The objective of this report was to provide the Auditor‐General’s independent assurance over the status of the selected Major Projects, as reflected in the Statement by the Secretary of Defence, and the Project Data Summary Sheets (PDSSs) prepared by Defence, in accordance with the Guidelines endorsed by the Joint Committee of Public Accounts and Audit.
Summary and Review Conclusion: The Major Projects Report
1. Major Defence equipment acquisition projects (Major Projects) continue to be the subject of parliamentary and public interest. This is due to their high cost and contribution to national security, and the challenges involved in completing them within the specified budget and schedule, and to the required capability.
2. The Australian National Audit Office (ANAO) has reviewed 26 of Defence’s Major Projects in this ninth report (2014–15: 25). The objective of the report is ‘…to improve the accountability and transparency of Defence acquisitions for the benefit of Parliament and other stakeholders.’1
3. The Capability Acquisition and Sustainment Group (CASG) within the Department of Defence (Defence), manages the process of bringing new capabilities into service.2 In 2015–16 CASG provided support to the Australian Defence Force (ADF) through the acquisition and sustainment of required military equipment and supplies3, and expended some $6.8 billion on major and minor capital acquisition projects.4
4. The February 2016 Defence White Paper established the Government’s priorities for future capability investment for the next 20 years and provided for additional spending of over $29 billion across the next decade. More recently, the Minister for Defence Industry announced an investment of $195 billion over the next decade, for building Defence capability.5
Major Projects selected for review
5. Major Projects are selected for review, based on the criteria included in the 2015–16 Major Projects Report (MPR) Guidelines (the Guidelines), as endorsed by the Joint Committee of Public Accounts and Audit (JCPAA).6 They represent a selection of the most significant Major Projects managed by Defence.
6. The total approved budget for the Major Projects included in this report is approximately $62.7 billion, covering nearly 58 per cent of the budget within the Approved Major Capital Investment Program of $107.4 billion.7
Conclusion by the Auditor-General
20. The Auditor-General was unable to provide an unqualified Independent Assurance Report as a number of matters were identified, in the course of the ANAO’s review, that resulted in the qualification of progress and performance as reported in two Project Data Summary Sheets (PDSSs).
21. The Guidelines define a project as the acquisition or upgrade of Specialist Military Equipment. The Guidelines provide that the scope of Defence reporting includes the performance of selected major equipment acquisitions and associated sustainment activities, where applicable.
22. The ARH Tiger Helicopters PDSS has been prepared on the basis of the Defence acquisition project12, which is narrower than the scope established in the Guidelines.
-- The Project Financial Assurance Statement in Section 1.2 of the PDSS reports that sufficient funding is available to complete the acquisition project. The statement does not address the significant caveats, capability deficiencies and obsolescence issues identified in the declaration of FOC, in April 2016.13 Additional funding for these elements would need to be provided separately to the acquisition project, the amount of which is unable to be quantified.
-- The project maturity score in Section 6.1 of the PDSS reports a total of 67 out of a maximum of 70 (95.7 per cent) at the end of the acquisition project. Noting the significant caveats, capability deficiencies and obsolescence issues at FOC, this score does not accurately or completely represent the project’s maturity as at 30 June 2016.
23. In addition, the following material inconsistencies have been identified in the forecast information:
-- Section 4.1 in the ARH Tiger Helicopters PDSS reports that materiel capability delivery performance is at 99.8 per cent, indicating that there is a high degree of confidence that materiel capability performance will be met. Expert analysis commissioned by Defence indicates that the program will remain incapable of fully meeting expectations relating to reliability, availability, maintainability and rate of effort.14
-- Section 4.1 in the LHD Landing Craft PDSS reports that materiel capability delivery performance is at 99 per cent, indicating that there is a high degree of confidence that materiel capability performance will be met. Evidence to support the estimated 99 per cent was not available during the review.
24. With the exception of the matters above, the Auditor-General concluded that ‘…nothing has come to my attention that causes me to believe that the information in the 26 Project Data Summary Sheets in Part 3 (PDSSs) and the Statement by the Secretary of Defence, excluding the forecast information, has not been prepared in all material respects in accordance with the 2015–16 Major Projects Report Guidelines (the Guidelines), as endorsed by the Joint Committee of Public Accounts and Audit.’
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