The Future PGCS 2019 Chloe Kempster www.pgcs.org.au/library/2019 2 For example, the Defence Science and Technology Organisation (DSTO) referred in a 1997 publication to an initiative to help the Australian Defence Organisation (ADO) be a smart buyer in relation to software acquisition. 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. Note a:Defence, CASG Executive Advisory Committee paper position paper reflecting the views of the SPO Reform Project, 13February2017. In May2016, the Sustainment Gate Review for the program found that the commercial incentive in the contract was insufficient to obtain the desired rate improvement. [19], Capability Acquisition and Sustainment Group, Last edited on 19 February 2023, at 03:28, "First Principles Review: Creating One Defence", "Department of Defence Annual Report 202-21 | Performance Criteria | Criterion 10 | Manage the investment, acquisition and sustainment of Defence equipment, supplies and services to meet Government and Defence requirements", "DMO appoints industry supremo to drive reform", "Going to the Next Level The Report of the Defence Procurement and Sustainment Review", "Address to the Department of Defence Senior Leadership Group", "Fact Sheet: Smaller Government: Defence Materiel Organisation: Reintegration into the Department of Defence", "Defence extracts new deputy secretary from industry", Mortimer Review into Defence Procurement and Sustainment, https://en.wikipedia.org/w/index.php?title=Capability_Acquisition_and_Sustainment_Group&oldid=1140236078, Military Equipment Acquisition and Sustainment, inadequate project management resources in the. SeeCost Considerations-The Cost Principlesfor additional details. The ANAO considered progress with two of the above elements briefly (business framework, centres of expertise) but in more detail for three others (smart buyer, Systems Program Office reform and performance-based contracting). Defence then rewrote the Mortimer recommendation to read implement a system200 to improve oversight of DMO sustainment performance.201 Thus Defence took a passive role, focusing on developing a system to monitor Systems Program Offices work rather than the more active analysis and management of sustainment across the organisation, envisaged by Mortimer. 95Since 201314, Defence has also reported estimates for sustainment by Defence Group/Service. Defence began its Smart Sustainment reforms in early 2010 as part of the Strategic Reform Program Implementation package. 29Defence, Operational Concept Document for DMO Sustainment Reporting System (Version A, December 2004, Sponsored by Director General Standardisation). 2.9Agreements, internal to Defence, between the Capability Acquisition and Sustainment Group and each capability manager, set out the level of performance and support required by the capability manager.21 These are Materiel Sustainment Agreements (MSAs). Source:Defence, PMkeys Reporting, Full-time equivalent staff in all Systems Program Offices DMO/Capability Acquisition and Sustainment Group, by month, July2004 to June2016. 5.23As discussed in paragraph 3.47 of this report, Systems Program Offices have had between three thousand and four thousand staff over the last decade. The consultants attributed the diversity to historical issues around original parent organisations, [and] individual service influences. Three principal issues remain for the conduct of a process for sustainment parallel to the MPR for acquisition: 35. The majority of contracts could be reshaped to enhance industry accountability for asset management outcomes, which could result in more effective time and materials management; and. 3.12In a recent submission to the JCPAA, Defence stated that The Defence Ministers are provided with a Quarterly Performance Report, which includes Projects of Concern, Projects and Products of Interest and Performance Summaries for the Top 30 Sustainment Products.44 The stated intent of the Quarterly Performance Report is to provide ministers and senior Defence personnel with: a clear and timely understanding of emerging risks and issues in the delivery of capability to our Australian Defence Force end-users. They do this through a combination of internal work and commercial contracts. 13Defence, First Principles Review: Creating One Defence, 2015the First Principles Review. On its face, this is arguably of wider applicability: [Acquisition and sustainment each have] a distinct character, but need to be carefully linked to ensure a smooth passage from acquisition (design, build, test and commission) to sustainment (maintain, operate, support logistically). 5.64The current Capability Life Cycle manual and its detailed design document do not mention a business model for sustainment nor any overarching sustainment framework. are subject to the 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. 356), items such as Super Hornet fighter aircraft (operating costs) and C-17 transport aircraft (operating costs) are shown as separate line items. The audit had found, among other things, that it was not generally used in the in-service (sustainment) stage. 2732. There is also evidence of a planned benchmarking exercise to identify appropriate operating and functional models that can support DMOs future End State Design (around May2015). Box 1: The origin of Systems Program Offices. Defence planned to reallocate the $20.6billion to other areas of Defence capability and contribute to the governments 2009 Defence White Paper, Defending Australia in the Asia Pacific century: Force 2030. The Review team thought the answer to that was No.60. located at 48 CFR Part 31.2 Federal Acquisition Regulation. 5.36Performance-based contracting was described in a chapter on managing sustainment in the DMOs 2007 Acquisition and Sustainment Manual, but not made a requirement or a priority.151 In 2008, a Defence internal audit evaluating the effectiveness of Defences use of performance-based contracting found that: the maturity of management systems for such contracts varied, there was inadequate central oversight and support, inconsistent contracting arrangements, and less effective outcomes in many cases. 2.8As a consequence of the 2015 First Principles Review and the decision to consolidate and reform Systems Program Offices, Defence has adopted a new definition of Systems Program Office. Poor outcomes in the Key Health Indicator result in primary risk to Material Confidence outcomes (supportability) and secondary risk to achieving Material Availability. 27Defence, Collins Class Sustainment Review, November 2011, p. 10. Poor outcomes in this Key Health Indicator will also have an impact upon the Sustainment Efficiency outcomes, as rework will require additional funding and stores to remedy. Please direct enquiries relating to reports through our contact page. Other, related GAO work has used the term in relation to the management of sustainment: privatizing total support on new and future weapon systems can make it difficult for the organic depots [equivalent to Systems Program Offices] to acquire and sustain technical competence on new systems, leading edge technologies, and critical repair processes necessary to maintain future core capabilities, provide a credible competitive repair source, and be a smart buyer for those logistics activities that will be contracted out.207. 158Defence, CASG First Principles Review Implementation Plan, version 2.9, 15 December 2016; Capability Acquisition and Sustainment GroupMatrix Management, 8 September 2016. The subsequent Defence Procurement Review (Kinnaird Review) in 2003 also stressed the need for high-quality, highly skilled sustainment managers in delivering modern military capability in a business-like manner. 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. 22Performance measurement and reporting on sustainment is considered in Chapter 3 of this report. 5.66The ANAO recommends that Defence develop and implement an evaluation plan to assess the implementation of the recommendations of the First Principles Review. xref
Sustainment costs can exceed those of the original procurement and the challenges can be more complex.26. For some Defence systems the planning documentation includes a description of the system followed by a statement of the primary focus for that asset for the forthcoming financial year, and in the annual report there is an account of what has been achieved. There is a risk that insights into a very substantial reform process could be lost. The ANAO recommends that Defence institutes a risk-based quality assurance process for the information included in the Defence Quarterly Performance Report. Defence subsequently increased the numbers of organisational units it considered to be Systems Program Offices from 54 to 78, with staff numbers ranging from three to 178.135. 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. It provided no explanation of its inability to implement the recommendation in its advice to ministers on the matter. 183Defence, minute Effective implementation of asset management in Defence, 17 September 2015. Note: Military units also undertake some operational-level sustainment activities. 0000000883 00000 n
18. 108Defence, The Strategic Reform Program: Making it Happen, 2010, p. 4. 5.7Defences Capability Acquisition and Sustainment Group has its own CASG First Principles Review Implementation Plan, which contains a range of elements, some of which correspond directly to the summary set of recommendations in the First Principles Review (such as [Systems Program Office] Consolidation and Reform). Accuracy is an output measure, which directly reflects achievement towards the Materiel Confidence outcome. Effective sustainment of naval, military and air assets is essential to the preparedness of the Australian Defence Force (ADF) and to enable Defence to conduct operations. 20In April 2016, Capability Acquisition and Sustainment Group defined a Systems Program Office as a business unit that works directly with Capability Managers and Suppliers as necessary to deliver agreed capability across the CLC [capability lifecycle], coordinating the FIC [fundamental-inputs-to-capability] elements required to achieve this objective. 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. 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. Appendix 5 of this audit report sets out both the root causes and those of the Coles Reviews consequential recommendations that have wider applicability in Defence sustainment. This Key Health Indicator relates to the ability of the Capability Acquisition and Sustainment Group to manage temporary variations to the platforms configuration. The main insights into what became of the initiative can be derived only from external consultancy reports. Capability Acquisition and Sustainment Group also undertook in July2016 that over the next 12months, Capability Acquisition and Sustainment Group will commence effort capture (where staff time is tracked against the projects and products we support), led by the Group Business Manager.85. At the time DMO developed MRS it was noted internally that DMO currently spends around 3billion dollars per year on sustainment activities and at this stage has no system that can adequately report on the effectiveness or efficiency of these activities.29 Work began in September2005 to introduce sustainment reporting capacity into MRS. 3.3Several major reports have criticised sustainment reporting over the last decade, including Mortimer (2008) and Rizzo (2011).30 Rizzo was highly critical of existing performance indicators: Each current [MSA] Product Schedule has inadequate Key Performance Indicators They only include a small subset of the contractual measures that should be placed on each party and there are no consequences associated with noncompliance. 78The analogy estimating method uses actual costs from a similar asset/system and then relies heavily on expert judgement to adjust these costs to account for differences between the similar asset/system and the new asset/system to develop an estimated cost for the new asset/system. The initiative was not prescriptive except that capability and safety should not be compromised by any savings proposal. 62Until the implementation of the full system, project performance review data will continue to be captured using spreadsheets. 3.11The Quarterly Performance Report is the primary way by which Defence provides information to government and senior Defence personnel about the status of major acquisition and sustainment activities.43 The report was developed in 2015 in consultation with the office of the Minister for Defence. In March 2016, Defence extended Bechtels contract until 30 June 2016, which increased the value to $9.7 million. We understand that there are in more than 580 panellists across 79 skills sets. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program . The cost recovery method is a method of revenue recognition in which there is uncertainty. [Systems Program Offices] claim that policies and new tools are developed which do not sit well with sustainment and, because Canberra is acquisition-focused, sustainment advice is not taken.25. Other reforms flowing from the First Principles Review remain underway: 30. When conducting procurement, an official must consider the relevant financial and non-financial costs and benefits including, among other things, whole-of-life-costs.63 Sustainment expenditure is a major contributor to whole-of-life costsin some cases, the largest contributor. Defence analysed these targets and developed overall targets to finalise the Defence White Paper and design of the Strategic Reform Program. Completing this work is likely to take longer than the two years intended for the First Principles Review Implementation. Note b:These figures include Australian Public Service and Australian Defence Force staff. The Coles Review identified five root causes of the problems it observed. On 31 August 2015, Kim Gillis was appointed Deputy Secretary CASG. Defence has drawn heavily on contracted industry expertise to support its implementation of the program of organisational change relating to acquisition and sustainment that has followed the First Principles Review. Defence had multiple repositories and versions of asset management information making it hard to assess whether Defence was aligned to best practice. Defence is not easily able to identify the effort, in terms of staff numbers, expended on each. 0000000016 00000 n
Setting the Direction 3. These risks and issues are highlighted so that stakeholders can respond in a coordinated manner to guide the conduct of remediation actions. 4. 190Defence Portfolio Budget Statements 201516, Section 2: DMO Outcomes and Planned Performance, p. 151, available from
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