Slaying Taipan: The ADF’s $3.7 billion problem

The move will cost Defence a cool $7 billion, however it is said to save the ADF up to $2.5 billion by 2037 – the initial planned retirement date of the Taipan fleet – given the costly maintenance required on the Taipans. Meanwhile, the Black Hawk fleet is expected to remain in operation into the 2040s.

At the time of the decision, Minister Dutton said: “The performance of the MRH-90 Taipan has been an ongoing and well-documented concern for Defence and there has been a significant effort at great expense to try to remediate those issues. It is critically important there is a safe, reliable and capable utility helicopter available for our servicemen and women into the future, with reasonable and predictable operating costs.”

So how exactly did a multi-billion helicopter program fail so miserably?

The writing on the wall

Between 2005 and 2006, the Australian Government ordered a total of 46 Airbus MRH-90 utility helicopters, most of which would be manufactured locally by Airbus Helicopters subsidiary Australian Aerospace. Airbus eventually offered the ADF an additional MRH-90, taking the fleet total to 47, due to operational issues and delays in the Taipan program. The last aircraft entered service in November 2017. Six aircraft were operated by 808 Squadron, supporting maritime support capability for the Royal Australian Navy, while the remaining 41 were utilised by Army as its utility aircraft, supporting Special Operations.

However, from early on, the Taipan struggled to meet even basic expectations. “Interestingly, even though this project has been ongoing since the early naughties, it’s never actually declared Final Operational Capability,” says Marcus Hellyer, the Senior Analyst for defence economics and capability at the Australian Strategic Policy Institute. “FOC is declared when Defence can say that a platform can do everything that we wanted it to do – it’s passed all evaluation milestones, and we’ve got a fully mature system. The Taipan has never reached this level.” 

The Australian National Audit Office (ANAO) first listed the Taipan program, formally known as AIR 9000 Phase 2, 4 and 6, as a “project of concern” in 2011 as part of its Defence Major Projects report. It claimed this was due to “significant technical issues preventing the achievement of milestones on schedule”. The program continued to be flagged as a concern over the coming years due to its “ongoing inability” to meet material capability delivery milestones and performance criteria. ANAO again noted in 2016 that some nine years after the first Taipan was delivered to the ADF, it had still not achieved any of its set operational capability milestones. Hellyer explains these certain capabilities that were expected of Australia’s Tapian fleet, including door-mounted machine guns and fast-roping capabilities for Special Forces, were never able to be achieved to the standard expected by Defence. “So after nearly 20 years, this project, still, has just never really delivered,” he says.

A costly exercise

On top of this, the Taipan fleet was often out of service and unavailable to Defence, as both operating and maintenance costs skyrocketed over time. Maintenance and technical issues saw the Taipan fleet grounded numerous times. Most recently, in June 2021, Defence suspended flying operations of its Taipan fleet as a “safety precaution” after an issue relating to the aircraft’s IT support system was identified. Earlier, in 2019, a tail rotor vibration forced the MRH-90 helicopters based at HMAS Albatross to be grounded. This followed a precautionary landing on HMAS Adelaide from an Army MRH-90 a fortnight earlier, prompting officials to similarly temporarily suspend the entire fleet.

In fact, in the last 10 years, the entire fleet been grounded by the ADF on at least nine occasions, for periods of between one and three months at a time, which on some occasions forced Army to lease out commercial helicopters to perform basic air lift tasks. This understandably led to an explosion in costs on an already underwhelming platform.

“Capability-wise, Taipan has fallen short, but I think the much more fundamental issue here has been the aircraft’s low level of availability, and with that, its excessive operating costs,” Hellyer says. “In the 10 years since the Taipan entered the ADF fleet, its operating costs have not plateaued as would normally expected, in fact, they keep going up each year,” Hellyer says. Himself a former public servant in the Department of Defence, responsible for analysing costs and advising the government on major capital investments, Hellyer came prepared with the Taipan’s disappointing statistics. “In 2021-22, Defence spent $276 million in operating costs on its Taipan fleet, while this coming year, 2022-23, that cost is expected to balloon to $303 million,” he explains. “That’s $303 million a year for helicopters that aren’t up to scratch.

“Last year, its average cost-per-flight-hour was $53,000, which makes it more expensive to operate than the CH47 Chinook, which is a much bigger helicopter that can carry far bigger payloads. In terms of the number of hours flown, we’re looking at about 100 hours per aircraft per year on average, some years its been closer to 150, but generally around 100,” Hellyer says. “That’s a pretty poor result for what is supposed to be your reliable utility helicopter, which should be doing everyday tasks and flying most often out of all of your aircraft.

“If we compare this to Black Hawk – honestly, they’re so cheap to operate, it doesn’t even appear in Defence data. But for comparative purposes, the last information I could find was between 2007-08 to 2014-25, which said it cost on average around $11,000 per flight hour to operate Black Hawk, and they were averaging about double the number of flight hours per year as the Taipan.”

Hellyer paused to note here that the Taipan is not a sophisticated attack platform, in fact, it’s not even an armed aircraft. “It doesn’t have the same complicated sensor suites that a sophisticated attack platform would have, and yet we still have these excessive issues of cost and availability,” he explains. “It’s really strange that the MRH 90 actually costs more to operate than some of our combat aircraft, it costs about two or three times as much to operate as the Classic Hornet, which was a frontline fighter aircraft.”

So what, exactly, was at the heart of these constant availability issues? A key selling-point of the MRH-90 program was the fact that Australian suppliers and MROs could support the program, with many of these European-designed aircraft built in Australia. However, Hellyer says maintenance on the Taipan quickly became a nightmare, as local agencies tasked with the sustainment of this European platform struggled to access the parts they needed for repairs. “The explanations we’ve been given on the Taipan’s troubles haven’t really changed over time. Right from the outset of these problems, were were told that the reason has been related to supply chain issues,” Hellyer says. “Maintenance contractors would say it was hard to get spare parts out of European suppliers, so the turnaround times for repair of was taking too long. Australia was in competition with other users from around the world for those parts, and being say, further away than European operators, I’d say it could have put us at a disadvantage.”

Though, Hellyer did suggest that Australia was likely not alone in its struggles to maintain the Taipan, however likely felt the burden more-so than overseas counterparts. “To be perfectly frank, European nations don’t have the same expectations of performance as us. All of their fleets have terrible availability, and it’s only now with the war in Ukraine erupting, that this is being questioned,” Hellyer says. “When Australia buys something, we buy it to use it. We don’t buy stuff to stockpile in sheds for a rainy day. We carefully think about our requirements, and we buy just the number we need to meet our requirements. And so there’s an expectation that all of our platforms perform.”

Making the call

It’s obvious that Defence has known about the Taipan’s troubles since soon after its initial delivery in 2007. Interestingly, Hellyer says he was personally involved in flagging the spiralling cost of retaining the Taipan with Defence within the last decade.

“I used to work in Defence in an area that assessed the value for money of various systems. So I know that 10 years ago, we were already raising these issues, that the MRH-90 just didn’t bring present value for money,” he says. “We also made the case a long time ago, that in the longer-term, if you just absorbed the already sunk costs and bought Black Hawks, it would still be cheaper in the long-run. Because even though you have to spend money to acquire new aircraft and write off the sunk cost of the old aircraft, Black Hawk would be so much cheaper to operate in the long term, that in all it would actually save money. 

“And interestingly, that is now the exact argument which defence is now making.”

One has to wonder, if Defence was informed a decade ago that it would be cheaper to just cut our losses and walk away from the Taipan program, why did it take so long to finally follow through? Hellyer says, as is often the case, both money and optics are at play. “I think the intent 10 years ago inside Defence was ‘We’ve just got to make it work. We’ve spent all of his money on it.’ At the same time, roughly 2006-07, Defence had just cancelled the Super Seasprite contract, with a sunk cost of a billion dollars. So that was another helicopter that never met its performance requirements. So really, no one wanted another failed helicopter program.

“Another issue at play, is that all businesses have to manage their cash flow, and Defence is no different. In fact, Defence has less tools to manage its cash flow than a commercial entity does, because the ADF has to live within its means every year, it can’t just go to the bank and take out a loan to invest in new equipment. We just don’t have money lying around to write-off what we’ve already sunk into Taipan, and then invest new money in acquiring Black Hawks. Or at least, we didn’t back then.”

Hellyer says that there are a number of factors that play in the ADF’s decision to now finally call it quits on the Taipan. Firstly, increasing tensions with China in recent years has seen the federal Government’s budget for Defence increased. Then, Australia decided to pull the plug on a multi-billion-dollar attack class submarine project, in favour of the AUKUS agreement. “Suddenly, Defence had more money than it really knew what to do with, so it presented a golden opportunity to finally take care of the MRH-90 problem,” Hellyer says.

The rise of Black Hawk

According to Hellyer, Defence has always had a “natural affinity” of sorts for American-built equipment, which most of Air Force’s aircraft being US-built. In fact, Peter Dutton even acknowledged that the Black Hawk platform was advantageous to the ADF, being “interoperable with our counterparts and with our allies”, along with being “the favoured platform in the United States”.

It also appears the next-generation Black Hawk was in the running for the ADF’s utility helicopter before Taipan was ultimately selected, largely due to the fact that Taipan could be manufactured at home. “Defence at that time recommended Black Hawk, but the government was swayed by the domestic industry package that was on offer with the MHR-90, given that it could be built here and support local contractors.”

Further, Black Hawk has proven itself time and time again around the globe as a reliable and cost-efficient platform – an appealing offer to Defence after the chaos of Taipan. “There are thousands of them in use, not just with the US, but with other US partners and allies around the world. There are well-established supply chains, and you could argue it’s a sort of a simpler, less exquisite platform than MRH-90. Both of these bring sustainment costs down. They’re also very battle-tested, since the US has been using them around the world in conflict every day for the last 20 years. So Black Hawk seemed like an obvious choice.”

Of course, though, the choice of Black Hawk means the Army’s utility helicopter will no longer be manufactured in Australia, in a major blow to local industry. But Hellyer said the result, particularly in light of Taipan’s outcomes, is unsurprising. “First of all, we were never going to design and build an Australian utility helicopter. So Taipan’s replacement was always going to be an overseas design.”

He explains that the government manages a delicate balance between prioritising the best outcomes for the ADF and for Australia’s homegrown manufacturing industries. “For many things, the government’s expectation is that we’ll build it here. We’ll take an overseas design and build it here. That’s a great solution when it comes to shipbuilding, and it seems to be increasingly a solution in armoured vehicles,” Hellyer says. “In aircraft, though, we’ve sort of taken a different approach. In terms of RAAF aircraft, the classic Hornets were built here in the 1980s, but I don’t think we’ve built any of our Air Force fleets here in Australia since then.

“Now, Air Force buys overseas, because that’s where they can get the best outcomes, and tap into existing production lines. While there is plenty of opportunity for more sovereign capability in this space, just look at Boeing and the RAAF’s partnership on the Loyal Wingman – now Ghost Bat – program. That involves investing and nurturing an Australian industry, which is being done. Unlike the MRH-90, which was more trying to replicate a US aircraft production line in Australia, making it more-so an assembly line for US components. It doesn’t really create or grow Australian capability here, it simply adds costs, creates logistical and scheduling difficulties, and adds risk to the delivery of favourable outcomes.”

Image credit: Defence / Corporal Jarrod McAneney