French and Australian ministers with DCNS, whose $50bn contract to build 12 submarines is being questioned  © AAP/PA Images
French and Australian ministers with DCNS, whose $50bn contract to build 12 submarines is being questioned © AAP/PA Images

Australia defence procurement 'bleeding billions', says senator

29 January 2018

Australia’s Department of Defence (DoD) is “bleeding billions of dollars” by mismanaging the procurement of its Futures Submarines project, according to a senator.

Last week, the Australian National Audit Office (ANAO) released its Major Projects Report, which said major defence projects were averaging delays between 14 and 54 months and most contracts were seeking extra funds from the government. 

The latest ANAO report represent serious concerns about the current state of operations within the Department of Defence, said Senator Rex Patrick, a former submariner and project manager who replaced South Australia leader Nick Xenophon in the Senate when he resigned over his dual passport last year.

“Defence’s management of major equipment procurement is bleeding billions of dollars,” he said.

“While the government has been cutting cost to welfare, health, education and other important community programmes, major blowouts in defence are almost going unnoticed.”

In 2016, French company DCNS won the government's $50bn Future Submarines contract to build 12 new vessels, which would replace the Navy’s ageing Collins Class fleet.

However, in December 2017, the DoD confirmed that two planning documents relating to the $50bn contract, due to be released in 2016, had still to be finalised.

Patrick told ABC radio that such significant delays in the project could amount to billions in extra costs for the government.

“Given that the project is running across three to four decades and is a $50bn programme, these sorts of delays, they cascade through – it could be a $1bn to $2bn blowout on the evidence we have at the moment,” he said.

Meanwhile, the Australian government last week awarded its latest Future Submarine contract to defence giant Lockheed Martin – a $700m contract to design the weapons system for the Navy’s fleet of 12 new submarines being made by DCNS.

While the contract was praised for its potential creation of 200 jobs, Patrick raised concerns over the contract cost and the lack of transparency.

“We have no idea what’s included in the $700m contract – that’s something we’ll have to unpack at Senate estimates,” he said.

“Noting this work is for integration and installation, the number seems high.”

In 2015, former senator Xenophon asked a Senate estimates hearing about the actual tactical weapon control system that Lockheed Martin would integrate but no answer was given. 

Patrick said the fact that the government had still not confirmed a definitive price for the equipment they are buying off Lockheed Martin, showed lax management of the procurement process. 

“It seems we’ve committed to a system where we don’t understand the price,” he said. “That approach is somewhat cavalier.” 

However, in a statement, the DoD rejected Patrick’s concerns and insisted the programme remains “on time and on budget”.

“Requests for proposals have been issued to key equipment suppliers and the procurement process is progressing to support subsequent design activities,” it said.

“The supporting work required to achieve key milestones continues to be managed, ensuring those milestones are met on schedule.”

It added, “all work continues to be conducted within approved funding”. 

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