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Chapter 12 - Performance against DMO strategic priorities

Review of the DMO's organisational structure was identified as a key priority in the Portfolio Budget Statements 2012-13. The DMO's performance against the remaining four key priorities is outlined below.

Support to operations

Support to operations remains the highest priority for the DMO. It provides support to ADF operations through the acquisition of equipment and supplies, sustainment of ADF capabilities, deployments of specialist staff and support to the withdrawal of materiel from theatres of operation.


The DMO has been the lead agency within Defence, working with capability managers, in meeting the target of $5.5b of cost reductions set under the smart sustainment reform. During the year, the DMO coordinated achievement of sustainment savings of $497m.

Defence, DMO and our suppliers work closely not only to pursue further reform but also ensure that all outcomes are sustainable and will not compromise safety, agreed levels of capability or quality. An assurance process to verify these outcomes is undertaken annually and reported to the CEO DMO and Secretary of Defence.

Acquisition and sustainment performance

To improve the quality of schedule estimates, the DMO established a schedule data repository. The repository leverages data made available by the United States Department of Defense through a memorandum of understanding signed in 2012. It provides the DMO with access to project costs and schedule estimation data for software-intensive projects as a basis for estimates in project planning and schedule preparation. The DMO created a negotiation cell to improve the conduct of commercial negotiations and achieve better commercial outcomes for the Government. The DMO will achieve this through the initial engagement of external experts to coach, mentor and, in some cases, lead contract teams. This is accompanied by a professionalisation program to increase the number and quality of internal experts. The DMO completed a successful pilot activity, which will lead to a roll-out of the program.

The DMO undertook a pilot of a management framework and key performance indicator reporting mechanism against materiel sustainment agreements. More trials are planned for 2013-14, aimed at refining performance indicators to appropriately tailor them to each sustainment product.

Governance and accountability

Gate reviews

During the year, gate reviews were conducted for all major active acquisition projects and recommendations for project improvement were provided to the DMO senior leadership team. The early indicators and warnings system was extended to all groups in Defence.

Naval shipbuilding

In May 2013, the Government released the Future Submarine Industry Skills Plan, developed by the DMO with assistance from an expert industry panel. The plan presents a practical long-term approach to the management of naval shipbuilding in Australia. It envisages using future naval shipbuilding projects as a way to improve skills and productivity in the shipbuilding industry through innovative practice.

Work health and safety

To facilitate understanding of and compliance with the Work Health and Safety Act 2011, the DMO revised and updated its work health and safety policy framework, including its work health and safety management system-DMOSAFE. One of the objectives of these revisions is to ensure that DMO workers are aware of, and familiar with, their work health and safety responsibilities and have the resources, including training, to meet them.

'Managed contractor' arrangements

The DMO piloted a number of new initiatives designed to drive a stronger commercial outlook on its business and ultimately improve its performance. These initiatives included managed contractor arrangements where industry specialists were invited to compete for the role of managing selected procurement activities.


Early indicators and warnings

Early indicators and warnings (EI&W) aim to identify problems with projects 'early' in the acquisition life-cycle to increase the opportunity for remediation of issues before they impact on delivery. The EI&W system uses a set of defined triggers to allow project performance to be measured against schedule, cost, capability and commercial risk thresholds. The EI&W system continues to evolve to introduce more quantifiable and leading indicators that can reveal early drift from an approved project's baseline.

Each project's performance is compared against defined parameters from the Government-approved baselines at second pass. A project triggering a breach against these mandated thresholds will be identified and advised to the Government through quarterly reporting. Projects triggering on EI&W thresholds are considered through the Gate Review process to identify specific remediative actions to minimise future underperformance and potentially regain lost ground.

A number of EI&W scans were conducted by Defence during 2012-13. The EI&W scans measured the performance of major capital acquisition projects in the DMO, Capability Development Group, Chief Information Officer Group, Defence Support and Reform Group, Defence Science and Technology Organisation and Intelligence and Security Group against agreed performance thresholds in relation to cost, schedule and capability deliverables.

The system has been refined during the reporting period to increase the focus on identifying potential problems early in the lifecycle of project delivery and to improve accuracy and repeatability. Accordingly, reporting from the DMO has focused on projects within the first 50 per cent of their acquisition life-cycle. The EI&W system has allowed project managers and line management to more effectively focus on identifying and remediating these early problems and, as a result, a number of projects that previously triggered against EI&W thresholds no longer trigger in the latest scans.

The EI&W system is still relatively immature, and will continue to evolve over the next 12 months. The key focus will be to more effectively integrate the EI&W system within existing reporting mechanisms.

Table W12.20 provides a list of six early DMO projects that have triggered against EI&W criteria during 2012-13 and were reported to government. The majority of projects triggered on the schedule criterion. The three projects remaining on the EI&W list will be subject to increased monitoring and internal management processes.

Table W12.20 Early DMO projects triggering against EI&W thresholds during 2012-13

Table W12.20 Early DMO projects triggering against EI&W thresholds during 2012-13
  Project End-of-year status Outcome
1 AIR 5440 Phase 1C130J Block Upgrade On Project has been re-baselined.
2 JP 2057 Phase 3Australian Overhead Persistent Infra-Red (OPIR) Capability On The DMO has initiated regular contact with the United States program office.
3 JP 5408 Phase 2BGPS Protection and Enhancement On Revised delivery dates agreed for the project.
4 AIR 9000 Phase 5CAdditional Medium Lift Helicopters Off Project budget issues resolved and there is no longer an impact on schedule.
5 LAND 121 Phase 3BOverlander Phase 3B Medium Heavy FVM&T Off Cost, capability and schedule issues have been remediated.
6 LAND 40 Phase 2Direct Fire Support Weapons Off Declared a project of concern and no longer reported under the EI&W system.

Table W12.21 provides a list of Capability Development Group (CDG) post first pass but pre second pass projects that have triggered against EI&W criteria during 2012-13. Projects in the first to second pass phase are highly dynamic, as risks are identified and mitigated through the process. The EI&W process has been successful in identifying projects not proceeding in accordance with agreed first pass government approval performance parameters, thereby permitting appropriate corrective management action to be taken early in the project life-cycle.

Of the nine projects that triggered in the period, five have been remediated.

Table W12.21 CDG projects triggering against EI&W thresholds during 2012-13

Table W12.21 CDG projects triggering against EI&W thresholds during 2012-13
  Project End-of-year status Outcome
1 AIR 5416 Phase 4B2
C130J Large Aircraft Infrared Countermeasures (LAIRCM)
On The Air Force and the DMO continue to coordinate the LAIRCM and C130J Block Upgrade programs.
2 AIR 5440 Phase 1
C130J Block Upgrade
On The Air Force and the DMO continue to coordinate the LAIRCM and C130J Block Upgrade programs.
3 AIR 9000 Phase 7
Helicopter Aircrew Training System
On Actions underway to reduce additional delay to initial operational capability.
4 SEA 1439 Phase 5B.2
Collins Continuous Improvement Program (CIP)
On An alternative acquisition strategy is under development.
5 JP 2008 Phase 5B1
Wideband Transportable Land Terminals
Off The funding shortfall has been resolved.
6 JP 2068 Phase 2B.2
Computer Network Defence
Off Existing initial and final operational capability dates are still current.
7 JP 2072 Phase 2B
Battlefield Communications System - Land
Off Schedule re-baselined.
8 JP 66 Phase 1
Replacement for Air Defence Targets
Off Project cancelled.
9 LAND 121 Phase 4
Overlander Protected Mobility Vehicle (Light)
Off Affordability issues resolved.

Table W12.22 provides a list of seven Chief Information Officer Group (CIOG) projects that triggered against EI&W criteria during 2012-13 and were reported to government.

Table W12.22 CIOG projects triggering against EI&W thresholds during 2012-13

Table W12.22 CIOG projects triggering against EI&W thresholds during 2012-13
  Project End-of-year status Outcome
1 JP 2077 Phase 2D
Improved Logistics
On Business case under review.
2 JP 2099 Phase 1
Identity Management
On Policy changes under consideration.
3 Next Generation Desktop Project (NGD) On Schedule delayed.
4 Project Sentinel
(Work Health and Safety Management Information Systems)
On Not expected to trigger in future EI&W scans.
5 JP 2054
Defence Messaging Handling Service
Off Project cancelled.
6 JP 2080 Phase 2B.1
Personnel Systems Modernisation
Off New approval strategy agreed.
7 JP 2090 Phase 1C
Combined Information Environment
Off Project cancelled.

Table W12.23 provides a list of sixteen Defence Support and Reform Group (DSRG) projects that triggered against EI&W criteria during 2012-13 and were reported to government.

Table W12.23 DSRG projects triggering against EI&W thresholds during 2012-13

Table W12.23 DSRG projects triggering against EI&W thresholds during 2012-13
  Project End-of-year status Outcome
1 AIR 7000
Maritime Patrol Aircraft Replacement
On All design contracts signed and design is well underway.
2 AIR 9000 5C
Replacement Chinook Facilities
On Investigations and design for interim solution underway pending government approval.
3 AIR 9000 Phase 8
Facilities for the Future Naval Aviation Combat System (FNACS)—MH-60R
On Review of construction methodology and industry capacity to determine impact (if any) in achieving initial operational capability.
4 Garrison & Estate Management System (GEMS) On Project is now nearing completion of a 'blueprinting' phase to inform both business and technical aspects of the design solution.
5 HMAS Albatross Redevelopment Stage 3 On Project is in contract and design progressing. Construction expected to commence early 2014 on key elements to support MH-60R Seahawk.
6 JP 154
Facilities for Joint Counter Improvised Explosive Device Capability—Stage 1 - Nurrungar
On Agreement met with Indigenous parties in May 2013. Parliamentary Standing Committee on Public Works referral to occur as soon as possible after the election.
7 JP 154
Facilities for Joint Counter Improvised Explosive Device Capability—Stage 2—Other sites
On Scope and requirement under review, in consultation with the Army.
8 JP 2047 Phase 3
Defence Terrestrial Communications Network Facilities Upgrade
On Detailed business case scheduled for completion late 2013. Anticipate PWC referral to Parliamentary Standing Committee on Public Works early 2014.
9 JP 3029-2
Space Surveillance Telescope
On Contractor engagement being streamlined in consultation with project stakeholders.
10 N2237 Port facilities Townsville, Queensland and Darwin Hardened Barge Ramp On Defence has engaged the Northern Territory Government through its Land Development Corporation to develop a detailed design of the proposed facility.
11 RAAF Base Williams, Point Cook, Victoria, Former Fire Training Area Contamination Remediation Works On Works completion anticipated by late 2014.
12 AIR 8000
Battlefield Airlifter
Off Interim solution is being developed for initial housing at an appropriate Air Force base until permanent facilities are provided.
13 Defence Force School of Signals (DFSS), Watsonia Victoria. Off Project was not able to deliver the full scope of works—outstanding elements may be included in a future redevelopment project. Interim solution is being developed.
14 LAND 17 Artillery Replacement Phase 1A Off All construction underway. Completion of all facilities scheduled for early 2014.
15 RAAF Williamtown Redevelopment Stage 2 Off Project has been re-baselined.
16 SEA 4000 (3)
Air Warfare Destroyers (AWD)
JP 2048 (4A & B)
Amphibious Deployment & Sustainment (LHD)
Off Project has been re-baselined.

Table W12.24 lists one project from the Intelligence and Security Group (ISG) that triggered against EI&W criteria during 2012-13 and was reported to government.

Table W12.24 ISG projects triggering against EI&W thresholds during 2012-13

Table W12.24 ISG projects triggering against EI&W thresholds during 2012-13
  Project End of year status Outcome
1 Allied Federated Access (AFA) Phase 1 On Phase 1 schedule slip and cost increase remediated, total project cost and final delivery dates remain as per government approval.

Gate reviews

Gate reviews are an important part of the DMO's assurance process. They are designed to improve overall project outcomes and ensure the DMO is able to provide high-quality and reliable advice to Defence and government regarding the health and outlook of all major capital acquisition projects.

An expert board, whose chair is independent of line management (and sometimes external to the DMO) and comprising a combination of senior DMO executives and external board members, conducts an annual review of each project, usually in the lead-up to a major milestone. Reviews are also conducted on an exception basis, on request from the project, as a diagnostic tool to inform EI&W, and as directed by government. External board members are drawn from the ranks of former senior government and industry executives with extensive experience in the field of complex project management. Boards are individually tailored to the project management, procurement and technical issues confronting the project and are able to help improve project outcomes through the provision of guidance and assistance to the project manager.

Board considerations are informed by a thorough and non-advocate analysis of the project conducted by the Independent Project Performance Office in the weeks leading up to the board meeting. The analysis team, which includes external board members, engages all stakeholders and, when required, industry.

All active major projects were reviewed in the last year. Gate Reviews have facilitated earlier identification and resolution of issues, and improved program transparency. Associated data collection has identified systemic lessons and is being used to drive corrective action.

Projects of concern

The projects of concern regime is closely linked to both the EI&W framework and the Gate Review process. Once troubled projects have been identified through triggering one or more of the EI&W thresholds and have undergone a diagnostic Gate Review to identify specific and measurable remediation objectives, a recommendation may be made to the Government to add a project to the formal list of projects of concern. Once listed, the primary objective of the regime is to remediate these projects through the implementation of an agreed plan to resolve any significant commercial, technical, cost and/or schedule difficulties. Projects of concern receive targeted senior management attention and are required to report more regularly to the Government.

Since its introduction in early 2008, the DMO has been working closely with industry, Defence and the Government to successfully remediate these projects with the goal of returning them to a standard management regime.

Significant events during 2012-13 included:

  • continuation of the projects of concern summits between the Minister for Defence Materiel, the DMO, Defence capability managers and CEOs from the industry with responsibility for projects on the list
  • the successful remediation of the following projects and their subsequent removal from the list of projects of concern:
    • 'Wedgetail' Airborne Early Warning and Control Aircraft (AIR 5077 Phase 3)
    • Lightweight Torpedo Replacement (JP 2070 Phase 2/3)
    • the addition of Mulwala Redevelopment Project (JP 2086 Phase 1) and Direct Fire Support Weapons (LAND 40 Phase 2) to the projects of concern list due to schedule/cost and contractual challenges respectively.

Table W12.25 Current projects of concern as at 30 June 2013

Table W12.25 Current projects of concern as at 30 June 2013
Project name Project number/phase Date added
Collins class submarines CN 10 Nov 08
Multi-Role Tanker Transport aircraft—Air to Air Refuelling Capability AIR 5402 Oct 10
Electronic Support Measures upgrade for AP-3C Orion aircraft AIR 5276Phase 8B Oct 10
Multi-Role Helicopter AIR 9000Phase 2,4,6 Nov 11
Direct Fire Support Weapons LAND 40 Phase 2   Dec 12
Mulwala Redevelopment Project JP 2086 Phase 1 Dec 12

Table W12.26 Former projects of concern as at 30 June 2013

Table W12.26 Former projects of concern as at 30 June 2013
Project Description Removed Outcome
SEA 1411 Sea Sprite Helicopter Mar 08 Cancelled
AIR 87 Armed Reconnaissance Helicopter Apr 08 Remediated
LAND 106 M-113 Armoured Personnel Carrier Upgrade May 08 Remediated
JP 2088Phase 1A SF Air Drop Rigid Hull Inflatable Boat Trailers Sep 09 Remediated
SEA 1390
Phase 2.1
Guided Missile FFG Upgrade Jan 10 Remediated
AIR 5416
Phase 2
Project 'Echidna' Jul 10 Scope reduced
JP 2048
Phase 1A
LCM2000 Watercraft for Amphibious Ships Feb 11 Cancelled
JP 2043
Phase 3A
High Frequency Communications Modernisation Jun 11 Remediated
AIR 5333 Air Defence Command and Control System 'Vigilare' Jun 11 Remediated
SEA 1448
Phase 2B
ANZAC—class Anti-Ship Missile Defence Nov 11 Remediated
LAND 121
Phase 3B
Medium and heavy vehicles, trailers and modules Dec 11 Remediated
JP 129
Phase 2
Tactical Unmanned Aerial Vehicles Dec 11 Remediated
AIR 5418
Phase 1
Joint Air-to-Surface Standoff Missile Dec 11 Remediated
AIR 5077Phase 3 'Wedgetail' Airborne Early and Control Aircraft Dec 12 Remediated
JP 2070Phase 2/3 Lightweight Torpedo Replacement Dec 12 Remediated

Managing interdependent risks

The Rizzo review (Plan to reform support ship repair and maintenance practices, July 2011) highlighted the need for interdependent risk management between the DMO and the Navy.

The DMO and the Navy have developed the Interdependent Mission Management System to highlight interdependent risks and potential sustainment 'blind spots', support collaborative management and provide a common and current understanding of the condition of Navy assets.

The system has been populated with key information from materiel sustainment agreements in anticipation for use at Navy Fleet Screening in November 2013.

Over 2012-13, the system's scope has been broadened to provide visibility of the whole-of-capability life-cycle through development of an acquisition application and provide visibility of potential capability gaps.