Yesterday's ANAO report Management of the Civil Maritime Surveillance Services Contract comments
1. Civil maritime surveillance has been identified by the Department of Home Affairs (Home Affairs) as important to deterring, preventing, detecting and responding to civil maritime threats, including illegal maritime arrivals as part of Operation Sovereign Borders. Following a tender process, on 3 March 2006 a contract commenced between the Australian Government1 and Surveillance Australia Pty Ltd (Surveillance Australia) for the provision of a ‘Detect-Classify-Identify-Report’ surveillance service to inform ‘maritime zone awareness’.
2. The contract requires the provision of 10 fixed-wing Dash–8 aircraft (six Dash–8 202 and four Dash–8 315), modified with specialised surveillance information management system (SIM) equipment which links aerial surveillance assets to the Australian Border Operations Centre. The contractor is required to provide 15,000 flying hours per annum. Home Affairs is to make monthly payments comprising a service charge (covering one twelfth of the annual fixed charge, an hourly charge and any monthly performance deductions) and reimbursable expenses (including landing and navigation charges and accommodation and meal allowances).
3. At the time it was entered into, the contract was to expire on 31 December 20192 and had a reported value of $1,187 million.3 Since the contract was executed, there have been 40 contract change proposals (CCPs) approved and Home Affairs has identified that these have significantly reshaped the contract.
Rationale for undertaking the audit
4. The contract with Surveillance Australia is the larger of two4 that are in place under ‘Project Sentinel’ for aerial surveillance to prevent people smuggling and manage other maritime threats across the North West approaches of Australia. This ANAO performance audit commenced in the second last year of the extended 14 year contract term to: assess and provide transparency over the services that have been provided to date; provide independent assurance to the Parliament as to whether Home Affairs is managing the provision of contracted services effectively given their importance to Project Sentinel; and examine whether there has been appropriate planning for the end of the contract on 31 December 2021.
5. This audit was undertaken in a similar timeframe to a separate audit of the Management of the Search and Rescue Contract by the Australian Maritime Safety Authority (AMSA), which provided an opportunity to compare and contrast two aircraft service contracts (and their management) with contractors that are subsidiaries of the same parent company, Cobham Ltd (Cobham). The report of the audit of AMSA was tabled on 18 January 2021 (Auditor-General Report No. 27 2020–21) and concluded that AMSA’s management of the search and rescue contract has been fully effective.
Audit objective and criteria
6. The audit objective was to assess whether the Department of Home Affairs is effectively managing the Civil Maritime Surveillance Services contract.
7. To form a conclusion against the objective, the following high level criteria were adopted: Has the contract delivered against the planned cost, scope and delivery timeframe? Have the specified surveillance assets been provided? Have the specified surveillance services been provided?
8. At the time the audit commenced, there was a fourth criterion (‘Has there been appropriate planning for the end of contract?’) and the audit scope was to include the transitional arrangements in place for the period post the expiry of the contract on 31 December 2021. In December 2020, twelve months6 out from the expiry of the contract and with no further extension options available, the Secretary of Home Affairs did not agree to a recommendation from his department that he agree to issue a Request for Quote to the incumbent provider to continue providing services.
9. As a result of the path forward not having been resolved by Home Affairs by December 2020, the Auditor-General decided to remove the fourth criterion from the scope of the audit. As at August 2021 with four months remaining on the current contract, there are no arrangements in place for the next contract.
Conclusion
10. The department’s management of the Civil Maritime Surveillance Services contract has not been effective and, as a result, while surveillance services have been provided, the quantum and range of those services has fallen short of the contractual requirements.
11. The contract has not been managed to secure delivery in line with the planned cost, scope and delivery timeframe. The contract has been varied on 40 occasions as of March 2021 with the effect of significantly changing the scope of the services to be delivered and increasing the term and value of the contract. The department has recognised that variations to the contract have significantly reshaped it and those variations have increased the cost by more than 29 per cent. There has been a high turnover of officers responsible for the management of the contract and the department has not ensured that each of its contract managers had appropriate training or experience.
12. There were shortfalls and delays in the provision of the contracted surveillance assets. At the commencement of services under the contract, delays in the modification program meant that four fully compliant aircraft were not available and nine of the 26 required aircrews were not provided. There was also a delay in the provision of the SIM required for the acceptance of the full surveillance system. The department did not effectively apply the contractual framework to manage the shortfalls and delays.
13. Home Affairs has not received the required quantum of surveillance services and the aircrew requirements have not been met. Under the contracted performance framework, Home Affairs has calculated that Overall Contract Performance (OCP) has met the specified 90 per cent threshold for 92 per cent of the period from 1 January 2008 to 31 December 2020. In contrast to this high level of calculated performance: the contracted Rate of Effort (RoE) in terms of hours flown has not been achieved in any year and has fallen short by an average of seven per cent each year; of the total missions planned, 25 per cent have only been partially completed and a further 11 per cent have been cancelled or aborted; and aircrew requirements have never been met with the number of aircrew on average each month 33 per cent below that contracted (where data is available for analysis).
Supporting findings
Contract delivery against planned cost, scope and timeframe
14. With an authorised cost of $1,187.3 million or $98.9 million per annum, the department contracted in March 2006 for the delivery of civil maritime surveillance services to December 2019, with an option to extend for a further two years. The contract requires that Surveillance Australia provide 10 Dash–8 aircraft, to be operated from bases at Darwin, Cairns, Broome and Horn Island from the scheduled handover date of 1 January 2008; the delivery of the SIM, and the provision of 26 aircrew to meet the annual planned rate of 13,613 flying hours.
15. The contract has been subject to 40 variations, with a significant variation to further extend the contract approved by the department in March 2021. The department has recognised that the variations have significantly reshaped the contract. The variations have also increased its duration by two years to date and have increased the authorised cost by more than 29 per cent.
16. Contract managers have not been provided with appropriate training and have not had appropriate experience. Contract managers have also not received appropriate support due to there being no approved contract management plan in place until August 2018, more than 12 years after the contract commenced. There has been significant turnover in contract management staff, in addition to contract management responsibilities changing a number of times, exacerbated by the poor state of records from the time the contract was entered into. Action has recently been taken by the department to improve the resourcing of the management of the contract.
And on and on it goes.
