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A new Australian National Audit Office report has put the future of the Hunter Class Frigate Program under the microscope with claims of mismanagement and delays.
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The Auditor-General’s report warns the future frigate program, overseen by the Defence Department, is already experiencing an 18-month delay, additional costs, and failure to meet targets.
Under the program, the Department of Defence is acquiring the nine Hunter Class frigates worth $45.6 billion and constructing them at the Osborne Naval Shipyard in Adelaide.
The future frigate program was expected to replace the Navy’s fleet of eight Anzac Class frigates, with a continuous build of the Navy’s future frigates commencing in 2020.
In response to the Auditor-General report’s findings, the Joint Committee of Public Accounts and Audit has expanded the scope of its existing inquiry into the Defence Major Projects Report to include a detailed examination of Defence's procurement of Hunter Class frigates.
The Joint Committee of Public Accounts and Audit will hold public hearings from 9.30am to 3pm on Friday, 19 May for its inquiries into the Major Projects Reports and Hunter Class Frigates, and the Commonwealth Financial Statements 2021-22.
The public hearings will be held in Committee Room 2R1, Parliament House in Canberra from 9.30am to 12.45pm and continue at Committee Room 1S5 from 1.30pm to 3.00pm.
Joint committee of public accounts and audit (JCPAA) chair Julian Hill said written submissions are invited before 15 June this year and the committee has requested submissions from the contractor, BAE Systems and the British High Commission.
“This is a deeply concerning report by the Auditor-General into a critically important Defence project,” he said.
“Given the seriousness of the concerns, the committee initiated this inquiry less than 24 hours after the tabling of the report, and has scheduled initial public hearings for Friday, 19 May.”
The report found that Department of Defence’s management of procurement for Hunter Class frigates has been partly effective, but lacked a value for money focus and key records.
“Contract expenditure to date has not been effective in delivering on project milestones, and the project is experiencing an 18-month delay and additional costs due in large part to design immaturity,” the report stated.
It also alleged Defence did not conduct an effective limited tender process for the ship design and value for money of the three competing designs was not assessed. In addition, Defence did not advise government that a value for money assessment had not been conducted by Defence officials.
The report outlined that the contract management plan was established 3.6 years after contract execution; Defence’s expenditure has not been effective in delivering on project milestones; the head contract had an increased additional cost of $422.8 million; and Defence did not retain complete records of the key decisions made during the shortlisting process.
The report also found that competing bids from Navantia and Fincantieri were considered as the “two most viable designs”, according to Defence, but BAE’s Type 26 had been selected for the tender process instead.
*This article was updated on May 18 with additional information regarding scheduled initial public hearings.
