Kim Gillis: I think pretty well. Like any large organisation going through a significant reorganisational change, where you’re putting a new layer of management in there, there is going to be a bedding down period but that actually happened relatively quickly. Warren will probably talk himself about the programs but I think the fact that we now have a very senior project manger, program manager, providing that mentoring and coordinating advice over the top of the major programs, the ACAT 1 (Acquisition Categorisation levels), probably predominantly the ACAT 1, our really super programs, has been invaluable and it really does. You just don’t get that experience and we’ve got so many new projects coming up and you just need somebody to provide that mentoring and advice.
In Systems Divisions, my main task is to get the standardisation because we’ve traditionally had four divisions, we’ve now grown to six divisions with Explosive Ordinance and the Helicopter Systems Division. Each of our divisions has an area of expertise, there’s an area that they’re really strong in. My strategy is to get that area of expertise and that strength and then to get that pushed across the other divisions. I don’t think there’s too many things, new things we need to do, it’s just making sure that we do the things now better and more consistently.
ADM: So what differentiates a project being Warren King’s Programs Office rather than being in the Systems Office?
Warren King: Fundamentally, we use the ACAT Categories. Basically if its a big project at ACAT 1 Level and it has significant national interest, it’s likely to be under the programs office, but it’s not a hard and fast rule. Let’s look at the C17s. It was a big program in terms of dollars but it was a production line procurement. There was a lot of work that had to go on around that, I’m not diminishing that in any way, but it wasn’t necessary to come under the major programs.
Kim Gillis: It comes down to the complexity of the project as well.
ADM: Has the sale of Tenix Defence to BAE had any impact on the LHD Program?
Kim Gillis: I’ve recently been working with both Tenix and BAE and with Navantia to make sure that that process is finalised and we are all but through that process. I don’t believe it’s had a negative effect on the overall program but anytime that you have a change of ownership in an organisation there will always be a transitional period. There are periods where you don’t have absolute certainty in the way ahead.
So there are some short-term issues that we have to deal with; in the longer-term I see that there will probably be some benefits there. But overall it’s one of those things which has been managed well and I’m not overly concerned about it. It’s one of those projects where the LHD now works with Warren, as it is one of those nationally important programs.
Warren King: We expect both companies to pay attention to their projects during this period and we’ve made that very clear to them and we’re watching them closely. But I think what Kim says is right. During this change there is always a point in which you could lose a little bit of focus if you weren’t watching it closely.
ADM: How is the LHD project sailing at the moment?
Warren King: It’s going well. With the acquisition of Tenix by BAE there was a number of processes that had to be put in place, which included an overarching Deed on the sale process that the CEO had to agree to and put on record for the Foreign Investment Review Board. So that’s all gone well. Going back to the selection of the LHD in that two pass process, we set up the project for a success anyway with selection of a platform that’s obviously very capable and a company in Navantia in Tenix who are well attuned to deliver that capability. But having said that, I think one thing that we are doing consistently is analytically and objectively reviewing program risks and taking action where necessary.
We know these projects are complex and one of the mistakes we’ve made in the past is we’ve not really told the taxpayer as clearly as we should how challenging these projects can be. I think the Australian public would appreciate understanding the challenges.
They are big ships but we’ve selected the right partners in LHD, AWD, and those issues should be able to be managed. I think they’ll be stories similar to the ANZAC Ship project or the MineHunter Coastal Project, which by, anybody’s measure, were internationally successful projects. But we’ll keep working at it.
Kim Gillis: Because of their complexity, you can never stop being concerned or stop looking at them. The risk doesn’t just go away. It’s very different to everything that’s in Warren’s environment and that’s why you’ve got a three-star equivalent managing those super programs. They are always needing review, constantly needing attention, because of the nature of their complexity and we would be naïve to say that any of them are all perfect. There’s always going to be issues because of the nature of the complexity.
ADM: Are there any plans to have DMO or RAN personnel seconded to Navantia or Spanish Armada to observe the completions, trials and introduction?
Warren King: They’re already over there. We have Captain Steve Goodall, who’s based in Spain at the moment. He’s been there for six or seven months already. He’s an ex-skipper of one of the LPAs; he took HMAS Manoora into Aceh, so he’s probably one of our most experienced amphibious warfare captains. He’s also going to take over as the Commander of Amphibious Task Force in six or nine months time when he actually comes back. So we’ve actually done some really smart things in that we selected him straight off at LPA as a ship’s captain, we put him into Capability Development to do the developmental work for the LHDs. We then, as soon as we got him into selection, posted him to Spain to follow that through for the first 12 months and then which he’ll then take over the Amphibious Task Force as the Operational Commander of that amphibious fleet.
So we do try to steer some of the military officers through those because it keeps the continuity.
Warren King: We also have Captain Steve Tiffin there on the AWD project, and he worked in the AWD team back here in the original design studies phase when we were looking at both evolved and existing designs. He was very much a part of that and now he’s transitioned into the AWD Alliance team and is participating in the development of the detailed design for the Hobart Class.
Kim Gillis: All of the people that are based in Spain now have had lots of experience with the development of the program. We invested people very early, basically as soon as the contract was signed we started the process of actually moving a team into Spain. Some people said that was early; my view is that you can never be too early to actually start understanding the culture and getting people in the shipyard. A lesson learnt from the UK Acquisition Organisation when they were building equivalent ships, is that you needed to get people in the shipyard as early as absolutely possible, and so we’ve done that.
ADM: How is the DMO’s professionalisation process going? What measures are you using to track its effect on the DMO’s project management?
Kim Gillis: We’ve got 107 project managers who achieved their certification, Certified Practising Project Managers, CPPM. We’ve also got over 600 trained with the Australian Institute of Project Management (AIPM) Certification – this is in the project management work. If you go back five years there was probably only a handful of certified project managers in the DMO. We now have greater than 600 who have achieved independent external certification, predominantly at the master project director level, which is the highest level that the AIPM has.
That master project director standard, is a good base but some of the work that we do within DMO is so complex and is such a high level, you start looking at a master project director, the competencies there, as opposed to somebody running an air warfare destroyer – two totally different levels. We’ve actually been working closely with the AIPM to establish an executive project director level, and we’ve also set up our own certification framework where to become a Certified Practising Project Manager at level one.
We’ve also established the International College of Complex Project Managers, which is an organisation which DMO was the founding sponsor. It brought together 20 of the most senior project managers in the world to set up a college. It’s already underway and will be formally opened in Italy in November this year at an international forum.
It’s doing independent research; it’s looking at the how behind really large defence or even industry projects. It isn’t problems that just occur with us, they’re problems that are universal and what we’ve got to try and work out is how do we learn from other countries? We might have within Australia, those truly really big ACAT 1s, have 5-10 of those in a generation. In America you might have 100 or 200 in a generation, and in England you might have 20 or 30.
Warren King: We are following a similar model for the sustainment area as well. We started looking at this area of our business probably 18 months ago, which has been fortuitous because sustainment represents about half our budget. We’re not just talking about technical program management but contracting skills, legal skills, financial skills is also part of that. But we’ve looked at professionalising the logistics domain and we’ve got a professionalisation program going there as well and it’s following very much the model of the groundbreaking work that Program Management’s done.
The biggest difficulty we probably have there at the moment is finding a civilian organisation the equivalent of AIPM which we can align ourselves to because our world of logistics is just so complex, you know, getting something from somewhere into a battle zone for example; it’s hugely challenging and then we support platforms from brand new all the way up for 35 years and so getting your spares buyer rights, storing them efficiently and everything is a huge challenge. But we’ve got this professionalisation framework. It’s very important because we’ve taken on this efficiency challenge this year and so having the sustainment people, the logistics people have responded really positively to that.
ADM: Schedule slippages appear to be the DMO’s main enemy. Greg Combet cited a figure of 53 per cent are due to industry concerns. How do you see the Government and the DMO addressing this?
Kim Gillis: A couple of things. Let’s look at Skilling Australian Defence Industry. A lot of it comes back to either we don’t have the resource, we don’t have the skilled staff, or we don’t have the technical competence, so we’re participating in that with the Government to make sure that we’re skilling those people. We have almost 11,000 people in 40 companies involved; another eight are on the pipeline and are about to join us, so that’s 48 companies across the defence industry.
Also one of the things that I’ve been working with a lot of the CEOs is making sure that we have accurate schedules when we contract. We put something in the DCP that says I want a ship delivered by – or an aircraft or a tank – delivered by 200X; it appears to be highly coincidental that when we receive our industry submissions, that everybody can achieve those dates.
One of the words that Warren uses is that there’s a conspiracy of optimism; everybody thinks that we can get something done. One of the things that I’ve asked my project managers to do is to make sure that we actually go in and have a look at those schedules to make sure that they are truly executable. Do they have the right level of contingency? Have they taken into consideration all of the different things? All the normal aspects of normal program management planning, are they are actually there? And the other one is also to say that we should be giving a greater emphasis in our selection processes on the quality of the schedules that were actually given.
Sometimes over-optimism is actually the thing that kills us the most, and as the Parliamentary Secretary has said: ‘When we actually look at our historical cost metrics over the last ten years, there is no significant issue or there is no issue in respect to cost. We have outliers where we do exceed price or cost on some occasions, but predominantly over 10 years, 230 plus projects, we are actually under our original budgets.’ Schedule is a significant problem.
Warren King: One of the things we’ve looked at is the very fine balanced position where we try and deliver as soon as practical for the military. They want the capability, they need it, but balancing that with what’s feasible, and more than anything, is what is the impact on delivery of Australianisation or new design. I’ve produced a bit of a graph that we’re talking to our military folks about which is from an operational point of view the military often want, need additional capability and we’ve got to get – we, that is we in DMO, in defence – have got to get more accurate about predicting what the impact that is, particularly on schedule for those unique capabilities that we need.
We’re not in the position of judging whether that’s needed or not; that’s very much a military, whole of department issue. But we need to be able to be competent enough and experienced enough, supported by good schedules or understanding international benchmarking; to be able to say to the military folk, ‘Look you can have it, of course, but this is what the impact of that is’ and it’s important that we do that so that they make informed decisions because – and I’ll just pick an example – let’s say that tailoring a solution. Australianising it adds let’s say three years to the schedule; the decision from the military about whether they would prefer off-the-shelf earlier or that Australianisation one later might be influenced by that number. It may be very much ‘No, we can’t wait, therefore we’ll go this way’ or do the other.
So it’s very importantly for us in DMO is that we are able to articulate for Defence the impact of those decisions accurately.
Kim Gillis: As the time gets closer to delivery, actually then give the military regular updates. So one of the things we’re moving to is to ensure that we have a reasonable level of schedule contingency at the start as we do with cost. We have our financial contingency, we should also have a schedule contingency but as it gets closer, as you de-risk the program you should be able to get down to a more definitive date and a more definitive cost. That’s normal project management practice.
ADM: The UK has a Smart Acquisition program where there is a throughlife sustainment oriented approach to acquisition rather than concentrated the resources on the initial procurement. Do you think this is an approach that Australia could benefit from?
Kim Gillis: We’re doing it now. I can talk from my own experience on the LHD program that probably one of the significant areas that we looked at in the evaluation was the actual throughlife cost, not just the throughlife cost of sustainment but the throughlife benefit: what’s the cargo capacity, what’s the fuel capacity, what’s the burn, what’s the maintenance cost, what’s the crewing levels.
Going back to even at the start of the Armidale Acquisition, which is probably when it started really embedding itself, and that’s going back now five or six years, it’s getting to the stage where those evaluations were made on not just the acquisition cost but the whole of life cost and I think that it’s a much more logical way of looking at it.
Warren King: We spend about six times the acquisition price on sustaining a product and broadly speaking that’s pretty efficient actually. The Queen Elizabeth spent 15 times its acquisition price in refits and maintenance in its life.
ADM: How do you see Public Private Partnerships and Private Finance Initiatives fitting in to the sustainment and throughlife support of DMO in the future?
Kim Gillis: I have seen some really good examples of public private partnerships working really well and I’ve seen areas where it just isn’t logical and if you look at across our business, we have a complete spectrum. There are obviously areas that are going to be very fruitful for public private partnerships and we should be following those with vigour. There are other areas that industry won’t be willing to take on the risk or if they can’t get insurance for, or are going to price in risk so much that it doesn’t make any sense for us to do that, but there are obviously things that are logical and appropriate.
I know it’s something that David Mortimer is actually looking at and I’ll wait with interest to see what his proposal is and I know that Government, and particularly the Parliamentary Secretary, is very keen on public private partnerships.
ADM: At the end of the day, what can industry do to make your life easier?
Kim Gillis: I think we all have to move away from the conspiracy of optimism. We have to be very genuine about when we can deliver things, what they’re really going to cost and what the real risk is. This is the challenge: you can read any audit office paper from any major country in the world that deals with defence acquisition and they’re all identical. We’ve got to get to a level of realism and that’s the culture that we need to drive in.
I obviously want them to be very realistic with their schedules and tell us early – this is one of the critical things – because as the supplier to the ADF, I need to be able to tell them as early as practically possible when there’s going to be a schedule issue and I also need to be able to tell government when there’s either a schedule or a cost issue there. So honesty upfront as early as practically possible, but other than that I’m very impressed with a lot of the CEOs and a lot of the senior managers in industry and one of the things that I’ve been working very closely with a lot of them is to make sure that our relationship is strong.
We’ve got to expect that when we ask them to do something, that they’ll tell us the truth and that we can expect that when they’re going to deliver something, it’s going to be delivered. And that really is a critical next step. I can generally say I do trust a lot of the CEOs out there but what they’ve got to do is they’ve got to work that through their organisation as I’ve got to work that through mine.
Warren King: For the good of the country we’ve have to – between us, between Defence, DMO and industry – I’ve called it moving the debate. The perception of the public about defence projects is far less than it ought to be. It’s not a matter of spin-doctoring or anything else; it’s having the debate in a place that’s more reasonable than where it’s currently being held. We need to move the strategic understanding of where we are. That means frankness with government, frankness with the tax payers, and I would really like Defence to join DMO on that journey, of both promoting the advantages of doing the business here, the challenges of doing the business here and then frankness when we have issues.
If I look at nearly any issue around the world that’s backfired on organisations, it’s usually not the issue. It’s how the issue’s been dealt with and if we can just learn to deal with it the debate will be much more informed.
We’re saying one thing internally now, Kim and I, there’s probably only one real sin in program management and that’s not declaring the true state of your project; that your project gets into trouble, that you’ve got challenges. We’re all going to do that; none of us are here because we have the perfect life. But the real sin is not responding to it adequately, and adequately means telling management; us. Our response in return to our people in industry is to deal with that fairly, not to create a massive beat-up over it but understand we’ve got a problem and then work together to solve it; explain it to the secretary and CDF and the service chiefs; explain it to government; explain it to the public. And I just can’t believe that the public’s that lacking of interest in the nation that they would treat that badly and I think they will deal with it.
ENDS