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4.17There is no evidence that Defence further developed a planned approach to a reform program supported by clear objectives or benchmarks, or that it provided reports annually to government on the achievements and benefits of this new approach. As others have observed, the apparent growth flows mainly from the inclusion of certain Estate and Infrastructure Group costs (such as garrison support) and the balance of Defences estimated future sustainment funding that Defence has yet to allocate to a Defence Group within the broader Capability Sustainment Program in the last years of the period.98 This is apparent for the period following the delisting of DMO and the inclusion of items other than specialist military equipment in Defences overall sustainment estimates (Figure3.5). By way of example, Appendix 2 of this audit report lists Navys MSA Performance Framework core Key Performance Indicators and Key Health Indicators.36 Defence advised the ANAO that Air Force has also developed a corresponding set of indicators and Army is progressing similar work. Note a:Defence, CASG Executive Advisory Committee paper position paper reflecting the views of the SPO Reform Project, 13February2017. 130In May 2016, Defence entered into another contract with Bechtel for $65.8 million, to conclude in June 2018. a collection of multi-functional, multi-disciplined teams; staffed to achieve a balance between environmental, capability system and technical needs in whole-of-life management; organised along class/fleet/weapon system lines; and. The idea is to establish a managed resource pool that provides skilled personnel for CASG activities. 'Some Economic Aspects of the Weapons Systems Acquisition Process' (2003); available from, This page was last edited on 19 February 2023, at 03:28. An output measure, which directly reflects achievement against the Materiel Availability outcome. SeeCost Considerations-The Cost Principlesfor additional details. The absence of an asset management approach within Defence makes it difficult to piece together a holistic asset management view across the myriad individual policies which focused on discrete processes. address four tests to determine the allowability of costs. by this website which may effect your viewing experience. Box 2: Sustainment work in Defences Capability Acquisition and Sustainment Group. Defence informed the ANAO that both measures are based on direct product costs incurred by the Capability Acquisition and Sustainment Group and do not include sustainment costs incurred by other parts of Defence. While poor outcomes in the Key Health Indicator represent risk across all Materiel Sustainment Agreement outcomes, these risks are more acute in relation to Material Confidence and Materiel. Key elements of the governance and organisational framework include: a specialist organisational unitcurrently the Capability Acquisition and Sustainment Groupstaffed by a mix of civilian and military personnel; contract-like arrangements for sustainment between that unit and the Chiefs of Navy, Army and Air Force (Defences Capability Managers); and day-to-day responsibility for most sustainment activities falling to Systems Program Offices, which carry out that work using a mix of in-sourced and out-sourced service provision. These cost principles provide a framework within which items of direct and indirect cost can be incorporated in a cost-reimbursement contract or subcontract. 9Executive Minute on Joint Committee of Public Accounts and Audit Report No. Performance has been effective but unstable during the recent high demand collective training exercise series period that culminated in Exercise Hamel. 5.67Defence already has an evaluation process developed that will be implemented by the end of 201617. the use of consistent time series data and analysis of sustainment expenditure. The Quarterly Performance Report is the primary way by which Defence provides information to government and senior Defence personnel about the status of major acquisition and sustainment activities. This high tempo period of exercises has tested the robustness of the logistics system and deficiencies have been identified. These risks and issues are highlighted so that stakeholders can respond in a coordinated manner to guide the conduct of remediation actions. Deficiencies in the configuration record indicates potential Configuration variance and will impact the availability of necessary inventory for planned and corrective maintenance tasks resulting in increased risk to achieving Materiel Ready Days (Materiel Availability outcome). 190Defence Portfolio Budget Statements 201516, Section 2: DMO Outcomes and Planned Performance, p. 151, available from [accessed 20 April 2017]. In that later report the list was labelled sustainment products of interest rather than underperforming, though the items are still listed in order of concern. the experience, skills and competencies of Systems Program Office staff; [Systems Program Offices (SPOs)] not being able to manage to an effective asset management plan; Disrupted maintenance schedules, affecting availability and increasing costs; Shortened life of type, and increased whole-of-life cost; and. Defence informed the ANAO that it had updated its procurement guidance in April2017 and intends to address the other concerns raised in the 2015 review over the next 18months. Inadequate contract management staffing levels, a lack of Commonwealth commercial acumen and poor leadership all contributed to a weakening of the Commonwealths position (p. 16). Accountability and Transparency in procurement The audit found that scope remained for Defence to enhance its sustainment management through the implementation, use and refinement of newly developed performance measures. The last item of Support & Test Equipment requires codification before it can be formally accepted by the Commonwealth of Australia (CoA). 14 of 51. . There are others which relate to the more detailed findings of the First Principles Review, including those identified in the paragraph above (such as a common approach to project management).125 All elements have implications for both acquisition and sustainment. It is now too late to revisit these events; nonetheless, Defence could benefit from evaluating future major change programs. Deployment of the PPR was, at that point (September2016), on pause pending further review of the prototype arrangements. There is a risk that insights into a very substantial reform process could be lost. startxref %%EOF The ANAO has also observed in Chapter 3 of this audit report that there is scope to improve the quality and transparency of public reporting on sustainment in existing Defence reportsthe Portfolio Budget Statements, Portfolio Additional Estimates Statements and Defence Annual Report. 185For example, a 2015 Lessons Learned Report prepared by Defence states that Defence did not adequately enforce the provisions of the [sustainment] contract . The Review team thought the answer to that was No.60. Defence had multiple repositories and versions of asset management information making it hard to assess whether Defence was aligned to best practice. 73The ANAO examined nine Second Pass or Combined First and Second Pass approvals including submissions related to Army, Navy, and Air Force capital acquisitions. Note b:Staff numbers are rounded to the nearest whole number. 1 A cost principle will also include expenses incurred in purchasing the asset, such as shipping and delivery fees, as well as setup and . 35Key performance indicators are intended to relate directly to a product outcome, for example, materiel-ready days. 20. The effectiveness of these reviews could be increased if the lessons obtained from gate reviews were routinely incorporated into management reporting on sustainment and if gate reviews were extended to contribute to the proposed quality assurance mechanism for Quarterly Performance Reports. 20In April 2016, Capability Acquisition and Sustainment Group defined a Systems Program Office as a business unit that works directly with Capability Managers and Suppliers as necessary to deliver agreed capability across the CLC [capability lifecycle], coordinating the FIC [fundamental-inputs-to-capability] elements required to achieve this objective. This narrower focus risks telling only a partial account of sustainment within Defence and is potentially at odds with the One Defence model promoted by the First Principles Review. 26. 129A Management and Operations contractor approach involves an external organisation being contracted to take on all responsibility for the day-to-day running of the organisation, including its transformation, but with the government maintaining ultimate ownership and strategic control over the body. The Product Delivery Agreement will cover both acquisition and sustainment of a capability system over its life, through to disposal. Although the document provides a description of the intended new organisational structure and the functions and responsibilities of its elements, it is not apparent that a fundamental rebuild of all Group processes has yet been delivered. The effectiveness of Defences internal reporting system for sustainment could be improved in several areas. Defence has not been able to provide the ANAO with adequate evidence to support this claim, nor an account of how $360million allocated as seed funding for Smart Sustainment initiatives was used. This prevents accurate lower level plans and targets (for example, for maintenance and operations) being established and achieved. For example, a commercial organization An organization, institution, corporation, or other legal entity, including, but not limited to, partnerships, sole proprietorships, and limited liability companies, that is organized or operated for the profit or benefit of its shareholders or other owners. That review found shortcomings in the application of procurement principles, which exposed Defence to risks. The Tiger fleet achieved a total of 312.0 flying hours in June against a planned 698 hours. Source:Defence Annual Reports 200506 to 201415, and Defence advice. Defence has not explained what became of these initiatives. 90In the 201718 Defence PBS, Defence presents the estimates and descriptive information for its Top 30 sustainment products in a single table. 3.36Numerous reviews and audits have urged greater focus on whole-of-life costs and better knowledge of the total costs of ownership of military assets, including sustainment, but have found that Defence has struggled to establish the skills, systems and data for this activity66: 3.37In recent years, Defence has generally estimated whole-of-life costs when seeking government agreement to a proposed acquisition. 11. 69Defence Annual Report 199798, p. 224. This requires visibility of the total cost of ownership of major equipment. The recruitment freeze has resulted in the incremental engagement of multiple individual contractors versus a single Integrated Support Contractor; and. (LIFO) Definition: The Inventory Cost Method Explained. Reviews of Defence over the last two decades have identified many opportunities for improvement in Defence sustainment practice. An output measure, which directly reflects achievement against the Materiel Availability outcome. It is now not clear whether Defence will continue with this work. Defence has drawn heavily on contracted industry expertise to support its implementation of the program of organisational change relating to acquisition and sustainment that has followed the First Principles Review.

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