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Chapter 12 - DMO Program 1.3 Provision of Policy Advice and Management Services

The objective for Program 1.3 is for the DMO to meet ministerial, government, Defence and DMO expectations and time frames for the provision of policy, advice and support, including delivery of programs to support the Australian defence Industry. The key performance indicator involves meeting these expectations and time frames. The deliverables include specialist legal and procurement advice on contracting policy, financial management, acquisition and sustainment advice, and industry engagement.

Program 1.3 represented about one per cent of the DMO's expenditure in 2012-13. Expenses under this program include:

  • procurement policy advice to Defence and the DMO and contracting services for the DMO and various Defence procurement activities
  • delivery of industry programs and engagement activities for government and Defence
  • financial management, including budgeting, reporting and project and sustainment financial management services
  • corporate governance and reporting to meet the Government's requirements.

Table 12.5 - DMO Program 1.3-deliverables

Table 12.5 - DMO Program 1.3-deliverables
Deliverable Performance information
Specialist legal and procurement advice and contracting policy Office of Special Counsel (OSC) in the DMO provided specialist legal advice to a range of DMO Projects, System Program Offices and other business support areas (DMO Legal raised 397 new internal legal engagements with a further 97 new external legal service engagements). Updates have been made to maintain currency in procurement policy through the Defence Procurement Policy Manual. In addition, new and updated contracting templates have been incorporated into the Australian Standard for Defence Contracting (ASDEFCON) suite of tendering and contracting templates. There has also been significant development and promulgation of operational guidance in the form of handbooks and better practice guides.
Acquisition and sustainment advice to support the Government and Defence High-quality and timely advice was provided through regular reports and ministerial correspondence on acquisition and sustainment issues.
Industry engagement Delivery of industry programs supporting Australian defence industry continued through 2012-13 despite the difficult global economic conditions facing the industry. Support was broadened in the area of skilling and engagement.
Implement a financial management shared service within projects and System Program Offices. As part of the broader shared services reforms in Defence and DMO, a successful implementation and transition to financial shared services under the Chief Financial Officer commenced on 15 February 2013.
The DMO is meeting ministerial, government, Defence and DMO expectations and time frames for provision of policy, advice and support. ¹ Measures were taken during the year to improve on the timeliness of advice provided to ministers and the Government.
Notes
  1. The level of advice provided to government fluctuates as a result of a number of factors, including the needs of government for such advice and the length of caretaker periods that fall within the reporting time frame.

Specialist legal, procurement, advice and contracting policy

Working within the DMO Commercial Group, Office of Special Counsel makes an important contribution to the acquisition and support of ADF capability through its two key enabling business areas: DMO Legal and the Commercial Policy and Practice (CPP) Branch. DMO Legal's primary role includes the provision of strategic commercial law and policy advice (including on intellectual property and commercial risk allocation), while CPP Branch assists Defence to achieve more efficient and effective procurement outcomes through the development and dissemination of mandatory and best practice Defence procurement policy, process, tools and templates, and procurement and contracting workforce professionalisation.

Major commercial policy achievements during 2012-13 include the release of an updated version of the Defence Procurement Policy Manual to provide guidance on the DMO's new streamlined framework for procurement delegation, together with guidance on the Commonwealth Procurement Rules, which came into effect at the whole-of-government level on 1 July 2012. During the latter part of the year, work commenced on a new electronic delivery process aimed at enhancing users' access to Defence's extensive range of procurement and contracting policy and guidance materials. In addition, the existing suite of procurement better practice guides was expanded with the development of the following two new guides: Industry engagement during the early stages of capability development and Tender debriefings.

The Office of Special Counsel, in conjunction with the DMO Standardisation Office, is also responsible in consultation with other DMO stakeholders for the maintenance and development of the Australian Standard for Defence Contracting (ASDEFCON) suite of tendering and contracting templates, with much development work undertaken in consultation with defence industry. Major ASDEFCON achievements for 2012-13 include the release of a new, streamlined and simplified template for the procurement of 'lower-order' support services for Defence materiel, ongoing development of work health and safety amendments to the ASDEFCON templates to ensure alignment with the work health and safety legislation, and the development of a proposed new approach to the ASDEFCON technical data and intellectual property provisions (which are currently under consideration by a joint Defence and Industry Intellectual Property Working Group and should be finalised in 2013-14). In addition, the Office of Special Counsel developed new non-disclosure agreement templates, with accompanying guidance. These important initiatives demonstrate the DMO's strong and ongoing commitment to working with industry to improve the efficiency and effectiveness of Defence's procurement and contracting processes and outcomes.

In recognition of the critical role that appropriately skilled and trained staff have on the achievement of efficient and effective procurement outcomes, the Office of Special Counsel continued its focus on professionalisation and training. During the year, DMO Legal delivered 61 days of contract risk training to DMO staff across Australia and CPP Branch continued to develop the procurement and contracting job family with the aim of providing relevant staff with a career path that develops and reinforces appropriate learning and expertise.

AusTender operations and reporting compliance business improvement initiatives have been a focus area for the Office of Special Counsel. As a result of these efforts, AusTender electronic tendering functionality is being further utilised by the DMO, with significant expected process efficiencies for both the DMO and industry. In addition, system enhancements were implemented to achieve improved AusTender contract reporting compliance.

Ministerial support

Providing policy advice and support to the Minister for Defence and the Minister for Defence Materiel is a key function of the DMO. The DMO continues to provide timely and accurate provision of responses to ministerial representations, other parliamentary questions and ministerial submissions.

Table W12.12 lists the correspondence by type of advice provided to the ministers' and the then Parliamentary Secretary's offices during 2012-13.

Table W12.12 Statistics on advice provided to the Government by the DMO

Table W12.12 Statistics on advice provided to the Government by the DMO
Type of advice  
Submissions 485
Speeches 15
Responses to parliamentary questions on notice 32[1]
Questions taken on notice in the course of parliamentary inquiries 12
Questions taken on notice at Senate Estimates Hearings 119
Media releases 63
Ministerial correspondence 160
Question Time briefs 86
Hot Issues briefs 2
Note
  1. The DMO also provided input for 33 portfolio questions on notice.

Industry engagement-enabling our business

As noted in the 2013 Defence White Paper, Defence industry is a major partner in the Government's plans for the current and future ADF. It is vital that Australia maintains a defence industry capable of supporting the ADF's acquisition and sustainment requirements during peacetime and operations. Defence works with and provides funding and other forms of assistance to support the growth and competitiveness of Australia's defence industry.

Business Access offices

Business Access offices continue to provide a regional interface between Defence and industry with the strategic intention of establishing stronger Defence-industry relationships to increase industry's effectiveness in support of ADF capability.

The Business Access offices, located in each mainland capital city, build and maintain relationships with industry through the ongoing provision of timely advice, information and guidance on how to do business with Defence, and how defence industry policy is implemented. They also work with local and state government and industry bodies to keep Australian businesses aware of the current and future opportunities that exist within the Defence environment.

As well as delivering the established and well received Defence awareness briefings and Defence updates, the Business Access officess  have worked closely with their local systems program offices to deliver a series of capability matching events. These events provide opportunities for firms to demonstrate how they can meet specific current and anticipated DMO and prime contractor capability requirements, and for the DMO to improve its insight into the capabilities of local defence industry.

Australian Industry Capability

The Australian Industry Capability (AIC) Program creates opportunities for Australian industry to compete on merit in the full scope of work for the provision of goods and services, domestically and internationally, based on a value-for-money analysis.

Work committed to Australian industry is captured within the contracted AIC Plan. The AIC Program also supports cost-effective delivery of acquisition and sustainment activities that underpin priority industry capabilities (PICs).

Through both the AIC program and the identification of priority industry capabilities, the AIC Program provides signals to Australian industry regarding specific priorities so that Australian industry can invest, develop innovative solutions and partner to meet the ADF's needs.

In late 2011, the Minister for Defence Materiel announced that AIC Plans for Defence Capability Projects would be made public. The public AIC Plan highlights future work opportunities that may be of interest to Australian companies and relevant points of contact. Six public AIC plans were published in 2012-13. The public AIC plans are available on the DMO website at http://www.defence.gov.au/dmo/id/aic/public_aic.cfm.

Global Supply Chain Program

The Global Supply Chain Program is a program that directly facilitates the provision of commercial opportunities between specifically targeted multinational primes and Australian Defence industry. The program involves selected multinational primes in providing commercial opportunities within their respective global supply chains to specifically identified Australian defence companies. Activities under this program are subject to a deed agreement. There are currently seven such deeds between Defence and multinational primes. The majority of Australian companies targeted are small to medium enterprises that, as a direct result of the program, have each established a competitive edge in the international marketplace.

To assist Australian defence industry in achieving export sales, the DMO supported Australian industry companies through an Australian defence pavilion at selected international trade shows under the 'Team Defence Australia' brand. Activities occurred in North and South America, Europe, the Middle East and South East Asia. Around 180 Australian companies participated, 34 of these companies for the first time.

Export readiness workshops, tradeshow and presentation skills training were also provided to Australian defence industry to support the increasing number of companies entering the competitive defence export market.

Priority industry capabilities

In July 2009, the Government announced a set of 12 priority industry capabilities, that is, industry capabilities considered strategically advantageous and operationally essential to hold within Australia. That list was confirmed in the Defence Industry Policy Statement 2010, which provided more information on the background to the PIC concept and the application of PIC considerations in acquisition decision making.

In February 2013, the DMO completed the final of a series of checks of all of the priority industry capabilities to improve definition, assess health, establish implications for government and, where necessary, determine appropriate intervention strategies. Subsequently, the 2013 Defence White Paper announced the establishment of a Priority Industry Capability Development Fund to help Defence address relevant capability shortfalls. The fund will commence operations in 2013-14.

As noted in the Defence White Paper, starting in the second half of 2013, the DMO will review the criteria used by Defence to determine which Australian industry capabilities should be accorded priority status.

More detailed information on priority industry capabilities can be found at www.defence.gov.au/dmo/id/pic/.

Priority Industry Capability Innovation Program

The Priority Industry Capability Innovation Program provides direct financial support to Australian defence industry, particularly small to medium enterprises, to commercialise innovative technologies and services that will enhance the priority industry capabilities.

The first of the projects funded under the program was completed in 2012-13 with the successful development of a portable secure data storage device that can be used in both government and commercial sectors. Five new grants were also awarded supporting developments in five PIC areas. The program will be replaced by the PIC Development Fund as announced in the Defence White Paper.

Defence Materials Technology Centre

The Defence Materials Technology Centre continued to collaborate with Defence, defence industry and research agencies to develop new materials and manufacturing technologies that benefit Defence.

The centre has now successfully achieved the objectives of five of the 16 foundation projects, including the development of high-strength steels with potential application in shipbuilding; evolution of vehicle armour requirements, including the development of improved systems and manufacturing techniques; and the development and commercialisation of advanced ceramic armour strike face components.

The centre is making progress on the remaining foundation projects and has begun an additional 10 research projects, including the evaluation of hull steels for submarine applications, portable power generation and storage, high curvature personnel armour, mitigation of microbiologically influenced corrosion in Australian harbours and developing a process to recycle commercially pure titanium chips produced during machining.

The centre also continued its focus on the creation and transfer of knowledge to Defence industry and currently supports a number of doctoral and masters students through its education program.

Defence and Industry ePortal

The Defence and Industry (D+I) ePortal provides a comprehensive and authoritative source of company-supplied information on Australian industry capability for Defence and other potential customers. Information is provided to enable companies to become better informed, engage in industry programs and participate in Defence acquisition and sustainment programs.

Companies can register on the D+I ePortal to participate in the Defence Global Supply Chain Program. Registered organisations can also provide feedback on the commercial impacts (if any) of delays by the DMO in issuing requests for tender or contract change proposal documentation.

Functionality has been added to the portal to enable organisations to indicate if they are a direct or indirect supplier to Defence; 650 organisations have indicated this status.

The D+I ePortal provides a vehicle for companies, including small to medium enterprises, to share information on their respective capabilities, with the aim of helping them find partners to compete for Defence business. Approximately 80 per cent of the current registered businesses on the D+I ePortal are subject matter experts. In 2012-13, 155 organisations and 7,154 company capabilities have been added to the ePortal database.

Company ScoreCard Program

The Company ScoreCard Program has continued to monitor and report on the key performance aspects of DMO contracts. The program has completed both of the assessment rounds planned for the year, supporting measurement of the performance of the DMO and its most significant contractors.

Performance was assessed against a number of key categories over two six-monthly reporting periods. These included the critical areas of technical performance, cost and schedule. Companies were given the opportunity to review and comment on the DMO's assessments of their performance, and the results have been made available to inform future source selection processes.

The Company ScoreCard Program's annual benchmarking report has been improved to enable comparison of contractor performance within the specific technology sectors related to each firm's contracts. The report allows companies participating in the ScoreCard Program to compare their individual performance with that of their direct competitors by technology sector as well as across the DMO as a whole. This report continues to encourage companies to maintain or improve their performance and productivity.

360° View ScoreCard

Under the 360° View ScoreCard program, key DMO contractors assess the DMO's performance against various criteria, including DMO's management of requirements, schedule, and Australian industry capability policy, as well as its awareness of company cost drivers. Contractors were again invited to provide their honest assessments of the DMO's performance for inclusion in 360° ScoreCard reports at six-monthly intervals. This feedback was provided to the DMO Executive for consideration and discussion with project staff, and it is used to drive contract and project management improvement.

Defence Industry Workforce Strategy

In September 2012, the then Minister for Defence Materiel released the main report for the Defence Industry Workforce Strategy, developed by the Australian Workforce and Productivity Agency (then Skills Australia). The purpose of the strategy was to provide recommendations on developing the workforce skills and capacity that will enable Australia's defence materiel industries to meet Defence's future capability acquisition and sustainment plans. The strategy's recommendations have informed the development of the 2013 Defence White Paper and the Future Submarine Industry Skills Plan.

Industry Skilling Programs

The Skilling Australia's Defence Industry Program is part of a significant investment program to support a range of training initiatives designed to improve the quality and quantity of personnel working in the defence industry. The program provides financial support to build the skills base that is required to provide the capabilities required by the ADF.

The South Australian Department of Education and Community Services and the Western Australian Department of Education were provided with grant funding under a national partnership agreement to implement Advanced Technology School Pathways in South Australia, and Marine Industry School Pathways in Western Australia. The Advanced Manufacturing Industry School Pathways Program is managed by Regional Development Australia in the Hunter region, in partnership with the New South Wales Department of Education. These three programs will work with lead and partner schools to develop industry-focused curriculum and establish or strengthen links with defence industry. Each has reported an increase in the number of students studying mathematics, science and engineering.

Grants management system

A grants management system has been developed to provide online lodgment of applications for grants under the Skilling Australia's Defence Industry Program. The system provides secure access through the Chief Information Officer Group's Defence Online Systems Domain. Implementation of the system has delivered some efficiency in the application and initial assessment processes for industry applicants and DMO staff.

Defence Industry Innovation Centre

The Defence Industry Innovation Centre is a government initiative which aims to assist Australian SME to better compete in Australian and overseas defence markets. The centre assists defence industry to enhance its competitiveness by building organisational capability and productivity, increasing efficiency and sustainability and fostering innovation and collaboration.

The centre offers a range of services and activities for small to medium enterprises to improve their performance in the defence sector. Services and activities include business reviews, benchmarking best practices and the Supplier Continuous Improvement Program, as well as collaboration with the DMO Global Supply Chain program. Grant funding is available to industry to support the implementation of plans and recommendations made by the centre.

Australian Military Sales Office

The Australian Military Sales Office (AMSO) was established in July 2012 to facilitate major disposals activities and export related transactions, including government-to-government sales, on behalf of Australian defence industry.

The creation of AMSO amalgamated the previous Defence Export Unit, Global Supply Chain, Defence Disposals Agency and the International Materiel Cooperation Directorates into a single branch focused on three strategic goals:

  • improving commercial opportunities for Australian defence industry through increased sales and exports and greater market diversification, while leveraging off Australia's diplomatic relationships
  • streamlining processes and business unit functions within the DMO to facilitate government-to-government sales of Australian manufactured defence equipment
  • supporting Australian defence cooperation and foreign policy objectives through building, maintaining and strengthening relationships with foreign governments.

The AMSO Disposal and Sales Directorate provides guidance and support in the disposal of major Defence equipment; it is also responsible for managing the process of government-to-government sales for defence and on behalf of industry. Recent highlights include the following:

  • Disposal by sale of the Navy's decommissioned ships HMAS Manoora and Kanimbla. The vessels are to be recycled by Southern Recycling LLC in the United States. This disposal was completed in less than two years from the date the vessels were withdrawn from service.
  • Establishment of a contract for disposal by sale of up to 12,000 Army non-combat vehicles and trailers with Australian National Disposals in November 2012. To 30 June 2013, more than 1,500 vehicles had been sold including Land Rovers, Mack trucks, Unimogs, motorcycles, trailers and all-terrain vehicles.
  • Disposal by sale of the Navy's remaining five Sea King helicopters, three hulks and associated spares to Aerospace Logistics (a United Kingdom based-company). Aerospace Logistics will use the Sea King inventory to sustain and support capability of international military, and search and rescue fleets.

AMSO continues to improve disposal processes to meet priorities within the bounds of Commonwealth and international treaty obligations. A key focus is to provide opportunities for industry to add value, not only to disposal of military equipment, but also in government-to-government sales. Key relationships are being built and maintained with industry to encourage development of innovative disposals and sales solutions.

International engagement

The DMO manages and coordinates international engagement activities with partner and allied nations to assist in ensuring Australia's access to cutting-edge defence technology, systems and capabilities. The most significant of these is the DMO's participation in the annual Australia-United States Ministerial Defence Acquisition Committee, which focuses on cooperative programs and science and technology, and strengthening Australia's access to the United States Foreign Military Sales process.

In addition, in 2012-13 annual bilateral forums were held with France, Germany, the Netherlands, Spain, Sweden and the United Kingdom. These relationships assist in promoting best practice in defence contracting and coordinating global responses to commercial behaviours in defence supply chains while encouraging industry cooperation at an international level.

Management services

Management services provided by the DMO are largely performed by Finance Division and the Business Operations Division. The role of these areas is to provide financial and corporate support services to meet the information needs of ministers and the Parliament, fulfilling the CEO DMO's statutory duties and governance accountabilities, and working with other Defence stakeholders to effectively implement the DMO business model.

Functions include:

  • providing the DMO with a financial management policy and procedure framework that meets statutory requirements and enables DMO to operate in a business-like environment with regard to all aspects of accounting and financial management
  • providing a central financial controller function for the DMO and provision of financial management services across the DMO
  • forecasting and managing the DMO's cash budgetary requirements
  • providing assurance over the DMO's financial data through appropriate systems, controls, user training, internal audit and risk management
  • preparing the DMO's financial statements and liaising with the Australian National Audit Office throughout the audit process
  • supporting ministerial and parliamentary oversight through a range of routine and annual reports such as the acquisition and sustainment performance reports and the major projects report, as well as contributing to the Portfolio Budget Statements and Defence annual report
  • supporting internal governance, including the Materiel Audit Risk Committee
  • implementing the Defence-DMO business model through coordination of agency agreements.

In 2012-13, the DMO has continued to strive for ongoing improvement in the delivery of management services. Key achievements include:

  • the release of the DMO 2013-15 Strategic Framework in December 2012 by the CEO DMO. The framework confirms DMO's purpose and goals and describes the core functions, values and behaviours which we will use to achieve our goals and purpose
  • re-balancing the structure and strengthening the DMO governance arrangements announced under the DMO 2013-15 Strategic Framework, which came into effect in February 2013. The Deputy CEO has taken greater responsibility for the day-to-day performance and administration of the DMO and has been tasked with driving reform across the organisation. The DMO's functional Council Chairs now meet quarterly to assess requirements and performance across functions and provide advice to the DMO Executive Committee
  • introduction of financial shared services and the commencement of the Financial Excellence Program. Both initiatives focus on performing finance functions more efficiently
  • delivery of an overarching strategic framework for finance service delivery within DMO
  • maintaining an ISO 9001 Quality Management Certification for the provision of financial resource services.

DMO governance and accountability

Defence Civilians and Defence Force members at Russell Offices, Canberra ACT

DMO Ministerial Directive

The current Ministerial Directive was issued on 28 July 2008 to the CEO DMO. The DMO continues to operate within the principles established by the directive. The directive establishes the accountability of the CEO DMO to the minister to achieve the following outcomes:

  • timely, accurate and considered advice in the CEO DMO's role as principal adviser to the minister on equipment acquisition and fleet sustainment
  • efficient and effective acquisition and through-life support of materiel for Defence capabilities
  • sound management of financial and other resources, operating within the budget and meeting statutory requirements for preparing financial statements
  • an appropriately skilled and experienced workforce while providing a working environment that attracts and retains people
  • high-quality governance and management, implementing agreed reform initiatives and embedding continuous improvement within business processes
  • savings and efficiencies for reinvestment in priority areas in Defence
  • appropriate representation of Australia internationally in the CEO DMO's role of National Armaments Director.

Accountability and financial management

Under the Financial Management and Accountability Act 1997, the CEO DMO is directly responsible to the Portfolio Minister for managing the affairs of the DMO in a way that promotes proper use of the Commonwealth of Australia resources for which the DMO is responsible.

The 2012-13 financial statements are included in Part 4 of this report. The CEO DMO and the Chief Finance Officer DMO have concluded that the financial statements are true and fairly stated.

The DMO has undertaken fraud risk assessments and had in place a fraud control plan. In addition, DMO had in place appropriate fraud prevention, detection, investigation reporting and data collection procedures. Also all reasonable measures to minimise the incidence of fraud were undertaken, and if identified, investigated and any proceeds recovered.

Relationship with Defence

The DMO is a fully integrated organisation within the Department of Defence and works to deliver the operational capability required by the ADF. From a governance perspective this business relationship operates under a memorandum of arrangements signed by the Secretary of Defence, the Chief of the Defence Force and the CEO DMO on 25 June 2006.

The memorandum of arrangements contains a framework of five types of agreements between Defence and the DMO that formalise the provision of products, services and resources between Defence and the DMO. The agreements have continued to evolve since the DMO's prescription in July 2005 to provide greater clarity of requirements and to delineate responsibilities and accountabilities. The current focus is to provide agreements with clear service standards and expectations as the basis for the DMO and Defence to understand the cost of doing business and to foster cost-conscious, business-like behaviours.

The categories of customer-supplier agreements between Defence and the DMO are:

  • materiel acquisition agreements
  • materiel sustainment agreements
  • shared services agreements
  • defence services agreements
  • military workforce agreements.

These agreements cover major and minor materiel acquisition projects, sustainment for ADF fleets, services provided to facilitate these activities, and the military personnel posted to the DMO in support of these activities.

During 2012-13, the materiel sustainment agreement process was revised to reduce the time and effort required to produce and maintain these agreements. This was achieved by moving to an enduring and modular construct, underpinned by a devolved management framework.

DMO senior committees

Following the release of the DMO Strategic Framework in February 2013, the senior committees in DMO have been refocused. The Executive Committee is responsible for advising the CEO on strategic direction, management and reporting. The CEO also takes advice in relation to responsibilities and accountabilities under the Work Health and Safety Act 2011 and the Financial Management and Accountability Act 1997 from the Work Health and Safety Committee and the Strategic Budget Committee respectively. The Deputy CEO chairs the Council of Chairs Forum, which is responsible for overseeing the main business process owner councils within the DMO. Independent advice on risk and financial management is provided by the Material Risk and Audit Committee.

Figure 12.2 - DMO senior committees

Defence Materiel Organisation senior committees