The Defence department and Airservices Australia have finally signed a contract for their $1.2 billion overhaul of the country's air traffic management systems.

The 'OneSKY' project has been in the works since 2010. It will unify Australia's civil and military air traffic management systems into a single platform known as the civil military air traffic control system (CMATS) that will control the 11 percent of the world's airspace that Australia manages.

Thales was down-selected as the technology provider for the new platform in mid-2015, and a contract was originally scheduled to be signed in October 2015.

However the technical complexity of the joint initiative, as well as underestimation of the work involved and difficulties stemming from two separate governance structures, set the project back by 28 months.

Last month the Australian National Audit Office revealed a contract signing had still not occured because Thales was yet to produce an "acceptable offer" that represented value for money.

It revealed the Defence department would need to ask the government for significantly more money this month to fund its portion of the project before a contract with Thales could be signed.

Defence's initial approved budget was $730.7 million for the project. The agency has been contacted for detail on whether its request had been granted.

Airservices today called the Thales contract signing a "significant milestone".

“[OneSky is] probably the biggest development in the safe management of Australia’s skies since aviation began in this nation,” Airservices Australia CEO Jason Harfield said in a statement.

"It is transformative, not only for air traffic management in Australia, but world-wide there is nothing like it."

Technical complexity

Defence and Airservices originally intended to purchase a largely commercial off-the-shelf system, but their requirements have instead forced them onto a significantly customised and integrated platform.

The pair tested nine bids over five phases against a set of 2609 specification requirements during the procurement process.

Airservices today said the parties last month completed a review of the system requirements, so all three had a "common agreed understanding" of what the system would look like.

“This has significantly reduced risks in the project prior to finalising the commercial and contractual arrangements," Harfield said in a statement.

“Reducing uncertainty in system requirements prior to finalising the contracts, was a critical risk reduction strategy developed to address the challenges that other major overseas air traffic control providers experienced with their own system replacements."

Despite the delay in the contract signing, Airservices said the agency had been working towards implementation for some time; millions have been handed to Thales for advanced work orders on the system over the past three years.

Airservices said the first phase of the platform's new voice communication system had been installed last year and would be commissioned "later this year".

As a result of the contract delays, the parties have also been unable to specify a date by which they expect the system to be fully functional.

Defence last year pushed back its expected timeline, forecasting that initial operational capability could be achieved by November 2022, and final operational capability by October 2025.

When the CMATS project commenced in 2010, both agencies thought the system would reach final operational capability in 2017-18.

Airservices did not provide detail on the project's schedule today.

It is providing 57 percent of the project's $1.2 billion cost, with Defence chipping in 43 percent, Airservices told senate estimates today.