Defence manages $100.1 billion of total assets. This includes approximately:
Defence Groups and Services are accountable for the underlying business transactions and records that substantiate the reported financial balances of assets under their control.
Defence undertakes accounting processes to enable the accurate and timely reporting of asset balances and ensure that they are consistent with the requirements for financial statement reporting defined in the Australian Accounting Standards. Defence conducts an annual fair value assessment of all assets.
Defence discharges its procurement function in accordance with the Commonwealth Procurement Rules and the attendant Procurement Connected Policies and Defence-specific procurement policies. These and other mandatory procurement requirements are expanded, explained and operationalised through the Defence Procurement Policy Manual. Defence officials undertaking procurements must comply with the Defence Procurement Policy Manual. To assist Defence officials to comply, Defence also provides procurement guidance, tools and templates that guide, inform and assure rigour and good governance in Defence procurements.
In accordance with the Commonwealth Procurement Rules, Defence publishes the Defence Annual Procurement Plan on AusTender (www.tenders.gov.au). The Defence Annual Procurement Plan gives notice of proposed Defence procurements and enables industry to prepare for the competitive tendering phase. Defence also publishes all open tenders on AusTender.
Defence supports small business participation in the Commonwealth Government procurement market. Small and medium-sized enterprise participation statistics are available on the Department of Finance’s website.
Defence recognises the importance of ensuring that small businesses are paid on time. The results of the survey of Australian Government payments to small business are available on the Treasury’s website.
In 2017–18, Defence undertook an extensive Commercial Reform Program. The program aims to minimise the cost of tendering and contract administration by reducing the complexity of tender processes, balancing the allocation of commercial risks and enhancing industry engagement. Defence has also established the Defence Support Services Panel, which provides small and medium enterprises with easier and more streamlined access to Defence business opportunities. In addition, Defence is developing a Defence Industry Participation Policy to further facilitate Australian and local industry involvement for Defence procurements of $4 million and above.
The Centre for Defence Industry Capability and the Defence Innovation Hub advise small businesses and assist them to participate in Defence procurement and research activities.
To ensure that Defence understands the range of issues that small and medium enterprises face in supplying products and services and accessing procurement opportunities, Defence engages with industry through a range of forums, industry working groups and events. Defence will continue to pursue initiatives to engage with industry and assist small businesses to participate in Defence procurement activities.
In 2017–18 Australian industry continued to play a vital role in the acquisition and sustainment of Defence capability to support the Government’s $200 billion investment in renewing and strengthening Australia’s defence capabilities.
In 2017–18, Defence continued to roll out a number of initiatives that were announced in the 2016 Defence Industry Policy Statement. It also worked on a number of new policy initiatives to support the recognition of defence industry as a Fundamental Input to Capability as outlined the 2016 Defence White Paper.
The 2016 Defence Industry Policy Statement set out a new approach to defence industry and innovation. This approach is supported by two broad initiatives, funded at around $1.6 billion to 2025–26:
In 2017–18, the Next Generation Technologies Fund entered into more than 40 funding collaborations with 17 companies, 23 universities and two publicly funded research agencies. It has also committed more than $130 million to research programs in the coming years. This includes the first Grand Challenge and the first Defence Cooperative Research Centre.
In 2017–18, Defence also launched a range of policy and program initiatives to enhance Australia’s defence industry to better support Defence capability:
Further information on Defence’s industry and innovation programs can be found in the annual Defence Industry and Innovation Programs Update Report detailed in Appendix B.
Defence remains committed to stimulating Indigenous economic development and growing the Indigenous business sector.
Since the introduction of the Commonwealth Indigenous Procurement Policy, Defence has consistently exceeded the Department of the Prime Minister and Cabinet annual portfolio targets. In 2017–18 the Defence target remained at 3 per cent of eligible domestic contracts, equalling 420 contracts for the Defence portfolio.
Defence’s performance against the portfolio’s annual targets is published annually on the Department of Prime Minister and Cabinet Indigenous Procurement website listed in Appendix B.
Defence is currently developing an Indigenous Procurement Strategy as a further pathway to delivering Indigenous procurement outcomes. Through strong leadership, an inclusive culture and proactive communication, Defence is well positioned to maximise supplier diversity and specific Indigenous engagement outcomes across our procurement activities.
Defence has continued to deliver the ambitious $200 billion recapitalisation of the ADF outlined in the 2016 Defence White Paper and associated Integrated Investment Program.
The 2016 Defence White Paper sets out the Government’s vision to enhance Australia’s defence capability, deepen our international security partnerships and collaborate with defence industry and science and technology research partners in support of our nation’s security. The Integrated Investment Program, published along with the white paper, sets out all elements of the Government’s defence investment, including new weapons, platforms, systems, and the enabling equipment, facilities, workforce, information and communications technology, and science and technology.
Since the launch of the 2016 Defence White Paper, the Government has approved a number of capability investments across the major equipment, facilities and infrastructure, information and communications technology and science technology to deliver the Government’s capability requirements.
During 2017–18, the Government approved 111 capability-related submissions. It gave 21 ‘First Pass’ approvals, 35 ‘Second Pass’ approvals and 55 ‘Other Pass’ approvals. Of the 55 ‘Other Pass’ approvals, 14 were granted for submissions that provided advice to Government on current and future capability, and 35 projects were approved for early access to Integrated Investment Program funding. This early funding is used to complete critical capability development work to ensure that Defence can present comprehensive First and Second Pass proposals to the Government as scheduled.
Significant government announcements in 2017–18 include the following:
In 2017–18, 10 major capital facilities and infrastructure projects, valued at a total of $1.5 billion, were referred to the Parliamentary Standing Committee on Public Works. The committee held public hearings for 11 major capital facilities and infrastructure projects, valued at over $2 billion. Five medium work projects, valued at $31.4 million, were notified to the committee. Further information on the Parliamentary Standing Committee on Public Works is in Chapter 6.
The Projects of Concern regime is a proven process for managing underperforming capability projects at a senior level. Once a project is listed as a Project of Concern, the primary objective of the regime is to remediate the project by implementing an agreed plan to resolve any significant commercial, technical, cost and/or schedule difficulties. Projects of Concern receive targeted senior management attention and must be reported regularly to the government.
Table 8.1 provides a list of Projects of Concern as at 30 June 2018. Significant changes in the 2017–18 reporting period were the addition of Civil Military Air Traffic Management System (AIR05431PH3) and Deployable Defence Air Traffic Management and Control System (AIR05431PH1) to the list. Subsequently, Civil Military Air Traffic Management System (AIR05431PH3) was removed from the list after the acquisition and support contracts were signed with the prime contractor. After the successful remediation of the Collins Class Submarines Sustainment (CN10) and Air Warfare Destroyer (SEA04000PH3), the projects were removed from the list.
|Project name||Project number
|Multi-Role Helicopter (MRH-90)||AIR09000PH2, 4 and 6||November 2011|
|Australian Defence Satellite Communications Capability Terrestrial Enhancement||JNT02008H3F||September 2014|
|Deployable Defence Air Traffic Management and Control System||AIR05431PH1||August 2017|
Defence will continue to actively manage the remaining Projects of Concern in 2018–19, as agreed with the government.