SECTION 2 REPORT ON PERFORMANCE€¦ · • Output 1.1—Management of capability acquisition • Output 1.2—Management of capability sustainment • Output 1.3—Provision of policy

SECTION 2REPORT ON PERFORMANCE

CHAPTER 3Outcome performanceThe DMO performance outcome is that Defence capabilities are supported through efficient and effective acquisition and through–life support of materiel.

The outcome is based on:

• Output 1.1—Management of capability acquisition

• Output 1.2—Management of capability sustainment

• Output 1.3—Provision of policy advice and management services.

The DMO delivered a 92.6 per cent achievement in outcome financial performance resulting from an actual result of $8,441.5m against a revised estimate of $9,117.6m.

OUTPUT 1.1 MANAGEMENT OF CAPABILITY ACQUISITIONUnder Output 1.1, the DMO acquired and delivered specialist military and associated equipment to Defence. These activities include all pre–approval tasks and tasks associated with the acquisition process for major and minor capital investments. Both major and minor capital equipment projects are funded through this Output.

Within the next 15 years, over 80 per cent of the ADF’s war fighting assets will be replaced or upgraded. In order to meet this challenge the DMO is managing about 230 major projects and about 190 minor projects.

Separate Materiel Acquisition Agreements between the DMO and Capability Development Group cover each major capability project. Minor projects are

covered either in separate or Omnibus Materiel Acquisition Agreements between the DMO and Defence Capability Managers.

Output 1.1 represented 46.6 per cent of the DMO’s actual expenses in 2007–08. Expenses under this output included DMO’s costs in delivering acquisition services.

The planned resource use for Output 1.1 was revised from $4,827.5m in the Portfolio Budget Statements 2007–08 to $4,100.2m in the Portfolio Additional Estimates Statements 2007–08. The DMO’s 2007–08 actual result against this output was $3,936.0m. This output achieved 96.0 of the 2007–08 revised estimate in the Defence Portfolio Additional Estimates Statements 2007–08.

18 DEFENCE ANNUAL REPORT 2007-08 VOLUME 2

CHAPTER 3 OUTCOME PERFORMANCE

NOTE

1. The revised estimate for 2007–08 was published in the Portfolio Additional Estimates Statements 2007-08.

Approved Major Capital Equipment ProjectsIn its role of acquiring and sustaining equipment for the ADF, the DMO manages the Approved Major Capital Investment Program (AMCIP). The AMCIP consists of projects that are funded from the Defence Capability Plan and transferred to the DMO following Government’s approval. While overall the DMO exceeded its revised AMCIP budget, the cash flow of some projects has been reprogrammed into future years. Reprogramming of projects is due to a number of factors that arose in both the pre–contract and contract performance stages.

The total spend against AMCIP in 2007–08 was $3,515m. This was $258m below 2006–07 ($3,773m), a decrease of seven per cent. The DMO’s 2007–08 AMCIP budget included an estimated cash flow requirement of $1,132m for activity expected to be approved by Government during the year, and passed to the DMO for management. This included $572m for acquisition of Super Hornets, $123m for Enhanced Land Force (ELF) acquisitions and $437m for other anticipated projects. A total of $856m was spent against these activities in the year; $286m for Super Hornets, $78m for ELF and $492m for other new projects reflecting the re–alignment of cashflow estimates to future years in support of activity delivery.

Table 3.1 Performance Information for Output 1.1

Performance indicator Planned evaluation of performance

Performance

Project scope, schedule and budget criteria, as agreed between the CEO DMO and the Defence customer, and expressed in the Materiel Acquisition Agreements.

Delivery of major and minor capital equipment projects against the Materiel Acquisition Agreement scope, schedule and budget criteria.

Substantially achieved.In 2007–08 the DMO achieved 96.0 per cent of our revised estimate[1] for Output 1.1. This output includes Approved major capital equipment projects, minor projects and service fee in support of acquisition activities. The estimates for this output also included unapproved major and minor projects.

DEFENCE ANNUAL REPORT 2007-08 VOLUME 2 19


Top 30 Projects as forecast in the Portfolio Budget Statements 2007–08Table 3.2 and the descriptions that follow provide details of the top 30 projects by forecast expenditure in the Portfolio Budget Statements 2007–08. Expenditure for the top 30 projects represented 52 per cent of total expenditure on major capital equipment projects in 2007–08.

Table 3.2 Top 30 Projects by expenditure as forecast in the Portfolio Budget Statements 2007–08

Project number

Approved project

expenditure($m)

Cumulative expenditure to 30 June 2007

($m)

Budget estimate 2007–08

($m)

Revised estimate 2007–08

($m)

Actual expenditure

2007–08($m)

Variation

($m)Aerospace Systems DivisionC–17 Globemaster heavy lift aircraft

AIR 8000 Phase 3

1,838 1,132 241 76 164 88

Air–to–Air refuelling capability

AIR 5402 1,750 499 198 237 61 -176

F/A–18 Hornet upgrade

AIR 5376 Phase 2

1,875 1,108 110 147 149 2

F/A–18 Hornet upgrade – Structural refurbishment

AIR 5376 Phase 3.2

874 97 106 63 67 4

Airborne surveillance for land operations

JP 129 Phase 2

126 1 34 18 6 -12

Airborne Early Warning and Control ProgramAirborne Early Warning and Control System

AIR 5077 Phase 3

3,752 2,468 160 139 43 -96

Air Warfare Destroyer Program Design Activity SEA 4000

Phase 2226 185 177 40 41 1

Aegis Weapon System

SEA 4000 Phase 3.1

150 150 112 – – –

Electronic Systems DivisionElectronic warfare self protection for selected ADF aircraft

AIR 5416 Phase 2

307 129 69 49 46 -3

High Frequency Modernisation

JP 2043 Phase 3A

637 355 42 9 6 -3



New air defence command & control systems for control and reporting units 2 & 3

AIR 5333 263 105 32 15 9 -6

MILSATCOM terrestrial infrastructure

JP 2008 Phase 3E

210 157 32 30 30 –

Explosive Ordnance DivisionMulwala redevelopment project

JP 2086 Phase 1

348 – 58 54 56 2

Explosive Ordnance reserve stocks

JP 2085 Phase 1B

202 115 54 47 32 -15

Follow–on stand off weapon

AIR 5418 Phase 1

373 65 50 37 40 3

Lightweight torpedo replacement

JP 2070 Phase 3

287 48 49 48 46 -2

Helicopter Systems DivisionMulti role helicopter

AIR 9000 Phase 2

3,557 556 432 325 262 -63

Armed reconnaissance helicopter (Tiger)

AIR 87 Phase 2

2,026 1,219 182 50 91 41

Land Systems DivisionUpgrade of M113 armoured vehicle

LAND 106 624 208 116 108 109 1

Bushmaster infantry mobility vehicles

LAND 116 Phase 3

893 280 46 118 112 -6

Tank replacement project

LAND 907 Phase 1

554 420 43 5 4 -1

Maritime Systems DivisionGuided missile frigate (FFG) upgrade implementation

SEA 1390 Phase 2

1,504 1,068 96 96 104 8

Standard missile (SM–1) replacement

SEA 1390 Phase 4B

575 104 78 64 77 13

Anzac Anti–Ship Missile Defence

SEA 1448 Phase 2A

359 102 40 46 44 -2

Anzac Anti–Ship Missile Defence

SEA 1448 Phase 2B

438 22 81 37 53 16


Project number

Approved project

expenditure($m)


($m)


($m)


($m)

Actual expenditure

2007–08($m)

Variation

($m)



Anzac Ship SEA 1348 Phase 2

5,377 5,320 55 33 23 -10

Collins Replacement Combat System

SEA 1439 Phase 4A

452 352 48 40 38 -2

Armidale class patrol boat

SEA 1444 Phase 1

559 400 35 72 62 -10

Ships self defence capability

SEA 1779 Phase 1

48 10 33 13 15 2

Military Integrated Logistics Information SystemImprovements to the Logistics Information Systems (MILIS)

JP 2077 Phase 2B

126 42 38 37 27 -10

Total Top 30 30,310 16,717 2,847 2,053 1,817 -236


Project number

Approved project

expenditure($m)


($m)


($m)


($m)

Actual expenditure

2007–08($m)

Variation

($m)



Top 30 Project DescriptionsAerospace Systems DivisionAIR 8000 Phase 3—C–17 Globemaster III Heavy Lift Aircraft

Contractor: The Boeing Company under a Foreign Military Sales (FMS) arrangement with the United States Government

Four Boeing C–17 Globemaster III heavy lift aircraft, and associated support and equipment have been acquired and successfully transitioned into Air Force service. This capability has significantly enhanced the ADF’s ability to support national and international operations and major disaster rescue and relief efforts. On completing initial transition, training, test and evaluation activities, the first two C–17 aircraft obtained an Australian Military Type Certificate and Service Release from the Chief of Air Force in August 2007, allowing them to undertake operational roles. The third and fourth aircraft were handed over to the Commonwealth in December 2007 and January 2008, again ahead of the contracted schedule. To date, the project is within budget and on schedule to deliver self–protection improvements, training devices, specialist role equipment and mature support arrangements during 2008–10. Full Operational Capability will be achieved when mature C–17 facilities have been established. This is anticipated to occur by 2011.

The primary risk to the project is the delivery of effective logistics support to

allow sustained C–17 operations of all four aircraft at required rates of effort. This medium level risk is being mitigated by obtaining critical spares and support equipment incrementally and participating in the United States Air Force Globemaster Sustainment Partnership. Increased spares and equipment holdings are being progressively delivered in 2008 and 2009.

AIR 5402—ADF Air to Air Refuelling CapabilityContractor: EADS CASA – acquisition Qantas Airways Ltd – through–life support

This project will acquire five Airbus A330 Multi–Role Tanker Transport aircraft – to be known as the KC–30B in Air Force service. The acquisition also establishes the infrastructure necessary to deliver through–life support services, including engineering, maintenance, spares, technical data, software and training support for the new fleet.

The through–life support contract was signed with Qantas in February 2007, with commencement aligned with acceptance of the first modified A330 aircraft.

Following first flight on 15 June 2007, the first aircraft was re–inducted into the conversion centre in Madrid, Spain for installation and test of the flight test instrumentation. This task took longer than expected with flight test not commencing until early November 2007 (an overall schedule slip of five months). The first phase of flight testing was successfully completed in mid–February 2008 and confirmed the handling qualities and performance of the modified aircraft. The aircraft was then re–inducted into the conversion centre to install the suite of military avionics.

The second aircraft was accepted by EADS CASA from Airbus in May 2008.

A significant shortfall in expenditure occurred in 2007–08 due to contractor delays. Schedule delay associated with the late commencement of the first phase of flight testing was not recovered, which



impacted completion of Phase 2 conversion milestones. Delays to completion of test planning impacted achievement of the Test Readiness Review milestone. Both conversion and test readiness milestones were completed to allow commencement of the second phase of ground testing in August 2008 and flight testing during fourth quarter 2008.

EADS CASA has committed additional resources and management attention to minimise further program delays. Nevertheless, there remains a medium level of technical and schedule risk associated with testing and certification of the new refuelling boom and military avionics systems. The current five month delay will not be recovered and the contracted February 2009 delivery date for the first aircraft will not be achieved. The first two aircraft are now expected to commence flying in Australia in the second half of 2009. Completion of Air Force receiver clearances and military airworthiness certification is now expected mid–2010.

There were two major technical risks to the project in 2007–08; qualification of the new refuelling boom, and the development of the military mission systems. The first risk was managed through the EADS–funded technology demonstration and qualification program for the new boom system, including flight testing on a demonstrator aircraft. The second risk is being managed by progressive bench and system–level testing, and a high degree of project input to the review and ongoing development of the military mission system. The overall risk level for this project is medium.

AIR 5376 Phase 2—F/A–18 Hornet upgradeContractors:• United States Navy – aircraft software

integration

• The Boeing Company (United States) – aircraft technical integration

• Raytheon (United States) – ALR–67(V)3 Radar Warning Receiver

• Saab – BOL–518 Supplementary Counter Measures Dispensing System

• Elta – EL/L–8222 Active Radio Frequency Electronic Counter Measures System

• Raytheon Australia – Hornet Aircrew Training System

This project involves upgrading the F/A–18 fleet to allow the aircraft to perform assigned air defence tasks more effectively.

Phase 2.2 is the upgrade of cockpit displays, moving maps, helmet mounted cueing system, data links and simulators, and was achieved in 2007–08. Phase 2.3 is the electronic warfare self–protection suite upgrade, and is currently underway.

The situational awareness aspects include upgraded cockpit displays, a moving map, a helmet–mounted cueing system for the advanced short–range air–to–air missile, and improved datalinks. Fleet modification is scheduled to be completed by the end of 2008.

The electronic warfare self–protection upgrades include a new radar warning receiver, a supplementary counter measures dispensing capability and a new active radio frequency jammer.

The major project milestones achieved in 2007–08 were the successful delivery of the Final Operating Capability for the Hornet Upgrade Phase 2.2 elements, the commencement of production of the first Phase 2.3 capability, and factory acceptance testing of three Tactical Readiness Trainers to supplement the already delivered Operational Flight Trainers.

The initial concept was to negotiate both the acquisition and in–service support of the Supplementary Counter Measures Dispensing System together. Due to value for money considerations, a new contracting strategy was adopted whereby the acquisition and in–service support elements were separated. The



acquisition contract was signed on 31 July 2008. A strategy for in–service support is being developed.

A risk for the project is maintaining the fleet modification schedule with concurrent aircraft modifications and maintenance activities, while allowing for ageing aircraft issues. This low level risk was mitigated by DMO and Air Force management of the production schedule and the implementation of several stand–alone production lines within the modification facilities.

A further risk is that the integration, aircraft installation, and legacy systems degrade the electronic warfare self protection suite subsystem performance, and hence the suite performance does not meet the function performance specification. This medium–level risk is being managed by incremental integration and testing that will identify issues for early rectification, drawing on Boeing and US Navy expertise, and performing systems integration laboratory testing. Flight testing in the US on an instrumented EW range will provide knowledge of deficiencies and allow development of tactics and techniques.

Another medium–level risk is the Commonwealth performing the role of electronic warfare self protection suite systems integrator and integrating disparate subsystems from multiple countries. This risk is being managed by conducting prototyping activities before contracting fleet modification; establishing and operating a Resident Project Team in the United States, establishing the interface control working groups, and implementing an incremental approach through progressive software releases to allow the logistics and operational elements time to adapt to the new systems and capabilities.

Meeting the schedule for delivery and acceptance into service of the Hornet aircrew training system is a low risk and has been reduced through close management with the contractor and capability user. Training requirements

limiting opportunities for the incorporation of upgrades to the Tactical Operational Flight Trainers is a low risk for the project. This risk will be managed by close liaison with Air Combat Group and the prime contractor in the development of schedules for upgrade activity.

AIR 5376 Phase 3.2—F/A–18 Hornet Upgrade—Structural RefurbishmentContractor: L–3 Communications MAS Inc (Canada) – Non–recurring Engineering/Modification

Production:• June – December 2007: Boeing

Australia Ltd (on behalf of the Hornet Industry Coalition) – for Structural Refurbishment Program 1 (SRP1) Delta production installation program.

• January – June 2008: Boeing Australia Ltd and BAE Systems Australia (even distribution of work) – for SRP1 Delta production installation program.

• January – June 2008: L–3 Communications MAS Inc – for Structural Refurbishment Program 2 (SRP2).

The first prototype centre barrel replacement aircraft successfully completed test flights in February 2008 and has been returned to the fleet. The second prototype has undergone centre barrel replacement in Canada and was returned to Australia for reassembly in September 2008.

Due to the risks associated with conducting centre barrel replacement in Australia and the dissolution of the Hornet Industry Coalition, initial production was contracted to L–3 Communications MAS (Canada) with low rate initial production beginning in February 2008. Currently a total of ten centre barrel replacements (including the two prototypes) have been contracted to L–3 Communications MAS (Canada). The total number of centre barrel replacements will be determined based on analysis of the planned withdrawal date and fatigue accrual rate.

The tender for the mature production contract has been issued and a prime



contractor is expected to be on contract by January 2009, with completion of work scheduled for 2013.

A low risk to the project is the potential failure to strike a mature contract for production. To mitigate this risk, a dedicated team is developing a contract with a firm delivery schedule. A contingency plan has been developed to extend the current interim contracts should the contract schedule be compromised.

Another low level risk associated with the project is schedule delays caused by poor aircraft condition requiring additional repairs. Additional work may also be required during Centre Barrel Replacement. Fatigue life extensions greatly reduce the impact of delay, thereby reducing this risk.

JP 129 Phase 2—Airborne Surveillance for Land OperationsContractor: Contractor not yet selected

The project scope includes two Tactical Unmanned Aerial Vehicle (TUAV) systems, each comprising four air vehicles fitted with sensor payloads, a ground segment to provide control and exploitation functions, and elements for maintenance and logistics support. The TUAV system will have electro–optic and infra–red cameras and a laser target designator. It will provide real–time video footage to ground operators via secure wideband line–of–sight datalinks.

Defence signed an acquisition contract with Boeing Australia in December 2006 for a TUAV system based on the Israel Aerospace Industries I–View 250. Boeing was awarded an in–service support contract in February 2007. However, in implementing the acquisition contract, Boeing experienced a range of technical and programmatic issues, making it increasingly difficult to deliver the full scope of the contract within a timeframe acceptable to Defence. The contracts were terminated on 4 September 2008.

Defence is presently considering alternative capabilities. Operational imperatives are likely to lead to off–the–shelf capabilities which can be delivered in minimum time.

Air Warfare DestroyerSEA 4000 Phase 2—Air Warfare Destroyer Design ActivityContractors: ASC Shipbuilder Pty Ltd and Raytheon Australia Pty Ltd—Phase 2 Design Agreements and Not–to–Exceed Contracts were in place between the Commonwealth and the Alliance partners

This Phase of the SEA 4000 Program was closed following government approval of the design, and the scope incorporated in SEA 4000 Program Phase 3—Build, which commenced in October 2007. Refer to additional project information on page 42 for further detail on Phase 3.

SEA 4000 Phase 3.1—Air Warfare Destroyer AEGIS Combat SystemContractor: A Foreign Military Sales case with the United States Government (United States Navy).

Phase 3.1 was established in 2005 to acquire three ship sets of core Aegis Combat System equipment.

This Phase of the SEA 4000 Program was closed following Government approval of the design, and the scope incorporated in SEA 4000 Program Phase 3—Build, which commenced in October 2007. Refer to additional project information on page 42 for further detail on Phase 3.

Airborne Early Warning & Control System AIR 5077 Phase 3—Airborne Early Warning & Control SystemContractors: The Boeing Company (USA)

This project will provide Defence with an airborne early warning and control capability, with the provision of six aircraft and associated supplies and support.

On 10 June 2008, Boeing advised a further schedule delay of approximately 10



months to the delivery of the first fully mission capable aircraft, due to continuing problems associated with sub–system integration and radar and electronic support measures maturity. Boeing now proposes delivery of the first aircraft in January 2010, a total delay of 38 months against the contract baseline.

In order to minimise the impact of this latest delay, Boeing has proposed to the Commonwealth that it would deliver two aircraft in July 2009 with sufficient capability to enable the ADF to commence training and bed–down its logistics support systems. Defence continues to review the underlying details of the proposed revised Boeing schedule but assesses that there is still residual technical and schedule risk to delivery in January 2010. Defence is now planning to establish an initial operating capability by mid–2011 and final operating capability in mid–2012.

The first two aircraft continued to undergo system integration and initial developmental testing throughout 2007–08. The sub–contractor, Boeing Australia Ltd, completed modification of the third aircraft at RAAF Amberley in January 2008, and this aircraft has now joined the flight test program in Seattle. The remaining three aircraft are scheduled to complete their modification programs in September 2009, January 2010 and March 2010. Construction of the initial Airborne Early Warning and Control System (AEW&C) facilities at RAAF Tindal commenced in July 2007 and is scheduled for completion by the end of October 2008. Construction of the main Tindal facilities was approved by Parliament in June 2008. The Operational Flight Trainer was delivered in June 2008, with final acceptance planned for November 2008. Expenditure for 2007–08 was significantly less than estimated, due primarily to the slippage against the prime contract and the signing of the support contract.

The risk rating for the project is high. The major risks to the project are radar and electronic support measures, technical

maturity, software development and system integration. These risks are being managed through close interaction between Commonwealth and contractor staff. The Commonwealth, contractor and principal sub–contractor senior management are undertaking regular reviews against a risk–based integrated master schedule.

Military Integrated Logistics Information System (MILIS)JP 2077 Phase 2B—Improvements to the Logistics Information SystemContractor: Mincom Ltd

MILIS will provide the foundation for integrated supply, inventory management, maintenance and distribution throughout Defence. This will include support to logistics processes for ADF units and headquarters, in barracks and in the field, including to deployed locations without access to reliable communications.

Phase 2B.1This phase will replace the core Standard Defence Supply System. Phase 2B.1 has been rescheduled by 12 months due to slippage in Mincom’s software development schedule. A project remediation program has been successfully negotiated, with the project now scheduled to go live in October 2009. The revised schedule removes the risk associated with the simultaneous upgrade of ROMAN and MILIS.

Phase 2B.1 carries a number of technical risks – development of critical system interfaces, data migration and functional testing and performance. Defence is mitigating these risks through extensive stakeholder engagement with relevant subject matter experts, developing architectural and delivery frameworks to provide clarity on solution design, and engaging specialist market expertise where appropriate. This risk is assessed as high to medium.



A further risk to Phase 2B.1 is the ability of Mincom to deliver the required system to Defence requirements. The project has implemented a revised approach, within the new contractual construct, to more tightly manage the prime contractor’s progress. This revised approach includes milestones, strengthened warranties around system performance, improved linkage of payment and deliverable milestones. Based on these mitigants, the risk is considered medium.

Phase 2B.2This phase will deliver deployable logistics capabilities and in–transit visibility of items in the supply chain. Phase 2B.2 has been impacted as a result of dependence on Phase 2B.1 delivery. Project planning for the acquisition has recommenced, following successful negotiation of the 2B.1 remediation plan.

Phase 2B.2 capability delivery has been delayed. Defence is investigating options to address the delay, including staged functionality and alternative delivery models. The delay in Phase 2B.2 has no impact on operational support, and this risk is rated medium.

Project expenditure for Phase 2B.1 and Phase 2B.2 in 2007–08 was lower than planned as a result of slippage in the software delivery schedule impacting the overall program. The project cost baseline for Phase 2B.1 and Phase 2B.2 has been revised and the projects are still expected to deliver within the approved budget.

Phase 2DThis phase will provide the delivery of an enhanced information systems capability for the following materiel logistics support processes: engineering management, maintenance management, enterprise reporting, architecture integration, repairable items management, classified assets management, security management and automated tracking technology. The Request for Proposal closed in April 2008

and is now in the process of evaluation. Phase 2D is not dependent on Phase 2B, and is delivering on schedule and below budget.

Electronic Systems DivisionAIR 5416 Phase 2—Electronic Warfare Self Protection for selected ADF Aircraft (Echidna)

Contractor: • Phase 2A BAE Systems Australia

• Phase 2B BAE Systems Australia (formerly Tenix Defence)

Phase 2A of the Echidna project involves the modification of the Black Hawk and CH47D (Chinook) Aircraft with Electronic Warfare Self Protection. The project has taken additional responsibility for implementing a missile warning system and countermeasures dispensing system onto 12 Black Hawk aircraft, developed under an approved Army minor project. As a consequence, delivery of the full Echidna 2A capability on the first Black Hawk aircraft has been extended by six months.

The full Echidna Phase 2A detailed design review was held in October 2007. Induction and commencement of modification was delayed from November 2007 until July 2008 due to a combination of contractor delay and the non availability of a Black Hawk aircraft for modification.

Modification of the first interim Black Hawk aircraft, against the Army minor project, was completed in September 2007. However, because of problems



identified on the aircraft tail cone requiring remedial work and testing, the overall Army minor project has incurred a five–week slippage. Ground testing was completed in March 2008 and flight testing which commenced in April 2008, was completed in August 2008. Modification of a further two Black Hawk aircraft commenced in June 2008. Due to availability issues with Chinook, work against this aspect of the contract will be reviewed on conclusion of the detailed design phase, currently planned for December 2008.

The decrease in expenditure is the result of slippage to both the full Echidna Phase 2A and interim schedules incurred due to contractor delays and problems with aircraft availability.

There is a medium–level risk that problems with the development of the software for the electronic warfare controller will impact on the schedule. To lessen the impact, this risk is being managed by restructuring the program into a two–build approach to allow for the incremental delivery of capability.

Of greater concern is the ongoing risk that, due to the continued high operational tempo, Army will be unable to provide Black Hawk aircraft to allow the modification program to proceed as planned. While the allocation of aircraft is being managed by intensive aircraft fleet management by Army Aviation System Program Office, this risk remains high.

Phase 2B of the Echidna project involved the modification of the C–130H fleet of aircraft with a comprehensive electronic warfare self–protection capability. All 12 aircraft have been modified to schedule and on cost, with the modification to the final aircraft being completed in June 2008. There are no significant risks remaining with this phase of the project.

AIR 5333—New Air Defence Command and Control SystemsContractor: Boeing Australia Ltd

The project’s critical design review was completed in July 2008. Completion of the critical design review precedes the commencement of the integration and test phase.

The contractor commenced installation work associated with the site at RAAF Tindal in May 2008. These activities were expected to be completed in 2007, but delays resulted from an underestimation of the effort required and the complexity of the required interfaces. Mitigation action is under way to address these delays and the contractor is applying greater resources to complete the work.

Because of the overall complexity of integration and the large number of unique interfaces involved, the project risk remains high. Software development risk is being managed through the use of Commonwealth resident teams, and active monitoring of contractor performance through software development–related metrics. These strategies reduce the risk level to medium.

Risk associated with Integrated Tactical Data Links is being managed through the employment of tactical data link experts, close liaison with the ADF tactical data link authority and through increasing the tactical data link expertise within the Commonwealth Project Team. This risk remains high.

JP 2008 Phase 3E—MILSATCOM Terrestrial InfrastructureContractor: BAE Systems Australia

The inclusion of the land element into the maritime through–life support contract was signed with BAE Systems in December 2007. The support contract for the Primary Injection Facility is to be in place by the end of 2008.

All 26 land terminals have been delivered and accepted and have commenced integration into the total system,



including the roll–out to Army. Twenty–four land terminals have been delivered and accepted by Army. The remaining two land terminals will be delivered to Army by the end of 2008.

All 15 maritime terminals have been delivered by the contractor and accepted by the Project Authority. Thirteen maritime terminals have been installed on Major Fleet Units; one is in the new training suite. The installation of the remaining terminal on HMAS Anzac is forecast in late 2009, pending ship availability.

Initial Operational Release of the Primary Injection Facility was achieved in February 2008. This facility is providing operational services to the Defence–accepted terminals both within Australia and overseas.

The development of theatre broadcast software was completed in May 2008, following successful completion of contractual software acceptance test and additional Commonwealth acceptance testing. The software will be rolled out to all land and maritime terminals by the end of 2008.

The prime contractor has met both budget and schedule requirements. The project remains on target with only minor variances, due primarily to ship availability for the installation of maritime terminals.

While overall project risk is assessed as low, implementation of Primary Injection Facility operations and support arrangement, and conduct of integration and verification activities for the Primary Injection Facility Mission System are being managed through close liaison with stakeholders. The simultaneous installation and integration of the new theatre broadcast software across a large number of remote operational terminals is being managed through a staged delivery of software with the ability to roll back to current versions, based on a rigorous system engineering approach to implementing complex software products.

JP 2043 Phase 3A—High Frequency ModernisationContractor: Boeing Australia Ltd

The first stage of the project has replaced capability at six Navy sites and four Air Force stations. The second stage is to provide increased levels of automation, improved capability, enhanced security and survivability, reduced reliance on staff, and will incorporate the new equipment into mobile platforms.

The capability is being implemented, however there have been difficulties with certain complex elements of design, in integration and testing, and acceptance of the full final fixed network capability. This was originally planned for 2008 but is likely to be delayed until 2011. Technical and schedule reviews are currently being conducted. As the difficulties being experienced in design also affect the design of the mobile upgrades equipment, there is a flow-on effect to completion of upgrades to mobile platforms.

The project remains within the total approved budget; however, some payments to the contractor have been deferred due to failure to meet milestones, resulting in underachievement in the expenditure planned for 2007–08.

Major risks relate to the schedule for introduction of the fixed network capability, and the installation of upgrades into mobile platforms. Following delays in delivery of the final fixed network capability, Defence has been working with Boeing Australia to agree a revised schedule for completion. Boeing Australia agreed with Defence in June 2008 to an independent technical review to confirm technical feasibility of the design, followed by a schedule review to inform the way ahead and to enable revised delivery dates to be set. This risk is assessed as high.

In addition to delays in completion of the fixed network that impact on the mobiles program, platform availability is a major risk against the schedule for the mobile



platform upgrades. Evaluation of risk mitigation options is being undertaken to closely monitor any platform availability changes and to seek alternative opportunities.

Explosive Ordnance DivisionJP 2070 Phase 3—Lightweight Torpedo Replacement

Contractor: Djimindi Alliance Team (Eurotorp, Thales Underwater Systems and Commonwealth of Australia)

The project involves the assembly of locally and internationally produced torpedo components into MU90 lightweight torpedoes (LWT) using facilities at Fleet Base West, Western Australia. It will establish an Australian manufacturing and support capability for the Eurotorp MU90 LWT, and delivery of a number of warstock rounds.

Principal activities for Phase 3 during 2007–08 included: the delivery of an obsolescence overview report to ensure that all torpedoes built under this phase reflected the required build standard, initial delivery of equipment to support local production; and the implementation of sub contracts by the prime contractor for the manufacture of torpedo sub–assemblies. The prime contractor also completed a range of plans and reviews. These included a preliminary design review, a detailed design review and integration quality test plan.

The major risk to the project is potential difficulties in transferring overseas supplier skills and technical knowledge for a complex weapon system into Australian industry. This risk will be mitigated through financial incentives in the

contract and critical review of the contractor’s proposal for acceptance and delivery of formal training courses. The risk is assessed as low.

JP 2086 Phase 1—Mulwala Redevelopment ProjectContractor: Bovis Lend Lease Ltd

This project will deliver a modernised propellant manufacturing capability at Mulwala, New South Wales. It will replace the existing capability that dates back to the 1940s. The works include construction of new nitrocellulose, solvent and propellant production plants, and a confined burn facility.

A design and construction contract was signed with Bovis Lend Lease in June 2007. A further contract was signed in that month with GHD Pty Ltd to provide engineering expertise in the areas of building design, construction and chemical and mechanical engineering. During 2007–08 the main project activity focussed on facility and process design. Front end engineering design is now complete, the milestone for ‘30 per cent detail design’ is significantly complete and the milestone for ‘80 per cent detail design’ is well advanced.

There are two major risks associated with the project. Both are assessed as medium. The first is that the modernised plant will not be capable of producing propellant that meets the qualification requirements for use in ADF ammunition. This risk is being mitigated by the requirement for the prime contractor to partner with an experienced propellant manufacturer. The prime contractor has partnered with US munitions company ATK. The risk is further mitigated by contractual arrangements that require the contractor to demonstrate that all propellants meet relevant performance specifications prior to final acceptance.

The second is compliance with both state and federal environmental and occupational health and safety requirements. The risk is being mitigated through the engagement of specialist



consultants, the use of proven technologies, equipment and safeguards and the contractual requirement for the contractor to ensure that the design complies with requirements.

AIR 5418 Phase 1—Follow–On Stand Off WeaponContractor: A Foreign Military Sales (FMS) case with the United States Air Force, and Lockheed Martin Missiles and Fire Control

This project is acquiring AGM–158 Joint Air–to–Surface Standoff Missiles (JASSM) for integration onto the F/A–18A/B aircraft. This will improve weapon terminal effectiveness against well–defended targets. The project is to deliver an initial operational capability in 2009 to engage fixed and relocatable targets.

Flight testing began in 2007 and is continuing successfully with the first release of a JASSM test missile from an F/A–18 aircraft. The US Navy continued to develop the new F/A–18 A/B operational flight program software in preparation for flight testing in 2008–09. In May 2008, the US Department of Defense certified a restructured US JASSM program for continued funding. Discussions progressed with the US Air Force on the requirements definition for a maritime interdiction missile variant. The project funded Lockheed Martin to expand its simulation studies to include missile performance in a maritime environment.

During 2008–09 missile and aircraft integration testing will continue with testing being undertaken in Australia and the United States, culminating in a live missile firing in Australia in late 2009.

The two main risks for achieving Initial Operational Capability are the timely development, by the US Navy, of the F/A–18 A/B operational flight program and the development of the F/A–18 mission planning software to enable the F/A–18A/B aircraft to employ JASSM. These risks are rated as high and are being mitigated through close engagement with US Navy, Lockheed

Martin and key Defence stakeholders on scheduling and programming.

JP 2085 Phase 1B—Explosive Ordnance Reserve StockContractors: Multiple purchase contracts with Australian and overseas munitions suppliers

A significant delivery in 2007–08 was the SMArt155 155mm artillery Precision Guided Munition. This is the first procurement of this type of capability for Army. Other deliveries included various types of anti–armour munitions, small arms ammunition, missiles, bombs, and demolitions and pyrotechnics. Contracts for the acquisition of Excalibur 155mm artillery Precision Guided Munitions and procurement of bomb fuses were placed in the last quarter of 2007–08. The late placement of these contracts due to late advice of changes in requirements, resulted in lower–than–planned expenditure in 2007–08.

The major focus in 2008–09 will be the first delivery of the Excalibur 155mm artillery Precision Guided Munitions and associated systems and the integration of the capability into the Australian M198 Gun System. Acquisition of the munitions will be completed in 2011.

Recent concerns with the design integrity of the latest version of the ammunition have caused delays in deliveries. A number of other deliveries against current contracts, including quantities of 30mm, 25mm, and 5.56mm ammunition are now scheduled for 2008–09 due to manufacturing and delivery/transportation delays. Shortages in raw materials in the global market have placed pressure on manufacturers and are contributing to delays in deliveries.

The cost of some items has increased from original budget, beyond standard indices, due to increases in global demand for certain items over the period and an overall reduction in the supply base as large corporations acquire smaller suppliers and rationalise manufacturing to achieve efficiencies.



The major risk for this project, assessed as high, is the delivery and introduction into service of Excalibur 155mm artillery Precision Guided Munitions. Estimates of schedule and final costs will be of low fidelity until the finalisation of the design specification and the integration of the munitions with the Australian M198 Gun System. Rigorous review of system specifications, and participation in or visibility of the US Government test program, combined with regular communication with the relevant overseas government agencies will provide higher quality indications of cost and/or schedule change.

Helicopter Systems DivisionAIR 9000 Phase 2—Multi Role Helicopter

Contractor: Australian Aerospace and CAE Australia

This project is acquiring 46 Multi–Role Helicopters (MRH–90) and support systems for the Army and Navy. The support systems will include an electronic warfare self–protection support suite, ground mission management systems, a software support centre, instrumented aircraft with telemetry, and facilities infrastructure at Townsville, QLD, Oakey, QLD, Sydney, NSW and Nowra, NSW. An initial ten year sustainment contract was activated on 18 December 2007. A contract for two full flight and mission simulators was signed with CAE Australia on 19 December 2007.

The first four aircraft have been manufactured in France; the remaining 42 have commenced assembly at Australian

Aerospace’s Brisbane facility. The first two MRH–90 were accepted by the Commonwealth on schedule on 18 December 2007. The third aircraft was flown from France to Australia, by RAAF C–17, and arrived on 22 June 2008 whereupon it was reassembled, tested and accepted. The fourth aircraft is being used for flight data collection in France, required for the design of the training simulators by CAE Australia, prior to delivery in November 2008. The first MRH–90 assembled in Australia is on schedule for delivery in December 2008.

The Navy Initial Operational Capability (IOC) of one aircraft at sea is planned for mid–2010; the Army IOC of a troop of four aircraft is planned for mid 2011. Both of these key capability objectives remain on schedule, however qualification and engineering certification of the MRH–90 is a large task that poses the highest risk to the program.

The contractor has devoted additional resources to the manufacturing element of the Australian program so that it is not subjected to the delays experienced in provision of NH90 for other countries. Early flying rates are yet to achieve the level required. Work is underway by the contractor to improve this, and it is being managed at senior executive level.

AIR 87 Phase 2—Armed Reconnaissance Helicopter (ARH)Contractor: Australian Aerospace

By July 2008, 11 aircraft and four of the six ground training devices had been accepted and the twelfth ARH was in the process of being accepted. Delivery of the remaining 10 aircraft and the completion of delivery of all supplies is presently the subject of further detailed scheduling to enable Army to conduct operational test and evaluation in 2009–10. The full flight and mission simulator was accepted in December 2007 and is now being used for training. Australia has now trained 24 ARH aircrew, including six instructors. The ARH has now flown in excess of 2,870 hours, mainly in support of training in Australia.



The Australian flight hours achievement is about 30 per cent of the international Tiger fleet that also includes France, Germany and Spain.

Delivery of operational capability to Army is delayed by 24 months, primarily because of delays in the Franco–German program on which the ARH relies for certification and qualification. This has caused slippage in the aircraft and system certification, simulator development and aircrew training. The delays in the program resulted in the contractor failing to achieve a critical milestone—Initial Operational Capability—and, as a result, the DMO imposed a contractual stop payment on 1 June 2007. This led to Australian Aerospace filing a dispute in late 2007, which included both acquisition and through–life support contract issues. The dispute was resolved and a Deed of Agreement was signed on 16 April 2008. Payments to Australian Aerospace were resumed although one third was retained pending completion of the contract changes and implementing the Deed of Agreement. These are expected to be signed by 31 October 2008. The project has experienced a much improved rate of achievement since dispute resolution.

As part of the settlement, Australian Aerospace will provide two EC–135 helicopters in Darwin for ARH aircrew currency training at a rate of 1,600 hours per year. In addition, three ARH were relocated from Oakey in Queensland to Robertson Barracks in Darwin in late June 2008 to further achieve training objectives.

The main risk, assessed as medium, is delay due to qualification and certification of the aircraft and systems which is being mitigated through the implementation of the Agreement, which also transitioned the support contract to performance based arrangement.

Land Systems DivisionLAND 106—Upgrade of M–113 Armoured Vehicles

Contractor: BAE Systems Australia (formerly Tenix Defence)

The M–113 Upgrade Project is modernising 350 of the Army’s fleet of M113A1 armoured vehicles, which provide mobility and fire support for the Army’s mechanised forces. The project will provide improved protection, firepower, mobility and habitability. This major upgrade replaces most of the existing vehicle, retaining only the hull, hatches, rear door and communications systems. It also includes provision of appliqué armour, a new armoured turret and machine gun, a new engine, drive train and suspension, and the stretching of the armoured personnel carriers and other variants.

A number of technical and performance issues were identified in initial vehicle testing and delayed vehicle development. The resolution of these issues placed pressure on the project schedule. Brake problems were encountered, resulting in the introduction into service date being delayed from July 2007 to December 2007. This issue has been successfully resolved and the group of vehicles that has been introduced into service is performing well. BAE remains committed to achieving the final delivery of vehicles by December 2010 as contracted.

Crew and maintenance training is continuing as planned, and spares, special tools and test equipment to support



introduction into service are being delivered to meet fleet sustainment requirements. Further procurement of support items is planned as more vehicles are progressively introduced into service.

Delays from technical problems continue to be a high schedule risk to this project. Testing and design and development of the stretched Armoured Logistic Vehicle (ALV) may encounter unacceptable load carrying restrictions. In order to mitigate this risk the contractor has developed a number of design modifications in parallel with the ongoing testing to reduce the risk. The ALV has been moved to the rear of the production schedule to limit any potential impact on the delivery of other variants. The contractor advises that the delivery of the last vehicle will be in late–2010 as per the contracted schedule.

BAE’s revised schedule and order of build requires a significant increase in skilled welder and fitter tradesmen at the Bandiana production site. There is a high risk that the required numbers cannot be recruited and trained resulting in reduced production rates and schedule slippages. This risk is being mitigated by the production of some variants in Adelaide, combined with an increased effort to recruit and retain skilled staff.

LAND 116 Phase 3—Bushranger Protected Mobility VehiclesContractor: Thales Australia

The project is acquiring at least 700 vehicles in seven variants—troop, command, mortar, assault pioneer, direct fire weapon, ambulance and air defence. The vehicles will provide protected land mobility to Army combat units and RAAF Airfield Defence Guards. A through–life support contract has been operating since 25 March 2006.

The Bushmaster is currently deployed overseas with the ADF and it is performing

well. It has a high level of operational performance and provides a significant level of protection for the ADF.

All 300 troop, command, assault pioneer, mortar, direct fire weapon and ambulance variants under the original acquisition contract have been delivered. Delivery of the 143 additional vehicles acquired under the Enhanced Land Force initiative, commenced in November 2007, and all command, mortar and ambulance variants have been delivered to the Commonwealth. The remainder of the variants will be delivered by March 2009.

In August 2007, the Government approved the purchase of at least 256 Bushmaster vehicles as part of the Land 121 Project Overlander protected mobility medium requirement. Negotiations have commenced with the contractor for the provision of the additional vehicles. The delivery of these vehicles will commence in mid–2009 and is scheduled to be completed by mid–2012.

In June 2007, the Government approved the rapid acquisition of an additional 72 Protected Weapon Stations, 116 Fire Explosion Suppression Systems and 116 purpose–designed spall curtains to further enhance the protection level of those vehicles currently deployed on operations and the pre–deployment training fleet. Fitting of the stations to deployed vehicles commenced in early 2008. The fitting of suppression systems and spall curtains will now commence in late 2008.

Production Acceptance Testing and Evaluation of the vehicles continues to be a risk to schedule. This risk is assessed as high and is being mitigated by Thales providing additional resources to support the testing. Configuration management also continues to be risk and is being mitigated by regular audits and intensive management by the project office.



LAND 907 Phase 1—Tank Replacement ProjectContractor: A Foreign Military Sales (FMS) arrangement with the United States Government

This project provides the replacement of the Army’s Leopard tank fleet with a modern, survivable and interoperable tank capability that will be supportable until at least 2020. The project includes the acquisition and through–life support arrangements for 59 M1A1 Abrams main battle tanks, seven M88A2 Hercules recovery vehicles, simulators, tank transporters and fuel trucks. Support arrangements include the procurement of spare parts, ammunition, facilities and additional equipment and the conduct of initial training.

The project continues on schedule. All the M1A1 Abrams tanks and M88A2 armoured recovery vehicles have been delivered. In addition all simulators, fuel trucks, tank transporters and spare parts have been delivered in line with the project’s scope. Conversion training has been completed. In early 2008 a change of scope was approved to procure Tank Urban Survivability Kits within the existing funding allocation for the project. These kits will enhance crew and vehicle survivability and are scheduled for delivery during 2009.

Failure to provide an adequate Australian–based through–life support arrangement and the delay in the release of the through–life support request for tender, remains a high risk. This is being mitigated through the establishment of cooperative logistics services support arrangements directly with the US Government, which are in place, and the supplementation of technical staff through the provision of field service representatives to provide maintenance advice. These arrangements provide effective interim through–life support until the Australian–based support contract is in place.

Maritime Systems DivisionSEA 1390 Phase 2—Guided Missile Frigate (FFG) Upgrade ImplementationContractor: ADI Ltd trading as Thales Australia

This project is to upgrade combat systems, including sensors, missile launchers and associated platforms systems on the Adelaide class guided missile frigates.

Provisional acceptance of HMAS Melbourne and the shore–based Team Trainer were achieved by November 2007. HMAS Darwin is nearing completion of contractor sea trials. HMAS Newcastle (the last upgrade) completed the docking phase of the upgrade in November 2007 and is currently undertaking in–water installation and production work. HMA Ships Sydney and Melbourne are operated by Navy and are progressing rectification of deficiencies in the underwater warfare, electronic support and combat systems to achieve initial operational release, and contractual acceptance scheduled for November 2008. The project expenditure variation is attributable to early achievement of some prime contract milestones and a high number of price variations evaluated and finalised during October/November 2007.

The main project risk relates to contracted performance of the electronic support system and production, system integration and test/trials activity. Risk is being mitigated by the integration of Commonwealth and contractor product teams to achieve the required performance. These risks are influenced by the availability of experienced, competent and skilled personnel in a limited and very competitive Australian commercial market. To mitigate risk, the prime contractor has implemented recruiting and retention strategies and established a commercial industry alliance for the production work. The overall risk is assessed as medium to high.



SEA 1390 Phase 4B—Standard Missile (SM) –1 Missile ReplacementContractor: Various commercial contracts under a Foreign Military Sales (FMS) arrangement with the United States Department of Defense

This project is to replace the SM–1 missile with a modern variant of the same missile system (SM–2) and integrate the replacement missile into four guided missile frigates; deliver missiles with mid–course guidance capability, and acquire initial ship outfit and inventory stock missiles.

The contract for the guided missile launching system was awarded in January 2008 with other elements awarded in July 2007. Design reviews for the equipment items have been accomplished and the first installation is planned for end 2008.

The system software development Preliminary Design Review occurred in April 2008. Initial deliveries of SM–2 missiles to the US Navy were made in June 2008. Initial missiles were delivered to Australia in September 2008.

The year end budget variance is attributable to FMS payments ahead of plan, an invoice receipt from US commercial suppliers, and a June 2008 processing not occurring until 2008–09.

The medium risks of schedule slippage in system development and providing interoperable systems and logistics support are mitigated by rigorous schedule monitoring and participation with the US Government and industry in integrated product teams. System installations will be conducted during planned ship maintenance.

SEA 1448 Phase 2A—Anzac Ship Anti–Ship Missile DefenceContractor: The contract management is under the Anzac Ship Integrated Materiel Support Program Alliance comprising Saab Systems, BAE Systems Australia (formerly Tenix Defence), and the Commonwealth represented by the DMO. The contractor is CEA Technologies Pty Ltd.

This project is to upgrade the combat management system (CMS) from MK3 to MK3E, upgrade the fire control system, and install an infra–red search and track (IRST) capability to provide improved detection of low–level aircraft and anti–ship missiles when ships move close to land. The proposal to combine the project SEA 1448 Phases 2A and 2B remains under review by the DMO.

The preliminary principal design review was completed in August 2007.

The search and track capability and the hardware and software architecture for the MK3E combat management system are achieving the master contract schedule. The first tracking system along with the MK3E combat management system production hardware were successfully integrated and set to work in April 2008.

Combat management system integration into the shore–based systems centre progressed well with software running on the MK3E equipment. Integration testing of the combat management system on both Phases 2A and 2B equipment, and existing ship equipments has been ongoing from April 2008. Part 1 of the critical design review was completed in May 2008 and confirmed that the current approach meets requirements, and that the Anti–Ship Missile Defence system is ready for fabrication and coding.

Phase 2A is a low–risk project due to its procurement and delivery of fielded systems. Production and integration successes with IRST hardware and CMS software continue to support this technical risk assessment. Cost risk is low following a review that confirmed there is sufficient financial provision to deliver the scope of the project.

Schedule risk is medium due to the Phases 2A/2B relationship and the Phase 2B higher risk for phased array radars. The key schedule driver is the ability of CEA to deliver against the Master Schedule. Until CEA is able to demonstrate timely production deliveries, schedule risk is medium.



SEA 1448 Phase 2B—Anzac Ship Anti–Ship Missile DefenceContractor: The contract management is under the Anzac Ship Integrated Materiel Support Program Alliance comprising Saab Systems, BAE Systems Australia (formerly Tenix Defence) and the Commonwealth represented by the DMO. The contractor is CEA Technologies Pty Ltd.

The project is to deliver a CEAFAR target indication and tracking radar; CEAMOUNT target illuminator; and a replacement for the existing Navigation Radar suite in the Anzac class frigates. A proposal to combine the project SEA 1448 Phases 2A and 2B remains under review by the DMO.

The preliminary principal design review was completed in August 2007 and the first part of the critical design review in May 2008. The first production phased array radar tile tracking capability was successfully demonstrated in December 2007 and included successful demonstration of the digital beam forming capability. This was achieved at least 12 months in advance of expectation.

Due to increasing costs, the project will be unable to be completed within the existing budget. A revised acquisition strategy will deliver project outcomes by retiring risks in the first ship’s installation and testing before further commitment is made to a staged investment beyond the first ship. Under the revised strategy, the Government, Defence and the DMO can intervene at specific demonstration milestones during the project.

Technical risk remains at medium to high due to the leading edge, indigenous technology and the introduction of new capabilities to the Anzac class frigates. The procurement strategy will allow the Commonwealth to exit the program if risk becomes unacceptable. The risks are progressively being retired; however, some significant risks have materialised which will require a scope change and cost increase. The DMO is working with

industry to reduce costs and develop an optimum risk/investment arrangement.

The medium schedule risk is the ability of CEA to deliver against the Master Schedule for the production of new technology. The risk is mitigated by performance milestones, with first production completed on time in June 2008.

SEA 1348 Phase 2—Anzac Ship ProjectContractor: BAE Systems Australia (formerly Tenix Defence)

All eight Australian ships and four shore facilities are in service with the Royal Australian Navy and two ships are in service with the Royal New Zealand Navy. The ongoing delivery of spares, documentation and other logistic support deliverables is near completion. Closure of the prime and major contracts is progressing. Minor configuration changes to the ships in service and the finalisation of outstanding design and installation issues were progressed during 2007–08 with implementation of solutions to all issues and first–of–class installations continuing into 2010–11.

Project risk is low as all 10 ships have been delivered, and the majority of final support deliverables received.

SEA 1439 Phase 4A—Collins Replacement Combat SystemContractors: A Foreign Military Sales arrangement with the US Department of Defense and an Armaments Cooperative Project Arrangement. Australian contractors include Raytheon Australia, Thales, Sonartech Atlas, Cerulean Solutions, Acoustic Technologies and ASC Pty Ltd.

The project will provide Collins class submarines with the US Navy Tactical



Command and Control System; minor improvements to the combat system augmentation sonar, and shore facilities for integration, testing and training.

System trials in HMAS Waller were completed during post docking sea trials in early 2008 and Waller is now undertaking Navy operational test and evaluation. The second of the installations (HMAS Farncomb) was completed in June 2008 and harbour acceptance trials have commenced.

The next version of the AN/BYG–1 Tactical Control System for installation in the remaining four Collins class submarines is undergoing integration testing. Installation in HMAS Dechaineux will be completed during its current full–cycle docking, with post docking sea trials planned to commence in mid–2009.

The project did not reach the full expenditure target because of cost savings and payment delays under the Armaments Cooperative Project with the United States.

US Navy changes to the baseline tactical system pose a medium level of risk to both cost and schedule. This risk is being mitigated by the joint Australian–US Project Office (co-located in the United States) to monitor scope changes early and minimise adverse impacts on the Collins installation program.

The submarine docking program is subject to changes to enable Navy to achieve operational and maintenance priorities. These changes are a high risk to the schedule for completion of installation and are managed by DMO engaging with Navy to ensure compatibility of the submarine docking and installation schedules.

SEA 1444 Phase 1—Armidale class Patrol BoatContractor: Defence Maritime Services

The project has delivered all 14 Armidale class patrol boats within the current approved cost, and will also deliver in–service support until 2020 under the prime acquisition contract.

The new patrol boats improve the Navy’s ability to intercept and apprehend vessels suspected of illegal fishing, quarantine, customs or immigration offences.

The fourteenth and final patrol boat HMAS Glenelg, was commissioned by the Navy in February 2008. The upgrade of wharf facilities in Darwin was completed in December 2007.

Although trials of the fuel system reliability continue, the patrol boats are meeting the Navy’s availability requirements, as discussed in Outcome Two in Volume 1 of this report.

The project risk is low and relates to implementing permanent improvements to fuel system reliability and to rectifying the design defect in the davit hydraulics.

Fuel system modifications were incorporated into all boats to address diesel engine fuel system issues. Since March 2007, vessel availability has met and sometimes exceeded contractual requirements. A further testing program is underway to evaluate the latest fitted modification.

Hydraulic system changes into HMAS Glenelg overcame problems related to the hydraulic system pipe work, resulted in limitations on sea boat hoist speed and payload, and will remain in place until a revised safety assessment has been conducted and approved. On completion the modifications will be rolled out to the other patrol boats.



SEA 1779 Phase 1—Ships Self Defence Capability Contractor: Alliant Techsystems Inc for the supply of the 25mm Bushmaster Naval Variant Cannon, and Rafael Armament Development Authority (Israel) for the supply and integration of the Toplite, Mini–Typhoon and Typhoon systems.

The project is to deliver a dual–level ship self–defence capability for HMA Ships Kanimbla, Manoora and Tobruk. The capability consists of an integrated fire control system comprising the Rafael Typhoon (25mm Bushmaster Naval Variant Cannon) and the Mini–Typhoon Browning (50 calibre machine gun) weapon systems, and Toplite electro–optical director system.

The majority of the Amphibious Ships Close Range Weapons Capability in HMA Ships Kanimbla, Manoora and Tobruk was installed by the end of financial year 2007–08. Orders for the Typhoon and Bushmaster cannon hardware were placed in late 2007–08.

Schedule and ship availability risks have retired as the installation nears completion and the equipment manufacturers are to deliver supplies to an agreed delivery date. The low technical risk is mitigated by the conduct of system testing, certification activities and training, including the provision of detailed manuals and operating procedures. The operational effectiveness of the multi–weapon system configuration is progressively being assessed as the systems and weapons are installed.




Additional Project InformationTable 3.3 shows additional information for significant projects that were not listed in the Top 30 in the Portfolio Budget Statements 2007–08 due to the timing of their approval.

NOTES

1. SEA 4000 Phases 2 and 3.1 have been closed and combined with SEA 4000 Phase 3.

Amphibious DeploymentJP 2048 Phase 4A/B—Amphibious ShipsContractor: BAE Systems Australia (formerly Tenix Defence)

This project will acquire two 27,000–tonne Amphibious Ships to replace the Heavy Landing Ship HMAS Tobruk and one of the two Amphibious Transports (either Manoora or Kanimbla).

Following negotiations, a contract for the supply of two Amphibious Ships was signed with BAE on 9 October 2007 and took effect from 23 November 2007.

Following contract signature, the project placed a resident team in Spain to monitor progress and develop operator data with the ‘parent navy’, Spain’s Armada Española.

The hulls will be built and fitted out in Spain and transported to Australia. The superstructures will be constructed, fitted out and integrated with the hulls by

the contractor at its Williamstown dockyard, Melbourne. L3 Communications is subcontracted by the prime contractor to supply the communications system and Saab Systems Australia to provide the combat system and integrate the combat management system.

The Project completed the Systems Requirement Review in February 2008. First steel was cut for the first ship on 23 September 2008. The hulls will arrive in Australia in July 2012 and February 2014 respectively. Delivery and acceptance of the ships is to occur in December 2013–January 2014 and July–August 2015. An in–service support strategy is currently being developed. The initial support contract is to be in place 12 months before first ship delivery.

The project has reported an overspend in budget for 2007–08. This was due to the instability of preliminary (2006) estimates of price indexation and scheduling of payment milestones.

Table 3.3 Additional project information

Project number

Approved project

expenditure ($m)

Cumulativeexpenditure to 30 June 2007

($m)


($m)


($m)

Actual expenditure

2007–08 ($m)

Variation

($m)Amphibious DeploymentAmphibious Ships

JP 2048 Phase 4A

2,949 24 1 151 220 69

New Air Combat CapabilityBridging Air Combat Capability

AIR 5349 Phase 1

3,156 55 548 235 285 50

Bridging Air Combat Capability – Weapons

AIR 5349 Phase 2

164 – 25 4 5 1

Air Warfare Destroyer Program

AWD Build[1] SEA 4000 Phase 3

7,197 – – 299 441 142

Total 13,466 79 574 689 951 262


The main risk of technical regulatory acceptance is being mitigated through early engagement and rigorous oversight of technical and engineering issues. These risks are assessed as high.

Air Warfare DestroyerSEA 4000 Phase 3—Air Warfare Destroyer (Build)

Contractor: Alliance contract between ASC AWD Shipbuilder Pty Ltd, Raytheon Australia Pty Ltd and the Commonwealth represented by the DMO. The Commonwealth also has a contract with Navantia SA as the Platform System Designer and a Foreign Military Sales arrangement with the US Navy for the supply of the core Aegis Combat System.

The key outcomes of Phase 3 will be the finalisation of detailed design, construction of the ships, set to work of the Aegis Combat System and platform systems, test and trials and ultimately the delivery to Navy of three Air Warfare Destroyers (AWDs) and their support system. The support system includes crew training, technical documentation, shore facilities, maintenance schemes and spare parts inventories.

The Alliance Based Target Incentive Agreement between the Alliance participants; the Commonwealth, ASC AWD Shipbuilder Pty Ltd and Raytheon Australia Pty Ltd was signed on 4 October 2007. The Platform System Design contract between the Commonwealth and Navantia SA was also signed on 4 October 2007. The effective date for both

contracts and the start of Phase 3 of the project was 5 October 2007.

The major project milestones achieved during 2007–08 were the production of Aegis equipment such as the AN/SPY–1D(V) radar antennas, the AWD System Functional Review in April 2008 and the project’s Integrated Baseline Review in June 2008. The Alliance released a range of requests for proposals covering combat system equipment and hull block and module fabrication. Infrastructure work progressed on schedule at the South Australian State Government’s Common User Facility and ASC shipyard.

With the tight national labour market, there is a risk the AWD Alliance will not recruit the required skilled workforce. In mitigation, the Alliance has a strategy to execute recruiting plans early and has retained flexibility in major supplier selections like the block fabrication contracts to distribute work around Australia to align with industry capacity.

If information from equipment vendors is not available when required by the Platform System Designer (Navantia), there will be a delay in delivering production data packages to block fabricators. To mitigate this risk, the Alliance has a two–pronged strategy; to work closely with vendors and the staged release of information to the Platform System Designer.

The sale of ASC poses challenges to the successful outcome of the AWD project. This risk is assessed as medium and is being mitigated initially through close collaboration and cooperation between the Department of Finance and Deregulation and the DMO. Within the Alliance, both the DMO and Raytheon will need to work closely with the new ASC owner to minimise any project disruption.

The readiness of shipyard infrastructure in Adelaide to support block fabrication in late–2009 is critical to the successful start of hull construction. Any delay in completing this infrastructure work is



likely to affect the schedule for first ship delivery. All parties are working cooperatively together to ensure the facilities are delivered on schedule. To date, the Common User Facility and ASC shipyard construction is on schedule.

Bridging Air Combat Capability (Super Hornet)AIR 5349 Phase 1—Bridging Air Combat CapabilityContractor: The Boeing Company under a Foreign Military Sales (FMS) arrangement with the United States Government

The project was considered and approved by Government in March 2007 with a total program approved cost of $6.6b including acquisition of 24 aircraft, weapons, facilities and all estimated support costs. The project is being managed by the DMO under two separate project phases. Phase 1 manages the aircraft and related support systems. Phase 2 manages weapons and related support systems.

The through–life support element of the Phase 1 program includes all support and personnel costs. Defence is developing a sustainment concept that utilises existing US Navy support arrangements where practical to reduce risk. Direct commercial arrangements are being developed to establish an intermediate maintenance capability in Australia at RAAF Amberley.

The first four aircraft are scheduled for delivery in the second quarter of 2010. Initial operational capability will be achieved in December 2010 and final operational capability will be achieved in December 2012. An accelerated schedule is possible due to the ‘off the shelf’ nature of the acquisition.

Variation in budget spend was due to a higher than planned Termination Liability payment request by the US Navy. The impact to 2008–09 forecasts and future

Termination Liability forecasts is still being assessed.

The acquisition and delivery of Super Hornet aircraft remains low risk. Establishment of logistics support to meet Initial Operational Capability (IOC) requirements is medium risk. The risk is being mitigated through access to existing US Navy and Australian support arrangements.

AIR 5349 Phase 2—Bridging Air Combat Capability—WeaponsContractor: Foreign Military Sales (FMS) arrangements with the US Navy

This project will acquire and introduce into service a number of new weapons and countermeasures under the Australian Super Hornet Program. These weapons will significantly enhance the ADF’s ability to conduct land and maritime strike operations. This project is running concurrently with AIR 5349 Phase 1 to ensure IOC for the Bridging Air Combat Capability is achieved by December 2010.

Defence has established FMS cases for the acquisition of AIM–9X Sidewinder missiles, AGM–154 Joint Stand Off Weapon and Infrared Flares, as well as seeking to acquire additional AIM–120, Advanced Medium Range Air to Air Missiles. Delivery of the first weapons is expected by December 2009.

The program IOC and Final Operating Capability (FOC) dates of December 2010 and December 2012 respectively do not allow for any significant schedule slippage. There is a medium schedule risk related to US Navy contracting and delivery of a number of developmental weapon systems. These weapon systems were originally scheduled to be available to support IOC. This risk has been mitigated by acquisition and/or use of currently In–Service weapon variants to support IOC, with all currently developmental weapon variants now to be acquired in time to meet FOC.



Previously Reported ProjectsSome projects dropped below the top 30 in 2007–08. Details are available on the internet version of this volume at www.defence.gov.au/annualreports.

New ProjectsDuring 2007–08, 15 new acquisition projects were transferred to the DMO following Government approval.

The DMO classifies a project as having been transferred on the signing of a Material Acquisition Agreement (MAA) between the DMO and Defence.

Table 3.4 New Projects transferred to DMO in 2007–08[1]

Project name Project number

Budgetestimate 2007-08

($m)

Actual expenditure

($m)

Project information

Aerospace Systems DivisionC–130J Block Upgrade – Block 7.0

AIR 5440 Phase 1

4.3 3.7 Annual cost contribution to development of multi–national C-130J Block Upgrade 7.0 and generation of required project documents leading to first/second pass approval.

Maritime Patrol and Response Aircraft System

AIR 7000 Phase 2

52.3 0.2 The variation of expenditure between planned and actual for 2007–08 was the result of re–phasing of the US$60m spending for the P–8 Poseidon Spiral 1 Cooperative Development MOU with the US Navy. Re–phasing was required as the understanding of a number of related activities had not matured sufficiently enough to allow the MOU to be signed.

Helicopter Systems DivisionAdditional Chinook Helicopter Project

AIR 9000 Phase 5C

0.6 – The purpose of this project is to purchase three additional F model Chinook Helicopters. First pass approval was received on 13 September 2007; however, the MAA was not executed until 24 June 2008. Second pass approval is expected in October 2009.

Seahawk Capability Assurance Program 1

AIR 9000 SCAP 1

0.7 – The purpose of this program is to address obsolescence in the platform to maintain existing capability. Slippage in contractor start dates to June 2008 caused expenditure to move to 2008–09.

Electronic Systems DivisionNext Generation Satellite Program

JP 2008 Phase 4

36.6 18.0 Provide WGS Communications and ground infrastructure to support the Satellites. The re–programming of expenditure occurred due to the main contractor providing invoices to the prime contractor three months behind schedule. This slippage was identified in February 2008.

Land Force Combat Identification

LAND 146 Phase 2

2.0 0.5 This project is yet to receive second pass approval and aims to expand the provisioning of Combat Identification kit provided under Phase 1 (Phase 2A) and introduce a Digital Terminal Control System (Phase 2B).


http://www.defence.gov.au/budget/07-08/dar/index.htm#online


NOTE

1. There were three classified projects approved. Details are not published in this list.

Tactical Information Exchange Domain

JP 2089 Phase 2

0.5 – Risk Reduction Program to determine whether the introduction of the Variable Message Format Digital Communication System into the F/A-18 Hornets will present a development, cost or schedule risk to the Hornet Upgrade Project Phase 2.3 Electronic Warfare Self Protection software development program.

Military Integrated Logistics Information SystemImproved Logistics Information Systems

JP 2077 Phase 2D

5.3 2.4 This will provide the delivery of an enhanced information systems capability. Phase 2D is on a three pass strategy. First pass approval received in March 2007 with an interim pass scheduled for June 2009 and second pass scheduled for late 2010.

Land Systems DivisionField Vehicles And Trailers – Overlander Program

LAND 121 Phase 3

6.3 1.6 Phase 3 addresses the acquisition and support of the new range of Military–Off–the–Shelf vehicles, trailers and integrated modules. Second Pass Approval received on 14 August 2007. The MAA was signed in March 2008. Phases 3A and 3B were merged during 2007–08.

Overlander – Protected Mobility Vehicle – Light

LAND 121 Phase 4

0.7 – Phase 4 addresses the acquisition and support of a Light Protected Mobility Vehicle capability. Pre–first pass MAA signed in May 2008. First pass approval is anticipated in September 2008.

Maritime Systems DivisionCollins Class Communications & Electronic Warfare Improvement

SEA 1439 Phase 5B2

– – Development of documentation to achieve Second pass approval.

Air Warfare Destroyer ProgramAWD Build SEA 4000

Phase 3315.1 441.1 Refer to additional project information

on page 42.

Table 3.4 New Projects transferred to DMO in 2007–08[1]


Budgetestimate 2007-08

($m)

Actual expenditure

($m)

Project information



Closed ProjectsSeventeen projects closed during 2007–08.

Table 3.5 Projects Closed in 2007–08


Reason for closure

F/A–18 Hornet AIR 15 The project is complete. All requirements have been delivered and accepted by all parties.

Medium Tactical Airlift Capability

AIR 5401 Phase 1

All activity completed for this project.

Seahawk Missile Integration

AIR 9000 Phase 3E

The project commissioned a study to examine the incorporation of the Penguin missile on the Seahawk platform. Due to the high technical risk of the integration identified in the report, the project was held in abeyance until closed in March 2008 following the decision to dispose of Penguin missile stocks.

Aerial Target System JP 7 Phase 4 Reached planned withdrawal date. Removed from service.Acoustic Mine Imaging System

SEA 1432 Phase 2

All project deliverables have been completed.

ADF Deployable Medical Capability

JP 2060 Phase 2A

Project has been completed. The phase delivered portable ultra sound systems and intermediate fidelity mannequin systems with integrated logistic support for the first three years of service.

Ninox – Ground Surveillance Radar

LAND 53 Phase 1E

This project delivered the full capability and has transitioned to fleet.

Project Overlander Field Vehicle And Trailer Fleet

LAND 121 Phase 3A

Second pass approval combined Phases 3A and 3B into a single Phase 3.

Soldier Combat System

LAND 125 Phase 2A

This project was to conduct a Project Definition Study in order to shape the strategy for future phases. All project deliverables have been met and the project was closed.

Acoustic Threat Localisation System

LAND 148 Phase 1

This project was a Capability and Technology Demonstrator that met all of the required deliverables and was subsequently closed.

MILSATCOM – Military Satellite Payload

JP 2008 Phase 3D

Project closure was achieved in June 2008. The capability has been delivered, accepted into service and transitioned to sustainment.

Personal Radar Warning Device

JP 2093 Phase 1

Project completed and closure achieved in May 2008.

Electronic Attack On Global Nav. Sat. System

JP 5411 Phase 1

Requirements delivered as per MAA.

Maritime Communications Study

SEA 1442 Phase 2B

SEA 1442 Phase 2B successfully completed delivery of its scope and objectives in May 2007. All equipment procured for test and trials will be used for and supported by future phases of SEA 1442 and related Navy minor projects.

CAMM2 AIR 5279 Phase 2

The project was completed in 2006 with transition into service. The final closure documents were completed in 2008.

Air Warfare Destroyer Design Activity

SEA 4000 Phase 2

This phase of the SEA 4000 Program has been closed and the scope incorporated in SEA 4000 Program Phase 3—Build, which commenced in October 2007.

Air Warfare Destroyer Program – Aegis Combat System

SEA 4000 Phase 3.1

This Phase of the SEA 4000 Program has been closed and the scope incorporated in SEA 4000 Program Phase 3—Build, which commenced in October 2007.


CHAPTER 3 O

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47

n to enhance or replace existing capability. They e. There are currently about 190 such projects, stment projects during 2007–08, compared to

riation $m

Explanation for significant variation of expenditure

0.2

-1.2 Delivery delay has caused the slippage of the in-service date from May 2009 to June 2011. Revised project plans are being prepared.

-0.3 Estimates were based on the median costs of the three tendered prices and the schedule prior to contract signature. The contract represents a real cost saving against those estimates. The in–service date and project closure has been slipped by up to three months and is now planned to be December 2009.

0.3 The overspend is due to the early delivery of components required to assemble the floodlight sets.

-1.4 The variation results from the delay in construction of the Oakey facility that will house the system. The facility was originally planned to be completed in 2007–08 but will now be completed in August 2008 and expenditure of funds will occur in 2008–09.

-2.4

Minor Capital Investment ProjectsMinor capital investment projects are undertaken to address emerging requirements—ofteare funded from outside the Defence Capability Plan and are usually of relatively low valuwith an average value of around $6m. A total of $97m was expended on minor capital inve$161m in 2006–07. Table 3.6 Top five minor projects 2007–08

Project number

Approved project

expenditure $m


$m


$m


$m

Actual expenditure

2007–08 $m

Va

Air Force

Pilot Monitoring Facility (PMF) Radios

AFM00913 17.1 4.2 6.7 9.9 10.0

RAAF Aeronautical Information Services (AIS) Upgrade

AFM00930 14.8 2.4 4.9 1.6 0.4

Army

Field Refrigeration Storage and Distribution

AMP081.03 21.1 0.5 6.1 1.1 0.7

Portable Floodlight Sets

AMP012.01 5.2 0.6 4.3 2.4 2.7

Weapons Training Simulation System

AMP029.27 14.2 7.2 4.2 1.9 0.5

Total top five minor projects 72.4 14.9 26.2 16.9 14.4

Acquisition

Wideband Global SatelliteOperational units of the ADF are now supported by a world class satellite capability, thanks to the efforts of a small team from the DMO in partnership with other Defence groups.

In 2007 Australia entered a partnership with the US to gain assured access to the Wideband Global Satellite (WGS) Communications System, setting a course that will significantly enhance Australian Defence Force communications capability. The negotiation of the Memorandum of Understanding with the US Government, and combined first/second pass approval from the Australian Government, was achieved in a nine–month timeframe.

The Joint Project 2008 Phase 4 team is delivering access to the WGS constellation of satellites with its global coverage, increased wideband capacity and operational flexibility. Participation in the program will also improve the communications support to our deployed forces in a cost effective manner. In addition, the WGS initiative will better enable future ADF capabilities and will provide opportunities for Australian industry to contribute to enduring ADF Satellite Communications (SATCOM) operations.

Australia’s global military commitments and contingencies maintain a heavy reliance on SATCOM capabilities, which currently provide for the effective command, control, support and protection of our forces in Afghanistan, Iraq, East Timor, Solomon Islands and those forces meeting our global maritime commitments.

In the longer term, WGS will enable the next generation of military capabilities to achieve its full potency. The Air Warfare Destroyer, amphibious ships, multi–mission

unmanned aerial vehicles and land–based communications and weapon system platforms will all benefit from networking through WGS.

Strategically, the WGS program strengthens the US/Australian alliance and will directly contribute to the ADF fulfilling the Network Centric Warfare Roadmap aims of becoming a network–enabled force by 2016.

Finally, Australian industry will benefit from the partnership contributing to the development of currently programmed Australian east and west coast anchor stations, as well as ongoing opportunities for the development and production of deployable wideband terminals. The first WGS satellite was launched in October 2007 and is now operational and used by ADF units in the field. The second satellite is due for launch later in 2008, with the full constellation of six satellites operational by 2013. When fully operational, the WGS constellation will service the needs of the ADF to 2024.



OUTPUT 1.2 MANAGEMENT OF CAPABILITY SUSTAINMENTUnder this output the DMO delivered support for specialist military and associated equipment to Defence. It included the maintenance of equipment and purchasing of inventory, such as explosive ordnance, fuel, stores and spare parts. Sustainment involves the management and provision of services and products needed to meet the capability, preparedness and performance requirements of a materiel system. Typical services include maintenance, engineering, supply, configuration management and disposals. Common products include spares, technical data, support and test equipment, training equipment and materials. The DMO also provides support for Defence operations, much of which is funded through this output.

The DMO's sustainment services to Defence, and the price the DMO receives for these services, are formalised in

Materiel Sustainment Agreements between the DMO and Defence Capability Managers.

Output 1.2 represented around 52.7 per cent of the DMO’s expenses in 2007–08. Expenses under this output included the DMO’s costs in delivering sustainment services.

The planned resource use for Output 1.2 was revised from $4,681.6m in the Portfolio Budget Statements 2007-08 to $4,916.4m in the Portfolio Additional Estimates Statements 2007-08. The DMO’s 2007-08 actual result against this output was $4,445.1m. Most of the underachievement in respect of this output was reflected in the Portfolio Budget Statements 2008-09 and relates to a reduction in the level of sustainment services required by Defence and a reprogramming of activities into 2008-09.

NOTE


Table 3.7 Performance Information for Output 1.2

Performance Indicator Planned evaluation of performance

Performance

Performance targets agreed between the DMO and Defence Capability Managers, consistent with enabling the ADF to deliver its operations and capability preparedness requirements as directed by the Government.

Deliver quality, timely and cost effective maintenance, repair, and supply services to the levels and standards agreed by Defence including support to ongoing operations.

Substantially achieved.In 2007–08 the DMO achieved 90.4 per cent of the revised estimate[1] for Output 1.2. This output delivered in–service support to 100 diverse categories of Defence specialised military equipment, ranging from major platforms (e.g. aircraft and ships), to individual items such as vehicles, rifles, tents, support and clothing.



Table 3.8 Top 20 products, by expenditure as forecast in the Portfolio Budget Statements 2007–08[1]


($m)


($m)

Actual 2007–08

($m)

Variation

($m)

Reason for variation in product expenditure 2007–08

Aerospace Systems DivisionF–111 Weapons System

146 145 147 2 Additional expenditure can be primarily attributed to non–receipt of price supplementation. The requirement for additional funding for the purchase of urgent spares was offset by areas of under–expenditure in facilities and fuel tank repair.

P–3C/AP–3C Orion Weapons System

121 126 113 -13 Maritime Patrol SPO experienced delays in • establishing the Mission Systems

Support Contract• the Avionic Processor Investigation• the purchase, and integration of new

Radar Processor A’s• commencing Autopilot replacement

program.

In addition, a reduction in unscheduled engine failures during the year resulted in fewer modules being repaired, and the use of FMS has reduced inventory costs.

F/A–18 Hornet Weapons System

119 111 112 1 Additional costs can be attributed to additional repairs associated with ageing aircraft issues. Funding was also brought forward into 2007–08 to procure additional engine parts, representing better long term value to the Commonwealth.

Lead–In Fighter Hawk 127

95 96 97 1 Additional Hawk costs can be attributed to the procurement of additional engineering support and additional Alternate Mission Equipment being brought forward into 2007–08.

C–130J–30 Weapons System

65 120 81 -39 Variation from revised 2007–08 estimate is directly attributable to the over-allocation of Operations Funding in 2007–08.

C–17 Weapons System

55 52 17 -35 Variation from the revised 2007–08 estimate is attributable to the incorrect assignment of Fuel and Explosive Ordnance allocation to Aerospace Systems Division.

Electronic Systems DivisionWide Area Surveillance Capability

74 74 77 3 Overachievement of $3m is due to a $2m increase in spend for the single software development and engineering environment as well as $1m for additional hardware purchases, repairs and replacements.



Battlespace Communications Systems

63 70 32 -38 The underspend is primarily due to Enhanced Land Force funds that were allocated to the Battlespace Communications product prior to requirements being articulated. Minimal requirements were defined during 2007-08 and these funds were not required.

Explosive Ordnance DivisionExplosive Ordnance – Navy, Army, Air Force

266 298 357 59 The overspend was driven by additional procurement of munitions in support of ADF operations, a large FMS deposit payment for Paveway 2 Guided Bomb Units and components and unbudgeted accounting effects due to delays in the clearing of explosive ordnance purchases.

Helicopter Systems DivisionSeahawk S70B–2 Weapons System

79 56 72 16 The Government decision to cancel the Seasprite project included a requirement to enhance Seahawk availability. Seasprite sustainment funds were redirected to Seahawk to purchase spares and additional maintenance in support of this capability.

Black Hawk S70A–9 Weapons System

67 76 74 -2 Black Hawk expenditure was $2m less than budget due to the reduced requirement for operational support funding in Operation Astute, as predicted increases in overall deeper maintenance costs for the fleet did not materialise.

Super Seasprite Helicopter SH–2G(A)

55 49 27 -22 Seasprite expenditure was $22m less than budget because the project was cancelled.

Maritime Systems DivisionFuels and Lubricants – Navy, Army , Air Force

430 468 422 -46 The underspend is attributed to fuel consumption being less than forecast, and funding not utilised for an operational exercise.

Collins class submarines

322 326 333 7 The variation was required to meet additional materials and subcontractor costs for HMAS Dechaineux’s full–cycle docking, and real costs for the combat system adaptation and US Navy support services under the Armaments Cooperation Program.

Helicopter Capable Frigate

238 252 219 -33 The variation is due to a planned delay in procurement of spares. The logistic shortfall activities are now planned to rollover procurement into 2008–09.



($m)


($m)

Actual 2007–08

($m)

Variation

($m)




NOTES

1. Figures in the table represent contracted services costs only.

Guided Missile Frigate – Adelaide class

126 119 103 -16 The variation is due to the delay in preparations for disposal of the decommissioned ship Adelaide to the NSW Government until July 2008, and the deferral of inventory acquisition.

Mine Hunter Coastal

61 62 61 -1 The underspend is due to late 2007–08 invoices and a milestone payment deferred into 2008–09, and delays in deliveries from overseas suppliers.

Land Systems DivisionB Vehicles 85 141 117 -24 The revised budget estimate

reflected increased funding to support ADF Operations. The level of support required was not as high as expected and is reflected in actual result.

ADO Commercial Vehicle Fleet

81 73 73 –

ADF Clothing and Equipment

101 135 117 -18 The increased level of support required for ADF operations was not as high as expected.

Sub–total Top 20 Products

2,649 2,849 2,651 -198



($m)


($m)

Actual 2007–08

($m)

Variation

($m)




Aerospace Systems DivisionAerospace Systems Division provides acquisition and through life support to 13 fixed wing aircraft types, ranging from F/A–18 Hornet, Hawks and F–111’s, to C–130H/J Hercules and AP–3C Orions and related aircraft support systems.

In cooperation with the Air Force, the Division has embarked on an initiative to develop a cost conscious capability culture aimed at reducing aircraft support costs through continuous improvement and cost benchmarking.

Achievements• Commenced formation of the Heavy

Air Lift Systems Program Office (HALSPO) at RAAF Amberley in early 2008, which has accepted responsibility for in–service sustainment of the four C–17A Globemaster III Heavy Airlift aircraft. HALSPO will also be responsible for sustainment of the KC–30B Multi Role Tanker Transport weapon system on delivery of the first aircraft in 2009.

• Completion of the withdrawal from service of the B707 tanker aircraft.

• Completed the modification of the C–130H fleet to provide improved electronic warfare self–protection capability.

• Modified the C–130J full flight simulators at Air Lift Group in RAAF Richmond to the Block 5.4 standard.

• Completed acceptance testing of the C–130J Block 6.1 Common Core modification with the international partners in advance of Australian aircraft trial installation in 2008–09.

• Successfully supported the C–130H and C–130J–30 deployment and operations in the Middle East Area of Operations (MEAO).

• Signed performance based contract with Standard Aero for maintenance support to the C–130J engine, nacelle and propeller.

• Fitted an Operational Loads Monitoring System to a C–130J aircraft as part of a collaborative fatigue management program with the Royal Air Force.

• Fitted a Precision Air Drop System to three C–130J aircraft in preparation for operational deployment to the MEAO.

• Commenced trial installation of the replacement instrumentation and Global Position System into a second PC–9/A aircraft.

Challenges • Managing ageing aircraft platforms,

including PC–9/A Training Aircraft, C–130H and Caribou.

• Completing the disposal of the B–707, spares and support equipment from service.

• Delivery of C–17A Globemaster III Heavy Airlift aircraft long lead time spares, support equipment, role equipment and training devices needed to achieve final operating capability.

F–111Fourteen F–111G variant aircraft, acquired in 1993 to replace F–111C attrition losses and to extend the life of the F/RF–111C fleet, were retired with the last flight occurring on 3 September 2007. F–111 wing fatigue testing activities were completed assuring maximum F–111 wing sets and wing life to the end of 2010. Negotiations were undertaken to align contracts for logistics and deeper maintenance support with the recently confirmed F–111 planned withdrawal date of December 2010.

P–3C/AP–3C Orion Management of the ageing aircraft issues with the AP–3C Orion continues with the introduction of a safety by inspection fatigue management regime to replace the previous safe-life policy for the aircraft. Under the previous regime, the aircraft could continue flying until a predetermined fatigue point was



reached. At this point the aircraft either needed to be retired or transitioned to a new fatigue management philosophy. The safety by inspection regime assures the continued safety of the airframe structure through a series of modifications and recurring inspections that were not required under the safe life policy.

The development of a new Mission System Support Contract along with the established Platform System Support Contract and the expanded Avionics Workshop contract is another key element of the enhanced delivery model to maintain the capability to its planned withdrawal date and to support key upgrades to address both obsolescence and capability requirements.

Future sustainment strategies for the AP–3C are currently being investigated under Project AIR 7000 including manned and unmanned maritime patrol and response capabilities.

F/A–18 Hornet

During 2007–08, an on–line Fatigue Management tool (Aircraft Structural Life Monitoring Program) was implemented to assist F/A–18 aircrew to manage aircraft structural fatigue. In addition, a number of items of equipment from the Hornet Upgrade Project Phase 2.2 were transitioned into sustainment including: Advanced Memory Unit; Joint Helmet Mounted Cueing System; Multi Display Group Unit; and Joint Mission Planning System.

Managing aircraft structural issues and system supportability and obsolescence issues for the ageing F/A–18 Hornet

aircraft has been a challenge for 2007–08, along with negotiating and implementing long–term logistics support contracts for the maintenance and modification of the F/A–18 Hornet aircraft. Hornet Upgrades and structural refurbishment programs are partly addressing aircraft ageing and obsolescence issues. Further planning is underway to address issues on wings, undercarriages and deeper maintenance. Support contracts for modifications and maintenance are expected to be in place by December 2008.

Lead–in Fighter (LIF) Hawk 127 The fatigue monitoring system for the Hawk aircraft is now functional and accredited.

In January 2007 BAE Systems Australia commenced the major servicing schedule.

The LIF Capability Assurance Program AIR 5438 has been established to consider future Hawk requirements. The program is currently scheduled for first pass approval in November 2009.

C–130J–30 Weapons SystemThe 12 C–130J aircraft and C–130J full flight simulator are supported through a mix of short–term spares supply, component repair support, aircraft deeper maintenance, and engineering services contracts. The DMO is currently evaluating tenders to establish a performance–based C–130J through–life support contract to replace the existing contracts from 2009–10. Purchase of additional spares and improvement of repair pipelines to enhance demand satisfaction performance will continue throughout 2008–09. Support to operations to assure availability of spares over extended supply lines to deployed aircraft, and remediation of wear and tear caused by the harsh operating environment experienced by deployed aircraft, will continue. Support for the Enhanced Land Force program will commence, ramping up to the mature requirement by 2009–10. The DMO is providing project management and engineering support to the C–130J role expansion, obsolescence management and block upgrade programs.



C–17 Globemaster III Heavy Airlift Aircraft Weapons SystemSustainment responsibility for the C–17A has transferred from the acquisition Project Office to the Heavy Air Lift Systems Program Office with the transfer of C–17 Logistics Management Unit staff in early 2008. Lay–in of spares and support equipment and development of infrastructure is continuing.

Helicopter Systems DivisionHelicopter Systems Division provides through–life support to ten rotary wing weapon systems through an Aviation System Program Office based at Nowra for Navy aviation and another based at Oakey for Army aviation. They provide fleet–wide engineering, repair parts, contract management for deeper level maintenance and replacement of ageing and obsolescent aircraft equipment.

The sustainment tasks are driven by operational unit requirements such as the Black Hawk Squadron’s support to special operations, and deployments such as the Seahawk in the Middle East, Chinooks to Afghanistan and continued requirements for unmanned aerial vehicles operations in Afghanistan. The introduction of the Tiger Armed Reconnaissance Helicopter (ARH) and delivery of the first two Multi–Role Helicopters (MRH–90) generated the need to establish logistics management capabilities in Brisbane to support sustainment of those products.

Achievements• The Iroquois and some Kiowa

helicopters were successfully withdrawn from service. Disposal arrangements have yet to be finalised and this necessitates ongoing logistic management effort.

• The support of Army Aviation training at Oakey was successfully transitioned to a new performance–based contract with Boeing Australia Ltd.

• The maturation of the combined Seahawk upgrade and deeper maintenance lines resulted in enhanced aircraft availability.

• The replacement of the Chinook engines was completed ahead of schedule and under budget, which, in conjunction with the incorporation of other Rapid Acquisition upgrades, facilitated the successful redeployment of Chinook to Afghanistan. Refer to the case study on page 64.



• Implementation of support arrangements for the ARH and the MRH–90, including resolution of a dispute with Australian Aerospace that encompassed both acquisition and through–life support issues.

Challenges• Managing ageing aircraft platforms

such as the Sea King, Black Hawk and Seahawk. A life-of-type approach is in place for the Sea King. The Black Hawk, to be replaced by the MRH–90, requires a life–of–type approach whereby configuration is fixed to a baseline and then early but larger orders of spares are made. Seahawk obsolescence issues will be addressed through a capability assurance program.

• Transitioning the ARH and MRH–90 from acquisition to sustainment remains an ongoing challenge in order to sustain the rates of effort needed to meet training expectations. This requires intensive management between the project offices and the new logistic management organisations.

• Reducing the cost of ownership of rotary wing platforms is a major focus for Helicopter Systems Division and will remain a targeted area throughout 2008–09.

• A shortage in the Australian industry of aerospace technical skilled personnel imposes increasing difficulty in recruiting competent staff to perform the logistics management functions required to sustain rotary wing platforms for the DMO as well as for contractors. While Helicopter Systems Division is not unique in this regard, development of strategies to address this challenge will be a priority activity for 2008–09.

S–70B–2 Seahawk The Navy aviation fleet includes 16 Seahawk helicopters whose primary role is frigate–based anti–submarine warfare. During 2007–08, they continued to be deployed to guided missile frigates and Anzac class frigates on task rotation to provide maritime surveillance and force protection to ADF and coalition forces on Operation Catalyst. To offset the lack of a Seasprite capability, some additional funding has been transferred to increase Seahawk availability.

S–70A–9 Black Hawk The high operational deployment of US Army Black Hawks has significantly extended the turnaround times on overseas repair and overhaul of components. In conjunction with increased difficulty in supporting the obsolete systems, this has increased the cost of sustaining the Black Hawk fleet, which has, in turn, necessitated examination of options to achieve the Black Hawk planned withdrawal date. Options, including making a life–of–type purchase of spares, are being examined.

SH–2G(A) Super Seasprite Seasprite flying operations were suspended for much of 2007–08 and the project was cancelled in March 2008. Logistic management capacity had to be maintained throughout the year and a small team will be needed to continue until disposal is complete. Approximately $30m worth of common spares have been re–assigned to other weapon systems and $10m of allocated annual Seasprite sustainment funding has been re–directed to Seahawk aircraft to increase their operational availability. Because some spares common to other aircraft were being procured through Seasprite sustainment, approximately $2m per year will need to be retained from the Seasprite allocation with the remaining funds returned to Defence.



Electronic Systems DivisionWithin the Electronic Systems Division (formerly Electronic and Weapon Systems Division), the through–life support of electronic systems materiel is managed across 18 System Program and System Support Offices. The other two Offices reported in the Defence Annual Report 2006–07 were transferred to the new Explosive Ordnance Division.

The 18 offices cover command and control systems, communications, airspace surveillance and control systems and their supporting radars, electronic warfare systems (including self protection), and satellite communications and tactical interoperability systems. In 2007–08 a high level of sustainment effort was directed to effective support of ADF operations, which was achieved concurrently with achievement of agreed sustainment targets of equipment fleets.

Achievements • Provided significant additional

quantities of radios and associated equipment to support operations in the Middle East Area of Operations. The Division also provided cryptographic equipment and hardware and software support to the operational theatres, and to other Government agencies.

• Commenced replacement of obsolete plain voice and data communications systems on the Navy’s Landing Platform Amphibious ships (HMA Ships Manoora and Kanimbla). This activity will complete in 2008–09.

• Supported the two Navy very low frequency communication sites: Naval Communications Station Harold E Holt located in Exmouth, Western Australia and Navy Transmission Station—

Darriman in Sale, Victoria. Substantial anticorrosion and guy wire replacement activities were undertaken at Harold E Holt during the year.

• Met or exceeded availability and serviceability targets for the Nulka Active Missile Decoy System fitted to Australian warships. The Systems Program Office continued to improve the system, and has worked with the US Department of State to increase access to overseas markets for the Nulka system.

• Continued to provide in service support for the Australian Defence Air Traffic System, including radar mechanical maintenance. Support was also provided for deployments of the Transportable Air Surveillance Radar. Under Project Genesis, integration of the Defence and Airservices Australia Air Traffic Control capabilities was scaled down; however, a long term contract for the Pearce to Perth Approach Radar was executed on 1 July 2008.

• The in–service support arrangements for the Tactical Air Defence Radar Systems continued with one of the four systems on deployment to the Middle East Area of Operations in support of Operation Slipper. Support for the Tactical Interface Cabin continued, with integration of the Tactical Air Defence Radar System and Mobile Control and Reporting Centre. The System Program Office has a significant ongoing effort to remediate obsolete hardware to extend the life of type of current equipment until new systems are delivered. The Northern Regional Operations Centre is being prepared for the delivery and fit out of the Project AIR 5333 Vigilare equipment.



Challenges• Reducing the cost of ownership, which

the Division achieved through renegotiating sustainment contracts, altering maintenance philosophies, consolidating functions, and moving transactional work to contractors.

• The high level of support to capabilities deployed on current operations. This was achieved in part by deploying civilian and military personnel into theatre.

Wide Area Surveillance CapabilityThe ADF’s Over the Horizon Radar wide area surveillance capability, which includes the Jindalee Operational Radar Network, regularly met or exceeded operational availability requirements of the Air Force, providing surveillance over the northern sea and air approaches to Australia. Two new primary support contracts were implemented with support to the three major ground stations in Western Australia, Queensland and the Northern Territory. Control elements in South Australia were further rationalised and standardised. Features of the new contracts include a new rate of effort, to match the capability managers’ operational needs for wide area surveillance, and rationalisation of support responsibilities between the two prime support contractors. Work has progressed on implementing a single software development and engineering environment across the two contractors and Defence, with implementation progressing through the first quarter of 2009.

Battlespace Communications Systems

Battlespace Communications Systems comprises a range of radio and trunk systems used for transmitting voice and data primarily in support of land–based forces. Obsolescence issues are beginning to affect the risk profile of this product group; however, all of the ADF’s important sustainment needs are currently being met. A contract for five years in–service support of the Battlefield Telecommunications Network was signed in June 2008 with BAE Systems Australia, providing maintenance, spares management and engineering support services, including proactive obsolescence management. During the year consolidation of heavy grade repair engineering and supply support of selected single channel radio systems equipment and ancillaries proved to be very successful. Resource savings have been redistributed to other high priority tasks, including support to operations.



Explosive Ordnance DivisionExplosive Ordnance Division was established in February 2008, taking responsibility for all explosive ordnance from the former Electronic and Weapon Systems Division. The Division provides acquisition and through–life support to the ADF for Explosive Ordnance (EO). 2007–08 was characterised by an increased number of procurement requests for urgent delivery of Explosive Ordnance to meet operational commitments.

Achievements• The EO Division budget was expended

on activities associated with support of the inventory, inclusive of procurement of stock to replace that consumed during Raise–Train–Sustain activities of the ADF, and assuring the readiness, reliability, and performance of the items of inventory. A portion of the total expenditure was utilised to support indigenous manufacturing capability through the Strategic Agreement for Munitions Supply and the Mulwala Agreement, both of which are agreements between the Commonwealth and Thales Australia.

• EO was procured in direct support of operations, primarily for Operation Catalyst. International activities requiring EO have placed pressure on manufacturers and suppliers of raw or finished components. This pressure has manifested as growing uncertainty in delivery lead times for high demand items or those items comprising common components.

• Logistic Supplementation was provided to remediate identified deficiencies in EO stock levels. This allocation was fully expended. The final allocation of approved EO logistic supplementation funding will be made in 2008–09.

• Rapid response to short–notice demands for EO in support of operations.

• The extension of the shelf–lives and service–lives of numerous natures of EO deployed to operational theatres through a comprehensive review of the impacts of climatic conditions on the reliability and performance of the items.

• A reduction in the level of unserviceable stock through disposal activity.

Challenges• Establishment of the newly–formed EO

Division, and the de–merger of staff, resources and accountabilities from Electronic and Weapon Systems Division in February 2008. This involved:

- a fundamental reorganisation of Divisional elements and the formation of Guided Weapons Branch and Munitions Branch, with their respective System Program Offices, to create single points of accountability for outcomes and direct linkages with Service customers.

- Implementation of more formal and structured engagement with the capability managers to elicit their EO requirements, determine priorities going forward and address product and performance issues.

- Development and negotiation of more performance–based Materiel Sustainment Agreements with the Navy, Army and Air Force, including robust key performance indicator frameworks.

- Commencement of a detailed scoping study to determine professionalisation priorities and opportunities to build competency–based career frameworks for those working in the EO domain,



including Defence, the Services and industry.

- Implementation of a senior executive Strategic Governance Board with Thales Australia to further build the partnering relationship for indigenous munitions manufacturing and to determine the way ahead for the Strategic Agreement for Munitions Supply and the related Mulwala Agreement.

Land Systems DivisionThe sustainment of land systems is now managed through 10 System Program Offices (SPO). An additional SPO was established during 2007–08 to manage surveillance and simulation systems without increasing total personnel numbers. Land materiel products span more than 1,200 equipment fleet types and tens of thousands of consumable line items. Land materiel is supported by Land Systems Division throughout Australia, and in several concurrent overseas operational theatres. During 2007–08, these products were managed across 26 separate Materiel Sustainment Agreements. The range of land materiel is significant and includes:

• armoured fighting vehicles

• combat support vehicles

• engineer systems

• B vehicles

• bulk liquid distribution and storage systems

• weapon systems, from small arms to mobile guided missile systems

• health systems, medical and dental equipment

• tentage and defence stores

• ADF clothing and uniforms

• surveillance and simulation systems

• consumable stores such as combat rations.

Achievements• Planning and loading of over 56,000

maintenance jobs to Joint Logistics Command using in excess of 1,093,000 hours of labour, representing an increase of 13 per cent and 16 per cent respectively over 2006–07.

• Consistently achieving procurement lead time targets in 85 per cent of transactions in support of operations.

• Processing in excess of 2,000,000 Standard Defence Supply System inventory demands.



• Consistently achieving operational availability levels of greater than 92 per cent for deployed Armoured Fighting Vehicles.

• Twenty–seven rapid acquisition projects were delivered to deployed services.

Challenges• The priority for Land Systems Division is

the continued sustainment of ADF operations. There have been 14 continuous operations globally during 2007–08 in addition to a number of minor short term contingencies.

• Manage the refurbishment of equipment returning from overseas deployments to ensure its availability for future operations.

B VehiclesB Vehicles are generally unprotected Land Rovers, Mercedes Unimog 4–tonne and Mack 8–tonne trucks, and associated trailers. The total number of vehicles and trailers under management is approximately 11,500. The overall budget included logistic shortfall supplementation and provided for regional unscheduled maintenance, centrally managed repair programs and remediation of vehicles as they returned from operational areas. The major risks mitigated were the uncertain timing of equipment returning from operations and the increasing maintenance liability and cost due to the ageing of the fleet. A number of specific outcomes were achieved, notably:

• A total of 119 vehicles were refurbished under the operational remediation program, including 71 Land Rovers, 41 Unimogs and 7 Mack trucks.

• A total of 188 vehicles were refurbished under the B Vehicle Logistic Shortfall Project, including 144 Land Rovers, 16 Unimogs, 25 Mack trucks and 3 S–Liner trucks, encompassing 2,976 repairable items.

Commercial VehiclesDuring 2007–08 the Defence Commercial Vehicle Program replaced 2,110 vehicles.

This involved:

• 2,087 light vehicles procured from standing offers with Toyota, Ford, Mitsubishi, Nissan and Holden

• 23 trucks and trailers procured

• $40.4m in revenue realised through the sale of replaced vehicles.

ADF Clothing and Equipment

ADF clothing consists of combat clothing, personal field equipment and non–combat clothing. In 2007–08 ADF Clothing ordered over nine million items and delivered over seven million items to meet approximately 950,000 demands for clothing and field equipment. It achieved its baseline sustainment budget and met its operational and Enhanced Land Force requirements. ADF Clothing continues to strengthen its relationship with industry, with Clothing Industry Forums held in September 2007 and April 2008, with 80 industry representatives attending each forum.

In 2008 ADF Clothing commenced the move to a Prime Vendor for non–combat uniforms based on four work packages: Garrison Wear, Ceremonial Uniforms, Sports Wear and Commercial Work Wear. Following the release of an Invitation to Register in April 2008, release of a restricted Request for Tender is planned to occur in the fourth quarter of 2008.

Over 26 tenders that were detailed in the 2008–12 ADF Clothing and Personal Equipment Procurement Plan were released to industry. Major risks associated with this sustainment capability remain the capacity of the local textile clothing and footwear industry to meet ADF combat and non–combat clothing demands as a result of ongoing sector rationalisation.



Maritime Systems DivisionMaritime Systems Division (MSD) provides the management, services and products needed to meet the capability, preparedness and performance requirements of maritime platforms, systems and equipment for the operational requirements of the Chief of Navy. MSD also provides materiel sustainment, infrastructure and training for the Pacific Patrol Boats, and manages the provision of fuel and lubricants for the ADF.

Achievements• The submarine escape and rescue

vehicle Remora was refurbished and re–certified in Canada and is awaiting transport to Australia. Remora’s lifting and recovery system was refurbished in Scotland.

• HMAS Sirius transitioned successfully into in–service support.

• The Anzac class Integrated Material Support contract between the Commonwealth, SAAB and BAE Systems Australia (formerly Tenix Defence Pty Ltd) was implemented.

• Effective support of the Armidale class patrol boat to meet the operational availability requirements of Navy.

Challenges• Significant upgrades to the Collins class

submarines were achieved by maintaining cohesive stakeholder cooperation in operational and refit programming while concurrently achieving the availability of sufficient platforms to meet operational requirements.

• The major refit of HMAS Success was achieved as the first ship repair undertaken under the new ship repair ‘batching contract’ methodology.

• Improvements to the Configuration Management Tool which supports the Anzac and Adelaide class frigates and Amphibious and Afloat Support major units will enhance the control of ships’ configurations.

Coastal Mine Hunter vesselsThe new performance–based contract for in–service support delivered efficiencies under the inherent reliability and performance modelling. Effective sustainment enabled four ships to be tasked to support mine countermeasures activities and two ships to participate in border protection roles.

Fuels and Lubricants—Navy, Army, Air Force Significant increases in world fuel prices and the impact on the 2007–08 budget were mitigated by consumption being less than forecast, and the comparative increase in the strength of the Australian dollar against the US dollar.

Adelaide class guided missile frigate (FFG)HMAS Adelaide was decommissioned in January 2008 and has been made available to the NSW Government from 30 September 2008 for sinking as a dive wreck.

HMA Ships Sydney and Melbourne are now being operated by Navy pending initial operational release in early 2009. HMAS Sydney successfully fired an Evolved Sea Sparrow missile in August 2007 and operational test and evaluation firings occurred in October 2007. These outcomes provide increased confidence in the Australian Distributed Architecture Combat System. Early warning and fire control radar sensor upgrades have also demonstrated significant improvements to long range detection and engagement capabilities of the combat system. Remediation of performance deficiencies with the electronic support and underwater warfare systems continues.

Adelaide class upgrade project delays impacted the availability of surface combatant Adelaide class frigates. Anzac class frigates were tasked to meet operational requirements.



Collins class Submarines

HMAS Waller successfully completed a full–cycle docking and achieved initial operational release for the combat system and heavyweight torpedo upgrades in May 2008. Waller will now undertake more operational tests and trials. HMAS Farncomb completed a mid–cycle docking, which included the installation of a replacement combat system, heavyweight torpedo, and also provided new multifunction and high data rate communication antennae. HMAS Dechaineux’s full-cycle docking including associated upgrade work is well advanced.

Operational submarines were supported effectively during deployments. Support costs including obsolescence issues remain a challenge. Several initiatives are being examined and trialled to reduce the cost of ownership, including the introduction of an eight–year rather than the current six–year usage upkeep cycle.

Anzac class helicopter capable frigate (FFH)The Anzac class Integrated Material Support contract between the Commonwealth, SAAB and BAE Systems Australia (formerly Tenix Defence Pty Ltd) has been implemented. Extended maintenance and capability upgrades in HMA Ships Ballarat, Stuart and Toowoomba were completed during 2007–08. Operational Anzac class frigates were supported effectively during deployments.


Sustainment

In–service, ahead of schedule & under budgetThe Partnership between the DMO, BAE Systems Australia, the Foreign Military Sales (FMS) team and the US Army delivered the Chinook CH–47D heavy lift helicopter engine upgrade under budget and ahead of schedule.

The Australian Army Chinook detachment was commended for its performance during operations in Afghanistan. In March 2007, the detachment returned to Townsville for a recovery program that included maintenance and the installation of new engines. After an accelerated modification program bringing the engine installation to completion nine months ahead of schedule, the Chinook fleet has now re–deployed in support of our troops in the reconstruction of Afghanistan.

Under Project AIR 9000 Phase 5A, approved by Government in December 2004 at a cost of $53.7m, the Chinook fleet was to receive the engine upgrade by August 2008. However, the fleet’s deployment early in 2006 and anticipated future deployments generated the requirement to accelerate the modification program.

The engines are 22 per cent more powerful and use seven per cent less fuel as a result of new technologies and a digital control system that reduces pilot workload. The engines are also more reliable, with a predicted overhaul life of 2,400 hours or 12 years of flying. The engine upgrade enables Chinook to operate at higher altitudes and in hotter climates with the equivalent payloads.

New engines were acquired from the US Army at reduced costs under the FMS system. This acquisition allowed Australia’s position on the production line to advance by diverting US Army–designated engines to Australia and providing replacement engines to the US Army at a later date.

BAE Systems was contracted to install the Government–furnished engines and kits. However, the FMS contract included the support of Westwind Technologies Ltd, a Chinook support company from Huntsville, Alabama to install the first engine and to assist Army Aviation System Program Office in amending Modification Work Orders for ADF–configured

aircraft. The installation of the first engine by Westwind Technologies Ltd also provided on–the–job training for BAE Systems in relation to the engine modification.

The last Chinook to complete the engine modification was returned to service in mid–November 2007, ending a modification program that was completed ahead of schedule and significantly under budget.



OUTPUT 1.3 PROVISION OF POLICY ADVICE & MANAGEMENT SERVICESUnder this output the DMO delivered procurement and industry policy advice to both Defence and the Government. Corporate functions that would exist regardless of the scale or nature of DMO’s business are also covered by this output. This output represented less than one per cent of the DMO’s expenditure in 2007–08 (similar to 2006–07 levels).

During 2007–08, the DMO’s expenses for Output 1.3 totalled $60.4m, which delivered:

• procurement advice to Defence and the DMO and contracting advice to the rest of Defence

• industry policy advice to both Defence and the Government

• corporate governance and reporting to meet the Government’s requirements.

The planned resource use for Output 1.3 was revised from $106.4m in the Portfolio Budget Statements 2007-08 to $101.0m in the Portfolio Additional Estimates Statements 2007–08.

For further information on industry engagement for 2007–08, refer to Chapter 7 —Enabling Our Business.

NOTE


Table 3.9 Performance information for Output 1.3

Performance Indicator Planned evaluation of performance

Performance

Delivery of quality policy advice and management services

The DMO will continue to evaluate and improve the delivery and quality of advice and services.

Significantly achieved. In 2007–08 DMO achieved around 59.7 per cent of the revised estimate[1] for Output 1.3. Delays in the Skilling Australian Defence Industry and the Defence Industry Policy Strategies programs contributed to this underspend. The DMO and Defence made further progress with regard to the maturity of the framework supporting Output 1.3, including the way in which costing and internal reporting is done. The DMO continued to pursue and initiate further reforms with an aim to make organisational and business improvements.



Ministerial SupportProviding policy advice and support to the Minister for Defence is a key function of the DMO. The key to maintaining trust and credibility with our principal stakeholders is the prompt and accurate provision of

responses to Ministerial representations and other parliamentary questions, and Ministerial submissions.

Table 3.10 shows a breakdown of correspondence provided to the Ministers’ offices during 2007–08.

Table 3.10 Statistics on advice provided to the Government

Type of Advice NumberSubmissions 474Speeches 11Responses to Parliamentary Questions on Notice 9 and DMO input to 4 whole-of-

Defence responsesQuestions taken on notice in the course of Parliamentary inquiries

11

Media releases 98Ministerial correspondence 1,390Question Time Briefs 79Total 2,076


Documents

SECTION 2 REPORT ON PERFORMANCE€¦ · • Output 1.1—Management of capability acquisition • Output 1.2—Management of capability sustainment • Output 1.3—Provision of policy