It is just over nine months since the Rudd government faced up to the greatest blunder every made in Australian Defence Force procurement. After eleven years the Defence Minister, Joel Fitzgibbon, announced the abandonment of the Super Seasprite helicopter programme. A billion dollars spent for no result whatsoever plus the cost of replacement choppers for the ANZAC frigate fleet. 

A few weeks ago businessman David Mortimer presented to government his report on the operation of the Defence Materiel Organization (DMO), the organ of the defence department responsible for the delivery of billions of dollars worth of equipment and supplies to the ADF.   Before we look at what might be learned from his report it is time to tell the full story of the Seasprite fiasco before the dust finally settles. Or is there any dust to settle? This procurement tragedy seems to have sunk without trace in the face of global billion dollar disasters.  The Mortimer Report suggests how to reform radically future defence purchasing. It’s time to see how these proposals might have saved the Australian taxpayer from the Seasprite scandal.

Kaman Aerospace builds Seasprites. Charlie Kaman founded the company in 1945. He designed a number of helicopters over the years, as well as an acoustic guitar, and in 1973 the Kaman SH-2F Seasprite entered US Navy service. There was a long production run and over the years the design was developed and upgraded into the SH-2G. This was also accepted by the US Navy and in 1993 they delivered another 29 to the Navy Reserve.

The Super Seasprite had been cleared for international sales and this target was finally achieved in 1994 when Egypt ordered nine SH-2G(E) under a foreign military sales agreement with the US Navy. These aircraft were delivered in 1998 The Polish navy is also reported to operate four Super Seasprites.
Kaman Aerospace has its headquarters in Bloomington, Connecticut in the USA. The salesmen there did particularly well in March, 1997 when first Australia and then New Zealand came through the door with cash in hand, both wanting Super Seasprites. Australia took eleven and New Zealand four, later five. They were for use on the ANZAC frigates operated by both navies.
Australian original interest in the SH-2G was roused when Defence was looking for a helicopter to use on an off-shore patrol boat that was under joint development with the Malaysian Navy. The Malaysians pulled out and the project was abandoned. The helicopter element, however, was seen as suitable for use on the ANZAC frigates. The Royal New Zealand Navy already had ordered a couple of the frigates and they decided to use the same helicopters. 

The delighted Kaman Corporation expected to have no trouble meeting the orders. After all, the SH-2G was known as the ideal multi-mission helicopter. “For anti-submarine warfare, anti-surface warfare, over-the-horizon targeting, utility and search and rescue— you name the mission, the SH-2G meets the challenge”. So says the Kaman sales literature.
There was no problem with supply either. Kaman had dozens of forty year old empty hulls shrink-wrapped in the Arizona desert just waiting to be fitted out. The workshops were rarin’ to go.
It seems, however, that the Australians and New Zealanders were singing to different song sheets even though both had the same ultimate use in mind for the choppers. The Australians were perfectly happy with the antique hulls. After all, they were cheaper than new ones. The cadre of officers that had reached the design and supply level in the Defence Department felt the need to put their mark on the project. So they proposed designing and fitting a new state-of-the-art, all singing all dancing avionics package. The fact that this would first have to be designed, tested and then built into the 40 year old hulls was not seen as an obstacle at that stage. Nor was the cost. Design work commenced.
The New Zealanders had a different idea. They knew how many choppers they needed and what their operational requirements were. The model tried and tested by the US Navy met their bill. No variations were required or permitted.
They were also ordering for the future. These planes were required to have an operational life of 25 years. So new hulls were ordered at a cost of an additional $3 million for each Super Seasprite. This new hull gave certainty in scheduling and price. Kaman was perfectly happy to build the new hulls and the work commenced. The New Zealand delivery dates were set for 2001/2. Unfortunately this is where the stories of the two orders deviate.
By 2002 four of the RNZN Sea Sprites were in service on their ANZAC frigates and the fifth came soon afterwards. They were within budget and practically on time. They have given excellent service ever since. It was the right plane for the job at the right price.
By 2006 Kaman Aerospace Corporation recognized four New Zealand naval aircrew for each surpassing 1000 flight hours in SH-2G(NZ) helicopters. Commemorative plaques were awarded. Kaman noted that this achievement reflected the aircraft’s high level of operational availability and reliability.
In September this year (2008) the RNZN successfully fired two live Maverick air-to-surface missiles from their Super Seasprites. This verified the Seasprite as a firing platform for the missile. A senior RNZN officer stated “the air-to-surface missile performed as expected and has proven the capability.” All goes well with the New Zealand Seasprite fleet.
The Australian saga is markedly different. The new avionics systems proved to be difficult to design and integrate. A subcontractor, Litton Systems, was given the job of developing the radically new integrated software package for the Seasprite. They had great difficulty over many months and ultimately CSC Australia and Northrop Grumman joined the design team. All this took time.
The possibility of returning to the original tested and proven design (as accepted by New Zealand) never came up. Why should it? By this time the rolling programme of transfers and promotion within the DMO in the defence department would have brought yet another new team of planners onto the scene. Any suggestion that changes be made would have let down their predecessors by suggesting that the earlier team had got it wrong. That would never do. The earlier team were now their seniors! And anyway, by the time the Seasprites finally made it to certification and active service the current planners would have moved on. So the system works.
As the months and years rolled by it became apparent that some general concern was noted. In October 2003 the Minister of Defence, Senator Hill, admitted that the helicopters were “ late but on budget”. This was part of an enthusiastic announcement that the RAN was “poised to accept the first of the new Seasprites for testing, evaluation and training.” Their full capability, however, was forecast for the end of 2004 with operational service scheduled for mid-2005.
The Defence Department Annual Report for 2003-2004 still described the project as “substantially achieved” Ten of the eleven helicopters were by then in Australia and five had been provisionally accepted but the report made it clear that the provisional acceptance was with “a basic suite of software.” This was by no means the finished product but it enabled the commencement of flight trials and initial squadron training. The new design of software, the exclusive RAN state-of-the-art avionics package, was still to be released and fitted in 2004-2005 with flight tests in the first half of 2005.
A Kaman Aerospace release told the same story at the Australian Air Show in Avalon in March 2005 where the RAN had two Super Seasprites on static display. As Kaman put it “the RAN is presently operating eight SH-2G(A) helicopters in Interim Training Helicopter configuration.” The work still remaining, and the cause of all the delay was described as “the integration of state-of-the-art weapons, sensors and communications equipment”. This still lay ahead.
Incidentally, Kaman releases at the Avalon Air Show announced that the SH-2G(NZ) New Zealand Seasprites had by this time accumulated in excess of 4000 flight hours in just three years of service under “very harsh, at sea conditions.”
Meanwhile back in Bloomfield, Conn., Kaman signed a contract from the US Naval Air System Command for the first major overhaul of the Egyptian Seasprites. By this time they had been operational for seven years.
By this time, March 2005, public attention in Australia for the first time became fixed on the Seasprite programme. Reports said that the installation of “high tech hardware in an old airframe had not been achievable”. The Defence Department admitted that the helicopters could not be used in “murky weather” and their use up to this time had been limited to delivering stores and transporting passengers and that only when the weather was good.
Editorials chewed out Australian defence procurement and described the Seasprites as the “latest billion-dollar lemon”. Australian gullibility was seen as undiminished with every new acquisition described as “a world beater”. The government response was seen to be the provision of additional spending “entrenching the very management shortcomings the extra cash would try to conceal” Taxpayers were seen as deserving a much more rigorous response. This was not forthcoming.
Defence claimed they had been misrepresented. They expected the certification process to be completed late in 2005 when the Seasprite would fulfil all its planned roles including search and rescue in poor visibility. However a warning for the future could be seen in the Defence statement that they were “working through a range of issues that are expected to be rectified or mitigated by the time a fully capable helicopter is accepted…”
The topic disappeared into the black hole of public neglect for nearly a year till in February 20006 the head of the Defence Materiel Organization, Stephen Gumley, speaking of the helicopter, said, “It’s now clear we made a mistake.” This was seized on in editorials that correctly picked that the problem was the avionics and weapons technology sought by the navy. “Getting the latest software to fly in a Vietnam-era aircraft not designed for it has proved exceptionally difficult.” (The same editorial suggested the age of the airframe was not an issue since the New Zealand Seasprites, refitted less ambitiously, were flying day and night. It was not reported in Australia that the NZ Seasprites were ordered with new airframes.)
Kaman continued to be hopeful and announced in June 2006 the commencement of Formal Qualification Testing to be witnessed by the customer. The third quarter of 2006 was to mark the opening of final flight acceptance testing of the full eleven mission-capable helicopters.
In the same release, however, Kaman admitted that they were still “in consultation” with RAN “with regard to an anomalous flight condition attributed to the aircraft’s airspeed sensor that resulted in the grounding of the aircraft.” The company believed it had a plan to resolves the issue and had ready a replacement component for delivery. No reference to this problem appears to have been published in Australia.
By May 2006 the possibility that the Seasprite fleet might be scrapped came into the public arena. The Minister of Defence, Dr Brendan Nelson, went as far as saying that it was time to look at what was involved in “getting out of the programme”. He went on to reveal that the cause of endless delays in certification were software problems associated with electronic equipment that affected flight safety.
Other people were now speaking out frankly. Mark Thompson from the Australian Strategic Policy Institute (ASPI) was reported to have said that the specifications exceeded what was practical. Brendan Nelson did his best but revealed his concern that at this time there were ten different types of helicopter operating in the Australian Defence Force.
In a revealing comment the Minister said that the recent overhaul of the Defence Materiel Organization (DMO) and a more rigorous decision-making process meant a Seasprite-style contract could not happen again. This was strong talk and the Minister even saw a lesson to be learned from the Australian habit of mistakenly chasing after ambitious requirement rather than buying off-the-shelf. And for the first time for years the New Zealand purchase was reported in the Australian press. “The New Zealand Navy is flying Seasprites successfully but never attempted to acquire the more advanced range of capabilities destined for the RAN’s machines.” (The Australian 16 May 2006) Destined, but sadly, never achieved.
Around this time other defence projects were also showing signs of trouble. The early warning aircraft (AWAC) were already running late as was the aerial refuelling fleet. In fact, neither of these projects is yet operational in 2008.
Defence was not prepared to give up on the Seasprites. In May 2006 they released figures estimating a further $100 million to $200 million over another two years would make the Seasprites operational. This was seen as the cheapest solution as opposed to spending $1.5 billion for a new capability to be delivered in three to four years. (What a hope!)
These proposals won out. By the end of July Australian media published a report that suggested the problems had been solved for a mere $10 million. Apparently Kaman officials had briefed top defence brass, including Secretary Ric Smith and Navy Chief Russ Shalders. From published reports they seem to have blurred the major electronic problems into the airspeed sensor problem referred to earlier in Kaman’s press release that had gone unreported in Australia. This left the impression that the entire problem would be solved “at a fraction of the estimated $100-$200 million previously advanced by Australian defence officials.” (The Australian 29 July 2006). This was not questioned in Australia at the time.
In fact one might have believed all was well with the project and Australian defence planning till a revealing statement by the chief of the defence force’s new Capability Development Group (CDG), Lt. Gen David Hurley. He spoke at the Lowy Institute for International Policy in Sydney and he was asked a question on the passion for the Australianisation of standard products in general and the Seasprite project in particular. He said, “In the future ADF mistakes will be the exception rather than the rule.” He planned “to avoid over-Australianising and take more off-the-shelf products.” (The Dominion Post, NZ, 6 September 2006)
These were strong words but no reference to them has been found in the Australian media.
In the first half of 2007 it seemed that the end was in sight. There were reports that Defence had recommended that the Kaman contract be cancelled. Kaman fought back claiming that the requirements to meet current airworthiness certification regulations fell outside the original contract specifications. To meet these specifications would take a further 29 months and cost $45 million. The Minister of Defence, Brendan Nelson, countered by saying that the Seasprite concept was like putting a 2010 motor vehicle into an EH Holden. “If it was my money, my project and it involved my domestic arrangements, I know what I would be doing.”
Unfortunately it wasn’t his money, it was the Australian taxpayers and in an election year taxpayer money is there to be splashed around indiscriminately. The Minister was unable to convince cabinet to dump the Seasprites. Although he showed his clear concern for the ultimate safety, performance and reliability of the Seasprite, his office said that “initial operating capability” was scheduled for 2011 with full operational capability in 2014.
This stretched out the project for another seven years but media reported it under the heading “Helicopter finally at take-off period” and Labor’s defence spokesman Joel Fitzgibbon said that Dr Nelson had been forced into an embarrassing election year about-face. (SMH 26-27 May 2007) John Howard had undoubtedly seen the dangers of cancelling such a long-standing and expensive project a few months before the general election, whatever the cost. But the cost he had to pay in the election was even higher when he lost government and his own seat.
It was not long before the new Defence Minister, Joel Fitzgibbon, grasped the nettle. Soon after the election the Rudd government initiated a review of the project and on 5 March 2008 announced the cancellation of the Seasprite project.
“The decision taken by the Rudd Labor government is one that should have been taken by Brendan Nelson when he had the opportunity last year but his government   decided to put its own political interests ahead of the national interest. Consequently the responsibility for cleaning up the mess they created falls to us,” said Mr Fitzgibbon. 
On 20 March the government announced an agreement with Kaman Aerospace. The helicopters, training equipment and some spare parts were to be returned to Kaman for sale. The Australian government was to share the proceeds and receive at least 50%. There was to be a guaranteed financial return to Australia from Kaman of $39.5 million. Not much of a return for a billion dollar outlay.
The media release at that time crowed that the government had thereby saved a further $150 million that was to have been spent attempting to save the Seasprite project.
Now we know that the choppers are already on the world market. On 3 September 2008 Kaman Aerospace announced that they had SH-2G(I) Super Seasprite helicopters for sale, ready for immediate delivery. This should have rung a bell with the Australian taxpayer.
By chance Kaman has eleven of these multi-mission maritime helicopters available for immediate delivery. Under any other circumstances this would be highly improbable. Clearly these must be the 11 RAN Super Seasprites dumped by the Australian government as inoperable last March.
Kaman displayed one at the Black Sea Defence and Aerospace Exposition on 24-26 September at Bucharest, Romania. An earlier press briefing from Kaman at the time of the Farnborough Airshow on 16 July offered the eleven helicopters accompanied by a complete logistics and training package. Kaman touts the Seasprite as an incredibly capable multi-mission aircraft backed up with a Moving Base Simulator and a complete integrated Logistic Support package to sustain eleven aircraft.  This is the identical kit and caboodle that had been supplied to RAN Squadron 805. It goes without saying that there is no mention of the previous “owners” in the Kaman sales material.
The question must now be asked. If a few months ago the Seasprites were seen by Defence as requiring years of further development to reach full operational capability how can they now be offered by Kaman as ready for action, fully equipped to perform a wide variety of naval and coastguard missions? Are Australian defence standards set impossibly high? Is Kaman boosting its product beyond the bounds of safety and operability?
It has been possible to obtain from Kaman a comparison of the various configurations of the SH-2G. This five page document compares the original SH-2G, the SH-2G(E) as sold to Egypt, the SH-2G(NZ) as sold to New Zealand and the model now for sale, the SH-2G(I). Advice has been received from New Zealand Defence that the International model is indeed the old Australian configuration. This conclusion has been reached by comparing the ITAS and other systems.
All this gives added weight to the question of the adequacy of Australian defence standards and the way that Kaman boosts its latest (?) product. Can they both be correct?  Whatever the answers, the Seasprite saga must be followed to its conclusion and hopefully some lessons can be learned from the whole sorry business. 
It’s time now to return to the Mortimer report. The key recommendation made by Mortimer was that the DMO should become a stand-alone agency responsible solely to the Defence Minister. This had in fact already been recommended in the Kinnaird review of defence procurement that was completed in 2003 but was not accepted by the Howard government.
Mortimer backs up that earlier recommendation for a clean split from defence and supports his case in three major areas. The failure of the Seasprite project reported above was in great part due to failure in these areas.
First. Mortimer showed that “setting requirements beyond that of off-the-shelf equipment generates disproportionately large increases to the cost, schedule and risk of the project.” (Mortimer Report P.18)
The acceptance of a standard avionics package by the Royal New Zealand Navy and the finally impossible cost of developing new systems for the Royal Australian Navy are a case in point. Another point is that the uncompleted “new” Australian systems were spread across a comparatively small production run.
The Report warns that even a tiny modification (imperial to metric units) bears some risk. “A seemingly minor software change to an aircraft’s mission computer can carry considerable risk.” A telling point is made where “ADF regulatory authorities need to clearly understand where their requirements differ from international standards and be sure that these differences are necessary.” (There may be an unspoken hint at the Seasprite certification programme here.)
Mortimer uses the Collins class submarines as an example where there was no off-the-shelf solution and the Commonwealth had to bear great additional modification and developmental costs. He sees the Joint Strike Fighter (JSF) programme as one where Australia can use international effort to access cutting-edge technology. Recommendation 2.3 says that “Any decision to move beyond the requirements of off-the-shelf solutions must be based on a rigorous analysis of the capability sought and the cost and risk of doing so…..The government must be kept informed…”
Second. In the area of Staff Turnover the Mortimer report sees a major risk for stable project development. A chart shows current times in position of the staff of the DMO by grade and rank. The average tenure of all DMO staff is just two years. That of DMO military staff is less. Public service reports are quoted suggesting that new Australian Public Service recruits perform only at 60% of potential when first appointed and reach 100% only after a year. Major acquisition projects are spread over many years and Mortimer sees an average tenure of less than two years as having a negative impact on DMO performance.
Once again the Seasprite case is a tragic example of the negative impact staff turnover has on the satisfactory  progress of a project. The Capability Development Group (CDG) takes the lead in planning the acquisition of new capability. The Mortimer report finds that the core personnel of CDG are military officers on short term postings, with tenure averaging just 18 months. While the use of military personnel in early stage project development ensures expert knowledge and operational experience the very short tenure of these postings cannot provide the skills needed to plan billion dollar acquisition programmes.
Third. The DMO and the CDG should both improve their planning capabilities. The Mortimer report calls for adequate resourcing with enhanced skills in both areas to accurately estimate the cost and scheduling of major projects. This will increase the likelihood of equipment being delivered to the ADF on time, on budget and to specifications.
The Seasprite project is an example of a complete failure to deliver at all.
With the multi-billion dollar Joint Strike Fighter just around the corner the recommendations of the Mortimer Report could make the difference between success and an even more disastrous failure. As of now the Report has gone into another black hole,