Senator GIBSON —On behalf of the Joint Committee of Public Accounts and Audit, I present report No. 357 entitled Jindalee Operational Radar Network and seek leave to move a motion in relation to the report.

Leave granted.

Senator GIBSON —I move:

That the Senate take note of the report.

I seek leave to incorporate my tabling statement in Hansard and to continue my remarks later.

Leave granted.

The statement read as follows—

Madam President, in June 1991 Defence entered into a contract with Telstra—or Telecom as it then was—to acquire a wide-area surveillance capability based on an over-the-horizon radar technology which had been developed in Australia.

From the beginning, Madam President, the JORN Project has been bedevilled with technical and management problems which have so far resulted in an increase in the contracted price of over $600 million and a four year delay in the schedule. On current estimates, Australia will not have a fully operational over-the-horizon radar network—which is a crucial element of our surveillance system—until the year 2002.

The Committee's inquiry revealed deficiencies in almost every aspect of the JORN Project: in the process of selecting the prime contractor; in the supervision of the prime contractor (Telstra) by Defence; in the management of the project by Telstra; and in the performance of a key sub-contractor, GEC-Marconi.

In selecting the prime contractor Defence ignored the report of an internal review team which con cluded, early in the process, that the best approach would be to select a contractor experienced in over-the-horizon radar technologies and with a proven track record in managing major defence projects. The review team had favoured a US-based prime contractor with an Australian company in partnership. The Committee is critical of Defence's actions in establishing a review team for the particular purpose of making recommendations on acquiring an over-the-horizon radar network, only to ignore the fundamental assumptions on which its recommendations were based. It is ironic that the company now responsible for completing the JORN Project is an American company—Lockheed Martin—with an Australian company in partnership.

The Committee found that Defence exhibited weaknesses in its supervision of the prime contractor. For example, Madam President, Defence did not intervene early enough or with sufficient rigour to put in place formalised and systematic risk assessment procedures (as required by the contract). Nor did Defence insist on greater Telstra consultation with DSTO—world renowned experts in the field of over-the-horizon radar. Defence's unwillingness to give progressive approval to Telstra's system designs, while understandable given the terms of the contract, contributed to Telstra's difficulties in finalising and progressing a design capable of meeting JORN's very demanding performance specifications.

Telstra's lack of experience in Defence contracting and its unfamiliarity with contracts written in terms of required functions and performance became evident in the early stages and were to have damaging consequences for the project. The Committee also found lack of commitment by senior Telstra management to the JORN Project. Telstra failed to access relevant expertise in Defence project management or systems engineering, failed to develop an effective relationship with DSTO and encountered significant difficulties in its management of a major sub-contractor, GEC-Marconi.

The original sub-contract between Telstra and GEC-Marconi set out a cumbersome division of responsibilities which contributed to a breakdown in the commercial relationship between Telstra and GEC-Marconi. Remaining unresolved for over three years, the problem of poorly specified interfaces, and the lack of a coherent plan to manage and control hardware and software interface configurations, significantly influenced Telstra's management of the sub-contract and impeded progress on the project.

The Committee is critical that GEC-Marconi, given its experience elsewhere, did not anticipate the difficulties that were inherent in the original sub-contract with Telstra. Moreover, the Committee was told in the course of the inquiry that GEC-Marconi's inability to deliver transmitters and receivers and associated drivers to quality, performance and time requirements had an adverse impact on the project's cost and schedule.

As you are aware, Madam President, Telstra has relinquished its management role to a Lockheed Martin/Transfield joint venture company. The future of the JORN Project is, however, far from clear. Although Defence asserts that the radar network's performance requirements are technically achievable and the partners in the joint venture company have expressed confidence that the radar network can and will be completed, the Committee believes that there are good reasons for a more cautious assessment to be made.

Although much has been done to mitigate the technical risks that are still to be confronted, the fact remains that it is in the last years of the project that the high-cost, high-risk systems integration phase will take place. As Defence's New Submarine Project has shown, systems integration and testing can be particularly troublesome and time-consuming.

Madam President, since 1983 the Joint Committee of Public Accounts has examined a number of Defence projects and programs which have revealed Defence's consistent inability to gain value for money. It is essential that Defence addresses project management shortcomings and establishes sound procedures which will ensure that high cost projects are completed within allocated budgets and time-frames.

The Committee believes that it is critical that Defence obtain the best project managers, if necessary from overseas, for major acquisition projects. The problems encountered in the JORN Project demonstrate conclusively that Defence should choose appropriately experienced consortiums or companies to acquire its major defence capabilities—with a particular focus on choosing the best project managers.

Madam President, a broader issue to emerge during this inquiry was the extent of the Commonwealth's liability for cost overruns incurred by the JORN Project. In 1991 Defence had negotiated a ceiling price in its contract with Telstra. However, given Telstra's status as a Commonwealth business entity, any additional costs incurred by Telstra over and above the ceiling price to be paid by Defence are costs to the Commonwealth in terms of reduced dividend payments to the Government and its shareholders. This is a matter of immense concern to the Committee.

In conclusion, the Committee expresses its appreciation to those people who contributed to the review by preparing submissions and giving evidence at both public and in camera hearings. The Commit tee also thanks John Alcock from the Department of Defence and Ray McNally from the Australian National Audit Office for their assistance.

Madam President, I commend the Report to the Senate

Debate adjourned.