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Defence Materiel Organisation

Prescription Day

"Defence Materiel is exciting. Its challenge ahead is as formidable and nation-building as the Snowy Mountains hydro electric project was in the 1950s and 60s. Like that program of dozens of projects, outcomes will be built on high quality professional engineering, superior program management, and the skills of Government and Industry alike," says Dr Stephen Gumley, Chief Executive Officer of the Defence Materiel Organisation (CEO DMO) in his National Press Club address in Canberra on 29 June 2005.

On 1 July 2005 a new era in the Defence and Defence Materiel Organisation (DMO) relationship was forged, with DMO becoming a prescribed agency under the Financial Management and Accountability Act.

The Minister for Defence, Senator Robert Hill says the change in the DMO reflects the Government's strong commitment to deliver the best possible leading edge capabilities for Defence personnel - on schedule and within budget.

"The formal establishment of the DMO as a prescribed agency is the culmination of a great deal of work by Defence and central Government agencies over the last year to put in place necessary legislative measures and accounting arrangements," Senator Hill says.

"DMO has undergone major reform in recent times implemented by the Government to provide a professional quality service. The new arrangements will allow DMO to become even more business-like and match best practice in private sector program management.

"The DMO's performance in delivering acquisition and sustainment services will become even more transparent to the Parliament and the public," Senator Hill says.

Dr Gumley is directly accountable to the Minister for DMO's performance in the efficient and effective delivery of acquisition and through-life support of materiel for Defence capabilities. This direct relationship has been formalised in a Ministerial Directive to the CEO.

From 1 July DMO is responsible for its own financial management including the production of separate financial statements, but will remain inextricably linked to Defence. A comprehensive range of agreements form the basis of the relationship between DMO and Defence.

"Setting the DMO up as a prescribed agency sounds rather bureaucratic," says Dr Gumley, "but with over $40 billion of assets being divvyed up, it is thought to be the largest demerger in Australia's history.

"We have a great partnership with Lieutenant General Hurley and his team in Capability Development Group and continue to build and evolve relationships with industry in meeting the challenges flowing from the Capability Development Program.

"With the massive job of making DMO a prescribed agency, I thank the very hard working and professional staff at Defence and DMO for an outstanding job, done on time," he says.

In a joint statement on 1 July 2005, the Secretary of Defence, Ric Smith and then Chief of the Defence Force, General Cosgrove, said that prescription would allow "greater autonomy to equip and sustain the Australian Defence Force, and provides greater visibility of the costs of procuring and sustaining our assets".

The new DMO, they said, has clarity of purpose, appropriate powers and is well placed to take on the challenges of financial autonomy."

The road to prescribed agency status has been a long and complex one. It began, formally, in September 2003 with Government agreement to the majority of the recommendations from the Defence Procurement Review (known widely as the Kinnaird review).

In the lead up to achieving prescription status, major tasks completed in preparation for the demerger of DMO and Defence have included:

  • modification of Defence's corporate information management systems to identify DMO as a separate entity;
  • separation of the budget for DMO from that for the rest of Defence and publishing it separately in the Defence Portfolio Budget Statements;
  • preparation and ratification of Agency Agreements between Defence and DMO defining accountabilities and responsibilities;
  • establishment of DMO's own Materiel Audit Committee; and
  • establishment of accounting policies, Chief Executive Instructions and appropriate delegations for DMO.

Having reached the historic milestone of achieving prescribed agency status, Dr Gumley speaks with confidence about the DMO of the future.

"My vision is for DMO to be Australia's premier engineering services and program management organisation."

"The six DMO Themes are starting to take hold. Professionalising, Benchmarking, Standardising, Reprioritising, Better industry relationships, and Leading reform," he says.

And according to the CEO, prescription comes with a greater focus on being 'business-like' and achieving improvements in support for the purchase and maintenance of Defence equipment.

"Three thousand DMO staff will receive business acumen training this year, to enhance their understanding of commercial and business issues - eg profit, contracting, scheduling, intellectual property, and risk," says Dr Gumley.

"It's all about becoming more business-like. A way of straddling the gap between government ownership and being arguably Australia's biggest contractor."

Compiled by Karlene Sargent

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