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Essay / Research Paper Abstract
This 4 page paper assesses some of the financial risks that are faced by the Australian Department of Defence in the procurement of F-35 Joint Strike Fighter (JSF) from Lockheed Martin and methods of mitigating the risk. The bibliography cites 9 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEjsfrisk.rtf
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Unformatted sample text from the term paper:
be delivered to by Lockheed Martin for an estimated A$15.5 billion. There are a number of aspects to the financial risk that
this project presents. There is the potential for the costs to be more than estimated, there is also the potential for there to be hidden costs or for the financial
costs to fail to give value, especially due to the need for the government and the Department of Defence to be accountable for their budgets which use money form the
public purse (Baye, 2006). It has been noted that there is often a low level of integration between the processes of procurement and financial risk (Minter, 2009). Associate professor
of Kelley School of Business, Mark Frohlich, stated of finance departments that they were "guilty of ignoring the real value that their procurement teams can bring to the financial health
of their organizations" (quoted Minter, 2009). While this was aimed at commercial organizations rather than government departments the same may be seen
as true and according to the Department of Defence there is a requirement for the project and procurement that is undertaken to bring benefits that outweigh costs (ANAO, 2006).
The commercial important is also shown when it is stated by the Defence Procurement Review that "ideally, Defence should provide [to Government] well developed business cases for the proposed investments,
based on sound costings models, for validation by Finance" (ANAO, 2009). Costings may be difficult during long term procurement, the cost
of inputs changes; for example, the cost of oil has changed significantly over the last twelve months (Narayan and Wong, 2009). The viability of fixed cost contracts become difficult
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