Senate Notice Paper Question No 221 Publication Date: 17 June 2002
Hansard: Pages 1911-14

Defence: Project SEA 1411

 Senator: Evans

Senator Chris Evans asked the Minister for Defence, upon notice, on 5 April 2002:

With reference to project Sea 1411:

  1. When were tenders put out for this project.
  2. Can the department confirm that it was the intention that these helicopters would operate from the proposed offshore patrol craft that has since been abandoned.
  3. (a) Were the ANZAC frigates designed for the proposed Seasprite helicopter; and (b) do the ANZAC frigates have the capacity to use a larger helicopter.
  4. (a) How many organisations submitted tenders; and (b) which organisations submitted tenders.
  5. (a) Was there a shortlisting of tenders; (b) how many organisations were shortlisted; and (c) which organisations were shortlisted.
  6. On what basis did Kaman Aerospace International win the tender; if it was on the basis of cost, what was the approximate differential with other tenders (eg. $20 million); if it won the bid on other factors, what were they.
  7. (a) Do the 11 helicopters to be delivered have reconditioned airframes; if so, physically how old are those airframes; and (b) were other bidders proposing to use reconditioned airframes.
  8. Can a copy of the original tender documents be provided.
  9. Was there any other documentation provided to the tenderers; if so, can a copy of this documentation be provided.
  10. (a) Can a copy of the contract signed with Kaman Aerospace International for the delivery of the helicopters be provided; and (b) when was that contract signed.
  11. Is there some form of damages or penalty clause in the contract that would allow the Government to pursue the manufacturer over the delays to the project.
  12. (a) What avenues does the Government have to pursue the manufacturer over the delays; and (b) to date has the Government initiated any such action.
  13. Can yearly totals for the payments made under the contract to date be provided (ie. presumably from the 1996-97 financial year).
  14. (a) To date what has been the total amount spent on the project under this contract; and (b) how much is left outstanding on the contract.
  15. In terms of the service life of the helicopters: (a) what impact will the delays have; and (b) will they be able to remain in service for the same period as initially intended after their delivery.
  16. At the time the contract for the helicopters was signed what was the total cost of the project.
  17. (a) Can a copy of the contract signed with Kaman Aerospace International for the service of the helicopters be provided; and (b) when was that contract signed.
  18. At the time this service contract was signed what was the total cost of servicing the helicopters.
  19. When did the department first become aware of problems with the project (eg. failure to meet agreed progress points).
  20. (a) When was the Minister (presumably a previous Minister) first briefed on delays in this project; and (b) how many times have Defence ministers been briefed on problems with this project.
  21. What action has the current Minister, and/or his predecessors, taken in relation to the delays with this project.
  22. What is the latest estimate on the delivery of the first helicopter.
  23. What is the latest estimate of when all 11 helicopters will be operational.
  24. What is the latest estimate of the cost of this project.

Senator Hill - The answer to the honourable senator's question is as follows:

  1. The Request for Tender (RFT) was issued to industry on 18 October 1995. It had been preceded by a draft RFT issued on 10 February 1995.
  2. It was intended that the helicopter selected to satisfy the requirements for Project Sea 1411 Phase 1 would also be operated from the offshore patrol vessel (OPC) proposed to be purchased under Project SEA 1427. The contract was to provide the helicopters for the ANZAC class frigates with options for additional helicopters for the OPC.
    1. No. The Seahawk helicopter was used for the design guidance of the ANZAC frigates.
    2. Yes. The ANZAC is capable of handling medium size helicopters, for example the Seahawk.
    1. Two companies submitted tenders.
    2. Kaman Aerospace International Corporation and GKN Westland Helicopters Limited (now Agusta Westland).
    1. No, shortlisting was not used for this project.
    2. Not Applicable.
    3. Not Applicable.
  6. Kaman Aerospace International was selected as the preferred tenderer on the basis of a combination of value for money and more completely meeting the required operational capability than its competitor. The Kaman bid was in the order of $A200 million less expensive.
    1. Yes, the SH-2G(A) Super Seasprite is based on refurbished and modified SH-2F Seasprite airframes. Airframe build dates are detailed below:

      Airframe Production No. USN Bureau No Original Build Date USN Refurbishment Date (1) (as SH-2F)
      1 161656 1985 Not Applicable (New build SH-2F)
      2 149773 1963 1973
      3 150156 1964 1974
      4 150160 1964 1975
      5 151310 1964 1975
      6 151329 1965 1974
      7 152205 1965 1975
      8 161913 1986 Not Applicable (New build SH-2F)
      9 161914 1986 Not Applicable (New build SH-2F)
      10 149024 1963 1973
      11 163210 1988 Not Applicable (New build SH-2F and was further modified to a SH-2G in 1995)
      Note 1. Some airframes have been refurbished more than once.
    2. No.
  8. It is understood that this question refers to the Request for Tender documents. A copy is available from my department.
  9. Various Commonwealth and other documents referred to in the Request for Tender was provided to the potential tenderers on request. In addition some hundreds of responses to clarification questions from the tenderers were issued to both tenderers. During contract negotiations the Project Office issued nearly 200 requests for clarification. Making copies available would require commitment of significant time and resources, which I am not prepared to authorise.
    1. My department has sought Kaman's agreement to the release of the contract.
    2. Contract PM8016 with Kaman Aerospace International Corporation for the acquisition of 11 SH2-G(A) helicopters, operational flight trainer, software support centre and an integrated logistic support package was signed on 26 June 1997.
  11. and 12. The contract does not provide for liquidated damages. It does provide for measures such as a financial guarantee to be held in a bank account and for the withholding of payments if milestones are not met. Also, normal remedies under contract law are available, under the jurisdiction of ACT law and its courts. To date, the Commonwealth has withheld payments that were otherwise due under the original contract schedule. In addition, under my direction, my department is negotiating with Kaman to establish links between the revised delivery schedule of the aircraft under the acquisition contract, and the provision of in-service support under the service contract, so that a 10-year period of support is provided by Kaman from the date of acceptance of the aircraft. Kaman has agreed to work with the Commonwealth to reinstate the intention of the 10-year in-service support contract, at no additional cost to the Commonwealth.
  12. Financial expenditure by financial year under the contract:

    1996/1997 $ 66.186 million
    1997/1998 $160.329 million
    1998/1999 $190.138 million
    1999/2000 $114.887 million
    2000/2001 $137.252 million
    2001/2002 $ 73.901 million
    (to 10 April 2002)
    1. To 10 April 2002 Defence has spent $A778.264 million (including price variation) on the project, of which $A742.694 million was under the contract.
    2. $180.991 million is outstanding for payment on the contract as at 10 April 2002. The contract updated to a December 2001 price base, has a total cost of $923.685 million.
    1. The project delays will have no impact on the service life of the helicopter.
    2. Yes. The helicopters will be able to stay in service for the projected 25 year life.
  15. The approved total project cost was $799.637 million (December 1996 price and exchange).
    1. My department has sought Kaman's agreement to the release of the contract.
    2. Contract PM8017 with Kaman Aerospace International Corporation for the supply of provision of in-service support for the Super Seasprite SH-2G(A) helicopters was signed on 26 June 1997.
  17. At the time of contract signature, the in-service support contract was valued at $A125 million (December 1996 prices). It should be noted that the contract includes management of deeper maintenance activities, training of aircrew and maintainers, helicopter mission software updates, management and maintenance of the Full Mission Flight Simulator and warehousing. It does not include the costs of operational level maintenance or the cost of repair of aircraft components.
  18. The department became aware in November 1998 of a delay of two months although no progress points had been missed at that time.
    1. 26 May 2000.
    2. Ministers have been provided with written briefs on 13 occasions.
  20. I have directed the department to continue investigating all options in respect of these contracts, and to negotiate amendments to the Super Seasprite acquisition and in-service support contracts, in particular to the payment schedules. With regards to the acquisition contract I have directed a review of the Commonwealth's legal position and to be advised of outcomes of amended payment schedules.
  21. December 2004.
  22. The helicopters should be operational in mid to late 2006 after an exhaustive series of operational tests and evaluation conducted by the Navy has been completed. This evaluation requires a period of operation of the helicopter in its intended environment (an ANZAC frigate) with an operational crew.
  23. The current budget approval for the project is $1,015.717 million (December 2001 dollars, including price and exchange). My department estimates that the project will be completed within the budget.

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