or any other modern web browser. Defence continues to strive towards efficiencies in the delivery of sustainment outcomes for Defence capability and to report on outcomes, noting the need to balance transparency and accountability to the Australian public and Parliament, with the national security interests of the Commonwealth. 113Defence, Smart Sustainment Reform Health Check, June 2011. Contracts with the principal provider are not performance-based. 111The ANAO has not verified the reported savings in the three cases quoted here. Research and reviews conducted for Defence have revealed a range of specific operational problems that are detracting from the efficient and effective sustainment of Defence capability, including the functioning of Systems Program Offices. Under the PGPA Act, Defence will need to report meaningfully against this plan in its annual performance statement. Provide high level advice to Defence Senior Leaders on reform, business improvement and change management initiatives; Support the design and implementation of the new Capability Acquisition and Sustainment Group business framework; Assist Capability Acquisition and Sustainment Group in strengthening the project controls discipline across the Group including monthly reporting, business process improvement and cost transparency, mentoring and coaching Defence leaders, and providing advice on international best practice; Assist with implementing the smart buyer function across Capability Acquisition and Sustainment Group, including conducting pilots in Chief Information Officer Group and Estate and Infrastructure Group; Assist Defence redesign and restructure Systems Program Offices to align with required reform activities, including but not limited to smart buyer function, business framework and capability life cycle reforms; Assist Capability Acquisition and Sustainment Group with the establishment of the Commercial Centre of Expertise including business process improvement, mentoring and coaching Defence leaders and providing advice on international best practice; Assist Capability Acquisition and Sustainment Group with the establishment of a Program Management Office at the Group level to support the Capability Acquisition and Sustainment Senior Leadership Group in managing the program; Assist Defence to measure the efficiency gained through the above reform activities (in terms of both cost and schedule); Other reform activities as required by Defence. 0000001107 00000 n The availability of appropriately skilled, qualified and authorised staff (Navy and Civilian) to fill positions in the Systems Program Office and Capability Manager Representative organisations is a key contributor to all three of the Materiel Sustainment Agreement outcomes and a key constraint to long term Materiel Confidence. Grouping of polymers in relation to the specific registration requirements, in order to facilitate cost-effective registration of PRR in line with the 'one substance, one registration' principle and to reduce testing costs and avoid unnecessary testing (e.g. It expressed concern that without such a feature Defence was exposed to risk. achieving a clearer line of sight between planning and reporting documentsfor both expenditure and descriptive information at the corporate and project levels; and. CASG customers means internal customers: the Capability Managers for whom the Capability Acquisition and Sustainment Group undertakes sustainment. Defence has advised that Collins Class sustainment cost per materiel ready day has decreased by approximately 40percent. address four tests to determine the allowability of costs. 3.4This led to the commencement of work on a new IT system, the Sustainment Performance Management System (SPMS), in mid-2011 to replace the sustainment module in MRS.32 Defence agreed in August2012 to the continuing refinement and implementation of a shared Sustainment Performance Management Framework and reporting system for use in the sustainment of all products jointly managed by Defence and DMO.33 An objective of developing SPMS is that the system should provide the central source of truth for sustainment management data and reporting for sustainment management personnel at all levels of both Capability Acquisition and Sustainment Group and Capability Manager organisations.34 This was contrasted with the MRS, which reportedly required substantial work-arounds requiring double and triple handling. See Defence Portfolio Budget Statements 201718, Table 68: Top 30 Sustainment Products by End of Financial Year Outcome 201718, pp. Defects post Maintenance Period. In 2011, a health check by external consultants found some early successes with cost reductions and changes in practice. 32. Note a:In compiling the data underlying this table PMKeys Reporting is not able to identify all those organisational units now recognised by Capability Acquisition and Sustainment Group as Systems Program Offices. The First Principles Review has pointed out that Defence has treated Systems Program Office staff costs at the project level as a free good, reducing the transparency of the cost of sustainment work and providing inaccurate price signals and a distorted incentive structure to Capability Managers. The performance of the Armed Reconnaissance (Tiger) Helicopter is reported thus in the Quarterly Performance Report for April June2016, produced in August2016: The Final Acceptance Milestone under the Acquisition Contract with Airbus Group Australia Pacific (formerly Australian Aerospace) was declared achieved on 28May2013, approximately five years later than originally contracted. Tiger sustainment is continuing to mature. 5.67Defence already has an evaluation process developed that will be implemented by the end of 201617. Sustainment costs can exceed those of the original procurement and the challenges can be more complex.26. 5.40The analysis could usefully have regard to the outcomes of past reviews and audits, which provide insight into the effectiveness of Defences contracting arrangements for specific fleets of equipment. In examining why contracting out work to the private sector had not worked well during the Reagan administration, these studies find that government has often not proved to be an intelligent consumer of the goods and services it has purchased. startxref Defence conducts reviews of sustainment performance through sustainment gate reviews that help Defence to obtain insight into a project or products progress and status. 3.55Sustainment has been identified as a distinct category of expenditure since 1July2005.88 In effect, this was the point at which the term sustainment came into regular Defence use. There is no evidence that specific merger integration activities have been undertaken to ensure consistent integrated operating models. For more information or to provide feedback on the Cost Principles, please send an email to theDefence Financial Investigation Service. Fleet Screenings comprise a meeting or series of meetings between the Services and Capability Acquisition and Sustainment Group. 3.53Commonwealth entities must reportin an annual performance statementtheir actual results against the planned performance criteria outlined in their corporate plan and Portfolio Budget Statements. 211Dr Andrew Davies, Director of Research, Australian Strategic Policy Institute. SeeCost Considerations-The Cost Principlesfor additional details. Defence is now undertaking a rolling program of reviews of all Systems Program Offices, adding a further 17 to those being reviewed. 71 0 obj<> endobj No of contract staff as advised 2June2017. This stream of activity is likely to take much longer than the two years expected for implementation. The allowable use of funds under those awards is included in Ruth L. Kirschstein National Research Service Awards in IIB. However, they are in a different order, which may reflect changes in organisation following the delisting of DMO. In 2000, when the expected benefits were not being realised, Defence reviewed Support Command Australia and the Defence Acquisition Organisation, finding that serious problems persisted in capital acquisition and whole-of-life support. Fragmented management meant Defence did not have an enterprise-wide view of the many Smart Sustainment initiatives, and was missing opportunities for wider reform. Defence was able to provide the ANAO with copies of a suite of standard letters of assurance from managers throughout DMO, each stating that, to the best of their knowledge, cost reductions of various values had been implemented for the respective financial year. However, a September2015 assessment by external consultants of Capability and Sustainment Group policy and guidance against the requirements of the Asset Management Standards concluded180: While the organisation can demonstrate clear leadership and commitment to delivering and sustaining asset capabilities that meet its strategic business and operational intent, its ability to uniformly translate this intent into actions that demonstrate the consistent delivery of the business outcomes from its assets, is hindered by incomplete process documentation and [the absence of] an integrated Business Management System for its assets.181, 5.61The report noted that it is impossible to compare different operational business processes within the organisation, in order to determine which process is the most effective for the entire organisation, until the organisation has determined the base policies (rules) by which it will conduct the comparisons.182, 5.62The same view was reflected in advice received by Capability and Sustainment Group from the Chief Defence Scientist, also in September2015. Box 1: The origin of Systems Program Offices. More efficient support services for the Jindalee Operational Radar Network, reportedly saving $100million over ten years; Navy using Telstras NextG network for several minor war vessels, relinquishing satellite communications subscriptions and saving $2.3million a year; and. 133Defence internal correspondence, April 2016. The Chief of the Defence Force is Australias senior military leader. There had been limited progress on the 35 action items identified in the 2011 health check with seven action items implemented, five abandoned, and 23 outstanding (among which Defence intended to re-write 14). [4][3]. Unclear lines of responsibilityMany key sustainment roles and responsibilities were not clearly defined or understood, from both an individual and organisational perspective. 2.1The ANAO examined Defences governance and operational arrangements for managing the sustainment of specialist military equipment, with a particular focus on the clarity of: 2.2Defence has clear and long-standing arrangements for the management of materiel sustainment for specialist military equipment. In other cases, this information is so general as to be of limited value. 5.20The purpose and structure of Systems Program Offices have remained essentially the same since their inception in 2000. examining each Systems Program Office to determine where each fits within the smart buyer function, and the most appropriate procurement model for delivering the capability and achieving value for money. The reports traffic lights, in particular, focus attention on the measures contained in contractual and intra-Defence agreements (for example, aircraft availability) and not the measures that matter to Army, the end-user (aircraft actually able to be flown). Defence has not kept a systematic record of the outcomes of the Smart Sustainment initiative associated with the 2009 Strategic Reform Program. There is also evidence of a planned benchmarking exercise to identify appropriate operating and functional models that can support DMOs future End State Design (around May2015). This matter is also taken up in the next chapter. 178British Standards Institution, Publicly Available Specification for the optimal management of physical assets PAS 55-1:2008: Asset Management, cited in Defence, Defence Asset Management Landscape Document, May 2012, p. 1. 51Defence, CA12Armed Reconnaissance Helicopter (ARH) Weapon System, Sustainment Performance Gate Review, 8 July 2016. In business, it is a key aspect of an organization's financial stability. Gate reviews are conducted to provide high quality and reliable advice to Defence and Government regarding the health and outlook of both acquisition projects and sustainment products. This has occurred with the extension of DMOs earlier program of gate reviews to cover sustainment as well as acquisition.54. 165United States Government Accountability Office, GAO/GGD-00-172R, Study on Facility Design Reviews, July 2000, available at http://www.gao.gov/assets/90/89986.pdf. 279280. An unspecified proportion of Smart Sustainment savings of $197million in. 85Deputy Secretary, Capability Acquisition and Sustainment Group, 5 July 2016, email Message [to CASG staff]. 5.66The ANAO recommends that Defence develop and implement an evaluation plan to assess the implementation of the recommendations of the First Principles Review. The Mortimer Review (2008, p.48) noted that the efficiency and effectiveness of DMO sustainment performance will not improve unless it is measured. The use of the traffic light indicators Green (acceptable performance) or Amber (early signs of underperformance). The audit found that scope remained for Defence to enhance its sustainment management through the implementation, use and refinement of newly developed performance measures. 5.25The 2009 report from the Pappas Review identified opportunities for efficiencies in maintenance activities carried out by Systems Program Offices by consolidating maintenance facilities; restructuring outsourcing contracts to ensure the contractual conditions create the right incentives for performance improvements; and implementing lean techniques in workshop management.138 From the formation of DMO, Defence received similar external advice from different sources that substantial improvements in efficiency were possible in the Systems Program Offices. [1], As of 30 June 2021, Defence through the Capability Acquisition and Sustainment Group (CASG) was managing 161 major projects and 13 minor acquisition projects, at various phases in the Capability Life Cycle, worth a total of $121.6 billion, with an annual acquisition budget was A$9.3 billion. 3.61The Defence Annual Report 201516 includes financial information and some descriptive material for the same Top 30 sustainment products reported on in the PBS and PAES.91 However, the Annual Report does not report the actual expenditure for Defences Capability Sustainment Program, for which estimates were reported in the Defence PBS and PAES.92 Additionally, there is no reconciliation of the total sustainment product funds available amounts reported in the Annual Report93 and the total funding for the Capability Sustainment Program reported in the PBS and PAES tables. The ANAOs analysis found that the report may not include additional information available to Defence that is critical to the readers ability to understand the status of significant military platforms. 46Defence, Decision BriefSustainment Performance Management System Development, 8 August 2011. Thus, for example, slippage in new acquisition projects can increase sustainment costs for ageing platforms. Second, the material to be produced for scrutiny of sustainment performance would need to reflect a One Defence (that is, whole of portfolio) view. Defence records show that the department made substantial efforts to keep track of the large number of diverse initiatives identified across the department under the smart sustainment reforms associated with the SRP, including internal reporting to management. 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. 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. 200.410 Collection of unallowable costs. 160Defence, Review by Mr Jeff Worley, 30 May to 3 June 2016. 157Defence, Report on Defence Governance, Acquisition and Support, (KPMG), April 2000, p. 51. Defence has continued a program offering its staff professional development options in asset management. 3.44The Mortimer Review (2008) observed that through-life maintenance and support account for more than half of the DMO annual budget and involve about two-thirds of its workforce. The tests are as follows: These four tests apply regardless of whether the particular category of costs is one specified in the cost principles The government-wide principles, issued by OMB (or, in the case of commercial organizations, the Federal Acquisition Regulation [48 CFR 21], or, in the case of hospitals, 45 CFR 75, Appendix IX, "Principles For Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals"), on allowability and unallowability of costs under federally sponsored agreements. There was/were: In all, Mortimer made 46 recommendations, with 42 accepted in full by the Government and three accepted in part. 200.407 Prior written approval (prior approval). @ GV The SPMS system was not fully implemented during audit fieldwork but is expected to be fully operational by the end of June2017. 14 and 40). 3.48On the inclusion of staff costs in the new Product Delivery Agreements, Defence informed the ANAO in March2017 that The PDA remains under development, and it is inappropriate to speculate in any detail on how anticipated elements of the document will be used. 4. Figure 3.5:Cumulative estimates of Defence sustainment costs, by year, 200607 to 202021. It has engaged a consultancy (at an estimated cost of $1.2million) to undertake the data identification and cleansing for active major contracts for the top 15 Acquisition and Sustainment projects/products (about 60 contracts) by 30June2016.c After completing approximately 15 major contracts the project was suspended due to competing priorities within Capability Acquisition and Sustainment Group. 89Defence advised the ANAO in March 2017 that The 201516 purposes have been replaced by the 201617 purposes and will not be reported on in 201617. The simplified formula is: 3.21Defence has implemented a strategy in recent years that should help to draw problems in individual sustainment products to senior management attention. 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. 5.42A design guide for the establishment of the Centres of Expertise has been produced and initial establishment of these centres is scheduled for April2017, with the establishment of a balanced matrix expected to be over a two-year period.158. 0000001615 00000 n Smart Sustainment was showing significant stress. The report also acknowledged that contract amendments were made to introduce a revised performance management regime. The CASG Cost Principles apply to all procurements. trailer 1.1Defence materiel sustainment is about the maintenance and support of Defences fleets of specialist military equipment. 5.10The ANAO considered how Capability Acquisition and Sustainment Group is managing the reform process, including by the extensive use of industry expertise. Edge A target expenditure cut of five per cent of sustainment costs over a financial year was set by the Chief Executive Officer of the DMO in February2008. In this context any proposal for new reporting requirements will need to consider if the new information might be aggregated to disclose classified information on capability readiness and availability.. 5.3Otherwise, the report does not discuss sustainment as a topic separate from the acquisition stage of the equipment lifecycle.
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