The Parliamentary Secretary for Defence Procurement, the Hon. Greg Combet MP, has given a briefing on the Government’s first Budget and outlined a number of features relevant to Defence procurement and sustainment.

“Defence will continue a strong program of acquisitions. Over the next four financial years. Some $21.9b will be directed to Major Capital Investment with $4.6b occurring during 2008/09.

The DMO is currently managing 236 major projects (each valued over $20m) and more than 180 minor projects. These projects cover the air, sea, land, electronics, helicopters and explosive ordnance areas.

In addition, there is significant sustainment expenditure planned.  In 2008/09 the DMO will spend $4.8 billion on sustainment activities including support for the armed forces, Intelligence and Security, and operating costs associated with the Defence Capability Plan.

The Budget also contains $26.8m for rapid acquisitions to support current Defence operations. The rapid acquisition program has been very successful in delivering operational support on a much enhanced timetable.

Defence will also be assessing new capability proposals in order to commence future acquisitions, including design studies for the Collins Submarines replacement, upgrading the C-130J aircraft and improving the ADF’s protection against Improvised Explosive Devices.”

Issues for the Defence Materiel Organisation

“The Defence Procurement and Sustainment Review is intended to examine the effectiveness of reforms to date and also develop a program of ongoing reforms.

One area that I am keen to see developed is a series of reforms that will move DMO further towards a more businesslike and commercial operation. I believe this is essential if we are to achieve a more effective and efficient defence procurement process. The efficiency of procurement and contracting processes will also receive attention.

The problems associated with schedule were well demonstrated within this Budget. In contrast, the cost of many of the DMO projects have been well controlled.

This was evidenced by the need for no additional funding being required for any of the Top 30 major projects in 2008/09 other than Government approved changes to quantity and quality – so no cost overruns due to poor management on behalf of the DMO.

This does emphasise the need to find solutions to the schedule problem and I am hoping that the review will touch on some of these in its findings.

That said, cost control issues must be continually monitored given the high level of government expenditure in this area.

This is why the DMO, on advice from the Government, has targeted savings of five per cent applied across the sustainment area. We have already had a positive result from this reflected in the budget which saw DMO contribute half of the savings that were identified.

It also appears to me that the large majority of the reported cost blow outs of the past have actually occurred prior to 2nd pass approval and the DMO responsibility. It might therefore be advantageous for the Mortimer Review to consider how the procurement process is handled and reported prior to 2nd pass approval.”

‘Projects of Concern’ Update

“We are taking a direct role in investigating the remediation of ‘projects of concern’ within the DMO and industry participants and have put in place a management team and regular reporting process.

I am pleased to say that there are already some notable improvements in some of the projects, while others still have a long way to go. I am increasingly confident that I will progressively be able to announce the successful remediation of some of the projects.

It is hoped that this closer Government scrutiny and direction for these projects will help alleviate some of the past problems experienced and therefore reduce the need for future reprogramming in the capital investment program.” 

Budget Figures

“In 2008/09, the Government will invest $21.76 billion in the Australian Defence Force (ADF) to ensure that it is ready to meet the challenges it faces. This represents about 1.8 per cent of GDP. The Defence Materiel Organisation part of the Defence Budget is equal to $9.6 billion in 2008/09.

It is important to note that this is an increase in the Defence Budget of 7.3 per cent over the 2007/08 forecast outcome of $20.28 billion. The Government will support Defence by providing real growth of 4 per cent on average over the forward estimates out to 2011/12.  

In addition, the Government has renewed its commitment for real growth in the Defence budget at an average of three per cent in real terms every year to 2017-18 – an additional two years funding than previously announced.

This will provide a further $2.8 billion in 2016/17 and 2017/18 and will ensure the ADF has the necessary equipment, training and support.

In total over the next ten years the Government, in this budget, has provided for additional funding of over $13.4 billion, a large part of which has been the result of an exceptionally strong growth in the indexation applied to Defence.

This new funding will give Defence a firm ten year financial planning base that will help underpin the planning and development of the new White Paper and help promote long term planning.”

Defence International Engagement and Cooperation

“The 2008-09 Budget also provides $85 million for military cooperation with Australia’s allies, friends and partners around the world.

In 2008-09, Australia will progress practical initiatives designed to enhance defence cooperation in the areas of defence trade, joint training, interoperability, communications and intelligence collaboration with the United States.”