Geoscience Australia will have a hard time showing it achieved value for money for a $1.18 billion satellite positioning system, a report from the national audit office says.

The government’s geoscientific research agency in 2022 awarded the 19-year contract to Lockheed Martin Australia to delivery the Southern Positioning Augmentation Network (SouthPAN).

The aim of the network is to boost the accuracy of global navigation satellites for a range of uses including agriculture, construction, automation, intelligent transport systems, and location-based services on smartphones across Australia and New Zealand.

In winning the contract, Lockheed Martin, which in December 2016 had already received $12 million to trial the technology, beat out the only other tenderer.

The economic benefits of the procurement, initially estimated at $6.2 billion – and currently $7.6 billion – over 30 years, were predicted to flow from automation benefits across a variety of sectors.

But Auditor General Grant Hehir says GA will find it hard to demonstrate value for money over the life of the contract.

“The performance framework for Geoscience Australia to demonstrate that the implementation of SouthPAN will generate benefits and achieve the outcomes of the contract is not effective,” he says.

Performance framework ‘not effective’

SouthPAN’s procurement by GA between 2020 and 2022 was ‘largely effective’ and compliant with commonwealth procurement rules, Mr Hehir says in a report handed down this week.

However, he noted “Geoscience Australia did not effectively manage the perceived conflict of interest in relation to an incumbent provider tendering for a new contract”.

The rvial bid was also ‘significantly less’ than Lockheed Martin’s with an average variance of $82.94m, the report says. While this was identified as a weakness for Lockheed, the information wasn’t included in the Tender Evaluation Report.

Due to the limitations in the study that estimated economic benefits of $6.2 billion over the next 30 years, Geoscience Australia will find it challenging to demonstrate value for money over the life of the contract.

Auditor General Grant Hehir

In seeking funding from the Australian Government, GA estimated $6.2 billion in benefits to the Australian economy, but Mr Hehir questioned the study used to support that statement.

“Due to the limitations in the study that estimated economic benefits of $6.2 billion over the next 30 years, Geoscience Australia will find it challenging to demonstrate value for money over the life of the contract,” he said.

The report says contract negotiations resulted in Geoscience Australia achieving its minimum fall-back
position, paying $32 million more and transferring non-insurable liability to the Commonwealth.

Recommendations accepted

Geoscience Australia has accepted all the report’s recommendations for improvement, including improving future procurement processes, and says the audit was a valuable opportunity for it to reflect on what could have been done better.

“We particularly agree that improved consistency in the documentation of our decisions would have enabled us better to demonstrate the steps we took to comply with the Commonwealth Procurement Rules,” it says.

GA says SouthPAN’s early Open Services have been available for over a year and are already being accessed by diverse industry sectors, and technology delivered via the program will be transformational for the citizens and economies of Australia and New Zealand.

“GA is confident that value for money will be realised for SouthPAN over the life of the system, even though there will be challenges to quantify the economic benefits realised empirically,” it said.