Annual Report 2013-14

The objective for Program 1.3 is to meet government, ministerial, Defence and DMO expectations and time frames for the provision of policy advice and support, including the delivery of programs to support the Australian defence industry. The key performance indicator involves meeting these expectations and time frames. The deliverables include specialist legal, procurement and contracting policy and services, industry programs and engagement, and acquisition and sustainment advice.

Program 1.3 accounted for about 1 per cent of the DMO’s expenditure in 2013–14. Expenses under this program included:

• procurement policy advice to Defence and the DMO and contracting services for the DMO and various Defence procurement activities
• the delivery of industry programs and engagement activities for the Government and Defence
• corporate governance and reporting to meet the Government’s requirements.

Ministerial support

A key function of the DMO is to provide policy advice and support to the Minister for Defence, the Assistant Minister for Defence and the Parliamentary Secretary for Defence. The DMO continues to provide accurate responses to ministerial representations, other parliamentary questions and ministerial submissions. In 2013–14, the DMO met ministerial, government, Defence and DMO expectations and time frames for the provision of policy advice and support.

DMO governance and accountability

The current Ministerial Directive was issued on 28 July 2008 to the then CEO of the DMO. The DMO continues to operate within the principles established by the directive. The directive establishes the accountability of the CEO to the minister to achieve the following outcomes:

• timely, accurate and considered advice in the CEO’s role as principal adviser to the minister on equipment acquisition and fleet sustainment
• efficient and effective acquisition and through-life support of materiel for Defence capabilities
• sound management of financial and other resources, operating within the budget and meeting statutory requirements for preparing financial statements
• an appropriately skilled and experienced workforce while providing a working environment that attracts and retains people
• high-quality governance and management, implementing agreed reform initiatives and embedding continuous improvement within business processes
• savings and efficiencies for reinvestment in priority areas in Defence


• appropriate representation of Australia internationally in the CEO’s role of National Armaments Director.

The Executive Committee advises the CEO on directing the DMO. The committee is chaired by the CEO and meets monthly to review strategic direction and performance. As required, the committee meets as the Strategic Budget Committee to focus on strategic investment and budget management.

The Council Chairs’ Forum addresses DMO enterprise business performance risks and issues against the DMO’s functions of procurement, finance management, project management, materiel engineering, sustainment management and materiel logistics, work health and safety, human resources, industry engagement and administration. The Deputy CEO chairs the forum, which meets quarterly.

The independent Materiel Audit and Risk Committee allows the CEO to meet his obligations under the Financial Management and Accountability Act 1997. The committee monitors and recommends improvements to the DMO’s governance, risk management, internal controls and financial reporting.

Figure 6.2: DMO senior committees

The projects of concern regime is a proven process for the senior management of seriously underperforming projects. Once troubled projects have been identified through triggering one or more of the early indicators and warnings 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 implementing 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 movements in 2013–14 included:

• the successful remediation of electronic support measures upgrade for AP-3C Orion aircraft (AIR 5276 Phase 8B) and the subsequent removal of the project from the list of projects of concern
• the addition of the Air Warfare Destroyer (SEA 4000 Phase 3) project to the list following a critical report from the Australian National Audit Office and a comprehensive independent review confirming a significant cost overrun.