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Defence averaging project slippages of up to 4.5 years

An Australian Army Tiger Armed Reconnaissance Helicopter lands at Mount Bundey training area near Darwin, Northern Territory. Image via Commonwealth of Australia, Department of Defence.

As Defence looks to commence work on major naval and land projects this year, the projects could experience serious delays if history is anything to go by, with one senator calling for major reforms to the department.

Figures released by the Department of Defence in response to questions from Senate estimates have revealed major defence projects face delays between 14 and 54 months.

The 42 Defence Major Capital Equipment Projects included in the Major Projects Report for 2017-18 have been classified into one of three categories:

Military-Off-The-Shelf (MOTS): A project is only deemed to be MOTS when the system or equipment being procured is currently in production and is already established in service with one or more customers for the equivalent purpose. Average slippage of 14 months.

Australianised Military-Off-The-Shelf (AMOTS): AMOTS projects are purchases of off-the-shelf systems or equipment with modification to meet the particular requirements of the Australian or regional physical environments and/or the Australian Defence Force’s particular operational requirements. Average slippage of 32 months.

Developmental: Developmental options pose alternatives where a significantly better outcome and/or technological warfighting advantage may be gained. Average slippage of 54 months.

Currently, 29 per cent of Australia's major defence projects are considered MOTS, 52 per cent are AMOTS and 19 per cent are Developmental.

Former submariner and project manager senator Rex Patrick said the Department of Defence needs to undertake serious changes in its acquisition process to deliver better results for the Australian defence forces and the taxpayer.

"The project data that has been released to the Senate by Defence shows that major reform is required in Defence’s approach to the procurement of capability and its subsequent delivery to operational commanders," Senator Patrick said.

"Billions upon billions of dollars are being wasted as Defence takes on unnecessarily risky acquisitions."

The calls for reform come after Patrick raised concerns that the Future Submarine Project is headed towards a multibillion-dollar blowout after Defence and submarine designer Naval Group failed to meet milestones on time.

As previously reported on Defence Connect, under the design and mobilisation contract for the SEA 1000 project, signed on 30 September 2016, Defence and Naval Group were required to produce the Australian Industry Capability Plan and an Australian Steel Development and Qualification plan within five months of the contract signing.

Rear Admiral Greg Sammut, Head of the Future Submarine Program, said that while Defence was previously on schedule in meeting all milestones for the design and mobilisation contract, the relevant parties fell behind in August last year.

"We're still working on the Australian Industry Capability Plan with Naval Group, and similarly with the study for the Australian development of the steel and so forth," RADM Sammut said.

"There have been some delays with the work that we want to do with Australian industry on the steel study."

Senator Patrick said failure to meet these milestone suggests more troubles are ahead for the $50 billion project.

"These milestone signals are like the canary in the coalmine," said Patrick.

"In this case, the canary has fallen off the perch and Defence are ignoring that fact. In the context of a $50 billion project spanning multiple decades, these small problems can easily cascade and turn into years of delays and billions of dollars of additional cost."

Defence is no stranger to mammoth blowouts on large projects, with the Wedgetail aircraft (Developmental), the Air Warfare Destroyer (AMOTS) project and the Tiger Armed Reconnaissance Helicopters (AMOTS) experiencing a series of serious cost and delivery problems in recent years.

Defence Industry Minister Christopher Pyne rejected these comments, telling Defence Connect, "The submarine project is on time, on budget and does have independent oversight outside Defence. Any suggestion to the contrary is demonstrably false."

A spokesperson for the minister also said the overdue plans do not affect the schedule or cost of the project.

"Neither of the two plans referred to, the Australian Industry Capability Plan and the Australian Steel Plan, have any impact on schedule or cost," the spokesperson said.

"The Australian Industry Capability Strategy and Australian Steel Development and Qualification Study are both due by April."

If the plans are delivered by April this year, it will be a year later than scheduled in the Design and Mobilsiation Contract. Senator Patrick has questioned how Naval Group has been able to engage Australian industry properly, or at all, without final approval of the plans.

Defence averaging project slippages of up to 4.5 years
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