THE Defence Department says the “economic payback” for it and contractor Thales is a key factor in determining the length of a new deal for munitions factories at Benalla and Mulwala.
Defence Minister Christopher Pyne revealed last week that the federal government was committed to extending its agreement with Thales over the plants which combined employ 640.
The department yesterday responded to Border Mail questions about the deal.
It declined to say whether the fresh pact would extend over five, ten or more years.
“The new arrangement between Defence and Thales Australia Limited (which trades as Australian Munitions) is yet to be negotiated but is envisaged to be a long term performance based strategic agreement enabling both parties to invest in and have sufficient tenure to allow economic payback of that investment,” the department stated.
“The agreement is planned to have suitable performance measures to enable additional tenure subject to satisfactory performance, along with off‑ramps as required if contractor performance is unsatisfactory.”
The department expects negotiations to be finished by the end of the year but details may take another six to 12 months.
However it stressed: “The new contractual arrangements will enable seamless transition from the current contract when it expires in mid-2020.”
The department would not say if a tendering process with other operators was considered, nor reply to the question of whether the government seriously considered seeking munitions from overseas.
It noted defence had accepted an Australian National Audit Office report in 2015-16 which urged greater investment in the plants.
“The announcement of defence now entering into these negotiations is the part of the considered strategy and longer term operational plan,” it flagged.
The department added Thales would also now be able to negotiate with unions over workers’ future conditions.