casg cost principles casg cost principles
Defences comments, and suggested editorial amendments, have been provided to the ANAO. 43The Quarterly Performance Report, introduced in late 2015, has evolved from earlier management reporting designed to identify potential problems in the formative stages of the project life cycle (Defence advice of March 2017). 81Defence, First Principles Review, p. 66. SPO staff have limited experience, skills, and competencies needed to effectively establish, govern, and assure industry delivery of capability. That modelling indicated cost of ownership of between $240million and $360million per year (October2012 prices), or $5.1million to $7.7million per aircraft per year. 114Defence, Final Audit Report, Audit Task: 12-041, SRP Savings and Performance Reporting, Audit and Fraud Control Division, August 2012. 3.35Defence major capability decisions have substantial longterm financial consequences for Defence and the Commonwealth budget. 5.20The purpose and structure of Systems Program Offices have remained essentially the same since their inception in 2000. Note a:In compiling the data underlying this table PMKeys Reporting is not able to identify all those organisational units now recognised by Capability Acquisition and Sustainment Group as Systems Program Offices. How to Use the Commonwealth Procurement Rules Division 1 - Rules for all Procurements 4. It must cover a minimum of four years. 3.5In common with MRS, SPMS is a web-based system designed to provide performance reports for Capability Acquisition and Sustainment Group and Capability Managers. Defence has recently improved its whole-of-life costing of proposals to acquire major capital equipment but remains unable to measure or report reliably the total cost of ownership. Defence has engaged Bechtel to assist [the] Deputy Secretary of Capability Acquisition and Sustainment, on an as required basis, to design and implement First Principles Review deliverables that relate to Capability Acquisition and Sustainment Group and its functions. 5.39To work out whether performance-based contracting is yielding the outcomes it expects, Defence is undertaking an academic analysis of the Critical Success Factors for PBC and their role in Program success. Using internal and external expertise to provide the best advice so that the outcome is delivered in the most cost-effective and efficient manner. Note d:In late 2016, Defence estimated that the Collins Class submarine sustainment program would achieve international benchmarks for cost per materiel ready day by 202223. 34Defence, Decision BriefSustainment Performance Management System Development, 8 August 2011. 71Defence, Rizzo Review, Chapter 4, p. 29. 78The analogy estimating method uses actual costs from a similar asset/system and then relies heavily on expert judgement to adjust these costs to account for differences between the similar asset/system and the new asset/system to develop an estimated cost for the new asset/system. Funding Adequacy over the Defence Management Finance Plan. The term contract for availability is a term used in British military circles but is equivalent to performance-based contracting. 69Defence Annual Report 199798, p. 224. 0000002669 00000 n
Capability Acquisition and Sustainment Group also undertook in July2016 that over the next 12months, Capability Acquisition and Sustainment Group will commence effort capture (where staff time is tracked against the projects and products we support), led by the Group Business Manager.85. On its face, this is arguably of wider applicability: [Acquisition and sustainment each have] a distinct character, but need to be carefully linked to ensure a smooth passage from acquisition (design, build, test and commission) to sustainment (maintain, operate, support logistically). Defence notes the findings of the ANAO, and agrees to both recommendations. An output measure, which directly reflects achievement against the Materiel Availability outcome. Defence had not developed robust capability and cost baselines for all capabilities, did not fully understand sustainment cost drivers nor whole-of-life costs for platforms. 3.65During DMOs existence, the data represents expenditure by DMO on capability sustainment excluding DMO service fees/DMO departmental appropriation (representing DMO staff and other operating costs). 3.12In a recent submission to the JCPAA, Defence stated that The Defence Ministers are provided with a Quarterly Performance Report, which includes Projects of Concern, Projects and Products of Interest and Performance Summaries for the Top 30 Sustainment Products.44 The stated intent of the Quarterly Performance Report is to provide ministers and senior Defence personnel with: a clear and timely understanding of emerging risks and issues in the delivery of capability to our Australian Defence Force end-users. 52Defence, Houston Review into Army Aviation, November 2016. Ruth L. Kirschstein National Research Service Awards, Cost Considerations-Allocation of Costs and Closely Related Work, Cost Considerations-Allowability of Costs/Activities. Recommendations with potential Defence-wide application: 3. Cash Conversion Ratio - the amount of time between when a business pays for its inventory (cost of goods sold) and receives payment from its customers is the cash conversion ratio Funding Gap - a measure of the shortfall a company has to overcome (how much more cash it needs) Dividend Payments - CF can be used to fund dividend payments to investors The CASG MSP implementation is inconsistent with the intent of the First Principles Review, opting for the ease of 'body shopping' rather than thoughtful outcomes-based procurement. In 2000, when the expected benefits were not being realised, Defence reviewed Support Command Australia and the Defence Acquisition Organisation, finding that serious problems persisted in capital acquisition and whole-of-life support. Defence confirmed in March2017 that this risk remains. 124Defence, First Principles Review, p. 40. They provide recommendations as to how government can become a smart buyer, knowing what it wants and judging better what it has bought. This resulted in the various parties failing to act on, or enforce, their responsibilities within the sustainment space. The lack of understanding of whole-of-life costings and poor management of sustainment funding within Defence meant that the increasing levels of future cost reductions expected were at risk (the review estimated a shortfall of $1.8billion could increase to a $3billion shortfall). Demand Satisfaction Rate measures the effectiveness of the supply chain. In this light, the cost of those staff is a substantial omission from the apparent price of services facing the capability manager. Defence has advised that Collins Class sustainment cost per materiel ready day has decreased by approximately 40percent. The Defence White Paper, Defence 2000Our Future Defence Force, stated that the DMO will adopt commercial best practice as its norm and assess its performance against industry benchmarks. 150D Abraham, Performance based contractinga panacea for supporting legacy aerospace platforms?, Defence Geddes Papers, 2005, available from [accessed 16 January 2017]. Defence advised the ANAO that Capability Acquisition and Sustainment Groups expenses on all employees in 201516 were $490.4million. Defences broader sustainment program also includes the maintenance and support of corporate information technology and estate and infrastructure assets. In 201516, Defence spent about $6.3billion21percent of its total departmental expenditureon sustainment of specialist military equipment. a collection of multi-functional, multi-disciplined teams; staffed to achieve a balance between environmental, capability system and technical needs in whole-of-life management; organised along class/fleet/weapon system lines; and. 3.11The Quarterly Performance Report is the primary way by which Defence provides information to government and senior Defence personnel about the status of major acquisition and sustainment activities.43 The report was developed in 2015 in consultation with the office of the Minister for Defence. The bulk of SPO staff consist of engineering and logistics experts who are trained to solve technical and practical problems. 143The First Principles Review (p. 36) states: The Capability Acquisition and Sustainment Group should outsource significant elements of the project management associated with sustainment contracts to an appropriate provider or providers We envisage efficient implementation would result in reductions in the public service workforce and the transfer of military personnel to other functions within Defence. CASG customers means internal customers: the Capability Managers for whom the Capability Acquisition and Sustainment Group undertakes sustainment. 183Defence, minute Effective implementation of asset management in Defence, 17 September 2015. The ANAO has recommended that Defence develop and implement an evaluation plan. By way of example, Appendix 2 of this audit report lists Navys MSA Performance Framework core Key Performance Indicators and Key Health Indicators.36 Defence advised the ANAO that Air Force has also developed a corresponding set of indicators and Army is progressing similar work. 16Defence, Capability Acquisition and Sustainment Group, Accountability, available from [accessed 13 April 2017]. Defence would benefit from evaluating future major change programs. Defence has achieved key outcomes expected from the Smart Sustainment reforms and has progressed its implementation of the reforms to sustainment flowing from the First Principles Review. SeeCost Considerations-The Cost Principlesfor additional details.. inefficiencies in the processes leading to government approvals for new projects. The initiative was not prescriptive except that capability and safety should not be compromised by any savings proposal. Nevertheless, an internal review conducted by Defence and research conducted for Defence following the 2015 First Principles Review have identified a range of operational problems that detract from the efficient and effective sustainment of Defence capability, including: adherence to procurement principles; staff capabilities; duplication of effort and transparency of internal costs. 115Raytheon Australia, Smart Sustainment Solutions, March 2013. The real growth rate for the then recommended force structure option was 4.2 per cent. 3.48On the inclusion of staff costs in the new Product Delivery Agreements, Defence informed the ANAO in March2017 that The PDA remains under development, and it is inappropriate to speculate in any detail on how anticipated elements of the document will be used. Products are those that deliver a capability based on smaller but more numerous systems often involving regular replacement of all, or components of, the capability. Source:Defence, Portfolio Budget Statements and Additional Estimates Statements, 200607 to 201718. Poor outcomes in the Key Health Indicator result in primary risk to Material Confidence outcomes (supportability) and secondary risk to achieving Material Availability. 77The total cost of ownership (whole-of-life costing or lifecycle costing) includes the costs of: capital acquisition; bringing the equipment into service; operating it; sustainment; disposal; and financing. This is a project relevant to sustainment and which has been underway for many years. 5.25The 2009 report from the Pappas Review identified opportunities for efficiencies in maintenance activities carried out by Systems Program Offices by consolidating maintenance facilities; restructuring outsourcing contracts to ensure the contractual conditions create the right incentives for performance improvements; and implementing lean techniques in workshop management.138 From the formation of DMO, Defence received similar external advice from different sources that substantial improvements in efficiency were possible in the Systems Program Offices. 121Annex A to the First Principles Review report indicates that the reviewers considered six FPR recommendations, including one key recommendation, to have been influenced by Coles earlier review. The Chief of the Defence Force is Australias senior military leader. This stream of activity is likely to take much longer than the two years expected for implementation. Most recently, the First Principles Review recommended immediate implementation of measures of productivity, a related concept. Consequently, while cannibalisations are undertaken to avoid failure against Materiel Ready Days (Materiel Availability outcome), their true impact is on Materiel Confidence with secondary impact upon Sustainment Efficiency outcomes. 132Defence considered not using the term Systems Program Office as this could be confused with the use of the same term in the USA, where Systems Program Offices were said to be concerned only with acquisition and not sustainment. 94Defence has advised that around two-thirds of Systems Program Office staff are engaged in sustainment work. Value for Money 5. Grouping of polymers in relation to the specific registration requirements, in order to facilitate cost-effective registration of PRR in line with the 'one substance, one registration' principle and to reduce testing costs and avoid unnecessary testing (e.g. Similarly, a new Systems Program Office may be created for a major acquisition project. The Smart Sustainment reform stream of the Strategic Reform Program funded the work (see paragraph 4.6). The idea is to establish a managed resource pool that provides skilled personnel for CASG activities. The development of an effective sustainment monitoring system remains a work-in-progress, and the effectiveness of Defences internal reporting system for sustainment could be improved in several areas. Setting the Direction 3. 3. Defence conducts reviews of sustainment performance through sustainment gate reviews that help Defence to obtain insight into a project or products progress and status. %PDF-1.4
%
More efficient support services for the Jindalee Operational Radar Network, reportedly saving $100million over ten years; Navy using Telstras NextG network for several minor war vessels, relinquishing satellite communications subscriptions and saving $2.3million a year; and. Care would need to be taken to avoid any conflict of interest among vendors in these circumstances.173, 5.54Defence has long aspired to introduce a systematic approach to asset management for its specialist military equipment (see Appendix 6 of this audit report). 177Defence, Defence Asset Management Landscape Document, May 2012, p. 1. 23Fleet Screenings is a term originally used by Navy. The framework had enabled Defence to clearly identify roles and responsibilities at a functional level, and individual agreements documented funding, deliverables, risks and performance measures for sustainment products. 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. The development and maintenance of the MSA framework had also encouraged and facilitated collaboration between Defence and the (then) DMO at both the management and operational levels (see paragraph 12). Army refer to the reviews as Sustainment Financial Screens, and Air Force call their reviews Sustainment Assessment Reviews. SeeCost Considerations-The Cost Principlesfor additional details. 133Defence internal correspondence, April 2016. 28The same issue continues to arise. 3.54Under section 17 of the PGPA Act, one of the functions of a Commonwealth entitys audit committee is to provide independent advice and assurance to the entitys accountable authoritythe Secretary of Defenceon performance reporting for the entity. Deficiencies in the configuration record indicates potential Configuration variance and will impact the availability of necessary inventory for planned and corrective maintenance tasks resulting in increased risk to achieving Materiel Ready Days (Materiel Availability outcome). Bechtel is now, with others, providing the UK with tailored private sector expertise and human resources, indicating relevant experience in the Defence procurement field. 11. 229. In July 2015, Defence issued a request for quote and tasking statement to Bechtel. One major contractor noted that Smart sustainment has achieved limited success to date through cost cutting and minor reform driven by piecemeal, top down budget pressure.115. A performance measure under this Purpose is Military capability is sustained consistent with Government requirements. The cost recovery method is a method of revenue recognition in which there is uncertainty. or an F&A cost Necessary costs incurred by a recipient for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. The report assessed the maturity level of asset management policy and supporting guidance documentation only. 27Defence, Collins Class Sustainment Review, November 2011, p. 10. Mortimer identified five principal areas of concern. SeeCost Considerations-The Cost Principlesfor additional details. 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. Browse our range of publications including performance and financial statement audit reports, assurance review reports,information reportsand annual reports. The effectiveness of these reviews could be increased if the lessons obtained from gate reviews were routinely incorporated into management reporting on sustainment and if gate reviews were extended to contribute to the proposed quality assurance mechanism for Quarterly Performance Reports. 5.47Operating as a smart buyer is an essential function for an organisation seeking to outsource work. This is potentially useful information though not always written in clear language. 3.36Numerous reviews and audits have urged greater focus on whole-of-life costs and better knowledge of the total costs of ownership of military assets, including sustainment, but have found that Defence has struggled to establish the skills, systems and data for this activity66: 3.37In recent years, Defence has generally estimated whole-of-life costs when seeking government agreement to a proposed acquisition. Maintenance Completion (tasks) to Plan is an output measure, which directly reflects achievement against the Materiel Confidence outcome. 9. This recommendation, which was also made in the 2003 Kinnaird Review, was not implemented by the Howard government. 5At the strategic level, guidance is given by the Chief of the Defence Forces Preparedness Directive. In June2017, Defence advised the ANAO that implementation plans for significant reforms to Systems Program Offices would be developed in the second half of 2017. 18. 55ANAO Audit Report No.52 201112, Gate Reviews for Defence Capital Acquisition Projects, June 2012. 5.49Defence has developed its own meaning for the term smart buyer, which does not clearly capture the intent of the First Principles Review recommendation. We recommend this process cease immediately. CASG was also managing 109 sustainment products with a total annual budget of A$7.7 billion; for a total annual budget of A$17.0 billion.[2]. Introducing performance-based contracting into Defence sustainment has been underway for over a decade. 3.60The Defence PBS 201516 reports estimates for Defences Capability Sustainment Program and Top 30 sustainment products, as well as some descriptive information on Defences Top 30 sustainment products. The simplified formula is: It was not expected to meet key sustainment metrics such as Reliability/Availability/Maintainability, Rate of Effort and cost of ownership, and should be replaced; the Chief of Army has place caveats on its useeffectively limiting what the aircraft can be used for, and where it can be used; Army did not deploy the helicopter in its engagements in Afghanistan or Iraq; the program has consistently underperformed; on average only 3.5 aircraft of the operational fleet of 16 aircraft were serviceable at 10 am on any given day in 2015, against a requirement of 12 aircraft; availability for the aircraft is predominantly limited by premature component level failures and is constrained by inadequate sustainment arrangements, despite the lower than expected hours flown, by June2014 sustainment costs for the Tiger had exceeded the original sustainment contract (, in June2016, the cost per flying hour for the Tiger fleet was $30335, compared to a target of $20000 (the long-term average in June2016 was $39472 per flying hour); and. SeeCost Considerations-The Cost Principlesfor additional details. 5.35The problem of existing contract arrangements was described as follows by an RAAF officer in 2005, with a special focus on ageing aerospace platforms: The typical [support entity] entails a Systems Program Office managing a variety of small to large volume-based, process-oriented contracts. Defence concurs with the ANAOs conclusion that the fundamentals of the governance and organisational framework for the management of sustainment are clear, and fit for purpose. This method produces a rough order-of-magnitude estimate, and is generally used early in the life cycle of a new asset/system when technical definition is immature and insufficient cost data is available. Develop and implement a contracting strategy to improve performance based contracting [Management Recommendation. The report of the Review, at various points, advocates outsourcing of work of a transactional nature but otherwise gives little guidance on criteria for outsourcing decisions. Key elements are: 2.3While a number of reviews have focused on the optimal distance of the specialist entity from the Department of Defence12with changes over time in its degree of separationand have made recommendations on the units operations and practices, the fundamentals of the sustainment management framework have been stable for over a decade. Therefore, it is used to account for revenue when revenue streams from a sale cannot be accurately determined. 29Defence, Operational Concept Document for DMO Sustainment Reporting System (Version A, December 2004, Sponsored by Director General Standardisation). This information is presented in multiple tables and sections of the PBS and an explanation of the variation between tables is not provided.90 Further, some of the descriptive information about sustainment activity is not always expressed in clear language, which detracts from its usefulness. Note a:Data is current as at 24February2017. 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. [17], On 13 February 2012, Warren King (former Deputy CEO) was appointed CEO.[18]. It addresses sustainment management at a high level and is not focused on the sustainment of individual platforms or the technical aspects of their maintenance. The review also found that while the cost effectiveness of the Collins Class submarine sustainment program was showing signs of improving as submarine availability increased, it was yet to achieve international benchmarks.d The review team recommended that Defence should now focus on cost reductions to improve the efficiency of the Collins Class submarine sustainment program.e. Such a framework would need to articulate how an organisation responsible for both acquisition and sustainment would carry out those major tasks. A single defined and realistic requirement is critical to target setting, future planning, and the development of enterprise behaviours. Defences 201516 public reporting of sustainment activity included expenditure information and other descriptive material. 4.17There is no evidence that Defence further developed a planned approach to a reform program supported by clear objectives or benchmarks, or that it provided reports annually to government on the achievements and benefits of this new approach.
Types Of Descent Groups In Sociology,
Hounslow Visitor Parking Permits,
Articles C
