Peter La Franchi/CANBERRA

Australia's airborne early warning and control (AEW&C) and new light tactical airlifter projects have been thrown into turmoil following the appearance of a A$2.4 billion ($1.6 billion) hole in forward defence expenditure plans. A top-level upheaval inside the Defence Acquisition Organisation (DAO) has excaberted the situation.

An announcement on the preferred supplier for the AEW&C project had been expected by mid-month. Key committee meetings to select a winner have, however, been abandoned two weeks in a row after the effective dumping of the head of the DAO on 1 July by Australia's Minister of Defence, John Moore.

The delays last week saw Moore direct that the Defence Source Selection Board make a recommendation as soon as possible.

The board is next scheduled to meet on 14 July with a recommendation going to the minister two days later. If the meeting takes place, an announcement on the project, being contested by Boeing, Raytheon and Lockheed Martin, is likely to be made by around 20 July.

The management upheaval follows the release on 1 July of a scathing report of project management practices used by the DAO in acquiring submarines for the Royal Australian Navy.

The report, prepared by the former UK Ministry of Defence head of acquisition, Malcolm McIntosh, recommended that the head of DAO be upgraded to a more senior level and that a person with greater commercial experience replace the existing occupant. Moore used the release of the report to announce that the changeover would occur by September.

The McIntosh report is also causing major problems for Boeing's AEW&C bid. The report recommended that the Boeing-developed submarine combat data system should be abandoned and the government seek to recover funds already paid to the company.

Boeing has made repeated representations to the Australian Government over the past two weeks, asking that the findings of the report be discounted in the AEW&C selection process.

Before the release of the report, the Boeing bid, based on a Northrop Grumman Multirole Electronically Scanned Array radar aboard a 737, had been widely tipped within Australia's aerospace industry as the preferred option. Raytheon is offering an Airbus A310 carrying a Rafael Phalcon radar, while Lockheed Martin is offering a C-130J equipped with an APS-145 advanced UHF radar.

The contenders are concerned that if a committee recommendation is not put before the minister in the next fortnight, the project may not reach a decision for up to three months while a new management team is installed in DAO.

The management upheaval comes as the Australian Defence Executive acknowledges a A$2.4 billion gap in forward capital equipment plans over the next 10 years. Project approvals over the past year, including the Australian Army's armed reconnaissance helicopter and the Royal Australian Air Force's (RAAF) light tactical airlifter, increased the shortfall by A$900 million. The Defence Source Selection Board deferred its decision on the airlifter last month, instead directing the project office to seek new data from CASA, offering its C295, and Lockheed Martin-Alenia Tactical Transport Systems, offering the C-27J.

CASA and LMATTS were last week provided with requests to clarify aircraft performance and pricing data. Australian Defence officials say the existing bids are inadequate in detail.

The officials acknowledged that the delays in making a selection had directly exposed the project to extensive financial pressure with all existing funding allocations for the airlifter transferred into the 2000-1 defence budget.

Officials say CASA and LMATTS have been asked to consider alternative financing options for the project, including the options of leasing and phased acquisition. The officials say the budget problem means it is unlikely that the RAAF will see the new airlifter entering service before 2002, two years later than previously expected. The RAAF will continue flying ageing de Havilland Canada DHC-4 Caribous. The project office is expected to advise both contenders on its future acquisition strategy in August.

Source: Flight International