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Tuesday, 10 March 2009
Page: 1201


Senator Ronaldson asked the Minister representing the Minister for Defence, upon notice, on 24 November 2008:

For the 2008 calendar year, can lists be provided for: (a) the department’s top 5 program overspends and their costs; and (b) the department’s top 5 program underspends and their costs.


Senator Faulkner (Special Minister of State and Cabinet Secretary) —The Minister for Defence has provided the following answer to the honourable senator’s question:

(a) and (b) Defence’s project expenditure plans are developed on a financial year basis. The first table below details the top five major capital equipment project overspends and underspends for 2007-08. The second table details the information for 2008-09 to the end of November 2008.

Table 1: Approved Major Capital Investment Projects - 2007-08 Summary

Project No

Project Name

Plan 2007-08

$m

Actual 2007-08

$m

Variation

$m

Underspend

AIR 5402

Air To Air Refuelling

237

61

-176

AIR 5077 Phase 3

Airborne Early Warning And Control System

139

43

-96

AIR 9000 Phase 2

Multi Role Helicopter

325

262

-63

AIR 7000 Phase 2

Maritime Patrol And Response Aircraft System

48

0

-48

JNT 2077 Phase 2B.2

ADF Deployable Logistics Systems

22

3

-19

Overspend

SEA 4000 Phase 3

Air Warfare Destroyer - Build

299

441

142

AIR 8000 Phase 3

Heavy Airlift

76

164

88

JNT 2048 Phase 4A/4B

Amphibious Deployment And Sustainment

151

220

69

AIR 5349 Phase 1

Bridging Air Combat Capability Phase 1

235

285

50

AIR 87 Phase 2

Armed Reconnaissance Helicopter

50

91

41

Table 2: Approved Major Capital Investment Projects - 2008-09 Performance to 30 November 2008

Project

Project Name

YTD Plan

$m

YTD Spend

$m

Variation

$m

Plan 2008-09

$m

Underspend

 

 

 

 

 

SEA 4000 Phase 3

Air Warfare Destroyer - Build

230

181

-49

694

JNT 2086 Phase 1

Mulwala Redevelopment Project

66

20

-46

144

AIR 5402

Air To Air Refuelling

227

180

-47

315

AIR 87 Phase 2

Armed Reconnaissance Helicopter

75

29

-46

125

JNT 2048 Phase 4A/4B

Amphibious Deployment And Sustainment

53

32

-21

142

Overspend

 

 

 

 

AIR 5349 Phase 1

Bridging Air Combat Capability Phase 1

38

84

46

560

LND 106

M113 Upgrade

25

44

19

105

SEA 1428 Phase 4

Evolved Sea Sparrow Missiles

9

26

17

23

AIR 5333

2CRU/3CRU Control And Reporting Units

23

31

8

30

SEA 1390 Phase 2.1

FFG Upgrade - Implementation

59

61

2

109

Note:

Table 1 data is based on the variation between the actual expenditure by projects measured against their endorsed expenditure plans as submitted in the 2007-08 Additional Estimates review.

Table 2 data is based on variation between actual expenditure to 30 November 2008 by projects measured against endorsed expenditure plans as submitted in the 2008-09 Additional Estimates review.

By way of context, of the 242 major capital equipment projects managed in the DMO in 2007-08, 150 recorded underspends totalling $722 million whereas 58 recorded overspends totalling $492 million.

It should be noted that ‘overspend’ does not refer to a breach of project approval, but rather to a greater expenditure for the period than was planned at its start. The overspend most often reflects payments made for work completed earlier than anticipated. Underspend most often reflects completion of work by industry later than, or completion of the work at less than, anticipated in the project’s cash flow plan.

Project financial performance should be measured over the life of a project, which may extend over many years. Of the projects closed during 2007-08, 94 per cent of the projects came in on or under budget.