From (bolding mine)http://www.theage.com.au/articles/20...864378971.html
By Mark Forbes
June 17 2002
"We should never have bought them in the first place," said Aldo Borgu, an adviser to former defence ministers John Moore and Peter Reith and now a director of the Australian Strategic Policy Institute. The plan to build a unique helicopter was unrealistic and poorly executed, and was designed for a proposed Offshore Patrol Vessel (OPV) to be built jointly with Malaysia. The patrol vessel never got off the ground.
"Once the OPV didn't go ahead, the rationale for buying a smaller helicopter disappeared," Mr Borgu said.
The patrol vessel project was a favourite of the Keating government, proposed by major ALP donor Transfield (now Tenix). The Defence Force hierarchy was always wary of a project it believed was driven by a desire for export dollars, and its fears increased after the Coalition's election in March, 1996.
Put simply, said one senior official, the boat was "neither fish nor fowl", too big for a conventional patrol boat, too small to combat a frigate. To expand its range and firepower it needed a helicopter, but the vessel was too small to carry the Seahawks already planned for the Anzac frigates.
Tenders were called for a small, state-of-the-art helicopter. The former chief of navy, Don Chalmers, confirmed that the Seasprites were acquired for the patrol vessels, OPV, although it was also planned to place some on the Anzacs. Despite this, Defence and the government failed to formally link the Seasprite and patrol vessel projects.
In Senate estimates hearings this month, Air Vice-Marshal Ray Conroy attempted to fudge over when the patrol vessel project was dropped. "That was effectively abandoned in February, 1998, when Malaysia selected a German tender over the one submitted by the Australian company," he said.
At that point, the argument for buying the Seasprite instead of more of the larger Seahawk collapsed, Air Vice-Marshal Conroy admitted. But he said the argument was hypothetical as the Seasprite contract was signed earlier, in June, 1997.
In fact, Malaysia announced the patrol vessel decision in October, 1997, but earlier that year in March the Howard cabinet was told the deal would not go ahead and the vessel was unsuitable for the Australian Navy.
At a cabinet meeting in Pakenham on March 11, former defence minister Ian McLachlan presented a call from the then Defence Force chief, General John Baker, to suspend the patrol vessel proposal.
"I don't want to embarrass anybody, but we felt the thing was heading south," Mr McLachlan said this week.
"As well, we were in a position of having to buy some vessels that were not appropriate for replacing either the Fremantle patrol boats or warships and we didn't want to do that.
"All the information I could glean was the Malaysians were cooling off on the whole deal. It was a big order but got smaller as the months went on and we thought it might never come to pass and it didn't."
Government sources confirmed that the cabinet had effectively decided to suspend the patrol vessel project, but no decision was announced after strenuous objections by Foreign Affairs Minister Alexander Downer and fears that an announcement would be portrayed as scuttling Transfield's Malaysian tender.
"There was a problem with not connecting the helicopter purchase to the OPV purchase," Mr Borgu said. "When cabinet decided to kill off the OPV nobody thought about the Seasprites. It's adding an additional helicopter platform to the ADF unnecessarily as the Anzacs could take the Seahawks."
A senior member of the Seasprite project agrees the deal should have been scrapped. "It's smarter to get 27 Seahawks rather than 16 Seahawks and 11 Seasprites," he said.
Mr McLachlan said he has no recollection of the Defence Force ever telling him of the pivotal link between the patrol vessel project and the Seasprites.
One of Defence's most senior officials at the time also did not "recall a lot of discussion about cancelling the Seasprite when the OPV hit the fence. I don't think it was looked at carefully and that's perhaps where we made a mistake."
Despite the belief that the patrol vessel the Seasprites were designed for would never be built, Defence - never keen to reject already-committed funds - went ahead and signed the $660 million helicopter contract with Kaman.
That contract contained the seeds of today's fiasco, Defence insiders admit. Ever ambitious, Defence wanted to build a high-tech helicopter at a bargain price. The number of helicopters ordered had shrunk to fit under the price cap and it was determined to go for an option that would cut costs further, rebuilding surplus US navy helicopters up to 40 years old.
Mr McLachlan said: "I do remember a long series of discussions about the problem that now appears to have arisen, and that is: if you buy something with old frames, will everybody say they are old aircraft?"
The second-hand helicopter purchase has been pilloried, but those involved in the project are adamant the issue is overblown. A team of 10 has supervised the selection of helicopters from their shrink-wrapped storage in the Arizona desert and overseen the removal of corrosion from the frames.
Expecting Kaman to install a new, sophisticated weapons and avionics system into these "old birds" is where the project came to grief, insiders said.
Too much was expected of Kaman in too short a time. The Seasprite deal was Kaman's biggest ever and the company was no big-time defence player. Founded by eccentric inventor Charlie Kaman, who also designed the Ovation electric guitar, it has made more in recent years from musical instrument sales than aerospace. "The Commonwealth has signed up to an unachievable contract at an unachievable price," said one senior member of the project team. "The whole thing was set up for failure."
It was unfair to blame Kaman, said one official who played a key role in the contract. "Defence has to realise you can't lay all the risk and blame on this little company," he said.
The official said the contract had no damages clauses because liquidated damages on a deal this size would put Kaman out of business.
The head of the Defence Materiel Organisation, Mick Roche, has said the contract is "not the sort of contract we would wish to draw up these days". In a speech to a Defence seminar earlier this year he said Defence's project management should have ensured effective penalty clauses and prevented a key software contractor walking away, resulting in seven helicopters being delivered without a mission-control system.
Installing this sophisticated control system had been subcontracted to US firm Litton, a major military company that dwarfed Kaman. Soon after accepting the contract, Litton won a much bigger US deal and moved many key staff from the Seasprite project.
In 1999 Litton decided to walk away from the complex task, and under its contract won a settlement that cost Kaman $32 million. Australian firm CSC has now been contracted for the task, but the project is already more than three years' late.
Defence is trying to redraft Kaman's contract, despite having already paid out $960 million of the $1 billion budget. Last month Mr Roche told a Senate hearing the government was examining suing Kaman for breach of contract and could possibly recover that money, but then "we will not end up with the helicopters and will have to start again, that is the dilemma we are in".
Another dilemma remains for the navy. Even if it does receive working helicopters, the boats they were designed for do not exist. Putting the Seasprites on the existing Anzac frigates makes less sense. The Seasprites carry an anti-surface missile, the Penguin, originally intended to cover for the patrol vessel's lack of such a weapon, but the Anzacs already carry the Harpoon anti-surface missile.
A former defence official said the Seasprites created profound logistics and maintenance problems for the navy, with it having five different helicopters for five different uses. Air force chief Angus Houston has overall responsibility for air capability but pointedly refused to endorse the Seasprite purchase when interviewed. Asked if the Seahawk would have been a better choice with the patrol vessel off the scene and if the Seasprite was one helicopter too many for the military, Air Marshal Houston replied: "I'd prefer not to make a judgment on that, you can draw your own conclusions. I think we do have too many helicopter types."
"You can't dispute it's the wrong helicopter," Mr Borgu said. "There are obvious question marks over the Penguin anti-ship missile as opposed to the Harpoon, and the anti-sub capability isn't as good as the Seahawks. We should have got the Seahawks. On balance the ADF would have been better off."