Background
1.1
The Department of Defence defines sustainment as:
The provision of the appropriate goods and services required to achieve readiness and sustainability goals for the life of the Defence Element. Defence Sustainment involves the provision of in service support, including repair and maintenance, engineering, supply and replacement parts, configuration management and disposal action.
Sustainment can apply to platforms (ships, aircraft, vehicle fleets), commodities (clothing, combat rations, munitions) or services (calibration, provision of maritime target ranges).
1.2
Table 1 below outlines forthcoming sustainment budgets in comparison to acquisition budgets.
Table 1.1: Capital Investment Program and Capability Sustainment Program
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Acquisition
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11,601.7
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12,912.1
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14,033.6
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15,984
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Year on Year Growth
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1,310.4
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1,121.5
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1,950.4
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Year on Year Growth (%)
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11.3%
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8.7%
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13.9%
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Growth against 2017-18 Baseline
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1,310.4
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2,431.9
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4,382.3
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% Growth against 2017-18 Baseline
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11.3%
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8.7%
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13.9%
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Sustainment
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9,474.2
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9,931.9
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10,743.4
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11,508.3
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Year on Year Growth
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457.7
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811.5
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764.9
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Year on Year Growth (%)
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4.8%
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8.2%
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7.1%
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Growth against 2017-18 Baseline
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457.7
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1,269.2
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2,034.1
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% Growth against 2017-18 Baseline
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4.8%
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13.4%
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21.5%
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Percentage of Sustainment to Acquisition
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82%
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77%
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77%
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72%
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Source: Department of Defence, Submission 1.1, p. 1.
1.3
This summary of a portion of Defence’s submission outlines how the sustainment process is managed by Defence.
The sustainment phase of military assets commences just before or around the declaration of initial operational release. Activities include routine sustainment work and obsolescence management, managing any changes to preparedness levels, and the incorporation of pre-planned technology refresh activities or upgrades to maintain capability relevance. The effective sustainment of capability is crucial to maintain the preparedness of the Australian Defence Force (ADF) and to enable the conduct of Defence operations.
For the vast majority of Defence’s military assets, CASG is responsible for ensuring the management of the acquisition of ADF capital equipment and the sustainment of these assets throughout their in-service life and disposal. Decisions in particular about in-service requirements and priorities are decisions made by the Capability Manager in consultation with CASG.
The CASG Systems Program Offices (SPOs) serve as the single point of contact with industry, other government entities and with the Capability Manager partner. Generally, each major platform – such as an aircraft type or class of ship will be managed by a single SPO.
Since 2005 Materiel Sustainment Agreements (MSAs) have been used as customer–supplier agreements to formalise the relationship between the Capability Manager and CASG. MSAs outline governance arrangements, respective roles and responsibilities, sustainment deliverables, performance reporting and monitoring arrangements, sustainment issues and risks, and dispute resolution procedures. They facilitate the effective and business-like relationships by setting out the level of performance and support required and have Key Performance Indicators (KPIs) by which service delivery is measured.
Capability Managers undertake formal and informal reviews of sustainment performance, then through consultative mechanisms with the CASG reprioritise sustainment funds to maximise capability outcomes. Capability Managers bid to the Enterprise Business Committee for the in-year sustainment budget, providing transparency of individual sustainment products funding.
Conduct of the Inquiry
1.4
In 2015 the Joint Committee of Public Accounts and Audit (JCPAA) noted that sustainment expenditure accounted for more than $5 billion per annum and that this figure was expected to rise further in the future. The JCPAA recommended that the reformed Department of Defence, following implementation of the First Principles Review, provide the same level of priority and resources to the Defence Major Projects Report and the future development of sustainment reporting.
1.5
On 30 November 2016, the JCPAA resolved to conduct an inquiry into any items, matters or circumstances connected with Defence Sustainment Expenditure, readopting an inquiry which had lapsed following the prorogation of the 44th Parliament. On 21 June 2017, the Committee then resolved to conduct an inquiry into Auditor-General Report No. 2 (2017-18) Defence's Management of Materiel Sustainment.
1.6
As discussed in detail in Chapters 2 and 3, the Committee noted the following issues:
a clear read of both financial and descriptive performance information via Defence’s public financial reporting documents is an important accountability measure
continued refinement of Defence’s external reporting and periodic ANAO reviews of this reporting constitute the most cost effective way of improving sustainment reporting
while the Committee acknowledges Defence’s sensitivity in balancing sustainment reporting with national security considerations, the Committee remains of the view that appropriate parliamentary scrutiny of sustainment activities and expenditure is both necessary and defensible
it is difficult to determine a clear divide between project acquisition and sustainment, but moving to a whole-of-life costing model may provide a better understanding of total asset cost
changes arising out of the First Principles Review continue to be pursued, and Defence has placed a moratorium on further reviews to ‘bed in’ reforms
Defence’s engagement of Bechtel to provide services to support First Principles Review implementation did not occur through performance based contracting or a competitive process
the reform process of Systems Program Offices continues, and Defence has committed to a regular review cycle to continue to drive reform and efficiency
Defence is proactively moving away from a transactional work approach to staffing towards a supervisory or governance role
Systems Program Offices were not sufficiently prepared to undertake Smart Sustainment Initiatives, and $360m of ‘investment funds’ to drive initiatives were unaccounted for
the move from Quarterly Performance Reports to Monthly Reporting are expected to improve the timeliness and accuracy of sustainment reporting to the Secretary and Minister
the reintegration of the former Defence Materiel Organisation back into Defence is bearing positive cultural effects, with no delineation between Defence and the Capability, Acquisition and Sustainment Group (CASG), and with project management becoming the responsibility of Capability Managers, rather than CASG.