Australian senate criticises 'flawed' defence procurement

31 August 2012

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1 September 2012 | Anna Reynolds

An Australian senate committee has criticised the Department of Defence for lacking a robust risk management regime and failing to engage with their suppliers.

The report by the Foreign Affairs, Defence and Trade Committee described the department’s current management structure as “flawed” and proposed a new model. In the new approach - used in other militaries - projects should be allocated to a capability manager, who oversees the organisation, facilities, supplies, personnel and training. Under this approach, the capability manager would be the sole client with the contracted suppliers.

The Defence Materiel Organisation (DMO), which buys equipment for the Australian Defence Force, would take on the responsibilities of tendering, contracting and project management as well as providing support to these managers. The report also recommended procurement of services should be transferred with budgets to chief services.

By streamlining the DMO and giving financial responsibility to capability managers, the report suggested future projects would be more coordinated and have tighter budget controls. The report highlighted the department’s inability to learn from “past mistakes” made in earlier projects, including failing to attract people with the appropriate skills and a lack of cohesion among different groups who work to different agendas.

It highlighted the Royal Australian Navy’s submarine replacement project saying it should be managed directly by the chief of the navy and supported by the DMO to ensure there is full disclosure throughout the program to obtain government, industry and the public support.

A spokesperson from the defence department replied on 5 September to SM's earlier request for comment. They said: "The testimony from defence reflected a shared commitment to continuing to enhance the process for acquiring and supporting defence equipment.

"Over the past year, the government has announced reforms to project management accountability (May 2011); reforms to strengthen the projects of concern process (June 2011); reforms to support ship repair and management practices (the Rizzo Report) in July 2011; and in August 2011, reforms in the sustainment of Australia’s Collins class submarines (the Coles Review). Implementation of all these is well underway, with the majority already implemented."

They added that an effectively functioning defence organisation, including the Australian Defence Force (ADF), is a critical part of protecting and defending Australia’s national security interests.
"There will always be risk in complex, costly procurements involving cutting edge technology. To minimise that risk and to manage it effectively, we need to continue to instil greater rigour and greater individual and institutional accountability to our consideration and management of major capability projects, both acquisition and sustainment. This in particular applies to the early stages of projects – 80 per cent of problems with defence capability projects emerge in the first 20 per cent of the project’s life.

"The government will respond to the committee’s report in due course."

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