CAPITAL INVESTMENT PROGRAM

Capability Development

Capability Development Group drives the implementation of plans for Defence's future capability. This year marked the second year since the Group's formation in response to the 2003 Kinnaird Defence Procurement Review. Major achievements this year included the completion of the Defence Capability Strategy and the release of the Defence Capability Plan 2006–16 (DCP).

The DCP is a detailed, costed plan for Australia's military capabilities for the next ten-year period, with broad guidance on major investments over the following ten years. The plan is reviewed and updated annually to take account of changing strategic circumstances, new technologies and changed priorities. It sets out the planned investment in new equipment under six capability goals—land, air combat, maritime forces, strike, information and intelligence. In 2005–06, a major update of the Defence Capability Plan was conducted, leading to the public release of the 2006–16 DCP in June 2006. The release of a public version is designed to keep Australian industry abreast of Defence's major acquisition planning so industry too can play its part in capability development.

The DCP is implemented through a mandatory 'two pass' approval process by the Government. In 2005–06, the Government agreed to eight first-pass project approvals and 12 second-pass project approvals, plus a number of other studies and project development activities, at a cost of $7.2 billion. Notable approvals included the Follow-on Standoff Weapons Capability for the F/A-18 Hornet (AIR 5418) and the Black Hawk Midlife Upgrade/Replacement (AIR 9000). In addition to projects within the DCP, the Government also approved the rapid acquisition of four Heavy Airlift C-17 aircraft. In support of the 'two pass' approval system, the Group continued the Kinnaird reform process, notably in the application of test and evaluation and simulation to the pre-second pass approval process. The Group also strengthened its relationship with the DMO by embedding DMO project managers within the Capability Systems Division.

2005–06 also saw the release of other important publications, including the second version of the Defence Capability Development Manual and the Network Centric Warfare Roadmap. These documents provide guidance for the development of capability proposals and capability planning, and a roadmap to focus ADF efforts towards being a more cohesive and integrated force by 2020.

The Defence Capability Plan

The approved major capital equipment program comprises those projects that generally cost in excess of $20m and which, following approval, are transferred from the Defence Capability Plan to the DMO to manage the acquisition phase.

Funding for approved major capital equipment projects, including project management and overhead costs, is provided by Defence to the DMO under separate Materiel Acquisition Agreements for each project.

Projects costing between $8m and $50m are approved jointly by the Ministers for Defence and Finance and Administration. Projects costing more than $50m are approved by the National Security Committee of Cabinet.

Since the Defence White Paper was published in December 2000, the Government has approved more than 150 major projects or phases of projects with an approximate cost of $28.2 billion. During 2005–06, a number of projects and studies were approved at a cost of $7.2 billion, as shown in Table 3.2. The Government will be presented with further projects for consideration in 2006–07.

Key Achievements for 2005–06

Significant projects progressed for Government approval during 2005–06 included:

• the acquisition of up to four C-17 Heavy Airlift aircraft and associated support equipment (AIR 8000 Phase 3);
• an additional 34 MRH-90 helicopters to replace the current Black Hawk and Sea King helicopter fleets (AIR 9000 Phase 4);
• the upgrade of the ANZAC-class frigate anti-ship missile defence system (SEA 1448 Phase 2B);
• the acquisition of the AEGIS combat system for the Air Warfare Destroyer (SEA 4000 Phase 3.1);
• the acquisition of the Joint Air to Surface Stand-off Missile for the F/A-18 (AIR 5418 Phase 1); and
• first-pass approval for the Amphibious Ships project, and the provision of funding to conduct further design, technical and through-life support studies. (JP 2048 Phase 4A/4B).

Table 3.2 List of Major Capital Equipment Projects Approved by the Government in 2005–06⁽¹⁾⁽²⁾

Project No	Phase	Name	Approval Budget(Band $m)	Status as at 30 June 2006
Support to the Development of the Major Capital Equipment Program
		Capability Technology Demonstrators (2005)	20–30	Various
		Capability Technology Demonstrators (2006)	20–30	Various
Project Development Funding	20–30	Various
AIR 7000	1.1	North West Shelf Unmanned Aerial Vehicle trials	Less than 20	1
First Pass Approval
JP 2008	3F	Military Satellite Capability	Less than 20	4
JP 2048	4A/4B	Amphibious Ships	20–30	3
JP 2080	2B	Defence Management Systems Improvement	Less than 20	Various
JP 2099	1	Identity Management—Project CERTE	Less than 20	4
LAND 17	1	Artillery Replacement	Less than 20	4
LAND 75	3.4	Battlefield Command Support System	Less than 20	4
LAND 125	3	Soldier Enhancement Version 2	20–30	4
LAND 144	1	Counter Mine Capability	Less than 20	4
Second Pass Approval
AIR 5418	1	Follow-on Standoff Weapons Capability	350–450	2
AIR 8000	3	Heavy Airlift (C-17)	2,000–2,500	1
AIR 9000	4	Black Hawk Midlife Upgrade/Replacement(3) (together with Sea King Replacement)	2,000–2,500	1
JP 129	2	Airborne Surveillance for Land Operations	100–150	2
JP 2077	2C	Automated Identification Technologies	20–30	1
JP 2095	1	Aviation Fire Trucks	20–30	3
JP 2098	1	Joint Combined Training Centre	20–30	1
JP 5408	2B	ADF Global Positioning System Enhancement	50–75	4
SEA 1439	5B.1	Collins Mast UHF(3)	30–50	1
SEA 1448	2B	ANZAC Anti-Ship Missile Defence Upgrade—Fire Control Radar	350–450	1
SEA 1448	3	CEA AUSPAR—Further Development of AUST Phased Array Radar	Less than 20	1
SEA 4000	3.1	Air Warfare Destroyer Program—AEGIS Combat System	1,000–1,500	1

Key to Project Status Categories Project under way (contract signed) Tender Closed Out to Tender Yet to go to Tender

Various: Either contributing to more than one project or consisting of several internal phases of varying status

Approved major capital equipment

An overview of the Approved Major Capital Equipment Program, including the top 30 projects in 2005–06, can be found in the Defence Annual Report Volume Two—Defence Materiel Organisation.

Key achievements in 2005–06

All up, Defence spent $3,888.4m on the major capital equipment program which was $149.3m more than the revised estimate. This included start-up expenditure on the range of new projects listed in Table 3.2.

The higher than planned result in 2005–06 reflects the early progression of the C-17 project with the initial deposit payment of $386m made in June 2006, rather than early in 2006–07 as planned, when the 2006–07 Budget was announced.

The following projects contributed to the $3,888.4m result:

• Air 8000 Phase 3 Heavy Airlift ($386.0m);
• Air 5077 Phase 3 Airborne Early Warning & Control ($338.5m);
• Air 87 Phase 2 Armed Reconnaissance Helicopter ($261.6m);
• Air 5402 ADF Air Refuelling Capability ($193.6m);
• Sea 1348 Phase 2 ANZAC Ship Project ($180.6m);
• Air 5376 Phase 2 F/A 18 Hornet Upgrade Project ($154.4m);
• Land 907 Phase 1 Tank Replacement Project ($153.2m);
• Sea 1444 Phase 1 Armidale-Class Patrol Boat ($151.2m);
• Air 9000 Phase 2 Additional Troop Lift Helicopter ($119.8m); and
• Sea 1439 Phase 4A Collins Replacement Combat System ($90.4m).

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