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

by leave—I move:

That the Senate take note of the documents.

The Auditor-General’s Report No. 36 of 2005-06 is entitled Management of the Tiger Armed Reconnaissance Helicopter Project. Once again, the Auditor-General raises serious concerns about the management of a Defence procurement project. Again, the press has had a field day with this particular report. ‘Underpowered Tiger helicopters may lack growl,’ said the Australian Financial Review. ‘Choppers hit turbulence,’ said the Australian. From the Canberra Times we had, ‘Defence pays for toothless Tigers.’

Looking behind the headlines, the Auditor-General’s report tells the real story of this latest disaster from the Department of Defence. Briefly, the report found that we have a fleet of helicopters that are flawed in their contracted design. Tender guidelines were flouted when purchasing these craft. Buying the Tigers off the shelf—meant to save money—could end up costing at least another $110 million. And there was also that old friend from the past, inadequate oversight of contracts.

How did it come to this? The sorry saga started six years ago when the government approved the purchase of 22 Tiger armed reconnaissance helicopters costing then some $1.58 billion. The government wanted craft that offered all-weather reconnaissance, provided fire support for our troops and had a commonality so that the craft could be used across the forces. Instead, it has ended up with four aircraft delivered and eight copters grounded in Brisbane, leaving our forces with no capability in this area at all in the field. This, by way of introduction, was meant to be a less risky way of buying helicopters.

Alarm bells should have started ringing right back in 2001 when contracts were entered into by the relevant agency. Back then, the Tigers had still not received full certification or design acceptance from their manufacturer, an agency of the French government. This meant Australia was the first country in the world to give the green light to the production of this type of helicopter—so much for minimising risk by buying off the shelf.

Certainly at this time, the government should have started checking more thoroughly into the way it set about tendering for these particular craft. It took the Auditor-General to tell us how the Defence Materiel Organisation’s Tender Evaluation Board failed to adhere to its own tender evaluation plan and, indeed, its own detailed policy guidelines in this area. Perhaps if the defence department had been more accountable here the next chapter in this sorry story would not have to have been written, for when the first two prototype Tigers were finally delivered in December 2004, they failed to meet more than 70 contractual specifications.

A few of the vital areas in which flaws were found included: their weapons operability, their navigation system, the emergency locator beacon, their ability to fly long distances over water and the flight data recorder, which was not compliant. The list goes on. But what did the DMO do? Instead of sending these back to the shop and demanding better—or demanding what had been contracted for—it took delivery and, believe it or not, paid. Why?

DMO advised the Auditor-General that that was normal practice. I quote from the Auditor-General’s report:

It is DMO’s practice to accept deliverables with contractual shortfalls, and operational limitations, on a risk-managed basis, to ... deliver the required operational capability.

What a marvellous sentence! Yet here we are 24 months on and still no line pilots have been trained to an operational standard. Not one craft is up to airworthiness and the DMO is haggling with the contractor over the through-life support and maintenance.

And this, the Auditor-General warns, is likely to lead to even more delays and cost blow-outs. How? Because part of the original contract to build the 22 Tigers contained a low estimate for the cost of giving essential through-life support—the maintenance required while they are in operation. DMO simply assumed such costs would be lower than the contractor’s competitors because of the Tiger’s ‘more modern design’. We will never know how much the other three contenders for the project would have charged for through-life support because their tenders were not required. That is because the DMO failed to follow its own tendering guidelines and merely provided briefs as to why it rejected the others. So, when accepting the winning contractor’s bid, DMO assumed any continuing support for the Tigers would be cheaper because they were a more advanced design.

As we know, they were in fact wrong by $625 million, according to another contractor. This figure is disputed by the DMO but, as the Auditor-General reminds us, the through-life support contract even now remains unresolved. We are now far removed from the government’s original intent of buying off-the-shelf helicopters to reduce the risk of overspend. Incidentally, the Auditor-General raised yet another red flag over DMO’s ability to drive a hard bargain. It found that intellectual property remains with the contractor. This means we do not have the means—unless we pay again—to fix our own craft.

According to the 2000 defence white paper, the Tigers should have been in service by 2004. A year after this, the DMO accepted delivery of another helicopter. Yet again, the goods were shoddy. A test pilot and flight test engineer found that the craft, in the words of the report:

Exhibited neither high quality nor mature system performance, and a number of issues would directly affect safe and efficient operation of the craft.

Don’t you love the people who draft these things? This means the craft would not fly and could not turn but was accepted for delivery. So here we are, six years later, with just four aircraft delivered and 18 in production in Brisbane, leaving the ADF none of the capability it desired in the field.

Let us revisit the government’s original checklist for buying the Tiger fleet. It wanted a helicopter offering all-weather reconnaissance. What do we have? The Tigers have engines that are too heavy and use too much fuel. It wanted fire support for our troops, naturally enough. What have we got? The Tigers are not even in service—serving troops have to rely on our allies for this. It wanted a commonality to allow it to be used across the services. What do we have? The Tigers are not even approved for operational use, let alone possess the desired commonality.

We have seen how a flawed contract design, operational shortcomings and a nonadherence to established process have led to none of the government’s original checklist for a high-powered craft being met. This whole project is a classic case of poor planning, inadequate specifications and huge time delays blowing out the defence budget.

I will conclude by referring to another article in the media following last week’s headlines. This one is on the defence minister, Dr Brendan Nelson. Apparently the minister is looking at how Defence can assure government it is achieving value for money in its procurement activities. I would like to remind Dr Nelson of a Senate resolution, carried three years ago, to independently audit Australia’s major defence projects. So far this remains unheeded by his government. Should Dr Nelson take on board the Senate’s resolution, perhaps fiascos such as that surrounding the acquisition of the Tiger helicopters would not escalate. Such an independent audit may also provide him with solid backup once change is implemented and ensure he is not merely a toothless tiger.

I seek leave to continue my remarks at a later stage. I also seek leave to continue my remarks in respect of Auditor-General’s reports Nos 37 and 38 that are before the chamber.

Leave granted; debate adjourned.