Budget Review 2012–13 Index

Nicole Brangwin and Marty Harris

In the lead-up to the 2012–13 Budget, the Government flagged the reprioritisation of projects slated in the 2009 Defence Capability Plan (2009 DCP). Of the original 180 projects listed in the 2009 DCP, ten have been cancelled or stopped.[1] The majority of these ten projects ‘either had their scope reduced, were subsumed by other related projects or replaced by newer technologies’.[2] On Budget day, a further 19 projects were earmarked for cancellation (two projects), reduced scope and provision (three projects) or delays of one (twelve projects) or two (two projects) years.[3]

Due to program cuts and delays, a total of around $1.7 billion of savings has been achieved in the DCP program to 2015–16.[4] According to the Budget, six DCP projects are being developed for first-pass approval consideration in 2012–13 and 19 for second-pass approval.[5] This is a considerable decrease given last year’s Budget listed 54 ‘significant’ projects for first-pass approval and 36 for second-pass approval consideration in 2011–12.[6] Ultimately, 49 projects received Government approval in 2011.[7]

Given the degree of program cuts and delays, the Government has only allocated $275.8 million in 2012–13 for planned Defence Capability approvals.[8] This is in stark contrast to last year’s Budget estimate for 2012–13 of $1.3 billion.[9] Therefore, the Government plans to spend around $1 billion less on project approvals in the forthcoming financial year than originally estimated. Funding levels are expected to increase from 2014–15 with the total figure for the Forward Estimates reaching $6.7 billion, compared to last year’s budget Forward Estimates total of $8.8 billion.[10]

Some of the key DCP initiatives are detailed below.

The cancellation of LAND 17 Phase 1C—self-propelled artillery

The largest procurement project to be cancelled in the 2012–13 Budget is the acquisition of the Army’s self-propelled artillery under Project LAND 17. The Government’s decision not to proceed with the purchase of two batteries of 155mm self-propelled Howitzers (Phase 1C) is expected to save $225 million.[11] 

According to the Minister for Defence, this project had experienced ‘some difficulties’, and the Australian Defence Magazine has editorialised that the two companies competing to supply the self-propelled guns have ‘been put out of their misery’ with the cancellation decision.[12]  Conversely, the Shadow Minister for Defence, David Johnston, has criticised the Government’s decision, labelling it ‘short sighted’ and adding that ‘there is no doubt that cancelling this project was 100 per cent political and nothing to do with what capabilities our troops need’.[13]

In its place, a new phase to LAND 17—Phase 1C.1—was included in the 2012–13 Budget for the purchase of additional towed artillery and is expected to be considered for second-pass approval in 2012–13.[14]

Early retirement for the C-130H Hercules

The early withdrawal of the Royal Australian Air Force’s (RAAF) fleet of 12 C-130H Hercules medium transport aircraft is expected to save the Government $251 million in maintenance and operating costs over the Forward Estimates.[15]  The C-130H entered into service with the RAAF in 1978 and conducted an estimated 3200 flying hours in 2011–12. The aircraft was slated for retirement in 2013.  According to the Government, the tasks previously conducted by the C-130H Hercules ‘will [now] be redistributed across the remaining Air Force air mobility fleet. There is no expectation that this will require additional hours for those platforms’.[16]

The National Secretary of the Australian Workers Union, Paul Howes, criticised the Government’s decision to retire the C-130H early, claiming that the decision put at risk the positions of the 250 Qantas Defence Services employees based at RAAF Base Richmond.[17]

Caribou replacement

Two days after the release of the Budget, the Government announced its decision at the RAAF’s Air Power Conference to purchase 10 Alenia C-27J Spartan Battlefield Airlift aircraft at a cost of $1.4 billion under a Foreign Military Sales (FMS) arrangement with the US.[18]  This represents second-pass approval for acquisition project AIR 8000 Phase 2, a project which some commentators thought might be delayed or cancelled.[19]

In October 2011, the Government confirmed that the C-27J was considered a primary option to replace the Caribou. However, the US production line for the aircraft was due to be shut down so the Government authorised Defence to approach the US, via a ‘Letter of Request, seeking price and availability information on the C-27J.’ This approach was non-binding and other options, such as the Airbus Military C-295 aircraft, were still being considered.[20]

In early February 2012, the US Air Force cancelled the C-27J program citing changed strategic and budgetary priorities. In response, the Italian-based Alenia warned the US Government not to on-sell the aircraft already sold to the US otherwise those aircraft would not be supported. Alenia CEO, Giuseppi Giordo, did however state that if the US ‘want to sell additional airplanes as FMS’, they would support them.[21]

On 7 May 2012, the US House Armed Services Committee ‘released legislative language’ that would prevent the cessation of the C-27J Spartan Airlift program. Given the restrictions and lengthy parliamentary processes in the US, the US Air Force is unlikely to ‘be allowed to begin retiring C-27s until midway through FY-14’.[22] Whether these issues will have any impact on the Australian program remains to be seen.

Unlike its predecessor, the DHC-4 Caribou which was based out of Townsville and retired from service in 2009, the C-27J will be based at RAAF Base Richmond.[23]  

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