Katherine Ziesing | Canberra
The Australian National Audit Office has taken a look at how Defence spends its multi billion-dollar sustainment budget and concluded that in essence, it’s good, but not great.
“Effective sustainment of naval, military and air assets is essential to the preparedness of the ADF and to enable Defence to conduct operations,” the report begins. “Defence spends similar amounts each year on sustainment and the acquisition of new equipment. In 2015–16, Defence spent $6.3 billion—21 per cent of its total departmental expenditure—on the sustainment of specialist military equipment.”
As many readers know, Defence has been under a constant reform program, with the organisation not really having the time between reform cycles to give changes time to bed down - a concept formally acknowledged in the First Principles Review (FPR). The ANAO report also acknowledges this, but notes that “the fundamentals of Defence’s governance and organisational framework for the management of materiel sustainment are fit-for-purpose. However, Defence continues to address specific operational shortcomings and there remains scope for Defence to improve its performance monitoring, reporting and evaluation activities to better support the management and external scrutiny of materiel sustainment.”
ASPI’s Andrew Davies has also lamented the lack of publicly available material that was once provided in the annual report but has since disappeared from view.
The report also takes a not so subtle dig at CASG’s Smart Buyer framework and implementation of the FPR recommendations.
“Reforms to the management of sustainment flowing from the FPR remain at an early stage, and this stream of activity is likely to take much longer than the expected two years. For example, the Systems Program Office reviews are not yet complete and Defence has provided no evidence that decisions have been taken on changes to their structure and functioning.
“Defence has engaged industry expertise to guide and help it with the First Principles reforms relating to acquisition and sustainment, including $107 million with a single company where the contract for services is not performance-based. Reform is expected to lead to greater outsourcing of functions currently performed in-house by Defence’s Systems Program Offices (SPOs).”
A project to reform and consolidate Systems Program Offices is currently underway, with 24 out of 64 SPOs (37.5 per cent) reviewed as of February 2017. As CASG head Kim Gillis has previously explained to ADM, the review is a three year program and does not cover SPOs which were examined during the Strategic Reform Program (SRP).
The ANAO was also critical of the alleged savings under the Smart Sustainment program, which began in 2008.
“Smart Sustainment had a 10-year savings target of $5.5 billion,” the report says. “In its 2014–15 Annual Report, Defence claimed to have achieved $2 billion of savings from the initiative in its first five years. Defence has not been able to provide the ANAO with adequate evidence to support this claim, nor an account of how $360 million allocated as ‘seed funding’ for Smart Sustainment initiatives was used.”
The report made two recommendations: that Defence institutes a risk-based quality assurance process for the information included in the Defence Quarterly Performance Report and develop and implement an evaluation plan to assess the implementation of the recommendations of the FPR. Defence has agreed to both.