The Government today admitted it made a "judgement call" to pay more than $80 million for a contract that has to date delivered no value and faces a cost blow-out to $1.4 billion.
Senator Mark Bishop, Shadow Minister for Defence Industry, Procurement and Personnel was given the information at a hearing into the Fast Frigate Guided Upgrade project.
The project -- originally scheduled to upgrade six frigates at a cost of $944 million – has not only blown-out, it has also been downgraded to refit just four ships.
Senator Bishop was also told the Government had learned from this costly mistake, by in future insisting on contracts with less milestone payments and more payments at the conclusion of the contract.
But the lesson is too late for the frigate project, which will end up costing taxpayers $1.4 billion for four frigates, which will only be sea-worthy for another five years.
In other evidence at today's public hearing, Senator Bishop was told the Government:
- Continued to pay the project contractor payments, even though it failed to deliver against milestones
- Topped-up the company's books with a further $80 million of taxpayers money, even though the company already banked more than $200 million from the contract
- Specified a contract that failed to provide for interest repayments for funds advanced to the company
"Again, the Government has failed to deliver value-for-money," Senator Bishop said. "It did not specify proper specifications on a multi-billion dollar contract, it failed to adequately manage the project and its risk analysis was flawed from beginning to end."
Of particular concern was the Government concession that earned-value payments were made as a mechanism to provide cash-flow to a lowly capitalised company, Senator Bishop said.
"As well as considering legitimate requirements of industry, the Government should consider taxpayers' best interests in securing best value for money in likely future multi-billion dollar Defence projects," he said. (ends)
Poor Judgement Call On Frigates
