The Defence Materiel Organisation and the Capability Development Group are to be abolished and their functions replaced by a new Capability Acquisition and Sustainment Group, after the federal government accepted all bar one of 76 recommendations from the First Principles Review of Defence.
The review was led by former Rio Tinto managing director David Peever, and its report, titled ‘Creating One Defence’, was released on Wednesday by Defence Minister Kevin Andrews.
“The shortcomings identified by the review affect all of Defence and need to be urgently addressed,” Andrews told a press conference in Canberra. “These include a proliferation of structures, processes and systems with unclear accountabilities, which in turn cause institutionalised waste, delayed decisions, flawed execution, duplication, over-escalation of issues for decision and low engagement levels amongst employees in parts of the organisation.”
The review’s four key recommendations include, Andrews said, taking “an end-to-end approach to capability development with a robust and tailored investment approval process and a new ‘smart buyer’ arrangement for the acquisition and sustainment of defence capability.”
Andrews said the new Capability Acquisition and Sustainment Group would have a “life of project” focus.
“One of the criticisms that has been made by the panel is that there are many handover points through the Defence chain and we don’t have a single capability development and sustainment [process] from the beginning of a project right through to the end of life of a particular acquisition at the present time.”
The new organisation would be led by a Deputy Secretary for Acquisition and Sustainment, “responsible,” the report reads, “for smart procurement of Defence capability and being the delivery agent for the capability managers. [The role] incorporates functions from Capability Development Group, Defence Materiel Organisation, logistics service delivery, non-materiel procurement and the Defence Science and Technology Organisation.”
This new Deputy Secretary, observes the review, “should have extensive experience managing large commercial supply chain and project management organisations.“
The review also recommends a strengthened role for the Vice Chief of the Defence Force.
“We recommend that the Vice Chief of the Defence Force’s decision rights be greatly strengthened, including the right to stop projects proceeding through the approval process until joint force integration is proven,” says the report.
Another of the required changes identified by the review is “Strengthening the front end of the capability development life-cycle by revising the two pass process, establishing an entry gate and creating more opportunity to tailor and fast track projects.”
The review also calls for the development of a Defence Investment Plan in place of the current Defence Capability Plan, which it says “as a management tool is problematic as it focuses on capital equipment only and is seen generally as a ‘shopping list’ of projects requested by the services. It is too easy to get a project onto the Defence Capability Plan as the Force Structure Review process is irregular and not appropriately contested.”
Instead, the review reads: “We recommend that, on government approval, the entire project acquisition budget is allocated to the Capability Acquisition and Sustainment Group to ensure expenditure is in accordance with the project delivery plan.”
Implementation of the review’s recommendations will take place over a two-year timeframe and will be overseen by an “oversight board” chaired by Peever and comprising fellow First Principles review members former Defence Minister Robert Hill, former Finance Minister Lindsay Tanner, former Chief of Army LTGEN Peter Leahy (ret’d) and former head of BAE Systems Australia Jim McDowell, plus one additional appointee.