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Annual Report 2013-14

Volume 1, Part 2 : Performance

Program 1.2 Management of Capability Sustainment


The objective for DMO Program 1.2 is to sustain the ADF and its capabilities. Each financial year, the DMO enters into an agency-level bilateral materiel sustainment agreement with each Defence capability manager. The agreement details the level of performance and support required, within an agreed price, as well as key performance indicators by which service delivery will be measured.

In 2013–14, the program supported 118 products for Defence, which ranged from high-grade specialised military platforms (such as the C-17 Globemaster III heavy airlift aircraft, Super Hornet F/A-18 multi-role aircraft, Anzac class frigates and Seahawk helicopters) to clearance diving systems and patrol boats, as well as commodity-type items such as rifles and ADF clothing.

Support to ADF operations is the highest priority for the DMO. Significant effort is put into ensuring that our forces are effectively deployed and maintained. This task includes ensuring that the forces are supported from the outset, from training and exercise regimes to well-serviced and maintained platforms, and are equipped with the supplies and support needed to do the job. This outcome is only achieved through planning and implementing efficient procurement activities and maintenance programs.

Program 1.2 accounted for around 57 per cent of the DMO’s expenses in 2013–14.

Table 6.4: Program 1.2 deliverables for top 30 sustainment products

Deliverable

Performance summary

General Manager Joint, Systems and Air

Aerospace Systems products

Aerospace Systems Division provides through-life support to 13 aircraft types, including the F/A-18A/B Classic Hornet, F/A-18F Super Hornet, E-7A (airborne early warning and control), AP-3C Orion, C-17A Globemaster, KC-30A (multi-role tanker/transport), C-130J and PC9. The Division also supports a number of advanced flight simulators and ground-support equipment fleets.

Achievements in 2013–14 included:

  • implementing efficiency initiatives, including incentive-based support contracts
  • managing the ageing Classic Hornet to maintain the capability until at least 2021
  • supporting operationally deployed weapon systems, such as the C-17A, C-130J and AP-3C
  • continuing to finalise in-service support arrangements for the F/A-18F, KC-30A and E-7A
  • developing acquisition and sustainment strategies for future aerospace projects
  • providing support to emergent operational capabilities, such as the Heron unmanned aerial system
  • replacing the ageing aircraft cargo loader fleet.

Airborne Early Warning and Control System (CAF20)

The Airborne Early Warning and Control system, comprising six E-7A Wedgetail aircraft, fixed and deployable mission support systems, flight deck and mission simulators and two software laboratories, is sustained principally through a performance-based commercial support and training service arrangement.

Performance against sustainment levels agreed with the Air Force improved as support systems matured towards final operational capability in 2015. This work included the development and release of the second in-service software build, and maturing the logistics system to support the increasing flying rate of effort.

The prime in-service support contract was novated from Boeing Defence, Space and Security in the United States to Boeing Defence Australia, providing both efficiencies and greater Australian industry involvement. A five-year contract extension was negotiated during the year and became operative in July 2014.

F/A-18 Hornet Weapon System (CAF02)

Seventy-one F/A-18 Classic Hornet 9 (CH) aircraft and associated training systems are supported by a range of commercial contracts and Air Force workshops. The major challenge in supporting the CH is the increased maintenance requirements of an ageing aircraft fleet.

The CH Logistics Management Unit continued to work closely with the Air Force and industry partners to remediate ageing issues, ensuring that required aircraft serviceability levels were achieved. Effort centred on bedding in the CH deeper maintenance contract, which merged all deep maintenance events in one contractor venue incorporating a combined contractor and military workforce. The CH Structural Refurbishment Program also concluded after the last aircraft completed modifications in early 2014.

F/A-18F Block II Super Hornet Weapons System (CAF21)

The sustainment of 24 F/A-18F Super Hornets and their systems, weapons and support infrastructure has continued to mature. Current performance targets for aircraft availability have been consistently achieved. Flying program requirements have been met despite the lack of some long-lead spares that are yet to be delivered.

As a result of adjustments to the Air Combat Capability Plan, there have been a number of initiatives to assess and develop enhanced support arrangements in recognition of the extended planned withdrawal date for the Super Hornet, as well as the introduction of the AIR 5349 Phase 3—Growler Airborne Electronic Attack Capability.

P-3C/AP-3C Orion Weapons System (CAF04)

The P-3 capability includes 17 aircraft and a range of ground-based systems. The capability is supported through the P-3 Accord and a range of commercial and foreign military support arrangements.

The fleet continues to be maintained under the more resource-intensive ‘safety-by-inspection’ program, comprising additional targeted structural inspections, repairs and/or structural element replacements. Boeing Defence Australia completed the P-3 aircraft repaint program in June 2014.

C-130J-30
Weapon System
(CAF06)

The C-130J fleet comprises 12 aircraft that provide air logistics support, aero-medical evacuation, airborne operations, and search and survivor assistance and training.

During 2013–14:

  • revised product support arrangements were established for the C-130J spares previously managed under C-130H arrangements
  • a new performance-based contract was entered into that reduced the cost of the propulsion system support
  • aircraft maintenance efficiencies were implemented by the C-130J through-life support contractor and operational squadron to further reduce costs and increase aircraft availability
  • upgrades to the self-protection capability through project AIR 5416 4B1 achieved final materiel release
  • the Selective Availability Anti-Spoofing Module compatible embedded Global Positioning System trial installation was completed.

Lead-In Fighter Hawk 127 Weapon System (CAF03)

The Hawk 127 Lead-in Fighter weapon system comprises 33 Hawk Mk 127 aircraft, a full-scale fatigue test article, mission planning systems, a computer-based training system and a tactical weapon system training system.

The aircraft and training devices are sustained through a prime contract with BAE Systems Australia and a number of smaller contracts that focus on specific areas of Hawk sustainment, such as fatigue testing and repainting. The main performance-based contract provides all in-service support other than operational maintenance, which is currently performed by the Air Force. The in-service support contract, which commenced on 1 July 2013, transitioned during 2013–14 and all key performance metrics were met.

The fleet corrosion control and repaint program continued throughout the year.

KC-30A
Weapon System
(CAF22)

Five KC-30A multi-role tanker/transport aircraft were accepted by the Commonwealth between June 2011 and November 2013. Transition of the KC-30A into service continues. The in-service support arrangements are maturing as the acquisition project office continues to deliver remaining capability requirements.

An additional aircraft was committed to support the completion of remaining acquisition project flight test activities. One aircraft is assigned continuously to an acquisition-managed modification program.

Sustainment performance in 2013–14 against the agreed Air Force requirements was limited by hail damage to two aircraft in December 2013.

C-17 Heavy Air Lift
Weapons System
(CAF19)

The Australian C-17 fleet comprises six aircraft, an aircrew training simulator and other training devices. Primary support for the C-17 is through foreign military sales arrangements with the US Air Force, which provides comprehensive engineering, maintenance and global supply support to the US and all international operators of the C-17.

The new cargo compartment trainer was accepted in November 2013, increasing the scope of training for loadmasters in Australia.

The C-17 fleet achieved final operational capability in February 2014.

Special Purpose Aircraft (CAF09)

The current special-purpose aircraft fleet consists of two Boeing business jets and three Bombardier Challenger CL604 aircraft. The aircraft are secured under a commercial lease arrangement with General Electric Capital Holdings and maintained by Northrop Grumman Integrated Defence Services.

The aircraft leases and maintenance support arrangements were extended until mid-2017, ensuring the continued delivery of the capability while Defence manages the acquisition of, and transition to, a replacement capability.

PC-9/A
Weapon System
(CAF10)

The PC-9/A system comprises 63 aircraft. The fleet requires significant management attention to treat problems such as fatigue, parts obsolescence and corrosion, which are customary in an ageing fleet.

To ensure that the fleet can operate to its planned withdrawal date, the DMO began a range of reliability assessment and correction measures in 2013–14.

Electronic Systems products

Electronic systems are sustained through 17 system program and system support offices based on materiel sustainment agreements with five capability managers. The offices cover command and control systems, communications, satellites and tactical interoperability, airspace surveillance and control systems, and electronic warfare systems.

Achievements in 2013–14 included:

  • the safe delivery of required sustainment despite growth in demand and increasing obsolescence
  • analysis, planning and execution of a major radio fleet transition phase as the second tranche of JP 2072 (Future Combat Net Radio) equipment is delivered and rolled out
  • the management of sustainment of all ADF large aircraft infra-red countermeasures systems, covering multiple current and future airborne programs
  • the sustainment of the joint counter improvised explosive device capability
  • remediation of air traffic control and air defence support arrangements in preparation for possible life-of-type extensions and to achieve reform
  • the treatment of obsolescence issues at the Woomera Test Facility, South Australia
  • the development of support concepts for narrowband satellite communications, the identification of further efficiencies and the remediation of obsolescence issues effecting tactical satellite terminal equipment
  • the sustainment of maritime, land and air tactical electronic warfare capabilities, including continued support to address changes in targeted technologies and the remediation of systems returning from operations.

Wide Area Surveillance (CAF13)

The wide area surveillance capability consists of three over-the-horizon-radars based in Longreach, Queensland; Laverton, Western Australia; and Alice Springs, Northern Territory, and is known as the Jindalee Operational Radar Network (JORN). The capability is remotely operated by the Air Force from an operations centre at RAAF Base Edinburgh, South Australia.

The JORN Priority Industry Capability Support Program was implemented. The aim of the program is to retain specialised engineering skills through minor capability enhancements, urgent remediation of obsolescence issues, system improvements and risk reduction for future major acquisitions.

Command and Intelligence Systems (CA40)

The product schedule addresses the sustainment of a suite of hardware and software products used to support Defence’s specialised command and control environment. It includes modular deployable local area networks (DLANs); geospatial stand-alone and deployable systems; special operational command support systems; and command, control and intelligence products, along with the associated deployable standard operating environment (DSOE) upon which many of the applications function.

Systems deployed on operations were supported, including through transition and remediation action on systems as the ADF progressively withdraws from operations. The design of the next-generation DLAN and its supporting DSOE was completed. Subject matter advice was provided on DLANs, the DSOE design and build and geospatial architecture to emerging and current projects with deployable components. Sustainment was also begun on a range of deployable network equipment being acquired by the Chief Information Officer Group’s Strategic Communications Modernisation Program—Land.

Air Traffic Control Capability (CAF12)

The air traffic management capability consists of fixed and deployable radars, navigation aids, display and data processing systems, communications systems and related training aids at Defence sites throughout Australia.

The required sustainment outcomes and strategic reform targets were met, while system obsolescence was mitigated.

Naval and Shore Communication Systems (CN22)

This product provides sustainment services for the Defence high frequency (DHF) and very low frequency (VLF) communications systems, modernised maritime communication systems and ship–shore communications.

The delivery of contracted support for the naval and shore communication operational systems, the change out of antenna guy wires for the VLF system and the remediation of workshop equipment and hazardous chemical products across the product suite continued. Multiple-platform baseline software upgrades for the maritime communications system were undertaken, the Navy’s global maritime distress and safety-at-sea-system radios began to be replaced, and obsolete components in some of the Navy’s communication switching equipment were replaced.

The fleet-wide support and service delivery contract for the Satellite TV @Sea capability for naval platforms as part of an overall Quality of Life at Sea program for deployed personnel was established. Changes were made to extend the network operation support contract and support services contract to provide for the continued support of the DHF communications system, inclusive of the integrated Nullarbor capability, until May 2019.

Battlespace Communications Systems (CA33)

The capability consists of two primary fleets of communications equipment. The combat net radio fleet is a range of man-portable and vehicle-mounted radios for use by ground forces on the battlefield. The battlefield telecommunications network fleet is a satellite and trunking system that provides a voice and data capability to a deployed brigade. These fleets are maintained through sustainment contracts with Thales Australia, Saab Australia and BAE Systems Australia.

Planning for the transition of the first phase of the JP 2072 generation of communications equipment from acquisition to sustainment occurred. Planning for the establishment of mature maintenance and support contracts with Harris Corporation and Raytheon Australia began. Concurrently, elements of the old-generation fleet were identified for retirement as the new-generation radios are introduced into service. This activity is critical to minimise longer term sustainment costs.

Helicopter Systems products

Helicopter Systems Division provides through-life support to seven rotary-wing weapons systems through system program offices based at Nowra, New South Wales, for Navy Aviation; and Brisbane and Oakey, Queensland, for Army Aviation. The offices provide fleet-wide engineering, repair parts, and manage contracts for deeper level maintenance and replacement of ageing and obsolescent equipment for the helicopters. In addition, a combined project and sustainment team to manage the through-life support of the Army’s tactical level unmanned aerial systems has been established within the Division in Brisbane.

The highest priority sustainment task in 2013–14 remained the support of operational deployments, including the embarked Seahawk Classics in ships serving in the Middle East. Chinooks and Shadows were supported on operations in the Middle East until late 2013.

Achievements in 2013–14 included:

  • improved MRH-90 availability as a result of the implementation of significant contractual reforms negotiated in 2013
  • recognition of the requirement for a ‘step-change’ in industry’s Tiger sustainment performance
  • the establishment of the new MH-60R Seahawk Romeo logistic support framework
  • the commencement of Black Hawk and Seahawk Classic withdrawal from service
  • the integration of Guided Weapons Branch into the division.

In April 2014, the Guided Weapons Branch of Explosives Ordnance Division was transitioned into Helicopter Systems Division.

Multi-Role Helicopter (CA48)

MRH-90 availability and flying rate of effort continued to improve steadily during 2013–14, but remained below contracted levels. Prime contractor performance has been sharply focused on improving outcomes following the introduction of significant reforms to the sustainment contract agreed in May 2013 and effective from 1 July 2013.

Armed Reconnaissance Helicopter Weapons System (CA12)

As a result of continuing maintenance and supply-chain problems, the Tigers underflew the 2013–14 plan by 7 per cent. A strategic review of the Tiger sustainment contract, focusing on reducing the cost of ownership and improving support to the Army, has begun.

S-70A-9 Black Hawk Weapons System (CA11)

The fleet of 34 Black Hawks contributes to the Army’s air mobile and special operations capabilities. The Black Hawk is being phased out of service in lock step with the introduction of the MRH-90. Black Hawk operations at the School of Army Aviation in Oakey, Queensland, ceased in December 2013, and the drawdown of Black Hawks from the 5th Aviation Regiment in Townsville, Queensland, commenced. Black Hawk operations with the 6th Aviation Regiment in Holsworthy, New South Wales, will continue until the mid-2018 planned withdrawal date.

The Black Hawk was supported throughout 2013–14 by a combination of maintenance contracts, mainly held with BAE Systems Australia and Asia Pacific Aerospace, Army in-unit maintenance, and support from helicopter manufacturer Sikorsky.

S-70B-2 Seahawk Weapons System (CN03)

The fleet of 16 Seahawk Classic helicopters contributes to the Navy’s anti-surface and antisubmarine warfare capabilities. The Seahawk was supported throughout 2013–14 by a combination of maintenance contracts, mainly with BAE Systems Australia and Asia Pacific Aerospace, Navy in-unit maintenance, and support from helicopter manufacturer Sikorsky.

The phase-out of the Seahawk Classic fleet has begun, ahead of the introduction of the new Seahawk Romeo capability.

General Manager Land and Maritime

Guided Weapons Branch products[1]

Guided Weapons Branch acquires and sustains ADF guided weapons. Two guided weapons system program offices provide sustainment logistics, engineering and maintenance support at RAAF Base Amberley, at Defence Establishment Orchard Hills and at the Torpedo Maintenance Facility in Western Australia.

ADF guided weapons include maritime and land strike missiles, air combat missiles, land and air defence missiles, aerial smart bombs and underwater weapons, including light- and heavy-weight torpedoes. The majority of these weapons are supported by a combination of US Government Foreign Military Sales arrangements, commercial contracts and Commonwealth in-house maintenance activity. Varying degrees of industry support are provided by Thales, MBDA, Boeing, Raytheon and Euro Torp.

Achievements in 2013–14 included:

  • the satisfaction of all Navy, Army and Air Force demands for guided weapons
  • the continuing remediation of the Harpoon missile inventory
  • the completion of facilities upgrades at the Surface Warfare Complex, Defence Establishment Orchard Hills, New South Wales, for maintenance of the Block IIIB Standard missile, and at the Torpedo Maintenance Facility, Fleet Base West, for maintenance of the Mark 54 lightweight torpedo.

Guided Weapons Navy, Army and Air Force (CN38, CA60, CAF33)

Navy guided weapons products include the Harpoon missile, Standard missile, Evolved Sea Sparrow missile, Mark 48 heavyweight torpedo, Mark 46 lightweight torpedo, MU90 lightweight torpedo, Encapsulated Harpoon Certification test vehicle, Danish mine disposal charge and Stonefish exercise mine.

All operational and raise, train and sustain demands for Navy guided weapons were met.

Army guided weapons products include the FGM-148 Javelin missile, RBS70/Bolide missile and AGM-114 Hellfire missile.

All operational and raise, train and sustain demands for Army guided weapons were met.

Air Force guided weapons products include AIM-132 advanced short range air-to-air missile, AIM 120 advanced medium-range air-to-air missile, AIM-9M and X Sidewinder missiles, AGM-154 C/C1 joint stand-off weapon, AGM-158 joint air-to-surface stand-off missile, joint direct attack munitions, high-explosive and inert bombs and laser-guided bomb kits.

All operational and raise, train and sustain demands for Air Force guided weapons were met.

Munitions Branch products[2]

The Munitions Branch, which transitioned to Land Systems in April 2014, is responsible for the acquisition and sustainment of non-guided explosive ordnance systems for the ADF, including the management of strategic contracts for munitions supply with Thales and Chemring. In addition, it is responsible for JP 2086 Mulwala Redevelopment Project and the Domestic Munitions Manufacturing Arrangements Project.

Achievements in 2013–14 included:

  • the development and implementation of a detailed plan to transition out of the current arrangements for domestic manufacture of munitions, propellant and high explosives
  • the repatriation of a significant quantity of munitions from Afghanistan in preparation for a reduction in Australian forces
  • a revision of munitions target stockholdings to reflect greater confidence by the Services in effective inventory management
  • ministerial consideration of options for future domestic munitions manufacture.

Explosive Ordnance—Navy, Army & Air Force (CN37, CA59, CAF32)

All munitions demands in support of operations were met within the required timeframes. Navy, Army and Air Force requirements for munitions in support of training were mostly met. The exceptions were invariably due to unforeseen supply-chain disruptions resulting from a dramatic reduction in global munitions production. The exceptions were managed in conjunction with the Navy, the Army and the Air Force to minimise their impact on training. Improvements in inventory management and reporting facilitated reductions in target stockholdings, which enabled planned strategic reform savings targets to be met.

Land Systems products

Land Systems Division is responsible for the sustainment of the following materiel, managed in conjunction with the Army, the Navy, the Air Force and Joint Health Command as the lead capability managers:

  • armoured fighting, combat support and field vehicles
  • commercial and general service vehicles
  • engineer, surveillance and simulation systems
  • weapon systems, from small arms to missiles
  • medical and dental equipment, health systems and combat rations
  • ADF clothing and personal combat equipment
  • the national inventory of munitions.

Achievements in 2013–14 included:

  • meeting the support requirements of forces on operations and conducting post-operational equipment remediation in accordance with agreed plans
  • delivering the agreed level of support to the ADF, within budget
  • completing a comprehensive review of key performance indicators and health indicators in consultation with Defence capability managers
  • progressing the development and training of the division’s sustainment workforce
  • commencing trials to optimise vehicle fleet sustainment by using vehicle health usage monitoring systems
  • absorbing Munitions Branch from Explosive Ordnance Division.

ADF Clothing (CA39)

ADF clothing comprises about 21,300 line items of personal clothing, footwear and other items manufactured by the textile, clothing and footwear industry.

During 2013–14, new clothing lines introduced included new parade footwear for the three Services, including RM Williams boots for the Army; a new general-purpose jacket for the Army; a new general-purpose uniform for the Air Force; cadet footwear; and wet and foul-weather garments. Continuing procurement to meet the ADF’s clothing and footwear requirements was undertaken to support operations as well as for raise, train and sustain activities.

General Service B Vehicle Fleet (CA45)

The general service vehicle fleet consists of approximately 8,700 light, medium and heavy wheeled vehicles, including protected (up-armoured) and unprotected variants, used in Australia and on operations overseas. Defence is progressively replacing most vehicles in the fleet under Project LAND 121.

During 2013–14, full support continued to be provided for operations, including the procurement of deployable all-terrain vehicles and the acquisition of additional up-armoured sports utility vehicles. In addition, work continued to upgrade 135 stores and ammunition modules to improve operator safety and functionality.

A key focus for the fleet has been to ensure that the required capability levels are maintained, and the fleet reduced in size as new capability is delivered under Project LAND 121. As part of the fleet reduction program, about 1,350 vehicles were removed from service.

Australian Defence Organisation Commercial Vehicles Fleet (CA19)

The Defence Commercial Vehicle Program uses commercially available motor vehicles for administrative purposes. Currently, the fleet has around 5,600 vehicles and trailers under management. The fleet ranges from passenger sedans through to heavy rigid trucks and touring coaches. The whole-of-government fleet services provider, sgfleet, supports the fleet.

During 2013–14, the fleet replaced around 1,200 vehicles as part of its normal replacement cycle. This included 880 passenger and light commercial vehicles, 39 medium cargo trucks, 250 light trailers and 25 medium buses. Under the program, around 880 vehicles were released for disposal during the year.

Health Systems (JHC01)

The health systems fleet is made up of pharmaceutical, medical and dental consumables and medical and dental equipment. These are generally commercial off-the-shelf items.

During 2013–14, a prime vendor contract for the provision of medical and dental consumables was established to achieve efficiencies in their management, the replacement of defibrillators was completed, and ADF health requirements for operations and raise, train and sustain activities were satisfied.

Maritime Systems products

The DMO supports maritime capability through cost-effective materiel design, maintenance engineering and logistic support to platforms, equipment and systems. These sustainment services are provided under a structure of system program offices that are collocated regionally with the Navy forces and groups by ship class. The offices manage the delivery of services through a variety of outsourced commercial contracts.

Under the Rizzo Review, the Maritime Capability Business Model Health Check program has been used to assist the Navy and the DMO business units to embed policy, procedural and cultural changes and assess the maturity and effectiveness of their processes to deliver end-to-end sustainment.

Implementation of the Navy Inventory Procurement Office strategic sourcing initiative continued. In 2013–14, there was progress in the formalisation of through-life support for Navy life-rafts and the development of support contracts for LM2500 gas turbines and MTU diesel engines and components.

Improvement of configuration management and the maintenance baseline of major surface ships and other platforms continued.

Other achievements in 2013–14 included:

  • the awarding of the guided missile frigate FFG class group maintenance contract
  • the awarding of the Garden Island dock operating and reticulated services contract
  • the transfer of the Ocean Shield to the Australian Customs and Border Protection Service on 1 July 2014
  • the awarding of the Canberra class landing craft heavy capability support coordinator contract.

Fuels and Lubricants—Navy, Army & Air Force (CN26, CA43, CAF18)

Petrol, oil and lubricant products are procured under long-term contracts and provided to Defence operational and support elements and visiting foreign forces. The Fuels Technical Regulatory and Quality Control Framework is maintained for the conduct of Services’ operations and technical data integrity.

Provision of these products was completed to meet requirements. Under the implementation of the Wraith Review of the petroleum supply chain, Joint Logistics Command has assumed control of the fuel supply chain for the ADF. The DMO’s Joint Fuels and Lubricants Agency will now formally transfer to Joint Logistics Command.

Anzac Class Frigate (CN02)

Planned outcomes were the provision of continuing sustainment of materiel capability to meet the Navy’s operational requirements, the continued implementation of the Anzac class group maintenance contract, continued inventory management reforms and the continuation of anti-ship missile defence refit work on the designated ships under Project SEA 1448 Phases 2A and 2B.

Planned maintenance was completed, including additional pre-anti-ship missile defence work in HMAS Warramunga. Materiel support to capability was provided to the Anzac class frigates undertaking activities associated with operations Slipper, Sovereign Borders and Southern Indian Ocean. HMAS Arunta is undergoing sea trials following the completion of an anti-ship missile defence upgrade and refit program.

Adelaide Class Frigate (CN01)

The support objective is to maintain the materiel capability of the Adelaide class frigates through the provision of materiel support and continuing maintenance of the ships and associated equipment, systems and operator training facilities.

Planned maintenance was completed in the four guided missile frigates. A contract for combat system support, the signing and commencement of the group maintenance contract and the extension of the integrated materiel support contract were achieved; together, they will provide the long-term contracted support required to sustain the class.

Mine Hunter Coastal (CN14)

The support objective is to maintain the materiel capability of the Huon class coastal mine-hunter vessels and associated training equipment through the provision of materiel support and continuing maintenance of the in-service ships.

Scheduled ship maintenance was completed during 2013–14, along with additional maintenance. Detailed designs for the upgrade of the firefighting system and the upgrade of the combat systems are progressing as planned.

Armidale Class Patrol Boat (CN09)

The objective is to provide the agreed support services required for the sustainment of 14 Armidale class patrol boats.

While operational requirements were largely achieved during 2013–14, boat availability was affected by a class-wide structural design defect that required extensive rectification work. Along with significant growth in corrosion, this caused maintenance overruns.

There has been increased effort to address the root cause of system failures and to instigate the upgrade program for the boats to reduce the level of operational damage. A sustainment reform program is being conducted to improve the delivery of materiel support to the ships and to provide options to optimise supply. Implementation of an improved asset management regime commenced with the development of a rolling hull-survey program.

General Manager Submarines

Collins Submarines program

Performance:

  • Availability: 105 per cent of an increased availability target was achieved on the path towards benchmark performance, despite three unscheduled dockings and the significant impact associated with a fire in HMAS Waller.
  • HMAS Rankin full-cycle docking was completed early against the integrated master schedule.
  • HMAS Collins main generator room and motor room hull cuts were completed (proving new maintenance techniques as part of continuing sustainment reforms).
  • HMAS Farncomb full-cycle docking commenced (the first of the new two-year full-cycle dockings).

Reforms:

  • The two-year transition phase of the in-service support contract with ASC Pty Ltd was completed on schedule on 30 June 2014; the DMO and ASC entered the first performance period of this contract on 1 July 2014.
  • Substantial improvements were made to the combat system support contract with Raytheon Australia, paving the way to evolve this contract into a performance-based contract.
  • Substantial improvements were made to the sonar support contract with Thales Underwater Systems, paving the way to evolve this contract into a performance-based contract.
  • Industry management responsibility for Collins class inventory increased to 98 per cent (by line item).
  • Increased engineering authority was awarded to industry members operating within the Collins authorised engineering organisation, including an expansion of platform engineering authority and the introduction of combat system and sonar engineering authority.

Collins Class Submarine (CN10)

Reforms to improve Collins class sustainment were catalysed by the Coles Report of November 2012. The report’s recommendations will take a number of years to implement fully; however, after returning to Australia for a progress review in early 2014, Coles assessed the turnaround in Collins sustainment as ‘remarkable’.

Sustainment experienced several setbacks in 2013–14, including a merchant vessel colliding with HMAS Sheean while the boat was berthed in July 2013 and a fire in HMAS Waller in February 2014. The repair of HMAS Waller is still being scoped, but is expected to continue well beyond 2013–14. The achievement of the agreed aggregate 2013–14 submarine availability target despite these setbacks reflects the emerging resilience of Collins sustainment. While the impact of the HMAS Waller fire is expected to be felt beyond the end of 2013–14, it is not expected to delay the restoration of Collins class sustainment to Coles’s benchmark by 2016–17.

Notes

  1. In April 2014, Guided Weapons Branch commenced transition to Helicopter Systems Division. The move took effect on 1 July 2014.
  2. In April 2014, Munitions Branch commenced transition to Land Systems Division. The move took effect on 1 July 2014.

Table W6.17: Top 30 sustainment products by expenditure as forecast in the Portfolio Budget Statements 2013–14

  Budget
estimate
2013-14
Revised
estimate
2013-14
Actual
expenditure
2013-14
Variation Reason for significant variation in product expenditure 2013–14
  $m $m $m $m  
>General Manager Joint, Systems & Air
Aerospace Systems
Airborne Early Warning and Control System 163 167 167 0  
F/A-18 Hornet Weapon System 158 173 179 6 Due to contract milestone delivery achieved ahead of schedule.
F/A-18F Super Hornet Weapons System 123 131 140 9 Early realisation of software requirement resulted in an overspend for 2013-14.
P-3C/AP-3C Orion Weapons System 110 113 108 -5 The variation is due to lower than anticipated engine failure rates and lower than anticipated costs in transitioning to a new engine maintenance contract.
C130J-30 Weapon System 95 100 95 -5 The underspend is a result of lower than anticipated maintenance costs due to the condition of aircraft and savings realised due to the outsourcing of the C130J Capability Enhancement Project Management to Australian Aerospace Ltd. 
Lead-In Fighter Hawk 127 Weapon System 78 79 75 -4 The variation is due to efficiencies realised in deeper maintenance and a reduction in rate of effort. 
KC-30A Weapon System 59 46 56 10 The overspend is a result of hail damage repairs. 
C-17 Heavy Air Lift Weapons System 58 51 51 0  
Special Purpose Aircraft 47 49 44 -5 The variation is due to lower than anticipated additional work and loan item requirements plus lower than anticipated fees for preliminary work on the SPA replacement program.
PC-9/A Weapon System 38 40 40 0  
Electronic Systems
Wide Area Surveillance 99 99 94 -5 Delays in the realisation of remediation activities for Defence Fuel Installation audits and R22 refrigerant gas phase out, and review of high risk expenditure resulted in $5M being handed back to Air Force in March 14. No impact to capability.
Command and Intelligence Systems 45 49 76 27 The variation is due to additional requirements from Army relating to Generation 2 Deployable Local Area Network (hardware and software) and Special Operations Command Support System (SOCSS) activities.
Air Traffic Control Capability 42 41 43 2 The overspend is due to the Australian Defence Air Traffic System (ADATS) support contractor clawing back slippages in delivery schedules for obsolescence management activities from that advertised at Mid Year Review, as well as unforeseen over-spends in the development of the Super Hornet comms capability.
Naval and Shore Communication Systems 40 39 39 0  
Battlespace Communications Systems 38 37 26 -11 The underspend is a result of delays in the delivery of the LAND 75 Battle Management System and in the establishment of mature support contracts for equipments delivered under JP 2072 Ph 2A.  There were also savings associated with moving from disposable to rechargeable batteries. 
Helicopter Systems
Multi Role Helicopter [1] 121 114 110 -4 The under achievement is due to lower than forecast Rate of Effort. 
Armed Reconnaissance Helicopter Weapons System 104 114 130 16 The over achievement was due to the need to address the Full Flight and Mission Simulator obsolescence issues and the cost of maintaining repairable items exceeding estimations. 
S-70A-9 Black Hawk Weapons System 77 79 77 -2 The under achievement was due to savings achieved from the relocation of aircrew training from Oakey to Sydney.
S-70B-2 Seahawk Weapons System 65 63 62 -1 The under achievement was due mainly to delays in the contracted maintenance program.
General Manager Land & Maritime
Guided Weapons Branch [2]
Guided Weapons - Air Force, Army & Navy 101 103 125 22 The over achievement was due to the purchase of additional replacement stock of Navy weapons and the early deliveries against a number of FMS cases.
Munitions Branch [2]
Explosive Ordnance - Air Force, Army & Navy 269 231 241 10 The variation is earlier than planned delivery of grenades, fuses and mortar ammunition.
Land Systems
ADF Clothing 70 45 51 6 Variation is due to Australian Multicam Camouflage Uniform production commencing ahead of schedule to replace the current in-service disruptive pattern uniform and procurement of additional swords and parade boots in support of the 2015 ANZAC day commemorations.
General Service B Vehicle Fleet 67 71 66 -5 The variation is the result of $2m of cost savings achieved against the  procurement of Up Armoured vehicles for the MEAO and $3m not required for preparation and remediation activities associated with Exercise Hamel.
Australian Defence Organisation Commercial Vehicles Fleet 51 52 55 3 The variation is due to additional requirements to replace commercial vehicles in FY 2013-14.
Health Systems 40 42 44 2 The variation is due to the acquisition of Environmental Stress Index Monitors.
Maritime Systems
Fuels & Lubricants - Air Force, Army & Navy 507 493 520 27 The variation is due to increases to fuel prices, increased requirements by Air Force and Navy during Qtrs 3 and 4 2013-14, and the replenishment of fuel holdings to meet heightened operational activity.
Anzac Class Frigate 224 250 263 13 The variation is due to the increased costs to remediate ships entering refit as a result of their poor materiel state.
Adelaide Class Frigate 89 121 110 -11 The variation resulted from unscheduled delays in the implementation of the Phase-In for the Group Maintenance Contract and the non-payment of docking fees, due to an ongoing dispute with the contractor, for HMAS Newcastle.
Mine Hunter Coastal 81 80 75 -5 The variation resulted from the Watermist System design documentation being unable to be completed in the period, and contingency funds not being required due to an underspend on the associated upgrade of the Combat System.
Armidale Class Patrol Boat 40 44 39 -5 The variation is due a reduction in payments to the contractor based upon performance outcomes.
General Manager Submarines
Collins Submarine Management Program
Collins Class Submarine 574 580 590 10 The variation is a result of additional sustainment activity, in particular HMAS Waller repairs and purchase of additional inventory.
Total -Top 30 Products 3673 3696 3791 95  
Other approved Sustainment Product 994 1061 1246 185  
Total Sustainment Product Funds Available 4665 4757 5037 280  
Support to Operations 297 293 281 -12  
Total Sustainment and Operations Funding 4962 5050 5318 268  

Notes

  1. The financial recognition of compensation benefits, totalling approximately $253 million, negotiated by DMO from the Contractor (Airbus Group Australia Pacific) as a result of the Deed 2 settlement is not included in actual expenditure for MRH in this Table. The credit was made to consolidated revenue at the Defence level and is included in the Other approved Sustainment Product Total.
  2. Explosive Ordance Division restructure was completed in April 2014. This Table reflects the New Structure.

Program 1.2 key performance indicators

Program 1.2 key performance indicators vary with each sustainment product and are specified in the relevant materiel sustainment agreements.

Industry Engagement— Enabling our Business

The Australian defence industry is a major partner in, and enabler of, the Government’s plans to equip and support the current and future ADF. It is vital that Australia maintains a defence industry capable of supporting the ADF’s acquisitions and sustainment. Defence works with individual companies and with industry groups to support the growth and competitiveness of the industry.

There is certainty in the funding available for a number of industry programs until the development of the next Defence White Paper, Defence Capability Plan and Defence Industry Policy Statement. The DMO’s industry engagement programs continued to be in high demand during 2013–14 across a range of the services, particularly for business advice for small and medium enterprises. Funding certainty has allowed the continuation of key programs beyond June 2014, including Defence’s contribution to the ongoing work of the Defence Materiels Technology Centre, funding for the Defence Industry Innovation Centre managed by the Department of Industry, and national partnership agreements for school careers programs in two states. A further round of the Skilling Australia’s Defence Industry program was agreed by the Minister for Defence and announced in May 2014.

Business access offices

Defence works closely with industry to ensure that contracts for goods and services provide effective capability solutions for the ADF. For industry, one of the first points of contact with Defence is typically the local Defence business access office. In each mainland capital city, the office represents Defence in the local region and promotes effective relationships between Defence, industry and state and territory governments.

The offices provide tailored advice, guidance and knowledge of current and emerging capabilities for industry companies aspiring to enter the Defence market or continue to do business in it. They help to build networks, offer advice and work with local and state governments and industry bodies to facilitate information flows, keeping Australian businesses aware of current and future opportunities in the defence sector.

Defence also stages nationwide Defence Industry Updates and Introduction to the Defence Market briefings through the business access offices. Information on the scheduling and topics for the briefings is available from the local office.

Priority industry capabilities

The Government has set clear priorities for supporting the priority industry capabilities (PICs) outlined in the Defence White Paper and the Defence Industry Policy Statement. PICs are defined as those industry capabilities that confer an essential strategic advantage by being available within Australia. Lack of them would significantly undermine defence self-reliance and ADF operational capability.

There are currently 12 PICs. The ‘health’ of each PIC has been assessed through PIC ‘health checks’, and Defence continues to monitor industry capabilities for changes that may affect the growth and development of local industry and the availability of those capabilities. A review of the PICs, and the criteria by which they are identified, is underway in the context of the development of a new Defence White Paper and Defence Industry Policy Statement. This process will examine the current criteria, validate the current list of PICs and test new and emerging capabilities for their potential to become PICs.

To ensure that industry can meet Defence’s capability needs, Defence will emphasise investment in PICs through the implementation of the PIC Development Fund—an initiative funded through the Defence Capability Plan. Defence also prioritises PIC areas in providing increased opportunities for industry to participate in skilling and export opportunities where PIC relevance can be demonstrated. This includes assessments of Skilling Australia’s Defence Industry program applications and the selection of participants for Team Defence Australia missions.

More information on PICs is at www.defence.gov.au/dmo/id/pic/.

Australian industry capability

The Australian Industry Capability (AIC) Program creates opportunities for Australian industry to compete on merit to provide goods, services and capabilities based on a value-for-money analysis.

Work committed to Australian industry is captured in the contracted AIC Plan as an enforceable provision. The AIC Program also supports the cost-effective delivery of acquisitions and sustainment that underpin PICs.

By identifying PICs, the AIC Program signals priorities to Australian industry to enable investment, the development of innovative solutions and partnering to meet ADF needs.

Within the DMO, the AIC Program informs the development of aspects of the Acquisition and Support Implementation Strategy.

The DMO also facilitates the release of public AIC plans that highlight the scope of contracted work and indicate future work opportunities that may interest Australian companies. Public AIC plans also detail points of contact to enable industry to target its representations. At 30 June 2014, 27 AIC plans had been published.

Published 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 creates opportunities for Australian companies to win work in the global supply chains of multinational defence companies and their major suppliers. The prime companies establish Australian industry offices and identify bid opportunities among their defence and commercial business units. This work is then competed for and won on merit.

Seven prime companies are currently implementing the program (Boeing, Raytheon, Thales, BAE Systems, Northrop Grumman, Lockheed Martin and Finmeccanica) and working with Australian companies—mainly small to medium-sized enterprises (SMEs)—to increase their competitiveness and promote innovation.

In 2013–14, the number of companies awarded contracts continued to grow. At 1 June 2014, 90 companies had been awarded 404 contracts with a total value of $594m. The prime companies also provided a range of training, mentoring and market assistance, often in conjunction with the Defence Industry Innovation Centre, to increase the companies’ competiveness.

After an external review of the program in 2013, the program’s the performance framework is being strengthened to align more closely with the intended outcomes.

Defence and industry ePortal

The Defence and Industry (D+I) ePortal was established to provide a comprehensive and authoritative source of company-supplied information on Australian industry capability for Defence and other potential customers. Around 80 per cent of the businesses registered on the D+I ePortal are SMEs. In 2013–14, 72 organisations and 2,679 capability listings were added to the ePortal database. An analysis of the fit between current ePortal functionality and the DMO’s business requirements is in progress.

Industry skilling programs

The Skilling Australia’s Defence Industry Program is part of a significant investment program to support training initiatives to improve the quality and quantity of personnel working in the defence industry. The program provides financial support to improve the skills base needed to provide the capabilities required by the ADF. More than 120 defence industry companies received funding in the 2013–14 grant round, providing more than a thousand training or skilling opportunities. On 26 May 2014, the Minister for Defence announced the opening of a new round of applications for the 2014–15 financial year.

In 2013–14, the South Australian Department of Education and Child Development and the Western Australian Department of Education were funded under a national partnership agreement to run the Advanced Technology Industry School Pathways Program in South Australia and the Marine Industry School Pathways Program in Western Australia. The Advanced Manufacturing Industry School Pathways Program is managed by Regional Development Australia in the Hunter region of New South Wales, in conjunction with the New South Wales Department of Education. These three programs work with lead and partner schools to develop industry-focused curriculum and establish or strengthen links with the defence industry. All three have reported increases in the number of students studying science, technology, engineering and mathematics.

The Defence Engineering Internship Program supports third and fourth year engineering students, targeting specific engineering streams and matching the student with a defence industry SME for their 12-week industry placement. This program aims to increase the skills base of the defence industry, create pathways into the sector and address capability skills gaps.

In 2013–14, the DMO continued its sponsorship of the Re-Engineering Australia Foundation. The foundation raises school students’ awareness of engineering and other technical and professional careers in the defence industry through the F1 in Schools Technology Challenge competition and the Future Submarine Technology Challenge (to be known as SUBS in Schools). These programs support an increased awareness of the link between studying science, technology, engineering and mathematics and careers in the defence industry.

Defence Industry Innovation Centre

The Defence Industry Innovation Centre is a government initiative helping Australian defence industry SMEs to be more competitive in Australian and international markets. The centre conducts comprehensive business reviews and provides tailored improvement programs to enhance a company’s competitiveness by building organisational capability and productivity, increasing efficiency and sustainability, and fostering innovation and collaboration. Grant funding is available to industry to support the implementation of plans and recommendations made by the centre.
During 2013–14, the Defence Industry Innovation Centre delivered more than 140 client engagements using tools such as business reviews, Defence Industry Change Plans and the multi-year Supplier Continuous Improvement Program, in which more 80 Australian SMEs are participating. The Australian program is based on a successful British program (known as SC21) that is designed to enhance performance at all levels of the supply chain in the aerospace and defence sectors. The program consists of an internationally recognised set of diagnostics that:

  1. benchmarks a business’s quality and delivery performance
  2. benchmarks both business and manufacturing processes
  3. creates a standardised view of how a business compares to its peers in Australia and internationally
  4. helps SMEs to prioritise business improvements in areas valued by key customers
  5. embeds a culture of continuous improvement within the firm.

A key element of the program is recognition in an industry awards and recognition program. To be eligible for recognition, businesses must achieve and sustain a very high level of performance. In Australia, a joint assessment process has been developed in conjunction with the Australian Industry Group Defence Council to ensure that the award is valued by key defence industry peers. In 2013–14, there was significant improvement by a number of participants, and some SMEs are now performing at levels eligible for recognition.

International materiel engagement

The DMO manages and coordinates international engagement with partner and allied nations to help to ensure Australia’s access to cutting-edge defence technology, systems and capabilities. The most significant activity is the DMO’s participation in the annual Australia–US Ministerial Defence Acquisition Committee, which focuses on cooperative programs, science and technology and strengthening Australia’s access to defence materiel, including through the US Foreign Military Sales Program.

In 2013–14, annual bilateral forums were also held with Germany, Sweden and the United Kingdom. These relationships assist in promoting best practice in Defence contracting and help to coordinate global government responses to commercial behaviours in defence supply chains.

Team Defence Australia

The Team Defence Australia initiative, developed by the DMO in 2007, supports Australian defence industry access to foreign markets by leading trade missions and establishing an Australian presence at key international defence trade exhibitions and conferences around the world.

Since its inception, Team Defence Australia has helped more than 280 Australian companies to participate in trade missions in Europe, the Middle East, the Americas and Asia. This has resulted in the Australian defence industry securing over $780m in sales to foreign markets.

In 2013–14, Team Defence Australia led trade missions to Indonesia, Malaysia, Singapore, the United Arab Emirates and the United States. More than $10m in contracts was secured as a direct result of the industry’s participation in those missions. An additional $31.5m in contracts was secured in 2013–14 as a result of the Australian defence industry’s participation in trade missions during previous years.