Defence manages $78.4 billion of total assets. This includes:
Defence Groups and Services, including the Defence Materiel Organisation (DMO), are accountable for the underlying business transactions and records that substantiate the reported financial balances of assets under their control.
The Chief Finance Officer Group undertakes accounting processes to enable the accurate and timely reporting of asset balances and ensure that they are consistent with requirements for financial statement reporting defined in the Australian Accounting Standards.
During 2014–15, Defence worked to secure and advance the improvements in financial and asset management achieved in previous years. This was achieved by:
The DMO manages its assets in accordance with relevant Accountable Authority Instructions, accounting standards and internal DMO guidelines.
The DMO’s property, plant and equipment assets, which were valued at $5 million at 30 June 2015, are subject to an annual stocktake to ensure that records are accurate. Impairment reviews were also undertaken during the year. Valuations are conducted as outlined in note 1.19 of the DMO financial statements in Volume Two of this report.
Defence undertakes procurement in accordance with the core purchasing policies and principles as articulated in the 2014 Commonwealth Procurement Rules (CPRs) and Defence policies.
Under non-materiel shared procurement services, high-level procurement advice and support is provided to staff who exercise delegations under the Public Governance, Performance and Accountability Act 2013 to ensure compliance with the CPRs.
The Defence Annual Procurement Plan is published on the AusTender website to give industry notice of potential business opportunities and to help it prepare for the competitive tendering phase. Defence publishes open tenders on AusTender.
Defence was a major member of the Department of the Prime Minister and Cabinet’s cross-agency working group for Indigenous engagement and is also developing Defence’s strategy in response to the new Commonwealth Government Indigenous Procurement Policy. The policy, which applies to all Australian government agencies, has two key objectives:
Defence supports small business participation in the Commonwealth Government procurement market. Small and medium enterprise (SME) and small enterprise participation statistics are available on the Department of Finance’s website.
Defence also recognises the importance of ensuring that small businesses are paid on time. The results of the survey of Australian Government payments to small business are available on the Treasury’s website.
Low-risk procurements valued under $200,000
The Defence Procurement Policy Manual and the Contract Template Selection and Tailoring Guide incorporate and encourage procurement officers to use the Commonwealth Contracting Suite for those procurements determined suitable under the Department of Finance Defence-specific decision tree.
The Chief Finance Officer Group provides finance shared services to Defence, including centralised payment of accounts. In addition, Defence promotes the use of credit cards to facilitate prompt payment.
Under Defence’s Australian industry participation policy, Defence requires prime contractors for materiel systems to provide Australian industry with opportunities to compete on merit in major procurements, and requires contractual commitments from suppliers to provide nominated domestic industry through an agreed plan. Under the policy, prime contractors are required to release a public version of the plan to provide industry with enhanced visibility and transparency of local industry commitments and business opportunities in relation to specific Defence procurements.
Defence is committed to and has established a range of initiatives designed to promote industry engagement (particularly for SMEs) and reduced costs of tendering making Defence business opportunities more transparent and accessible.
Defence has implemented a mandatory procurement policy on the use of the Defence Purchasing Card as the method of payment for purchases of less than $10,000 and for certain procurements categorised as low value and low risk over $10,000. To ensure compliance with the Department of Finance Resource Management Guide 417—Supplier Pay on Time or Pay Interest Policy, Defence contracting templates include provisions that require the Commonwealth to make a self-generated interest payment for any late payment (and without the need for any further invoice) for all contracts valued up to $1 million (GST inclusive).
The Contracting and Legal Division, Commercial Group, DMO is responsible for providing strategic commercial law advice and contracting services directly to the DMO project and system project offices, and for maintaining and improving Defence’s procurement policy, guidance tools and Defence’s suite of contracting templates—known as the ASDEFCON templates. The Division also has responsibility for whole-of-Defence procurement training and the professionalisation of the Defence Procurement and Contracting (P&C) Job Family.
Key achievements in 2014–15 included:
The Approved Major Capital Investment Programme generally comprises those projects that cost more than $20 million and which, following approval, have been transferred from the Defence Capability Plan to acquisition areas within Defence to manage the acquisition phase.
Funding for approved major capital equipment projects, including project management and overhead costs, is usually provided by Defence to the DMO under separate materiel acquisition agreements for each project. Funding is also provided to other Groups, such as the Chief Information Officer Group and the Defence Support and Reform Group, to deliver the ICT and infrastructure components of the projects. A small number of projects are led by Groups other than the DMO, such as the Chief Information Officer Group and the Intelligence and Security Group.
Projects costing between $20 million and $100 million are jointly approved by the Minister for Defence and the Minister for Finance. Projects costing more than $100 million are approved by the National Security Committee of Cabinet.
In 2014–15, a total of 35 submissions with a combined value of more than $7 billion were approved. Significant approvals included:
The Capital Facilities Programme comprises approved and unapproved major and medium projects.
Major capital facilities projects are defined as having expenditure of more than $15 million (including GST) and are subject to government approval and review by the Parliamentary Standing Committee on Public Works.
Medium facilities projects have expenditure of between $500,000 and $15 million (including GST). Projects of between $2 million and $15 million are subject to departmental or government approval and are notified to the Standing Committee on Public Works.
The Capital Facilities Programme develops facilities and infrastructure to support the Approved Major Capital Investment Programme, sustain current and future capability requirements, support other government initiatives, meet legislative obligations and assist initiatives that support Defence personnel. A significant proportion of the programme funding is directed towards the provision of basic engineering and infrastructure services, in support of new projects and upgrades to existing facilities.
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