Minister for Defence and Minister for Defence Materiel – Progress of Implementation of Key Defence Reforms

Minister for Defence Stephen Smith and Minister for Defence Materiel Jason Clare today released a progress report on the implementation of key Defence reforms.

This year, the Government has announced a series of reforms to strengthen procurement processes and improve accountability within Defence.

These include: 

  • Reforms to project management accountability (announced 6 May);
  • Reforms to strengthen the Projects of Concern process (announced 29 June);
  • Reforms to the disposal of military equipment (announced 29 June);
  • Reforms to strengthen Australian industry (announced 29 June);
  • Reforms to Support Ship Repair and Management Practices – the Rizzo Report (announced 18 July); and
  • Reforms to improve accountability in Defence – the Black Report (announced 9 August).  

Implementation of all these reforms is now underway.

Minister Smith said that in 2011 Defence had made good progress in implementing these important reforms.

Minister Smith also said that it was vital that Defence continue the ongoing Defence reform program, including accountability, procurement and budget reforms.

“These reforms will enhance the delivery of Defence capability projects, strengthen Australian Defence industry and improve accountability,” Mr Clare said.

“The Kinnaird and Mortimer reforms had a big impact, especially in reducing schedule problems with projects.

“These reforms build on the Kinnaird and Mortimer reforms.

“They are focussed on getting projects right at the start, fixing problems early and taking action to fix issues with problem projects.”

Tables detailing the status of the reforms are below.

Further reforms are under development.   These reforms will include the Government’s response to the Coles Review of the Sustainment of Australia’s Collins Class submarines.


 Reforms to Project Management Accountability:





 Cost-benefit analysis of projects that are not off-the-shelf.  Implemented – All future projects seeking second pass that are not off-the-shelf will include a rigorous cost-benefit analysis against an off-the-shelf option.
 Establishing project directives.  Implemented – Project Directives now implemented for all projects approved since March 2010.
 Establishing an Independent Project Performance Office (IPPO)  Implemented.
 Creating a more disciplined process for changing the scope of a project.  Underway – The Project Directive process has been implemented (see above). A baseline review of approved scope for older projects is underway.
 Establishing a two-pass approvals system for Minor Projects valued between $8 million and $20 million.  Implemented.
 Early Indicators and Warnings (EI&W) system.  Implemented – System established and will undergo continuous improvements.
 Expansion of the full diagnostic reviews (Gate Reviews) system to include all Major Projects managed by the DMO.  Underway –  major projects will have undergone a Gate Review by the end of 2012.


 Introduction of Quarterly Accountability Reports.  Underway – The first Quarterly Accountability Report (HMAS Choules) has been submitted.

 Reforms to strengthen the Projects of Concern (PoC) process:



 Introducing incentives for companies to fix projects that are on the PoC list.  Implemented.
 Establishing a more formal process for adding projects to the PoC list.  Implemented.
 Establishing a more formal process for removing projects from the PoC list.  Underway – All projects on the PoC list are currently developing remediation plans describing how to get back on track and when each project may be taken off the PoC list.
 Increased Ministerial involvement and oversight of projects.  Implemented – In addition to regular reviews of all Projects of Concern, Minister Clare chairs bi-annual summits between Defence, industry and Government stakeholders.

Reforms to Disposal of Military Equipment:





 Disposing of equipment in bulk.  Underway –  The Request for Proposal (RfP) for ship disposal methods closed on 14 October 2011 and responses are currently being evaluated.  It is expected that a decade long ship disposal plan will be finalised in 2012. The RfP for disposal of ADF vehicles closed on 21 November 2011. A decade long vehicle disposal plan will be finalised in 2012.

Improvements in processes are currently being finalised with implementation to begin in 2012. 

 Reforms to Strengthen Australian Industry:





 Reducing the threshold for mandatory Australian Industry Capability Plans (AICPs) from $50 million to $20 million.  Implemented.
 Removing the ability of a company to arbitrarily reduce the level and type of work included in an AICP.  Underway – Initial guidance released.
 Introducing a new clause to be included in the Conditions of Tender allowing a company to be excluded from a tender if they have previously failed to meet their AICP obligations.  Underway – Initial guidance released.  New tenders for DCP projects incorporate the new clause. 
 Including the AICP performance in the Company Scorecard  Implemented.
 Making project teams more accountable for AICP performance by including them in the DMO Project Manager’s Charter  Implemented for all new DMO Project and Product Manager Charters.  Existing Charters for relevant projects and products are being progressively updated under the DMO’s Charter review cycle.
 Australian Industry Capability Plans made public  Acquisition projects – Underway.Initial guidance released.  Work continues on updating applicable policy and procedural templates.

Sustainment projects – Underway. Will commence 1 January 2012. 

 Reforms to Support Ship Repair and Management Practices – the Rizzo Report:



Short Term Recommendations  
 R3: Constrain the Operation of HMAS Kanimbla.  Implemented – HMAS Kanimbla was  decommissioned on 25 November.
 R10: Refocus Fleet Command.  Underway – A Fleet Regulatory Review has been completed identifying assurance resources required.
 R11: Capture Mutual Obligations

R12: More effective information exchange.

 Underway – These recommendations are being progressed in tandem. Senior Navy and DMO officials have agreed to regular formal consultation. Materiel Sustainment Agreements (MSAs) are being reviewed and updated to include mutual obligations and information exchange.
 R15: Investigate Third Party Quality Assurance.  Underway – Naval Flag Authority established. Third party panel developed.  A tender to establish a third party quality assurance panel has been developed and will be released shortly.
 R18: Resource the Amphibious and Afloat Support Systems Program Office (AASSPO)  Underway – AASSPO recruitment underway with new Systems Program Office Director, Chief Engineer, two sustainment managers, engineering manager and quality manager in place. 28 positions under recruitment.
 R22: Quantify Maintenance and Engineering Backlog  Underway – Data has been collected and is being analysed. Report is being prepared.
Medium Term Recommendations  
 R5: Strengthen Partnerships with Industry  Underway – Group Maintenance Contract is currently being evaluated for the ANZAC Class. FFG Class RFT will be released in 2012.
 R6: Remediate ICT System Shortcomings  Underway – Plan to address ICT system shortcomings has been developed and agreed with key stakeholders. Roll-out of updated software for Asset Management and Planning System (AMPS) and Configuration Management Tool  (CMT)  has commenced.
 R8: Increase Resources for Capability Management  Underway – revised posting priority for Navy personnel into sustainment Systems Program Offices has been completed and Navy has undertaken a Fleet regulatory review.
 R: 16 Control Acceptance into Naval Service (AINS)  Implemented.
Long Term Recommendations  
 R1: Formalise Asset and Sustainment Methodologies  Underway – DMO Sustainment Business Model has been developed.
 R4: Plan for Aging Vessels  Underway – aligned with R22 and R23. Project definition has been completed.
 R7:  Closer working relationship between Defence and DMO  Underway – Senior Navy and DMO officials have agreed to regular formal consultation and revised posting priority for Navy personnel into Sustainment Systems Program Offices in DMO has been completed.
 R13: Establish an Integrated Risk Management System  Underway – Enterprise risk management framework review completed. A risk management tool has been approved for development by Rapid Prototyping, Development and Evaluation (RPDE).
 R17 Rebuild engineering  Underway – Rear Admiral Mick Uzzell has been appointed to lead the reform in Navy engineering. Planning on delivery of recommended improvements has begun.
 R20: Rebuild the Fleet Support Units (FSU)  Underway – FSU Capability Improvement Program has developed a new FSU model and eight specific projects have been developed for approval by the Navy Reform Board. 
 R21: Reinstate the Cultural Importance of Technical Integrity  Underway – Being integrated into the New Generation Navy culture program.

  Reforms to improve accountability in Defence – the Black Report:



 The establishment of two Associate Secretary positions to strengthen Defence’s capacity to implement the Black Review.  Underway – Associate Secretaries being recruited and associated improvements to capability processes in development.
 Strengthening personal and institutional accountability particularly in the areas of capability development and acquisition.  Underway –  Resources and skilling being improved. Terms of reference and resources have been arranged for a Capability Development Business Process Review (BPR) that will consider a range of systemic reforms. The BPR is to commence work in early 2012 under direction of the Associate Secretary Capability. New processes have also been established to detect problems early; limit scope creep; and provide stronger oversight on key projects.


 Increasing rigour and contestability within capability development, including the establishment of a new process for the inclusion of projects into the Defence Capability Plan and the separation of Capability and Investment Resources Division from Capability Development Group that will directly report to the Associate Secretary (Capability).  Underway – The Capability Development Group has consulted within Defence to draft a re-baselined Defence Capability Plan, which will be further developed for Ministerial consideration.

Work has been undertaken to develop options for a revised organisational structure, including the separation of the Capability and Investment Resources Division from the Capability Development Group. These options will be considered by the Associate Secretary when this person is in place.


 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.


 Underway – Development of project management skills is encompassed in the ongoing work of the Defence Material Organisation’s Professionalisation Agenda. It is supported by the Defence APS Job Families construct, which includes a Project Management Job Family. Job Families will be rolled out in early 2012.  The Services refine career management models to retain personnel in key capability related positions for at least three years. Defence will continue to use targeted additional remunerative outcomes to attract and retain people critical to Defence capability.


 Reforming Defence planning, decision-making processes and performance management including the establishment of a single Defence Plan.  Underway – A Framework for a five year Corporate Plan and an Enterprise Risk Plan has been agreed and the first drafts compiled for consideration by the Defence Committee. New robust and specific benchmarks of performance and clear personal accountabilities are being used to drive the delivery of key enterprise priorities. The new enterprise framework will be in place by the end of June 2012.


 Substantially reducing the number of Committees in Defence.  Underway – The Secretary and CDF are considering new arrangements for the most senior committees in Defence. Transition to the new committee system is expected to be finalised by the end of June 2012.


Media Contacts:

Mr Smith’s Office: Ellen Shields (02) 6277 7800 or 0400 347 473

Mr Clare’s Office: Korena Flanagan (02) 6277 7620 or 0418 251 316

Department: (02) 6127 1999



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