Editorial: Use it or lose it | ADM August 2011
Gregor Feguson | Sydney
Shortly after the previous edition of ADM closed for press the CEO of the Defence Materiel Organisation, Dr Steve Gumley, retired at short notice from the Australian Public Service. ADM wishes to take this opportunity to pay tribute to a man who dared mightily in taking on the challenge of reforming Australian defence acquisition.
Dr Gumley made a determined effort over seven years to professionalise and modernise a large, complex public service organisation to whom the rest of the Department of Defence has largely abdicated its responsibility for capability acquisition and defence industry policy.
In spite of a greatly improved performance dealing with some of the toughest project management challenges in world, the DMO still cops much of the blame for everything that goes wrong but isn’t always given the power to change the things that would make them right. Dr Gumley did as much as anybody could to reform the DMO and his achievements deserve lasting respect. However, at the time of writing it appears possible his reforms will be overturned, or at least undermined, by fundamental changes in the organisation yet to be announced by Defence Minister Stephen Smith.
The DMO uses the relatively limited suite of tools at its disposal to control risk and achieve project performance. These tools allow Defence little freedom to ensure industry’s capacity and skills base are aligned with Defence’s demand for goods and services.
At the D+I Conference 2011 Dr Gumley stated that one of the issues that continued to keep him awake at night was skilling – specifically industry’s skill levels and general capacity to deliver and sustain the ADF’s capital equipment.
The DMO has sought to address the skills shortfall through mechanisms such as the highly regarded Skilling Australia’s Defence Industry (SADI) program; this has been successful so far as it goes, but it doesn’t address an issue striking at the very heart of industry’s capacity and proficiency.
As ADM and other have repeatedly pointed out, the stop-start nature of Defence’s project-based acquisition program provides no continuity, no firm base on which to build and sustain both individual and collective skills and to create genuine capability. To take one topical example, training hundreds of welders doesn’t in itself create a competitive shipbuilding capability.
Experience and specialist domain knowledge, both in the blue collar workforce and the engineering and management teams, are vital. These take time to grow and require constant nourishment. If there’s no continuity between projects these expensively created skills simply die away and then need to be recreated all over again in the future. Industry’s skills are like everybody else’s: if you don’t use them, you lose them.
There is a disconnect between Defence’s rhetoric and industry’s reality, and although Dr Gumley has been the mouthpiece for much of the rhetoric the disconnect arises from a fundamental policy position that the DMO cannot change by itself.
If industry’s skill levels and capacity are of such concern then Defence should honour the commitments in its Defence Industry Policy Statement and manage demand in such a way that both defence and industry can grow individual and collective skills and sustain and expand them through successive projects.
However, this would require somebody to convince Defence, the Treasury, Department of Finance and the Federal Cabinet there is a clear link between industry proficiency (and efficiency) and reduced project and sustainment risk.
Achieving this would force them to make a value judgement. They would need to compare the relative benefits of a blindly competition-driven business environment, which requires little professional or technical judgement but perpetuates inefficiencies in a small monopsony market, with a less authoritarian approach which accepts some inefficiencies in the market mechanism but arguably delivers greater overall efficiency in project and capability delivery.
As defence projects become more complex (think AWD, think Future Submarine, think Land 400) the challenges of delivering and then sustaining these capabilities will grow, and so must industry’s ability to respond. An acquisition policy which acknowledges the need to grow industry’s skill levels and capability in the short term but then refuses to implement a practical mechanism for nurturing them in the longer term is both intellectually dishonest and an unaffordable indulgence. Worse – it looks like a lazy contradiction that smacks of government contempt for the defence industry and for the taxpayer.
While we still await official announcements on the future of the DMO there’s little confidence among industry folk that the changes we are all anticipating will change the current situation for the better.
Subject: ADM Editorial