Reforms to Projects of Concern

Minister for Defence Stephen Smith and Minister for Defence Materiel Jason Clare today announced reforms to the Project of Concern process and removed two projects from the list.

Reforms to Projects of Concern

Minister for Defence Stephen Smith and Minister for Defence Materiel Jason Clare today announced reforms to the Project of Concern process and removed two projects from the list.

 

Reforms to the Project of Concern process:

 

The reforms include incentives for companies to fix projects that are on the list.

The performance of companies in addressing Projects of Concern will be considered when evaluating their tenders for other projects.

If companies are not satisfactorily remediating the project this will result in a negative weighting against them and in extreme circumstances could result in exclusion from further tenders until the project is fixed.

Other reforms to the Project of Concern process include:

  • The establishment of a more formal process for adding projects to the list;
  • The establishment of a formal process for removing projects from the list;
  • The development of agreed remediation plans, including formal milestones for the removal of a project from the list; and
  • Increased Ministerial involvement and oversight of the process.

 

“The Project of Concern process is working. The objective of these reforms is to make it even more effective,” Mr Smith and Mr Clare said.

Industry leaders contributed their ideas on this important reform to the Projects of Concern process.

The new Project of Concern process will be implemented by the new Independent Project Performance Office within the Defence Materiel Organisation.

This Office was recommended by the Mortimer Report into Defence Procurement and Sustainment and will begin operation on 1 July this year.

Further details on the reforms to the Project of Concern process are attached.

Update to the Project of Concern list:

Mr Smith and Mr Clare also updated the Project of Concern list, removing two projects – Vigilare (AIR 5333) and High Frequency Modernisation (JOINT 2043 Phase 3A).

‘Vigilare’ is an air defence command and control system giving the Defence Force improved surveillance and communications capabilities.

The High Frequency Modernisation project provides the Australian Defence Force with a modernised high frequency communications system.

Mr Smith and Mr Clare thanked Boeing for its hard work in turning both these projects around. 

“These projects are excellent examples of what can be achieved when Defence and Industry work together through the Project of Concern process,” Mr Smith and Mr Clare said.

The Projects of Concern list was established by the Government in 2008 to focus the attention of Defence and Industry on remediating problem projects.

The removal of these two projects brings the total number of Projects of Concern now removed from the list to nine.

Of these nine projects, seven have been successfully remediated and two have been cancelled. (Details attached)

 

Project of Concern Reforms

Incentive for Industry to focus on fixing problem projects:

Where a company has a project on the list, Government and Defence will weigh their performance in remediating the project when evaluating their tenders for other projects. 

When a company is not satisfactorily implementing an agreed remediation plan, this will result in a negative weighting of tenders received from the company, and in extreme circumstances could result in exclusion from further tenders until the project is remediated.

Formal process for adding projects to the list:

The process for determining whether a project should be added to the Projects of Concern list will be as follows:

  • When an Early Indicator and Warning is triggered, Defence will advise Ministers, including whether a full diagnostic review (Gate review) of the project is required.
  • If a Gate review is to be conducted, Ministers will write to the Chair/CEO of the prime contractor advising them that the project has triggered an early warning, requesting their involvement in the Gate review, and emphasising the potential for the project to be added to the Projects of Concern list.
  • Following the Gate review, Defence will provide Government with recommendations on how to fix the problems with the project.  If the problem is very serious, it may be listed as a Project of Concern immediately. 
  • Alternatively, Defence will propose a series of actions that it and the company involved will undertake to fix the problems.  This will include timelines, targets and thresholds which if not met will trigger a further Gate review to consider listing the project as a Project of Concern.

 

The decision to add a project to the list will be made by the Minister for Defence and Minister for Defence Materiel.

 

Remediation plans:

 

The Defence Materiel Organisation (DMO) and Industry will develop formal remediation plans for all projects that undergo Gate reviews. 

In the case of projects confirmed as Projects of Concern, these plans will:

  • identify remediation objectives;
  • identify key milestones and the timeline for their achievement;  and
  • detail an end-state for remediation and the agreed basis on which a project will be removed from the Project of Concern list. 

 

Where DMO and Industry cannot agree a satisfactory remediation strategy, DMO will provide formal advice to Government on whether the project should be cancelled.

For all existing Projects of Concern, formal remediation plans will be developed and agreed with Industry.  These will include the basis on which these projects will be removed from the current list.

Removal of projects from the list:

There are two events that will enable a project to be removed from the Project of Concern list:

  • Government satisfaction that remediation is completed in accordance with the agreed plan; or
  • a decision is taken by Government to cancel the project.

 

Increased Ministerial Involvement:

Ministerial involvement has been a cornerstone in driving improved outcomes for Project of Concern projects. 

The Minister for Defence Materiel will hold bi-annual reviews of Projects of Concern with Defence and Industry representatives.

Biannual face-to-face meetings with the Minister will ensure responsible individuals are being held to account for the progress of projects, and will give the Minister a better understanding of the progress of remediation strategies.

 

Projects of Concern List – Update

 

Vigilare:

‘Vigilare’ is an air defence command and control system giving the Defence Force improved surveillance and communications capabilities.

It was added to the Project of Concern list in 2008 due to schedule delays.

The prime contractor, Boeing, worked closely with Defence to address the issues and get the project back on track and is to be congratulated for its efforts.

Following successful testing the system is now in operational use by the RAAF.

As a result, the Chief Executive Officer of the Defence Materiel Organisation has recommended it be removed from the Projects of Concern list.

Ministers have agreed to this recommendation.

 

High Frequency Modernisation:

 

This project provides Defence with a modernised high frequency communications system.

It was added to the Project of Concern list in 2008 because of the failure of the fixed network to meet project milestones.

A revised schedule was negotiated with the company and these milestones have now been achieved, 13 months ahead of the revised schedule.

As a result, the Chief Executive Officer of the Defence Materiel Organisation has recommended it be removed from the Projects of Concern list.

Ministers have agreed to this recommendation.

Current Projects of Concern List as at 29 June:

Project Description Date
AIR 5077Phase 3 ‘Wedgetail’ Airborne Early Warning and Control aircraft Jan 2008
SEA 1448Phase 2B Anti-Ship Missile Defence radar upgrades for ANZAC Class Frigates Jan 2008
JOINT 2070 Lightweight torpedo replacement for ANZAC and ADELAIDE Class Frigates Jan 2008
LAND 121Phase 3 ‘Overlander’ replacement field vehicles, trailers and modules for land forces (‘Medium Heavy’ class of vehicles only) Jul 2008
JOINT 129Phase 2 Tactical Unmanned Aerial Vehicles – airborne surveillance for land forces Sep 2008
CN10 Collins Class Submarine Sustainment and Projects Nov 2008
AIR 5402 Multi-Role Tanker Transport aircraft – Air to Air Refuelling Capability Oct 2010
AIR 5276Phase 8B Electronic Support Measures upgrade for AP-3C Orion aircraft Oct 2010
AIR 5418Phase 1 Joint Air to Surface Standoff Missiles Nov 2010

 

Projects removed from Projects of Concern list:

Project Description Date
SEA 1411 Sea Sprite Helicopter (Project cancelled) Mar 2008
AIR 87 Armed Reconnaissance Helicopter (Remediated) Apr 2008
LAND 106 M-113 Armoured Personnel Carrier Upgrade (Remediated) May 2008
JP2088Phase 1A SF Air Drop Rigid Hull Inflatable Boat Trailers (Remediated) Sep 2009
SEA 1390Phase 2.1 Guided Missile FFG Upgrade (Remediated) Jan 2010
AIR 5416Phase 2 Rotary Wing Electronic Warfare Self Protection ‘Echidna’ (Scope reduced) Jul 2010
JOINT 2048Phase 1A LCM2000 Watercraft for Landing Platform Amphibious Ships (Project cancelled) Feb 2011
JP2043Phase 3A High Frequency Communications Modernisation (Remediated) Jun 2011
AIR 5333 Air Defence Command and Control System ‘Vigilare’ (Remediated) Jun 2011

 

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