Laura Rayner, Foreign Affairs, Defence and Security
Section
Genesis and aims
The next Senate Estimates Committee hearings on the
2010–11 Defence Budget will be an opportunity for the
Parliament to examine the progress made during the first year of
the Defence Strategic Reform Program (SRP). The aim of the SRP is
to reform Defence business processes and practices over the next
decade, allowing resulting savings to be reinvested within the
Defence portfolio.
The SRP was introduced in 2009 as a key element in the Rudd
Labor Government’s financial plan to fund the objectives of
its 2009 Defence White Paper, Defending Australia in the Asia
Pacific century: Force 2030. The May 2009 publication which
outlined the SRP, The Strategic Reform Program 2009: delivering
Force 2030, lists its three key elements: improved accountability,
improved planning, and enhanced productivity.
The aims of the SRP include $20.6 billion in gross savings (cost
reductions) to help fund Defence’s planned capital investment
and to remediate previously underfunded areas. Defence estimates
that reform implementation will cost $2.404 billion, resulting in a
planned net saving of $18.258 billion by 2018–19. On its SRP
webpage, Defence candidly states that if it does not achieve the
reforms set out in the SRP, it will not be able to ‘deliver
the organisation that can deliver and sustain Force
2030’.
The SRP, which is now in its implementation phase, is a complex
and ambitious program. In an April 2010 publication, The
Strategic Reform Program: making it happen, Defence estimates
that it will take between two and four years for the benefits, cost
reductions and savings opportunities of the SRP’s 15 reform
streams, and the more than 300 associated initiatives, to
‘fully mature’.
The Savings Streams and their targets
The Savings Streams and their gross savings targets, are listed
in the April 2010 publication. These figures differ, sometimes
markedly, from the original 2009 estimates, and one particular 2009
stream, Inventory ($0.71 billion), is no longer listed
separately.
The Non-Savings Streams
The Non-Savings Streams aim for more efficiency and
effectiveness rather than for direct cost reductions. They are
described in detail in the 2009 and 2010 documents, as well as in
the information sheets on the SRP webpage:
- Strategy and Planning (establishing a five yearly Defence White
Paper cycle and a strengthened Defence Planning Guidance
process)
- Capability Development Process (providing a more informed basis
for government decisions and streamlining the decision making
process)
- Procurement and Sustainment (Mortimer Review) (imposing
commercial discipline on procurement and sustainment processes, and
making the Defence Materiel Organisation more business-like)
- Preparedness and Personnel and Operating Costs (increasing
understanding of the cost of preparedness for military operations,
including the costs of readiness and sustainability)
- Output Focused Budget Model (improving accountability and
management of resources, including improved visibility of the cost
of goods and services)
- Intelligence Human Resources (HR) and Information
Communications Technology (ICT) (consolidating the management of HR
and ICT across the Intelligence and Security Group by providing
scope for centralisation, integration and collaboration)
- Estate (improving management of contracts and service
delivery), and
- Science and Technology (‘future proofing’ Defence
by ensuring that its science and technology capabilities match its
future needs).
Progress
In evidence to a Senate Budget Estimates hearing on 31 May 2010,
the Secretary of the Department of Defence stated that Defence was
‘on track to deliver the $797 million in cost reductions
programmed for this year’, and ‘well placed to achieve
the target of around $1 billion in cost reductions for
2010–11’. In his evidence, the Secretary listed three
cost reductions making up $484 million of the $797 million target
for 2009–10: $263 million for Smart Sustainment; $172 million
for non-equipment procurement cost reductions (e.g. travel and
training); and $49 million for communications technology.
How should success be measured?
Mechanisms have been set up by Defence to keep track of the
SRP’s progress (e.g. an advisory board, and regular
monitoring). However, the success of the SRP could be difficult to
gauge, especially for those outside Defence. Over half of the
initiatives are not targeting direct cost reductions, but aim to
promote a cost-conscious and business-like cultural change across
the Defence organisation. There is also little indication on the
public record of how any actual cost reductions will be measured or
reported over the next decade, and no guarantee that the method
used will remain consistent and thus allow valid comparison.
According to the Australian Strategic Policy Institute’s
2010–11 Defence budget brief, The cost of Defence,
the success or otherwise of previous Defence programs in increasing
efficiency and reducing costs has not been easy to measure or
possible to verify.
Parliamentary accountability
Given the vital importance of the SRP to future defence
planning, and the scope, scale and complexity of the program, the
new parliament could expect that Defence would be ready to provide
it with easily accessible and comprehensive information on the
progress of the SRP. This information should be made available to
the parliament and its relevant committees in sufficient detail,
and with sufficient clarity and frequency to enable parliament and
taxpayers to be assured that Defence is achieving its SRP
targets.
Library publications and key documents
Department of Defence, The Strategic Reform
Program 2009: delivering Force 2030, Department of Defence,
Canberra, 2009, http://www.defence.gov.au/publications/reformBooklet.pdf
Department of Defence, The Strategic Reform
Program: making it happen, Department of Defence, Canberra,
[April] 2010, http://www.defence.gov.au/srp/docs/srp.pdf
Parliamentary Library, Budget Review
2010–11, Research paper, no. 17, 2009–10,
Parliamentary Library, Canberra, 2010,
http://www.aph.gov.au/library/pubs/RP/BudgetReview2010–11/DefenceSRP.htm
M Thomson, ‘Chapter 5–Strategic
Reform Program’ The cost of Defence: ASPI Defence Budget
brief 2010–11, Australian Strategic Policy Institute,
Canberra, 2010, pp. 131–158,
http://dpl/Ejournals/ASPI_TheCostOfDefence/2010-2011.pdf