Home' Asia Pacific Defence Reporter : APDR Sept 2014 Contents SEA 1000
exercise before and if the answer is yes then they will
look at the last price that they have paid. To that they
add a contingency factor for price escalation based
on inflation, or if the production line has been stopped
add in the cost of restarting it.
“For this platform coming up with a price is relatively
easy because they have been built before and they
are in production – so the RAAF is paying the same
amount as the USAF. But many of the spares we are
buying are no longer in production and the USAF has
to go back to the vendors and negotiate contracts on
There is a standard 3.5% FMS charge, which is
paid progressively. This means that Australia pays a
small premium above the price paid by the parent US
service. However, the US price also includes all of the
program management expenses that are a necessary
part of any acquisition – and the US system is not
known for its efficiency.
Having corrected all of that, these still seem very
expensive for what they are – due in no small part to
converting the aircraft to the J configuration. Looking
at transport aircraft that are already in service with the
RAAF, the unit fly-away cost of a C-130J is around
US $100 million; the fly-away cost of a single C-17 is
something more than US $200 million; a KC-30 Multi-
Role Tanker Transport would probably come in under
$300 million – and with a lot of work for Australian
industry. Yes, the C27J comes with a stack of spares
– but is this deal really worth three extra KC-30s plus
two extra C-17s, with change?
Finally on the matter of aircraft certification, APDR
gloomily predicted that this will be a major problem
to be overcome now that the USAF is exiting the
program and has disposed of their C27Js. Defence
argues that certification will be conducted by
Australian airworthiness authorities based on the
normal process of assessing relevant documentation.
This methodology is exhaustive – some would say
tedious – but this is just the way it is and the aircraft
will eventually be cleared for operations. Time will tell.
As an aside, if Defence wanted to save a lot of
money they would completely overhaul certification
processes because there often seems to be a lot of
duplication. It would seem logical that if an aircraft
has been certified by the USAF that would good
enough for us, but no – our airworthiness people
need to double check everything. This is not because
Australian standards are always higher – it is just that
they are different. This process has its most ridiculous
manifestation in the certification of trucks being
acquired under LAND 121, but that is another story.
One wonders whether Australia will seek to recertify
our F-35s. While we are at it maybe we should seek
to acquire all the source code.
Regarding industry involvement – or lack of it –
prime contractor L-3 did examine the option of doing
some of the fit-out in Australia but quickly dismissed
that as being uneconomic for a relatively small number
of aircraft. This view is shared by Defence, which also
concluded early in the piece that there was no point
duplicating L-3’s existing production line in the US.
That is almost certainly a correct assessment, but it
never seems to have been tested.
Of course, if Australia had an offsets policy the
outcome might have been different – but with
companies under no pressure to place work in
Australia, the industry benefits of many large
Defence contracts are non-existent, apart from
the support of many platforms. This might mean
that no unnecessary tax dollars are being spent
on purchases – the argument of most but not all
economic rationalists – but this approach leaves
Australia extremely vulnerable in the unlikely event
of a major conflict. If a country has a large defence
manufacturing sector with production lines in
operation, it is relatively easy to increase the
speed of assembly of assets in the event that
more hardware is needed – for example in the
case of combat losses. It is a much more difficult
exercise to start building things from scratch.
As mentioned above, Australia is acquiring the
C27Js through FMS, taking advantage of the
economies of scale that can be found with US
equipment. DMO chief Warren King stated at the
recent Defence & Industry conference in Adelaide that
Australia’s use of the FMS is not increasing, but has
remained steady at about 17% of acquisitions. A large
number of these are in the aerospace sector: Super
Hornets; Growlers; C-17s; F-35s; and the Battlefield
Airlifter. This is more than $20 billion of equipment
that – with the partial exception of the F-35
no Australian involvement in the production phase.
Australia is one of the world’s largest users of FMS,
along with countries such as Egypt and the United
Arab Emirates. Most other advanced nations with
large defence budgets have correspondingly diverse
and capable industry sectors – meaning that they do
not need to import so much materiel.
The last serious conflict Australia faced was World
War II – and our naïve over dependence on Britain in
the lead up to it left the country extremely vulnerable.
But as those memories have faded, we are once
again sleepwalking down the same path. If the world
enters a time of major instability, the United States
and European countries singly and collectively have
the means to dramatically ramp up the production of
defence equipment – which they will keep for their
Australia does not have anything like those industry
expansion capabilities. We are placing all of our eggs
in the basket labeled “someone will always supply us
with what we need.”
Air National Guard C-27J.
Credit: US Air Force photo
The first point to be made is that after purchasing the aircraft and
ferrying them to Waco in Texas, significant and expensive work has to be
undertaken by L-3 to upgrade them to the “J” configuration required by
the USAF – and now Australia.
30 Asia Pacific Defence Reporter SEPT 2014
4/09/14 3:07 PM
Links Archive APDR October 2014 APDR July-August 2014 Navigation Previous Page Next Page