This should be implemented immediately and individual leaders from the first line to the Deputy Secretary Capability Acquisition and Sustainment must be accountable for cost and schedule targets.61, 3.33On the question of the above recommendation about measuring productivity, Defence referred the ANAO to the Capability Acquisition and Sustainment Group Business Framework and, within it, the proposed process for the Capability Acquisition and Sustainment Group Business Review Cycle. For example, in ANAO Report No.52201314, Multi-Role Helicopter Program, the ANAO concluded that the pre-2012 sustainment contract provisions for Defences Multi-role Helicopter Program were largely ineffective.156 The audit report noted that this was largely due to Defence not applying its own processes to the standards required. 54During 2016, Defence renamed its gate reviews independent assurance reviews. Defence has engaged industry expertise to guide and help it with the First Principles reforms relating to acquisition and sustainment, including $107million with a single company where the contract for services is not performance-based. Procurement Framework 3. 4.4Defence informed the ANAO that it believed it had achieved a five per cent sustainment budget cut in 200809. The audit had found, among other things, that it was not generally used in the in-service (sustainment) stage. Antiviral chemotherapy typically involves a delicate interplay between host cellular functions and viral targets of action. To form a conclusion against the audit objective, the ANAO adopted the following high-level criteria: 1.8The scope of this performance audit is the management of sustainment of specialist military equipment. For more information or to provide feedback on the Cost Principles, please send an email to theDefence Financial Investigation Service. Commercial organizations An organization, institution, corporation, or other legal entity, including, but not limited to, partnerships, sole proprietorships, and limited liability companies, that is organized or operated for the profit or benefit of its shareholders or other owners. As discussed, a quality assurance process for the Quarterly Performance Report would provide a firmer basis for internal and external scrutiny of sustainment reporting. 95Since 201314, Defence has also reported estimates for sustainment by Defence Group/Service. Defence does not yet have a completed register of its acquisition and sustainment contracts though, since January2016, it has had a facility in place and begun populating it. Reflecting the First Principles Review theme of better engagement with industry, Defence has engaged a USA-based engineering company, Bechtel, to help with implementing the Reviews recommendations. Step 2develop a risk-based tailored project execution strategy, covering approvals, project management, and through life asset management, including a coherent approach to the acquisition and sustainment phases. The ability to maintain, change and control the Configuration baseline of the product is key to ensuring long-term supportability and the health of maintenance and supply support outcomes. Failure of this Key Health Indicator will affect the achievement of all three of the Materiel Sustainment Agreement outcomes. Cost Accounting Standards Board Notice on Principles and Other Matters to Guide Conformance of the Cost Accounting Standards (CAS) to Generally Accepted Accounting Principles (GAAP) . 135These numbers are for 30 June 2016 and based on the pre-stocktake number of Systems Program Offices. SeeCost Considerations-The Cost Principlesfor additional details. 9Executive Minute on Joint Committee of Public Accounts and Audit Report No. Primary impact will be on achievement of Materiel Ready Days (Materiel Availability outcome) with secondary impact upon Sustainment Efficiency outcome as alternate supply chain or cannibalisation will be required. Defence doing only for itself what no one else can do more effectively and efficiently. Maintenance is still a large cost component for sustainment of these systems but regular replacement is more significant in comparison with platforms. This requires visibility of the total cost of ownership of major equipment. This month closes out the Financial Year total at 3995.2 against the planned 5848 hours, a result of 68.32 percent. This was, strictly speaking, a previous initiative. The review considered the causes of this complexity, made comparisons with commercial organisations with similar operations and analysed the impact of this complexity on DMO. 2732. Cumulative effect of a change in accounting principle: remove it from Late delivery has minimal impact on the overall development of the Armed Reconnaissance Helicopter (ARH) capability. However, the skills may be retained in the marketplace and the real issue is whether the organisation loses the capability of being a smart purchaser (The Contracting Organization: A Strategic Guide to Outsourcing, Oxford 1998, p. They are mandatory for all procurements valued at greater than two million Australian dollars (AUD$2m), and guidance for all others, unless exemptions apply. Smart Sustainment is examined in Chapter 4. 33. 146Defence, Systems Program Office Design Guide, August 2016, p. 7. It is now planning to implement a new model, which seeks to capture the full cost of ownership throughout the life of an asset, with implementation planned for completion in July2018. The Support and Operating Intent of the capability are not being adequately articulated by Capability Managers, which results in: Activities assigned to the Services that affect asset management and asset condition are not being completed, and limited feedback is being provided to the Capability Manager Representative regarding the impact of non-completion on cost and availability. Defence has advised that Collins Class sustainment cost per materiel ready day has decreased by approximately 40percent. 34Defence, Decision BriefSustainment Performance Management System Development, 8 August 2011. Asset management is not mentioned in the 2007 DMO Acquisition and Sustainment Manual. Given the substantial resources involved, both in the expenditure on sustainment and the reform process, Defence would benefit from assessing all aspects of these changes carefully. This is especially so, given the recent observation by Defence that, in some cases, [Systems Program Offices] have been spending more money on salaries than they were on actual acquisitions or sustainment.84, Figure 3.2:Numbers of staff in DMO/Capability Acquisition and Sustainment Group Systems Program Offices, 200416. 122Defence, First Principles Review, pp. As their names indicate, direct material . There is no record of target for these objectives. by this website which may effect your viewing experience. 0000002669 00000 n
2.16Two recent reviews of the operations of Systems Program Offices have identified major challenges for the future management of sustainment. SeeCost Considerations-The Cost Principlesfor additional details. A preference in the report of the First Principles Review for a whole-of-life focus (rather than on acquisition and sustainment as distinct spheres) is evident from the discussion of total cost of ownership (pp. xref
4.1Sustainment practices have been subject to numerous reform initiatives over the last decade, especially since the Mortimer Review (2008).99 In 2015, the First Principles Review concluded that the change programs associated with previous reviews have resulted in only incremental change.100 This remark explicitly included all phases of the capability lifecycle, including sustainment. There is a risk that insights into a very substantial reform process could be lost. Note e:The 2016 report from the Coles review team states that Attaining benchmark performance was a higher priority than efficiency. Poor planning, poor compliance with External Maintenance Period Planning Milestones, transference of Organic maintenance tasks to External Maintenance Period due to poor Organic Maintenance Completion rates or failure to undertake reliable Pre Refit Condition Assessment will result in increased External Maintenance Period cost. The fundamentals of Defences governance and organisational framework for the management of materiel sustainment are fit-for-purpose. Achievement of External Maintenance Period Planning Milestones. An amended version commenced on 1 March 2017. 3.53Commonwealth entities must reportin an annual performance statementtheir actual results against the planned performance criteria outlined in their corporate plan and Portfolio Budget Statements. If the owner does not have the capacity to operate as a smart buyer, the owner risks project schedule and cost overruns and facilities that do not meet performance objectives.165. It is likely that some unquantifiable portion of claimed savings derive from the five per cent across-the-board cut among Systems Program Offices imposed by the Chief Executive Officer before the Strategic Reform Program commenced. [6], Ministerial statements in 2010 and 2011 suggested that the Government believed new procurement reforms were needed. We recommend this process cease immediately. 229. 1. This measure is applicable to Service / Commodity products only and the achievement against the agreed service levels contained within the Requirements element of the Product Schedule. located at 48 CFR Part 31.2 Federal Acquisition Regulation. Defence subsequently increased the numbers of organisational units it considered to be Systems Program Offices from 54 to 78, with staff numbers ranging from three to 178.135. Opportunities also remain to increase the completeness and transparency of publicly reported information regarding materiel sustainment. For example, the category listed in the PBS Helicopters, Tactical Unmanned Aerial Systems and Guided Weapons no longer appears and the items are distributed among other categories. 84Mr Kim Gillis, Deputy Secretary, Capability Acquisition and Sustainment Group, Defence, quoted in Ziesing, K, From the Source: Deputy Secretary CASG Kim Gillis, (interview) Australian Defence Magazine, 1 November 2016. 0000001615 00000 n
2.10Defence intends to replace MSAs (and the associated Materiel Acquisition Agreements) progressively with Product Delivery Agreements. The bulk of SPO staff consist of engineering and logistics experts who are trained to solve technical and practical problems. The effectiveness of the reforms implemented following the 2003 Defence Procurement Review (the Kinnaird Review) were evaluated in 2008 by the Defence Procurement and Sustainment Review (the Mortimer Review).198 Mortimer made specific recommendations to improve sustainment, including that Defence create an independent Sustainment Efficiency Office to measure, benchmark, and find ways to improve the efficient delivery of sustainment. Under the PGPA Act, Defence will need to report meaningfully against this plan in its annual performance statement. Figures for 201516 are based on Defence advice with one-third of Capability Acquisition and Sustainment Group staff costs allocated to acquisition and two-thirds to sustainment. 5.29In September2015, Defence engaged a consulting firm to review and develop an optimal design for one of its Systems Program Offices. External Maintenance Period Demand Fill Rate. Defence established Support Command Australia in August1997 to coordinate materiel support to Navy, Army and Air Force, and to help Defence do more with less. These activities are outside the scope of the audit. 13. Browse our range of publications including performance and financial statement audit reports, assurance review reports,information reportsand annual reports. Capability Acquisition and Sustainment Group officers have stated that, because of the lack of internal capacity and expertise, the group has depended heavily on consultants/contractors with its reforms. Knowledge of the total cost could contribute to a better understanding of the whole-of-life costs of Navy assets and, over time, could provide useful insight into whether cost-effectiveness is improving or deteriorating.41. It expressed concern that without such a feature Defence was exposed to risk. CASG customers means internal customers: the Capability Managers for whom the Capability Acquisition and Sustainment Group undertakes sustainment.
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