casg cost principles

The documentation does not specify which elements remained relevant. The Department of Defence welcomes the Australian National Audit Office (ANAO) performance audit on Defences management of materiel sustainment. In the Defence Annual Report 200405 (p. 242), DSTO nominated ensuring Australia is a smart buyer of defence equipment as one of the ways in which it supports Australias defence. 3.50To assess Defences public reporting for the sustainment of specialist military equipment, the ANAO considered: 3.51The Public Governance, Performance and Accountability Act 2013 (PGPA Act) aims to improve the line of sight between what was intended and what is delivered. 0000001012 00000 n Capability Acquisition and Sustainment Group officers have stated that, because of the lack of internal capacity and expertise, the group has depended heavily on consultants/contractors with its reforms. The 2015 First Principles Review was preceded by earlier major reform initiatives, notably the Strategic Reform Program (SRP) begun in 2009. 3.15Under current arrangements for its production, the Quarterly Performance Report is neither timelyit is more than 50 days old by the time it gets to ministersnor clearit is dense with acronyms and jargon. 92See Defence Portfolio Budget Statements 201516, p. 21, Table 6: Capability Sustainment Programme; Defence Portfolio Additional Estimates Statements 201516, p. 21, Table 10: Capability Sustainment Programme. Opportunities also remain to increase the completeness and transparency of publicly reported information regarding materiel sustainment. Note b:This is part of a substantial project within Defence to improve both the recording of contracts and purchasing within Defence. 109Defence, Helmsman Sustainment Complexity Review, July 2010, p. 5. Systems Program Offices are located in different parts of the country but are organisationally all part of the Capability Acquisition and Sustainment Group within Defence. ], P3 Orion, P8 Poseidon, Herron UAV, and Aeronautical Life Support Equipment, Ground support equipment, aircraft common spares, aerospace support and test equipment, and technical data and publications, Air Mobility & Tanker Program Office (AMTPO), Directorate Aerospace Simulators & Special Aircraft (DASSPA), Tiger (ARH), Taipan (MRH-90), Blackhawk and Kiowa helicopters, Cargo Helicopter & Unmanned Surveillance Project Office, Chinook and Unmanned Aerial Vehicle aircraft, Squirrel and Seahawk helicopters and aerial targets, Helicopter Aircrew Training System Project Office, Multirole Helicopter [MRH-90] Project Office, Joint domain (16 Systems Program Offices), Wide area and space surveillance capability, Maritime strategic communications capability, Joint C4I [communications, command, control, computers and intelligence], Joint communications, command, control, computers and intelligence capability, Land C3 [communications, command and control], Land communications, command and control capability, Maritime command, control, and communications capability, Joint & Air Intelligence, Surveillance, Reconnaissance and Electronic Warfare, Joint & air intelligence surveillance reconnaissance and electronic warfare capability, Land Intelligence Surveillance, Reconnaissance and Electronic Warfare, Land intelligence surveillance reconnaissance and electronic warfare capability, Maritime Intelligence, Surveillance, Reconnaissance & Electronic Warfare, Maritime intelligence surveillance reconnaissance and electronic warfare capability. 1.5The Committee noted, however, that the final structure for sustainment reporting was as yet undecided. Instead, it would usually be done as several separate calculations, as we showed in the first 4 steps of the derivation. 4.13In contrast to the advice to ministers, in September2012, an internal progress report on the action items from the 2011 health check showed that Smart Sustainment was still struggling to gain traction. Late delivery has minimal impact on the overall development of the Armed Reconnaissance Helicopter (ARH) capability. As noted in Figure 3.2, Systems Program Office staff have numbered between three thousand and four thousand over the last decade. It has the agility to refine those strategies as new information becomes available. 3.66There is no direct explanation in the estimates documents reconciling or explaining the difference or helping the reader to identify any trends. Defence doing only for itself what no one else can do more effectively and efficiently. The Reviews terms of reference included one specific reference to sustainmenta requirement that Defence ensure a commercially astute, focused and accountable materiel acquisition and sustainment capability. Note a:In compiling the data underlying this table PMKeys Reporting is not able to identify all those organisational units now recognised by Capability Acquisition and Sustainment Group as Systems Program Offices. 157Defence, Report on Defence Governance, Acquisition and Support, (KPMG), April 2000, p. 51. ii. 70.). 43 199798, Lifecycle Costing in the Department of Defence, examined Defences 1992 policy on lifecycle costing, finding that while Defences policy and procedures advocate the use of whole-of-life costings in acquisition decisions, in practice, Defences use of whole-of-life costing was uneven. Step 2develop a risk-based tailored project execution strategy, covering approvals, project management, and through life asset management, including a coherent approach to the acquisition and sustainment phases. 16Defence, Capability Acquisition and Sustainment Group, Accountability, available from [accessed 13 April 2017]. Defence advised the ANAO that Capability Acquisition and Sustainment Groups expenses on all employees in 201516 were $490.4million. The system supporting the current AusTender site is described by Defence as in a state of decay as it is over a decade old and no longer viable to upgrade and sustain. Current proposals appear to be limited to an independent health check on progress.184 On the face of it, the scope of the health check is narrow, focused on closing recommendations and assessing progress. The absence of an asset management approach within Defence makes it difficult to piece together a holistic asset management view across the myriad individual policies which focused on discrete processes. The terms of reference were also accompanied by a range of issues for consideration, among which was How Defence sustains and supports capabilities and extending lessons from the Coles review [of Collins Class submarine sustainment] across all areas of sustainment. Defence notes that the audit was conducted at a strategic level, and acknowledges the opportunities for improvement identified by the ANAO. Later (April2004), senior DMO managers stated that there was scope to achieve a better risk balance in sustainment program management, where well-defined tasks had, in the past, been transferred to industry successfully with net savings, thereby improving efficiency. 5.12Bechtel had made contact with Defence in July2013 seeking an opportunity to help with reform of the DMO, presenting a paper Australian Defence OrganisationDMO Transformation Opportunities. Setting the Direction 3. The DMO was a half-way house with a separate chief executive and badging, but staff and funds continued to be provided by the department. An amended version commenced on 1 March 2017. There are four basic financial . Defence has engaged industry expertise to guide and help it with the First Principles reforms relating to acquisition and sustainment, including $107million with a single company where the contract for services is not performance-based. More efficient support services for the Jindalee Operational Radar Network, reportedly saving $100million over ten years; Navy using Telstras NextG network for several minor war vessels, relinquishing satellite communications subscriptions and saving $2.3million a year; and. Foreword Introduction 2. 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. %%EOF The primary element of this reform is the consolidation and review of the Systems Program Offices; establishing centres of expertise as part of a matrix organisation within Capability Acquisition and Sustainment Group to make best use of specialist skills that are common across its Systems Program Offices. ~rEy0Eq2I;+t4NY1. 5At the strategic level, guidance is given by the Chief of the Defence Forces Preparedness Directive. 203Defence, The Helmsman Sustainment Complexity Review, July 2010, p. 29. 5.60In May2015, DMO released a sustainment policy stating that Defence assets would be managed in accordance with the international standard for asset management. 59Defence Materiel Organisation, Zero-Based ReviewPhase 2, Final Report, 9 December 2003. 4.9Defences Sustainment Complexity Review in mid-2010 warned that most Systems Program Offices did not have the capacity to undertake Smart Sustainment initiatives.109 Nevertheless, in late 2010, an internal health check on Defences governance arrangements for Smart Sustainment found that, despite some difficulties, Defence had the fundamentals in place to support their success.110. 1See, for example, ANAO Report No.40 201617, 201516 Major Projects Report. The following paragraphs provide an overview of the contents of the 201516 performance documents. The objective of the audit was to assess whether Defence has a fit-for-purpose framework for the management of materiel sustainment. Table A.1:Key data for each of Defences Systems Program Offices: staff, assets and major contracts, Assets under sustainment/consumables supplied, Number of sustainment contracts with a value greater than $1million, Total value of contracts with a value greater than $1million ($m), Maritime domain (17 Systems Program Offices), Amphibious fleet (excluding LHD) and supply ships, Directorate, Maritime Operational Support, Maritime targets and ranges and Dock Management at Garden Island, Hydrographic fleet, minor fleet support vessels and Army amphibious fleet, Mine hunting and clearance diving materiel, Small, Medium, and heavy arms, and surveillance systems, All clothing and apparel for all ADF elements, Health materiel and combat rations for all ADF elements. 200.403 Factors affecting allowability of costs. 206General Accounting Office, GAO/GGD-92-11 Government Contractors: Are Service Contractors Performing Inherently Governmental Functions?, 1991, p. 30, available from [accessed 16 January 2017]. Defence lacked a single set of accurate information to inform decision makingThe review found that, whilst significant levels of information and analysis exist across the Collins Class Sustainment Program, the basis for long-term decision making was not always consistent or accurate, with multiple systems and datasets in use for financial, maintenance and supply chain activities. 130In May 2016, Defence entered into another contract with Bechtel for $65.8 million, to conclude in June 2018. 5.5A subsidiary recommendation (2.2 disbanding the DMO and transferring its core responsibilities in relation to capability delivery to a new Capability Acquisition and Sustainment Group) has led to the creation of Capability Acquisition and Sustainment Group in Defence. A cash flow statement is a financial report that details how cash entered and left a business during a reporting period. The SPMS system was not fully implemented during the ANAOs audit fieldwork but is expected to be fully operational by the end of June2017. These measures track expenditure against phasing and is key indicator of the quality of Systems Program Office planning and costing processes across the Financial Year. 200.404 Reasonable costs. In March 2016, Defence extended Bechtels contract until 30 June 2016, which increased the value to $9.7 million. The skill sets required in sustainment are quite different from those required for design and build: repairing the range of equipments in a submarine poses problems of access and control which are not likely to be experienced during build, and the design issues which crop up during sustainment are focused on keeping equipment operational rather than on design for performance. 5.46Work was then reinvigorated and Defences First Principles Review Implementation Committee approved the Business Framework on 1September2016. In 2000, when the expected benefits were not being realised, Defence reviewed Support Command Australia and the Defence Acquisition Organisation, finding that serious problems persisted in capital acquisition and whole-of-life support. It is an output measure, which directly reflects achievement against the Sustainment Efficiency outcome. This month closes out the Financial Year total at 3995.2 against the planned 5848 hours, a result of 68.32 percent. 3.19In this case, the Quarterly Performance Reports usefulness is reduced by the following: 3.20The contrasting information identified in this case indicates that the Quarterly Performance Report would benefit from the application of a quality assurance process to ensure that government and senior Defence personnel are presented with a frank and balanced assessment of performance (see paragraph 3.27 below). Demand Satisfaction Rate measures the effectiveness of the supply chain. Under the PGPA Act, Defence will need to report meaningfully against this plan in its annual performance statement. 2732. In August 2022, Chris Deeble was appointed Deputy Secretary CASG. Again, this presentation is not consistent as in certain years, for example, individual product sustainment costs are identified as separate line items.96 Nevertheless, Navy, Army and Air Force sustainment costs can be traced to identify trends. 61Defence, First Principles Review, p. 40. An unspecified proportion of Smart Sustainment savings of $197million in. Given the substantial resources involved, both in the expenditure on sustainment and the reform process, Defence would benefit from assessing all aspects of these changes carefully. CASG was also managing 109 sustainment products with a total annual budget of A$7.7 billion; for a total annual budget of A$17.0 billion.[2]. The data will be obtained from: Defences internal cost data; industry suppliers; industry-maintained databases; and cost data made available to Defence from the United States, United Kingdom, New Zealand and Canada.80. 90In the 201718 Defence PBS, Defence presents the estimates and descriptive information for its Top 30 sustainment products in a single table. Support of products represents about 2025percent of sustainment expenditure. located at 48 CFR Part 31.2 Federal Acquisition Regulation. For example, in ANAO Report No.52201314, Multi-Role Helicopter Program, the ANAO concluded that the pre-2012 sustainment contract provisions for Defences Multi-role Helicopter Program were largely ineffective.156 The audit report noted that this was largely due to Defence not applying its own processes to the standards required. [4][3]. 4.16Defence documents indicate that by June2013, it had determined that the Strategic Reform program targets were no longer valid and Defence was developing a revised approach to reform. Correct date believed to be July 2009.] 104Defence, 2008 Audit of the Defence Budget, April 2009. 28The same issue continues to arise. The effectiveness of these reviews could be increased if the lessons obtained from gate reviews were routinely incorporated into management reporting on sustainment and if gate reviews were extended to contribute to the proposed quality assurance mechanism for Quarterly Performance Reports. Final Operational Capability was declared with caveats by Chief of Army (CA) on 14April2016. An output measure, which directly reflects achievement against the Materiel Availability outcome. 5.26In 2016, the First Principles Review concluded that Defence had too many Systems Program Offices139, and that Defence could make savings by restructuring them and reducing their staff.140 The Review drew on a 2013 consultants report that identified ways to reduce the DMO workforce.141. This chapter examines Defences governance and operational arrangements for managing the sustainment of specialist military equipment. In May2016, a sustainment gate review identified the cost of sustainment as a key risk for this program. The total spend was about $350000. Poor outcomes in the Key Health Indicator result in primary risk to Material Confidence outcomes (supportability) and secondary risk to achieving Material Availability. In this light, the cost of those staff is a substantial omission from the apparent price of services facing the capability manager. The ANAO has recommended that Defence institute a risk-based quality assurance process for information included in the Quarterly Performance Report. 86Department of Finance, Resource Management Guide No. 71 11 Defence requires that the first sustainment gate review be held within 12months of the review held before final operational capability is reached.57 Thereafter, further such reviews are to be undertaken periodically (every one, two or three years) with the exact timing determined on a risk basis. In other cases, this information is so general as to be of limited value. Web Table8.2 provides a one-paragraph performance summary by product for each of the same Top 30 sustainment products. Work towards benchmarking was begun in 2013 for Navys surface ships and shore capabilities in response to a Chief of Navy directive. This introduces risks related to ensuring that Systems Program Office staff working on outsourcing have the necessary skills and competencies. The First Principles Review has pointed out that Defence has treated Systems Program Office staff costs at the project level as a free good, reducing the transparency of the cost of sustainment work and providing inaccurate price signals and a distorted incentive structure to Capability Managers. Eliminating complicated and unnecessary structures, processes, systems and tools. In February2016, the Deputy Secretary, Capability Acquisition and Sustainment Group, informed the First Principles Review Implementation Committee that the business framework project has commenced and been resourced to deliver a fundamental rebuild of all Group processes.159 The completion date was extended to 1July2016 and the objective was to have a High-level business framework approved. [15][16] The case is said to have "significant implications" for the Senior Executive Service of the Australian Public Service, where legal challenges to performance decisions have been rare. This is especially so, given the recent observation by Defence that, in some cases, [Systems Program Offices] have been spending more money on salaries than they were on actual acquisitions or sustainment.84, Figure 3.2:Numbers of staff in DMO/Capability Acquisition and Sustainment Group Systems Program Offices, 200416. This was to focus more holistically on benefits realised to the organisation through reform, rather than only acquitting financial targets. Reviews have consistently emphasised the need for Defence to improve the efficiency of its operations, including in sustainment. 3.6SPMS was introduced, first, for Navy (MayJuly2015) following work to develop its sustainment performance framework with a standard suite of performance indicators.37 The system was being implemented in Air Force and Army from late 2015 through 2016. 30Defence, Going to the Next Level, the report of the Defence Procurement and Sustainment Review [Mortimer Review], 2008, p. 49, Recommendation 4.2; Defence, Plan to Reform Support Ship Repair and Management Practices, [Rizzo Review] July 2011, p. 46. 99Some of those attempts are examined later (paragraph 5.54 forward). A Smart Buyer will also enable appropriate financial return for its Suppliers. Contents - Commonwealth Procurement Rules - 1 July 2022 1. This indicates that any actual adjustments, if made, were to internal Defence allocations. 200.409 Special considerations. 103DMO internal paper, Reform Issues, April 2011. See Defence Portfolio Budget Statements 201718, Table 68: Top 30 Sustainment Products by End of Financial Year Outcome 201718, pp. First, the effective management of risks to national security which can arise with the exposure of details of the readiness and availability of Defence capability. 5.65The audit found limited evidence that Defence was preparing to evaluate the reforms to Capability Acquisition and Sustainment Group, its execution of the reforms or their outcome in terms of improvements to either acquisition or sustainment. Research and reviews conducted for Defence have revealed a range of specific operational problems that are detracting from the efficient and effective sustainment of Defence capability, including the functioning of Systems Program Offices. The review team assesses that in some cases, 2530percent of current SPO activity is involved in auditing and man marking industry, making basic modifications, and the management of these activities. 3.30More recently, after the release of the 2015 First Principles Review, one of the Review panel members characterised inefficiency as the most prominent problem across Defence: The big problem that the Review team saw was one of efficiency and not of effectiveness. 98Australian Strategic Policy Institute, The Cost of Defence: ASPI Defence Budget Brief 201617, p. 58. In that later report the list was labelled sustainment products of interest rather than underperforming, though the items are still listed in order of concern. 44Joint Committee of Public Accounts and Audit, Inquiry into Defence Sustainment Expenditure, submission from the Department of Defence, February 2017. The Future PGCS 2019 Chloe Kempster www.pgcs.org.au/library/2019 2 20. 5.44Defence began development of the Capability Acquisition and Sustainment Group Business Framework as of 31July2015 with a view to completion on 1February2016. All 22 Tiger helicopters, simulators, ground support systems and contracted training devices have been accepted and introduced into service within project budget approvals. Fuel and lubricants, combat clothing and explosive ordnance fall into this category, which makes up about 20percent of sustainment expenditure.

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