3.1
The Department of Defence (Defence) seeks approval from the Committee to proceed with the AIR555 Phase 1 Airborne Intelligence Surveillance Reconnaissance Electronic Warfare Capability Facilities Works Project. The project proposes to deliver works at the following four locations to support the incoming MC-55A Peregrine Airborne Intelligence Surveillance Reconnaissance Electronic Warfare capability:
RAAF Base Edinburgh (South Australia)
RAAF Base Darwin (Northern Territory)
RAAF Base Townsville (Queensland)
The Territory of Cocos (Keeling) Islands
3.2
The estimated cost of the project is $293.65 million (excluding GST).
3.3
The project was referred to the Committee on 16 June 2020.
Conduct of the inquiry
3.4
Following referral, the inquiry was publicised on the Committee’s website and via media release.
3.5
The Committee received one submission, one supplementary submission and one confidential submission. A list of submissions can be found at Appendix A.
3.6
On 7 August 2020, the Committee conducted a project briefing, public and in-camera hearing via teleconference. A transcript of the public hearing is available on the Committee’s website.
Need for the works
3.7
The purpose of the AIR555 Phase 1 Airborne Intelligence Surveillance Reconnaissance Electronic Warfare Capability Facilities Works Project is to provide purpose built facilities and infrastructure to support the introduction into service of the MC-55A Peregrine Airborne Intelligence Surveillance Reconnaissance Electronic Warfare capability (Peregrine).
3.8
In their submission Defence stated that the key drivers of the project were:
the number and timing of the delivery of Peregrine capability including aircraft and ground systems;
the need to deliver key initial facilities to enable Defence to complete ICT integration activities prior to the first Peregrine aircraft arriving; and
the need to support the Peregrine achieving Full Operating Capability once all aircraft have been delivered and all associated operating personnel are deployed in their roles.
3.9
Defence told the Committee that ‘the Peregrine project was approved by government in 2017’, aligning with the government's Defence White Paper 2016 and the 2020 Defence Strategic Update ‘to provide enhanced intelligence, surveillance, reconnaissance and electronic warfare capability that are integrated with the latest generation of weapon systems.’
3.10
At the public hearing Defence explained the reasoning behind the choice of locations for the facilities:
The operational concept for Peregrine includes a main operating base at RAAF Base Edinburgh and three forward operating bases located at RAAF bases Townsville and Darwin and the Cocos (Keeling) Islands territory. The main operating base is where the operational planning, command, data handling, administration, training and sustainment is planned to occur. These facilities have been master planned to integrate into the existing intelligence surveillance and reconnaissance precinct at RAAF Base Edinburgh. The forward operating bases will enable Peregrine to project into Australia's area of interest and perform its operational function. These facilities will include a capacity for data handling, limited operational planning, storage of self-protection flares for operational use and minor aircraft maintenance.
3.11
Defence told the Committee that with regards to the project timing, the ‘actual facilities need to be established in time to ensure that, through the fit-outs, all of the facilities—and that includes maintenance facilities, computer infrastructure, all of the administration and intelligence areas et cetera—are ready to go so that when the aircraft arrives we can conduct tests and evaluation of the whole system.’
3.12
In response to the Committee’s questions regarding the impact of a delay on the project , Defence stated that ’there are quite a lot of interconnected pieces, so the delay to the facilities will directly impact our ability to conduct [system] tests and hence delay the utility of our aircraft when they arrive.’
3.13
Defence told the Committee that it was expecting to commence construction in September 2020, ‘pending expediency, with an expected completion date at the end of December 2024.’
Options considered
3.14
Defence stated in their submission that it considered the following three options for the project:
Option 2: modify existing facilities and infrastructure; and
Option 3: new facilities.
3.15
Defence stated that Option 1 (do nothing) is not recommended as ‘the state of the current facilities and infrastructure would not enable an initial level of capability.’
3.16
In considering Option 2 (modify existing facilities and infrastructure) Defence ‘identified there were minimal to no available existing facilities suitable for permanent reuse to support the incoming capabilities. The level of building security for the ground systems would require significant and costly upgrade to any existing facilities’. As such, Defence did not recommend this option.
3.17
Option 3 (new facilities) was recommended by Defence as the preferred option as it ‘represents value for money to the Commonwealth over the life of the capability, allows Peregrine to deliver maximum capability for Defence and supports an integrated approach to facilities design and delivery.’
3.18
Defence stated that Option 3 ‘includes new purpose designed facilities and infrastructure. Purpose built facilities and infrastructure would enable maximum development and operation of the capability.’ Defence noted that this ‘would also assist in enabling an ongoing integrated program approach to efficiently support any future capability needs of the Intelligence Surveillance Reconnaissance Precinct at RAAF Base Edinburgh.’
Scope of the works
3.19
The proposed scope of the AIR555 Phase 1 Project consists of four key project elements:
Project element 1 – RAAF Base Edinburgh (South Australia):
squadron headquarters facility
logistics and warehousing
initial operating facility
ground support equipment shelter
shared car parking area, general footpaths and landscaping
local building services plant
site wide engineering services (reticulated services including high and low voltage power distribution, communications cabling, water and sewer connections)
an explosive ordnance storehouse to offset storage capacity losses arising from siting considerations.
3.20
Defence stated in their submission that the current site at RAAF Base Townsville ‘lacks suitable facilities to support Peregrine’, thus a ‘small scale facility to support Peregrine operations is required’, which will integrate with existing facilities and infrastructure.
Project element 2 – RAAF Base Townsville (Queensland):
car parking area, pavement works and landscaping
local building services plant
site wide engineering services (reticulated services including high and low voltage power distribution, ICT, water and sewer connections).
3.21
Defence noted that with regards to Project element 3, ‘the AIR7000 Phase 2B Facilities Project, approved by Parliament in 2015, is delivering an air operations facility, a hangar and infrastructure at RAAF Base Darwin (Forward Operating Base).’
3.22
Defence stated that the AIR555 Phase 1 project ‘will share the air operations facility and minor explosive ordnance storage facilities being delivered under AIR7000 Phase 2B, and proposes to purchase and install a Local Emergency Generator System to improve the reliability of power at the site to meet the Peregrine's requirements.’
3.23
Defence told the Committee that as the Cocos (Keeling) Islands site currently lacks suitable requirements, ‘the project proposes to construct a small-scale facility to support air operations’.
Project element 4 – Cocos (Keeling) Islands:
explosive ordnance locker
general pavement and landscaping
local building services plant
site wide engineering services (reticulated services including high and low voltage power distribution, ICT, water and sewer connections)
3.24
Defence noted there were three additional facilities and infrastructure elements located at RAAF Base Edinburgh that ‘have been identified and approved for delivery but are unable to be funded within the project's $293.65 million budget.’
3.25
Defence stated that should funds become available within the budget, ‘for example through competitive tendering or retired risk provisions, savings may be able to be allocated to these unfunded elements and enable them to be delivered.’ The unfunded elements consist of the following:
Peregrine Flight Simulator Building
Peregrine Aircraft Shelter
3.26
When asked by the Committee to what degree the project would be compromised if the additional elements were not funded, Defence stated that:
Whilst we would only put them in the statement of evidence if they were important, they're not critical to the running of the capability. In order to be able to live within our means and deliver within the budget we have, we currently have them dropped below the line by way of priority.
3.27
Defence told the Committee that:
The general philosophy for the design of the proposed works is based on: providing effective, functional, low maintenance, energy efficient design options compatible with existing aesthetics…gaining efficiencies by planning for shared uses where possible…considering the functional relationships of the proposed facilities to existing facilities …and providing flexible services and infrastructure that can accommodate future growth and capability evolution.
3.28
When asked about the plans for the earthworks proposed for the Cocos (Keeling) Island site, Defence told the Committee that the scale of the earthworks would be ‘no larger than 40 metres by about 15 metres’.
3.29
With regards to the capacity on the island to conduct the earth works, Defence stated:
The capacity on the island and the equipment that already exists on the island after an investigation in January is more than sufficient to be able to do any excavation. The logistics of getting the concrete out there for them to work with is sort of our side of it. But the skills and the labour that the shire councils and the Indian Ocean government training authority have shown to us—we believe that there is sufficient capacity on the island to easily be able to do the earthworks and a significant component of the project… The scale of the facilities is not large, and we are seeking to design it in the simplest manner for a rapid in-and-out build.
Community consultation
3.30
In its submission to the Committee, Defence stated it had engaged with a variety of internal and external stakeholders across the four locations, during the project development phase.
3.31
Key areas of concern raised with Defence during the community consultation sessions included ‘the capacity of community infrastructure to support the facilities at Edinburgh (South Australia) and the opportunities for local businesses on Cocos (Keeling) Islands.’
3.32
Defence told the Committee that there would be a ‘small increase of around 15 percent against offset’ of personnel at each of the bases, which would be a ‘very minimal increase in numbers’.
3.33
When questioned by the Committee whether the new program would result in a change in noise exposure forecast grids or patterns at any of the airports or near the bases, Defence responded that:
The short answer is no. There is no significant change to either noise or the patterns.
The aircraft will use the same patterns that currently exist at Edinburgh. The aircraft noise itself is less than aircraft that are being replaced at Edinburgh, so overall the forecast does not exceed the current footprint of noise around the area.
3.34
At the public hearing Defence told the Committee that the project would result in an increase in workforce numbers:
At RAAF Base Edinburgh, where the major work is going on, we expect a peak workforce of around 250 per day, and that's spread over the life of the project to be around 70 subcontracts let, so that's 70 opportunities for small builders to be involved, and larger ones potentially as well. The numbers at the other sites will be a bit less than the other locations, probably around the 100 to 150 mark. At RAAF Base Townsville we're probably looking at around about 200 site inductions over the life of the project, but probably on any given day around about 100 onsite. And maybe similar for Cocos Island as well, about 100 site inductions over the course of the project. So that's workforce opportunities.
3.35
In response to the Committee’s question about the impact of COVID-19 on the project rollout, Defence stated that ‘with the current restrictions that are in place, we see that the schedule that we have now is an achievable one.’
3.36
Defence further stated that while it already has ‘an impetus to go with local content’, the COVID-19 pandemic had created an even greater reason for Defence to procure content locally, as there is ’less chance …that there would be COVID impacts.’
Cost of the works
3.37
The proposed AIR555 Phase 1 Project has an estimated cost of $293.65 million, exclusive of GST.
3.38
Defence noted in their public submission that an increase in ‘annual future sustainment costs’ of $8.45 million is expected as a result of the proposed works. Defence explained that this is ‘due to the additional maintenance, cleaning and utilities expenses that will be required to operate the additional facilities and infrastructure.’
3.39
Defence provided further details on project costings in its confidential submission and during an in-camera hearing.
3.40
The Committee is satisfied that the costings for the project provided to it have been adequately assessed by the proponent entity.
Revenue
3.41
There will be no direct revenue generated by the project.
Committee comment
3.42
The Committee acknowledges the important role that large scale Defence projects such as the works proposed as part of the AIR555 Phase 1 Project play in creating job opportunities and advancing local industry across Australia. The Committee was pleased to hear that, where feasible, the required works would be completed by local companies and contractors.
3.43
The Committee was cognisant of the tight project timeframe when conducting this inquiry, and recognises this is due to the interdependent nature of the project on the delivery of the Peregrine capability.
3.44
The Committee did not identify any issues of concern with the proposal and is satisfied that the project has merit in terms of need, scope and cost.
3.45
Having regard to its role and responsibilities contained in the Public Works Committee Act 1969, the Committee is of the view that this project signifies value for money for the Commonwealth and constitutes a project which is fit for purpose, having regard to the established need.
3.46
The Committee recommends that the House of Representatives resolve, pursuant to Section 18(7) of the Public Works Committee Act 1969, that it is expedient to carry out the following proposed works: AIR555 Phase 1 Airborne Intelligence Surveillance Reconnaissance Electronic Warfare Capability Facilities Works Project.
3.47
Proponent entities must notify the Committee of any changes to the project scope, time, cost, function or design. The Committee also requires that a post-implementation report be provided within three months of project completion. A report template can be found on the Committee’s website.
The Hon Dr John McVeigh MP Mr Tony Zappia MP
Chair Acting Chair, AIR555 Phase1