4.1Sustainment practices have been subject to numerous reform initiatives over the last decade, especially since the Mortimer Review (2008).99 In 2015, the First Principles Review concluded that the change programs associated with previous reviews have resulted in only incremental change.100 This remark explicitly included all phases of the capability lifecycle, including sustainment. An output measure, which directly reflects achievement against the Materiel Availability outcome. 160Defence, Review by Mr Jeff Worley, 30 May to 3 June 2016. 102Email from Steve Gumley, CEO, to DMO General Managers, Division Heads and Branch Heads, 26 February 2008. 14 of 51. . In this context any proposal for new reporting requirements will need to consider if the new information might be aggregated to disclose classified information on capability readiness and availability.. The fundamentals of Defences governance and organisational framework for the management of materiel sustainment are fit-for-purpose. The Government agreed to the recommendation. F&A (indirect) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived., and set forth allowability and allocability principles for selected items of cost. General Provisions for Selected Items of Cost: 200.420 - 200.476 200.420: The concept was also included in the initial Materiel Sustainment Agreements in 2005 between DMO and the Defence Service Chiefs. 3.53Commonwealth entities must reportin an annual performance statementtheir actual results against the planned performance criteria outlined in their corporate plan and Portfolio Budget Statements. 196Defence, Study into the Business of Sustaining Australias Strategic Collins Class Submarine Capability, November 2012. Specifically, the review identified instances where: 2.18Defence makes extensive use of external service providers and contractors to deliver acquisition and sustainment services. Combat Support Vehicles, including Fire Vehicles, C and D Vehicles, Bulk Liquid Distribution equipment, Special Forces Vehicles and Engineer Equipment, Management of vehicle maintenance and support equipment, electrical systems and general stores. 39Capability Acquisition and Sustainment Group Cost is the MSA-related expenditure. SeeCost Considerations-The Cost Principlesfor additional details.. This introduces risks related to ensuring that Systems Program Office staff working on outsourcing have the necessary skills and competencies. Ongoing legacy reform activities that continue to require oversight and do not align with current reform activities; SPOs continue to manage and perform work that industry may be able to do more effectively or efficiently, whilst insufficient resources are being applied to governing and assuring. Improving the How 4. External Maintenance Period Activity Cost Growth. In essence, this First Principles Review recommendation is very similar to the finding of the Defence Governance and Accountability Review of 2000 which advocated outsourcing provided sufficient inhouse competency is retained to allow [Defence] to be a smart customer and that [Defence] has sufficient contract management capability. 3.56The first planning and reporting cycle under the PGPA Act requirements was for 201516. 172Sir John Parker GBE FREng, An Independent Report to inform the UK National Shipbuilding Strategy, November 2016, p. 11. To facilitate the reforms, Defence made $360million of investment funds available for projects that would yield net savings. The ANAO work program outlines potential and in-progress work across financial statement and performance audit. The 201516 Defence Corporate Plan did not include an explicit reference to sustainment in the Purposes statement. The second series, commencing in 201314, represents the reported totals for Defences capability sustainment program. 5.60In May2015, DMO released a sustainment policy stating that Defence assets would be managed in accordance with the international standard for asset management. 923. Implementation is incremental and subject to feedback and review. Delivering what is required with processes, systems and tools being the means not the end. 2. Setting the Direction 3. Applicability of a particular set of cost principles The government-wide principles, issued by OMB (or, in the case of commercial organizations, the Federal Acquisition Regulation [48 CFR 21], or, in the case of hospitals, 45 CFR 75, Appendix IX, "Principles For Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals"), on allowability and unallowability of costs under federally sponsored agreements. This recommendation, which was also made in the 2003 Kinnaird Review, was not implemented by the Howard government. There is no evidence of any decisions having been made.147. 73 0 obj<>stream
This narrower focus risks telling only a partial account of sustainment within Defence and is potentially at odds with the One Defence model promoted by the First Principles Review. Accuracy is an output measure, which directly reflects achievement towards the Materiel Confidence outcome. 3.13This broad focus is consistent with Defence advice to the ANAO that some sustainment services for some equipment items are also undertaken by Capability Managers and other enabling Groups, including Joint Logistics Command.45 The primary data source for the report is SPMSthe central source of truth for sustainment management data and reporting for sustainment management personnel at all levels of both Capability Acquisition and Sustainment Group and Capability Manager organisations.46 The approach, as advised to the JCPAA, also reflects the First Principles Review recommendation that an end-to-end approach should be taken for accountability for capabilitythe One Defence model.47, Figure 3.1:Preparation of the Quarterly Performance Report, 3.14However, Defence advised the ANAO in June2017 that the Quarterly Performance Reports primary focus is on products and projects delivered by the Capability Acquisition and Sustainment Group, and does not encompass the complete sustainment enterprise. In November 2018, Tony Fraser was appointed Deputy Secretary CASG. The Defence White Paper, Defence 2000Our Future Defence Force, stated that the DMO will adopt commercial best practice as its norm and assess its performance against industry benchmarks. A key focus of the enhanced Commonwealth performance framework established under the PGPA Act is ensuring that programme managers, accountable authorities, ministers, the parliament and the public are able to use performance information to draw clear links between the use of public resources and the results achieved.86. 121Annex A to the First Principles Review report indicates that the reviewers considered six FPR recommendations, including one key recommendation, to have been influenced by Coles earlier review. The idea is to establish a managed resource pool that provides skilled personnel for CASG activities. 1.9The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $422000. Step 1develop a risk profile for the project, which identifies the severity of risk in nine categories for the acquisition phase and eight for the sustainment phase; and. Using internal and external expertise to provide the best advice so that the outcome is delivered in the most cost-effective and efficient manner. Reviews have consistently emphasised the need for Defence to improve the efficiency of its operations, including in sustainment. 104Defence, 2008 Audit of the Defence Budget, April 2009. This high tempo period of exercises has tested the robustness of the logistics system and deficiencies have been identified. This should be implemented immediately and individual leaders from the first line to the Deputy Secretary Capability Acquisition and Sustainment must be accountable for cost and schedule targets.61, 3.33On the question of the above recommendation about measuring productivity, Defence referred the ANAO to the Capability Acquisition and Sustainment Group Business Framework and, within it, the proposed process for the Capability Acquisition and Sustainment Group Business Review Cycle. As noted in this audit report, the focus of some current arrangements requires clarification as it may reflect only the performance of Capability Acquisition and Sustainment Group. Other reforms flowing from the First Principles Review remain underway: Defence has also been developing its approach to asset management over many years, having obtained substantial advice from internal and external sources to adopt a Defence-wide asset management strategy to underpin a sustainment business mode for specialist military equipment. The First Principles developed were: Clear authorities and accountabilities that align with resources Decision-makers are empowered and held responsible for delivering on strategies and plans within agreed resourcing. Encouraging Competition 6. SeeCost Considerations-The Cost Principlesfor additional details. HWrH+z S, ?~#|~!hI&Y{/.>ae0KQ $$ 3,B(3ot=zh6+EZ(Z=\(]/EY&bm>KD_;$8Gb To be a smart buyer requires the capacity and technical knowledge to articulate its organisations requirements and recognise, independently of the vendor, whether the vendor is meeting those requirements.163 Past Australian use of the smart buyer concept (discussed in Appendix 7 of this audit report) is consistent with this approach. It is likely that some unquantifiable portion of claimed savings derive from the five per cent across-the-board cut among Systems Program Offices imposed by the Chief Executive Officer before the Strategic Reform Program commenced. 3.43In developing this new approach to cost estimating, Defence sought information from Defence partner nations about the structures, data and approaches they use to develop cost estimates for major capital projects. 191-202, available from
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