Improving personal and institutional accountability in Defence

The Minister for Defence Stephen Smith, the Minister for Defence Science and Personnel Warren Snowdon and the Minister for Defence Materiel Jason Clare today announced further Accountability Reforms for Defence.

This builds on reforms to Defence that the Government has already announced in 2011.

The Minister for Defence said the new key reforms are:

  • the establishment of two Associate Secretary positions to strengthen Defence’s capacity to implement the Black Review;
  • the strengthening of personal and institutional accountability, particularly in the areas of capability development and acquisition;
  • increasing rigour and contestability within capability development, including the establishment of a new process for the inclusion of projects into the Defence Capability Plan;
  • improving project management skills, implementing three year postings for Australian Defence Force (ADF) personnel into capability projects, and developing employment incentives to retain key civilian staff in the capability area;
  • reforming Defence planning, decision-making processes and performance management; and
  • substantially reducing the number of Committees in Defence.

The Minister for Defence also released the “Review of the Defence Accountability Framework” (the Black Review) commissioned by theSecretary of the Department of Defence and the former Chief of the Defence Force and conducted by Dr Rufus Black.  The reforms announced today fully implement the Black Review.

The Black Review is the first comprehensive review to examine personal and institutional accountability in Defence as a whole.

It has found that there are significant problems with performance in many parts of the Defence Organisation.  Much of this goes to Defence management and the quality of its management systems.

The Black Review states “… Defence has reached a point in its history where there is a strong case to redesign its accountability system…. the current arrangements are under stress and their failure damages Defence.”

These failures damage Defence, weaken ADF capability and cost taxpayers money.

To meet the demanding challenges it faces, Defence must operate as a single, integrated organisation, and be managed as such.  Defence’s accountability framework has to support this concept.

The Black Review also found that “…accountability systems are not working optimally, with respect to both the quality of decisions made and their implementation.

The Black Review recommendations include reforms to enhance personal and institutional accountability, reforms to planning and decision-making, performance management, accountability and contestability in capability development, Defence Committees, financial management, the delivery of services across different parts of the Defence Organisation and skills development.

Implementation of the Black Review will improve Defence management and improve delivery of ADF capability and Defence’s ability to manage large, highly complex projects and systems and billions of dollars of taxpayer funds.

New Structural Reforms

To strengthen Defence’s capacity to implement the Black Review and embed a culture of accountability, the Government will create the positions of AssociateSecretary(Chief Operating Officer) and AssociateSecretary(Capability). The Secretary of Defence will initiate filling these positions immediately by a merit selection process.

Associate Secretary (Chief Operating Officer)

This officer will be responsible for the management, coordination and better integration of the Personnel Services and Policy, Defence Support and ICT Groups.

These groups are the key to much of the Defence Strategic Reform Program and their better integration is essential to achieving the efficiencies and cultural change sought.

This officer will have responsibility for the integration of these Group outputs to ensure that the development and delivery of corporate services best support Defence’s ability to effect the necessary reforms under the Strategic Reform Program.

This officer will also be responsible for implementing key parts of the Shared Services Review and the performance and cost efficiencies that the Government is seeking.

This position will play a key role in Defence Strategic Reform and have a close interaction and relationship with the Strategic Reform Group.

Associate Secretary (Capability)

The Associate Secretary (Capability) will be responsible for further detailed reform and delivery of integrated capability development, acquisition and sustainment within the Kinnaird/Mortimer framework to ensure it is a seamless process, with better performance and improved support for decisions to be made by Government.

This officer will also be responsible for the integration of work in relation to capability development by Strategy Group, Capability Development Group, the Defence Materiel Organisation and the Defence Science and Technology Organisation.  In particular, this officer will ensure the more effective contestability and integration of advice at the early stages of the process, as well as for ensuring the performance and accountability of the overall capability development, acquisition and sustainment chain.

The Associate Secretary (Capability) will be responsible for ensuring that Defence meets the capability development and acquisition targets set in the Defence Capability Plan, and will eliminate unnecessary duplication of function and support services across Groups involved in the capability development process.

The AssociateSecretary(Capability) will also be responsible for reviewing capability proposals before they are considered for inclusion in the Defence Capability Plan, to ensure they reflect the Government’s strategic requirements and that all risks are well understood.

Strengthening Accountability in Capability Development and Acquisition

The Black Review states:  “Despite much work in recent years, the capability development process continues to suffer from delivery shortfalls related to poor accountability. The reality of much greater scrutiny and the prevailing environment of a capped budget make resolution of these issues essential for the credibility of Defence and the delivery of its outcomes.”  “Accountability for delivery needs to be assigned clearly to named individuals and, where there is joint accountability for delivery of an outcome (as will occur from time to time in a matrix organisation), a clear articulation of who does what to deliver the outcome.”

Improving the development, acquisition and sustainment of ADF capability will be a key priority for the Associate Secretary (Capability).  This requires the full and effective participation and contribution of many parts of Defence, with a disciplined team focus on achieving an essential ‘One Defence’ outcome.

Defence will reduce administrative silos through the greater use of project teams which span the whole capability development and acquisition process, ensuring greater consistency of expertise and oversight for major projects.

Defence is also implementing improved planning to reduce over-programming in the Defence Capability Plan.  Over-programming hinders the management of capability delivery by not aligning capacity with resources.

The Defence Materiel Organisation will continue to be a Prescribed Agency under the Financial Management and Accountability Act to support financial transparency and accountability. The Chief Executive Officer of the Defence Materiel Organisation will continue to provide independent advice to Government, at key points in the capability and acquisition cycle, on cost, schedule and risk.

Increasing Rigour and Contestability in Capability

Improving the quality and rigour of capability project information is an essential part of improving Defence performance.

The Kinnaird and Mortimer reforms have improved the rigour applied to the capability development process.  This includes the ‘two pass’ approval process and a strengthened Central Agency (the Department of the Prime Minister and Cabinet, the Treasury and the Department of Finance and Deregulation) role in oversight of Defence proposals being brought forward for Government consideration.  The Government will continue to fully implement these reforms.

Already we are seeing signs of improvement, with around 20% to 25% reduction in slippage of scheduling of those projects caught by the Kinnaird and Mortimer reforms as compared with earlier projects not subject to that rigour.

It is essential to also address the very first stages of capability planning, to get projects right at the outset when they are for the first time proposed for inclusion in the Defence Capability Plan.  Failure to get projects right at their outset means that problems are magnified later in the development of a project.

The capability requirements of the ADF are derived from Government priorities.

The management of the Defence Capability Plan must ensure that projects are fully aligned with the Government’s priorities, that risk is understood when decisions are made and then effectively mitigated through implementation.  It is not acceptable for resources to be misdirected to projects or acquisitions that are not aligned with the Government’s priorities or which are unacceptably risky.

Defence will now ensure that the ongoing development of the Defence Capability Plan, in particular the inclusion of new Capability Plan Projects, will be more closely linked with the annual Defence Planning Guidance.

The Black Review states: “Consistent criticism from external sources have noted that internal contestability of advice has been diluted and that while central agencies provide some contestability they “cannot hope to mount compelling arguments from afar.”

New internal contestability within Defence will be strengthened.  This will include a new process for the inclusion of new projects in the Defence Capability Plan.

Proposals for inclusion of new projects in the Defence Capability Plan will initially be subject to an assessment by the AssociateSecretary(Capability) whose mandate will include the review of all potential capability proposals to ensure that they align with strategic requirements and that cost and risk is understood and accounted for.

To strengthen the capacity to provide this contestability, Capability and Investment Resources Division will be separated from Capability Development Group and report directly to the Associate Secretary (Capability).  Further, to address the number of proposals that need to be developed over the next several years, the resources of Capability Development Group will be enhanced.

Defence will work with the Department of the Prime Minister and Cabinet, the Treasury and the Department of Finance and Deregulation to ensure they play a greater role at earlier stages of significant projects and that their specialist advice on cost, risk and alignment with Government policy is an integral component of the recommendations made to Government.

After agreement by the Secretary and CDF, new proposals for inclusion in the Defence Capability Plan will be considered by Government bi-annually, in consultation with Central Agencies.

This new arrangement will retain the flexibility to develop new capabilities rapidly in response to operational requirements and other Government priorities.

Project Management and Skills Development

Accountability rests on the foundation of appropriate skills and experience.

In its response to the Mortimer Review, the Government agreed that the Capability Development Group should be adequately resourced in terms of workforce numbers and skills to develop capability proposals.  Skilling remains the major challenge in this area.

Defence will give priority to developing career streams for both ADF and civilian staff in capability development and acquisition. Reform will include implementation of three year postings for ADF personnel into capability projects, and the development of employment incentives to retain key civilian staff.

A project team will be established to structure a career model for long-term capability development in collaboration with broader Defence workforce initiatives. The new career model will include greater emphasis on skills, such as financial management, project and procurement management, and technical and engineering skills.

Reforms to Planning and Decision-making

Defence has plans for parts of its activities, but none for Defence as a whole.

Accordingly, Defence will develop a single Defence Plan to Support ‘One Defence’ and ensure better accountability of the whole organisation to the Minister and Government through theSecretaryand CDF. This plan will also translate broader Defence Planning Guidance into activities for which specific accountability can be assigned.

The Plan will establish key performance measures and specific senior individuals will be identified and held accountable for the achievement of these measures.   Defence will integrate this plan with its 2012‑13 budget development and management cycle, commencing in the third quarter 2011.

The plan will be published in an unclassified version with performance measures. The performance of Defence against these measures will be reviewed annually and the results reported to Parliament as part of Defence’s Annual Report.

Performance Management

Defence performance management suffers from limited personal accountability for outcomes.  This undermines performance and delivery.

Defence will implement strengthened organisational and individual performance accountability arrangements for all senior officers.  Performance arrangements will focus on specifying actions and initiatives that are implemented by named individuals against specific performance measures.

Business units in Defence will be required to specify activities that align with, and support, priorities and goals identified in the Defence Plan. Accountability for delivery against these measures will be assigned to named individuals.  Where there is joint accountability, divisions of responsibility for delivery will be clearly indentified.

All Defence staff will have their personal and professional accountability defined against performance plans which are linked to the Defence Plan.

Performance will be reviewed half-yearly. Defence will implement performance arrangements which encourage and reward high performance and deter under-performance.

Committee Rationalisation

Defence Committees will be restructured to support the management of Defence as an integrated ‘One Defence’ enterprise.

The Black Review states:  “There are too many committees in Defence, which create diffused and confused accountability, and their operation is often characterised by confused committee roles, unstructured agendas, poor monitoring and feedback mechanisms for decisions made and weak commitment to decisions and actions down the organisation”.  “The number of committees attended by the senior personnel in Army alone is 297 whilst Defence Support Group leaders attend 69”.

Defence will ensure that Committees are only established as advisory bodies to accountable decision makers. Members of Committees will be advisers to the accountable decision maker on the Committee, and the accountability of Committee members will be defined in Committee charters.

All Committees will be placed on a 12 month sunset clause, with existence beyond that date only on approval from theSecretaryand CDF.

Implementation

An important element of implementation is ensuring appropriate external oversight. This strengthens accountability and provides valuable external perspectives to reform challenges.

The recommendations of the Black Review will be implemented immediately as part of the Strategic Reform Program (SRP).  SRP governance and oversight processes, including oversight by the Defence Strategic Reform Advisory Board (DSRAB) chaired by Mr George Pappas, will be applied. The DSRAB is also responsible for oversight of the Shared Services Review and the APS staffing reductions announced by the Minister for Defence and the Minister for Defence Materiel as an extension to the SRP on 6 May 2011.

Mr Paul Rizzo, Chair of the Defence Audit and Risk Committee and a member of the DSRAB, has, as announced on 18 July, agreed to chair the Implementation Committee to oversight implementation of the Plan to Reform Ship Repair and Management Practices (the Rizzo Report).

Mr Rizzo will also provide oversight of implementation of the new capability reforms announced on 6 May, 29 June and 18 July.  Mr Rizzo’s membership on the DSRAB will provide a link between the two oversight bodies and help ensure that reform activities are integrated.

Progress on implementation of the above reforms will be reported quarterly to the Minister for Defence, the Minister for Defence Science and Personnel and the Minister for Defence Materiel.

The Black Review is available online at www.defence.gov.au/oscdf/BlackReview

Attachments:

1.   The new Defence Senior Management Organisation Structure.

2.   The Executive Summary of the Review of the Defence Accountability Framework  (the Black Review).

3.   Reform statements:

  • Strategic Reform Program dated 6 May 2011.
  • Reforms to Projects of Concern dated 29 June 2011.
  • Release of Plan to Reform Support Ship Repair and Management Practices  (the Rizzo Report) dated 18 July 2011.
  • Minister for Defence Speech to the Australian Strategic Policy Institute dated 19 July 2011.

MS-Word version

Black Review Executive Summary

Reform statement – Strategic Reform Program

Reform statement – Rizzo review

Reform statement – Projects of concern

Reform statement – ASPI-Speech

New Defence Organisation Structure

 


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