Peter La Franchi/CANBERRA

Australia's introduction of defence private financing has sparked a wave of unsolicited proposals for new military capabilities, ranging from a buy-back proposal for all RAAF flight simulators to a new network of coastal surface wave surveillance radars.

The most advanced of the proposals is a bid by Boeing Australia to renegotiate a 1997 contract to develop a new national military high frequency communications network. Boeing now seeks to restructure the project into a lease-back arrangement enabling the company to offer residual capacity to other government and private sector users.

The proposal is based on Boeing funding the rest of construction of the new network with the Australian Department of Defence leasing service for between 20 and 30 years.

Boeing would also be responsible for continually upgrading the system to meet emerging ADF service requirements. Government agencies interested in using the system include the Australian Maritime Safety Authority (AMSA).

The surface wave radar coastal surveillance system proposal is understood to have been put forward by Telstra Australia, formerly the prime contractor for the Australian Jindalee Operational Radar Network project. Potential third party users include AMSA and the Australian Customs Service.

John Pluck says the new private financing programme will be applied "only where it offers better value for money, and that is the bottom line in all of this. Private financing is to exclude lethal force, the application of that, or arrangements which might jeopardise the ability of defence to own its own capabilities."

No silver bullet solution

The programme, he stresses, is not intended as a "silver bullet solution to our budget problems. Private financing is of interest because of the value for money it represents and the cost savings it might provide. It is not there to provide a saviour for projects which are under threat because of budget stresses. There will be some people disappointed with that concept, but it is widely accepted within [the Australian Department of] Defence [DoD] that it is not a budget solution.

Cdre Syd Lemon, director for general organisational effectiveness at the Australian Defence Headquarters, says private financing will be considered "whenever it is a feasible option. It doesn't mean it will be [used] in lieu of any other purchasing option. It is to be part of the process and while a third of our contracts may well be decided by private financing, private financing is to be part of our normal assessments of an activity.

"Whenever we get new or replacement equipment, we will look at private financing as an option."

The new policy, he says, would operate alongside the DoD's present commercial support programme and could give rise to a new market based on the divestment of "assets as well as services. With service contracts it may be better to use private financing rather than use contractors operating defence assets. There may be opportunities for sale and lease-back".

The overall scope of private financing opportunities, Lemon says, will remain focussed on meeting present force development plans. "We are not trying to confuse investment and capability here. We basically need to have a requirement for some capital investment. We aren't going to buy basically because it's a good idea. We aren't going to buy on sale just because it is on sale. The requirement has to have a substantial service content."

Source: Flight International