The Defence Department has conceded it had a "poorly executed" process for selecting a British company to build Australia's $45 billion future frigates, where "sufficient attention" was not given to risks associated with choosing an immature design.
Key points:
- Defence admits its processes were poor for selecting the provider for its future frigate program
- The $45 billion program has been beset by delays and technical issues
- Defence's secretary says successive ministers were closely involved in a process with numerous shortcomings
In 2018 the Turnbull government announced BAE Systems had beaten rival bids from Spain and Italy for the lucrative project to build up to nine high-tech, anti-submarine warships in Adelaide.
A scathing auditor-general's report in May found the Hunter-class program was "experiencing an 18-month delay and additional costs due in large part to design immaturity" and defence had failed to keep key documents.
Department secretary Greg Moriarty has now outlined numerous shortcomings by defence during the competitive evaluation process between 2014 and 2018 where officials reported that "successive government ministers were closely involved as the process developed and iterative advice was provided".
"These senior defence officials considered across this period that there was sufficient advice provided to government to allow it to make a value for money assessment," Mr Moriarty stated in a submission to Parliament's Public Accounts and Audit Committee.
Mr Moriarty was appointed as defence secretary in 2017, taking over from veteran bureaucrat Dennis Richardson who has recently been appointed by Labor to "oversee the implementation of the Defence Strategic Review (DSR) recommendations".
The secretary also observed that his department "did not use all information available out of the tender process to undertake a comparative assessment in a manner consistent with defence procurement policy".
Parliament's joint public accounts and audit committee is scheduled to have another hearing on the matter next week.
"In failing to do this defence did not fulfil the requirements of the Commonwealth Procurement Rules in relation to achieving value for money," the Secretary writes in a submission dated November 10.
"The focus on achieving capability requirements displaced sufficient attention to the risks as well as the consideration of the tenders against other criteria which information was assessed and documented as part of the process."
Uncertainty is growing over the Hunter Class program as the government considers the findings of a highly anticipated review into the navy's surface fleet conducted by retired US Admiral William H Hilarides.
Last week BAE Systems unveiled a dramatic design overhaul of its anti-submarine warship which would triple the number of missile cells onboard following criticism the frigate does not currently boast enough firepower.
Committee chair and Labor MP Julian Hill said he would seek critical missing documents from defence at a public hearing next week.
"It's possible that Sir Humphrey was engaged as a consultant to help draft this submission, yet nevertheless it contains a series of pretty startling admissions," he said.
"Defence confirms that no proper value for money assessment was undertaken to support the Liberal govt's decision to buy now $46bn of ships, and that successive ministers were curiously all over this.
"It's clear as day now that procurement rules were egregiously breached by the former government."