Defence: Project Sea 1390

Senator Chris Evans asked the Minister for Defence, upon notice, on 16 May 2002:

With reference to project Sea 1390 and the 2001-02 Additional Estimates Statement, which indicates that there are delays with the FFG upgrade program:

1. What are the reasons for the delays.
2. What is the latest estimate on: (a) when the first ship will commence the upgrade program; and (b) when the last ship will complete the upgrade program.
3. Are there any costs associated with these delays; if so, what is the latest estimate of those costs.
4. Under the contract is the Government liable for any increased costs due to the delays.
5. (a) What impact does the delay have on the capability of the FFGs; (b) are the ships as they are currently configured more vulnerable to attack; and (c) does this have implications for the deployment of the ships on operations, including in the Persian Gulf.
7. (a) Given that the Defence Materiel Organisation website notes that the combat system is expensive to maintain due to its age, what are the additional costs associated with the continued maintenance of the existing combat systems during the delayed start to the project; and (b) will the Government pay these costs.

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

1. An overall schedule delay of between 18 and up to 24 months beyond the original schedule is now likely. Significant contributing factors for this schedule delay relates to the design development and delivery of the combat system software. These schedule delay figures do not include the contractual 8 month schedule contingency, negotiated under the original contract, to facilitate operational flexibility and allows for delivery of the ships from the production phase before liquidated damages can be invoked. ADI is confident it can effectively replan its schedule to contain the schedule slippage to the 18 month window.
2. On the basis of current arrangements:
   1. The first ship, HMAS Sydney (FFG03), will commence its upgrade in the last quarter of 2003.
   2. The last ship, HMAS Newcastle (FFG06), will complete in the first half of 2008.
3. The latest estimate of the costs associated with the delays is $55.14M(AUS) at base date figures. To minimise and contain these costs ADI has re-organised its subcontract arrangements and is taking greater responsibility for Combat System design and integration.
4. Questions of liability are yet to be resolved.
5. 1. The current schedule slippage delays capability and maintainability improvement by the period of the delay.
   2. FFG is currently capable anti-air and Anti-ship missile systems, a 76mm gun, and torpedo tubes and is further enhanced through addition of Seahawk helicopters and Nulka anti-missile decoy. FFG's capability to counter a range of anti-ship air defence threats and emerging submarine threats is limited, however, this is why Defence proceeded with the upgrade program.
   3. The current FFG is sufficiently capable to deal with the likely threat environment in the Persian Gulf. Should this environment change, this would be reviewed in the ordinary course.
7. 1. The additional cost of the continued maintenance of the existing combat system will be the normal operating cost of keeping the system operational for the period of the delay.
   2. As these costs are normal maintenance costs the Government will be responsible for them.

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