The Department of Defence has admitted that it 'did not conduct an effective limited tender process' for the design of the $45 billion Hunter class frigates.
An ANAO report into the program, tabled in Parliament on 10 May, was sufficiently critical of Defence’s procurement processes to suggest that “further training and oversight may be required of Defence officials involved in high-level planning and advising on major capital acquisition projects, at all levels."
Findings in that report included that contract expenditure to date had not been effective in delivering on project milestones, and “lack of design maturity” had resulted in a fresh 18-month delay to the project, with the first of the nine Hunter-class vessels intended to replace the RAN’s Anzac-class frigates now expected to be delivered in mid-2032 rather than early 2031.
Now, Secretary of the Department Greg Moriarty has admitted that Defence's own tender processes resulted in risks that are now being realised.
"After initial pass and up until first pass, there was no consistent expression of the goals and purpose of the procurement. Planning for the procurement fell into a process of disjointed advice to government that did not include deliberate steps to maintain clear coherent goals and a procurement method commensurate with the scale, scope and risk of the procurement," Moriarty wrote on 10 November.
The submission also acknowledges poor record-keeping: "The absence of formal documentation means that there is no evidence to demonstrate that the shortlisting activities and decision were commensurate with the scale, scope and risk of the decision."
Moreover, the submission acknowledges that Defence focused too heavily on capability requirements and did not pay enough attention to risk, particularly given 'other tender criteria' that included a mature, in-the-water design (which the heavily-Australianised Hunter class was not).
"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," Moriarty wrote.
According to the original ANAO report, Defence’s Capability and Investment Committee had decided in February 2016 that Italy’s FREMM multipurpose frigate and Spanish shipbuilder Navantia’s modified F-100 were considered the most viable designs and that either the UK’s BAE Systems Type 26 or the French variant of the FREMM design should be progressed as a third option for the competitive evaluation activity.
Records of the rationale for the selection by the Defence Secretary (the decision-maker) of the BAE Type 26 design as the third option to be recommended to government had not been retained by Defence, the ANAO said.
Last week, BAE Systems revealed an 'up-gunned' Hunter class proposal which will increase the number of vertical launch system (VLS) cells from 32 to 96, at the expense of some of the high-end anti-submarine warfare (ASW) equipment such as the towed array sonar, and the Hunter’s mission bay aft of the funnel.
The Hunter program is awaiting the outcome of the Surface Fleet Review, now not expected to be made public until the end of the first quarter next year.