AUSTRALIAN DEFENCE ACQUISITION CHIEF REASSURES

C O N F I D E N T I A L CANBERRA 000247 SIPDIS SIPDIS DEPARTMENT FOR EAP, PM AND T SECDEF ALSO FOR OSD PACOM ALSO FOR POLAD E.O. 12958: DECL: 03/16/2018 TAGS: MARR PREL MCAP AS SUBJECT: AUSTRALIAN DEFENCE ACQUISITION CHIEF REASSURES AMBASSADOR ON US DEFENSE CONTRACTS Classified By: Ambassador Robert D. McCallum, Jr. for reasons 1.4(b) AN D 1.4(d) SUMMARY -------------- ¶1. (C/NOFORN) In a meeting with Ambassador McCallum and other Embassy staff on March 17, Parliamentary Secretary for Defence Procurement, Mr. Greg Combet, indicated that the GOA will probably not abandon any U.S. defense contracts, other than the recently terminated contract with Kaman Corporation for the SeaSprite helicopters. Mr. Combet listed his top priorities as a review of current acquisition projects, the sale of the Australian Submarine Corporation (ASC),efficient management of the Air Warfare Destroyer (AWD) project, and continued reformation of the Defence Matierel Organization's (DMO) internal processes. He expressed gratitude for the USG offer of assistance as he and his staff continue to research and advise the Minister of Defence on acquisitions. Mr. Combet also expressed an interest in U.S. procurement processes related to cost-plus pricing. End Summary. ¶2. (SBU) Participants: UNITED STATES Ambassador Robert D. McCallum, Jr. Deputy Chief of Mission Daniel A. Clune Defense Attache Colonel A.J. Britschgi ODC Chief Colonel Eric Lorraine Political Officer Carol Hanlon (Notetaker) AUSTRALIA The Honorable Mr. Greg Combet, Parliamentary Secretary for Defence Procurement Chief of Staff Rod Hilton ¶3. (C/NOFORN) Mr. Combet identified his top priority as a review of those defense acquisition projects which are over budget or behind schedule. He cited the decision to cancel the SeaSprite helicopter contract as the first action from that review and indicated that this was probably the only contract that would be abandoned and that future efforts will be focused on keeping projects on schedule. His office is currently reviewing the schedule for the Boeing Wedgetail project to ensure the airborne early warning and control capability is available to the Australian Defence Force (ADF) when needed. He indicated that the first part of the Air Capability Review had been completed on the retirement of the F-111's. He said that announcements would be made soon regarding the purchase of the F-18 Super Hornets and that the announcement would contain no surprises. (Note: The GOA confirmed the F-18 Super Hornet purchase in an announcement made hours after the meeting.) The second part of the Air Capability Review is due at the end of April and will focus on the purchase of a fifth-generation fighter, for which the Joint Strike Fighter (JSF) was the previous government's choice and will include consideration of the F-22. Key issues with this purchase center around the cost and delivery schedule of the JSF. Mr. Combet shared that the GAO audit results showing delivery delays for the JSF program gave the GOA "palpitations" and noted that the aircraft's capability is critical for the ADF. He remains concerned about the wide range of assessments on the project's status and is seeking the best possible information on the timing and cost. ¶4. (C/NOFORN) Mr. Combet advised that, before finalizing the privatization of the Australian Submarine Corporation (ASC), he is reviewing the transaction for strategic outcomes vice commercial outcomes. The GOA wants to ensure that access to sensitive technologies developed by the U.S. Navy can continue under a privatized ASC and will structure the privatization to achieve that goal. Mr. Combet noted U.S. Qprivatization to achieve that goal. Mr. Combet noted U.S. Navy officers had met with Defence Minister Fitzgibbon to discuss the time required to develop new capabilities. He welcomed continued input and advice from USG sources. ¶5. (C/NOFORN) Another of Mr. Combet's priorities is the Air Warfare Destroyer (AWD). He advised that the project office is now up and running and that the alliance members seem to be working collegially together. Mr. Combet was again receptive to input from the US Navy and noted that he may need some help in managing Lockheed and Raytheon, who appear to have some competitive sensitivities. ¶6. (C/NOFORN) Mr. Combet inquired about opportunities to better understand U.S. procurement arrangements, especially the cost-plus pricing structure of some U.S. defense contracts. He expressed an aversion to having the GOA underwrite technology development, but is open to learning from the U.S. how to achieve greater success in defense contracting. Mr. Combet also noted that DMO is responsible for the Australian Industry Capability Program and has developed contract conditions that attempt to integrate Australian industry into prime contractor global supply chains. He reassured the Ambassador that while Australia currently has a labor shortage, the country has the engineering capacity necessary to handle additional work. Mr. Combet also indicated that he will work with DMO to instill more commercial discipline into the organization's processes. MCCALLUM