First Principles review chair David Peever flanked by Defence Minister Kevin Andrews and CDF Air Chief Marshal Mark Binskin.

The First Principles review into the operations of the Department of Defence is damning of the Defence Organisation’s ability to reform itself, particularly in the area of equipment acquisition.

“We acknowledge the complex and difficult tasks expected of Defence, particularly in making investment decisions with a 30 to 40 year tail. Yet we were puzzled as to why Defence has been unable to reform itself. Organisations need to be periodically reset and reshaped by their leadership. Substantive change appears to have been too difficult for Defence leaders,” the report, released by Defence Minister Kevin Andrews on Wednesday, reads.

It fingers three “root causes” in creating “complacency and inertia” and an inability to change – “leadership churn” and “budget uncertainty”, as well as the ADF’s high operational tempo of the past decade.

“Leadership churn and budget uncertainty are the critical root causes of the organisation’s complacency. The frequent turnover in Ministers and Secretaries, in particular, does not enable effective leadership of change. The state of the organisation is symptomatic of one that has not been materially reshaped for over a decade and has been allowed to drift.”

The report, written by review chair former Rio Tinto managing director David Peever plus 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, is especially heavily criticical of current Defence acquisition processes.

“It is clear that the processes in the current capability development life cycle are cumbersome, excessively bureaucratic and inefficient. The organisation is more focused on process adherence than high quality capability outcomes.”

The Defence Materiel Organisation, the review found, was “extremely top heavy” and “a disempowered delivery organisation”, with elements that “have little or no perceived value as they are not core to the acquisition and sustainment function”.

It also fingered an “excessive” number of system program offices (SPOs) and an “artificial handover point between Capability Development Group and the Defence Materiel Organisation that complicates the focus on capability outcomes”.

In accepting all bar one of the First Principles review’s 76 findings, the Defence Materiel Organisation and the Capability Development Group are now set to be abolished, and their functions replaced by a new Capability Acquisition and Sustainment Group.