Defence

Corporate Services and Infrastructure Group

In Support of the 'sharp-end'

Side story: Pass the Parcel

The transformation of the Australian Defence Organisation in recent decades has many features in common with the development of shared services providers and outsourcing in large private sector enterprises. Behind the sometimes-negative headlines Defence has attracted in recent times, there is a success story about organisational transformation. Defence has been learning from experience elsewhere in the private and public sectors and in the process, has identified some of the distinctive features of the reform process in Defence.

In the last forty years Gross Domestic Product (GDP) has grown at about 3.75% annually whereas Defence expenditure has grown at about 3.25% annually. As a result Defence expenditure has slipped as a share of GDP from 2.6% to around 2%. This is all the more remarkable when we consider the operational tempo maintained over the past number of years. A further notable development has been the substantial reduction in military and civilian Defence personnel. Since the mid 1980's Defence civilian personnel numbers have declined from over 40 000 to about 18 000 and ADF personnel strength has declined from over 70 000 to about 52 000. Despite this significant decline, the number of personnel in combat or combat related positions is estimated to have increased.

Two structural changes have been associated with these developments:

• the market testing and outsourcing of a wide range of services formerly provided by military personnel or Defence civilians; and
• the establishment of shared or common service provider organisations, frequently involving the civilianisation of formerly military positions, or in some cases, the creation of tri-service organisations.

As a result of these changes, the number of private sector employees supporting Defence capability and the proportion of military personnel employed in 'sharp-end' positions has increased significantly. These structural changes and outcomes have much in common with developments in the private sector. For Defence however, the pressure for transformation usually derives from budgetary rather than competitive market forces.

The strategy underpinning these developments is long standing. For example, the 1987 White Paper entitled The Defence of Australia indicates that, "A program of management reviews will identify areas in which ADF personnel can be replaced at less cost by the use of civilians and private industry."

Similarly, in 1990 the report entitled The Defence Force and the Community, generally known as the Wrigley Review, recommended increased use of civilian capability. "The Review concluded that many of the quasi-civilian activities conducted within the defence force could be carried out much more efficiently in a competitive civilian environment, so freeing military positions for military work and allowing military management competence to be redirected to the core military functions."

This review eventually led to the Commercial Support Program of market testing and outsourcing.

More recently, the Defence Efficiency Review, initiated in 1996 recommended that Defence structure itself for war, not for peace and harness the support and resources available through local industry for support-type operations. "Indeed, the very essence of this Review is to free up resources from support and administrative activities to strengthen the ADF's combat capabilities."

The resulting Defence Reform Program initiated in 1997 paved the way for the creation of two significant shared service provider organisations - CSIG and more recently, the Chief Information Officer's Group (CIOG). The responsibilities and resources to establish these groups have generally been drawn from the three Services and other major groups within Defence and significant savings have been harvested in the process. As is no doubt the case in other large organisations, sometimes there has been reluctance to transfer these resources.

The establishment of CSIG and the CIO Group represent significant examples of shared service providers in Defence. In both Groups, ways are being examined to improve performance by reengineering business processes. For example in CSIG, technology based initiatives underway will significantly reduce the need for paper-based methods for processing travel, accounts, pay and leave - bringing Defence closer to best practice in the private sector.

The stability of Defence expenditure as a share of Commonwealth outlays and the modest recent call on national income is impressive when we take account of the high level of operational tempo. Market testing and outsourcing in combination with the development of shared service provider organisations and continuing reengineering of business processes has contributed to this success. As a result, the proportion of military personnel employed in sharp end combat and combat-related positions has increased significantly and the number of private sector employees supporting Defence capability also has increased significantly.

In short, the increasing strength of our partnerships with industry has been a key ingredient in the successful transformation of the Australian Defence Organisation in recent decades. The transformation and the associated transfer of resources from support to the sharp end reflects a combination of budgetary pressures and the availability of new technologies. The available evidence suggests there will be continuing budgetary pressures to economise on the provision of support services if we are to successfully continue to meet the challenge of defending Australia and its national interests.

This is a summary of Alan Henderson's speech at the Shared Services APAC 2005 in Sydney on 15 March 2005.

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