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Australia struggles with bloated defense contracts

MELBOURNE, March 8 (UPI) -- Projected Australian defense budget constraints are affecting military acquisition programs.

Given that many of the Australian Department of Defense purchases will come from U.S. companies, Australia's Defense Material Organization is seeking professional assistance in how to navigate the labyrinth of the U.S. military acquisitions system.


The DMO management is soliciting Australia's private sector for help after acknowledging that it lacks the skills and ''general business acumen'' to negotiate billion-dollar contracts with U.S. defense firms.

The Australian National Audit Office reported that of 29 defense major projects worth a total of $47.3 billion, many contracted to U.S. defense firms, 18 have "'experienced schedule slippage," running behind time and experiencing cost overruns.

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The ANAO also observed that while DMO was confident 91 percent of projects would be delivered on time, the audit office noted that the DMO timeline was "in some cases overly optimistic," The Sydney Morning Herald reported Friday.

Among projects over which the ANAO expressed concern is the Australian navy's Collin class diesel electric submarine program. The navy operates six Collins class boats, a $5 billion program that has been fraught with problems since November 2008.

The submarines were Australia's first indigenous-built underwater vessels, constructed by ASC Pty. Ltd., formerly the Australian Submarine Corp, at Osborne in Adelaide. The navy says it hopes to acquire 12 newer versions of the vessel.

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Another program over which the ANAO expressed concern is the Australian air force's "multi-role tanker transport aircraft" with air-to-air refueling capacity. The air force program has experienced difficulties since late 2010 and is projected to cost $1.8 billion.

The DMO has defended the program even while noting, "other program elements that are expected to extend completion of boom testing and redelivery of the of the first (prototype) aircraft later in 2013."

Another air force project under ANAO scrutiny is an upgrading of electronic support measures for the air force's AP-3C Orion surveillance aircraft, with cost overruns in the last two years topping $130 million.

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The ANAO report comes at a sensitive time for the Australian Defense Department, as the government of Labor Party Prime Minister Julia Gillard is considering department budget cuts, as outlined in an upcoming white paper, portions of which have leaked to the media.

Gillard's administration is justifying the potential cuts in the country's defense budget by arguing that the global recession necessitates Australia being able to generate a government budget surplus to underwrite the country's defense structure. Defense Minister Stephen Smith refused to rule out further reductions.

Other projects whose cost concerns were noted by ANAO include projects of concern include the potential $3.6 billion purchase of 46 helicopters from an Australian subsidiary of European defense contractor EADS to replace the Australian military's aging Black Hawk and Sea King fleets, a project officially flagged as "troubled" in November 2011.

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The DMO concludes about 100 contracts a day and has an annual budget of $8 billion.

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