The Real Price? Corrina Tierney Executive Director Financial Investigation Service

1. The Real Price?Corrina TierneyExecutive Director Financial Investigation Service

2. FIS Role Overview • FIS provides analysis, investigation and advice on the financial aspects of Strategic, Complex and Simple Procurements based on professional commercial cost accountancy expertise • The service provided by FIS is a part of DMO's risk mitigation strategy, ensuring that financial due diligence is applied consistently with the overarching policy requirements • FIS actively maintains the Commercial-in-Confidence nature of each Company’s financial data, maintaining Industry’s trust in FIS’ semi- independent role in considering their sensitive financial information • Industry can expect FIS contact for: • sole source cost investigations • strategic, complex, high risk, or high value competitive tenders • Annual review of labour rates (large Primes) • financial queries during a tender evaluation process

3. FIS Advice on financial aspects High Value Complex RFTs • Labour Rate Reviews Strategic Procurements Benchmarking Financial Due Diligence Cost Principles Viabilities “Shared” Service Defence clients • DMO clients Tender Evaluation Commercial Consistency • Sole/Direct Source Gate Reviews True Ups Simple Procurements Competitive Tenders Overarching Policy High Risk Cost Data Models Tiger Teams FMS Financial Statement Analysis

4. WHAT PRICE?? Focus is on the costs associated with the Cost of Capability and Whole of Life Cycle Costing including • Capability • Acquisition • Operation • Support • Disposal • Contract • Facility • Staffing/Resources • Intangibles APPROVALS (Government/Delegate) COST ANALYSIS BRANCH CDG (COST ESTIMATION) • Including • Engineering • Commercial • Logistic • Pricing • Statement of Work PROJECT $ X Capability and Value for Money Considerations $ Z $ Y NEGOTIATIONS FINANCIAL INVESTIGATION SERVICE (CONTRACTS) INDUSTRY (TENDERS) • Focus is on the tendered/contract costs and pricing (acquisition and sustainment) including • INDUSTRY COSTS • Assessing reasonableness of costs • ‘What If’ analysis of options • Financial comparisons of tenders • Reconciliation to original estimates Focus is on the contract/tender costs including • Materials - Profit • Insurance/Warranties/LDs - Risk • Escalation/Hedging - Staffing • Exchange Rates/Price Risk - Facilities • Contract Type (Fixed/Cost-plus) - Schedule

5. Now… Gaps… • Ambiguity • Duplicated Effort • Different Focus • Sourcing information multiple times • Information Overlaps / Gaps • Rework- both Industry & Govt APPROVALS (Government/Delegate) COST ANALYSIS BRANCH CDG (COST ESTIMATION) Capability and Value for Money Considerations NEGOTIATIONS FINANCIAL INVESTIGATION SERVICE (CONTRACTS) INDUSTRY (TENDERS)

6. Same Project Different Focus Cost Capability Actuals Contract Price Capability Net Present Scope (+ growth) Acquisition + Sustainment Operating Costs Budget Cost Government Approval Estimated Costs plus profit Contract cost plus escalation Escalation Non-Farm GDP Forecasting Contract Indices Profit Only look at cost Shareholder Return Risk vs. Reward vs. Return Risk - Schedule - Government Process Costed Risk - Budget - Schedule (Risk Mitigation) - Capability - Technical Also: • Financing charges • Intellectual Property • KPIs/KERs • Insurance • Securities • Warranties • Payment Schedule • LDs/EDs

7. APPROVALS (Government/Delegate) COST ANALYSIS BRANCH CDG (COST ESTIMATION) Capability and Value for Money Considerations NEGOTIATIONS FINANCIAL INVESTIGATION SERVICE (CONTRACTS) INDUSTRY (TENDERS) One thing we could do better… • capture the same data once • data consistency • less duplication • improved evaluations and analysis • more timely decisions • reduced tender cost to industry • more effective and efficient use of Commonwealth and Industry resources • Use a uniform “Cost Model” COST MODEL

8. APPROVALS (Government/Delegate) COST ANALYSIS BRANCH CDG (COST ESTIMATION) Capability and Value for Money Considerations NEGOTIATIONS FINANCIAL INVESTIGATION SERVICE (CONTRACTS) INDUSTRY (TENDERS) Future….. Bridge the Gap • Single source of information • Better Pricing Process • More Uniform Approach • Reduced Effort by all • Reduced Tender Costs • Better Quicker Result • One Cost Model COST MODEL

9. Which Price is the Real Price… A combination of : XYZ

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