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Capability Development Group post-Kinnaird - a personal perspective.

Capability Development Group post-Kinnaird - a personal perspective. Vice Admiral Matt Tripovich, AM CSC RAN Chief Capability Development Group. Capability Managers. CEO Defence Material Organisation. Chief Capability Development Group. Capability Life Cycle.

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Capability Development Group post-Kinnaird - a personal perspective.

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  1. Capability Development Group post-Kinnaird- a personal perspective. Vice Admiral Matt Tripovich, AM CSC RAN Chief Capability Development Group

  2. Capability Managers CEO Defence Material Organisation Chief Capability Development Group Capability Life Cycle Government Agreement/Approval process Agreement for Further Analysis 1st Pass Approval 2nd Pass Approval Service Life Extension Acquisition Approval to Dispose Acquisition Management Strategic Assessment Initial Business Cases Acquisition Business Cases In Service Management Disposal Capability Management Accountability Dep Sec Strategy & Corp Gov’nce Chief Capability Development Group

  3. Kinnaird Review

  4. Kinnaird Recommendation 1 • Present to Government achievable capability development information in a succinct form on an annual basis • Defence Planning Guidance (DPG) • Defence Capability Strategy (DCS) • Defence Capability Plan (DCP)

  5. Kinnaird Recommendation 2 • A three star officer, military or civilian, should be responsible and accountable for managing capability definition and assessment • Capability Development Group formed to: • manage the capability development process • maintain a joint warfare focus • deliver the Defence Capability Plan (DCP)

  6. CDG MISSIONTo shape Defence’s future joint war fighting capabilityCCDG VISIONTo be a leading Defence Capability Development organisation which is respected by Defence, industry, the central agencies and international defence forces

  7. Kinnaird Recommendation 3 • Government should mandate and enforce, via revised Cabinet rules, a rigorous two pass system for new acquisitions • Entry into the Defence Capability Plan • Intention to commence a project • 1st Pass Approval – Initial Business Case • Explore options), analyse capability, costs (acquisition and through life), schedule and risk • 2nd Pass Approval – Acquisition Business Case • Obtain Government funding commitment to acquire new capability

  8. Delivering the Defence Capability Plan Significant preparatory work between 1st and 2nd Pass approval: ~ 6% of total project funds are spent before 2nd Pass approval ~ 22 months between 1st and 2nd Pass Plus total annual funding of up to $66m for: Project Development Funds Capability Technology Demonstrators Rapid Prototyping Development and Evaluation

  9. Kinnaird Recommendation 6 • The Defence Materiel Organisation (DMO) should become an executive agency • DMO became a a ‘Prescribed Agency’, separately funded and accountable, in July 2005 • flexibility to adjust budget and staff resources to meet workload • works closely with CDG to deliver new capability • establishes ‘contracts’ with Service Chiefs to support in-service equipment

  10. DMO Purpose To equip and sustain the ADF DMO Goal To deliver capability and sustainment on time, on budget and to the required capability, safety and quality DMO Vision To become the leading program management and engineering services organisation in Australia

  11. DMO – Facts • Controls 40% of the Defence budget annually • Manages a capital budget of $4.5b annually • Spends $3.6b on support annually • Manages 210+ major projects • Manages 200+ minor projects

  12. DMO themes • Professionalise workforce • Reprioritise work • Standardise business practices • Benchmark against best practice • Improve industryrelationships • Lead reform and embrace change

  13. Kinnaird Recommendation 7 • Project Managers should be: • Selected onmerit • Drawn from the military, industry or the public service • Be accountable to CEO DMO • Have minimum tenures • Have remuneration levels set to attract and retain specialists

  14. CDG – DMO relationship • More independent…… • “Prescribed Agency” • Materiel Acquisition Agreements • …..but closer working relationship: • Steering Groups • Integrated Project Teams • Embedded Personnel

  15. Relationships with Industry • Capability Development Advisory Forum (CDAF) • Critical Industry Capabilities (CRITICS) • Request For Tender before 2nd Pass • Skilling Australia’s Defence Industry program

  16. Measuring CDG performance

  17. Major Capital Equipment spending in real 07-08 $B Transition from Cash to Accrual Accounting Further predicted by DCP 06-16 (Source ASPI/DMO 2007) 7.0 6.0 KINNAIRD 5.0 F18s 4.0 Anzac & Collins $ Billion (REAL Expenditure) 3.0 Vietnam MAJORS 2.0 MINORS 1.0 FACILITIES 0.0 59-60 61-62 63-64 65-66 67-68 69-70 71-72 73-74 75-76 77-78 79-80 81-82 83-84 85-86 87-88 89-90 91-92 92-93 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09 10-11 12-13

  18. Measuring DMO performance • ~ 210 major projects = ~ $55b • Jul 03-Jul 06, 93 major projects were closed (~ $5.5b) • 10 projects required real budget increase ($131m) - ~ 0.2% of the total program value (this excludes the effects of ‘intentional’ capability increase) • 51 managed a real budget decrease, returning an unspent budget of about $94.5m • This equates to a nett variation of just $36.5m • Australia’s problem is not COST, it is SCHEDULE

  19. Initial Variation Measuring DMO performance Total Project Approval $60.6B This circle is $60.6B Initial Approval $44.3B Variations $16.3B 27% 73% Shows variations(+ and -) across project life of all projects managed by DMO since July 2003

  20. Total Project Approval $60.6B Initial Approval $44.3B Indexation $9.5B Exchange $3.1B Real $3.7B Measuring DMO performance This circle is $60.6B 16% 5% 6% 73% Indexation Exchange Real Initial Shows variations(+ and -) across project life of all projects managed by DMO since July 2003

  21. Other 7% White Paper Reapproval 14% P&E 0% Class 1% Adjustment 2% Real cost increases by category Estimate insufficient RCI ABOUT 34% of 6% = 2% 12% RCI (2%) Post 2nd Pass Scope Increase 2nd Pass Scope Increase 38% 23% 1st pass Scope Increase This circle is $3.7B (6%) 3% (1) Shows variations(+ and -) across project life of all projects managed by DMO since July 2003

  22. Very large civil & defence projects Benchmarking SOURCE: RAND COST GROWTH STUDY 2006

  23. Lessons Learned • Reforms are working • Transparency and accountability • Early stakeholder engagement • Professional project management • Fiscal responsibility - value for money • Timely delivery of capability

  24. Pre-Kinnaird project management

  25. Questions?

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