Airservices Australia board chair Sir Angus Houston has told a Senate committee that the air navigation service provider is “99 per cent ready to go” to sign contracts for the new OneSky air traffic management system.
Since February 2015 Airservices has been negotiating with Thales as its preferred supplier for the OneSky project for a new civil and military air traffic management system (or CMATS), but the main acquisition and support contracts for the new system, which will be funded by both Airservices and the Department of Defence, have yet to be signed.
“We’re getting close, 99 per cent of the paperwork is contract ready, that means we’re getting very close,” Sir Angus told members of the Senate Rural & Regional Affairs Transport Legislation Committee on Wednesday.
Some risk mitigation work for OneSky has already been undertaken under advance supply contracts, but finalising the main acquisition contract has been delayed while Airservices and Thales agree to terms, especially in the light of a recent Australian National Audit Office audit which raised concerns about the tender evaluation process’s ability to deliver value for money on the near billion dollar project.
But Sir Angus told the committee that Defence is close to seeking government approval for its share of the program from the National Security Committee (NSC) of Cabinet.
“Right now we are about 99 per cent ready to go into contract on our side, we just need to finalise the arrangements with Defence after they’ve been through [the NSC approval process].”
However, the Airservices chair did indicate that Defence’s share of the OneSky project is likely to be greater than a previously agreed “not to exceed” price of $244 million.
“We’re at a stage where Defence are going back to the National Security Committee of Cabinet for a final approval on the project with some form of cost increase,” he said.
Airservices has not publicly put an exact number on the value of its own share of the OneSky program, however the organisation’s new five-year corporate plan, released on Tuesday, records that “OneSKY and its enabling projects account for $652 million” in capital expenditure over the next five financial years, through to the end of 2021-22.
“Much of the delay in finalising this contract is because the board will not sign a contract until such time that it is satisfied that we can protect Airservices commercially under these arrangements,” Tim Rothwell, Airservices board member and chair of the board’s audit and risk committee, told the Senate.
Another of the ANAO report’s criticisms was that the Airservices business case for OneSky had not been reviewed or updated since January 2011.
“The latest cost estimates have been included in Airservices’ corporate plans, including the one tabled yesterday, so it’s not as if the cost estimates were unknown, but the final business case will be provided to the board as part of the approval process, hopefully towards the end of this year when we do hopefully contract to get this project underway,” Rothwell said.
Fellow Airservices board member David Marchant, chair of the board’s technology committee, told the Senate committee Airservices had moved to an open book process as part of contract negotiations to ensure value for money.
“We’ve stopped going to contract until we’ve got the definition and the design absolutely right and it’s absolutely in agreement with Defence and ourselves,” he said.
“Secondly, we’ve moved to a full ‘open book’ process for every cost, for every activity and are going through and assessing those against that design criteria, so we don’t have to go retrospectively back [to make changes once contracts have been signed].
“And the reason for the comment about the business case and the rest is that until that’s concluded and the risks and contingencies all through those things are put out in the open and mitigated down, that’s when we’ll get to a final cost and a final risk and a final mitigation.”
Open book contract management is a contracting arrangement favoured in government procurements in the United Kingdom. It allows “the scrutiny of a supplier’s costs and margins through the reporting of, or accessing, accounting data,” according to the UK’s Crown Commercial Service.
“This transparency allows both parties to be clear on the supplier’s charges, costs, and planned return. It also provides a basis to be able to review performance, agree the impact of change and to bring forward ideas for efficiency improvements.”
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