At ASPI’s Defence White Paper: from page to reality conference, I got to sum up the future challenges for the acquisition program. The most certain prediction I could make is that the program won’t ever be delivered. In fact, it’d be an outlier among Defence White Papers (DWPs) if it gets even close.
If we look at its six predecessors, Mark Thomson’s data shows that only DWP 2000 got (most) of the promised funding. But, as my previous analysis showed, a third of DWP 2000’s major capability announcements were cancelled, or significantly changed in scope. And it’s not finished yet—the air warfare destroyers and joint strike fighters are still to be delivered, and some of the helicopter projects are yet to reach full capability (and the Tiger armed reconnaissance helicopter never will).
It’s not surprising that even the best funded DWP didn’t completely translate into ADF capability. The intervening 16 years saw big changes in the external environment—DWP 2000 was written with the lessons of the 1999 Timor operation fresh in mind, but the delivery process was barely started on 11 September 2001. There have also been big swings (in both directions) in government revenues, rapid technological developments, and three major reviews of Defence acquisition. We can hardly expect the next 16 years to be any more predictable or linear than the previous 16, so we shouldn’t expect DWP 2016’s program to remain inviolate. What follows is my best guess at the challenges that lie ahead—my ‘known unknowns’, if you like.
Challenge #1 is economic pressures. The Turnbull government’s plan will deliver 2% of GDP to defence earlier than the Abbott government promised, but not because there’s more money. Instead, Treasury thinks GDP will be smaller in the 2020s than it thought a couple of years ago. If that trend continues (and economic projections have been falling for some years now), a future government might find itself with a bill for 2.5% of GDP to deliver the 2016 DWP—and it might have other priorities. Current governments can’t tie the hands of future ones (or even its own the following year). This year’s budget figures are bankable, the forward estimates (next three years) are suggestive, and everything further out is aspirational.
But let’s be optimistic and assume that the money will eventuate: Defence will have to spend $142.7 billion on capital acquisition in the next decade, compared to $76.6 billion in the previous (both figures in 2016 dollars). That brings us to the second challenge: at the moment, Defence doesn’t really have a functional project development and acquisition process. The First Principles Review implementation involves major organisational changes: the former DMO has been pulled back into the core of the business, and the former Capability Development Group has been scattered between the three Services and the VCDF. It also adds a new ‘Gate Zero’ into the Kinnaird two-pass process. (Cynics in Defence have been heard to say that the previous two-pass process has been simplified to a three-pass process.)
Gate Zero has plenty of potential to help, particularly in terms of getting a project into the Integrated Investment Plan. Intended to be a ‘quick look’ sanity check at the start of the process, it could result in proposals being fast tracked, including sole sourcing where appropriate, rather than chugging through a laborious competitive process. So far, so good. But it also looks like the First Pass process that Kinnaird (PDF) originally envisaged, before ‘pass creep’ set in and First Pass came to require supporting documentation and data that could take years to collate, with cost confidence unlikely to be achievable so early. For a major project such as the future submarine, that’s probably OK, but for many projects it’s overkill. When Mortimer (PDF) reviewed the Kinnaird implementation, in 2008, he lamented the slowness and again recommended streamlining simpler, less risky projects. Based on the number of approvals over the years, that hasn’t happened. The danger is that Gate Zero will become a third hurdle if Defence defaults to process (or is forced to by the central agencies). And there’s a real danger that many—if not all—of the projects already in the IIP that accompanies DWP 2016 will need to go through Gate Zero
Even when Defence’s internal deliberations are finished, the Defence Minister has to approve any project up to $20 million. The Defence and Finance Ministers have to approve projects over $20 million, and anything over $100 million—not a big number by Defence standards—has to go to the National Security Committee. Just how the NSC is going to deal with the number of defence projects in the forward program isn’t clear. There’s a clear case for raising the thresholds for Ministerial and NSC approval, as the First Principles Review suggested. Perhaps there’s also scope to increase funding available to the Capability Managers as part of the now overregulated ‘minors’ program—which has, thanks to a previous minister, been unnecessarily subjected to its own two-pass process.
I’ll come back in part 2 and look at some of the other challenges that lie ahead in the areas of industry, politics, technology and project management.