First principles review: one more round of external oversight

On 5 August, eleven months after coming to office, the government finally announced its long-promised First Principles Review of Defence. Although the review’s terms of reference have not been formally released, the minister effectively outlined them in a recent speech saying that the review would make recommendations to:

ensure that the Department of Defence’s business structures support the ADF’s principal tasks, as determined by the 2015 Defence White Paper, and other whole of government responsibilities out to 2030
ensure a commercially astute, focused and accountable materiel acquisition and sustainment capability
improve the efficiency and effectiveness of Defence
guide the implementation of recommendations from the Commission of Audit not otherwise covered above, and
ensure the ongoing delivery and reporting of agreed recommendations

It’s probably not wise to read too much into the points above. For example, it’s hardly likely that the Review will uncritically accept the recommendations of the National Commission of Audit (or let’s hope not). Nevertheless, the government’s goals are clear: make Defence efficient and effective, reform the Defence Materiel Organisation, and ensure that any recommendations are carried out.

The review will be headed by David Peever, ex-managing director of mining powerhouse Rio Tinto Australia (and newly appointed Cricket Australia Deputy Chairman). Assisting him will be ex-chief of army Peter Leahy, BAE Systems executive Jim McDowell, ex-defence minister Robert Hill and ex-finance minister Lindsay Tanner.

In the weeks ahead, I will post on many of the issues that fall within the terms of reference (along with a few that don’t). With a major review underway, it would be good to see a public discussion about how best to structure and manage the multi-billion dollar Defence enterprise. In the remainder of this post, however, I want to reflect on the practice of having external reviews of Defence and provide some background.

As the following timeline shows, successive governments have brought in outsiders to assist in the quest to create a more efficient and effective Department of Defence.

In 1989, Kim Beazley tasked ex-ASIO head Alan Wrigley to review civil support to the defence force. The result was the Commercial Support Program (CSP), which saw thousands of uniformed and civilian positions outsourced from Defence through the 1990s.

In 1996, Ian MacLauchlan initiated the Defence Efficiency Review (DER) chaired by CSIRO head Sir Malcolm McIntosh. The result was the Defence Efficiency Program (DRP) which accelerated the outsourcing of jobs, rationalised the defence estate, and established the current ‘shared services’ business model within Defence. The goal was to generate $1 billion dollars a year in savings.

In 2007, Brendan Nelson launched the Defence Management Review in the wake of the failed repatriation of Pte Jacob Kovco from Iraq. Headed by ex-state government bureaucrat and businesswoman Elizabeth Proust, the Review led to some additional deputy-secretary positions but not much more.

In 2008, Joel Fitzgibbon hired management consultant George Pappas to undertake the Defence Budget Audit (DBA). The result was the Strategic Reform Program (SRP), which made widespread but largely incremental reforms to Defence from 2009 to 2012 in an attempt to generate more than $20 billion in savings over a decade.

In 2011, Stephen Smith commissioned a raft of ‘cultural reviews’ following the Skype scandal at the Australian Defence Force Academy, all but one of which was headed by an external party. In the same year, Smith also commissioned a Review of the Defence Accountability Framework headed by ‘ethicist, theologian and strategic advisor’ Rufus Black.

Why has government after government felt it necessary to use external people to recommend changes to Defence? It’s not that the organisation lacks high-paid talent; on the contrary, the past decade has seen strong growth in civilian and military executive positions. More importantly, Defence often impresses; it routinely executes complex military operations at short notice, and is capable of formulating innovative policies such as the recently announced enhanced workforce model. So why doesn’t the government rely upon its principal advisors—the Secretary and Chief of the Defence Force—to sort things out.

To start with, there’s inherent value in seeking outside perspectives. The specialised nature of the work means that many people in Defence—especially in the military—have limited experience of the world beyond. External reviews bring external perspectives unavailable from within the organisation.

But to my mind the real advantage of an outside review is that it brings a degree of objectivity impossible for those engaged in the internecine politics of Defence. Everyone, by position or past, has a vested interest in protecting their part of the organisation. More generally, when it comes time to trim the accumulated fat from the body bureaucratic, there’s no point handing the scalpel to the patient. Let’s hope the newly appointed review team has a steady hand.

Mark Thomson is senior analyst for defence economics at ASPI. Image courtesy of Department of Defence.