[Peetwo]

OneSKY trough fund under threat?? 

Just released and tabled in Parliament by the ANAO: https://www.anao.gov.au/work/performance...rangements or https://www.anao.gov.au/sites/default/fi...2020_4.pdf 

OneSKY: Contractual Arrangements
PUBLISHED
Wednesday 31 July 2019



Summary

Background

1. The December 2009 National Aviation White Paper identified expected benefits from synchronising civil and military air traffic management through the procurement of a single solution to replace the separate systems of Airservices Australia (Airservices) and the Department of Defence (Defence). The OneSKY Australia program involves the procurement of a Civil Military Air Traffic Management System (CMATS). Airservices is the lead entity for the procurement.

2. The procurement process commenced with a Request for Information issued to industry in May 2010, with 23 responses received. A Request for Tender (RFT) was issued in June 2013. Six tenders were received, four of which proceeded to detailed evaluation, during which one was set aside on the basis that it was clearly not competitive. The two highest ranked tenderers proceeded to the final evaluation stage. Decisions were then taken to set-aside, and later exclude, the second-ranked tenderer from further consideration (on the basis that it was ‘clearly non-competitive’) rather than enter into parallel negotiations with two tenderers.1

3. Negotiations with the successful tenderer (Thales Australia) commenced in September 2014. Offers were submitted by the successful tenderer in October and December 2014. On 27 February 2015, it was announced that an advanced work contracting arrangement would be entered into allowing discrete parcels of work to be performed while negotiation of the acquisition and support contracts was progressed. The earlier offers (including the response to the RFT) expired in October 2015. Another offer was submitted in June 2016, with a final offer submitted in September 2017, followed by further negotiation on scope, price and commercial terms.

4. In February 2018:

an acquisition contract was signed by Airservices and the successful tenderer (as well as a support contract). The acquisition contract had a target price of AUD$1.22 billion and a ceiling price of AUD$1.32 billion (applying exchange rates on the date the contract was signed);
Defence obtained Government approval for a $243 million increase to its project budget (including $90 million identified as relating to CMATS) to enable it to afford its share of project costs. Associated with the budget increase, Airservices and Defence were to undertake cost reduction measures, including capability offsets, to enable work to be delivered within the revised Defence budget for CMATS; and
cost sharing arrangements between Airservices and Defence were updated and formalised through the execution of an On-Supply Agreement. For a fixed price of $521 million, CMATS will be provided to Defence along with an alternative air traffic management tower solution at four sites2 and the voice control switch developed under Advanced Work Order 3. Defence’s contribution to program management costs are also included within this agreed amount. Airservices and Defence are each responsible for their own personnel and resourcing costs.

5. In February 2018 when the decision was taken by Airservices to enter into the acquisition contract, it estimated its acquisition program costs to be $1.517 billion. This figure does not include the fixed acquisition price of $521 million agreed between Airservices and Defence.

Rationale for undertaking the audit

6. OneSKY Australia was selected for audit because it is a significant program. The program has an estimated total cost of more than $4.11 billion.3 Australian airspace covers 11 per cent of the globe and OneSKY is expected to improve safety and efficiency for civil and military air traffic, while catering for the significant forecast growth in the aviation sector.

7. In August 2015, the Minister for Infrastructure and Regional Development and the Senate Rural and Regional Affairs and Transport Legislation Committee requested that the Australian National Audit Office (ANAO) examine the implementation of the OneSKY program. This is the third audit the ANAO has undertaken in response to those requests.4

Audit objective and criteria

8. The objective of the audit was to assess whether the contract for the acquisition of the Civil Military Air Traffic Management System demonstrably represents value for money.

9. To form a conclusion against the audit objective, the ANAO adopted the following high-level criteria:

Were required timeframes achieved for the replacement of existing systems?
Is there adequate assurance that the price being paid is consistent with a value for money outcome for the capability being acquired?

Conclusion

10. Important changes were made, after the successful tenderer was selected, to the timeframe for delivery, scope of work, type of contract and price. An appropriate governance framework was established to evaluate whether negotiations had resulted in contract terms that represent value for money. Shortcomings in the application of that framework mean that value for money has not been adequately demonstrated.

11. If the current contracted timeframes are achieved, there will be a more than ten year delay (from 2015 to 20265) in the replacement of the existing separate civil and military systems compared with the timeframe envisaged at the start of the procurement process. The capability baseline for the new combined system was established in advance of issuing the Request for Tender through appropriate engagement with industry. Delays with tender evaluation activities were exacerbated by even longer delays in the negotiation phase. Negotiations took so long that the offer submitted by the successful tenderer expired and the lives of the existing separate systems needed to be further extended. Negotiations also resulted in a late change in the contracting model from the one that had been presented to the market in June 2013.

12. There is inadequate assurance that the acquisition price is consistent with a value for money outcome:

For the June 2016 offer, a comprehensive evaluation report was produced that included a clear conclusion that value for money had not been achieved. This was principally due to concerns about the $1.449 billion estimated acquisition cost.
Through further negotiations, changes were made to delivery timeframes, the scope of work and the contract model, leading to a September 2017 final offer (with an estimated target price of $1.23 billion with the ceiling price to be 10 per cent higher) followed by further negotiation on scope, price and commercial terms. An evaluation report addressing each criterion, the expected total cost of ownership and whether the negotiated outcome represented value for money, was not prepared by the CMATS Review Board (CRB) and provided to the Airservices Board to inform the decision to sign the acquisition contract. Rather, the Board was provided with a report prepared by the Lead Negotiator6, who was not authorised to and did not undertake a full evaluation of the offer.7 The records of the relevant Board meeting do not identify or discuss the provision of the February 2018 Lead Negotiator’s Report8, and do not outline the value for money considerations of the Board.

13. Price risk is dealt with in the terms of the acquisition contract.

Supporting findings

Negotiation timeframes

14. The planned timeframe of replacing the systems in 2015 was not met. The current date for acceptance of the replacement system is 2026. Delays with the conduct of the tender, tender evaluation and contract negotiations contributed to this more than ten year delay. This meant that Airservices and Defence had to extend their existing, separate air traffic management systems beyond that which was originally envisaged.

15. Scope requirements for the harmonised civil military air traffic management systems were established prior to entering into negotiations. A request for information and industry briefing process had been undertaken, and the resulting feedback was used to inform the development of the tender requirements. The requirements were released with the June 2013 Request for Tender and updated in October 2013, prior to tenders being received.

16. In November 2016, more than two years after negotiations began, it was decided to change the acquisition contract from the firm fixed price model that had been part of the June 2013 request for tender. A change to a target cost incentive contract model had first been suggested by the successful tenderer in December 2015. Airservices’ decision to change the contracting model was made after various price submissions under the fixed price contract model received during the negotiation process had been identified as not representing value for money and/or as not likely to be affordable. The ceiling price under the target cost incentive model that was then adopted is more than double the price submitted by the successful tenderer in its response to the 2013 request for tender.

17. The delays in negotiating and finalising an acquisition contract, together with the scheduled delay in replacing the existing separate civil and military systems, have required the lives of the existing systems to be extended beyond that which was originally envisaged at an estimated cost of at least $212 million. Delays have also required additional resourcing from both entities for contract negotiations and project management. The costs relating to the additional resources for negotiations and project management were not quantified.

Negotiation outcome

18. Traceability was not maintained between offered requirements and the original Request for Tender. Traceability focused on changes over time in the various offers submitted by the preferred tenderer against updated versions of the requirements. The number of high priority requirements at the end of negotiations was 3.6 per cent greater than at the beginning of negotiations, with 6.7 per cent of the high priority requirements included in the Request for Tender modified in the signed acquisition contract.

19. There is a clear scope specified for the signed acquisition contract. Changes to the contract scope were envisaged before the acquisition contract was signed. To date, two change proposals have been actioned (in August 2018 and December 2018).

20. Price risk is dealt with in the terms of the acquisition contract. Of note is that the contract:

requires the successful tenderer to use its ‘reasonable endeavours’ to ensure that the outturn price is, at final acceptance, lower than a target price of $1.22 billion;
incorporates a painshare/gainshare framework intended to incentivise cost containment. This includes providing that Airservices’ exposure to actual costs being greater than the target price is limited to a 50 per cent share of the costs above the target price up to the ceiling price, capping Airservices’ exposure at $1.32 billion; and
allows the contract scope to be amended, and provides a mechanism for the target and ceiling prices to be adjusted for scope changes.

21. There is inadequate assurance that the contracted acquisition price is consistent with a value for money outcome for the capability being acquired. Assessment governance arrangements for the June 2016 offer (which was rejected for not providing value for money) were appropriate. There were shortcomings in the application of the governance arrangements for the final (accepted) September 2017 offer. Of significance was that the CMATS Review Board did not prepare a comprehensive assessment report that addressed each of the evaluation criteria, quantified the expected total cost of ownership and analysed whether value for money had been achieved.

Hmm...quite damning really but I guess much like most damning Parliamentary inquiry, Government review reports (eg Forsyth review) into the aviation safety sector; this ANAO wet lettuce report at the first chance will be quietly filed and shelf-wared for all eternity...




MTF...P2