[Peetwo]

Is Sir Gallacher the OneSKY nutcracker?

Not that I'm much on the boring - - intricacies of government infrastructure tenders but having reviewed the Hansard I believe the following segment from the ASA MKII performance inquiry hearing was critical to the above MSM reports...

Senator GALLACHER: Chair, can I just put two questions on those?

CHAIR: Sure.

Senator GALLACHER: So you've accepted recommendations 1 to 6. One of those recommendations is that you improve your value for money.

Mr Rothwell : Yes.

Senator GALLACHER: How do you do that retrospectively? You've gone through a process, you've ended up with a tenderer and you've ended up with a figure. You've accepted these recommendations, and I accept that in the future you may do things very much better. How do you apply value for money retrospectively? I'm happy for you to take that on notice.

Mr Rothwell : I'm happy to try and deal with that question. I think the very reason we haven't signed the contract is that we are striving to ensure that we do achieve value for money and—

Senator GALLACHER: Okay, but, see, this is a two-part question. How do you achieve value for money retrospectively? And what about your major silent partner in this exercise? Is anybody on the board prepared to put on the record what Defence's position is in respect of value for money?

Mr Marchant : There is no retrospective approach to value for money, as you have suggested. What we have moved to is an open-book reassessment of all the cost bases and all the return framework: an open book. We have learned the issues from the US and elsewhere and have gone back and said that we want to make sure that the specifications, design and criteria that are in the process actually line up with Defence's and our absolute expectations. That was one of the failings in the US; it blew out by billions of dollars because what was promised and what they got weren't in alignment. So we've stopped going to contract until we get the definition and design absolutely right, and it is absolutely in agreement with Defence and ourselves.

Secondly, we've moved to a full open-book process for every cost and for every activity. We are going through and assessing those against that design and criteria so we don't have to go back retrospectively. The reason for the comment about business case and the rest is that until that's concluded and the risks and contingencies all through those things are put out in the open and actually mitigated down, that's when we'll get to a final cost, a final risk and a final mitigation. The reason we are doing that now is not to get into the problems that our overseas colleagues have had by finding these things blow out later and that we have to come back and explain billions of dollars of blowout. So we are not retrospectively refitting.

CHAIR: You are in a last-man-standing environment here, aren't you?

Mr Marchant : No, we're far from it. We are far from that, Senator.

CHAIR: Well, you might help me and tell me who the other final competitors are to win this? Because evidence given to this committee before is that there was a shortlist of three.

Mr Marchant : Yes—

CHAIR: Two are now out and you've got one man left standing. Right?

Mr Marchant : In this process—

CHAIR: You are in a process, which you have just described—an open-book process, and I understand that.

Mr Marchant : Yes.

CHAIR: But there is only one person going to deliver this project—only one company.
Mr Marchant : Senator, there are three premises to that. We've all been in that situation, because once you get down to a winning provider, you—

CHAIR: Not when you get a bit of neck and neck about it, you don't get to that situation but—

Mr Marchant : Neck and neck requires like for like—

CHAIR: Yes, noted.

Mr Marchant : and the reality is that the evaluation is very clear on the technical and sound framework. But let me deal with your issue, because that is a critical issue of negotiating this framework.

There are a number of elements to actually finishing this. The open-book process provides for transparent and asymmetrical information in the actual management of the risks and the dimensions of it, including some changes that Defence want et cetera. It is better to do that through this process than to get raped and pillaged later. There are only a few suppliers worldwide for the air navigation market. The Australian market is one of the first to go to the next block of what are KO standards. We are seeking the next block of what the world market is requiring.

Whoever wins this actually gets into a situation where they are seen worldwide as being able to provide that next block, which Europe and the rest will have to move to on their next upgrades. So there is a lot of pressure on this supplier not only to win this but to deliver it on quality, price and risk outcomes, because nearly every ANSP in the world is watching.

Senator STERLE: So we are down to one last one standing, and there's one coming, but we're going to get, hopefully, open, accountable costings—the whole lot, with value for dollars.

Mr Marchant : Correct.

Senator STERLE: If it does not line up, they can walk away, sharpen the pencil, come back again and have another crack?

Mr Marchant : Yes. There are three elements to it. This is a world market where, because of our history, we happen to be in the lead for that framework, so there's a lot of pressure to provide the right outcome, because it opens up a market for them.
Secondly, the Australian market has a few suppliers and they're bidding for other Australian frameworks. Whatever they do here will be observed by other Australian agencies.

Lastly, through the open-book contender process, if in the end they aren't able to come to an outcome collectively with us, on value and quality, we don't have to sign a contract. We've not signed a contract yet. We're holding back to get all these things lined up and against the risks and against the detailed design so we do not fall into the US and other environment problems. So, even with one player, we are methodically going through it to keep the right pressure points there and we still have the option of not proceeding with a private provider.

Senator GALLACHER: Is there any prospective income arising out of this OneSKY? You're saying that whoever the successful person is, in integrating military and civilian airspace with a 'best of the best' system, can market it overseas. Is there anything that Airservices gets out of that? Do you get any prospective income from the creation of this world first?

Mr Marchant : We're working through those issues. I won't go into the commercial issues.

Senator GALLACHER: You don't know?

Mr Marchant : No, I'm not going to go through the negotiating rules here.

Senator GALLACHER: We're trying to find value for money in the public interest: what's the residual effect on the balance sheet?

Mr Marchant : Yes, of course.

Senator GALLACHER: At the moment, it looks like a dog's breakfast. We need it. Everybody knows we need it. We need the best in the world. It is a simple question: is there going to be any prospective income out of this extraordinary spend of money on world's best practice aviation management?

Mr Rothwell : Again, this is part of finalising the contract with Thales. That negotiation is part of finalising it.

Senator GALLACHER: So do they get the income? That's what I heard over the airwaves.

Mr Rothwell : We're still negotiating in that respect. Could I just also put in the fact that, from a value-for-money perspective, it is not just about the capital project—albeit that is very, very important, clearly. It is also about the total cost of operating Airservices. The airlines' charges are very much driven by these capital projects, including this one, but also the cost of operation of the organisation.

Senator GALLACHER: You may not have heard me before. I don't give a rat's about the airlines, because they pass it back to the passengers. Luv it! 

Mr Rothwell : Sure.

Senator GALLACHER: So it's the travelling public who eventually pay.
Mr Rothwell : Correct.

Senator GALLACHER: So it's people who get on and off planes who eventually pay for this.

Mr Rothwell : Absolutely, and that is why we went through the very extensive process to look at the whole organisation. We have reduced the costs of the organisation by some $170 million

Air Chief Marshal Houston : By $177.5 million a year.

Mr Rothwell : That will come directly off the charges that airlines pay for these services. So a very critical part of value for money is that process as well. It is important perhaps to realise—and I'm sure you do—that the whole Airservices operation and this project will be run with no government funding whatsoever. It will be charges to airlines. Indeed, Airservices is forecasting under its corporate plan, tabled yesterday, that it will be paying to the federal government in excess of $50 million a year in taxes and dividends from 2018. If we can try to get over the value-for-money point, we are striving to get the best value for money for both the taxpayer and the travelling public.

Senator GALLACHER: You just need a few good audit reports to get the direction of this committee looking elsewhere. You haven't had them.

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Senator GALLACHER: Can I just finish on your other partner, who I will examine in estimates later on in the year. There is a statement:

The overall acquisition cost estimate is not affordable against the draft 2014 Defence Capability Plan provision, and not affordable over the whole of life.

… Finance has not been provided with the basis against which to assess that Airservices can deliver the whole project. Nor has Finance been provided with the basis to assess whether the Defence capability can be delivered for the Airservices-agreed Not-to-Exceed price of $255.0 million for the Defence share of the Civil-Military Air Traffic Management System.

I accept that that is an historical figure, but, either now or on notice, can someone explain where you are sitting with your partner?

Air Chief Marshal Houston : We would be delighted to do that.

Senator GALLACHER: I have to tell you I have had a briefing from Defence. I want to see two sides of the story.

Air Chief Marshal Houston : We are at a stage where Defence are going back to the National Security Committee of Cabinet for a final approval on the project and for, I think, some form of cost increase. That is for them to inform you about.

Senator GALLACHER: So that's a correct statement—there is a process in place.

Air Chief Marshal Houston : There is a process and we are working very closely with Defence. Before you get to the National Security Committee of cabinet, there are a number of steps. We are joined up and we will be working closely together to ensure that we're in the best possible posture going into that National Security Committee of cabinet.

Just to make it very clear, in relation to the civil side of the project the board holds the delegation for the funding approvals, as you know. With Defence, they have to go to the National Security Committee of cabinet to get their funding authorisation.

Senator GALLACHER: So would it be unfair to characterise that revision in costs as a bit of competitive tension on Airservices? No-one likes to go back and ask for extra money. Are they putting their full scrutiny into this process to ensure we do end up with value for money?

Air Chief Marshal Houston : They are. I've spoken to the vice chief in the last few case days. The CEO has spoken to the Chief of Air Force in last few days. We are in lock step as to how we need to get to get to get to the National Security Committee of cabinet with the right story. Right now we're about 99 per cent ready to go into contract on our side. We just need to finalise the arrangements with Defence after they've been through that—

CHAIR: If the final quantum is not known, given you're still working through the due process with a potential contractor—

Air Chief Marshal Houston : We're obviously in negotiation with Thales at the moment.

CHAIR: So you're working on an ambit figure here?

Air Chief Marshal Houston : No. It's a very good process, an open-book process. We're looking at different assessments of risk and how much—

CHAIR: The total cost, which you will apportion between domestic or national services and Defence, that total figure is not known. It's an evolutionary figure that's moving along as you complete your processes in this case.

Air Chief Marshal Houston : To put it this way, we have much more definition of costs—

CHAIR: So you're in the ballpark with a tolerance of four or five per cent or something.

Air Chief Marshal Houston : We're getting close. Ninety-nine per cent of the paperwork is contract ready. That means we're getting very close. The risk-reduction work orders are continuing. All the way through, what we're getting is reduction in risk, and we're getting into a better place in terms of ensuring value for money.

Mr Rothwell : To put your minds at ease, this board cannot sign an agreement with Thales without a back-to-back agreement with Defence. Defence's agreement is—

Senator GALLACHER: I think Defence told me there was a preferred supplier on the books, but it wasn't value for money.

MTF...P2

Ps Bye the bye, I note that in the US that some of the more powerful GA Alphabets are taking issue with the Trump idea of privatising ATC...  

Via News13.com:

Aviation groups: Privatizing air traffic control hurts Florida flight training


President Trump and House Republicans are pushing a plan to shift the air traffic control system to a private system with a non-profit board of directors.

By Troy Kinsey, Capitol Bureau Reporter
Last Updated: Monday, August 21, 2017

TALLAHASSEE -- 

As the Trump administration presses a plan to privatize the nation's air traffic control system, general aviation advocates are warning the proposal could all but decimate Florida's flight training industry and, in turn, exacerbate a growing airline pilot shortage.

• Trump administration, House GOP wants to privatize air traffic control
  
• Non-profit board of directors dominated by airline executives
  
• Aviation leaders call for modernizing, not privatizing
  

The White House proposal is included in legislation recently filed by House Republicans and would shift the management of air traffic control from the Federal Aviation Administration to a non-profit board of directors. The board would be empowered to overhaul air traffic control processes, with an eye toward addressing the systemic delays plaguing the airline industry.

"Our plan will get you where you need to go more quickly, more reliably, more affordably and, yes, for the first time in a long time, on time," President Trump said in introducing the plan in June.

Because the board would be dominated by airline executives, however, it could be predisposed to implement airline-friendly policies, such as charging general aviation pilots air traffic control user fees. That, Aircraft Owners and Pilots Association President Mark Baker warns, would have the effect of discouraging the commerce and flight training operations that are critical parts of local economies.

"The ecosystem that we have in transportation, which includes airspace, air traffic, 5,000 public use airports, which keep jobs happening in rural America, bringing products to market, wouldn't happen -- 'cause it doesn't happen anywhere else in the world -- with a privatized system," Baker said.

Baker joined the leaders of three other aviation organizations -- the National Business Aviation Association, the General Aviation Manufacturers Association and the Experimental Aircraft Association -- for an anti-privatization rally at EAA's AirVenture airshow in Oshkosh, WI, last month.

The rally's tagline -- 'modernize, not privatize' -- underscored the groups' demands for Congress to pass multi-year FAA budgets that would allow the agency to take a long-term approach to improving the air traffic control system.

Sun 'n Fun President John 'Lites' Leenhouts came to Oshkosh, too, both to promote the Polk County flight training scholarship organization's annual airshow and to stand in solidarity against privatization. If user fees were to be implemented, he predicted Florida's mammoth flight training industry - second only to California's - could be hit especially hard, with prospective students deciding a career in aviation isn't worth the cost of training.

"If you charge those rates to operate out of an airfield and in the sky to learn to fly, the cost to learn, which is already expensive, goes up exponentially," Leenhouts said. "That then precludes the potential new aviator from going into the business."

Critics of the privatization proposal also argue that airline delays rarely owe to inefficiencies in the air traffic control system. Instead, most delays are caused by overcrowded hubs, maintenance issues and weather.

If anything, Leenhouts said, privatization could increase delays if it causes the pilot shortage - which Boeing estimates has grown to 637,000 over the next two decades - to get even worse. By discouraging flight training, user fees could leave airlines with lots of airplanes but not enough pilots to fly them.

"Guess who's going to pay for it?" Leenhouts asked. "You and I that get into our general aviation aircraft and call a controller and take off out of an airfield and land somewhere else. We're paying the price for them to talk to us, and right now if we do that it'll kill what is already a really challenging career field."

Privatization proponents point out that user fees aren't part of the current proposal, which maintains the use of the aviation fuel tax as the principal means of funding air traffic control.

Simply shifting to a privatized system, though, could come at a steep cost to taxpayers.

Last week, the non-partisan Congressional Budget Office estimated the current legislation would increase the federal budget deficit by $98.5 billion over ten years, up from an initial projection of $20.7 billion. 

Again lessons to be learnt from the Canuck system I'd say -