In respect of Project Air 5376 Phase 3 Hornet Upgrade: (1) where will the centre barrel replacement work on the Hornets be carried out; (2) when was the decision made to carry out the work at that location; (3) on what basis was that decision made; and (4) was it always intended that the centre barrel replacement work would be carried out at that location.

(1)   The Hornet Centre Barrel Replacement program is divided into 3 stages. These are prototype modification, Low Rate Initial Production and Full Rate Production. The prototype stage consists of one aircraft being partially dismantled at Williamtown, the centre barrel being replaced at Mirabel, Canada, and the aircraft being returned to Williamtown (NSW) for re-assembly and test flight. This strategy was implemented to obtain the expertise gained by Canadians in their Centre Barrel Program. The first stage is nearing completion, with the prototype aircraft about to undergo re-assembly at Williamtown. Low Rate Initial Production will commence in August 2007 and includes a minimum of nine aircraft from an overall program of up to 49. This will replicate the prototype strategy of having the aircraft partially disassembled in Williamtown, having the Centre Barrel replaced in Canada and then re-assembled and test flown at Williamtown. The nine Low Rate Initial Production aircraft represents approximately 12 per cent of the total Centre Barrel Replacement Program. This additional Canadian involvement within the low rate production stage represents 5 per cent of the total Centre Barrel Replacement Program. Full Rate Production is planned to be completely conducted in Australia at RAAF Base Williamtown.

(2)   Initial planning for the Centre Barrel replacement program intended to have all the Low Rate Initial Production activities conducted at Williamtown. However, the decision was made in early June 2007 to continue Low Rate Initial Production using the prototype strategy of having work performed at both Williamtown and Mirabel. The decision was made after analysis of lessons learnt during the prototype activity. Although the modification is now technically proven, the high proportion of spare parts that needed to be procured at short notice during the prototype activity demonstrated that the overall program was still too immature to completely transition to Australia.

(3)   The most challenging element of the Hornet Centre Barrel Prototype activity has been successfully carried out in Canada. However during this activity the following risks were identified:

(a)   A large proportion of spare parts such as rivets and specialist fasteners cannot be identified until after each individual aircraft is dismantled. Procurement and long delivery times for these spares introduces significant schedule risk. The prototype activity demonstrated that a large proportion of spares had to be obtained at very short notice from Canadian sources to maintain schedule. Australian stock of these spares is still too limited to support the schedule requirements of the program. Continuation of some Low Rate Initial Production activities in Canada will allow the procurement of the full range of parts required to support the program in Australia without adding risk to schedule.

(b)   A secondary consideration is the availability of a specialist workforce within Australia. Notwithstanding long term efforts by the Hornet Industry Coalition to employ and train this workforce, there are still workforce shortages in some key trades, such as aircraft structural fitters, at the Williamtown site. Industry sources indicate that this shortage is Australia-wide and may continue until the end of this decade. Continuation of some Low Rate Initial Production activities in Canada will allow alternative strategies to be explored, such as conducting some production activities in areas of Australia that have better access to a suitable workforce.

(c)   Another secondary consideration is the need to identify suitable facilities to conduct Full Rate Production in Australia. To some extent this will be driven by the strategies implemented to resolve the workforce issues identified above but may consist of adapting existing facilities, constructing new facilities or the leasing of existing commercial facilities.

(4)   The original intention was to conduct both low and full rate production in Australia. However, the significant risks that emerged as a result of the prototype activity drove the decision to extend the element of work to be done in Canada. This will now include some of the Low Rate Initial Production activities to mitigate schedule risk. The revised strategy will not result in any job losses in the Williamtown area and can be achieved within existing budget.