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DEFENCE MATERIEL ORGANISATION

Defence Materiel OrganisationSection 1: Agency overview and resources...........................................................108

1.1 Strategic Direction ...........................................................................................1081.2 Agency Resource Statement...........................................................................1101.3 Agency Measures Table..................................................................................1131.4 Additional Estimates and Variations............................................................1131.5 Breakdown of Additional Estimates by Appropriation Bill......................113

Section 2: Revisions to agency resources and planned performance..............1142.1 Outcome and Performance Information ......................................................114

Section 3: Explanatory Tables and Budgeted Financial Statements...............1403.1 Explanatory Tables ..........................................................................................1403.2 Budgeted Financial Statements .....................................................................141Notes to the Financial Statements .......................................................................147

Defence Portfolio Additional Estimates Statements 2009-10

Outcome 1 Contributing to the preparedness of Australian Defence

Organisation through acquisition and through-life support of military equipment and supplies

Total price: $10,725.202m (PBS 2009-10: $11,850.699m)

Total Departmental outcome appropriation $900.907m (PBS 2009-10: $851.082m)

Defence Materiel Organisation

Total Price of Programs: $10,725.202m (PBS 2009-10: $11,850.699m)

The information is as reported in the Portfolio Budget Statements 2009-10, except for the revisions detailed in this chapter.

The total price of programs estimates have primarily decreased to reflect foreign exchange rate movements.

The relationship between activities of the Defence Materiel Organisation (DMO) and its outcome is summarised in Figure 4 in terms of accrual-based prices rather than cash received from Defence and the Government. Prices have been updated in accordance with the Revised Estimates.

Figure 4: Contribution to outcomes and programs

Total Departmental outcome appropriation: $900.907m (PBS 2009-10: $851.082m)

Administered Appropriation: Nil

Program 1.1 Management of Capability

Acquisition Total price: $5,352.072m

(PBS 2009-10: $6,271.896m) Total Departmental program appropriation: $256.133m

(PBS 2009-10: $242.797m)

Program 1.3 Provision of Policy Advice and

Management Services Total price: $101.053m

(PBS 2009-10: $104.695m) Total Departmental program

appropriation: $90.717m (PBS 2009-10: $92.341m)

Program 1.2 Management of Capability

Sustainment Total price: $5,272.077m

(PBS 2009-10: $5,474.108m) Total Departmental program

appropriation: $554.057m (PBS 2009-10: $515.944m)

DEFENCE MATERIEL ORGANISATION

Section 1: Agency overview and resources

Note 1. Interest collected from overseas bank accounts is not retained by the DMO and is transferred to the Official Public Account

(OPA). These receipts are not considered resourcing to the DMO and are therefore not included above. Interest receipts and transfers are however shown in the administered schedules later in this chapter.

1.1 Strategic Direction

There has been no significant change to the DMO’s role, outcome, or programs as a result of Additional Estimates.

The additional appropriation being sought is for the increased workforce and operating expenses as a result of additional activities required to be performed by the DMO on behalf of Defence. There are no new measures impacting the DMO.

108

Defence M

ateriel Organisation

109

Figure 5: The DMO organisational structure as at 11 November 2009


Senior Executive Changes In August 2009, Mr Andrew Cawley was appointed to the position of Program Manager, Air Warfare Destroyer.

In September 2009, Mr Mark Reynolds was appointed to the position of Head Industry Division.

To assist resolve a difficult situation, in November 2009, Mr Kim Gillis was appointed to the newly created (temporary) position of Program Manager, Collins Submarines transferring from the position of General Manager Systems.

In November 2009, Ms Shireane McKinnie commenced acting in the position of General Manager Systems.

The DMO currently has three General Manager (Deputy Secretary) positions plus the CEO DMO.

1.2 Agency Resource Statement

The Agency Resource Statement details the resourcing for the DMO at Additional Estimates. Table 76 outlines the total resourcing available from all sources for the 2009-10 Budget year, including variations through Appropriation Bill No.3 and special accounts.

110


Proposed Total Total available

appropriation

2008-09 $'000

Additional = estimate Estimates

2009-10

at Additional Estimates

2009-10 $'000 $'000

Estimate as at Budget

2009-10 $'000

+

Estimate as Proposed Total Total available

ppropriation a

2008-09 $'000

at Budget + additional = estimate at

2009-10

estimates

2009-10

additional estimates

2009-10 $'000 $'000 $'000

[1] Ordinary annual servicesDepartmental appropriation

94,960 -

94,960

Departmental appropriation 851,082 49,825 900,907 Section 31 Relevant agency receipts[2]

- - -

Total ordinary annual services A 851,082 49,825 900,907 [3] Other services

-Total other services B - - -Total available annual

94,960 appropriations Total special appropriations C

851,082 49,825 900,907 - - - -

Total appropriations excluding94,960 special accounts 851,082 49,825 900,907

Special accounts 987,862 94,960

8,982,648

154,243 10,219,713

10,314,673

94,960

10,219,713

[4] Opening balance 927,341 -658,045 269,296

Appropriation receipts[5] 851,082 49,825 900,907 Appropriation receipts

[6] - other agencies 10,765,383 -1,055,162 9,710,221 Non-appropriation receipts to Special accounts 70,965 16 70,981

Total special account D 12,614,771 -1,663,366 10,951,405

Total resourcing 13,465,853 -1,613,541 11,852,312 A+B+C+D

Less appropriations drawn from annual or special appropriations above and credited to special accounts and/or Commonwealth Authorities and Companies Act 1997 bodies through annual appropriations

851,082 49,825 900,907

Total net resourcing for the DMO

12,614,771 -1,663,366 10,951,405

Table 76: The DMO resource statement – Additional Estimates for 2009-10 as at Additional Estimates November 2009

Notes 1. Appropriation Bills (No.1 & 3) 2009-10. 2. s31 Relevant agency receipts – estimate. 3. Appropriation Bills (No.2 & 4) 2009-10. 4. Estimated opening balance for special accounts. For further information on special accounts see Table 88. 5. Appropriation receipts from the DMO annual appropriations are included above. 6. Appropriation receipts from other agencies credited to DMO's special accounts. Reader note: All figures are GST exclusive.

There are no changes to third party payments from and on behalf of other agencies since the Portfolio Budget Statements 2009-10.

111


Star Ranked Officers 8 9 1 13 Senior Officers [4] 51 51 0 0 Junior Officers 148 148 0 0 Other Ranks 160 160 0 0 Sub-total : Permanent Navy 367 368 1 0 Reserve Force [5] 160 183 23 14 Sub-total Navy 527 551 24 4

Star Ranked Officers 7 8 1 14 Senior Officers [4] 54 54 0 0 Junior Officers 223 223 0 0 Other Ranks 216 215 -1 0 Sub-total : Permanent Army 500 500 0 0 Reserve Force [5] 105 77 -28 -27 Sub-total Army 605 577 -28 -5

Star Ranked Officers 9 8 -1 11 Senior Officers [4] 88 88 0 0 Junior Officers 465 464 -1 0 Other Ranks 366 366 0 0 Sub-total : Permanent Air Force 928 926 -1 0 Reserve Force [5] 50 56 6 1 Sub-total Air Force 978 982 4 0

Senior Executives 37 38 1 3

Senior Officers [4] 1,547 1,625 78 5 Other APS Staff 4,180 4,170 -10 0 Sub-total : APS 5,764 5,833 69 1 Contractors [6] 164 108 -56 -34 Sub-total civilian workforce 5,928 5,942 14 0 Sub-total ADF permanent workforce 1,795 1,794 -1 0 Sub-total ADF Reserves Force [5] 315 316 1 0 Total DMO Workforce 8,038 8,052 14 0

PEOPLE

Budget Estimate 2009-10

Revised Estimate 2009-10

Variation Variation %

NAVY [2][3]

ARMY [3]

AIR FORCE [3]

APS

Workforce summary

Approved increases in the DMO workforce positions have resulted in a Revised Estimate (excluding contractors) of 7,735. Variation to the DMO and Defence workforce numbers is shown in Table 77.

Table 77: Breakdown of personnel numbers by service and rank including APS and PSPs[1]

Notes 1. Personnel numbers are forecast of the average strength for 2009-10. 2. The Navy ADF staffing numbers includes a Rear Admiral for new head of Future Submarines project and four foreign

exchange positions funded by foreign agencies and provided to the DMO without Average Funded Strength. 3. ADF rank distribution is indicative only as agreement is yet to be finalised with Service Groups. 4. Senior Officers are of Colonel or Lieutenant Colonel rank equivalent and substantive APS Executive Level 1 and 2. 5. Reserve force figures represent the DMO ADF Reservist bids for 2009-10. 6. Contractors are individuals with specialist skills under contract to fill line positions and were reported as PSPs in the

Portfolio Budget Statements 2009-10. Discrepancies in this table between totals and sums of components are due to rounding.

112


2009-10 2010-11 2011-12 2012-13 2013-14 Navy 368 374 381 381 391 Army 500 525 538 538 568 Air Force 926 978 963 963 982

Table 78: Planned workforce statement

1. Sub Total Permanent Force 1,794 1,877 1,882 1,882 1,941 Navy 183 183 183 183 183 Army 77 77 77 77 77 Air Force 56 56 56 56 56 2. Sub Total Reserve Force 316 316 316 316 316 3. APS 5,833 5,909 6,003 6,171 6,264 4. PSP 108 109 105 102 102 Total Workforce strength (excluding Reserves) (1+3+4)

7,735 7,895 7,990 8,155 8,307

Total Workforce Strength (1+2+3+4) 8,052 8,211 8,306 8,471 8,623

1.3 Agency Measures Table

There are no measures impacting the DMO during the 2009-10 Additional Estimates.

1.4 Additional Estimates and Variations

The following table details the changes to the resourcing for the DMO at Additional Estimates, by outcome.

Table 79: Additional estimates and variations to outcomes from other variations Program impacted

2009-10 $'000

2010-11 $'000

2011-12 $'000

2012-13 $'000

Outcome 1 Increase in estimates (departmental) Direct Appropriation supplementation for increased activity

all 49,825 67,599 88,649 112,749

Net impact on estimates for Outcome 1 (departmental) 49,825 67,599 88,649 112,749

1.5 Breakdown of Additional Estimates by Appropriation Bill

The following table details the Additional Estimates sought for the DMO through Appropriation Bill No.3.

Table 80: Appropriation Bill (No. 3) 2009-10 2008-09

Available $'000

2009-10Budget

$'000

2009-10Revised

$'000

Additional Estimates

$'000

Reduced Estimates

$'000 DEPARTMENTAL PROGRAMS Outcome 1 Contributing to the preparedness of Australian Defence Organisation through acquisition and through-life support of military equipment and supplies

94,960 851,082 900,907 49,825 -

Total 94,960 851,082 900,907 49,825 -

113


2008-09 2009-10 Average Staffing Level (number) 5,552 5,833

Section 2: Revisions to agency resources and planned performance

2.1 Outcome and Performance Information

There has been no change to the DMO’s Outcome Statement since the Portfolio Budget Statements 2009-10.

OUTCOME 1

Outcome 1 Strategy There has been no change to the DMO’s Outcome Strategy since the Portfolio Budget Statements 2009-10.

Table 81: Budgeted Expenses and Resources for Outcome 1 Outcome 1: Contributing to the preparedness of Australian Defence Organisation through acquisition and through-life support of military equipment and supplies

2008-09 Actual

expenses

$'000

2009-10 Revised

estimated expenses

$'000 Program 1.1: Management of Capability Acquisition Departmental expenses

Ordinary annual services (Appropriation Bills No. 1 & 3) - 256,133 Special accounts 4,818,838 5,072,906 Expenses not requiring appropriation in the Budget year 23,033 23,033

Total for Program 1.1 4,841,871 5,352,072

Program 1.2: Management of Capability Sustainment Departmental expenses

Ordinary annual services (Appropriation Bills No. 1 & 3) - 554,057 Special accounts 4,761,662 4,707,314 Expenses not requiring appropriation in the Budget year 10,706 10,706

Total for Program 1.2 4,772,368 5,272,077

Program 1.3: Provision of Policy Advice and Management Services Departmental expenses

Ordinary annual services (Appropriation Bills No. 1 & 3) 67,131 90,717 Special accounts - 1,981 Expenses not requiring appropriation in the Budget year 8,355 8,355

Total for Program 1.3 75,486 101,053

Total expenses for Outcome 1 9,689,725 10,725,202

Note 1. Average Staffing Levels do not include military staff posted to the DMO, as military staff remain employees of Defence and

are not included in it’s staffing numbers. The Average Staffing Levels for military are provided in Table 77.

114


2009-10 Revised budget

$’000

2008-09 Actuals

$’000

2010-11 Forward

year 1 $’000

2011-12 Forward

year 2 $’000

2012-13 Forward

year 3 $’000

Annual departmental expenses: Ordinary annual services

(Appropriation Bill No. 1) - 256,133 290,392 311,653 339,629 Special account expenses:

Defence Materiel Special Account 4,818,838 5,072,906 5,604,616 5,596,166 4,390,003 Expenses not requiring appropriation in

the Budget year Total program expenses

23,033 23,033 23,033 23,033 23,033 4,841,871 5,352,072 5,918,041 5,930,852 4,752,665

PROGRAM 1.1: MANAGEMENT OF CAPABILITY ACQUISITION

Program Objective 1.1 There has been no change to the program objectives for Program 1.1 since the Portfolio Budget Statements 2009-10.

Program Expenses 1.1 The nature of the costs of Program 1.1 remains as described in the Portfolio Budget Statements 2009-10.

The revised planned resources use for Program 1.1 is $5,352.1m in 2009-10 which now represents about50 per cent of the DMO’s total expenses.

The revised planned resource use for Program 1.1 includes:

• direct appropriation of $256.1m relating to Acquisition workforce and operating expenses • the DMO major capital equipment program of $4,919.9m which comprises of $4,704.4m of the

approved major capital investment program and a further $215.5m of work planned to be transferred to the DMO during 2009-10 from Defence

• the DMO minor capital investment program of $153.0m, which comprises of the approved minor program of $112.5m and $40.5m of work planned to be transferred to the DMO during 2009-10

• resources received free of charge from Defence of $23.0m.

Table 82: Program 1.1 Management of Capability Acquisition

Program Deliverables The changes to the detailed descriptions of deliverables for the Top 30 DMO major capital equipment projects are provided under the project headings below. A status update on other major projects included in the previous five years is provided, at Table 84.

Program Key Performance Indicator There has been no change to the program Key Performance Indicators for Program 1.1 since the Portfolio Budget Statements 2009-10.

115

iation

$m

Explanation of Variation

-436 Comprised of early achievement in 2008-09 of scheduled activities originally planned for 2009-10 and foreign exchange rate movements.

-160 Due to foreign exchange rate movement and price variation.

63 Due to foreign exchange rate movement and price variation.

46 The additional funds for MRH are a result of increased delivery of spares and support for rate of effort.

59 The additional funds for ARH reflects the increasing maturity of the aircraft and project schedules for delivery of aircraft, spares and support.

-230 Due to delay of acceptance of first aircraft now expected in 2010-11.

-28 Primarily due to foreign exchange rate movement and better defined estimates for software and logistic support elements.

-5 Due to foreign exchange rate movement, a reduction in scope and savings cost.

-15 Caused by contractor delays to progress milestones.

Defence P

ortfolio Additional E

stimates S

tatements 2009-10

116
Table 83: Top 30 acquisition projects by forecast expenditure in 2009-10[1]
Project number

Approved project

expenditure

$m

Cumulative expenditure

to 30 June 2009

$m

Budget estimate

2009-10 $m

Revised estimate

2009-10 $m

Var

Bridging Air Combat Capability Super Hornet Bridging Air Combat Capability Super Hornet

AIR 5349 Phase 1

3,741 1,275 1,401 965

Air Warfare Destroyer Air Warfare Destroyer - Build

General Manager Programs

SEA 4000 Phase 3

7,835 1,175 1,137 977

Amphibious Deployment and Sustainment

Helicopter Systems

JP 2048 Phase 4A/4B

3,267 380 615 678

Multi Role Helicopter (MRH) AIR 9000 Phase 2

3,910 1,125 429 475

Armed Reconnaissance Helicopter (ARH)

AIR 87 Phase 2

2,076 1,462 203 262

Aerospace Systems ADF Air to Air Refuelling Capability

AIR 5402 1,941 874 425 195

F/A 18-Hornet Upgrade AIR 5376 Phase 2

1,962 1,353 159 131

F/A 18-Hornet Upgrade – Structural Refurbishment

AIR 5376 Phase 3.2

929 252 61 56

AP-3C Electronic Support Measure Upgrade

AIR 5276 Phase 8B

129 31 33 18

iation

$m

Explanation of Variation

-2 Due to foreign exchange rate movement.

-45

-21

-18

-12

Reflects the strategy change to a lead-ship program which must test successfully at sea before commitment to implementation in further ships. However, with Government approval in July 2009 for CEO DMO to manage obsolescence and critical workforce for the Phased Array Radar, additional expenditure of approved funds is foreshadowed for 2009-10. Forecast July 2009 milestone payments were achieved in June 2009.

Items were received at a reduced price.

Due to the reduction of work under the revised Memorandum of Understanding.

-36

-48

Australia is funding the production of Wideband Global Satellite (WGS-6) under a partnership with the United States. Two of the payments on WGS-6 that were scheduled to occur in 2009-10 occurred early. Also a major contributor to the variation was due to foreign exchange rate movement. The contractor remains on schedule and the Preliminary Design Review was successfully completed during the period, ahead of schedule. The variation in estimates is due to two planned activities being moved into the next financial year.

Defence M


117

Project number

Approved project

expenditure

$m


to 30 June 2009

$m

Budget estimate

2009-10 $m

Revised estimate

2009-10 $m

Var

AP-3C Capability Assurance program

AIR 5276 CAP 1

89 16 28 26

Maritime Systems Anzac Anti-Ship Missile Defence

Guided Missile Frigate Upgrade Implementation

Standard Missile Replacement (SM-1) New Heavyweight Torpedo

Electronic Systems

SEA 1448 Phase 2B

SEA 1390 Phase 2.1

SEA 1390 Phase 4B SEA 1429 Phase 2

457

1,528

628

445

131

1,297

240

247

131

77

58

34

86

56

40

22

Next Generation Satellite Program

Ultra High Frequency Satellite Communication

JP 2008 Phase 4

JP 2008 Phase 5A

945

271

114

39

126

89

90

41

iation Explanation of Variation

$m -6 A reduction in the estimated expenditure for this

financial year has been realised due to the significant reduction in scope to the project approved by the Government on 15 September 2009. The reduction in scope will result in the prime contract for the delivery of an advanced level of electronic warfare self protection for Black Hawk and Chinook aircraft being wound back and closed by mid 2010.

-14 Movement due to rescheduling of Ship 01 activities. The bulk of JP 2089 Phase 2A's expenditure plan is tied to the upgrade of the remaining Anzac class fleet with new tactical data links including variable message format and Link-16. This upgrade plan is linked to ship/ dockyard availability and the capacity of Anzac Systems Program Office (JP 2089 Phase 2A is task 82 of the Anzac program) to expend funds.

2 Variation mainly due to the recalculation of the Logistic Support (LS) Contract payments, including the associated escalation component, noting that the Vigilare Project is scoped to fund the first three years of the LS (Sustainment) Contract.

48 Design development of the logistic, command, ambulance and mortar variants is progressing well. The contractor is using additional hull conversion sites in Adelaide and Melbourne to completely recover the schedule. The variation of $48m this financial year was due to an increase in the delivery rate of major subassemblies from a subcontractor in Germany and approval to stretch the mortar variant.

Defence P


stimates S

tatements 2009-10

118

Project Approved Cumulative Budget Revised Varnumber project expenditure estimate estimate

expenditure to 30 June 2009 2009-10 2009-10

$m $m $m $m Electronic Warfare Self Protection for Selected ADF Aircraft – Echidna

AIR 5416 Phase 2

316 221 41 35

Tactical Information Exchange Domain

JP 2089 Phase 2A

103 3 37 23

New Air Defence Command and Control Systems for Control and Reporting Units 2 & 3 (2CRU/3CRU)

AIR 5333 274 177 27 29

Land Systems Upgrade of M113 Armoured Vehicles

LAND 106 890 461 115 163

iation Explanation of Variation

$m -12 Due to reprogramming expenditure for Signal

On Board Two-Wire Audio System – internet protocol communications harnesses, Automatic Fire Suppression and Cold Drinking Water systems post confirmation of price and delivery schedule from the contractor. Expenditure associated with the development of a new Air Defence Variant has also been reprogrammed into 2010-11.

-9 Due to reprogramming to align with the current contract delivery schedule for the light/light weight capability, the tender refresh activity for the medium/heavy capability and the revised expected contract signature date for the light trailer capability from May 2009 to late 2009.

233 Variation in the main is driven by reprogramming of System Acquisition Contract related payments from 2010-11 into 2009-10 to reflect the forecast schedule anticipated as an outcome of the Commercial Settlement currently being negotiated with Boeing. The variation also reflects the latest forecast of expenditure related to the Airborne Early Warning and Control (AEW&C) In-Service Support Contract negotiations.

19 Variation reflects the schedule slippage from 2008-09 to 2009-10 caused by delays in the commencement of construction activities due to design issues.

Defence M


119

Project Approved Cumulative Budget Revised Varnumber project expenditure estimate estimate

expenditure to 30 June 2009 2009-10 2009-10

$m $m $m $m Bushmaster Protected Mobility Vehicle – Project Bushranger

LAND 116 Phase 3

921 475 114 102

Overlander Field Vehicles LAND 121 Phase 3

2,889 15 43 34

Airborne Early Warning and Control System Airborne Early Warning and Control Aircraft

AIR 5077 Phase 3

3,927 2,528 97 330

Explosive Ordnance Mulwala Redevelopment Project

JP 2086 Phase 1

370 131 84 103

Budget Revised Variation Explanation of Variation estimate estimate

2009-10 2009-10 $m $m $m 72 7 -65 $26m of the variation was achieved in 2008-09

ahead of forecast. The remainder relates to milestone payments associated with Early Proof of Capability for the weapon, which was expected to be achieved in May 2010. However, due to risk associated with these milestones planned achievement has been slipped into 2010-11.

60 43 -17 $9m of the variation is due to foreign exchange rate movement. $8m of the variation is due to net cost savings on AIM-9X acquisition and Advanced Medium Range Air to Air Missile software updates, combined with reprogramming of other Foreign Military Sales case payments.

33

28

35

23

2

-5

Variation is due to extension and re-phasing of the Lockheed Martin Defence Capability Strategy contract. Due to foreign exchange rate movement.

37 32 -5 Due to foreign exchange rate movement and slowing of expenditure in 2009-10 to align with movement in project schedule.

Defence P


stimates S

tatements 2009-10

120

Project Approved Cumulative number project expenditure

expenditure to 30 June 2009

$m $m Lightweight Torpedo Replacement

JP 2070 Phase 3

314 158

Bridging Air Combat Capability - Weapons

AIR 5349 Phase 2

196 36

Follow-on Stand-Off Weapon

Evolved Sea Sparrow Missiles

AIR 5418 Phase 1

SEA 1428 Phase 4

408

88

155

48

New Air Combat Capability Detailed Analysis and Acquisition Planning

AIR 6000 Phase 1B

104 70

ised Variation Explanation of Variation mate

9-10 $m $m

34 8 The variance is due to an additional $2.5m expenditure for Information Technology hardware; an additional $2.7m for contractor support and associated price adjustments; and $2.8m due to adjustments in payment milestones.

5,111 -709

825 160

5,936 -549 1,232 4,704

216

new projects approved and other adjustments following the Mid-Year Economic

crue as the 2009-10 year progresses.

Defence M


121

Project Approved Cumulative Budget Revnumber project expenditure estimate esti

expenditure to 30 June 2009 2009-10 200

$m $m $m Human Resources and Corporate Services Improvements to the Logistics Information Systems

JP 2077 Phase 2B.1

129 90 26

Sub-Total - Top 30 Projects 41,082 14,579 5,820

Other Approved Project Estimate 34,049 29,014 665 Total Program Estimate for Major Capital Projects 75,131 43,593 6,485 Management Margin[2] -1,223 -Estimated Outturn from Existing Major Capital Projects

5,262

Projects Planned for Government Consideration 579 Notes 1. The Portfolio Additional Estimates Statements is based on adjustments for foreign exchange rate movements and

and Fiscal Outlook/ Portfolio Additional Estimates Statements review. 2. Management margin is an estimate of possible overall approved capital program expenditure slippage that may ac


TOP 30 PROJECT DESCRIPTIONS

Information relating to the following projects remains as reported in the Portfolio Budget Statements 2009-10.

• Guided Missile Frigate Upgrade Implementation – Maritime Systems. • Standard Missile Replacement (SM-1) – Maritime Systems. • Ultra High Frequency Satellite Communications – JP 2008 Phase 5A- Electronic Systems. • Tactical Information Exchange Domain JP 2089 Phase 2A – Electronic Systems. • New Air Defence Command and Control Systems for Control Units 2 & 3 (2CRU/3CRU)—AIR

5333 – Electronic Systems.

UPDATED INFORMATION ON THE TOP 30 PROJECTS

Information remains as reported in the Portfolio Budget Statements 2009-10, except for the following:

Bridging Air Combat Capability

Bridging Air Combat Capability—Super Hornet AIR 5349 Phase 1

Twenty four Boeing F/A-18F Block II Super Hornet aircraft are being acquired to de- risk the transition to the New Air Combat Capability (NACC) and maintain Australia’s air combat capability edge. A number of aircraft are at various stages of production and as of end October 2009, five aircraft had been delivered. Two aircraft are being operated by the United States Navy (USN) for final test and acceptance activities prior to delivery of the first four aircraft to Australia in second quarter 2010.

Training in the United States of America of RAAF Aircrew and Ground Crew by USN personnel commenced in July 2009 with the initial cadre returning to Australia in November 2009. Facilities construction is nearing completion and the first Maintenance Training device has been installed and accepted. The project remains on schedule for declaration of Initial Operating Capability (IOC) in December 2010.

Air Warfare Destroyer

Air Warfare Destroyer Build—SEA 4000 Phase 3

The majority of combat and platform systems equipment selections are complete with most combat system equipment and critical platform systems equipment under contract.

Infrastructure work is progressing quickly at South Australia’s Common User Facility (Techport) and the ASC Shipyard. The wharf, runway, dry berth and ship transfer systems are scheduled for commissioning well in advance of the shipyard requirements.

The hull block subcontractors have been selected and the first contract awarded. Steel fabrication for the hull blocks is scheduled to commence in late 2009.

General Manager Programs

Amphibious Deployment and Sustainment—JP 2048 Phase 4A/4B

Preliminary design review was completed in May 2009 and the keel laying occurred on 23 September 2009.

The hulls will arrive in Australia in July 2012 and February 2014 respectively. Acceptance of the ships is to occur in January 2014 and August 2015 respectively. An in-service support strategy is currently being developed. The initial support contract is to be in place 12 months before first ship delivery.

The main concern of integration complexity is being mitigated through allocation of more time for the design integration activities and more rigorous oversight of technical and engineering issues.

122


Helicopter Systems Division

Multi Role Helicopter (MRH)—AIR 9000 Phase 2

Eight aircraft have been accepted and are based with the Army’s 5th Aviation Regiment in Townsville. Training for Navy and Army aircrew, maintenance and support personnel is underway. The MRH-90 flying rate of effort has been less than planned, leading to significant delays in training MRH-90 aircrew and certification activities. As a consequence, the Army IOC of a troop of four aircraft is now expected to be achieved in late 2011, six months later than originally scheduled. Although at risk, the project is expected to achieve the in-service date with the Navy IOC of one aircraft at sea planned for mid 2010.

The major risk to the project schedule remains the flying rate of effort which is caused by an immature support system and poor reliability of a number of the systems on the aircraft. Significant effort by industry, Defence and the DMO project office to mature the MRH-90 logistics and support systems should result in the flying rate of effort improving throughout 2009-10. Industry is focused on improving the reliability of the aircraft.

Armed Reconnaissance Helicopter—AIR 87 Phase 2

The re-baselined schedule to deliver the first operational capability to Army was achieved in September 2009, 27 months later than originally contracted. All 22 Armed Reconnaissance Helicopters (ARH) are now planned to be delivered by 30 September 2010 with final supplies acceptance due 30 June 2011.

Australian Aerospace finalised support agreements with its remaining subcontractors SAGEM, Nexter and EADS on 16 June 2009. These subcontracts are essential to ensuring effective maintenance and supply support networks are in place to support ARH operations. Although not yet at the required level, there has been a gradual increase in the achieved rate of effort as Australian Aerospace establishes these maintenance and supply support networks with over 200 hours being flown in June 2009, the best monthly achievement to date.

The key risks to the program are linked to spares availability essential to support the aircraft retrofit program and to achieve the necessary aircraft rate of effort required to support test programs and the conduct of aircrew training. This is being closely managed and the improvement in the rate of effort achievement is expected to continue as Australian Aerospace’s maintenance and supply support networks become more effective.

Aerospace Systems Division

ADF Air to Air Refuelling Capability—AIR 5402

Notwithstanding the satisfactory outcome of the flight testing to date, delays with completion of conversion and test activities have slipped delivery and acceptance of the first aircraft to third quarter 2010 and achievement of an IOC to early 2011.

The first aircraft is expected to complete developmental flight test in December 2009, confirming performance of the new refuelling systems. The second aircraft has completed conversion in Australia and returned to Madrid, Spain to join the first aircraft for certification of the military systems. The third aircraft was delivered to Qantas in June 2009 and has commenced conversion at the Aircraft Conversion Centre.

Completion of developmental flight test has reduced technical risk, although there remains a low-medium level of risk associated with certification and qualification testing.

F/A-18 Hornet Upgrade—AIR 5376 Phase 2

The interim electronic warfare capability was introduced in November 2008. The mature electronic warfare production program commenced in May 2009 and is planned to be complete by late 2012.

Key risks are the development and integration of software associated with new and disparate systems. To alleviate the risks, an iterative development and testing regime including aircraft prototype testing is being used in conjunction with subject matter expert consultation. This is enabling early

123


identification and resolution of integration issues with a systems integration laboratory established in the United States. The risks continue to be assessed as medium.

F/A-18 Hornet Upgrade – Structural Refurbishment—AIR 5376 Phase 3.2

Aircraft one to five have been returned to air combat group after completion of centre barrel replacement. Aircraft six to eight are undergoing rebuild at RAAF Base Williamtown, NSW. Aircraft nine and ten have completed centre barrel replacement work in Canada and will be transported back to Williamtown in November 2009.

Although the project is proceeding to plan, some aircraft required significant additional work due to severe nacelle cracking identified during centre barrel replacement.

AP-3C Electronic Support Measure Upgrade—AIR 5276 Phase 8B

Under the prime contract, the first ground support system detailed design review was held in October 2009, with the second planned for December 2009. The aircraft detailed design review is forecast to be held in early 2010. An estimated delay of 20 months to IOC from 2011 to 2013 is attributed by the contractor, BAE Systems, to the contractors under estimation of the software development effort, and contention of key contractor and subcontractor resources with Project AIR 5077 (AEW&C).

AP-3C Capability Assurance Program—AIR 5276 CAP 1

The Government granted Second Pass approval for CAP 1 in July 2008. Contracts are in place for procurement of the data link system and electro optics, and for the integration design.

Major achievements for 2009–10 will be receiving electro-optics and tactical data link systems, finalising the design, and negotiating an installation contract with Australian Aerospace.

Maritime Systems Division

Anzac Anti-Ship Missile Defence SEA—1448 Phase 2B

Under a revised acquisition strategy, a first-ship installation is to prove operational capability before commitment to installation in all ships of the class.

New Heavyweight Torpedo—SEA 1429 Phase 2

The scope of work for 2009-10 was reduced under the revision of the Memorandum of Understanding (MoU) with the US Department of Defense.

Electronic Systems Division

Next Generation Satellite Program—JP 2008 Phase 4

The first satellite (WGS-1), with a footprint over the Pacific Ocean, has been providing operational capability to Australia since June 2008. The second satellite (WGS-2) was operationally accepted in August 2009 and provides capability over the Indian Ocean Region. WGS-3, which is not viewable from Australia, will be launched in late November 2009. The project operationally accepted, by late October 2009, offshore anchoring systems in Hawaii and Germany utilising a combination of Australian and US infrastructure as redundancy to indigenous interim anchoring systems. Indigenous interim anchoring is scheduled for operational acceptance early in 2010.

Electronic Warfare Self Protection for Selected ADF Aircraft - Echidna—AIR 5416 Phase 2

The further upgrade to Black Hawk and Chinook with the advanced Electronic Warfare Self Protection (EWSP) capability was cancelled by the Government on 15 September 2009. Defence reassessed the operational requirement and determined that the fitting of additional EWSP capabilities would have an adverse effect on aircraft availability, and that an insufficient return on investment would result from continuing the program when both Black Hawk and Chinook aircraft are nearing retirement. The program to fit a basic EWSP capability to 12 Black Hawk aircraft is continuing with all 12 aircraft to be modified by mid 2010.

124


Land Systems Division

Upgrade of M113 Armoured Vehicles—LAND 106

Construction of the recovery vehicles is complete and assembly of the armoured personnel carrier and fitters variants is continuing. Deliveries of major drive system sub-assemblies for all variants are ahead of schedule. Design development of the logistics, command and ambulance variants is progressing well and will continue through to early 2010. In August 2009, the Government approved a submission to stretch the only unstretched variant, the armoured mortar; and as a result all M113 variants will now be stretched. The final contracted delivery date for all 431 vehicles is now April 2012.

Acceptance testing of the initial logistic vehicle design has now been completed. Minor design changes will be necessary to increase the ground clearance for production vehicles in 2010.

The contractor remains committed to the delivery of the 431 vehicles as contracted by April 2012; however, Defence assesses this as a high risk as the required ramp-up of production relies on the contractor further enhancing the capacity of its new facilities at Williamstown, Victoria, and Wingfield, South Australia, and improving the performance at Bandiana, Victoria, in sufficient time to meet the vehicle assembly line output requirements.

Bushmaster Protected Mobility Vehicle - Project Bushranger—LAND 116 Phase 3

All 300 vehicles under the original acquisition contract plus 144 Enhanced Land Force vehicles have been delivered. Delivery of the 293 Bushmaster vehicles for Land 121 Overlander Phase 3 commenced in April 2009 and 66 vehicles have been delivered. The deliveries are on schedule to be completed as programmed by June 2012. The tender for the provision of up to 184 Protected Mobility Vehicle-compatible trailers to meet an element of Land 121 Overlander Phase 3 has been evaluated and the tenderer has been advised of the outcome.

The rapid acquisition, approved by the Government in 2007, of 72 protected weapon stations, 116 automatic fire suppression systems and 116 purpose designed spall curtains is complete. There have been subsequent urgent acquisitions in support of operations which are being managed through the Bushmaster sustainment area.

Key risk to the project is the requirement for sustained towing of a trailer will have some impact on the operation of the vehicle, which may require restrictions placed on the use of the vehicle when towing. This risk will be managed by conducting interoperability tests on similar trailers and modelling to evaluate the impact.

Overlander Field Vehicles—LAND 121 Phase 3

Contract signature for the medium/heavy capability is due in late 2011 and first delivery is due in late 2013.

Key project risks are the requirement to integrate new generation communications equipment into the light/light weight vehicles and modules prior to capability delivery may impact on cost and schedule. The medium/heavy capability basis of provisioning will be affected by industry prices, resulting from the tender refresh process.

Airborne Early Warning and Control System

Airborne Early Warning and Control Aircraft—AIR 5077 Phase 3

The sub-contractor, Boeing Defence Australia, is scheduled to complete the modification programs for the remaining three aircraft in March, April and September 2010. Construction of the main Tindal facilities is now scheduled for completion in February 2011.

The risk rating for the project remains high. The major risks to the project relate to integrated system maturity, notably radar and electronic support measures technical maturity, ongoing software development and the test and evaluation completion. These risks are being actively managed through close interaction between the Commonwealth and the contractor under the Deed.

125


Explosive Ordnance Division

Mulwala Redevelopment Project—JP 2086 Phase 1

Practical completion of the new propellant manufacturing facility at Mulwala is expected to slip from March 2010 to August 2010 commensurate with delays experienced at the commencement of construction due to design issues. Certification of ammunition in the new plant is expected to be completed by mid 2013.

Lightweight Torpedo Replacement—JP 2070 Phase 3

Due to a delay in the delivery of the early proof of capability of the Mark II torpedoes under Phase 3, Eurotorp offered several options to the Commonwealth to ensure the capability will be delivered on schedule. The Chief of Navy endorsed a mix of European production line Mk I torpedoes and Australian assembled Mk I and Mk II torpedoes. Commissioning and set to work of the commercial processes related to the Australian production of torpedo components and associated equipment has been completed. The Commonwealth is currently overseeing the factory acceptance testing of Australian produced Mk II Prime items.

Bridging Air Combat Capability Weapons – AIR 5349 Phase 2

The Project is currently focused on delivery of IOC weapons requirements to support declaration of Super Hornet IOC in December 2010. This involves the procurement of AIM-9X missiles, infra-red countermeasure flares and Joint Stand-Off Weapon (JSOW) C stocks. An Foreign Military Sales (FMS) case for JSOW C-1 weapons has now been established, with delivery scheduled in 2012 to support Super Hornet Final Operational Capability in December 2012.

Follow-on Stand Off Weapon—AIR 5418 Phase 1

The Project is acquiring the AGM-158 Joint Air-to-Surface Standoff Missile (JASSM) for integration onto the F/A-18 A/B aircraft to improve weapon terminal effectiveness against well defended targets. The project is to deliver an IOC in 2010 to engage fixed and relocatable land targets. Flight clearance testing to authorise the Australian F/A-18 A/B aircraft to carry the JASSM is now complete. The USN are continuing integration testing of the JASSM into the F/A-18A/B Operational Flight Program, with a number of flight tests being conducted.

Evolved Sea Sparrow Missiles – SEA 1428 Phase 4

The Original Equipment Manufacturer, Raytheon Missile Systems, has suffered production problems for the Evolved Sea Sparrow Missile, resulting in delays to the delivery of Australia’s remaining weapons. Production recovery measures implemented by Raytheon have addressed this problem. Delivery of missiles and canisters are now expected to commence in 2011, with final delivery in 2013.

New Air Combat Capability

Detailed Analysis and Acquisition Planning—AIR 6000 Phase 1B

Analysis and planning continues for acquisition of around 100 F-35 Joint Strike Fighter (JSF)'s as Australia's new air combat aircraft. A major focus of the project team's effort has been to complete the Second Pass submission for NACC Phase 2A/B and complete consultation within Defence and with Central Agencies. The JSF Program continues to make generally good progress and while currently there are no major technical issues, cost and schedule pressures do exist. The NACC project, however, has considerable buffer to address both cost and schedule issues. Public consultations continue on the potential environmental impacts from the JSF's introduction and increased JSF work for Australian industry is being pursued with some recent successes.

126


Human Resources and Corporate Services

Improvements to the Logistics Information Systems—JP 2077 Phase 2B.1 ADF Deployable Logistics Systems—JP 2077 Phase 2B.2

Phase 2B.1 will replace the core of the Standard Defence Supply System. The application has completed Defence functional testing and meets Defence functional requirements. Integration and performance testing is underway. The system Go-Live date is now planned for 1 July 2010. The Go-Live date has been adjusted to the end of the financial year to ensure training proficiency and data transition, especially for asset and stock take data, is optimised. The revised Go-Live date will allow the Defence one and two year stock take cycles to be reset and replanned in the new system at the end of the financial year.

Phase 2B.2 will deliver deployable logistics capabilities and in-transit visibility of items in the supply chain. A revised contracting approach for Phase 2B.2 builds on the lessons learned from Phase 2B.1 and mitigates the Phase 2B.2 risks through a solution definition phase which will be completed in 2010. Mincom has committed to deliver the full Phase 2B.2 capability through an integrated commercial off-the-shelf solution built on the JP 2077 Phase 2B.1 solution.

127

ancial years) riation

$m

Status Report

0 All Litening Pods have been delivered and are in service. Flight clearances are yet to be delivered to allow full use of the pods. Phase 2.4 continues to deliver capability within budget.

0 The AP-3C upgrade is complete and in service. Two outstanding elements are to address deficiencies in the Acoustic System performance and Radar spares. Developmental aspects are nearing completion and installation contracts have been awarded.

0

-8

-1

Defence has developed an alternative capability option and acquisition strategy for consideration by the Government. All four C-17 aircraft are in service with the Air Force. All four aircraft are operating in an air logistics support role (personnel and cargo transport) and have also operated in the high-dependency patient aero-medical evacuation role. Expansion to other roles, including air drop and air-to-air refuelling, will occur progressively during 2009-11. A C-17 aircrew training simulator will be commissioned at RAAF Amberley in November 2009. Project activity and expenditure during 2009-10 is based on implementing the P-8A Spiral 1 Cooperative Development MoU with the USN, and commencing the development of the production, sustainment and follow-on development MoU for later P-8A acquisition. The budget variation is due to foreign exchange rate movement.

Defence P


stimates S

tatements 2009-10

128
Table 84: Current status of previously reported Top 30 Projects (projects reported in the last five finProject
number Last

Financial year

reported in Top 30

Approved project

expenditure

$m


to 30 June 2009

$m

Budget Estimate

2009-10 $m

Revised Estimate

2009-10 $m

Va

Aerospace Systems Hornet Upgrade Project – Target Designation System

AIR 5376 Phase 2.4

2006-07 151 107 12 12

P–3C Update Implementation

AIR 5276 Phase 2

2007-08 908 869 5 5

Airborne Surveillance for Land Operations

C-17 Globemaster III

Maritime Patrol and Response Aircraft System

JP 129 Phase 2

AIR 8000 Phase 3

AIR 7000 Phase 2

2008-09

2008-09

2008-09

141

1,864

151

2

1,307

15

0

16

21

0

8

20

ariation Status Report

1 The capability has been delivered and accepted into service. Project closure will occur in 2010-11.

-1 All prime equipment has been delivered. The Australian Light Armoured Vehicle (ASLAV) Surveillance prototype is undergoing test and evaluation. Crew Procedural Trainer has been introduced into service and a through-life support contract is being established. Extensions to ASLAV hangars and support facilities are being managed by Infrastructure. Division. Variation is due to delays in the establishment of the Crew Procedural Trainer through-life support contract.

$m

Defence M


129

Project Last Approved Cumulative Budget Revised Vnumber Financial project expenditure Estimate Estimate

year expenditure to 30 Junereported 2009 2009-10 2009-10

Strategic Air Lift Capability

AIR 5216 Phase 1

2005-06 1,048 1,023 0 1

Land Systems Australian Light Armoured Vehicles

LAND 112 Phase 3

2005-06 687 590 6 5

in Top 30 $m $m $m $m

on Status Report

m 2 The variation is due to:

- approved additional gun tractor module safety enhancements; and, - procurement and installation of additional insulation and air conditioning kits to complete the Mack Noise Reduction segment of the project. Bulk Liquid Tankers – Project has been completed and closed. Heavy Recovery Vehicle - Project has been completed and closed. Land Rover Handling Upgrade – Project has been completed and closed. Mack In-Cabin Noise Reduction. ($14.0m) -In contract, due for completion in October 2010. Unimog & Mack Gun Tractors Passenger/ Cargo Restraint & Separation ($11.4m) - All modules delivered, project due for completion by the end of 2010. Land Rover Safety Improvements ($23m) - Modification of the regional force surveillance and the fitted for radio variants with a personnel/cargo restraint, Segregation and Rollover system. The regional force surveillance component is due for completion in 2010. The fitted for radio component has been removed from the project scope due to inability to find a ‘value for money’ technical solution.

1 Project is on schedule and within budget. All major capability platforms have been delivered and are in service. Current focus is on tender evaluation for the through-life support contract, Leopard tank disposal and the acquisition of Tank Urban Survivability Kits.

Defence P


stimates S

tatements 2009-10

130

Project Last Approved Cumulative Budget Revised Variatinumber Financial project expenditure Estimate Estimate

year expenditure to 30 Junereported 2009 2009-10 2009-10

in Top 30 $m $m $m $m $General Service Field LAND 121 2005-06 94 63 4 6 Vehicles – Overlander Phase 2

Tank Replacement LAND 907 2007-08 572 430 15 16 Project Phase 1

Budget Estimate

Revised Estimate

Variation Status Report

2009-10 2009-10 $m $m $m

15 13 -2 Variation is due to a work scope reduction; and rescheduling of repair work until ship availability in 2010-11.

12 12 0 Installation in HMAS Farncomb is complete and Farncomb achieved Initial Operational Release on 16 September 2009. Installation in HMAS Dechaineux and Sheean is progressing satisfactorily, dependent on the docking schedule.

26 40 14 Variation is due to the early delivery of Ship 3 combat management system.

6 13 7 Variation is due to resolution of technical issues which permitted work to proceed ahead of schedule.

8 9 1 The variation is due to advance purchases of logistic products from 2010-11 and additional ship design/modification costs.

25 26 1 Variation reflects ratification of forward estimates in the costed response; and slight slippage from 2007-08.

6 5 -1 The rectification of outstanding Integrated Logistics Support issues are currently underway and are coming in under budget.

Defence M


131

Project number

Last Financial

year

Approved project

expenditure


to 30 Junereported 2009

in Top 30 $m $m Maritime Systems Anzac Ship Project SEA 1348

Phase 2 2007-08 5,379 5,348

Collins Replacement SEA 1439 2007-08 457 415 Combat System Phase 4A

Anzac Ship Anti-Ship SEA 1448 2007-08 376 172 Missile Defence Phase 2A

Armidale class patrol boat SEA 1444 2007-08 535 472 Phase 1

Ships Self Defence SEA 1779 2007-08 53 38 Capability - RAPID Phase 1 Acquisition Collins class Submarine SEA 1439 2008-09 405 275 Reliability and Phase 3 Sustainability Amphibious Vessels Maritime Operations SEA 1654 2006-07 142 132 Support Capability Phase 2A

tion

$m

Status Report

2 Installation of the last maritime terminal on HMAS Anzac was completed in September 2009, with some delays experienced due to ship's availability. Two maritime terminal logistics products will be completed in the first quarter of 2010. The transition of the system to the in-service phase is scheduled in December 2009. The project remains on budget and schedule, with project closure anticipated in mid 2010.

1 Variation relates to a number of small requirements relating to the support environment of this capability, prior to the commencement of project closure.

22 Budget Estimates were pessimistic based on past contractor performance and progress of delay dispute negotiations; the dispute was resolved in April 2009 and the Contractor is now overachieving on a revised formal schedule.

-1 Variation of $1m relates to a milestone being slipped from 2009-10 due to acceptance issues with the proposed deliverables.

24 The variation is mainly due to the Government approving a real cost increase in March 2009 for the acquisition and introduction into service of the Advanced Field Artillery Tactical Data System.

1 The Seasprite project was cancelled in March 2008.

Defence P


stimates S

tatements 2009-10

132

Project number

Last Financial

year reported

in Top 30

Approved project

expenditure

$m


to 30 June 2009

$m

Budget Estimate

2009-10 $m

Revised Estimate

2009-10 $m

Varia

Electronic Systems MILSATCOM Terrestrial Infrastructure

JP 2008 Phase 3E

2007-08 211 198 5 7

Jindalee Radar Network JP 2025 Phase 3 & 4

2006-07 1,249 1,230 7 8

High Frequency Modernisation

JP 2043 Phase 3A

2008-09 658 373 17 39

Explosive Ordnance Lightweight Torpedo Replacement

JP 2070 Phase 2

2006-07 347 213 9 8

Explosive Ordnance Reserve Stocks

JP 2085 Phase 1B

2008-09 238 166 18 42

Helicopter Systems Anzac Ship Helicopter SEA 1411

Phase 1 2006-07 1,119 953 0 1


2009-10 Revised

budget $’000

2008-09Actuals

$’000

2010-11 Forward

year 1 $’000

2011-12 Forward

year 2 $’000

2012-13 Forward

year 3 $’000


(Appropriation Bill No. 1) - 554,057 553,579 580,997 607,034 Special account expenses:

Defence Materiel Special Account 4,761,662 4,707,314 4,441,950 4,575,879 4,725,250 Expenses not requiring appropriation

in the Budget year 10,706 10,706 10,706 10,706 10,706 Total program expenses 4,772,368 5,272,077 5,006,235 5,167,582 5,342,990

Program 1.2: Management of Capability Sustainment



The revised planned resources use for Program 1.2 is $5,272.1m in 2009-10 which now represents about49 per cent of the DMO’s total expenses.

The revised planned resource use for Program 1.2 includes:

• direct appropriation of $554.1m relating to Sustainment workforce and operating expenses • the cost of contracted services to Defence of $3,879.6m • support for current operations of $595.0m • the DMO Personnel and Operating Costs of $162.7m in support of new capabilities expected to

enter into service • support for foreign government activities of $70.0m • resources received free of charge from Defence of $10.7m.

The Smart Sustainment initiative consists of reforms in the provision of maintenance, inventory management and the purchase of non-equipment items such as clothing, fuel and explosive ordnance. The initiative is being rolled out by the DMO and the three Services with savings growing progressively across the decade. The savings are anticipated to reach in excess of $500m per year within four years and will total approximately $5,500m by 2019. These savings have been earmarked for reinvestment in current and future capabilities.

Table 85: Program 1.2 Management of Capability Sustainment

Program Deliverables The changes to the detailed descriptions of deliverables for the Top 20 DMO sustainment products are provided under the sustainment descriptions below.

Program Key Performance Indicators There has been no change to the program Key Performance Indicators for Program 1.2 since the Portfolio Budget Statements 2009-10.

133

ation

ign exchange rate movement. These figures represent the Super Hornet operations, which assumed sizeable set-up costs quired. The project has initiated action to adjust the current ich reflects that Super Hornet will only operate for a few hundred ear in a scaled ramp-up to full operational capability. nge rate movement. nge rate movement. te movements are the leading driver for this budget variance, in secondary costs attributions. -In fighter reduction in budget is due to variation in foreign ment and contract savings. gnment for planned withdrawal date. ign exchange rate movement, offset by a $7.861m increased rate of effort.

butable to foreign exchange rate movement and the savings ially offset by the receipt of additional funding for the sive ordnance for the Super Hornet aircraft and New Policy as part of the Defence White Paper 2009.

s delivering savings as part of the concerted effort by both the find cost savings measures as part of the SRP.

recast rate of effort. ystem not yet reaching maturity.

d cost of maintaining obsolete repairable items, and the f life of type purchases to ensure capability is maintained to the ate.

Defence P


stimates S

tatements 2009-10

134
Table 86: Top 20 sustainment products by forecast expenditure in 2009-10 Budget
estimate 2009-10

$m

Revised estimate 2009-10

$m

Variation

$m

Explanation of Vari

Aerospace Systems F/A-18 Block II Super Hornet 133 104 -29 Primarily due to fore

original estimate for that are no longer rebudget allocation, whhours this financial y

P-3C/AP-3C Orion Weapons System 133 120 -13 Due to foreign exchaF/A-18 Hornet Weapons System 129 119 -10 Due to foreign exchaC-130J-30 Weapons System 111 97 -14 Foreign exchange ra

along with reductionsLead-in Fighter Hawk 127 Weapons System 96 86 -10 The majority of Lead

exchange rate moveF-111 Weapons System 87 85 -2 Due to contract realiC-17 Globemaster III 68 58 -10 Primarily due to fore

supplementation for Explosive Ordnance Explosive Ordnance - Navy, Army, Air Force 345 330 -15 The reduction is attri

reform program, partprocurement of exploProposals approved

Electronic Systems Wide Area Surveillance Capability 73 71 -2 Relates to contractor

DMO and Industry toHelicopter Systems MRH-90 127 101 -26 Due to lower than foArmed Reconnaissance Helicopter Weapons System

107 94 -13 Due to the support s

S70B-2 Seahawk Weapons System 85 77 -8 Black Hawk S70A-9 84 106 22 Reflects the increase

additional expense oplanned withdrawal d

iation

tions funding required in 2009-10, as the remediation of some omplete until 2010-11and decrease to indirect support costs that across a broader base of Land-managed assets. t has reduced to reflect the correct attribution of 2009-10 The decrease has no impact on the capability being delivered to

RP savings realised in 2009-10.

arily to foreign exchange rate movement adjustments and mption.

rice and foreign exchange rate movement. a reduction in inventory purchases. lt of increased operations funding and foreign exchange rate

Defence M


135

Budget Revised Variation Explanation of Varestimate estimate 2009-10 2009-10

$m $m $m Land Systems B Vehicles 134 122 -12 Reduction in Opera

vehicles will not be chave been attributed

ADF Clothing and Equipment 116 91 -25 The clothing forecasOperations funding.the ADF.

Commercial Vehicle Fleet 77 69 -8 Variation is due to SMaritime Systems Fuels and Lubricants - Navy, Army, Air Force 476 456 -20 Variation is due prim

reduced Navy consuCollins class Submarines 329 349 20 Variation is due to pAnzac class frigate 231 214 -17 Variation relates to Adelaide class frigate 105 103 -2 Variation is the resu

movement. Sub-total - Top 20 Sustainment Products 3,046 2,852 - 194 Other Approved Product Estimate 1,570 1,623 53 Total Funds Available 4,616 4,475 -141

Note 1. The figures in the table above include baseline sustainment funding and support for ADF operations.


TOP 20 SUSTAINMENT PRODUCT DESCRIPTIONS

Information relating to the following sustainment products remains as reported in the Portfolio Budget Statements 2009-10.

• Fuels and Lubricants – Navy, Army, Air Force – Maritime Systems. • Anzac class frigate – Maritime Systems. • Adelaide class frigate – Maritime Systems.

Updated information on the Top 20 Sustainment Products Information remains as reported in the Portfolio Budget Statements 2009-10, except for the following:

Aerospace Systems Division Description as reported in the Portfolio Budget Statements 2009-10.

Aerospace System Products

F/A -18/F Block II Super Hornet

The Super Hornet aircraft will be based at RAAF Base Amberley in South-East Queensland. Support arrangements are being established utilising services available through the USN FMS system, and through direct commercial contracts in Australia. Three FMS cases have now been established to provide spares and repair services. Two contracts are currently being negotiated for the provision of maintenance and sustainment services, and training device maintenance and aircrew instructional services. These contracts establish an Australian support base with the majority of work being performed in Australia. The support arrangements are being progressively matured to support the arrival of the first four aircraft in the second quarter of 2010.

P-3C/AP-3C Orion Weapons System

The AP-3C continues to participate in Operations Slipper and Resolute, with the commitment to Operation Resolute increasing.

F/A-18 Hornet Weapons System

As the Hornet aircraft ages, significant effort continues in developing an enduring ageing aircraft remediation strategy which will include wings, aircraft structures, undercarriage, general deeper maintenance and obsolescence management.

C-130J-30 Weapons System

The C-130J fleet consists of 12 aircraft and one Level 5 simulator. The DMO is currently transitioning to a through-life support contract with Australian Aerospace to replace the existing support contracts; transition will be complete by end March 2010. The C-130J aircraft continue to provide critical support to operations. Equipment obsolescence is a key support risk for the C-130J. This risk will be primarily managed by the new through-life support contractor, and in cooperation with international C-130J users via the C130J Block Upgrade Program.

Lead-In Fighter Hawk 127 Weapons System

Limitations on engines due to component defects found by other Hawk aircraft international operators have limited ADF training support. A warranty remediation program is well underway.

F-111 Weapons System

The F-111 will reach its planned withdrawal date on 31 December 2010. The most recent and last F-111 Airworthiness Board reconfirmed that the technical airworthiness of the F-111 continues to be well maintained.

136


C-17 Globemaster III

Sustainment of the four aircraft C-17 fleet has continued to develop and the mature rate of effort is now expected to be achieved in 2011-12 based on current Air Force plans. Lay-in of spares and support equipment is still continuing, and development of infrastructure for C-17 operations and training systems is well underway.

Explosive Ordnance Division

Description as reported in the Portfolio Budget Statements 2009-10.

Explosive Ordnance Product

Explosive Ordnance —Navy, Army, Air Force

The ability to provide munitions products in the required quantities to the Navy, Army and Air Force continues to be impacted by high global demand. Price increases due to this high demand are being encountered and the Division continues to explore opportunities for greater local manufacturing in an effort to reduce supply chain risks and costs.

Electronic Systems Division

In-service support of Air Traffic Control (ATC) systems continues with improving levels of availability and quality of service. Engagement with Airservices Australia on the ATC harmonisation program continues to develop. Delivery of new transportable air operations towers and improved navigational aids will enhance the support of the ATC capability. Rationalisation of the management and improvement in the efficiency of ATC through-life support continues with the instigation of a new major contract.

The in-service support arrangements for the Air Defence Ground Environment equipment continues with the Mobile Control and Reporting Unit, including a Tactical Air Defence Radar System, having recently returned from the Middle East Area of Operations in support of Operation Slipper. Planning is underway to remediate the capability during 2010-11 following the extended deployment. The roll out of Project Vigilare into the Regional Operation Centre and subsequent transition to sustainment support continues with North Regional Operation Centre being the first site to be fitted out.

Electronic Systems Products

Wide Area Surveillance Capability

Wide Area Surveillance continues to provide support to the Government in many areas including successful detection and tracking of targets of interest.

Wide Area Surveillance sustainment effort is focussing on finding and delivering savings to meet the requirements of the Smart Sustainment stream of the SRP. This will involve significant input from Defence, the DMO, DSTO and Industry. Industry has already committed to some savings measures and has put forward a number of additional opportunities to be investigated over the remainder of the financial year.

Helicopter Systems Division


Helicopter System Products

MRH-90

Eight MRH-90 helicopters have been accepted and are based with the Army’s 5th Aviation Regiment in Townsville. A further four MRH-90 helicopters are expected to be delivered by December 2009.

137


Training for Army and Navy aircrew, maintenance and support personnel is being conducted in purpose-built training facilities in Townsville. MRH-90 flying rate of effort has been significantly less than expected and this has resulted in delays to aircrew training and certification. The flying rate is expected to increase as the MRH-90 support systems mature and aircraft reliability is improved by the manufacturer.

Armed Reconnaissance Helicopter Weapons System

Sixteen aircraft have been accepted and in excess of 4,900 hours flown. The mature configuration aircraft are now being fielded in Army’s 1st Aviation Regiment, Darwin. This unit has already fired Hellfire missiles and the gun, proving the combat capabilities of the ARH Tiger. The DMO and the contractor have been focussed on improving the flying hour rate of effort to the required level by continuing to mature the support system.

S70B-2 Seahawk Weapons System

The increased difficulty of supporting obsolete items on Seahawk is being closely managed in order to maintain the required available aircraft until replacement by Project AIR 9000 Phase 8.

Black Hawk S70A-9

The high operational employment of US Army Black Hawks and consequent parts usage has significantly extended the turnaround times on overseas repair and overhaul of Australian Black Hawk components. In conjunction with increased difficulty in supporting obsolete systems, this has increased the cost of sustaining the Black Hawk fleet. Early life-of-type purchases of spares are being made to ensure sustainability until the planned withdrawal date.

Land Systems Division


Land Systems Products

B Vehicles

There are approximately 11,997 vehicles and trailers under management. Seventy nine vehicles (predominately All Terrain Vehicles and Motorcycles) have been disposed of during the intervening period.

ADF Clothing and Equipment

The 5th edition of the ADF Clothing and Personal Equipment Procurement Plan 2010-2014 was released on 1 July 2009. This plan outlines the significant tendering activities to meet the ADF’s clothing requirements, and along with the six-monthly clothing industry forums continues to foster relationships with the textile clothing and footwear industry. In addition to the plan, a key initiative in 2009-10 will be an open tender to establish a prime vendor for non-combat clothing based on three work packages for the provision of general duty and ceremonial uniforms, sports wear and commercial work wear.

Commercial Vehicle Fleet

A reduced procurement of 1,584 vehicles is now planned for 2009-10 in line with significant SRP initiatives including extending the life of type of most commercial vehicles. The major risk to be mitigated is the declining values for used vehicles, which impacts the projected revenue target for the planned sale of 1,425 vehicles. The disposal of 2,113 vehicles was against a planned acquisition of 2,263 vehicles. With the SRP initiatives being instigated in 2009-10 and a reduction of Base funding of $9.5m ($38m over four years), only 1,584 commercial vehicles are being acquired and 1,425 vehicles being disposed of this financial year.

138


Program 1.3: Provision of Policy Advice and Management Services

2008-09 Actuals

$’000

2009-10 Revised budget

$’000

2010-11 Forward

year 1 $’000

2011-12 Forward

year 2 $’000

2012-13 Forward

year 3 $’000


(Appropriation Bill No. 1) 67,131 90,717 89,736 91,339 81,315 Special account expenses:

Defence Materiel Special Account - 1,981 996 1,000 1,004 Expenses not requiring appropriation in the

Budget year Total program expenses

8,355 8,355 8,355 8,355 8,355 75,486 101,053 99,087 100,694 90,674

Maritime Systems Division

Description as reported in Portfolio Budget Statements 2009-10.

Maritime System Products

Collins class Submarines

In June 2009, a series of defects impacted submarine availability. A maintenance remediation plan is being implemented and incorporates development of a new support contract with ASC Pty Ltd.



The revised planned resources use for Program 1.3 is $101.1m in 2009-10 which now represents about one per cent of the DMO’s total expenses.

The planned resource use for Program 1.3 includes:

• direct appropriation of $90.7m for policy advice and management services • resources received free of charge from Defence and ANAO of $8.4m • other revenue of $2.0m.

Table 87: Program 1.3 Provision of Policy advice and Management Services

Program Deliverables

There has been no change to the program deliverables since the Portfolio Budget Statements 2009-10.

Program Key Performance Indicators

There has been no change to the program Key Performance Indicators for Program 1.3 since the Portfolio Budget Statements 2009-10.

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Section 3: Explanatory Tables and Budgeted Financial Statements

3.1 Explanatory Tables

Estimates of special account flows Special accounts provide a means to set aside and record amounts used for specified purposes. Table 13 shows the expected additions (receipts) and reductions (payments) for each account used by the DMO. The corresponding table in the Portfolio Budget Statements 2009-10 is Table 71.

Table 88: Estimates of special account flows Outcome Opening

balance 2009-10

2008-09 $'000

Receipts

2009-10 2008-09

$'000

Payments

2009-10 2008-09

$'000

Adjustments

2009-10 2008-09

$'000

Closing balance 2009-10

2008-09 $'000

Defence Materiel Special Account(D&A) 1 269,296

987,862 11,356,211

9,858,307 11,342,358 10,576,873

--

283,149 269,296

Other Trust Monies Special Account - Defence Materiel Organisation (T) [1] 1 383

694 -

309 -

620(383)

- -

383

Services for Other Entities and Trust Monies - Defence Materiel Organisation (T) [1] 1 -

-380 380

- 383 383

Total special accounts 2009-10 estimate 269,679 11,356,591 11,342,738 - 283,532

Total special accounts 2008-09 actual 988,556 9,858,616 10,577,493 - 269,679

(A) = Administered (D) = Departmental (T) = Trust Money for Comcare Receipts

Note 1. The balance of the Other Trust Monies Special Account was transferred to the Services for Other Entities and Trust Monies

Account in the 2009-10 financial year. The Other Trust Monies Special Account was subsequently closed.

140


3.2 Budgeted Financial Statements

Analysis of budgeted financial statements Revisions to the budgeted financial statements for the DMO since the Portfolio Budget Statements 2009-10 are presented in this section.

Budgeted financial statements

Budgeted income statement

A decrease in the DMO’s estimated income and expenditure for 2009-10 (-$1,125.5m) is largely a result of the movements as detailed below:

• adjustments due to foreign exchange rates movements (-$840.9m) • the re-profiling of major capital projects cash flow to the previous year (-$122.6m) • decreases predominantly in unapproved major capital investment (-$135.9m) • other adjustments (-$26.1m).

Budgeted departmental balance sheet

The balance sheet has been updated to reflect the 2008-09 audited financial statements and adjustments to the income statements as described above.

Statement of cash flows

The estimated cash flow has been updated to reflect the changes in the income statement and balance sheet as noted above and in particular:

• decrease in receipts from goods and services (-$1,199.1m) reflecting the foreign exchange rates movements, re-profiling of major capital cash flow and other adjustments

• changes to GST receipts (-$111.1m).

141


Table 89: Budgeted departmental Comprehensive Income Statement (Showing Net Cost of Services)

Revised budget

2009-10 $'000

Actual

2008-09 $'000

Forward estimate 2010-11

$'000


$'000


$'000 EXPENSES

Employee benefits 493,611 527,166 569,207 603,329 647,793 Supplier 9,172,926 10,194,987 10,452,674 10,595,157 9,537,894 Depreciation and amortisation 2,914 3,049 1,482 642 642 Write-down and impairment of

assets 932 - - - -

Foreign exchange Gains/losses 19,339 - - - -Other 3 - - - -

Total expenses 9,689,725 10,725,202 11,023,363 11,199,128 10,186,329

LESS: OWN-SOURCE INCOME Revenue

Sale of goods and rendering of services

9,537,019 9,712,201 9,977,562 10,103,045 9,046,257

Other revenue 86,716 70,000 70,000 70,000 70,000 Total revenue 9,623,735 9,782,201 10,047,562 10,173,045 9,116,257

Gains Other gains 42,094 42,094 42,094 42,094 42,094

Total gains 42,094 42,094 42,094 42,094 42,094 Total own-source income 9,665,829 9,824,295 10,089,656 10,215,139 9,158,351

Net cost of (contribution by) services 23,896 900,907 933,707 983,989 1,027,978

Appropriation revenue 94,960 900,907 933,707 983,989 1,027,978 Surplus (Deficit) 71,064 - - - -

142


Table 90: Budgeted departmental balance sheet (as at 30 June) Actual

2008-09 $'000

Revised budget

2009-10 $'000


$'000


$'000


$'000 ASSETS Financial assets

30,000 30,000 30,000 30,000 Cash and equivalents 45,811 Trade and other receivables 320,708 350,372 356,762 364,204 370,509

Total financial assets 366,519 380,372 386,762 394,204 400,509

Non-financial assets 8,045 8,045 8,045 8,045 Infrastructure, plant and equipment 8,045

Intangibles 4,765 4,765 4,765 4,765 4,765 Other 1,587,235 1,587,235 1,587,235 1,587,235 1,587,235

Total non-financial assets 1,600,045 1,600,045 1,600,045 1,600,045 1,600,045 Total assets 1,966,564 1,980,417 1,986,807 1,994,249 2,000,554

LIABILITIES Provisions

170,095 174,177 179,141 184,963 Employees 157,841 Total provisions 157,841 170,095 174,177 179,141 184,963

Payables Suppliers 1,123,549 1,123,549 1,123,549 1,123,549 1,123,549 Other 373,302 374,901 377,209 379,687 380,170

Total payables 1,496,851 1,498,450 1,500,758 1,503,236 1,503,719 Total liabilities 1,654,692 1,668,545 1,674,935 1,682,377 1,688,682 Net assets 311,872 311,872 311,872 311,872 311,872

EQUITY[1]

Parent entity interest Contributed equity 155,368 155,368 155,368 155,368 155,368 Retained surpluses or

accumulated deficits 156,504 156,504 156,504 156,504 156,504 Total parent entity interest 311,872 311,872 311,872 311,872 311,872 Total equity 311,872 311,872 311,872 311,872 311,872

1,707,474 1,713,864 1,721,306 1,727,611 Current assets 1,693,621 Non-current assets 272,943 272,943 272,943 272,943 272,943 Current liabilities 1,635,531 1,647,912 1,653,811 1,660,655 1,666,261 Non-current liabilities 19,161 20,633 21,124 21,722 22,421

Note 1. ‘equity' is the residual interest in assets after deduction of liabilities.

143


Table 91: Budgeted departmental statement of cash flows (as at 30 June) Revised budget

2009-10 $'000

Actual

2008-09 $'000


$'000


$'000


$'000 OPERATING ACTIVITIES Cash received

9,681,537 9,971,172 10,095,603 9,039,952 Goods and services 9,796,712 Appropriations 62,504 900,907 933,707 983,989 1,027,978 GST 626,456 667,103 684,035 693,397 623,929 Other 96,678 70,000 70,000 70,000 70,000

Total cash received 10,582,350 11,319,547 11,658,914 11,842,989 10,761,859 Cash used

512,313 562,817 595,887 641,488 Employees 478,775 Suppliers 10,087,783 10,152,893 10,410,580 10,553,063 9,495,800 GST - 667,103 684,035 693,397 623,929 Other 96 - - - -

Total cash used 10,566,654 11,332,309 11,657,432 11,842,347 10,761,217 Net cash from or (used by) operating activities 15,696 -12,762 1,482 642 642 INVESTING ACTIVITIES Cash used

Purchase of property, plant and equipment 2,004 3,049 1,482 642 642

Total cash used 2,004 3,049 1,482 642 642 Net cash from or (used by) investing activities -2,004 -3,049 -1,482 -642 -642 Net increase or (decrease) in cash held 13,692 -15,811 - - -

Cash at the beginning of the reporting period 32,119 45,811 30,000 30,000 30,000

Cash at the end of the reporting period 45,811 30,000 30,000 30,000 30,000

Table 92: Departmental statement of changes in equity — summary of movement (Budget year 2009-10)

Retained earnings

$'000

Asset revaluation

reserve $'000

Other reserves

$'000

Contributed equity/ capital

$'000

Total equity

$'000 Opening balance as at 1 July 2009

Balance carried forward from previous period

Adjustment for changes in accounting policies

Adjusted opening balance

156,504

-156,504

-

--

-

--

155,368

-155,368

311,872

-311,872

Surplus (deficit) for the period - - - - -

Total income and expenses recognised directly in equity - - - - -

Estimated closing balance as at 30 June 2010 156,504 - - 155,368 311,872

144


Table 93: Capital Budget Statement - Departmental Actual

2008-09 $'000

Revised budget

2009-10 $'000


$'000


$'000


$'000 ACQUISITION OF NON-FINANCIAL ASSETS

Funded internally from departmental resources[1]

TOTAL 2,003 3,049 1,482 642 642 2,003 3,049 1,482 642 642

Note 1. Includes the following sources of funding: annual and prior year appropriations; donations and contributions; gifts; finance;

leases; internally developed assets; s31 relevant agency receipts; proceeds from the sale of assets.

Table 94: Statement of Asset Movements (2009-10) Asset Category

Otherinfrastructure,

plant and equipment

$'000

Intangibles

$'000

Total

$'000

As at 1 July 2009 Gross book value 9,945 18,375 28,320 Accumulated depreciation/amortisation 1,900 13,610 15,510

Opening net book balance 8,045 4,765 12,810

CAPITAL ASSET ADDITIONS Estimated expenditure on

new or replacement assets By purchase or internally developed 1,487 1,562 3,049 Acquisition of entities or operations (including restructuring) sub-total 1,487 1,562 3,049

Other movements Depreciation/amortisation expense 1,487 1,562 3,049

-As at 30 June 2010 Gross book value 11,432 19,937 31,369 Accumulated depreciation/amortisation 3,387 15,172 18,559 Closing net book balance 8,045 4,765 12,810

Schedule of administered activity

The Administered Estimates have been published for the first time in the Portfolio Additional Estimates Statements 2009-10 following the publication of the administered actuals in the volume two of the Defence Annual Report 2008-09.

145


Table 95: Schedule of budgeted income and expenses administered on behalf of government (for the period ended 30 June)

Actual

2008-09 $'000

Revised budget

2009-10 $'000


$'000


$'000


$'000 INCOME ADMINISTERED ON BEHALF OF GOVERNMENT Revenue Non-taxation

8,098 7,000 7,000 7,000 7,000 Interest Total non-taxation 8,098 7,000 7,000 7,000 7,000 Total revenues administered on behalf of government 8,098 7,000 7,000 7,000 7,000

Total income administered on behalf of government 8,098 7,000 7,000 7,000 7,000

Table 96: Schedule of budgeted assets and liabilities administered on behalf of government (as at 30 June)

Actual

2008-09 $'000

Revised budget

2009-10 $'000


$'000


$'000


$'000 ASSETS ADMINISTERED ON BEHALF OF GOVERNMENT Financial assets

7 - - -

- -

Receivables Total financial assets 7 - - -

Total assets administered on behalf of government 7 - - - -

Table 97: Schedule of budgeted administered cash flows (for the period ended 30 June)

Actual

2008-09 $'000

Revised budget

2009-10 $'000


$'000


$'000


$'000 OPERATING ACTIVITIES Cash received

7,000 7,000 7,000 7,000 Interest 8,215 Total cash received 8,215 7,000 7,000 7,000 7,000

Net cash from or (used by) operating activities 8,215 7,000 7,000 7,000 7,000

Net increase or (decrease) in cash held 8,215 7,000 7,000 7,000 7,000

Cash at beginning of reporting period Transfers to other entities

(Finance - Whole of Government) 7,000 7,000 7,000 7,000 Cash at end of reporting period

8,215

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Notes to the Financial Statements

Departmental The notes on the budgeted Departmental financial Statements remain as reported in the Portfolio Budget Statements 2009-10.

Administered Interest collected by the DMO, for use by the Government rather than the DMO, is administered by nature. Collections are transferred to the OPA maintained by the Department of Finance and Deregulation. The schedules of administered items largely reflects the Government's transactions, through the DMO, with parties outside the Government.

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