capability development group post-kinnaird - a personal perspective. vice admiral matt tripovich, am...
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Capability Development Group post-Kinnaird
- a personal perspective.
Vice Admiral Matt Tripovich, AM CSC RANChief Capability Development Group
Capability Life Cycle
Government Agreement/Approval process
Accountability
Strategic Assessment
Initial Business Cases
AcquisitionBusiness
Cases Capability Management
Agreement for Further
Analysis
1st PassApproval
2nd Pass Approval
AcquisitionService
Life Extension
Approval to Dispose
Acquisition Management
In Service Management
Disposal
Dep SecStrategy
& Corp
Gov’nceChief Capability Development Group
CEO Defence Material Organisation
Capability ManagersChief Capability
DevelopmentGroup
Kinnaird Review
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)
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)
CDG MISSION
To shape Defence’s future joint war fighting capability
CCDG VISION
To be a leading Defence Capability Development organisation which is respected by Defence, industry, the central agencies and international
defence forces
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
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
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
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
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
DMO themes
Professionalise workforce
Reprioritise work
Standardise business practices
Benchmark against best practice
Improve industry relationships
Lead reform and embrace change
Kinnaird Recommendation 7
Project Managers should be: Selected on merit 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
CDG – DMO relationship
More independent…… “Prescribed Agency” Materiel Acquisition Agreements
…..but closer working relationship: Steering Groups Integrated Project Teams Embedded Personnel
Relationships with Industry
Capability Development Advisory Forum (CDAF)
Critical Industry Capabilities (CRITICS)
Request For Tender before 2nd Pass
Skilling Australia’s Defence Industry program
Measuring CDG performance
2005 2006 2007 to date
Significant decisions
5 9 4
1st Pass 8 15 5
2nd Pass 11 17 7
Total approvals
24 41 16
Value $3.0B $6.4B $13.2B
Major Capital Equipment spending in real 07-08 $B
0.0
1.0
2.0
3.0
4.0
5.0
6.0
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
$ B
illio
n (
RE
AL
Exp
end
itu
re)
Transition from Cash to Accrual Accounting
Further predicted by DCP 06-16 (Source ASPI/DMO 2007)
Vietnam
F18sAnzac & Collins
FACILITIES
KIN
NA
IRD
MAJORS
MINORS
7.0
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
Measuring DMO performance
73%27%
Initial
Variation
Total Project Approval $60.6BInitial Approval $44.3BVariations $16.3B
Shows variations(+ and -) across project life of all projects managed by DMO since July 2003
This circle is $60.6B
16%
5%
6%
73%Indexation
Exchange
Real
Initial
Total Project Approval $60.6BInitial Approval $44.3BIndexation $9.5BExchange $3.1BReal $3.7B
Shows variations(+ and -) across project life of all projects managed by DMO since July 2003
This circle is $60.6B
Measuring DMO performance
Real cost increases by category
(1) Shows variations(+ and -) across project life of all projects managed by DMO since July 2003
Estimate insufficient12%
Post 2nd Pass Scope Increase
38%
1st pass Scope Increase
3%
Adjustment2%
Class1%
P&E0%
White Paper Reapproval14%
Other7%
2nd Pass Scope Increase
23%
This circle is $3.7B (6%)
RCI (2%)
RCI ABOUT 34% of 6% = 2%
Very large civil & defence projects
0
0.5
1
1.5
2
2.5
3
Large USRoad Projects
Large US RailProjects
ChannelTunnel
US DefenceWeaponsSystems
InternationalGas and Oil
Industry
CommercialBuildings
Co
st G
row
th R
atio
SOURCE: RAND COST GROWTH STUDY 2006
Benchmarking
Lessons Learned
Reforms are working
Transparency and accountability
Early stakeholder engagement
Professional project management
Fiscal responsibility - value for money
Timely delivery of capability
Pre-Kinnaird project management
Questions?
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