Program of Administrative Savings
In the 2003–04 Budget, the Government
agreed that Defence would absorb a range of cost pressures through a
program of administrative savings. The five-year program is designed
to deliver ongoing savings of $200m per annum by 2007–08. At this
stage, Defence expects to have found savings totalling $162.2m by 30
June 2006 and is therefore ahead of schedule in achieving the savings
targets. Measures have been put in place to ensure that $175m in savings
will be delivered by 30 June 2007. Other measures, including in the
business improvement project and substituting PSP positions with more
cost effective civilian staff, should deliver the remaining savings
by 30 June 2008. Details are shown in Table 1.14.
Table 1.14 Program of Administrative
Savings Targets
| |
2003–04
$m |
2004–05
$m |
2005–06
$m |
2006–07
$m |
2007–08
$m |
Ongoing
$m |
| Savings target |
50.0 |
100.0 |
150.0 |
175.0 |
200.0 |
200.0 |
| Savings achieved/ planned to date |
60.6 |
130.0 |
162.2 |
175.4 |
200.0 |
200.0 |
Administrative savings to date have been achieved by:
- reductions in the civilian workforce;
- reductions in non-capability–related supplier expenses, including
Professional Service Providers;
- a 20 per cent reduction in non-operations related overseas
travel;
- a ten per cent reduction in non-operations related domestic
travel;
- renegotiations of the Australian Defence Force Academy agreement,
resulting in cost savings of $1.9m as forecast in the Portfolio
Budget Statements 2005–06;
- a reduction in non-operational overseas positions of 110 personnel
programmed in 2003–04 and in the
years thereafter. There has been an increase in the number of overseas
personnel due to Government-endorsed initiatives, capital equipment
projects and Defence regional engagement, which has been offset from
elsewhere in Groups' budgets;
- removal from service of three P-3 Orion derivative training aircraft,
following the introduction of the advanced flight simulator, resulting
in operational savings which have been redirected to P-3 Orion aircraft
logistics;
- the rationalisation of the civilian personnel administration centres
from three to two locations;
- rationalisation of the former Public Affairs and Corporate Communication
Division;
- introduction of PMKeyS Self Service, resulting in printing savings
from the electronic distribution of civilian and military pay summaries;
- introduction of the Defence Travel Card for domestic and overseas
business-related travel, including the Diners Club rebate, as part
of the Defence Travel Reform;
- introduction of the Invoice Scanning and Imaging System, resulting
in processing savings;
- closing Defence cash offices and centralising receipting, resulting
in implementation of automated processes (Bill Pay and Phone Pay)
and recovery of debt through salary;
- renegotiations of the Defence Comcover insurance premium resulting
in savings of $20.8m in 2005–06,
with a further $19.1m expected in 2006–07,
and $17.3m in 2007–08;
- lease cost savings for commercial vehicles;
- business process improvements for the Regional Information, Communication
and Technology Market Testing function; and
- civilianisation of Navy and Army military positions.
Table 1.15 details the net savings achieved to date and planned
saving, including transition and up-front costs. The data is sourced
from the Portfolio Budget Statements 2006–07
as this is a more up-to-date and accurate estimate.
Savings achieved and planned are being used to offset the unavoidable
cost pressures shown in Table 1.16 (p. 59), to ensure cuts to capability
are not required to absorb these costs in the longer term.
Table 1.15 Administrative
Savings Achieved/Planned to Date
| Initiative |
2003–04
$m |
2004–05
$m |
2005–06
$m |
2006–07
$m |
2007–08
$m |
| Reductions in civilian workforce |
9.5 |
28.4 |
46.5 |
46.5 |
46.5 |
| Reductions in non-capability related suppliers, including Professional
Service Providers |
22.0 |
41.7 |
41.7 |
41.7 |
41.7 |
| Reductions in overseas travel |
7.4 |
7.4 |
7.4 |
7.4 |
7.4 |
| Reductions in domestic travel |
11.5 |
11.5 |
11.5 |
11.5 |
11.5 |
| Renegotiation of the Australian Defence Force Academy agreement |
0.9 |
1.9 |
1.9 |
1.9 |
1.9 |
| Reductions in non-operational overseas positions |
4.8 |
13.4 |
19.2 |
20.4 |
20.3 |
| Removal from service of three P-3 derivative training aircraft |
– |
– |
5.5 |
5.5 |
4.0 |
| Rationalisation of civilian personnel administration centres |
1.3 |
1.3 |
1.3 |
1.3 |
1.3 |
| Rationalisation of the former Public Affairs and Corporate Communication
Division |
2.7 |
3.2 |
3.2 |
3.2 |
3.2 |
| PMKeyS self-service |
– |
0.1 |
0.1 |
0.1 |
0.1 |
| Diners Club rebate |
0.5 |
–0.2 |
0.4 |
0.7 |
– |
| Travel Improvement Project (processing staff) |
– |
0.7 |
2.0 |
2.0 |
2.0 |
| Invoice scanning and imaging system |
– |
0.2 |
2.4 |
2.4 |
2.4 |
| Closure of Defence cash offices and centralising receipting |
– |
0.3 |
0.3 |
0.3 |
0.3 |
| Reduction in Comcover insurance premium |
– |
22.5 |
20.8 |
19.1 |
17.3 |
| Commercial Vehicles |
– |
– |
0.5 |
1.4 |
1.4 |
| Regional Information, Communication and Technology Market Testing |
– |
– |
1.5 |
2.3 |
2.3 |
| Civilianisation of Navy military positions |
– |
– |
– |
0.4 |
0.4 |
| Civilianisation of Army military positions |
– |
– |
– |
1.4 |
1.4 |
| 1. Subtotal Savings Achieved to Date |
60.6 |
132.3 |
166.3 |
169.4 |
165.3 |
| Travel Improvement Project (goods and services tax) |
– |
– |
– |
3.0 |
5.0 |
| Mail and freight |
– |
– |
– |
3.2 |
3.2 |
| Strategic supplier arrangements (office requisites) |
– |
– |
– |
1.5 |
1.5 |
| Rationalisation of business equipment |
– |
– |
– |
0.6 |
0.6 |
| Rationalisation of resource/paper management |
– |
– |
– |
1.5 |
4.8 |
| Rationalisation of military personnel administration centres |
– |
– |
– |
– |
1.3 |
| Further rationalisation of civilian personnel administration centres |
– |
– |
– |
– |
0.7 |
| Conversion of Professional Service Providers to civilians |
– |
– |
– |
17.5 |
20.2 |
| 2. Subtotal Savings Planned to Date |
– |
– |
– |
27.3 |
37.2 |
| Regional Information, Communication and Technology Market Testing
transition costs |
– |
–2.3 |
–3.3 |
– |
– |
| Business Improvement Project transition costs |
– |
– |
–0.8 |
–15.0 |
– |
| Business Centre set up and lease costs (in the vicinity of RAAF
Williamtown) |
– |
– |
– |
–6.3 |
–2.5 |
| 3. Subtotal Transition Costs |
– |
–2.3 |
–4.1 |
–21.3 |
–2.5 |
| 4. Net Savings (1+2+3) |
60.6 |
130.0 |
162.2 |
175.4 |
200.0 |
Table 1.16 Cost Pressures
Offset by Administrative Savings
| |
2003–04
$m |
2004–05
$m |
2005–06
$m |
2006–07
$m |
2007–08
$m |
| Establishment of the Chief Information Office |
4.9 |
4.9 |
4.9 |
4.9 |
4.9 |
| Comcare premium increases |
9.3 |
15.1 |
15.3 |
15.1 |
15.1 |
| ComSuper administration charge |
5.4 |
5.4 |
5.4 |
5.4 |
5.4 |
| Additional legal services and compensation costs |
4.0 |
4.0 |
4.0 |
4.0 |
4.0 |
| Establishment of the Defence Service Call Centre (Cooma, New South
Wales) |
9.5 |
9.5 |
9.5 |
9.5 |
9.5 |
| Contract costs not able to be funded from DRP savings including
DIDS Warehousing Manpower recruitment contract |
80.0 |
100.0 |
100.0 |
100.0 |
100.0 |
| Portfolio contribution to ADF service allowance increase |
29.8 |
29.8 |
29.8 |
29.8 |
29.8 |
| Defence Force Review Tribunal allowance increases |
7.0 |
7.0 |
7.0 |
7.0 |
7.0 |
| ADF remuneration reform project costs |
13.2 |
13.2 |
13.2 |
13.2 |
13.2 |
| Increases in overseas leases costs |
2.3 |
2.3 |
2.3 |
2.3 |
2.3 |
| P-3 Orion logistic shortfalls |
– |
– |
5.5 |
5.5 |
4.0 |
| Changes in Commonwealth Superannuation Scheme/Public Service Superannuation
contribution rates |
– |
7.2 |
7.2 |
7.2 |
7.2 |
| Department of Foreign Affairs and Trade common services charges |
– |
1.7 |
1.7 |
1.7 |
1.7 |
| Higher ComSuper user charges |
– |
2.4 |
2.4 |
2.4 |
2.4 |
| Higher Comcare user charges |
– |
1.5 |
1.5 |
1.5 |
1.5 |
| Total Cost Pressures Requiring Funding |
165.4 |
204.0 |
209.7 |
209.5 |
208.0 |
| Savings used as offsets to date |
60.6 |
130.0 |
162.2 |
175.4 |
200.0 |
| Absorbed Elsewhere in the Defence Budget or From Future
Savings |
104.8 |
74.0 |
47.5 |
34.1 |
8.0 |
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