1. Overview of the 2022-23 Major Projects Report

Introduction

1.1The Major Projects Report (MPR) is prepared jointly by the Department of Defence (Defence) and the Australian National Audit Office (ANAO), at the request of the Parliament. This is the sixteenth annual MPR.[1]

1.2The objective of the MPR is to improve the accountability and transparency of Defence acquisitions for the benefit of Parliament and other stakeholders. It informs parliamentary scrutiny and broader discussions on major Defence acquisitions. Defence major projects are characterised by their high cost and the fact completion within budget, to schedule, and to the projected capability, continues to be a challenge. Defence acquisitions typically also have significant industry and employment implications. Further, matters of defence acquisitions and capability are increasingly important given the rapidly evolving strategic environment in our region.

1.3At 30 June 2023, Defence was managing 609 major and 93 minor acquisition projects, with a total acquisition cost of $190 billion. The total approved budget for the 20 major projects included in the MPR (see Table 1.1) is approximately $58.6 billion, 30.8 per cent of the total acquisition budget.[2]

1.4The MPR is prepared according to the Major Projects Report Guidelines (the Guidelines), which are approved annually by the Joint Committee of Public Accounts and Audit (the Committee). It contains four parts:

• Part 1—Review and analysis by the ANAO
• Part 2—Department of Defence MPR
• Part 3—Independent Assurance Report by the Auditor-General, Statement by the Secretary of Defence, and Project Data Summary Sheets (PDSSs)
• Part 4—MPR Guidelines.

Conduct of the inquiry

1.5The Committee adopted the Inquiry into the 2022–23 Major Projects Report on 29February 2024, with terms of reference to consider any matters contained in and associated with the MPR. The inquiry was to also make specific consideration of the scope and Guidelines that underlie the MPR, and assess whether the MPR process continues to provide appropriate transparency and accountability to the Parliament in relation to Defence’s capability acquisition expenditure, and whether it remains fit for purpose into the future.

1.6The inquiry received 1 submission, and 3 public supplementary submissions containing responses to questions provided in writing by the Committee or taken on notice at the public hearings. The Committee held two public hearings in Canberra and by videoconference on Wednesday, 24 April 2024, and in Canberra on Friday, 28 June 2024.

1.7The list of submissions and supplementary submissions is at Attachment A. Witnesses to the public hearings are listed at Attachment B.

Report outline

1.8Chapter 1 of the report discusses briefly the history of the MPR, and provides an overview of the ANAO’s analysis, covering Defence’s cost, schedule and capability performance. It then discusses the Auditor-General’s qualified conclusion and emphasis of matter.

1.9Chapter 2 addresses the issues examined by the Committee during its inquiry, including: growing secrecy and the need to maintain transparency; Australian Industry Capability plans; the implementation of Defence’s risk management system; contingency statements and the continuing misalignment of contingency allocation with identified risks; and the use of terminology.

1.10Chapter 2 also examines scope creep in the context of the relationship between capability managers and delivery managers; discipline in the inclusion of off-the-shelf options in Defence procurements; the accuracy of the Battlefield Command System PDSS; and the future of the MPR.

Background

History of the MPR

1.11The need for transparency and accountability has always been at the heart of the MPR process. The broad outline of the MPR was first discussed in the Committee’s 2008 report, Progress on equipment acquisition and financial reporting in Defence (Report 411). In that report, the Committee expressed its views on transparency in defence acquisitions:

One of the major frustrations the Committee experienced during this inquiry was an absence of clear, consistent and precise information on which to make an assessment about the status and history of troubled acquisition projects.

A lack of transparency around Defence acquisition projects is not a recent phenomenon.[3]

1.12The Committee noted, in particular, the following issues when examining progress on Defence acquisitions: the use of ambiguous and inconstant language such as ‘military-off-the-shelf’, ‘legacy project’ and ‘pricing’; the need for a holistic approach that distinguished between delivery of equipment and delivery of capability; the necessity to monitor projects over ‘whole of life’ particularly as difficulties with projects tended to appear toward the latter stages of an acquisition; and an acknowledgement of context, specifically, the impact the capacity of industry had on project progression.[4]

1.13The initial structure of the MPR, examined in Report 411, was proposed by the ANAO, in consultation with the then Defence Materiel Organisation. It was modelled, in part, on the Ministry of Defence and United Kingdom National Audit Office Major Projects Report, which existed at that time.[5]

1.14In its first MPR report in 2009, examining the 2007–08 MPR, the Committee stated ‘the aim of the MPR is to provide the Parliament and the Australian public with accessible, transparent and accurate information about the state of Defence’s major acquisitions projects while these projects are still in train’.[6]

Transparency and accountability in Defence reviews

1.15The interrelated issues of transparency and accountability for Defence acquisitions have also be raised in other reviews, broadly in the context of failures in Defence procurement processes that increased costs and delayed projects. For instance, the Defence Procurement Review 2003, known colloquially as the Kinnaird review, stated any model for Defence capability acquisitions ‘must be transparent and accountable’.[7] ‘The practical consequences of how well these tasks have been performed can be measured in terms of the protection of the nation’s interests and the safety of its front line defence personnel’.[8]

1.16A key preoccupation in Going to the Next Level: The Report of the Defence Procurement and Sustainment Review, the Mortimer review, was also greater transparency and accountability across many aspects of Defence procurement.[9] It cited two projects, in particular, where scope creep and poor commercial practices had resulted in the defence force being ‘left waiting for capability that it needs, and … Australian taxpayers … [having] no result for their investment. This is plainly unacceptable’.[10]

Conduct of the MPR review

1.17The ANAO’s review of the Defence PDSSs (part 3 of the MPR) is a ‘priority assurance review’ under subsection 19A(5) of the Auditor-General Act 1997 (the Act), giving the ANAO full access to the information gathering powers under the Act. The ANAO’s review provides limited assurance, which is a level of assurance that is ‘substantially lower’ than the assurance that would be obtained from a ‘reasonable assurance’ engagement, such as a performance audit. The nature and scope of the procedures performed, and the supporting evidence required by the ANAO in a limited assurance review differs from that in a reasonable assurance review.[11]

1.18An assurance review is not an audit. The purpose of an assurance review is to indicate the level of confidence one might have in the information that has been reviewed. Assurance reviews can be undertaken to different levels of scrutiny and provide different levels of confidence. In effect, a limited assurance review relies primarily on an agency’s representations and other evidence generated by the agency; it entails a lower level of verification of source documents than would occur in a reasonable assurance review. The opinion expressed from a limited assurance review is typically expressed in negative terms—nothing has come to the auditor’s attention to indicate there is a concern.[12]

1.19The ANAO’s review includes an assessment of Defence’s systems and controls, including the governance and oversight in place, to ensure appropriate project management. The ANAO also seeks representations and confirmation from Defence senior management and industry (through Defence) on the status of selected major projects.[13]

1.20The assurance provided by the ANAO does not extend to all the information in the PDSSs. Certain forecast Information in the PDSSs is out of scope of the ANAO’s assurance review: Australian Industry Capability (AIC), forecast dates, expected capability/scope delivery performance, and future risks.[14] The Auditor-General’s Independent Assurance Report does not provide assurance in relation to this information. However, material inconsistencies identified in relation to the information are considered in forming the Auditor-General’s conclusions.[15]

1.21The ANAO advises the exclusions from the scope of the review:

… are due to a lack of Defence systems from which to provide complete and/or accurate evidence in a sufficiently timely manner to facilitate the review … it is intended that all components of the PDSSs will eventually be included within the scope of the ANAO’s review.[16]

1.22Information on significant events that have occurred after 30 June 2023 is provided in the Statement by the Secretary of Defence, contained in part 3 of the MPR and is included in the scope of the ANAO’s assurance review. Additional insights and context provided by Defence in its commentary and analysis in Part 2 of the MPR is excluded from the scope of the ANAO’s assurance review.[17]

1.23In addition to the formal assurance review, the ANAO has undertaken analysis of the PDSSs, and on some measures, provided longitudinal analysis.[18] The ANAO considers developments in Defence’s acquisition governance processes (Part 1, chapter 1) and undertakes analysis of Defence’s PDSSs. Information and commentary on systemic issues, and in-year and longitudinal analysis for the major projects is contained in chapter 2 (Part 1).[19]

Quality and completeness of PDSSs

1.24As part of the MPR process, the ANAO undertakes a range of educative activities to mitigate errors in PDSS preparation, and Defence is given multiple opportunities to refine the PDSSs before the ANAO finalises its assurance review. The ANAO’s expectation for this MPR was that it would base its assurance review on the third post-30 June 2023 version of the PDSS submitted by Defence.[20]

1.25The ANAO commented that while Defence had implemented a new internal management methodology and quality assurance approach, it nonetheless ‘observed ongoing quality issues relating to Defence’s preparation of iterations of the PDSSs …’[21]

1.26The ANAO found instances where internal project reporting—relating to financial data, schedule milestone dates, quantities of materiel, and risks and issues—was not accurately reflected in the PDSSs even after the third post-30 June version, notwithstanding the fact the ANAO continued to advise Defence of material errors and quality issues. The ANAO stated:

… a number of unresolved material errors persisted in some PDSSs and this has informed the ANAO assurance review and the Auditor-General’s conclusion.[22]

Overview of the 2022–23 Major Projects Report

1.27There are twenty major projects in the 2022–23 MPR: two projects entered the MPR (Advanced Growler and Heavy Armoured Capability),[23] and three projects exited: Future Submarines (SEA 1000 Phase 1B); Maritime Operational Support Capability (SEA 1654 Phase 3); and Battlefield Airlift – Caribou Replacement (AIR 8000 Phase2).[24]

Project		Approved Budget (m)	Slippage (in-year) (months)	Slippage (total) (months)	Lessons*
AIR 6000 Phase 2A/2B—New Air Combat Capability [Joint Strike Fighter]∞		$16,424.6	NFP#	NFP#	Yes
SEA 5000 Phase 1—Hunter Class Frigate Design and Construction [Hunter Class Frigate]∞		$6,148.2	N/A	N/A	No
LAND 400 Phase 2—Combat Reconnaissance Vehicles∞		$5,657.3	0#	0#	No
AIR 9000 Phase 2/4/6—Multi-Role Helicopter[25] [MHR90 Helicopters]∞		$3,654.5	6#	110#	NoΩ
SEA 1180 Phase 1—Offshore Patrol Vessel∞		$3,664.1	-2#	0#	No
LAND 121 Phase 3B—Medium Heavy Capability, Field Vehicles, Modules and Trailers [Overlander Medium/Heavy]∞		$3,399.7	36#	36#	No
AIR 555 Phase 1—Airborne Intelligence, Surveillance, Reconnaissance and Electronic Warfare (ISREW) Capability [Peregrine]		$2,360.2	NFP	NFP[26]	Yes
LAND 907 Phase 2 LAND 8160 Phase 1—Main Battle Tank Upgrade, Combat Engineering Vehicles  [Heavy Armoured Capability]		$2,283.0	NFP	NFP	No
AIR 7000 Phase 1B—MQ-4C Triton Remotely Piloted Aircraft System [MQ-4C Triton]		$2,403.7	0#	66#	YesΩ
LAND 121 Phase 4—Protected Mobility Vehicle – Light (PMV-L) [Hawkei]∞		$1,971.5	12#	12#	No
LAND 19 Phase 7B—Short Range Ground Based Air Defence [SRGB Air Defence]		$1,232.8	0#	0#	YesΩ
AIR 2025 Phase 6—Jindalee Operational Radar Network [JORN Mid-Life Upgrade]∞		$1,288.0	NFP	NFP	No
AIR 5431 Phase 3—Civil Miliary Air Management System [CMATS]∞		$1,010.0	0#	57#	No
LAND 200 Tranche 2—Battlefield Command System∞		$971.4	NFP#	NFP#	NoΩ
JNT 2072 Phase 2B—Battlespace Communications System Phase 2B [Battle Comm. Sys (Land) 2B]		$947.4	0#	36#	NoΩ
SEA 1439 Phase 5B2—Collins Class Communications and Electronic Warfare Improvement Program [Collins Comms and EW]∞		$614.2	0#	30#	No
AIR 5349 Phase 6—Advanced Growler Development [Advanced Growler]		$3,200.1	0	0	No
SEA 3036 Phase 1—Pacific Patrol Boat Replacement		$502.9	10#	12#	No
SEA 1442 Phase 4—Maritime Communications Modernisation [Maritime Comms]∞		$436.4	NFP#	NFP#	No
SEA 1448 Phase 4B—ANZAC Air Search Radar Replacement∞		$429.5	NFP#	NFP#	No
	TOTAL	$58,599	101 (5%)	453 (23%)

Shading indicates projects where PDSSs indicate certain information is not for publication (NFP).∞ ANAO performance audit has been undertaken on this project.* Lessons accepted into the Defence Lessons Repository in 2022–23. See discussion on Lessons Learned in chapter 2.Ω Project has not established a Lessons Learned Log or Lessons Collection and Management Plan.# Slippage data published in 2020–21 (noting not all projects in 2022–23 report were contained in 2020–21 report). The ANAO did not publish a complete analysis of schedule performance in 2021–22.[27]Source: ANAO, 2022–23 Major Projects Report, pages 3–4, 7–8, 19, 44, 83.

1.28Thirteen of the projects have been examined in an ANAO performance audit.[28] An audit in 2021 on the implementation by Defence of ANAO and Parliamentary Committee Recommendations found:

With respect to the 32 agreed parliamentary committee and ANAO performance audit recommendations examined in this audit, the ANAO assessed 15 (46.9 per cent) as implemented, six (18.8 per cent) as largely implemented, four (12.5 per cent) as partially implemented and seven (21.9 per cent) as not implemented.

Defence has appropriate governance arrangements for responding to, monitoring and implementing ANAO recommendations and partially appropriate governance arrangements for parliamentary committee recommendations.[29]

Project performance analysis

1.29In addition to its limited assurance review, the ANAO analyses the Defence PDSSs to provide information on project performance. It does so on the basis of: cost, schedule, and capability/scope. The ANAO found cost management was an ongoing process in Defence’s administration of major projects, and delivery of major projects on schedule continues to present challenges.[30]

Cost analysis

1.30While Defence reported the projects in the MPR could continue to operate within the total approved budget of $58.6 billion, this total approved budget had increased by $22.8 billion, or 39 per cent, since initial second pass approval by government.[31]

1.31The MPR does not report on a range of acquisition-related expenses including ongoing costs of project offices, training, and replacement capability.[32]

1.32Projects where budget variations were greater than $500 million included:

• Budget variations due to scope increases

• MHR90 Helicopters—$2.6 billion (34 additional aircraft at Phase 4/6 Second Pass Approval)[33]
• Joint Strike Fighter—$10.5 billion (58 additional aircraft at Stage 2 Second Pass Approval)[34]
• MQ-4C Triton—$1.4 billion (approvals including Second Pass Approvals for three additional aircraft and supplemental funding for first 7 years)[35]
• Advanced Growler—$2.9 billion (Second Pass Approval for Tranche 1 acquisition and sustainment of midband capability and training range upgrades)[36]

• Budget variations due to real cost increases

• Overlander Medium/Heavy—$0.7 billion (project supplementation ($684.2 million) and additional vehicles, trailers and equipment ($28 million) at Revised Second Pass Approval).[37]
  33. During the hearing, Defence told the Committee ‘in terms of real cost increases—where the project has gone over its government approved budget—there hasn’t been a real cost increase for these projects captured in the MPR since … 2018’.[38]
  34. The Overlander Medium/Heavy is identified in the ANAO’s MPR review and analysis as a project subject to real cost increases: a combination of ‘project supplementation’ ($684.2 million) and additional vehicles/trailers/equipment ($28 million). The ANAO stated:

Defence has advised that ‘project supplementation’ is a unique term used to describe the approvals history of this project as follows: ‘The original amount of $2549.2, was the Government decision to split Phase 3 into Phase 3A and 3B. In 2011, Government approved Second Pass approval of Phase 3A and the ‘Interim Pass’ Government approval for Phase 3B. The decision to grant Phase 3B ‘Interim Pass’ was to allow greater bargaining power for Defence while negotiating Phase 3A. Phase 3B was always going to return to Government for formal Second Pass approval, which occurred in July 2013, once contract negotiations were complete.[39]

1.35In-year budget variance analysis found a 7.9 per cent increase ($4.3 billion) in the approved budget for the selected projects at 30 June 2023, in comparison to their approved budget a year earlier, due to:

• net real increase of $3 billion, primarily reflecting changes in scope, transfers between projects for approved capability/equipment and budgetary adjustments (Advanced Growler, MQ-4C Triton, and JORN Mid-Life Upgrade had significant real variations)
• exchange rate variation of $1.3 billion (including Joint Strike Fighter, Heavy Armoured Capability, MQ-4C Triton).[40]
  36. Actual in-year expenditure for the major projects was $4.2 billion, compared to the initial portfolio budget statements forecast expenditure of $4.4 billion; mid-year portfolio additional estimates statements of $4.7 billion; and a final forecast of $4.3 billion.[41] Variances (both under and over) reflected a number of factors, including:
• Joint Strike Fighter: deferrals and delays, earlier contracts invoicing, and reconciled historical invoices
• Hunter Class Frigates: payments of UK Licence fee
• Combat Reconnaissance Vehicles: milestone schedule and commercial reset of prime contract, and delays to prime contract milestones, procurement and delivery
• Offshore Patrol Vessel: expected delivery of milestones and delays to milestones; funding of some activities by another area in Defence
• Heavy Armoured Capability: timing of Second Pass Approval, timing of disbursements
• Battlefield Command System: milestone slippage and imposition of Stop Payments, reduction in contract scope.[42]

Schedule analysis

1.37The ANAO found schedule performance continues to be an issue in delivering and sustaining Defence equipment and capability, which can introduce or exacerbate a capability gap, or require the extension to the planned withdrawal date of platforms.[43]

1.38Defence continues to argue the longitudinal schedule delay measure (aggregated in year schedule slippage) used by the ANAO ‘is not necessarily a helpful measure in understanding … performance’. Defence is of the view that ‘schedule delay needs to be contextualised by a delivery delay context and risk’.[44]

1.39Defence appears to be arguing aggregated slippage gives some impression of an even distribution of slippage across projects. Defence stated, ‘removal of Multi Role Helicopter MRH 90 AIR9000 Phase 246 alone from the 2023–24 Major Projects Report will improve Defence's schedule performance by around 25 per cent’.[45]

1.40Further, Defence stated ‘schedule risk increases proportionally with complexity of the undertaking’.[46] In and of itself, this suggests Defence might account for project complexity in its schedules, particularly where projects are, as explained by Defence, at the ‘cutting edge of technological engineering and industrial capability’ and inevitably involving risk.[47] The ANAO itself emphasised the importance of accurate initial assessments of project complexity, noting the troubled MHR 90 project was originally categorised by Defence as ACATII, amended by Defence to ACAT I subsequent to second pass approval, then in December 2020 identified as a ‘developmental platform’.[48]

1.41In the past a range of factors have contributed to slippage of final operational capability (FOC), including management of platform availability, projects with developmental content, and projects with greater complexity.[49] ANAO analysis found current MPR projects showing significant slippage tended to be developmental in nature, including the MHR90 Helicopters, MQ-4C Triton, and CMATS.[50]

1.42Defence identified a broad range reasons for schedule slippage in the following projects with large published FOC variations:

• Collins Class Comm and EW: difficulties engaging subcontractors in the project’s early phases; delays associated with cyber security accreditation and end-to-end sustainment requirements
• CMATS: protracted negotiations; schedule delays from post-contract inclusion of scope incorporated through contract change proposals; persistent schedule performance issues due to design and technical issues
• MQ-4C Triton: incremental approach to acquisition incurred a four-year delay to FOC when the United States Navy prioritised other capabilities during the production phase
• Battlespace Communications System: COVID-19 related delays.[51]

Detail	2023–24	2020–21
Total schedule slippage compared to initial schedule*	453 months	405 months
Increase of total schedule slippage since Second Pass Approval	23%	–
Average schedule slippage	25 months	23 months
In-year schedule slippage	101 months	73 months
Increase in-year schedule slippage since Second Pass Approval	5%	–

* Battlefield Command System excluded form analysis due to Auditor-General’s Qualified Conclusion.Source: ANAO, 2022–23 Major Projects Report, pages 18–19.

1.43In 2022–23, nine projects (45 per cent) did not disclose an FOC forecast date in the PDSS (eight projects),[52] or did not have a settled FOC date (one).[53]

1.44Forty percent of in-year schedule slippage was accounted for by seven of the eight projects where FOC forecast dates were not disclosed.[54] Due to the non-inclusion of key schedule information by Defence in several PDSSs, the ANAO was not in a position to publish a complete analysis of schedule performance on a project-by-project basis, as it had in the past.[55]

Capability analysis

1.45While outside the scope of the Auditor-General’s formal review conclusion, the ANAO provides an assessment of progress towards the delivery of capability as approved by government, to provide perspective on project performance.[56]

Detail	Number
Green: Projects reporting they will deliver all capability/scope	9 (45%)
Amber: Projects reporting challenges with expected capability/scope delivery; some elements of capability/scope to be delivered may be ‘under threat,’ but the risk is assessed as ‘manageable’[57]	5 (25%)
Red: Projects reporting they are unable to deliver all required capability/scope by FOC[58]	6 (30%)

Source: ANAO, 2022–23 Major Projects Report, pages 20–21, 78–80.

1.46In the previous MPR, the ANAO stated Defence’s MPR capability reporting was subjective because Defence made certain assumptions in forecasting achievements.[59]

1.47It is not clear whether Defence has updated its methodology for capability forecasting for the 2022–23 MPR, though the Committee has, in several past reports, encouraged Defence to find a more robust and objective measure of capability performance.[60]

1.48The Auditor-General issued a qualified conclusion on the MPR in part due to material inconsistencies in the Battlefield Command System PDSS regarding the degree of confidence that materiel capability would be met (see below).[61] Forecast information is not included in the limited assurance engagement due to the lack of Defence systems to provide complete and accurate evidence, in a sufficiently timely manner, to facilitate the review. However, material inconsistencies are considered in forming the Auditor-General’s conclusion.[62]

Auditor-General’s Qualified Conclusion

1.49The Auditor-General issued a ‘Qualified Conclusion’ for the 2022–23 MPR:

Based on the procedures I have performed and the evidence I have obtained, except for the effects of the matters described in the Bases for Qualified Conclusion, nothing has come to my attention that causes me to believe that the information in the 20 Project Data Summary Sheets (PDSSs) in Part 3 and the Statement by the Secretary of Defence, excluding the forecast information, and major risks and issues, has not been prepared in all material respects in accordance with the 2022–23 Major Projects Report Guidelines (the Guidelines), as endorsed by the Joint Committee of Public Accounts and Audit (JCPAA) on 23September 2022.[63]

1.50The following information was excluded from the scope of the engagement, though material inconsistencies identified in relation to forecast information and major risks and issues, were considered in forming the conclusion:

• Section 1.2 Current Status — Materiel Capability/Scope Delivery Performance and Section 4.1 — Measures of Materiel Capability/Scope Delivery Performance
• Section 1.3 Project Context — Major Risks and Issues, and Section 5 — Major Risks and Issues
• Section 2.4 — Australian Industry Capability
• forecast dates where included in each PDSS.[64]
  51. As a limited assurance engagement, the Auditor-General stated the level of assurance is ‘substantially lower’ than the assurance that would be obtained from a reasonable assurance opinion. The Auditor-General did ‘not express a reasonable assurance opinion on whether the PDSSs and the Statement by the Secretary of Defence are prepared in all material respects in accordance with the Guidelines.[65]

Bases for qualified conclusion

1.52The Auditor-General provided two reasons for the qualified conclusion:

• The LAND 200 Tranche 2 Battlefield Command System PDSS is materially inconsistent with evidence obtained during the course of the review. The material inconsistencies relate to the degree of confidence that materiel capability will be met; and
• Defence removed previously reported lessons learned from all 2022–23 PDSSs. The information disclosed instead does not satisfy the requirements of the Guidelines and is materially inconsistent with evidence obtained by the ANAO.[66]
  53. The Statement by the Secretary of Defence was signed on 23 January 2024, prior to the Auditor-General’s Independent Assurance Report (30 January 2024). The Secretary’s statement provides his opinion that the PDSSs for the 20 major acquisition projects that form part of the MPR ‘comply in all material respects with the Guidelines and reflect the status of the projects, as at 30 June 2023’.[67]
  54. The Secretary of Defence was responsible for the preparation and presentation of the PDSSs in accordance with the Guidelines; and the Guidelines require that the PDSSs and supporting evidence are complete and accurate.[68]

LAND 200 Tranche 2 Battlefield Command System

1.55The Auditor-General stated with regard to the LAND 200 Tranche 2 Battlefield Command System:

The disclosed degree of confidence that materiel capability will be met has not changed from the prior year despite evidence that there has been a reduction in materiel capability and scope delivery.[69]

1.56Further, the ANAO found further material inconsistencies in the PDSS in section 1.3 which does not specifically acknowledge the following ‘Other current related projects/phases’:

• the LAND 400 Phase 2 Combat Reconnaissance Vehicles PDSS reports it is reliant on delivery of two subsystems to be delivered by LAND 200 Tranche 2 (theBattlefield Management System and Tactical Communications Network)[70]
• the JNT 2072 Phase 2B Battle Comm. Sys. (LAND) 2B PDSS reports that the JNT 2072 Phase 3 project capability is a related project and that JNT 2072 Phase 3 is aligned with LAND 75 Phase 4 as part of a second tranche of LAND 200, with the capability being a vital function of the Battle Management System (BMS).[71]
  57. During the public hearing, the ANAO stated:

… what the PDSS doesn't mention sufficiently clearly is that other projects, such as LAND 400, are also reliant on delivery of LAND 200 capabilities. You have to go to page 218, which is a different PDSS, to find that information disclosed … what we were trying to draw out was that the PDSS on its face did not provide all the disclosures that were necessary for the Parliament to track through the consequences, and there were elements of other projects that were also dependent on LAND 200.[72]

Lessons learned

1.58On the removal of lessons learned from all PDSSs, the Auditor-General stated the Guidelines required disclosure of a description of the project lesson (at the strategic level) that has been learned. Projects are also to state whether ‘Systemic Lessons’ have been identified.[73]

1.59The Auditor-General stated Defence’s statement in each PDSS that ‘the project has not categorised any of its lessons information as a whole-of-Defence Lessons Learned’, and the disclosure of only three project level lessons and a summary of the lesson categories applied overall to each project:

… does not satisfy the requirements of the MPR Guidelines and is materially inconsistent with evidence obtained during the course of the review.[74]

Emphasis of matter

1.60The Auditor-General emphasised the impact of the Security Review undertaken by Defence that resulted in information being classified as ‘not for publication’ in 12 of the 20 PDSSs, noting this was an increase from 4 in the 2021–22 MPR.[75]

1.61Defence’s responses to these three issues will be discussed in chapter 2.

Footnotes

[1]Australian National Audit Office (ANAO), 2022–23 Major Projects Report, Report No. 14 2023–24, February 2024, hereafter 2022–23MPR, p. 3.

[2]ANAO, 2022–23 MPR, pages 3–4.

[3]Joint Committee of Public Accounts and Audit (JCPAA), Report 411: Progress on equipment acquisition and financial reporting in Defence, August 2008, hereafter Report 411,p. 157.

[4]JCPAA, Report 411, pages 164–169.

[5]JCPAA, Report 411, p. 158.

[6]JCPAA, Report 416: Review of the Major Projects Report 2007–2008, November 2009, p. 1.

[7]M. Kinnaird, L. Early, B Schofield, Defence Procurement Review 2003, August 2003, hereafter Defence Procurement Review, p. 34.

[8]Kinnaird et al, Defence Procurement Review, p. i.

[9]See, for instance, D Mortimer, Going to the Next Level: The Report of the Defence Procurement and Sustainment Review, September 2008, hereafter Mortimer review, pages VII, 22, 60–63.

[10]Mortimer, Mortimer review, p. VIII.

[11]ANAO, 2022–23 MPR, pages 5, 25.

[12]For a discussion of the assurance standard, see: ANAO, 2022–23 MPR, p. 25. For a general discussion of assurance, see: Victorian Auditor-General’s Office, Our assurance services, www.audit.vic.gov.au/sites/default/files/Our%20role/Our-assurance-services.pdf, viewed 27 March 2024.

[13]ANAO, 2022–23 MPR, p. 5.

[14]These are sections 1.2, 1.3, 2.4, 4.1, and 5, and forecast dates included in each PDSS. This is because of Defence systems are unable to provide complete and/or accurate information. ANAO, 2022–23 MPR, pages5, 25.

[15]ANAO, 2022–23 MPR, pages 5, 25.

[16]ANAO, 2022–23 MPR, pages 5–6.

[17]ANAO, 2022–23 MPR, p. 6.

[18]ANAO, 2022–23 MPR, p. 6.

[19]ANAO, 2022–23 MPR, p. 25.

[20]ANAO, 2022–23 MPR, p. 27.

[21]ANAO, 2022–23 MPR, p. 27.

[22]ANAO, 2022–23 MPR, p. 27.

[23]These projects applied the Smart Byer framework. ANAO, 2022–23 MPR, pages 4, 35.

[24]These projects had outstanding caveats and significant remaining materiel capability/scope or milestones to be delivered. ANAO, 2022–23 MPR, pages 12, 105–106, 126–127.

[25]In December 2021, the government announced plans to investigate other aircraft types to immediately replace the MRH90 helicopter fleets. In 2023 there were two incidents, in March and July, involving Army MRH90 helicopters, which have resulted in the fleet’s permanent grounding and a subsequent government decision that MRH90 helicopters will not return to flying operations prior to the planned withdrawal date in December 2024. ANAO, 2022–23 MPR, pages 29–30.

[26]Notification was received from USAF in October 2022 and June 203 of additional delays of aircraft delivery and impacting flight test and certification requirements. ANAO, 2022–23 MPR, p. 238.

[27]Aggregate schedule data for 2021–22 was not reported in the MPR due to the combined effect of four projects not having a settled final operational capability (FOC) date, and Defence’s decision to not publish FOC forecast dates in three PDSSs. ANAO, 2021–22 Major Projects Report, p. 43; ANAO, 2020–21 Major Projects Report, p. 13.

[28]For a full list of ANAO reports, see: ANAO, 2022–23 MPR, p. 83.

[29]ANAO, Implementation of ANAO and Parliamentary Committee Recommendations – Department of Defence, Report No. 34 2020–21, p. 6.

[30]ANAO, 2022–23 MPR, pages 15, 17, 19, 20.

[31]ANAO, 2022–23 MPR, p. 15.

[32]ANAO, 2022–23MPR, p. 15. See also, pages 39–40.

[33]Net increase of $2.7 billion from approved budget at initial Second Pass Approval and approved budget at 30June 2023. ANAO, 2022–23 MPR, pages 17, 55.

[34]Net increase of $13.7 billion from approved budget at initial Second Pass Approval and approved budget at 30 June 2023.. ANAO, 2022–23 MPR, pages 17, 55.

[35]Net increase of $1.5 billion from approved budget at initial Second Pass Approval and approved budget at 30June 2023.. ANAO, 2022–23 MPR, pages 17, 56.

[36]Increase of $2.9 billion from approved budget at initial Second Pass Approval and approved budget at 30June 2023. ANAO, 2022–23 MPR, pages 17, 56.

[37]Net increase of $0.8 billion from approved budget at initial Second Pass Approval and approved budget at 30June 2023. ANAO, 2022–23 MPR, pages 17, 55.

[38]Mr Chris Deeble, Deputy Secretary, Capability Acquisition and Sustainment Group, Department of Defence (Defence), Committee Hansard, 24 April 2024, p. 3.

[39]ANAO, 2022–23 MPR, p. 17.

[40]Note: amounts rounded. ANAO, 2022–23 MPR, p. 60.

[41]Note: amounts rounded. ANAO, 2022–23 MPR, p. 62.

[42]ANAO, 2022–23 MPR, pages 62–63.

[43]ANAO, 2022–23 MPR, p. 66.

[44]Mr Chris Deeble, Defence, Committee Hansard, 24 April 2024, p. 2.

[45]Mr Chris Deeble, Defence, Committee Hansard, 24 April 2024, p. 2.

[46]Mr Chris Deeble, Defence, Committee Hansard, 24 April 2024, p. 2.

[47]Mr Chris Deeble, Defence, Committee Hansard, 24 April 2024, p. 2.

[48]ANAO, 2022–23 MPR, p. 75.

[49]ANAO, 2022–23 MPR, p. 20.

[50]ANAO, 2022–23 MPR, p. 71.

[51]ANAO, 2022–23 MPR, p. 93.

[52]Joint Strike Fighter, Advanced Growler, Peregrine, Heavy Armoured Capability, JORN Mid-Life Upgrade, Battlefield Command System, Maritime Comms, ANZAC Air Search Radar Replacement.

[53]Hunter Class Frigate—no FOC date was approved by government at 30 June 2023. ANAO, 2022–23 MPR, pages 19, 66.

[54]ANAO, 2022–23 MPR, p. 19.

[55]ANAO, 2022–23 MPR, p. 75.

[56]ANAO, 2022–23 MPR, p. 20.

[57]Hunter Class Frigate, Offshore Patrol Vessel, Overlander Medium/Heavy, MQ-4C Triton, Battlefield Command System.

[58]Joint Strike Fighter; MHR90 Helicopters; Hawkei; JORN Mid-Life Upgrade; Battle Comm. Sys. (Land) 2B, Battlefield Command System.

[59]ANAO, 2022–23 MPR, p. 80.

[60]See: JCPAA, Report 496 Inquiry into Defence Major Projects Report 2020–21 and 2021–22 and Procurement of Hunter Class Frigates: Interim Report on the 2020–21 and 2021–22 Defence Major Projects Report, p. 6. See also, footnote 21.

[61]ANAO, 2022–23 MPR, p. 120.

[62]ANAO, 2022–23 MPR, p. 119.

[63]ANAO, 2022–23 MPR, p. 119.

[64]ANAO, 2022–23 MPR, p. 119.

[65]ANAO, 2022–23 MPR, p. 124.

[66]ANAO, 2022–23 MPR, pages 11, 120.

[67]ANAO, 2022–23 MPR, pages 124, 125, 128.

[68]ANAO, 2022–23 MPR, p. 123.

[69]ANAO, 2022–23 MPR, p. 120.

[70]ANAO, 2022–23 MPR, pages 120, 218.

[71]ANAO, 2022–23 MPR, pages 120, 305.

[72]Dr Tom Ioannou, ANAO, p. 5.

[73]ANAO, 2022–23 MPR, p. 120.

[74]ANAO, 2022–23 MPR, p. 120.

[75]ANAO, 2022–23 MPR, p. 121.