after problems were ironed out in other overseas orders. Unfortunately, as it turns out, Australia is the first country to receive the Tigers, so we are the guinea pigs.

Now Dr Nelson has had a rethink on the Seasprites and has decided to proceed with the original contract. Again, we are still waiting for the first sprite. So here we are, nine years after placing an order for sprites, with still no copter in sight. We have only a fraction of the Tiger copters ordered, in spite of these craft not being able to properly do the job for which they were ordered. And we are yet to receive any MRH90 copters. As we have seen with the purchase of these helicopters, these are the problems: the government continually changes the specs, leading to time delays; it prepays for benefits that never materialise; and it takes delivery of craft that cannot do the job they are ordered to do. I will lay a bet: we are in for a long wait before the Tigers, the sprites and the MRH90 copters can do the job they were ordered to do. This government gambles with taxpayers’ money on main defence projects. (Time expired)