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Chapter 12 - Defence Materiel Organisation

DMO overview

Review by the Chief Executive Officer

It has been another successful year for the Defence Materiel Organisation (DMO) as we strive to achieve the best possible outcomes for the Australian Defence Force (ADF), the Government and Australian taxpayers. From providing direct support to operations, to implementing significant reform and strengthening relationships with industry, the DMO has continued to build on the success of previous years. I am proud of our people and the way they have enhanced the quality of service for our Defence customers while pursuing opportunities to improve efficiency and effectiveness.

The ADF relies on the DMO to deliver equipment and sustainment solutions in a timely manner. Meanwhile, the Australian Government and people entrust the DMO with a significant amount of Commonwealth funds- the DMO manages an average of just under $40m of business each working day of the year. Given the size and complexity of the DMO's business, as well as its challenging responsibilities, a key priority throughout 2012-13 has been ensuring that DMO employees are empowered with the skills they need and supported by an organisational structure that enables them to deliver critical outcomes both now and into the future. Although it is still early days, and organisational changes are still being implemented, I am very proud of the progress that has been made so far.

As part of the continued drive to reform all elements of the DMO's operations, the DMO released its 2013-15 Strategic Framework in February 2013. The framework better positions the DMO to deliver customer requirements and become more accountable to the Government for its performance. It outlines key themes and behaviours critical to ensuring that the DMO is able to deliver its outcomes efficiently and effectively. The framework will help DMO staff to better understand the true cost of business, build better relationships with internal and external stakeholders and become a more skilled and agile workforce that is ready to deliver.

Another important element of the framework is the commitment it makes to industry. Industry plays a critical role in the Defence procurement and sustainment business, and requires Defence and government assistance to ensure that it can continue to make this essential contribution. In May 2013, the Government announced the Future Submarine Industry Skills Plan. This plan is a good example of the strategic framework in action and the DMO's desire to strengthen its engagement with industry. The plan recommends ways to schedule Defence projects to improve skills and productivity. This is a significant step to foster a more collaborative Defence-industry partnership as a priority.

As the DMO continues to implement recommendations for reform, it is important to consider how past reform activity has positively influenced current operations. During the year, the DMO commissioned an independent benchmarking study by Independent Project Analysis that revealed:

  • reforms previously implemented are improving DMO business
  • average DMO schedule slippage rates are better than those of other industry sector projects of similar complexity
  • the DMO's projects are more difficult than the average industrial project.

The study's findings are supported by DMO internal analysis showing project schedule slippage has reduced from an average of approximately 50 per cent before 2003- the date of the Kinnaird Procurement Review - to 30 per cent since then. As for cost, internal analysis of 59 projects closed in the last three financial years, following successful introduction into service, revealed they were completed within 95 per cent of budget.

While there is certainly room to improve, these findings are very positive and indicate the DMO is on the right track. Internal processes, such as annual full diagnostic reviews-known as gate reviews-are also helping to improve DMO project outcomes. These reviews will continue to assist the DMO to identify challenges and problems early in a project's life.

The DMO continued to provide critical support to operations and focused on fulfilling these requirements with managed urgency and agility. The Counter Rocket Artillery and Mortar capability, a life-saving system that provides warning to our troops of enemy attack, met Final Operational Capability-a very good result and an example of the important role the DMO plays in this area. Diggerworks-Driving innovation in the Defence sector, a study of success factors, released by the Government in June 2013, investigated the success of the Diggerworks model. This joint initiative between the DMO, the Army, Capability Development Group and the Defence Science Technology Organisation has significantly improved the way Australian soldiers are equipped for combat.

The DMO continued to provide 'materiel remediation' support as part of the significant work being undertaken to plan and manage the transition of the ADF's role in Afghanistan and the staged drawdown of personnel and equipment. This has involved substantial effort to receive, refurbish and reconfigure Defence equipment from the theatre of operations to the condition that capability managers require for readiness purposes and to use in the raise, train and sustain environment. This effort continues and the DMO will provide all necessary support throughout this challenging phase of Defence activity.

I am confident that the effort invested in 2012-13 to further improve the DMO's structure, the skills of its people, the relationships with its stakeholders and its accountability measures has better prepared the DMO for the challenges ahead.

Warren King
Chief Executive Officer
Defence Materiel Organisation

DMO role and functions

The Defence Materiel Organisation supports the ADF through the provision of acquisition and sustainment services for Defence specialist military equipment. Many of these services are complex, requiring specialist skills, management structures and business processes. As a prescribed agency, the DMO uses a purchaser-provider model, underpinned by service agreements, to deliver commercial, engineering, logistics and project management services in an accountable, outcome-focused and business-like manner.

As the head of a prescribed agency, the CEO DMO has statutory responsibilities and authority under the Financial Management and Accountability Act 1997. The CEO DMO also has joint responsibilities to the Secretary of Defence and the Chief of the Defence Force, and is delegated powers from the Secretary to manage and allocate staff resources under the Public Service Act 1999.

As the National Armaments Director for Australia, the CEO DMO has cooperative links and enjoys high-level international relationships with national armaments directors of other western democracies.

Figure 12.1 - DMO Executive as at 30 June 2013

Defence Materiel Organisation Executive as at 30 June 2013

Figure 12.1 shows the DMO's Executive Committee members as at 30 June 2013. As of 1 February 2013, the Chief Executive Officer re-balanced the workload across the general managers as follows.

The role and responsibilities of the Deputy CEO/General Manager Commercial were expanded to include reform. This position is now responsible for:

  • Special Counsel
  • Commercial and Industry Programs
  • Commercial Enabling Services
  • Business Operations Division
  • DMO Reform (the retitled Acquisition and Sustainment Reform Division).

The work between General Manager Systems and General Manager Programs was restructured to provide support to the people DMO is accountable to. General Manager Systems was retitled General Manager Joint, Systems and Air and is now responsible for:

  • Aerospace Systems Division (including the Wedgetail program)
  • Electronic Systems Division
  • the New Air Combat Capability Program
  • Helicopter Systems Division
  • Standardisation Office
  • Military Operations and Liaison.

General Manager Programs was retitled General Manager Land and Maritime and is now responsible for:

  • Land Systems Division
  • Maritime Systems Division (including the Amphibious Deployment and Sustainment Program)
  • the Air Warfare Destroyer Program
  • Explosive Ordnance Division.

General Manager Submarines is responsible for:

  • New Generation Submarines
  • Collins Class Submarines.