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ESTIMATES COMMITTEE B - 16/04/1991 - DEPARTMENT OF DEFENCE - Program 6-ACQUISITION AND LOGISTICS - Subprogram 6.1-Major capital equipment

SENATOR MACGIBBON -Could we turn to the Jindalee over-the-horizon radar program. Can anyone confirm the reports that were in the press that the United States has decided to scrap all its over-the-horizon radar programs?

VICE-ADM. BEAUMONT -That is not so, as I understand it. We understand that the United States Air Force has proposed mothballing-putting into care and maintenance-its over-the-horizon radar programs but we have not seen that definitively. We have seen the press reporting. We understand that the United States Navy is continuing to operate its relocatable over-the-horizon radar project.

SENATOR MACGIBBON -The USN relocatable project is a very experimental program, is it not?

VICE-ADM. BEAUMONT -No, I would not describe it as very experimental at all, I am afraid, Senator.

SENATOR MACGIBBON -What were the reasons attributed to the Air Force cancellation?

VICE-ADM. BEAUMONT -We understand that it is simply a budget cutting exercise; that the particular purposes for which the Air Force built its over-the- horizon radar were in a specific strategic scenario; that the risk of that occurring is considered to have reduced as a result of the so-called end of the Cold War; and that it has other means-basically space based systems-of doing the same thing. So the Air Force decided that it would not operate on this belt and braces approach as part of a cost saving program. That is our understanding.

SENATOR MACGIBBON -Could you assure the Committee that it was not because of any technical risks?

VICE-ADM. BEAUMONT -I could not assure the Committee of that at all.

SENATOR ROBERT RAY -Obviously it will be a matter that we will try to pursue to find out more detail. I think the announcement was three or four days ago.

SENATOR MACGIBBON -It was within the last two weeks.

SENATOR ROBERT RAY -But a lot was happening in those reductions, and trying to get information on a lot of them, which would be interesting, will take some time.

VICE-ADM. BEAUMONT -To the best of our knowledge, it is not because of the performance limitations or difficulties; it has simply been a budget reduction exercise. But I could not give the guarantee.

MR PODGER -Our understanding is that the purpose of the OTHR in the US is, primarily, to provide early warning of attack by large long-range bomber aircraft, so it is related to the general issue of tensions between the major powers. With the easing of those tensions, they have decided in their budgetary circumstances that this is where they could make some savings by putting it in mothballs. I am not aware at this stage that there are technical issues involved. I would not have thought that the issues for our OTHR are the same; I think we are talking about rather different overall purposes.

SENATOR MACGIBBON -Is there any part of the technical assessment that Australia made before it went ahead with this program that dealt with the inflexibility, in so far as it is a fixed electronic fence which cannot move?

VICE-ADM. BEAUMONT -No, that is not correct. Although the installation itself is fixed, you can scan the radar.

SENATOR MACGIBBON -With respect, Admiral, you can scan within a sector. You are restricted to a geographical boundary with it.

VICE-ADM. BEAUMONT -It is an extraordinarily large cover.

SENATOR MACGIBBON -It may be but it is still fixed. You can still go around it , that is all.

VICE-ADM. BEAUMONT -Certainly there were considerations of the technical aspects of the OTHR and there are certain limitations of the OTHR system and they were carefully looked at.

SENATOR MACGIBBON -As I understand it, official policies are to go both for Jindalee and for AWACS. Is that correct or not?

MR PODGER -That is certainly correct over a period, yes.

SENATOR MACGIBBON -Why was the priority assigned to Jindalee over AWACS?

VICE-ADM. BEAUMONT -For two reasons: firstly, we get greater coverage for surveillance purposes from the over-thehorizon radar for Jindalee. The various studies that we have done, looking at how an AEW and C aircraft might tailor into an overall surveillance system, indicate that it would be prudent for us to obtain experience with the operational system and then look at the characteristics of the particular AEW and C aircraft that we might need to do the other job. Our experience with OTHR may well dictate the characteristics of that AEW and C aircraft. Secondly, it is a numbers game yet again in that there did not seem to be anything affordable for us at the right capability at this stage for AEW and C. Our priority judgment was that OTHR ought to go ahead of AEW and C aircraft.

SENATOR NEWMAN -Is it an area of technology where there have been speedy changes?

VICE-ADM. BEAUMONT -Yes. There are changes occurring in AEW and C aircraft at the moment.

SENATOR ROBERT RAY -All leading to a cheaper option, we hope.

SENATOR NEWMAN -So delay is not necessarily disadvantageous to us. It might be to our advantage.

SENATOR ROBERT RAY -It might depend on your strategic perspective whether you say yes or no to that; we would say no.

SENATOR MACGIBBON -When the contract was announced it was said that Telecom was the preferred tenderer. That does not mean that Telecom is the prime and exclusive contractor, does it? They have got the right to subcontract to other Australian industries?

MR PODGER -The arrangement was a choice at that stage between two competing prime tenderers, each of them having put forward proposals which involved a range of subcontract arrangements. So Telecom will have a very substantial range of subcontractors.

SENATOR MACGIBBON -When is the contract to be formally signed, or has it been signed?

MR PODGER -It has not been signed at this stage. We are at the late stages of contract negotiations.

SENATOR MACGIBBON -And the figure of about $1 billion is the figure in 1991 dollars, is it?

MR PODGER -That figure is just under that for the total project cost. That is not necessarily just the contract price that we hope to have with Telecom; it includes other factors in the overall price. The contract, in fact, will be two contracts. One will be the prime contract for the building of the two radars and the centre in Adelaide, and the other will be for a four-year maintenance contract.

SENATOR MACGIBBON -But they will be for the station outside Longreach and the one outside Kalgoorlie?

MR PODGER -The contract is for the two radars, one in Western Australia and one in Queensland, and the joint communications centre at Edinburgh.

SENATOR MACGIBBON -The next thing on that list is the Anzac ships acquisition and a 127mm gun. One of the committees-I do not think it was an Estimates committee-was told some while ago that the cost of that was over $10m per weapon. Is that true?

REAR ADM. HUNT -Does the question relate to the unit cost of the gun?

SENATOR MACGIBBON -Yes, the project cost, if we are going to have eight ships or 10 ships.

REAR ADM. HUNT -In last year dollars the additional cost of acquiring the gun for eight ships was just over $100m. It is of the order of money that you describe, yes.

SENATOR MACGIBBON -It would be $12m or $14m a gun, then. How much of that is going to be spent in Australia?

SENATOR ROBERT RAY -My memory tells me $66m.

REAR ADM. HUNT -It is of that order. It is about two-thirds.

SENATOR MACGIBBON -Would it have been possible to do it at Maribyrnong or Bendigo, wherever we have got that heavy gun manufacturing facility?

REAR ADM. HUNT -It is a variable, value for money matter. There are aspects of the gun-the gun being a thing with three layers and feed systems and a whole tangle of technology-such that we anticipate that ADI Bendigo will build and be able to sustain parts of it. As to other elements of the gun, the premium of setting up industry capability to make only eight-off or 10-off for the gun would be exorbitant. There is a judgment to be made about selecting those elements of the gun and its support system that best suit us. The line that we have pressed the subcontractor to take is that we prefer the parts of the gun such as the weapon feed systems that are more likely to suffer either damage or wear over the life of the ship and therefore be able to be repaired or replaced by the Australian facility.

SENATOR MACGIBBON -What was Navy's preferred option there?

SENATOR ROBERT RAY -It got what it wanted. I say here, and Navy knows, that I put the heavy roller over it several times to make sure it was the right decision. But, I must say, on the case made out by Navy for that particular gun, and the reasons-I went over and over it with Admiral Hunt, who got called over a few times-I was convinced that it was the right decision.

SENATOR MACGIBBON -When the contract was first announced the original design was for a 76mm Oto Melara, was it not?

REAR ADM. HUNT -Yes.

SENATOR MACGIBBON -What was the reason, then, that we bought this big gun?

SENATOR ROBERT RAY -I understand it was the decision of the previous Minister. I am not privy to his thinking on it, but I understand he was the one who made the decision.

SENATOR MACGIBBON -There would have been a technical case made by Navy, surely .

REAR ADM. HUNT -The issue was that we included in the costs at the time the cost of a 76mm gun. Navy was always given the option to come and argue the size of the gun as a separate decision. That was argued on cost-capability grounds, and the arguments were persuasive.

SENATOR MACGIBBON -Just take me through them then, Admiral.

VICE-ADM. BEAUMONT -It is about the likely contingency, the weight of the projectile, the rates of fire, gunnery advantage, maintenance, and so on. It was those arguments that carried the day.

SENATOR MACGIBBON -What are you going to use it for-naval gunfire support?

VICE-ADM. BEAUMONT -No.

SENATOR MACGIBBON -Anti-ship operations?

VICE-ADM. BEAUMONT -Anti-ship operations; in low-level contingencies where it might not be appropriate to fire a missile.

SENATOR MACGIBBON -You have got a very slow ship here, have you not?

VICE-ADM. BEAUMONT -I would not describe it as a slow ship at all. It is probably--

SENATOR MACGIBBON -I thought the contract figure was 27 knots down hill with no load and a flat sea.

VICE-ADM. BEAUMONT -In the region, against the sorts of things it would be up against, it is not very slow. It has also got a helicopter.

SENATOR MACGIBBON -What are you going to be fighting in the region that has a 127mm gun?

VICE-ADM. BEAUMONT -Nothing, that is the whole issue.

SENATOR MACGIBBON -That is the point.

VICE-ADM. BEAUMONT -That is the whole issue. I want him out there.

SENATOR ROBERT RAY -There is no reason why we should be fair.

SENATOR MACGIBBON -I am not a believer in fairness in war at all. I am all for guile and deception--

VICE-ADM. BEAUMONT -There are larger guns in the region than 76mm, and that was part of the issue.

SENATOR MACGIBBON -Well, it is the thick end of a couple of hundred million dollars for maybe one encounter in the life of the whole fleet.

SENATOR ROBERT RAY -So, $100m; and if we happen to get outgunned, we are down to $500m per ship.

SENATOR MACGIBBON -These are great surface targets.

SENATOR ROBERT RAY -If you do not mind me saying it, Senator, your love of the Navy and dislike of air power is so well known that we will take your views on board.

SENATOR MACGIBBON -Let us move on to the next Navy project, the Minehunter Inshore Project. One of the legacies that your predecessor left you, Minister, was just the faintest smidgen of information in the Parliament about minehunting. It is a boring subject which no-one knew the first thing about, but the Defence Committee got a request to do an inquiry into it some years ago. So there has been that faintest smidgen of information around since then. Could someone bring me up to date on the program?

REAR ADM. HUNT -The Minehunter ship program has almost completed the first phase-that was the building of the two prototypes. Both of these are at sea and undertaking a range of systems trials. As we have reported at earlier times to this Committee, the significant failure of the project to date has been the imported minehunting weapons systems that were installed in the prototype vessel. We have recently set in motion a trials phase using the two ships. We have contracted a new minehunting weapons system from Thomson Sintra , France. We have, at the same time, negotiated with the provider of the original system, Krupp Elektronik of Germany, for a replacement system-a system that shows at least theoretically all evidence of overcoming the initial dilemma. That, as I say, is a replacement; so the commitment of the original contract can be satisfied by that replacement. The plan is to install one each of these systems in each of the prototype vessels and to conduct trials in both cold and warm water. One of the dilemmas of this science has been to ensure that we can cover the quite extraordinary range of conditions that Australia presents-it is somewhat different from the northern hemisphere. Those trials will probably take about 12 months and we would anticipate then being able to advise the Government further on further strategies.

SENATOR MACGIBBON -What does all that mean? Have you replaced that DSQS11H with the DSQS11M from Krupp?

REAR ADM. HUNT -That is the Krupp solution, yes.

SENATOR MACGIBBON -And that has been done at no cost to the Commonwealth?

REAR ADM. HUNT -That is correct. There is a secondary cost option that we are still negotiating. Because of the passage of time, there are other system interfaces with the sonar and the ship that we might take advantage of. But we have very carefully insulated those possible changes from the sonar; and the sonar comes under the commitment of the original contract.

MR PODGER -That figure is just under that for the total project cost. That is not necessarily just the contract price that we hope to have with Telecom; it includes other factors in the overall price. The contract, in fact, will be two contracts. One will be the prime contract for the building of the two radars and the centre in Adelaide, and the other will be for a four-year maintenance contract.

SENATOR MACGIBBON -But they will be for the station outside Longreach and the one outside Kalgoorlie?

MR PODGER -The contract is for the two radars, one in Western Australia and one in Queensland, and the joint communications centre at Edinburgh.

SENATOR MACGIBBON -The next thing on that list is the Anzac ships acquisition and a 127mm gun. One of the committees-I do not think it was an Estimates committee-was told some while ago that the cost of that was over $10m per weapon. Is that true?

REAR ADM. HUNT -Does the question relate to the unit cost of the gun?

SENATOR MACGIBBON -Yes, the project cost, if we are going to have eight ships or 10 ships.

REAR ADM. HUNT -In last year dollars the additional cost of acquiring the gun for eight ships was just over $100m. It is of the order of money that you describe, yes.

SENATOR MACGIBBON -It would be $12m or $14m a gun, then. How much of that is going to be spent in Australia?

SENATOR ROBERT RAY -My memory tells me $66m.

REAR ADM. HUNT -It is of that order. It is about two-thirds.

SENATOR MACGIBBON -Would it have been possible to do it at Maribyrnong or Bendigo, wherever we have got that heavy gun manufacturing facility?

REAR ADM. HUNT -It is a variable, value for money matter. There are aspects of the gun-the gun being a thing with three layers and feed systems and a whole tangle of technology-such that we anticipate that ADI Bendigo will build and be able to sustain parts of it. As to other elements of the gun, the premium of setting up industry capability to make only eight-off or 10-off for the gun would be exorbitant. There is a judgment to be made about selecting those elements of the gun and its support system that best suit us. The line that we have pressed the subcontractor to take is that we prefer the parts of the gun such as the weapon feed systems that are more likely to suffer either damage or wear over the life of the ship and therefore be able to be repaired or replaced by the Australian facility.

SENATOR MACGIBBON -What was Navy's preferred option there?

SENATOR ROBERT RAY -It got what it wanted. I say here, and Navy knows, that I put the heavy roller over it several times to make sure it was the right decision. But, I must say, on the case made out by Navy for that particular gun, and the reasons-I went over and over it with Admiral Hunt, who got called over a few times-I was convinced that it was the right decision.

SENATOR MACGIBBON -When the contract was first announced the original design was for a 76mm Oto Melara, was it not?

REAR ADM. HUNT -Yes.

SENATOR MACGIBBON -What was the reason, then, that we bought this big gun?

SENATOR ROBERT RAY -I understand it was the decision of the previous Minister. I am not privy to his thinking on it, but I understand he was the one who made the decision.

SENATOR MACGIBBON -There would have been a technical case made by Navy, surely .

REAR ADM. HUNT -The issue was that we included in the costs at the time the cost of a 76mm gun. Navy was always given the option to come and argue the size of the gun as a separate decision. That was argued on cost-capability grounds, and the arguments were persuasive.

SENATOR MACGIBBON -Just take me through them then, Admiral.

You are going to trial it for 12 months. When do the trials start?

REAR ADM. HUNT -In the second half of this year. I recollect that we are probably aiming at September-October. If you want more accurate information than that, I could get it.

SENATOR MACGIBBON -Realistically, you are looking at the end of 1992 before you get a handle on it, are you not?

REAR ADM. HUNT -It will be late 1992 before we have it affirmed.

SENATOR MACGIBBON -The way nobody has tackled this minehunter program is somewhat similar, if you will forgive my saying so, to the Army's ability to operate helicopters.

REAR ADM. HUNT -It is an opinion, Senator.

SENATOR MACGIBBON -It has been one awfully long saga.

REAR ADM. HUNT -I would certainly suggest that several of my predecessors have been here and discussed this project with this Committee. It seems to me that there was always a risk in taking an innovative design, and perhaps we are paying for some of that challenge. We have learned a great deal about the ship itself and the systems that we are dealing with.

SENATOR MACGIBBON -On the subject of this ship, there has been some discussion in the literature on the minehunter coastal program, which means going to a different hull length. How far has that gone?

VICE-ADM. BEAUMONT -We have looked at this fairly carefully in the force structure review and we will be reporting to the Minister in the context of the force structure review.

SENATOR NEWMAN -We keep coming back to this question of innovative design in Defence Force re-equipment. The story that I, as a layman, hear year in and year out is that, where we go for something very innovative and are not prepared to take something off-the-shelf that other defence forces use, we seem continually to get into trouble. When are we going to stop doing it? Can we afford it? Are we big enough? Do we have enough spare Defence dollars?

REAR ADM. HUNT -I think the Senator's question is not one that can be generally applied to the particular case of minehunting. If we go back a decade to off-the-shelf availability for the requirement that was placed on my predecessor's shoulder, the nearest equivalent available that met that was paradoxically called the Hunt class, a United Kingdom design. The project would have been at least twice as expensive as the funding that was allocated to this project.

SENATOR NEWMAN -Do you mean, as funding that we have already expended?

REAR ADM. HUNT -Indeed. Notwithstanding the cost of time which we have funded, the actual expenditure on behalf of the Commonwealth is still significantly less on this project than it would have been if we had gone and bought what was then available off-the-shelf.

SENATOR NEWMAN -Which would have worked.

REAR ADM. HUNT -At a very much greater investment.

SENATOR NEWMAN -As a matter of principle, and it is not directed particularly at the Navy, are we wise, when we are such a small Defence Force with a comparatively small budget in world terms, to be trying to reinvent the wheel all the time or to have a special model just for our Defence Force?

SENATOR ROBERT RAY -I do not know that that question is well-founded.

SENATOR NEWMAN -It is founded when this is an example, and there are plenty of other examples.

SENATOR ROBERT RAY -Senator Newman told me that there are numerous examples of this. We have not gone through those numerous examples so it is not so easy to answer the question. There are a lot of major defence acquisitions that do not fit the formula that you have put forward, that have effectively had to be bought off-the-shelf.

SENATOR MACGIBBON -I would like to compliment the Navy on having the courage to try something innovative. I think there is great scope in Australian defence for developing our own weapons systems and procedures. The censure for Navy is that when the damn thing did not work it took years and years to acknowledge that. It sat on its hands and did not do anything about it. Is it true that the GRP facility where the hulls for Rushcutter and Shoalhaven were built has been bought by the Government?

REAR ADM. HUNT -The Commonwealth owned some 85 per cent of the facility at Tomago, including the equipment and all the special facilities. So what was indeed proposed to Government and agreed last year was that we buy the remaining 12 per cent to assure that the facility remained as an integral whole until the outcome of these trials and the decision to proceed.

SENATOR MACGIBBON -What has happened to the manpower there?

REAR ADM. HUNT -We have arrangements for a minimal manpower that does little other than protect our interests. It is Commonwealth manpower. There is no commercial manpower.

SENATOR MACGIBBON -There is no skilled work force there now?

REAR ADM. HUNT -No.

SENATOR MACGIBBON -How are you going to build some more GRP hulls if you have to then?

REAR ADM. HUNT -A decision is taken that some of those skills will be retained in secondary ways. The two prototypes require, from time to time, servicing and repair, but it is a question that we will monitor as we get closer to the production if production proceeds.

SENATOR NEWMAN -Could I ask about the services manpower and pay project that is mentioned here on page 147. Could I have some more details.

VICE-ADM. BEAUMONT -I think the best thing I can say at this stage of the game is that it is in the developmental stage. We have a project team established in the headquarters defining the requirement for the three Services. We absorbed that project fairly recently, I am not sure what else you need at this stage, Senator.

SENATOR NEWMAN -The time scale and the cost, for example.

VICE-ADM. BEAUMONT -As I indicated earlier, we should finish refining the requirement in about six months' time. I do not have the overall cost figures readily available. We do have an approved cost for the first phase, which is what we are in at the moment. It is $1.730m for the first phase, which is what we are going through at the moment, which is a revised December 1990 project. In round terms, it is $1.8m at project costs and that is the defining requirement.

SENATOR NEWMAN -That is the design phase though, is it not?

VICE-ADM. BEAUMONT -Yes, it is.

SENATOR NEWMAN -What about the rest of the project?

VICE-ADM. BEAUMONT -I do not have that readily available. Until we complete that phase we do not have a good figure.

SENATOR NEWMAN -You do not have a projected cost?

VICE-ADM. BEAUMONT -We do have a projected cost but I do not have it available and I do not have any confidence in it until we finish the design phase.

SENATOR VALLENTINE -I have a couple of questions on this section about the new submarine project. Minister, I am not aware whether you have actually made a decision yet about submarines No. 7 and 8.

SENATOR ROBERT RAY -We made a decision not to make a decision. I think it was announced a few months ago. The matter I think will be revisited and subject to correction in mid-1992.

SENATOR VALLENTINE -Thank you. I would also like to just check some figures in relation to the Anzac project. On page 146 you mention a minus figure of $10. 751m and on page 148 it is listed as an increase. Could I get some clarification on which of those is correct. What exactly do you mean by `the rephasing of payments by New Zealand'?

REAR ADM. HUNT -There is a fairly complex equation in a treaty between Australia and New Zealand that attempts to minimise the amount of unnecessary transfer of New Zealand and Australian dollars in this collaborated program, so we have agreed a process which in simple terms means that expenditure on the project itself in New Zealand, whether for Australian or New Zealand ships , will be paid by New Zealand in New Zealand dollars, and similarly in Australia.

Now, because of the 2:8 ratio and the different industrial bases that does not come out evenly, so there is a programmed once a year exchange. For global budgetary reasons, New Zealand found it useful to pay more than its pro rata share this year-I believe that is what you are referring to-so there is a gain in revenue and a reduction in what we pay. Next year there will be an index. It is an accountancy process between the two partners.

SENATOR VALLENTINE -On another subject, could I have a breakdown of the 54 million rounds of 5.56mm ammunition mentioned on page 149? It would be helpful to have the annual production of this ammunition and of the former 7.62mm rounds, since 1982 or l983.

MAJOR-GEN. JEFFERY -Senator, could I just have that question again please.

SENATOR VALLENTINE -It relates to the SARP project. Could I have a breakdown of the 54 million rounds of 5.56mm ammunition to be manufactured, and what has been the annual production of this ammunition and of the former 7.62mm round which I gather it is replacing, in each year since 1982 and 1983?

MAJOR-GEN. JEFFERY -Mr Chairman, I will have to answer this off the top of my head to a degree. Of that 54 million rounds, 14 million have been bought from overseas, from Fabrique Nationale of Belgium. Another 14 million have been produced to date by Australian Defence Industries and we have to produce a total, as you see from there, of 54 million. What the annual production will be I do not know off the top, but I think we have about four years to meet that 54 million. I will get the answer to confirm that for you.

SENATOR VALLENTINE -What about the production of the former 7.62mm rounds?

MAJOR-GEN. JEFFERY -That phases out, because we go to a 5.56mm for the Steyr. We will need some 7.62mm for the Mag 58 machine-gun. I cannot give you the quantities there but I can find them for you if need be; but they will be pretty small.

SENATOR VALLENTINE -Thank you, that would be helpful. I am also interested in the avionics update when you mention slippages of this program. When the project was approved, what was its scheduled completion date and the approved total cost?

MR PODGER -The original estimate in April 1988 prices was $219m, and the current December 1990 price for the project is now $436m. I have not got the original delivery date. Currently, the final delivery is expected to be complete in January 1996, with deliveries of the updated aircraft commencing in January 1994.

SENATOR VALLENTINE -So, can you tell me what per cent slippage and what per cent costs escalation that represents?

MR THOMAS -I have some contradictory information before me, and a lot depends upon the base from which one tries to work out the variation. One set of figures I have here indicates that there was a real variation of $156m, but, in fact, that is a variation from the original project estimate. It was a figure that was revised quite substantially prior to entering into the contract when it was learned that significant errors had been made in gathering the project cost estimates.

MR PODGER -The real increase from the original project estimate is $156m, of which about $26m is the customs duty. But the main part of the increase was, as my colleague has just mentioned, because some errors were made at the time when the original estimate was made. In particular, there was reliance on the price of the US Air Force F111 modernisation program, which was subsequently changed by 40 per cent. There were a couple of other factors, but there were errors in the original estimate rather than decisions taken to increase the price.

MR JONES -I will answer that, Senator. I believe that, while we did have trouble with this project in getting the price estimates accurate, before we went back to contract we went back to the Government and got a new project approval. Since that time, I believe the only increases have been due to the additional impost of customs duty, for which we are supplemented. I do not believe there has been any slippage in the project. There have, as the explanatory notes suggest, been some difficulties, but nothing unmanageable in terms of getting the digital flight control system, which is a part of this aircraft system's requirements.

SENATOR VALLENTINE -Could I ask when you got that reassessment and that approval from the Government? Does that go back very far in the project's life ?

MR JONES -It was before we went to contract, so that was about a year and a half ago, I guess-something like that.

SENATOR MACGIBBON -I would like to ask a question about the purchase of Westralia, or the leasing agreement that we have. I do not recall seeing that in the FYDP or in any of the material that has come before this Committee. My first question would be: how does a sum of around $20m to $25m, which was the lease figure for that, suddenly become available without a lead-in in the program?

REAR ADM. HUNT -Mr Chairman, I would have to take this on notice. It was being handled just before I came to my position. My recollection is that we had a project in the program-and I regret that I cannot think of its name-and what occurred was a transfer from a function that had been programmed through the pink book and in to approval. That program was set aside and the funds provided when the Appleleaf-Westralia opportunity became available. I regret that I would have to go back and affirm which project it was that, as it were, sacrificed the allocation.

SENATOR MACGIBBON -I would be grateful if you could provide that information to the Committee.

VICE-ADM. BEAUMONT -It may have just become available, Senator. We actually deferred something in order to acquire it.

SENATOR MACGIBBON -I have seen the way that these just appear out of the air. It does not surprise me that a 30,000 tonne oiler appears out of the air.

VICE-ADM. BEAUMONT -The Navy has had a project for an oiler of opportunity for some considerable time.

SENATOR ROBERT RAY -We could talk about what was talked about in the 1976 White Paper that you had seven years to do something about and did nothing. We were able to do it overnight, but I will not be so crass.

SENATOR MACGIBBON -I think it is a good idea that we have that ship, but I want to pursue the economics of it. Was any sort of economic survey done of the total cost?

VICE-ADM. BEAUMONT -Yes.

SENATOR MACGIBBON -It was not a surprise, then, that the ship was in the state it ultimately turned out to be in?

VICE-ADM. BEAUMONT -That is correct. We actually had people go and inspect that ship very carefully to make sure that there was value in it and we had an independent survey done by Lloyds.

SENATOR MACGIBBON -What was its estimate of the cost to restore it to a level that Navy thought was acceptable?

REAR ADM. HUNT -I would have to take that on notice as well. All I could say is that we had programmed in the project cost sufficient funds to carry out the work that has been done in the last 12 months, so it certainly was something that we had anticipated in the programming exercise in 1989.

SENATOR MACGIBBON -As I understand it, the work that has been done on the ship so far is not anywhere near the whole of Navy's requirement, but there is a great deal of maintenance yet to be done.

REAR ADM. HUNT -In one of my capacities as the Chief Naval Engineer, I would have to acknowledge that we have some thinking to do about the operating of Westralia. We are manning it with a very small crew and that is one of the advantages of its equipment which allows us to do that. But it does mean-and the fleet is looking at this at the moment-that we may have to think of a different operating and servicing cycle because it is a ship that can deteriorate very rapidly.

SENATOR MACGIBBON -I would be grateful if you could provide the lease. We have it under a five-year lease with the option of purchase, have we not?

REAR ADM. HUNT -Yes.

SENATOR MACGIBBON -I would like to know what that figure was, what has been spent on the ship to date, and what you estimate has to be spent in the light of that survey report that you got before you bought the lease. Could I take up your invitation, Minister, under program 6, to ask a few questions about the Mirage sale. What was the contracted price in the end for the Mirages that went to Pakistan?

MR TERRILL -The contract price was $US27m or, at that time, $A36m.

SENATOR MACGIBBON -How was the sale conducted? Was it on a whole package deal with the best bid we could get for it, or did we try to sell or price individual items?

MR TERRILL -The history of the sale was that a team led by an officer in the logistics area made a very detailed survey of possible customers of the Mirage aircraft, bearing in mind that they were some 25 years old. The market was found to be rather limited but the attempt was made to try to sell the equipment and spares as a package if possible.

SENATOR MACGIBBON -That included all the airframe manufacturing jigs too, did it not?

MR TERRILL -I have a list of the items that were actually sold, if you would like to hear those, Senator.

SENATOR MACGIBBON -Yes.

MR TERRILL -There were 50 complete Mirage aircraft; there were 10 incomplete fuselages; there were some spare engines, after-burners, ejection seats.

SENATOR MACGIBBON -How many spare engines went with it?

MR TERRILL -I do not have a number on that.

SENATOR MACGIBBON -Could you get that for me please, and also details of their condition, whether they were run outs.

MR TERRILL -Yes, I can get that. I do not have it to hand.

SENATOR MACGIBBON -They were all time expired? Thank you.

MR TERRILL -In addition to that, there were general spares: ground-support equipment, simulators, weapons, the DIFAR 30 millimetre cannon.

SENATOR MACGIBBON -How many spare cannons went with them? Just the ones in the aircraft?

MR TERRILL -I do not have any information that there were spare cannons provided at all. I do not know that there were spares. I will ask my colleague . There were spare cannons but I do not have a figure on that. We can get that if you would like it.

SENATOR MACGIBBON -Thank you.

MR TERRILL -There was also documentation; there were publications, some raw materials and semi-finished production items.

SENATOR MACGIBBON -Is it true that Air Force could not retain one aircraft for museum or historical purposes, other than those that are set in concrete around the place?

MR TERRILL -Again, I will defer to my colleague.

AIR VICE-MARSHAL GRAF -We do have some aircraft but not one specifically for the Air Force Museum. There were two aircraft which were placed at the Air Force Museum prior to the Mirage sale. They were in good condition and were included in the sale numbers to maximise the return. So we do have aircraft, but not one currently at the Air Force Museum at Point Cook.

SENATOR MACGIBBON -Given the sorts of problems that arose in the diplomatic area, did you see the contract before it was signed, Minister? Were you aware of the whole business before it was signed by the Department?

SENATOR ROBERT RAY -I am not sure of the exact date on which I was informed that the contract was going to be signed. I believe it was 11 or 12 April 1990 . Do we have confirmation of the date?

MR PODGER -On 15 April the Government of Pakistan was informed by the Australian Government, but I do not have the date on which you gave the approval, Minister.

SENATOR MACGIBBON -Has the transfer of all the assets been completed now or are there still some to go? Have all the Mirage assets gone to Pakistan?

AIR VICE-MARSHAL GRAF -They have gone to Pakistan.

SENATOR MACGIBBON -Do we have any other contractual obligation with personnel or anything like that?

AIR VICE-MARSHAL GRAF -We do have one outstanding contractual obligation to provide technical assistance to the Pakistan Air Force for starting up the air operations with Mirage.

SENATOR MACGIBBON -What will be involved in that-one person or a number of personnel?

AIR VICE-MARSHAL GRAF -The original proposal was for a small Air Force team to go to Pakistan. That proposal has now been amended and the offer of training within Australia for Pakistan Air Force personnel has been made. That has yet to be accepted.

SENATOR MACGIBBON -But how can that work if the aircraft and all the spare parts are in Pakistan?

AIR VICE-MARSHAL GRAF -We still have sufficient aircraft and equipment at the training base at Wagga to enable a satisfactory transfer, we believe.

SENATOR MACGIBBON -Is it for diplomatic purposes that that arrangement was entered into?

AIR VICE-MARSHAL GRAF -As far as I can say, yes.

SENATOR MACGIBBON -Did Pakistan have any end user requirements placed on it by Australia for further disposal of those aircraft?

MR PODGER -I will confirm that subsequently. I believe so, but I will have to check that to be sure. I believe there was a requirement for the Australian Government to be a party to any decision by Pakistan to pass the planes on elsewhere, but I will have to confirm that.

SENATOR ROBERT RAY -That is a normal contractual thing, is it not?

SENATOR MACGIBBON -Thank you very much.

SENATOR VALLENTINE -I would like to ask one more question on that. Is this training that has been offered in Australia part of the contractual deal? At whose expense will these Pakistani Air Force personnel come here and be trained?

AIR VICE-MARSHAL GRAF -That would be at their expense.