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Thursday, 18 November 2004
Page: 158

Senator Chris Evans asked the Minister for Defence, upon notice, on 4 August 2004:

With reference to Project Sea 1405:

(1) Can an update be provided of how phases 1 and 2 of this project, which will upgrade the Seahawk helicopters with Forward Looking Infra Red (FLIR) and Electronic Support Measures (ESM) capability, are proceeding.

(2) What are some of the problems being experienced with this project.

(3) Has there been any legal action between the Commonwealth and the prime contractor, Tenix, in relation to this project; if so, what was this action in relation to.

(4) Is it correct that this action has now been settled out of court; if so: (a) can the details of the settlement be outlined; and (b) how much money was paid to the contractor as part of the settlement.

(5) (a) How much did Defence spend on legal representation on this case; and (b) can details be provided of lawyers hired and all payments made.

(6) How much of the $170.9 million budget for this project has now been spent.

(7) How many of the 16 Seahawk helicopters have been upgraded to date.

(8) Is it possible to upgrade the remaining aircraft with the remaining balance of the project budget; if so, how.

(9) Was this project initially to be delivered in 2002.

(10) (a) What is the current expected delivery date; and (b) what is the reason for the delay.

(11) Were the delays associated with the FLIR and ESM upgrades a factor in delaying the larger Seahawk upgrade project by 3 years in the new Defence Capability Plan (DCP).

(12) Did these delays also cause the budget to increase from $600 million in the previous DCP to $1 billion in the new DCP.

Senator Hill (Minister for Defence) —The answer to the honourable senator's question is as follows:

(1) The prototype aircraft has been modified and is well advanced in the testing phase with all new systems installed and powered. The modifications to the software support centre at Nowra have been accepted and the Seahawk simulator has been physically modified to represent the new aircraft standard. Actual acceptance of the prototype helicopter is now forecast for April 2005. Modification of the remaining 15 aircraft is scheduled to commence in March 2005 with the final aircraft completing the production phase in November 2007.

(2) The prime contractor Tenix has encountered a number of difficulties in delivering the contracted upgrade, including integration of the software systems, and integration of the aircraft's Electronic Warfare Suite.

(3) There has been no legal action.

(4) Differences between Defence and Tenix in progressing this project were settled through negotiation at the Chief Executive Officer level of the Defence Materiel Organisation and Tenix.

(a) The settlement is pragmatic and commercially appropriate with concessions agreed by both parties. The Deed provides Defence with improved schedule surety, early access to Intellectual Property, and brings a number of previously out of scope activities into scope. The Deed has substantially reduced the overall project risk to the Commonwealth.

(b) The settlement amount agreed is subject to a confidentiality clause agreed to under the Deed, but it is within the project's budget.

(5) (a) Defence spent $70,633 on legal representation in achieving this settlement;

(b) Defence applied its own internal legal resources and also sought advice from the law firm of Blake Dawson Waldron. The total amount paid to Blake Dawson Waldron was $70,633.

(6) At 31 July 2004, approximately 86 per cent ($148m) of the project's funds had been spent.

(7) One aircraft has been modified as the prototype aircraft.

(8) Yes, the contract with Tenix will be completed within the project's budget. The production phase in itself is a relatively low cost, low risk element of the contract.

(9) No. The original contract date for the delivery of the final modified aircraft was April 2003.

(10) (a) The current contract schedule forecasts the delivery of the final modified aircraft in November 2007.

(b) See my response to Part (2).

(11) No.

(12) No.