PETER LA FRANCHI / CANBERRA
Australia's Defence Material Organisation (DMO) is rushing to sign a deal this week to buy 22 Eurocopter Tiger helicopters in order to avoid a possible deferral as funds for the project are being eyed for re-allocation to meet operational costs emerging out of the war against terrorism.
Unless a contract is signed by 21 December, the project is likely to be swept up in a study of all Australian defence projects over the next three months as part of a new strategic review commissioned by the Australian government.
The DMO is hoping to finalise contract negotiations with Eurocopter Pacific this week. However, a final deal would still require approval from the new Australian Defence Minister, Robert Hill, to enable contract signature before the end of the year.
Sources in the DMO say that the Tiger negotiations have been fast tracked over the past two weeks, resulting in less than rigorous consideration of key contract issues. The DMO had planned on signing a contract by late November.
The sources say the delays have been caused by several factors, including national elections in Australia in early November.
According to one DMO source, issues such as liquidated damages and intellectual property for the Tiger contract were "negotiated in two hours. While it took days to do the same for the Boeing Wedgetail airborne early warning and control project."
The review of all proposed forward capital investment comes as Hill issued warnings that defence expenditure is being pressured by Australia's involvement in the war against terrorism.
Last week the defence minister warned that a clear cash shortfall was emerging in the financial year 2001-2002 defence budget which could result in project cutbacks unless additional funding was provided. This is despite the Australian government deciding last year to increase defence expenditure by A$23 billion ($12 billion) during the period to 2011.
The funding issue reaches a critical timeframe in mid February when the Australian Cabinet begins to consider the 2002-2003 national budget. The Australian Senate is also due to hold mid-year budget revision hearings late that same month.
Hill is seeking to have the new strategic review approved by Cabinet ahead of the release of the national budget in May.
Any delays in finalising a Tiger contract beyond this month would see the project having to fight for dollars against moves to give priority to what Australian government sources are terming "force multipliers" in the strategic review.
Australia has twice delayed the Tiger project because of reviews of defence expenditure priorities in the lead-up to the release of the last defence White Paper in December 2000.
Source: Flight International
