The Australian National Audit Office (ANAO) has found the major OneSKY project to unify civil and military air space under a single air traffic management (ATM) system could cost more than $4 billion.

The OneSKY project was launched in 2009 with initial plans for it to be operational in 2015, but that is now looking more like 2026.

“There is inadequate assurance that the contracted acquisition price is consistent with a value for money outcome for the capability being acquired,” an ANAO report released on July 31 said.

But both Defence and Airservices – the procurement lead – have disagreed. Defence said the procurement adequately demonstrated value for money, while Airservices said it had acquitted its obligation in making all reasonable inquiries to ensure the contract represented value for money.

OneSKY aims to replace two outdated air traffic control systems – covering civil and military airspace – with a single unified civil-military air traffic management system (CMATS). Airservices launched the procurement process in 2010 and, following an evaluation of tenders, Thales was selected to deliver the project. The $1.32 billion acquisition contract was signed in February 2018.

At that time, Airservices estimated total project costs of $1.517 billion. But the ANAO report now puts the final cost at more than $4.11 billion, taking into account procurement costs, support of existing and new systems, and contingencies.

The delay in OneSKY has required Airservices to extend the life of its existing air traffic management system through a hardware refresh and extension to support arrangements. The refresh was launched in 2016 and runs to December 2021. In December 2018, Airservices extended the system life again, this time to December 2024. The total cost of these refreshes is more than $140 million.

Throughout, OneSKY has been marked by problems. In May 2017, then Defence Minister Marise Payne placed the Defence side of OneSKY – Project AIR 5431 Phase 3 – on the Projects of Concern list, although it was subsequently removed in May 2018.

ANAO noted the long delays in getting the project off the ground and scope changes along the way. “Important changes were made, after the successful tenderer was selected, to the timeframe for delivery, scope of work, type of contract and price,” it said.

“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.”

For its part, Defence said the final price was higher than it had forecast and, rather than seek a further budget increase, it instead sought scope reductions. These included removing system contingency capability and potentially accepting lower cost non-CMATS solutions in some Defence airfield control towers.

Defence said this would not appreciably reduce the benefits for Australia nor impact on the ability to deliver safe and efficient air traffic management.

In a response to the report, Airservices chairman John Weber said the ANAO had identified some areas where, with benefit of hindsight, it could have better documented its decision-making. “However, that would not have materially impacted the decision-making process nor the substance of the evidence relied on by the Board as decision maker nor the outcome,” he said.

Mr Weber said what Airservices had embarked on was a large and complex procurement with highly technical requirements and a limited market of suppliers on behalf of two agencies with different requirements, funding arrangements and governance structures.

He said air traffic control systems were not an off-the-shelf product and were unique to each country. “In this circumstance, the value for money considerations are necessarily broad and must include supplier market maturity, the specialist nature of the capability required and the level of risk.”

And it seems this isn’t just a problem unique to Australia. Mr Weber said the US Federal Aviation Authority (FAA) air traffic modernisation program was running more than a decade late and had so far cost US$7 billion, 100 per cent more than the initial budget.

In a joint response to the ANAO report, Defence Department Secretary Greg Moriarty and Chief of Defence Force (CDF) GEN Angus Campbell said there was room to enhance administrative arrangements supporting documenting actions and decisions in such a complex program.

“Defence maintains however that is procurement of a Civil and Military Air Traffic Management and Control System adequately demonstrates value for money,” they said.