Aviation: F111s

Senator Chris Evans asked the Minister for Defence, upon notice, on 9 July 2002:

With reference to the four contracts related to the F-111s for avionics, weapons, engines and workshop:

1. What are the start and end dates for each contract and any options for extension.
2. What is the nature of the activity covered by each contract.
3. What is the total value of each contract, where a contract has been signed.
4. What is the total of payments made to date on each contract.
5. What is the total of scheduled payments for the 2002-03 and 2003-04 financial years.
6. (a) Are payments under the contracts contingent on the continued operation of the F-111 fleet; and (b) if a decision was taken to replace the F-111s before the end of the contract, would the Government still be liable to pay out some or all of the remaining value of the contract; if so, how much would the Government be liable to pay each year even if the F-111s were no longer operating.
7. (a) Are payments under the contracts contingent on a minimum level of activity across the F-111 fleet; and (b) if a decision was taken to wind down the activity of the fleet, in terms of the number of planes maintained in flying condition or total flying hours, would the Government still be liable to continue paying out the full value of the contract.
8. Are payments under the contracts linked to the flying hours of the F-111 fleet.

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

1. The start and end dates for each contract are listed at Table 1.

   Table 1

   Contract - Contractor	Start / End Dates	Extension Options
   Avionics: Honeywell Australia	23 February 2001 22 February 2011	Two five year extensions up to a maximum contract period 20 years.
   Weapon System: Boeing Australia	16 August 2001 15 August 2011	Two five year extensions up to a maximum contract period 20 years.
   Engines: In House Option	Not Applicable	Not Applicable
   Workshops: Tasman Aviation Enterprises	20 March 2000 19 March 2003	Options exist to extend the contract in up to five year increments to a maximum contract period of 20 years.

2. A short summary of each of the business units follows.
   
   Avionics. The Avionics Business Unit is responsible for integrated logistics support services (engineering, supply and maintenance) for a range of avionics components fitted to the F-111, Hercules and various other ADF aircraft.
   
   Weapon System. The Weapon System Business Unit acts as the prime weapon system contractor for the F-111 providing engineering and logistic support for the equipment it maintains. Activities covered in the contract include deeper level maintenance of the F-111 aircraft and its associated airframe components. It also includes operation and support of the F-111 Software Support Facility and the F-111 Mission Simulator. The Weapon Systems Business Unit contractor is also responsible for the integration of new capabilities on to the F-111 aircraft.
   
   Engines. The F-111 Engines Business Unit provides integrated logistics support services (engineering, supply and maintenance) for the TF-30 series of engines fitted to the F-111 aircraft. The Engines Business Unit is an in house option.
   
   Workshops. The Workshops Business Unit provides electroplating services, general engineering and metal machining support for the F-111 and other ADF customers.
3. 4. & 5. The information requested is consolidated in Table 2.

   Table 2

   Contract	Estimated Value ($m)	Payments to 29 Jul 02 ($m)	Estimated Expenditure FY 02/03 ($m)	Estimated Expenditure FY 03/04 ($m)
   Avionics	233.8	14.6	19.9	18.0
   Weapon System	569.8	38.2	58.0	66.0
   Workshops	14.1	11.6	6.2	7.2

   
   Notes.
   1. The value of the contracts is estimated as they include fixed and variable elements.
   2. The initial Workshops Business Unit contract is for three years. Expenditure in FY02/03 and FY03/04 is dependent on the contract being extended.
6. 1. Yes, payments are based on the continued operation of the F-111 fleet. Provision exists to change payments based on variations to activity levels, both upward and downwards. However, while the F-111 fleet remains in service, the contractors will be paid to maintain infrastructure and staff supporting the F-111 even if flying activity was temporarily suspended.
   2. In the event the contracts were "Terminated for Convenience", the Commonwealth would be liable to pay all reasonable costs associated with termination (eg. redundancies) and would also be liable to meet costs associated with any contractual commitments the contractors have made in fulfilling their obligations under the contract. The Contractor is required to mitigate its losses to the maximum extent under all contracts. There is a specific provision in the Weapon System Business Unit Contract wherein the Commonwealth is not liable for any loss of profit or other income. The actual termination costs will be subject to negotiation and will depend on the lead time provided to allow the Contractors to mitigate the impact of termination.
7. 1. Payments are based on an estimated level of activity that stems from the approved flying rate of effort for the fleet. All Contracts have provisions for adjusting the price of the contract if a reduced rate of effort alters the estimated level of activity and such change is deemed a "permanent change in conditions". There is no minimum level of activity stipulated.
   2. No, in both cases, both parties would be required to negotiate a change to the cost of the contract resulting from the change in conditions.
8. Payments are not directly related to flying hours. However, the baseline estimates that form the current contract price are derived from the maintenance required for the current approved F-111 rate of effort as well as activity levels associated with certain types of flying.

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