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Preliminary Report The Senate Foreign Affairs, Defence and Trade References Committee Procurement procedures for Defence capital projects Preliminary report December 2011 © Commonwealth of Australia 2011 ISBN 978-1-74229-565-7 Printed by the Senate Printing Unit, Parliament House, Canberra Members of the committee Core members Senator Alan Eggleston, LP, WA (Chair) from 7.7.2011 Senator the Hon Ursula Stephens, ALP, NSW (Deputy Chair) from 7.7.2011 Senator Mark Bishop, ALP, WA (Deputy Chair until 7.7.2011) Senator David Fawcett, LP, SA from 1.7.2011 Senator Helen Kroger, LP, VIC (Chair until 7.7.2011) Senator Scott Ludlam, AG, WA Senator the Hon Alan Ferguson, LP, SA – until 30.6.2011 Senator Michael Forshaw, ALP, NSW – until 30.6.2011 Senator Russell Trood, LP, QLD – until 30.6.2011 Participating members who contributed to the inquiry Senator Gary Humphries LP, ACT Senator the Hon David Johnston LP, WA Senator Nick Xenophon IND, SA Secretariat Dr Kathleen Dermody, Committee Secretary Ms Jane Thomson, Principal Research Officer Ms Alpana Modi, Research Officer Ms Angela Lancsar, Administrative Officer Ms Jo-Anne Holmes, Administrative Officer Senate Foreign Affairs, Defence and Trade Committee Department of the Senate PO Box 6100 Parliament House Canberra ACT 2600 Australia Phone: + 61 2 6277 3535 Fax: + 61 2 6277 5818 Email: [email protected] Internet: www.aph.gov.au/Senate/committee/fadt_ctte/index.htm iii iv Table of contents Members of the committee ................................................................................. iii Table of contents .................................................................................................. v Acronyms and Abbreviations ............................................................................. ix Executive summary ........................................................................................... xiii Chapter 1 The terms of the inquiry .......................................................................................... 1 Background to inquiry ............................................................................................ 1 Conduct of inquiry .................................................................................................. 3 Key documents and references ............................................................................... 4 Purpose of report .................................................................................................... 4 Scope of report ....................................................................................................... 5 Challenges encountered by the committee ............................................................. 5 Structure of report ................................................................................................... 6 Note on references .................................................................................................. 7 Acknowledgements ................................................................................................ 7 Chapter 2 Overview of Defence procurement .......................................................................... 9 Capability and acquisition ...................................................................................... 9 Fluid and complex procurement environment ...................................................... 10 Capability development process ........................................................................... 12 Scale and cost of Defence procurement ............................................................... 15 Committee view .................................................................................................... 16 Chapter 3 The Defence reviews and fluid reform agenda .................................................... 17 Background to the Kinnaird, Mortimer, Pappas and McKinsey reviews ............. 17 Implementing and monitoring Defence reviews recommendations ..................... 20 Defence reforms announced in 2011 .................................................................... 22 v Other relevant reviews and analysis ..................................................................... 24 Stocktake of reforms ............................................................................................. 25 Committee view .................................................................................................... 29 Chapter 4 Strategic analysis and needs .................................................................................. 31 Overview of the strategic analysis and needs stage ............................................. 31 Relating strategy to capability .............................................................................. 32 Defence Capability Plan ....................................................................................... 39 Committee view .................................................................................................... 47 Chapter 5 Requirements stage ................................................................................................ 49 Overview of the requirements stage ..................................................................... 49 Process .................................................................................................................. 49 Structure ................................................................................................................ 52 People ................................................................................................................... 59 Chapter 6 Capability acquisition ............................................................................................ 65 Overview of the capability acquisition phase ....................................................... 65 Process .................................................................................................................. 66 Structure ................................................................................................................ 67 People ................................................................................................................... 72 Chapter 7 Sustainment ............................................................................................................. 79 Overview of the sustainment phase ...................................................................... 79 Process .................................................................................................................. 79 Structure ................................................................................................................ 79 People ................................................................................................................... 81 Sustainment of Australia's defence industry ........................................................ 86 vi Chapter 8 Key areas for future consideration ....................................................................... 89 Common concerns across the capability development lifecycle .......................... 91 A holistic view of the entire process and its component parts ............................. 91 Improving efficiency in the process ..................................................................... 91 Responsibility and accountability at every phase and across the lifecycle .......... 92 Skills and resources .............................................................................................. 92 Risk management ................................................................................................. 92 Australia's defence industry .................................................................................. 93 Contestability ........................................................................................................ 93 Additional remarks ............................................................................................... 93 Appendix 1 List of submissions .................................................................................................. 95 Public submissions ............................................................................................... 95 Appendix 2 Public hearings and witnesses ............................................................................... 97 Appendix 3 Additional information, tabled documents, and answers to questions on notice ............................................................................. 101 Additional information and tabled documents ................................................... 101 Answers to questions on notice .......................................................................... 102 Appendix 4 Implementation of Defence Reviews Department of Defence ........................................................................................ 103 vii viii Acronyms and Abbreviations ADF Australian Defence Force ANAO Australian National Audit Office AWD Air Warfare Destroyer CAB Cost Analysis Branch, CIR Division, Capability Development Group CABSUB Cabinet Submission CCDG Chief, Capability Development Group CDB Capability Development Board CDD Capability Definition Document CDF Chief of the Defence Force CDG Capability Development Group CDS Chief Defence Scientist CEO Chief Executive Officer CGRB Capability Gate Review Board CIOG Chief Information Office Group CIR Div Capability Investment Resources Division, Capability Development
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