Contestability and independent advice
In his Review of the Defence Accountability Framework, Dr
Rufus Black suggested that Defence can achieve stronger decision-making and
strategic direction setting in a number of ways including:
Establishing mechanisms for increasing contestability of key
decisions (e.g., red teams) in a nonadversarial way to improve the quality of
decision-making by formalising and institutionalising contestability for key
He was of the view that to ensure high quality decisions for
large and complex projects there must be space for contestability. In the
following two chapters, the committee looks at contestability and Defence's
quality assurance framework for its acquisition programs. It is interested in
the extent to which ideas, proposals and decisions related to defence
procurement are informed by independent and impartial advice.
*Department of Defence, Review of the Defence Accountability Framework, January 2011, p. 10.
An informed organisation—contestability
In August 2009, the Minister for Defence identified a lack of
contestability as a weakness in Defence's accountability and decision-making
system. He indicated that measures would be taken to apply greater
contestability and rigour, particularly in the pre-first pass phase of acquiring
In this chapter, the committee considers the role of contestability in the
early stages of capability development.
Early stages–Defence White Paper
The Defence White Paper sets out the strategic approach that Australia will
take to defend itself and protect its interests, and therefore provides the
strategic structure upon which the DCP and other planning documents are
developed. Given the importance of this document, it is essential that its
contents are based on sound analysis and provides a coherent framework and process
to ensure consistent compliance.
Professor Hugh White argued that the 2009 Defence White Paper recognised
that defining strategic interests and objectives in a clear way was an
important step in any rigorous process towards setting capability priorities.
Even so, in his view, the White Paper failed to provide such clarity because
its account was 'undermined both by conceptual muddles and by substantive
In chapter 3, the committee noted the call by a number of defence analysts for
greater contestability to inform the capability decisions announced in the
White Paper. Notably, the veracity of the decision-making process regarding the
purchase of the 12 submarines was questioned.
The underlying issue was why the capability was prescribed in the White Paper without
any apparent robust contestability and before consideration of the procurement
options, and the need for trade-off between cost, schedule and capability.
In regard to open and rigorous debate at the strategic level, the Black
Review found 'insufficient contestability of decision-making' especially in
respect of strategic decisions and 'big ticket' decisions related to the
acquisition of capability. It continued:
The theme emerging was a strong desire for internal mechanisms
to produce more nuanced options around big strategic choices and to expose more
frequently, well-argued alternative options around these choices.
At the centre of these concerns is the issue of the quality of analysis
that underpins the White Paper and the documentation derived from it. Whilst
the committee accepts that much of the information that informs the White Paper
process is a matter of national security, it takes the view that such analysis
could be strengthened with the introduction of greater contestability within
the process by way of independent review and analysis.
Former Force Development and Analysis Division
Some analysts and witnesses referred to the Force Development and
Analysis (FDA) Division, which no longer exists, as a potential model for
restoring contestability and independent advice back into the capability
development process. For example, Dr Thomson noted that until the late 1990s,
capital investment program and projects were subject to independent scrutiny
and analysis by the FDA.
The Australian Industry Group Defence Council explained that the FDA
Division, including its Systems Analysis Branch, had its genesis in the 1960s
McNamara model in the Pentagon. This model 'applied systems analysis as a basis
for making sound decisions on complex weapons acquisitions'. McNamara also
introduced Planning, Programming and Budgeting, including a Five Year Defence
Plan (FYDP), which was 'the key policy document embraced by FDA'. The head of
the FDA was responsible for developing the FYDP or 'Pink Book', now the DCP.
Established as a central policy division in response to Sir Arthur
Tange's 1973 report, the FDA was part of an effort to create an integrated
system for study and debate around the Defence program. According to Dr Davies,
the FDA was central to the concept of contestability and had two primary roles:
- to develop the paperwork on force development proposals for
senior committee consideration; and
- to test the logic and quantify, through 'rigorous operational
research and scientific inquiry', the effectiveness, costs and benefits of
Dr Davies held that there was an 'enduring need' to apply scientific
method to evaluations of defence proposals. He explained that whereas the DSTO
engages in scientific work, it 'sits almost at arm's length—they are engaged in
the defence business'. In his assessment, the reinstatement of an organisation
which engages people who have the 'political, the organisational nous and the
technical skills' to analyse projects was required.
Dr Brabin-Smith, former First Assistant Secretary of the FDA Division,
noted in his submission that the FDA's responsibility was to 'rigorously
examine each and every proposed acquisition well before it went from the
Department to the Minister'.
He explained that the division had an experienced civilian head and was
answerable through a Deputy Secretary to the Defence Secretary. The Division
had several responsibilities including the provision of impartial analysis of
whether proposals for force structure development (i.e. new capability
- individually and collectively consistent with government-endorsed
- affordable overall; and
- sufficiently well-developed to be fit for submission for
consideration by government for approval and acquisition.
1997 Defence Efficiency Review and
the abolition of the FDA
In 1997, the Defence Efficiency Review (DER) report, 'Future Directions
for the Management of Australia's Defence' noted the call for 'substantial
changes' to capability development analysis within the department:
Our starting point for change is to delineate much more
clearly who brings the various bits of information to the decision and who is
to be held accountable for achieving the various outcomes.
According to a former senior Defence policy official, Mr Allan Behm,
whilst the efficiency review streamlined the department organisationally by
removing duplication, 'it failed to maintain a capacity for disciplined
FDA ran the heavy rollers of its considerable analytical
capability over all substantial acquisition proposals and, in consequence, was
loathed by the military. With no friends in high places, FDA morphed into a new
capability systems division that brought together the various ADF groups
against which FDA had battled. It was placed under a two-star officer, then
quarantined. The highly qualified and experienced analysts—many of them with
defence science and advanced policy development backgrounds— dispersed within
weeks. They have never returned.
By 1998, the analytical capability of the FDA had diminished and
ultimately disappeared entirely from Defence Headquarters. Dr Davies noted
Similarly, the ability of senior committee secretariats to
independently scrutinise costs and to provide frank assessments in agenda
papers is now a shadow of its former self.
A number of analysts including Dr Thomson and Dr Davies as well as Dr
Brabin-Smith recommended that the FDA be reinstated.
While recognising that the FDA 'caused a lot of rancour' and sometimes got it
wrong, Dr Davies asserted that it was important to have a group of
'well-informed devil's advocates'.
Dr Brabin-Smith recognised that some of the responsibilities of the former FDA
were dispersed between the Strategic Policy Division and CDF and recognised the
...to establish a strong central policy area with a remit to
improve the application of strategic guidance to capability development and the
associated industry support, and to conduct rigorous and independent analysis
of capability proposals.
Mr O'Callaghan of the Australian Industry Group held that the advice of
the FDA was valued by consecutive chiefs of the Defence Force 'because to some
extent it was separate, independent advice they were getting'. While he did not
have a view as to whether the FDA should be recreated, Mr O'Callaghan recognised
that providing a function that played the devil's advocate role made sense.
Mr Woolner noted that one of the reasons the FDA had 'clout in an
adversarial environment' was because it served as the gatekeeper for the money
and that merely reinstating a scientific analysis function might not be
It was the power of managing the forward budget that gave
what FDA decided the wherewithal to be heard and acted on by other people in
the organisation, because it foretold the problems that you would get into with
your budget if you did not. So whether you could create it just for the third
role and have it working effectively without some sort of organisation or
political clout is a question you would have to think about very carefully.
Another witness, however, was highly critical of the FDA. In his assessment
the system produced:
...a series of project disasters on one or more of cost, capability
or schedule. FFG Upgrade, original watercraft, Seasprite helicopters,
Amphibious ships, F111 Armaments upgrade projects, the original bushmasters,
Wedgetail, HF Modernisation, Vigilare etc. Some were rectified after much hard
work, others were scrapped at large capability and financial cost.
General Hurley, CDF, informed the committee that the FDA operated when
the consideration of options for new capabilities was done 'in house'. At that
time, there was limited transparency of the process and a 'single option was
provided to government for each possible acquisition as a paragraph or two on
each project as part of the budget submission—the old omnibus process'. According
to the General, the FDA operated in a context in which government did not get
the same rigour in terms of advice that it gets today. He noted further that
the FDA was in place when the 'Super Seasprite, HF mod, FFG upgrade and
purchase of the LPAs—Kanimbla and Manoora and Vigilair were
Although Mr King indicated that there could be a role for an organisation
such as an FDA, he was of the view that current arrangements for contesting
ideas, assumptions and proposals were far more structured.
The committee considers Mr King's viewpoint in the following chapter.
In his report, Dr Black acknowledged that there was concern that the
'levels of scrutiny and contestability had diminished' since the division's
abolition. Highlighting the fact that contestability is a precursor to good
decision-making, he recommended that:
Defence formalise and institutionalise a revised approach for
Defence decision-making, based upon a more formal and auditable mechanism for
decision-making across the full spectrum of Defence activities and increased
contestability for key decisions.
In this regard, Dr Black suggested that Strategy Executive on behalf of
Defence create a set of formal criteria for contestable decision-making that
should 'proceed from an analysis of the potential political, strategic,
financial and capability risk likely to accrue from a particular decision'.
Associate Secretary (Capability)
In August 2011, in response to Dr Black's recommendation, the Defence
Minister announced the establishment of an Associate Secretary (Capability)
position and that the Secretary of Defence would initiate filling the position
As noted in chapter 8, the Associate Secretary (Capability) would have
been responsible for strengthening the linkages between strategy and capability.
The creation of the position was intended to ensure the 'more effective contestability
and integration of advice at the early stages of the process, as well as for
ensuring the performance and accountability of the overall capability
development, acquisition and sustainment chain'.
While the proposal to appoint an Associate Secretary (Capability) was
still alive, a number of commentators expressed doubts that a single position
could introduce contestability and at the same time enable Defence to operate
as a single, integrated enterprise. One of the central concerns was that such
an appointment would only add to the complexity and bureaucracy of the
capability decision-making process rather than provide for a rigorous,
transparent and contested process. Indeed, the announcement that the position
would not be established was supported by analysts such as Dr Andrew Davies and
the Australian Defence Association whose executive director, Mr Neil James,
said that the creation of another level of bureaucracy defied commonsense and
the diarchic principle that underpins the running of Defence.
The committee's concern, however, is that the status quo will now
prevail without addressing the issues raised by the Black Review and its recommendations
regarding mechanisms to strengthen the decision-making process by way of
contestability and embedding a culture of accountability.
In its supplementary submission, Defence highlighted the important role
of the CIR Division in providing contestability in the capability development
process including during the early phases which concludes when a project enters
the DCP. The committee discusses the Division in the following chapter.
The committee acknowledges the views of several submitters supporting
the reinstatement of the FDA, and singing its praises. The committee also
notes, however, the record of failures during that period and therefore
questions its efficacy in current times. The committee also accepts CDF's
assessment of his preference for the current model, though the committee's
qualifications about its effectiveness remain, as expressed throughout this
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