25 November 2009

Defence acquisition: on budget isn’t everything

A small item in the Australian Financial Review, Tuesday 24 November 2009, p.10 (Defence savings plan by John Kerin) informs us:

A Defence think tank has argued the Rudd government should move to greater military off-the-shelf (MOTS) purchasing because the global market and exorbitant cost of defence weaponry demanded it. Australian Strategic Policy Institute co-author Andrew Davies argues in a paper on defence procurement that defence’s three big recent MOTS acquisitions, Abrams tanks, C-17 air transporters and Super Hornet fighters were all on time and on budget.

With all due respect, the more important question is whether we needed any of the above equipment at all. Each of them was fast-tracked without going through the full rigour of capability analysis that the ongoing commitment of such large licks of the Australian defence budget should receive:

- The Abrams tanks were purchased because the German Leopards we had in service were to be retired. But did we need to replace them, and if so, why and with what? Did we need such heavy tanks – in our region they are harder to move and harder to deploy. Will we ever use them?

- The $2 billion acquisition of the C-17 was a rapid decision of then Defence Minister Brendan “I don’t muck about” Nelson. The decision seems to have been driven by the need to be able to fly the Abrams tanks around. It is probably a nice-to-have, but whether it passes the test of being essential and unavoidable is a debatable question.

- The $6 billion acquisition of the Super Hornets was decided without conducting a competition.

MOTS purchasing seems to embody a certain danger of a shopping list approach to defence purchasing – an influential service chief gets the ear of the Prime Minister or Defence Minister and suddenly a large slice of the defence budget is committed. When we buy an Australian design, at least there is a proper process of analysis and debate about what we really need. Only then is it worth considering whether there is a sufficiently close approximation that can be purchased off the shelf.

For the record, the Collins class submarine project, one of Australia’s greatest technological achievements of all time, was completed for within 3-4% of its original budget after allowance for inflation. Most of the alleged cost over-run was to meet changed operational requirements and technological obsolescence, the latter being routine in the fast-changing world of high tech IT-intensive military equipment.

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