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Programme delays hurt Australian defence budget

Australia's armed forces will return A$4.3 billion ($4.6 billion) to the government over the next five years, with A$2.4 billion to come from troubled capital expenditure programmes.

"The reprogramming is necessary to better reflect realistic achievement of milestone delivery payments by industry for capability and infrastructure projects," said minister for defence Stephen Smith, introducing the country's 2011-12 defence budget. "This accommodates anticipated delays in project delivery from industry."

Of the total to be returned, A$1.1 billion will come from major capital investment programme funding in 2010-11, and A$1.3 billion over the following four years. The overall Department of Defence budget for 2011-12 is about A$25 billion.

"In 2010-11, capital expenditure has slipped by A$1.1 billion, which will have flow-on impacts in future years," said Smith.

One programme where Australia may have been unable to dispense capital expenditure funds is the long-delayed Project Air 5402 for the purchase of five Airbus KC-30A multi-role tanker/transports.

The DoD expected the Airbus A330-based KC-30A to perform 500 flying hours for the budgetary year 2010-11, but this will not be achieved. For the budgetary years 2011-12 to 2014-15, the type is expected to fly 2,160h a year. The DoD has warned, however, that "future figures will depend on the finalisation of the aircraft delivery schedule and associated training programmes".

Smith singled out the Royal Australian Air Force's fifth Boeing C-17 strategic transport as one bright spot, noting that lower than planned purchase costs will save A$87 million in 2010-11 and A$111 million over the following four years.

According to Australian media reports, the airlifter deal has benefited from a weak US dollar and by the strong Australian currency, which has soared on rising commodities prices.

In a 9 March notification to Congress, the US Defense Security Cooperation Agency valued the C-17 sale at an estimated $300 million, including associated equipment, spare parts, training and logistics support. The aircraft, originally destined for the US Air Force, will be delivered in August.

Australia is also considering extending the service life of its Lockheed Martin C-130H transport beyond 2013 owing to delays in the Air 8000 programme. This would have purchased two additional C-130Js; an option unlikely to be exercised owing to the purchase of a fifth C-17.

Smith has also said that over the next 12-18 months the DoD will seek approvals for five projects worth more than A$6 billion. Among these are Air 9000 Phase 8, which will acquire a new combat helicopter for the Royal Australian Navy.

The two contenders in the 24-helicopter competition are the NH Industries NH90 and the Sikorsky MH-60R. The latter is being offered by Team Romeo, which in addition to Lockheed and Sikorsky includes CAE, General Electric and Raytheon. At Australia's Avalon air show in March executives from both contenders said they expected a decision later this year.

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