Annual Report 2013-14

Secretary’s review

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Any organisation the size of Defence has a whole smorgasbord of good and bad over the course of a year. That said, there was a lot that was achieved in 2013–14 in which Defence civilians can take real pride:

• The professional provision of critical enablers (e.g. intelligence, facilities, logistics, financial services, communications and pay) which allow the Australian Defence Force to put into the field the highly trained men and women in whom all Australians are so proud.
• The very first exercise by a Commonwealth agency of a provision in the Commonwealth Procurement Rules for a construction contract to an Indigenous-owned enterprise—Pacific Services Group Holdings Pty Ltd for a project worth up to $6 million at HMAS Waterhen in Sydney.
• A solid increase in the number of Indigenous Australians in the Defence APS.
• The very significant contribution by the Defence Science and Technology Organisation to the whole-of-government effort in the search for Mh470 in the Indian Ocean.
• The very significant contribution by the Australian Geospatial-Intelligence Organisation to the whole-of-government effort in the MH17 recovery operation in Ukraine.
• The substantive contribution by the Australian Signals Directorate to Australia’s counter-terrorism operations and other intelligence priorities.
• The Defence Material Organisation’s management of the acquisition of the Landing Helicopter Docks (LHDs), the largest naval vessels in Australia’s history.
• The conclusion of new Base Support Contracts, worth in excess of $10 billion over 10 years.
• The conclusion of a treaty-level agreement with the United States about its annual Force Posture rotations through Northern Australia.
• The provision of quality policy advice and assessments around ADF operations, regional engagement and for the 2015 Defence White Paper.
• Further implementation of shared services.
• Further refinement and implementation of the 2012–17 Corporate Plan.
• Effective management of the Defence budget.

The department continued to downsize, with full-time equivalent staff reducing from around 22,300 in mid-2012 to around 19,500 in October 2014. The downsizing has been achieved with minimum fanfare and with the cooperation of staff, despite the obvious difficulties involved.

The downsizing will continue following decisions in the 2014–15 Budget, while the implications of the First Principles Review, which began in August 2014, are still unknown.

Most of the downsizing has come from natural attrition, which means that the impact has been uneven and largely uncoordinated. This will need to be addressed and tidied up following the First Principles Review.

The focus over the years on Defence APS staffing numbers has distorted rational management of the workforce which, on the civilian side, consists of APS, contractors and service providers. It also ignores past reforms which, as an efficiency and cost-saving measure, replaced higher cost ADF personnel with lower cost APS in jobs which did not require specific ADF skills.

The Defence cultural reform program—Pathway to Change—continues, with an emphasis on behaviour and personal accountability. Within the APS at least, we are making more progress on the former rather than the latter.

More broadly, we have made good headway in the recruitment of Indigenous Australians, but we still have a long way to go. Our performance in recruitment of people with disability has been disappointing.

We have taken a number of initiatives to increase the percentage of female graduates in our recruitment. Early results are positive, but we are still well behind where we want to be.

Our own internal audits and those conducted by the Australian National Audit Office have highlighted the need to front-end load all aspects of planning, capability considerations and project management—artificial deadlines and rushed decisions almost inevitably leading to poor outcomes.

Underinvestment in facilities and ICT is starting to catch up with us and, unless addressed, will impact negatively on ADF capability. This will be a focus in the 2015 White Paper, but will need to be balanced against other capability needs.

We gained further efficiency through shared services, especially in the finance and procurement domains. In April 2014 we embarked on the next phase of shared services, and hope to take this further through the First Principles Review.

We made progress in developing our Defence Enterprise Management System, comprising the enterprise risk framework, enterprise planning process (the Defence Corporate and annual plans) and a Defence Enterprise Report. This is a core element of our strategy to drive high performance and the implementation of the Public Governance, Performance and Accountability Act 2013.

The year 2014–15 will be dominated by the negotiations for a new workplace agreement, the First Principles Review and the new White Paper.

Given the fiscal environment and the parameters within which we must work a new workplace agreement will not be easy to achieve.

The First Principles Review got underway much later than we would have liked. Led by former Managing Director of Rio Tinto Australia, David Peever, it is critically examining processes, structures and all aspects of Defence work relating to efficiency and effectiveness. The findings of the Review Team will feed into White Paper considerations.

A firm implementation plan will be an important part of the Review. It will almost certainly mean that 2015 will see significant change in Defence structures and the way we do our business.

The 2015 White Paper is being underpinned by a Force Structure Review, the first since 2008–09. As stated publicly by the Government, the essential challenge in the White Paper will be to better align money and capability. This means that some necessarily tough decisions will need to be taken. The Government is also committed to a Defence Industry Statement in the context of the White Paper, which will underpin the essentiality of a productive and competitive Australian Defence Industry.

The year 2014–15 will see continued Australian Defence involvement in Afghanistan and Iraq, continued regional engagement, including through established forums such as the ASEAN Defence Ministers Meeting Plus, the trilateral strategic arrangements with the United States and Japan, and the essential engagement we have with China, Indonesia, Malaysia, Singapore, the Republic of Korea, India, Papua New Guinea, Timor-Leste and South Pacific countries. At the same time our relations with NATO are being upgraded.

It will be especially important to continue to ensure that the men and women of the ADF operating in harm’s way and in challenging environments have the very best enablers available.

Finally, I would like to record my gratitude to General David Hurley, who completed his term as Chief of the Defence Force in July 2014. While I have previously worked with other CDFs in different jobs, General Hurley was my first partner in what is called the diarchy. His commitment and professionalism made it easy. I look forward to continuing the partnership with General Hurley’s successor, Air Chief Marshal Mark Binskin, with whom I have already worked closely when he was VCDF. Unfortunately, Air Chief Marshal Binskin and General Hurley do share a somewhat annoying habit—support for the 2014 NRL Champions, the Rabbitohs!

Chief of the Defence Force’s review

I am proud to take command of the Australian Defence Force (ADF) at a time when we can reflect on our impressive heritage, while looking towards the future. Thanks to General Hurley’s outstanding leadership, I assume command of a Defence Force that is well poised to meet the challenges as we transition to a future force and to continue our well-established reform program. In parallel with these activities, the ADF continues to operate in Afghanistan and the Middle East region, as well as contributing to the whole-of-government effort to protect Australia’s borders and maritime interests.

My priority over the next four years is to successfully transform the ADF into the next generation force in accordance with the strategic direction of the upcoming 2015 Defence White Paper. We must learn from the successes and failures of our past to ensure that we transition as a capable and professional force that is trusted and respected by all Australians, and the region. To do this, we must:

• continue to conduct successful global operations
• continue with all aspects of our reform program
• deliver programs and services to sustain the health and welfare of our people—both at home and on operations—and the wellbeing of their families
• maintain our current capabilities and associated support equipment and facilities to the required levels of preparedness and safety

• safely, efficiently and effectively introduce our new weapons systems—most importantly, all the capabilities associated with delivering the joint amphibious capability
• evolve the strategic-level ADF headquarters command and control architecture to ensure timely and accurate information, and consistent high-quality advice and decisions to support successful joint operations
• continue to build and maintain strong and enduring regional relationships
• understand and better manage our energy footprint at home and on operations.

Most importantly, during my tenure we must work together to fully understand, address and put behind us the legacy issues that have come to the surface over the past three years, detailing how some of our people have been poorly treated, abused or assaulted. Clearly, their treatment was, and remains, unacceptable. We must learn from this dark aspect of our past and work to regain the respect of the whole Australian community.

I am pleased to be able to continue my close relationship with the strong and experienced ADF leadership team: Vice Admiral Ray Griggs (Vice Chief of the Defence Force), Vice Admiral Tim Barrett (Chief of Navy), Lieutenant General David Morrison (Chief of Army), Air Marshal Geoff Brown (Chief of Air Force), Vice Admiral David Johnston (Chief of Joint Operations) and Lieutenant General John Caligari (Chief Capability Development). I look forward to working with Dennis Richardson, Secretary of Defence, and his dedicated senior leadership team. I am also looking forward to continuing to work with the entire Defence team—uniformed personnel (both full-time and reserves), civilians and supporting contractors—to deliver the best capability possible from the available resources.

This will be a period of continuing change and challenges, as highlighted by the short-notice deployment to the Middle East to counter the Islamic State of Iraq and the Levant in September 2014, but I know we are able to meet these challenges.