Under the auspices of the recently released Kinnaird Review DMO is set to become a prescribed agency with greater autonomy to manage and deliver products.

The organisation will remain under the Defence umbrella for administration but will report directly to the Defence Minister on financial matters relating to acquisition and aspects of logistics.

The review’s recommendations aim to improve capability definition before projects are handed over to the Defence Materiel Organisation, give DMO more independence in the management of projects and enable it to take a more business-like approach.

Defence Minister Robert Hill said that while the management of major Defence acquisitions had improved significantly there was room for further reform.

“As a result of our reforms, new projects such as the Airborne Early Warning and Control aircraft and the Tiger combat helicopters are running on time and on budget,” Senator Hill said.

“But we are committed to making further improvements in our Defence acquisitions processes. We need to be confident that the extra money we have committed to ensure our Army, Navy and Air Force continue to be well equipped to defend Australia and our national interests is being spent well.”

Defence Secretary Ric Smith and CDF General Peter Cosgrove said in a Defgram the review is an important milestone for DMO.

“In accepting the recommendations of the review the Government has made it clear that the recommendations are part of the ongoing Defence reform program and will build on DMO’s success in reforming acquisition and sustainment over the last three years.”

They went on to say: “we understand that many people particularly those working in DMO, have been anxious about the review and its potential effects. The Government has now made its decision and people will be advised about the process of working through the outcomes and implications. We believe the results will produce an organisation better able to support the Defence capability development and acquisition process.

“We ask you to support us and DMO executives through the implementation process.”

Malcolm Kinnaird, Len Early and Bill Schofield were appointed in December last year to review a range of issues associated with major Defence acquisitions.

Key decisions flowing from the adoption of the Kinnaird Review

• Establishing the DMO as a prescribed agency under the Financial Management and Accountability Act to facilitate its evolution towards a more business like identity. As a prescribed agency it will be financially autonomous from the Department of Defence and be required to prepare separate and auditable financial statements, improving the financial transparency and accountability of the DMO.
  
  
• Strengthening the capability development and assessment process before projects are handed to the DMO. This will be achieved by forming a new Capability Group within Defence headquarters to be managed by a three-star official (military or civilian) reporting directly to the Secretary and Chief of the Defence Force. The new three-star position will be appointed on merit for an extended tenure and will be solely responsible for capability development and ensuring that project proposals put to Government have reliable cost and schedule estimates.
  
  
• Establishing an eight-member Advisory Board to provide advice to the head of the DMO on strategic issues and to report to the Ministers for Defence and Finance and Administration at regular intervals on the implementation of the Kinnaird recommendations. The Advisory Board will comprise four private sector members (one of whom will be Chair) together with the Secretaries of Defence, Finance and Administration and the Chief of the Defence Force.
  
  
• Giving the Chief Executive Officer (CEO) of DMO an expanded range of powers to make improvements to the delivery of Defence projects and the management of the DMO, including empowering the CEO to revise DMO staffing and remuneration policies in order that the CEO is able to attract and retain high quality project managers from the military, industry or public service on the basis of merit and for extended tenures.
  
  
• Strengthening the current two-pass approval system to facilitate early engagement with industry and provide a better basis for project scope and cost. This will be achieved by allocating additional funding at first-pass approval to allow Defence to undertake a detailed study of capability options and by mandating the early involvement of Defence Science and Technology Organisation and the Department of Finance and Administration to provide external evaluation and verification of project proposals.
  
  
• Establishing cost centres in Defence and the Department of Finance and Administration, which will build on Defence’s decision earlier this year to establish a Cost Assessment Group; strengthen the review of project costs and risks; and provide a quality assurance role for the Government.
  
  
• Conducting a worldwide search for a CEO to lead the DMO into the future. The CEO will work closely with the Secretary of the Department of Defence to implement the recommendations of the Kinnaird Review.
  
  
• Extending the role of Project Governance Boards to advising the CEO of the DMO on through-life support issues in order to provide greater recognition of the importance of managing the whole-of-life of a particular capability.

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