Seasprite – The Billion Dollar Blunder

Seasprite – The Billion Dollar Blunder

REPORTER: Thom Cookes

This scout troop is on an outing to a naval museum just outside of Washington DC.

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A retired marine sergeant is giving them a guided tour of one of the museum’s prize exhibits.

MARINE SERGEANT: Now we’ll tell you a little bit about the Seasprite here. This particular bird is a sub-hunter. This thing had a great history in its flight time, and it was retired here to the museum.

The Seasprite naval helicopter, first flown in the 1950s, is now a museum piece in the United States. It was phased out of service from the early ’90s and by 2001 the US had put its few remaining Seasprites into storage. But remarkably, the Royal Australian Navy has spent over $1 billion on these museum pieces. It bought 11 of the ageing helicopters and has spent the last seven years trying to convert them into state-of-the-art war machines. Most are older than the Seasprite on display in the US and some even flew in the Vietnam War.

The Australian Defence Department has a long history of embarrassing blunders on major projects, but the story of the Seasprite helicopter is possibly the most shocking to emerge so far.

REPORTER: How would you sum up the Seasprite deal in total?

SENATOR CHRIS EVANS, OPPOSITION DEFENCE SPOKESMAN: Oh, it’s been a disaster. We paid $1 billion for 40-year-old aircraft that have been delivered three years late, still haven’t got a weapons system. It’s just been a complete disaster.

REPORTER: Should have the Seasprite have been cancelled?

ALDO BORGU: Oh, certainly. The fact is I don’t think you can justify adding yet another helicopter to our inventory.

Aldo Borgu is a former adviser to three coalition defence ministers and is now an analyst at the Australian Strategic Policy Institute. He explains how the Seasprite project came about.

ALDO BORGU: Certainly the major requirement was because we actually had a smaller ship, the offshore patrol combatant, or offshore patrol vessel, which we were basically putting together jointly with Malaysia, it couldn’t carry a Seahawk helicopter, which can be carried on the Anzac frigate, so if we were proceeding just with the Anzacs, we probably would have gone for the existing Seahawk helicopter, but because we also had this smaller ship, which was banking on the fact that the Malaysians would buy it so we’d have a joint development program, we needed a smaller size helicopter which would have been either the Seasprite or the Westland Lynx.

Being small was the one thing the Seasprite had going for it. This is the offshore patrol vessel designed for the joint Malaysian-Australian project. The size of this rear helicopter deck meant that Australia’s existing Seahawk helicopters would be too large to land on the ship. Under questioning in Senate Estimates hearings, defence officials admitted that this was the sole reason the Seasprite was bought.

SENATOR CHRIS EVANS: Did we purchase the Seasprites because they had a superior anti-surface capability, or was it more to do with the size?

AIR VICE MARSHALL CONROY: It was entirely to do with the size, Senator. There is a variant of the Seahawk that carries the penguin missile, the same missile.

SENATOR CHRIS EVANS: So effectively we could have got the same capability out of the Seahawk if it wasn’t for the size question? Is that fair?

AIR VICE MARSHALL CONROY: Yes.

Aldo Borgu agrees that it was all about size.

ALDO BORGU: It’s the only explanation I can come up with. It’s the only reason why we wouldn’t have got additional Seahawk helicopters similar to the ones we operate on the Adelaide-class frigates. I can’t see any other reason. The platform itself doesn’t have any unique capabilities that would cause you to buy the Seasprite over the Seahawk.

The only problem was that this glossy brochure was as far as the offshore patrol vessel ever got. When Malaysia pulled out in October 1997, the ship was finally canned and with it, went any justification for a smaller navy helicopter. But for reasons that have never been fully explained, the Defence Department had already signed the Seasprite contract four months earlier, even though it was known by then in Government circles that the joint project with Malaysia would probably not go ahead.

Opposition Defence Spokesman Senator Chris Evans has been pursuing the Navy over the Seasprite deal for years, but on this critical point he’s drawn a blank.

REPORTER: Why do you think the Defence Department went ahead with the Seasprite even though the offshore patrol vessel was cancelled?

SENATOR CHRIS EVANS: Look, it’s a complete mystery to me. There’s been no proper explanation of that. The helicopter was designed for a ship that was cancelled, but we went ahead and ordered the helicopter, even though the capability was no longer going to be purchased.

The Defence Department was unable to provide anyone for an interview with Dateline, but it’s previously claimed that once it had signed the Seasprite contract, there was no going back.

SENATOR CHRIS EVANS: Isn’t it the case that you could have settled for the Seahawk?

AIR VICE MARSHALL CONROY: It would have meant breaking the contract with Kaman.

SENATOR CHRIS EVANS: No, in the absence of a contract? If the contract hadn’t been signed, wouldn’t we have got more Seahawks?

AIR VICE MARSHALL CONROY: That was certainly an option we could have pursued, Senator. It’s a hypothetical situation I don’t know what our decision would have been.

SENATOR CHRIS EVANS: Alright.

ALDO BORGU: Once we decided we don’t need the offshore patrol vessel anymore, we should have decided we don’t need the Seasprite anymore and just gone with a far more simpler solution in terms of getting additional Seahawk helicopters. There is this point about once a project gets approved, certainly by Cabinet, let alone moving into the acquisition phase, I don’t think Defence naturally doesn’t want to walk away from it, bird in the hand worth two in the bush type scenario, but the problem is that’s irrespective of how many problems it actually comes up against. I’ve never met a project that Defence didn’t like.

Undeterred by no longer having the ship it was designed for Defence went ahead with the Seasprite and was given two options by the manufacturer, Kaman Aerospace. Kaman could either restart its production line and build totally new helicopters or it could hunt around for old Seasprites that had been retired and rebuild them. Defence chose this cheaper second option. But as Opposition Defence Spokesman Chris Evans discovered, these old airframes were not entirely up to scratch.

SENATOR CHRIS EVANS: The contractor, in order to meet your specifications, has decided that some of these frames, up to 70%, has to be replaced – is that fair?

AIR VICE MARSHALL CONROY: That’s correct, yes.

SENATOR CHRIS EVANS: So I guess I’m just having difficulty coming to terms with why one would want 30% of an air frame to start a new multi-million dollar project.

AIR VICE MARSHALL CONROY: Senator, the reason existing frames were used was because the company tendered an additional price of $32 million to build new aircraft from scratch.

SENATOR CHRIS EVANS: Are you saying to me you think the contractor thought they’d get away with more of the old frames than they have?

AIR VICE MARSHALL CONROY: Yes, they did.

SENATOR CHRIS EVANS: And so you think they’ve had to rebuild more than they envisaged when they first tendered?

AIR VICE MARSHALL CONROY: I’ve been told so, yes, Senator.

SENATOR CHRIS EVANS: Okay. What sorts of hours would these airframes already have flown? Did any of them serve in the Vietnam War, by the way? Did any of them fly in the Vietnam War?

AIR VICE MARSHALL CONROY: From their build dates, it would appear so.

In fact, according to Defence, some of the Seasprite air frames date back to 1963 and have already been rebuilt at least twice.

AIR VICE MARSHALL CONROY: The air frames themselves were stored at a US storage facility and the Commonwealth sent a team of experts, engineering experts, to pick those air frames that were in the best condition.

SENATOR CHRIS EVANS: Is one of these desert things they’ve got?

AIR VICE MARSHALL CONROY: Yes.

SENATOR CHRIS EVANS: So which one were they at?

AIR VICE MARSHALL CONROY: They were near Davis Monthan I think they call it AMARC – A-M-A-R-C. It stands for something. I can find out what the acronym stands for.

SENATOR CHRIS EVANS: That means they’re stored in the desert, does it?

AIR VICE MARSHALL CONROY: Yes.

AMARC, or the Aircraft Maintenance and Regeneration Centre, is a massive parking lot where the US keeps aircraft it no longer has any use for. There are almost 4,500 planes and helicopters stored out here in the Arizona desert. It’s hard to find a more graphic display of military might and the amount of money that the US is prepared to spend on defence. These B1-B nuclear bombers were virtually redundant from the first day they were flown. They cost around US$300 million a piece and there are 18 of them in mothballs here.

LARRY KOTZ: I don’t think I want to know how much those things are worth out there. As a taxpayer, I just don’t want to know.

Larry Kotz has an office on the edge of AMARC and makes a living buying up old military aircraft for either parts or scrap. He’s currently working over these C-141 transport jets.

LARRY KOTZ: All these airframes were timed out during the Gulf War back in ’91, so the US Government has sold them off essentially for scrap. Part of the criteria is there can be nothing left of the airframe. So your next refrigerator or your next car may have a C-141’s heart inside it.

The majority of the material out there is left over from the Cold War. In some cases they’re getting either reuse, reutilisation out of the assets they have parked out there or you’ll use foreign aid credits from other countries and a lot of the stuff will go overseas, but probably the majority of what’s out there is going to end up like these C-141s they’ll end up being scrapped out. You have a gigantic inventory, billions of dollars of aircraft that essentially has no use anymore.

Larry also salvages spare parts from Seasprite helicopters and sells them to the NZ Navy.

LARRY KOTZ: We provide the parts that Kaman doesn’t necessarily build, so we either sell them to Kaman and Kaman sells them to NZ, or in a lot of cases, just because Kaman is a big company and sometimes we can do things a little bit faster, we’ll sell directly to NZ.

This is where Larry’s parts come from. Tucked away in a corner of AMARC, are these 50 or so old Seasprites. Australia’s second-hand airframes also came from this fleet and, according to base officials, seven more have been put aside for a possible future purchase.

TIM HORN: The oil you see coming out from there, that is just a residual oil from when they ran the engines and…

Tim Horn is from the Navy Office at AMARC.

TIM HORN: Evidently Australia came in to the International Program Office in the US Navy and requested a certain amount of SH2 aircraft, so the IPO asked us to put these aircraft aside and hold them for Australia whenever that point in time comes when they want to come in here and take the aircraft.

REPORTER: The cockpit ceiling here – is that sprayed on or something?

TIM HORN: Yeah, it’s called spraylex and it’s a latex coating. It sprays on. It can be peeled right off. At the end of the Cold War, most of these aircraft were used for antisubmarine warfare. They just brought in the H-60 another aircraft they felt probably do a better job.

REPORTER: From what I understand, the Seasprite has been retired by the US, it’s not being flown anymore.

TIM HORN: They’re not flying anymore in the US Navy.

REPORTER: Is this an Australian one, or the two on the end are the Australian ones, are they?

TIM HORN: The Australian ones are…these two right here are slated for Australia, 028 and 039.

Dateline has established from US Defence Department records that when these choppers were put into storage, they were each valued at around $600,000 American. By the time the Australian project is finished, we’ll have effectively spent around $100 million getting each one of our 11 Seasprites into the air.

It may be a $1 billion project for Australia, but US records show that since the early ’90s the United States has been trying to give away its old Seasprites as part of military aid packages. Despite the fact that the Americans were offering free helicopters, in at least three cases they were knocked back – Greece in 1993, Turkey in 1994 and Thailand in 1997.

REPORTER: Did you know that the United States has been trying to give away the Seasprite to a number of countries?

SENATOR CHRIS EVANS: No, I didn’t know that. I suppose it shouldn’t surprise me. But this is just the final nail, I suppose, in the coffin of the story.

But Defence sources claim that the most serious blunder with the Seasprite are the sophisticated electronics and weapons that Australia has tried to cram into a 1950s design. Australia’s Seasprites are being fitted with advanced systems that allow the helicopter to be flown by a crew of two instead of three and to find and destroy targets without the help of a mothership.

Robert Hill, the Minister for Defence, was given a demonstration of the system in October last year.

PILOT: Full-glass cockpit, sir. This is what sets our Seasprite apart from any other Seasprites. This is the unique capability which gives us the ability to have a 2-man crew. It’s a quantum leap forward from everything we have in the ADF. It’s the future.

But getting these systems to actually work has proved to be an expensive technical nightmare. The US subcontractor pulled out in frustration and a messy legal wrangle has been the main cause of a 3-year delay in the delivery of the Seasprite.

REPORTER: Obviously a lot of technical heartache has gone into the end result of reducing the crew by one person. Do you think that was a good call?

DEREK WOOLNER, AUSTRALIAN DEFENCE STUDIES CENTRE: I think it was an extremely risky decision and I think that events have proved that Navy was overconfident. When you do the sums on the savings achieved by reducing the one crewman there, have been well and truly eaten up by the cost increase in this system, which by now has doubled over its original estimated costs.

ALDO BORGU: Every time you try to put advanced avionics and systems into an old platform, you run into problems. Every time you try to integrate new weapons onto an old platform, you are going to run into problems. Before you actually try to commit billions of dollars or hundreds of millions of dollars to these projects, have a good sense about how realistic it is, what you’re trying to actually achieve.

Dateline has spoken to several US Defence sources who were stunned by the complexity of the systems Australia planned for the Seasprite. As far as Larry Kotz is concerned, it would have been better to keep it simple.

LARRY KOTZ: That wasn’t done in Australia’s case. They bought the whole, you know, kitchen with the sink and the automatic dishwasher and the refrigerator/freezer and they put it all in and they’ve had some growing pains. Now, my understanding is they’re on track with getting that done and by the time they’re done, they’re going to have a very cool system. It’s going to be able to track eight targets at the same time and do all kinds of nifty things. Whether that was a good way to go in the very beginning or to have done it slowly, it’s kind of too late to worry about it now since it’s already a done issue. If I was going to do it, I would have made a more simpler package closer to what the New Zealanders did.

The NZ Navy bought four old Seasprites for training and parts and then a further five brand-new choppers. These new Seasprites were bought virtually off the shelf and use a missile system already tested by the US and have been in operation for the last three years. For its nine Seasprites, the NZ Navy spent around $290 million compared to the $1.1 billion Australia will spend on 11.

Australia’s first Seasprite was officially accepted at this ceremony in October last year but for training only, and without any weapons system. The Australian Navy hopes to have its Seasprite squadron operational by the middle of next year. But Robert Hill was clearly relieved just to see an Australian Seasprite flying, even if it was without weapons.

NAVY OFFICER: The super Seasprite project has attracted its fair share of negative publicity and, yes, it is 3.5 years late, whilst remaining within budget. The delay has come about by the usual challenges faced by projects introducing leading-edge technology. The Defence Material Organisation has learned several important lessons from the progress of this program, which we’ve heeded.

One of those lessons was how to write a contract. When Defence agreed to buy the Seasprite, it also paid for a 10-year maintenance contract. But it forgot to link the two and as the project lagged further and further behind, Defence faced a $30 million maintenance bill for helicopters that are yet to arrive.

REPORTER: Did you find that shocking, though, that you can be paying for a maintenance contract and not actually have the helicopter present and that there’s no linkage in time between the two?

ALDO BORGU: It’s ridiculous. I don’t think anybody can basically argue against that.

SENATOR CHRIS EVANS: It got to the stage where it was like ‘Yes, Minister’. We had paid the money up front. We were actually maintaining a maintenance facility for the helicopters, even though we didn’t have the helicopters, so it was like the ‘Yes, Minister’ episode with the hospital without patients. It just got totally farcical.

In defence circles, the Seasprite has become a by-word for expensive bungling. At almost every stage of the project, whenever a mistake could be made, it was. First, there was the decision to buy a helicopter for a ship that was never built. The decision to develop sophisticated, one-off electronic systems for our small fleet of choppers almost guaranteed that they’d run into expensive delays. And because of the way the Seasprite deal had been structured, the more Defence got into the mess, the more they decided they couldn’t afford to get out.

DEREK WOOLNER: There is a strange perversity in the real world action of public finance, which is that the more expensive a project, the less likely it is to be cancelled. The real reason is because, of course, of political and bureaucratic embarrassment at having to explain why so much money was spent on a project that was ultimately canned.

ALDO BORGU: There’s a lot of discussion at the moment in terms of, we live in a period of increased uncertainty, increased threat of terrorism, and all those sorts of issues. It leads to a lot of debate about how you need to increase defence funding. I think my point would be is, if I was the Government, I wouldn’t be giving any extra money to Defence until Defence proves that it can spend the money that it’s getting already wisely, and I don’t think we’re at that point yet where Defence can actually do that.