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Implementing the White Paper

Initiatives to Get the Best Value for the Defence Dollar

Further development of the Defence Management and Finance Plan was undertaken in accordance with the Government's budget timetable. The 2004-14 Defence Management and Finance Plan was available by 31 October 2003 for the Senior Ministers' Review. An assessment of Defence's resourcing position formed part of the Defence Capability Review completed in November 2003 and was reflected in the published 2004-14 Defence Management and Finance Plan.

Lieutenant General David Hurley was appointed as Chief of the new Capability Development Group in December 2003. The Group's role in the capability life cycle is to define the defence capability required for future operations and to provide and assess the options for delivering that capability. This is to be achieved inter alia through the new 'two pass' implementation process, in which Defence provides independent analysis of capability development options to the Government, based on a rigorous assessment of technology, cost and schedule risks and whole-of-life costs. This new process applies to all major capital equipment proposals expected to cost more than $50m or of special significance. The new process improves the level of transparency and scrutiny of major capital equipment proposals by the Government, with a similar process established for major capital facilities projects.

The 'two pass' implementation process consists of three distinct stages and decision points for the Government: entry of projects into the Defence Capability Plan, and first pass and second pass approval.

The acquisition cycle is initiated when Defence identifies a capability gap. Defence seeks the Government's approval to address the gap by inclusion of the proposal to meet the identified gap in the Defence Capability Plan (the forward ten-year plan for capability acquisition proposals). In recognition of the inherent uncertainty at this early stage the Defence Capability Plan can be expected to be less precise about the nature, scope, cost and timing of individual projects, especially in the second-half of the decade.

Once the proposal is approved by the Government and included in the Defence Capability Plan, Defence will develop a broad range of options to address the proposal for consideration as part of the first pass approval stage.

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The first pass stage involves a range of feasible solutions being presented to the Government with information for each solution on what effect might be achieved, indicative cost and schedule, risk and how the option might be further developed. The Government compares each of the options and selects a set of options to be further explored as part of the second pass or acquisition approval process, how industry should be engaged, and the funding required to undertake the detailed analysis of those options.

After first pass approval, the Government is not committed to acquiring the capability, only to the conduct of detailed studies, analysis and, possibly, funded industry studies.

The focus of the second pass stage is to subject the options previously approved by the Government at first pass to a detailed and rigorous assessment for Government approval. In most cases, the funding received after first pass will be used to obtain more robust data through studies and industry solicitation, including requests for proposal and tenders. It culminates in approval to acquire the capability solution and support, including a defined acquisition budget, schedule, level of performance, and budgeted whole-of-life cost.

The Chief of the Capability Development Group manages the proposals through the first and second pass stages in close consultation with the Defence Materiel Organisation, the Capability Managers, and industry stakeholders. Following second pass approval by the Government, the Defence Materiel Organisation - working closely with the Chief of the Capability Development Group and the Capability Managers - takes carriage of the acquisition, through-life support, and disposal aspects of the projects.

More details on the Defence Procurement Review and the six materiel acquisition reform themes can be found in Chapter Six (Reforms), and information on the establishment of the Capability Development Group is contained in Chapter Three (Group Contributions).

Efficiency Savings

Defence is meeting some of its current budgetary challenges through the implementation of improvement initiatives as part of the Program of Administrative Savings. Based on measures implemented to date, the first tranche of the savings program ($50m) was exceeded in 2003-04, with those savings in excess of targets used to fund transition costs. Further details are provided in Chapter Six (Reforms).

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