The supplier of new helicopters to the Armed Forces Coast Guard and for the frigates has a great deal of responsibility for the delays, but the Ministry of Defense, Defense and Defense has not followed up the procurement well enough.
The delivery of the NH90 helicopters appears to be taking 14 years longer than agreed. "There have been shortcomings in the contract, poor planning and lack of coordination and governance for long periods," says Per-Kristian Foss, the auditor-general.
The Office of the Auditor General's investigation of the acquisition of maritime helicopters to the Armed Forces (NH90) (Document 3: 3 (2018-2019) was handed over to the Storting on 25 October.
The Storting's assumptions with the decisions of several propositions regarding the acquisition in the period 2000-2012 have not been met. This is also true for the 14 helicopters being delivered during 2008 and their operational capability. So far, eight helicopters have been delivered, six of which are in an interim version. The final delivery is expected to be in 2022, but there is still great uncertainty about delivery and phasing-in.
Those who have been delivered have so far provided few hours of flight, are significantly less accessible than planned, and have had very limited operating activities. In 2017, only one helicopter was available - the rest were waiting for spare parts and maintenance. Maintenance needs have been found to be about 15 times greater than expected for final version. Operating costs appear to be very high.
It was assumed that a helicopter should be chosen with known technology and proven operational reliability. The contract, concluded in 2001, was owned by four companies in four countries, the NATO Helicopter Industries (NHI), without production experience and with a new, untested helicopter.
"NHI obviously has a lot of responsibility for delays. At the same time, important prerequisites for the acquisition have not been followed up well enough on the Norwegian side. The Ministry of Defense and the Armed Forces did not go into the basis for choosing NH90 more seriously, and did not take the risk seriously," said Foss.
The contract was not sufficiently quality-assured and has been shown to have too low a daily penalty to avoid delays, and a low maintenance guarantee. This has given the supplier weak incentives to comply with delivery obligations. The contract has also not ensured stable supply of spare parts.
"In the Armed Forces, neither the planning, the staffing nor the coordination of the parties involved has been good enough," says Foss. There have been no basic plans for the maintenance, supply and operation of the equipment. A draft plan for material was only available in July 2017 and was recently approved.
The need for coordination of many actors in a highly complex and comprehensive process has been underestimated.
"Weak planning of such a large project with so many players, partial deliveries and the great need for coordination has been an important reason for the weak progress. Insufficient staffing in both maintenance, spare parts and procurement has also contributed to the delays, Foss notes.
The NH90 project has lacked one owner, standing above all others, to take responsibility for effective coordination and decision-making. The Ministry of Defense has been distant and unclear as project owners, and has not had enough management to capture the challenges, so measures were not taken on time, the OAG points out.
"The department's late involvement is serious in our opinion, especially given the economic size and the major operational consequences for our ships," says Foss.
The Ministry of Defense has also given the Storting little information, the OAG considers.
"This applies, among other things, to the fact that the conditions of the Armed Forces and Defense Matériels, not just the supplier, have contributed to the delays; that it has not been informed of the very low number of flight lessons that have been possible with the helicopters, information about the phase-in on the vessels, and little about the serious consequences for the coast guards' ability to carry out their tasks, "says Foss.
Click here for the full report (38 PDF pages) on the Riksrevisjonen website.
The Office of the Auditor General has examined the procurement and phasing-in of the NH90 helicopter to the Armed Forces. "I am familiar with the issues, largely agree with the production, and we will follow up the recommendations," said Frank Bakke-Jensen, Defense Minister.
“The report of the Office of the Auditor General is useful. It provides a thorough review of the current issues of the NH90 project related to the procurement under several governments going back to 2001,” says the Minister of Defense.
The report of the Office of the Auditor General indicates that the Storting's decision and prerequisites for the acquisition of NH90 were not met. According to the original contract, the Armed Forces should have received 14 NH90 by 2008. The status today is that the Armed Forces have received eight machines: six in an interim version and two in the final configuration.
The supplier's shortcomings and delays are identified as significant causes of the delays, but both the Office of the Auditor General and the Minister for Defense agree on the risk that the purchase was not sufficiently considered when the decision to choose NH90 was taken.
The Office of the Auditor General's investigation shows that phasing-in and commissioning of the NH90 has been challenging. The Defense Minister says that these are matters that are subject to specific follow-up for the NH90 procurement and that both the Armed Forces and Defense Matériel have established closer cooperation through the establishment of a joint program board for the NH90.
"NH90 was chosen in 2001, and part of the challenges the OAG observes are much more taken into consideration in today's routines for project planning and implementation. We have learned the NH90 acquisition and the experience is being used in the sector to learn and to further develop the materials investment methods, "said the Minister of Defense.
Information to the Storting
The Office of the Auditor General points out that the information to the Storting could be better.
"We have provided detailed information about NH90's operational capability to the Storting through established channels. Also, budget proposals to the Storting have for several years informed about the NH90. In Prop 1 S (2018-2019) I have also expanded the NH90 project deal," said the Minister of Defense.
The Defense Minister shares the OAG's concern regarding NH90's maintenance needs. However, it is too early to conclude what the load is, or whether it is possible to correct claims against the supplier in this context. It is only when NH90 in the final version has been put through an operating period in Norway will it be possible to know how much maintenance will be needed.
“The Office of the Auditor General points out that the NH90 would originally be a unit helicopter and thus reduce operating costs by using the same helicopter type in many functions. But already in 2007 it became clear that the NH90 would not replace Sea King as a rescue helicopter. In addition, the plan was also that cooperation with other nations would bring savings, but it has turned out that the nations have so different needs and requirements that the cooperation was not as extensive as hopes," said Defense Minister Bakke-Jensen.
The OAG's recommendations include ensuring that basic assumptions are clearly defined and taken care of throughout the procurement process, including in quality assurance of the contract. Assessing measures that ensure that plans are made for phasing in material on time, especially when many units and these are involved depend on each other to achieve effective phasing-in. Such a practice would improve substantial procurement, ensuring clear division of responsibilities and clear governance and authority relationships between the Ministry of Defense, Defense Matériel, Defense Staff and the relevant manufacturers.
“These are recommendations that we will listen to and include in our efforts to further develop framework, methods and processes for investment activities. Several steps have already been taken since the NH90 acquisition was initiated, and these largely respect the recommendations of the Office of the Auditor General.
“One step I would especially like to draw is the creation of Defense Materials in 2016 as a separate agency under the Ministry of Defense to strengthen strategic management of material investment and material management in the defense sector," said the Minister of Defense.
NH90 is customized for Norwegian requirements and is tailored to the needs of the Navy. There is no other helicopter on the market today that will provide equivalent capacity. Assessments have been made on several occasions of the possibility of terminating the NH90 contract, most recently after the Storting requested a review of the contract in 2017. Following overall assessments, it was concluded that continuing the NH90 procurement is the best way to meet the Armed Forces needs for maritime helicopters.
"It is possible to cover Defense's needs for flight hours, but it will cost significantly more than expected. However, I have stated that both frigates and coastguards will have the number of flight hours with the NH90 as we determined in the last long-term plan. The need for more money and the Armed Forces' need for flight hours beyond today's ambition will be addressed in the next long-term plan, and we are working on measures to reduce operating costs," said the Minister of Defense.