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Wednesday, 21 September 1983
Page: 1132

Question No. 456

Mr Sinclair asked the Minister for Defence, upon notice, on 6 September 1983:

(1) What is the latest estimated project cost of the new tactical fighter program.

(2) What proportion of this cost is to be spent on spares for the FA-18 aircraft.

(3) Has his attention been drawn to a draft report prepared by the US Defence Department Inspector-General's Office, which recommended that US Air Force Systems Command (AFSC) approval of Pratt and Whitney (East Hartford) purchasing system be withdrawn because of overpricing of spares for the FA-18; if not, will he take urgent steps to obtain the report.

(4) Has his attention also been drawn to allegations made by the Chairman of the US House of Representatives Armed Services Committee's Investigations Sub- committee (Representative Bill Nicholls) concerning overpricing of parts by both the Sperry Corporation and McDonnell Douglas; if so, do these allegations include (a) Sperry selling semiconductors to the US Navy for $US111, when the US Federal Supply System (FSS) price is 4 cents, (b) Sperry selling resistors for $ US100, when the FSS price is 4 cents and (c) McDonnell Douglas selling parts for an FA-18 radar at prices far in excess of those in the FSS.

(5) Can he give an assurance that Australia will pay only the fair price for FA -18 parts whether for assembly or for spares stocks, and not the inflated prices allegedly charged by some US companies; if not, will he give an undertaking (a) to immediately investigate what prices Australia is paying, (b) to advise the House of any excessive prices charged and (c) to seek recompense from the United States for any overcharging which may have taken place.

Mr Scholes —The answer to the honourable member's question is as follows:

(1) The latest estimate of the total project cost for our FA-18 acquisition is $3,396m in December 1982 prices and at post devaluation exchange rate. This represents a net increase of $969m, on the original approval of $2,427m in August 1981 prices and is due entirely to the effects of inflation and exchange rate variations, offset by some real reductions in some items of the project.

(2) Initial spares procurement including spare engine modules, account for approximately 12 percent of the total project cost estimate.

(3) My attention has been drawn to US press reports on the withdrawal of US Air Force Systems Command approval of Pratt and Whitney (East Hartford) purchasing system due to overpricing of spare parts. This overpricing, however, does not relate to the FA-18 spares as that company does not produce parts for the FA-18 aircraft.

(4) My attention has been drawn to these allegations which are substantially as suggested by the honourable member.

(5) Yes. I can affirm that all reasonable precautions are being taken to ensure that Australia pays only a fair price for its FA-18 parts, that no instances of overcharging for FA-18 parts for Australia have been discovered yet, and if any such instances were discovered I would take whatever steps may prove necessary to redress the situation. In providing this assurance, I should point out that there is probably no such thing as a perfect procurement system in which errors are never made. The issues which have been raised in the US Department of Defense and in the US Congress relating to the Sperry Corporation and McDonnell Douglas reveal that errors of judgment and/or procedure have been made in some US procurement activities. The US Government Agencies have reacted swiftly and positively to rectify deficiencies in their system and in doing so not only are they protecting US Government interests, they are incidently protecting our interests. Pursuit of improvement is a constant objective, and there are procedures designed to enable us to get the best price for what we buy.