Defence Update

Defence Minister, Mr Ian McLachlan, said in May that of all the Defence projects in his portfolio he was most concerned about JORN.

“JORN would be much better if we managed to produce the result that was contracted,” Mr McLachlan said. “We paid a large amount of money ($1.1 billion) and the software and parts of the radar hardware are significantly behind where they ought to be.

“Not long ago the software side was only 25% of where it ought to be. It should have been 39% by the end of March,” he said. He acknowledged that he was aware there were difficulties between Telstra and GEC-Marconi.

“I hope they sort it out. I know they’re trying,” he added.

In May Mr McLachlan called for an urgent report on the JORN project from the Secretary of the Department of Defence, Mr Tony Ayers, and it was delivered on time on June 14. At the time of writing its contents and recommendations had not been revealed.

However on June 18 after tabling in Parliament the Audit Office’s Performance Audit of the JORN Project, Mrs Bronwyn Bishop, the then Acting Defence Minister, and Minister for Defence Industry, Science and Personnel, expressed serious concern over JORN’s management and delivery.

“Initial operational capability is now expected in 1998-99, while final completion will be delayed until at least 2000. For a project with an original delivery date of mid 1997, this is simply unacceptable.

“The Government is determined to improve oversight of the project”, she said. “We will ensure that delays are minimised. We will insist that the contractor delivers the operational capability that Defence requires.”

In its report on June 18 on JORN the ANAO summarised the history of the project, the key issues and made recommendations. The author of the report was Mr Ray McNally.

“Defence, through its Jindalee Project Office (JPO), is responsible for overall management of the project. The JPO’s main function is to ensure that the prime contractor delivers JORN as agreed in the contract,” the report noted.

“As prime contractor, Telstra is to be paid over $800m for designing, developing, installing and presenting for acceptance two integrated radars — one at Longreach in Queensland and the other near Laverton in WA. Both are to be controlled from a central facility at Salisbury, SA,” the report outlined. It said the project began in 1991 and has progressed slower than expected. In 1994 Telstra rescheduled JORN’s completion from 1997 to 1999, and is proposing a further rescheduling, possibly to June 2000.

The necessary contract amendment to change the completion date still needs to be negotiated. The JPO expects the project to be completed within the approved total project cost, adjusted for price rises and foreign currency variations, the report noted. It said the objective of the audit was to assess the performance of the Department’s project management. An important part of the audit was to derive lessons to be learnt that could be applied to the remainder of the project and to other Defence projects.

The audit report traced how Defence, from the outset, knew that JORN was a high risk development project, and that Telstra was inexperienced in OTHR technology and defence system full scale development methods. So some of its principal findings are that many of the difficulties and slippages on the project could have been avoided if Defence had appointed an experienced project management team in the JPO ready to deal firmly and proactively with Telstra when problems became apparent.

It added that for satisfactory performance, progress payments should have been applied to better indicators of performance and withheld until their value was earned.

“The JPO should have insisted on compliance with contract requirements regarding system reviews and risk abatement plans,” Mr McNally found.

Some of the main issues addressed were:

Milestone progress payment amounts are not necessarily linked to the project’s earned value at each milestone. Current payment trends indicate that Defence’s JORN full scale development budget will be spent by mid 1997 (the original project completion date), but there will be at least two more years of system development work remaining.

Project management difficulties have added significant nontechnical risks to JORN’s system development risks.

The JPO should, from the outset, have scrutinised the contractors’ progress with caution and thoroughness, knowing that JORN was a risky developmental project and that Telstra was inexperienced in sky wave OTHR technology. Difficulties in the contracting team arrangements have led to poor relationships among the contractors.

The JPO agreed to pay Telstra for two important review milestones in 1992 and 1993 knowing that progress was inadequate and that it would affect later work.

Project office staff indicated they were under pressure to keep paying contractors to maintain Defence expenditure. This reduces the incentive on contractors to maintain efficiency.

JORN work was falling behind schedule and proceeding at considerable technical risk, but important risk management plans were not provided as required.

The JPO should have been more active in arranging for inspections by Defence’s Financial Consulting and Investigational Section.

The JORN contract seems not to be as robust as some other Defence contracts in protecting the Commonwealth against a number of risks.

The project involves advanced electronic hardware combined with advanced software engineering. The JPO would benefit by raising the skills of staff and contractors that monitor and review such work as the complexity increases.

The audit report was critical of Defence’s annual report of 1994-95 that stated that JORN design activity was nearing completion, confidence that the specifications would be met was high, and radar hardware was in production.

In a most forthright final conclusion the ANAO said it considers that, unless Defence maintains a rigorous approach to planning, oversight and management of large projects, it will not acquire the contracted product at the required cost, time and standard.