Procurement procedures for Defence capital projects

Procurement procedures for Defence capital projects

30 August 2012

© Commonwealth of Australia 2012
ISBN 978-1-74229-565-7

View the report as a single document - (PDF 2472KB)

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Members of the committee (PDF 43KB)
Acronyms and Abbreviations (PDF 12KB)
Executive summary (PDF 49KB)


Chapter 1 - Introduction (PDF 742KB)

Conduct of inquiry
   Change in Defence personnel
   Developments during inquiry
   Reviews and references
Site visits to South Australia and Western Australia
   Overseas visit
Scope and structure of the report
   Part 1—Major acquisitions—background and context
   Part II—Compliance with, and awareness of, policy and guidelines
   Part III— Accountability, responsibility and collaboration
   Part IV—Contestability and independent advice
   Part V—Right people, skills and analysis
   Part VI—Industry—workforce and relationship with Defence
   Part VII—Conclusion

Part I - Background
Chapter 2 - Project performance (PDF 129KB)

   Super Seasprite
   Landing Watercraft for HMAS Manoora and HMAS Kanimbla (LCM 2000)
   Tiger Armed Reconnaissance Helicopter
   Guided Missile Frigate Upgrade Project
   KC-30A Multi-Role Tanker Transport
   Multi-Role (MRH-90) Helicopter
   Air Warfare Destroyer
   M113 Upgrade Program
   Lightweight Torpedo Replacement Project
   The Collins Class Submarine Reliability and Sustainability Project
Common problems—costs, schedule slippage and reduced capability
   Schedule slippage

Chapter 3 - Lessons to be learnt (PDF 113KB)

Early research and analysis
   New submarines—SEA 1000
   Offshore combatant vessel
   Industry engagement
   Committee view
Funding Force 2030
   New Defence White Paper
   Committee view
Slippage of approval rate at first and second pass
   Reason for delayed approval rates
   Committee view

Chapter 4 - Challenges for defence procurement (PDF 77KB)

Large, complex and costly undertakings
   Advances in technology and the importance of integration
   Changing geo-strategic environment
   Conspiracy of optimism
   Long term ventures and extended timeframes
   Self-sufficiency for Australia as a medium sized country
   Marketplace developments
   Managing risk
Self-inflicted complexity

Part II - Risk and defence procurement
Chapter 5 - Risk management and good governance (PDF 50KB)

Risk management in defence organisations overseas
   Risk management—best practice
   Committee view
Risk management in Defence

Chapter 6 - Compliance and awareness (PDF 57KB)

Problems in defence procurement
Culture of risk management
   Adherence to procurement policy and guidelines
   Awareness and ownership of risk
   Committee view
   Learning lessons and recordkeeping

Part III - Accountability, responsibility and collaboration
Chapter 7 - Responsibility and accountability (PDF 120KB)

Background to accountability—committees
Who is responsible?
Capability Development Group
Capability Managers
Defence Materiel Organisation
   Distinct and complementary responsibilities
Measures to strengthen accountability
   Joint project directive
   Materiel Acquisition Agreements
   Ministerial Directive to the Defence Materiel Organisation
   Project charter
   Lessons to be learnt and accountability

Chapter 8 - Communication, integration and collaboration (PDF 146KB)

Shared understandings
   Strategy Executive and its relationship with CDG
Management matrix and linkages between groups
   Smooth transitions
Involvement of capability managers
   Strengthening relationships
   Materiel Acquisition Agreement
   Project initiation and review board
   Committee view
   Defence Science and Technology Organisation

Part IV - Contestability and independent advice
Chapter 9 - An informed organisation—contestability (PDF 51KB)

Early stages–Defence White Paper
Former Force Development and Analysis Division
   1997 Defence Efficiency Review and the abolition of the FDA
Associate Secretary (Capability)
   Committee view

Chapter 10 - Contest of ideas and independent advice (PDF 94KB)

Defence's quality assurance framework
   Independent Project Performance Office
   Gate reviews
   Committee view
Independent advice and contestability
   Defence Material Organisation
   Defence Science and Technology Organisation
   Capability Investment and Resources Division
   Central agencies
   Effectiveness of internal contestability
   One Defence view

Part V - Training, skills and experience
Chapter 11 - Knowledge-based organisation (PDF 108KB)

The right people
Smart customer
Specialist skills in Defence
   Capability Development Group and Defence Materiel Organisation
   Defence Materiel Organisation
   Engineering and high technical skills
The Services
   Rebuilding Defence's engineering base

Chapter 12 - Technical analysis and test and evaluation (PDF 88KB)

Off-the-shelf purchase
   Possible secondary risks
Analysis—test and evaluation
   Early testing
Resourcing test and evaluation
   Long-standing concern

Part VI - Defence industry
Chapter 13 - Sustaining and building Australia's defence industry (PDF 106KB)

Assisting Australian defence industry
Skills in industry
   Shipbuilding projects
   Defence Materiel Organisation and government initiatives
   Committee view
Access to information
   Industry's perspective
   Committee view
   Committee view

Chapter 14 - Defence's relationship with defence industry (PDF 87KB)

Partnership—Defence and industry
Early engagement
   Probity concerns
   Capability Development Advisory Forum and environmental working groups
   Committee view
   Defence Materiel Organisation's negotiations with industry
Contracting and risk sharing between Defence and industry
   Industry perspective
   Committee view

Chapter 15 - Conclusion (PDF 151KB)

Challenges and Defence's responses
   Process versus genuine reform
   Disenfranchised capability managers
   Continuing struggle for skilled people
Underperforming organisation
   Need for structural reform
Recommendations—proposed model
   Strategic Policy Division
   Capability managers
   Capability Development Group
   Defence Materiel Organisation
   Specialist acquisition organisation
   Defence Science and Technology Organisation
Other recommendations
   Future submarines SEA 1000—applying lessons
   Air 8000 Ph 2 (Battlefield Airlift—Caribou replacement)
   The 2013 White Paper—clarity on future capability
   Improving gate reviews
   Test and evaluation—building capability
   Industry—planning for investment and early engagement with Defence

Selected Bibliography (PDF 11KB)
Additional Comments by Senator Nick Xenophon - Independent Senator for South Australia (PDF 14KB)
Additional Comments by Senator David Fawcett - Liberal Party Senator for South Australia (PDF 318KB)
Additional Comments by Senator Scott Ludlam - Australian Greens Senator for Western Australia (PDF 6KB)
Appendix 1 - Public submissions (PDF 7KB)
Appendix 2 - Public hearings and witnesses (PDF 13KB)

Thursday 11 August 2011—Canberra
Friday 12 August 2011—Canberra
Wednesday 5 October 2011—Canberra
Friday 7 October 2011—Canberra
Wednesday 12 June 2012—Canberra
Thursday 13 June 2012—Canberra

Appendix 3 - Tabled documents, answers to questions on notice and additional information (PDF 8KB)

Additional Information Received
Answers to Questions on Notice

Appendix 4 - Independent Members of the Defence Gate Review Board – Background and Experience (PDF 13KB)

For further information, contact:

Foreign Affairs, Defence and Trade Committee
Department of the Senate
PO Box 6100
Parliament House
Canberra ACT 2600

Phone: +61 2 6277 3535
Fax: +61 2 6277 5818