• An Army Boxer Combat Reconnaissance Vehicle reverses onto a Light Landing Craft from HMAS Adelaide at Cowley Beach in Queensland during Exercise Sea WADER 2020.
    An Army Boxer Combat Reconnaissance Vehicle reverses onto a Light Landing Craft from HMAS Adelaide at Cowley Beach in Queensland during Exercise Sea WADER 2020.

Defence’s acquisition of Combat Reconnaissance Vehicles (CRVs) under Project Land 400 Phase 2 has been largely effective to date and has the potential to ultimately achieve value for money outcomes, the Australian National Audit Office (ANAO) concluded in a report released on 26 November.

However, while the tender process was competitive and resulted in procurement of the desired capability, Defence did not operate within the bounds of the first pass government approval and did not advise the Minister that it would issue a request for tender for both MOTS and ‘MOTS Plus’ options rather than the government-approved ‘MOTS-based’ approach.

Defence did not define the meaning of ‘MOTS-based’ in its advice to the Minister, to inform the government’s decision-making at first pass — one of a number of shortcomings in Defence advice to ministers, the ANAO commented.

Three Defence reviews identified that its approach to market, including the cost of tendering and schedule constraints, might have caused some potential bidders to not participate in the tender — potentially reducing competition and limiting the options available to the Commonwealth.

Further, the overall effectiveness of the tender evaluation process was undermined by deficiencies in Defence’s implementation of its risk mitigation activity (RMA) and shortcomings in its management of conflicts of interest and probity requirements, the ANAO stated.

The vehicles tested in RMA did not match the tendered vehicle; minimal evidence was obtained regarding the performance of mandated Government-furnished equipment in the vehicles; and claims made by tenderers were not adequately tested. Two Defence reviews on RMA implementation reported mixed findings.

Application of the process set out in the Tender Evaluation Plan did not identify a preferred tenderer and further steps — involving parallel negotiations and additional criteria — were necessary to identify a successful tender, the report disclosed.
Rheinmetall Australia was selected as preferred tenderer on the basis that its offer provided a higher level of assurance that it could meet Army’s capability and protection requirements in the scheduled timeframe, albeit at a higher cost than the alternative BAE Systems Australia offer, the report added.

As of 30 June 2020, Defence and Rheinmetall Australia had executed 10 Contract Change proposals since signing the $4.28 billion (including GST) acquisition contract in August 2018 for 211 CRVs, 12 mission modules and associated support systems, the ANAO stated.

These proposals have effected 175 changes to the contract including one change to the contract scope – to implement an integrated electronic architecture for the CRVs. Based on Defence advice to the Deputy Secretary CASG, this change added almost 600 new requirements and took nearly 12 months to realise, the ANAO reported.

The change proposals have added $91.5 million to the contract value plus an associated increase of $42.4 million “in the estimated amount to be paid by Defence for price escalations due to associated changes to milestone payment dates”.
The price increase was associated with additional Defence requirements necessary for Rheinmetall to deliver ‘a fully networked reconnaissance vehicle capability’ for the 186 Block 11 vehicles to be delivered between February 2022 and January 2027, the report disclosed.

These requirements will introduce an enhanced situational awareness and C4I systems integration for the Block II vehicles from the tendered basic RMA baseline vehicle.

A reduction of $71.8 million in contract costs deriving from changes to payment terms and arrangements was advised by Defence in September, as was serious damage to a test vehicle prior to a trial to verify elements of the proposed design for the CRV Recovery variant.

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