Defence Annual Report 2006-07: Volume 2 - Defence Materiel ... · Airborne Early Warning and...

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CHAPTER 3 Outcome performance

Section 2

CHAPTER 4 People management

The DMO performance outcome is that ‘Defence capabilities are supported through efficient and effective acquisition and through-life support of materiel’. This underpins the role, responsibilities and relationships of the DMO through:

Output 1.1—Management of capability acquisition

Output 1.2—Management of capability sustainment

Output 1.3—Provision of policy advice and management services.

Output 1.1 manaGement Of capabIlIty acquISItIOn

Under Output 1.1, all the DMO divisions contributed to the delivery of equipment to the ADF.

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Within the next 15 years, over 80 per cent of the ADF’s warfighting assets will be replaced or upgraded. In order to meet this challenge the DMO is managing 215 major projects and over 200 minor projects. In the light of dynamic and changing military requirements, many of these projects were developed to satisfy demanding schedules with the added complexity of rapidly advancing technologies.

The planned resource use for Output 1.1 was revised from $5,017.6m to $4,565.9m in the Portfolio Additional Estimates Statements 2006–07. Both major and minor capital equipment projects are funded through this output.

Output 1.1 represented 52.9 per cent of the DMO’s expenditure in 2006–07; this compares with 51.9 per cent in 2005–06. Expenditure included the DMO’s costs in delivering acquisition services.

Table 3.1—Performance information: Output 1.1

Performance�indicator Planned�evaluation�of�performance Performance

Project scope, schedule and budget criteria, as agreed between the CEO DMO and the Defence customer, and expressed in the Materiel Acquisition Agreements.

Delivery of major and minor capital equipment projects against the Materiel Acquisition Agreement scope, schedule and budget criteria.

Substantially�achieved. The DMO achieved 92 per cent of the budget target for the major capital program. Delays in projects such as the M-113, Airborne Early Warning and Control Aircraft and Armed Reconnaissance (Tiger) Helicopter contributed to this underspend.

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Chapter�3�Outcome performance

Approved major capital equipment projects

In its role of acquiring and sustaining equipment for the ADF, the DMO manages the Approved Major Capital Investment Program (AMCIP) as well as a program of minor projects. The AMCIP consists of project elements that are funded from the Defence Capability Plan and transferred to the DMO following government approval. AMCIP projects are generally costed at $20m or more, although individual project phases within the Defence Capability Plan, such as studies or pre–second pass elements, can cost less.

Some projects have been delayed, which meant that the DMO did not meet its budgeted target for the AMCIP, including some high-profile projects—such as the M-113, Airborne Early Warning and Control Aircraft and Armed Reconnaissance (Tiger) Helicopter. Delays in projects were due to a number of factors that arose in both the pre-contract and contract performance stages. Delays of these kinds

are a feature of complex military projects worldwide. Despite the delays, the DMO increased its overall output. The total spend against AMCIP in 2006–07 was $3,773m. This was $112m above 2005–06 ($3,661m) an increase of three per cent.

The DMO’s 2006–07 budget included an estimate of funding of $229m for 27 projects that were expected to be approved by the Government in the year. In fact, only 24 new projects commenced in the period, and a total of $100m was spent. The new projects are shown in Table 3.28.

Top 30 projects as forecast in the Portfolio Budget Statements 2006–07

Table 3.2 and the descriptions that follow provide details of the top 30 projects by forecast expenditure in the Portfolio Budget Statements 2006–07. Expenditure for the top 30 projects represented 77 per cent of total expenditure on major capital equipment projects in 2006–07.

Table 3.2—Top 30 projects, by expenditure, as forecast in the Portfolio Budget Statements 2006–07

Project�nameProject�number

Approved�project�

expenditure[1]

($m)

Cumulative�expenditure�

to�30�June�2006

($m)

Budget�estimate�2006–07

($m)

Revised�estimate�2006–07

($m)

Actualexpenditure�

2006–07($m)

Variation�from�

revised�estimate�

($m)

Aerospace�Systems�Division

C-17 Globemaster heavy lift aircraft

AIR 8000Phase 3

1,919 386 795 677 746 69

F/A-18 Hornet Upgrade

AIR 5376Phase 2

1,509 943 210 158 165 7

F/A-18 Hornet Upgrade—Target Designation System

AIR 5376Phase 2.4

148 18 50 43 33 -10

F/A-18 Hornet Upgrade—Structural Refurbishment

AIR 5376Phase 3.2

877 41 53 44 56 12

ADF Air Refuelling Capability

AIR 5402 1,803 383 167 147 116 -31

Helicopter�Systems�Division

Additional Troop Lift Helicopter

AIR 9000Phase 2

3,564 227 183 360 329 -31

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outcome performance :�chapter�3

Table 3.2 continued



expenditure[1]

($m)



($m)


($m)


($m)


2006–07($m)

Variation�from�


($m)

Armed Reconnaissance (Tiger) Helicopter

AIR 87Phase 2

2,013 1,068 312 246 151 -95

Anzac Ship Helicopter (Super Seasprite)

SEA 1411Phase 1

1,006 940 64 9 7 -2

Airborne�Early�Warning�and�Control�Program

Airborne Early Warning and Control Aircraft (Project Wedgetail)

AIR 5077Phase 3

3,534 2,410 439 159 58 -101

Air�Warfare�Destroyer�Program

Air Warfare Destroyer Design Activity

SEA 4000Phase 2

479 51 141 141 135 -6

Aegis Combat System

SEA 4000Phase 3.1

1,299 – 219 94 150 56

Maritime�Systems�Division

Armidale Class Patrol Boat

SEA 1444Phase 1

556 251 182 207 149 -58

FFG Upgrade Implementation

SEA 1390Phase 2

1,497 1,021 74 91 48 -43

FFG Standard Missile (SM-1) Replacement

SEA 1390Phase 4B

600 38 96 77 66 -11

Anzac Ship Project SEA 1348Phase 2

5,376 5,232 87 72 87 15

Anti-Ship Missile Defence

SEA 1448Phase 2A

354 57 63 61 44 -17

Replacement Heavyweight Torpedo System for Collins class Submarines

SEA 1429Phase 2

435 164 51 25 26 1

Collins class Reliability and Sustainability Improvements

SEA 1439Phase 3

390 178 35 43 31 -12

Collins class Replacement Combat System

SEA 1439Phase 4A

452 298 47 56 54 -2

Land�Systems�Division

Main Battle Tank Replacement Project

LAND 907Phase 1

558 308 157 156 112 -44

Upgrade of M-113 Armoured Vehicles

LAND 106 617 195 118 8 13 5

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expenditure[1]

($m)



($m)


($m)


($m)


2006–07($m)

Variation�from�


($m)

Project Bushranger LAND 116Phase 3

516[2] 199 86 62 80 18

Electronic�and�Weapon�Systems�Division

Echidna—Electronic Warfare Self-Protection for Selected ADF Aircraft

AIR 5416Phase 2

304 88 62 59 40 -19

Lightweight Torpedo Replacement (MU90)

JP 2070Phase 2

331 142 45 38 19 -19

Lightweight Torpedo Replacement

JP 2070Phase 3

287 32 54 27 15 -12

Explosive Ordnance Reserve Stocks

JP 2085Phase 1B

209 71 49 53 44 -9

Jindalee Operational Radar Network

JP 2025Phases 3 and 4

1,247 1,180 45 32 47 15

Vigilare—New Air Defence Command and Control Systems for Control and Reporting Units—2CRU/3CRU

AIR 5333 259 95 32 10 10 –

Amphibious�Vessels

Maritime Operations Support Capability

SEA 1654Phase 2A

144 104 32 26 22 -4

New�Air�Combat�Capability

Joint Strike Fighter System Development and Demonstration—New Air Combat Capability

AIR 6000 213 147 30 28 26 -2

Total 32,496 16,267 3,978 3,209 2,879 -330

Notes1. Approved project expenditure amounts are on Portfolio Budget Statements 2007–08 price and exchange basis.2. Inclusive of Enhanced Land Force funding in 2007–08 budget.

Table 3.2 continued


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AIR�8000�Phase�3�–�C-17�Globemaster�III�Heavy�Lift�AircraftPrime contractor: The Boeing Company under a Foreign Military Sales (FMS) arrangement with the United States Government.

Phase 3 of this project provides a global heavy airlift capability. Four Boeing C-17 Globemaster III heavy lift aircraft and associated support and equipment will be acquired. This will significantly enhance the ADF’s ability to support national and international operations and major disaster rescue and relief efforts.

The first aircraft arrived in Australia on 4 December 2006, just nine months after government approval and seven months after signature of the FMS case with the US Government. The second aircraft was handed over to the RAAF on 11 May 2007, one month earlier than scheduled. The final two aircraft will be delivered by mid-2008. On completing transition, training, test and evaluation activities, the C-17 aircraft has obtained Australian Military Type Certification. A Service Release was signed by the Chief of Air Force on 15 August 2007; this allows the aircraft to begin an operational role for the RAAF.

The project to date is within budget, although it has exceeded its planned expenditure profile for 2006–07 as a result of the earlier than planned manufacture and delivery of the C-17 aircraft.

RAAF C-17 aircrew (pilots and loadmasters) and maintenance personnel are undertaking specific training with the US Air Force under a separate FMS arrangement. Initial training has been completed; follow-on training for additional aircrew and maintenance personnel will continue until December 2008. Logistic support packages are being provided through Australian participation in the Globemaster Sustainment Partnership with the US Government and Boeing.

Full operational capability will be achieved when the training systems, including an aircrew simulator, have been set up in Australia. This is not expected to occur before the end of 2011.

Table 3.3—Key risk: AIR 8000 Phase 3

Risk Risk�mitigation Status

Delivery of mature effective logistics support to allow sustained C-17 operations once all four aircraft have been delivered.

This risk is being managed by obtaining critical spares and support equipment incrementally and participating in the US Air Force–led Globemaster Sustainment Partnership.

The project is assessed as low risk, as shown by the record time in which the DMO acquired the aircraft.

Top 30 project descriptions

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AIR�5376�Phase�2�–�F/A-18�Hornet�UpgradePrime contractors:

Boeing (United States)—aircraft cockpit upgrade and electronic warfare (EW) upgrade

Raytheon Australia—Hornet aircrew training system

Raytheon (United States via FMS)—EW upgrade

Saab (Sweden)—EW upgrade

ELTA (Israel)—EW upgrade

United States Navy—EW upgrade

Boeing Australia Limited—integration.

This project involves upgrading the F/A-18 fleet to allow the aircraft to perform their air defence tasks more effectively. Situational awareness, radar, and electronic warfare self-protection capabilities will be improved. The situational awareness aspects include cockpit displays, a moving map, a helmet-mounted cueing system for the advanced short-range air-to-air missile, and improved datalinks.

The source selection and budget approvals for the electronic warfare self-protection elements concluded in 2006–07. The selected systems were:

radar warning receiver ALR-67 (V)3—Raytheon United States via FMS

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electronic counter-measures EL-L-8222—ELTA

supplementary counter-measures dispenser BOL-518—Saab

aircraft technical integration—Boeing United States

aircraft software integration—United States Navy.

The major project milestones achieved were the successful delivery and acceptance of the Hornet aircrew training system flight trainers and the interim operating capability for the Hornet upgrade Phase 2.2 elements.

The variation of $7m from the revised 2006–07 budget estimate was due to FMS case activity on the procurement of the ALR-67-(V)3 radar warning receiver.

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Table 3.4—Key risks: AIR 5376 Phase 2

Risks Risk�mitigation Status

Maintaining the fleet modification schedule with concurrent aircraft modifications and maintenance activities and allowing for ageing aircraft issues.

This risk was closely managed by the DMO and RAAF of the production schedule and implementation of several stand-alone production lines within the modification facilities.

The risks are assessed as low.

Developmental nature of the ALR 2002 radar warning receiver.

This risk was managed through the acquisition of the ALR-67(V)3, an off-the-shelf, low-risk item purchased through a US Navy FMS case.

Schedule for delivery and acceptance into service of the Hornet aircrew training system.

This risk has been reduced through close management with the contractor and the capability user.


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AIR�5376�Phase�2.4�–�F/A-18�Hornet�Upgrade—Target�Designation�SystemPrime contractor: Northrop Grumman (United States).

This phase of the project will replace the current AN/AAS 38A NITE Hawk forward-looking infrared with the Litening AT targeting system to provide the aircraft with improved detection, identification, precision targeting, damage assessment and ground force interoperability capabilities in strike and offensive air support operations.

The first pods were received in October 2006. Following completion of the initial integration test and evaluation in early 2007, a limited flight clearance was granted. An initial operational capability of 14 target designation systems, with demonstrated logistic support, was completed in June 2007. The project is on schedule to complete operational test and evaluation, and service release

in 2007–08. The sharing of targeting information with ground forces will be significantly increased through the procurement of a datalink capability for all pods, scheduled for delivery in mid-2008.

The variation of $10m under the revised 2006–07 budget estimate was due to Northrop Grumman updating laser ranging firmware prior to pod delivery and delays with US Customs.

Table 3.5—Key risks: AIR 5376 Phase 2.4


Failure of the contractor’s ability to gain necessary export approvals and assistance agreements.

This risk was managed by early engagement of likely contenders to verify export requirements and through early delivery of select components.

Risk is now retired.

Failure to integrate the Litening AT onto RAAF F/A-18 aircraft.

This risk was managed through early risk reduction testing, use of previous US Navy certification and a graduated approach to approval of the initial clearance.

Risk is reduced from medium to low.



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AIR�5376�Phase�3.2�–�F/A-18�Hornet�Upgrade—Structural�Refurbishment�Stage�2�(SRP2)—Centre�Barrel�ReplacementPrime contractors:

L-3 Communications MAS Inc (Canada)—non-recurring engineering/modification development

Boeing Australia Ltd (on behalf of the Hornet Industry Coalition)—Structural Refurbishment Program 1 (SRP1) Delta Production Installation Program

Boeing Australia Ltd (on behalf of the Hornet Industry Coalition)—SRP2 Production Installation Program. Contract signature is expected in December 2007.

This phase seeks to upgrade the Hornet fleet to ensure airworthiness through to the planned withdrawal date of 2015–18 and beyond. A key element of the project is to replace the centre barrel structure on nominated aircraft.

The prototype aircraft was returned from Canada in July 2007 for re-assembly in Australia. The test flight is scheduled for November 2007.

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The variation of $12m over the revised 2006–07 budget estimate was attributable to an FMS case payment for centre barrel procurement being brought forward.

Table 3.6—Key risks: AIR 5376 Phase 3.2


Availability of spare parts. All three risks were managed by continuing approximately five per cent of the total centre barrel program work in Canada. This gives the Australian-based contractor additional time to develop sustainable facilities and workforce plans.

Risk was reduced from high to low. The overall risk level for this project is low.Adequate facilities for the start

of full-rate production.

Sufficiently skilled workforce to carry out the aircraft modification in Australia.


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AIR�5402�–�ADF�Air�Refuelling�CapabilityPrime contractors:

EADS CASA—acquisition

Qantas Airways Ltd—through-life support.

This project will acquire five Airbus A330 multi-role tanker transport aircraft—to be known as the KC 30B in RAAF service—together with through-life support services, including engineering, maintenance, spares, technical data, software and training support for the fleet.

The acquisition contract was signed in December 2004; the through-life support contract was signed with Qantas in February 2007, with commencement aligned with acceptance of the first modified A330 aircraft. A change to the acquisition contract was approved in December 2006, for design changes to the cockpit layout and the consequential change to a two-phased conversion and test approach.

Phase 1 conversion activities began in June 2006, with the aircraft taken out of stress-free condition by removing the aircraft from jacks in February 2007. Ground testing commenced in March 2007 as

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planned. First flight was achieved on 15 June 2007, but Phase 1 flight testing is not expected to commence until October 2007.

The lower than expected expenditure in 2006–07 was due primarily to reprogramming of milestones and earned value payments as a result of the change to a two-phase conversion and test approach. The test readiness review is expected to occur by the end of October 2007 in support of commencement of Phase 2 test activities in early 2008.

The in-service date—for two aircraft, qualification tested and issued with military airworthiness certificates—remains as planned for late 2009.

Table 3.7—Key risks: AIR 5402


Qualification of the new refuelling boom system.

This risk is managed through the EADS-funded technology demonstration and qualification program for the new boom system, including flight testing on a converted A310 demonstrator aircraft. Delays in boom qualification have also been mitigated by the change to a two-phase conversion and test approach, whereby final qualification of the boom is not required until commencement of phase 2 flight testing.

The first flight of the A310 demonstrator with the boom deployed occurred in January 2007. The A310 demonstrator logged 35 test flights and more than 100 flight-hours by the end of April 2007 to clear the boom operating envelope. Further flight testing is planned for the remainder of 2007. The risk level remains at medium.

Development of the military mission systems.

This risk is being managed by progressive bench- and system-level testing and a high degree of project input to the review and ongoing development of the military mission system.

Bench-level testing on many elements has commenced. Additional measures, including increased Commonwealth input, have been implemented against critical systems to support software release in line with the aircraft test schedule. The risk level remains at medium.



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AIR�9000�Phase�2�–�Additional�Troop�Lift�HelicopterPrime contractor: Australian Aerospace.

Phase 2 of this project will acquire 12 multi-role helicopters (MRH-90) and support systems for the Army. On 30 June 2006, a contract change proposal to the project was signed for the procurement of an additional 34 helicopters to replace the Army Black Hawk (AIR 9000 Phase 4) and Navy Sea King helicopters (AIR 9000 Phase 6), bringing the total to 46 aircraft. The support contract negotiation was completed, and a contract change was signed on 31 October 2006. The support systems will include an electronic warfare self-protection support suite, ground mission management systems, a software support centre, instrumented aircraft with telemetry, up to three full flight and mission simulators and facilities infrastructure at Townsville, Oakey, Sydney and Nowra. An initial 10-year sustainment contract starts from the in-service date of 18 December 2007.

The first flight for an Australian MRH-90 was conducted on 28 March 2007. The first four aircraft will be manufactured in France; the remaining 42 will be assembled at the Australian Aerospace Brisbane facility initially established for the Tiger armed reconnaissance helicopter. The first fuselage for the Australian assembly line arrived in Brisbane on 26 March 2007.

The Navy initial operational capability of one aircraft at sea is planned for mid-2010; the Army initial operational capability of a troop of four aircraft is planned for late 2011.

The MRH-90 is at a far more mature state of development than the Tiger armed reconnaissance helicopter was at the same stage of the project. Although software-intensive (being totally fly-by-wire),11 there are fewer modifications required for the MRH-90 and it is a less complex helicopter. The lessons from the acquisition of the Tiger helicopter and the lessons of the introduction of the Eurocopter NH-90 aircraft into the German Army are being considered and, where appropriate, applied to the Australian program.

11. An aircraft flight control system that has electronic rather than mechanical controls.



Schedule delay due to qualification and engineering for certification.

This risk relates to finalisation of certification of the German NH-90 and approval of that documentation by the French Ministry of Defence Arms Procurement Agency (on behalf of the Australian Technical Airworthiness Authority) in time for the Airworthiness Board in November 2007. Mitigation is being achieved through the application of suitably qualified personnel, predominantly Professional Service Providers, to support design and certification.

The issue is under close management at senior executive level and a decision on ability to achieve the in-service date will be made late October 2007. This risk is assessed as high.

Delays to Indigenous training. This risk relates principally to the achievement of MRH-90 preliminary stage training and exists because it relies on the availability of aircraft in France to achieve the training objectives required for airworthiness certification. It is being managed by collaborative management of training priorities and air freighting (instead of shipping) the third and fourth MRH-90 to Australia in 2008 to increase their availability in France.

Training is proceeding as planned and achieving good results.This risk is assessed as medium.

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AIR�87�Phase�2�–�Armed�Reconnaissance�HelicopterPrime contractor: Australian Aerospace.

This project will provide Defence with 22 armed reconnaissance helicopters (ARH), a training system including simulation devices for aircrew and maintenance personnel, a software support facility, and a ground mission management system. The Government signed a 15-year support contract that commenced when the first two helicopters were delivered on 15 December 2004.

By August 2007, seven aircraft and four of the six ground training devices had been accepted. Fourteen aircraft are planned for acceptance by the end of 2007–08 and all of the aircraft by mid-2009. The full flight and mission simulator should be accepted in stages from December 2007, as it achieves increasing levels of capability.

Australia has now trained 12 ARH aircrew, including six instructors. On current planning, a further six instructors and two test crews will qualify by the end of 2007. The aircraft fleet has now flown in excess of 1,800 hours, mainly in support of training.

Delivery of operational capability to the Army is delayed by 24 months, primarily because of delays in the Franco–German program on which the Australian Tiger relies for certification and qualification. This has caused slippage in the aircraft and system certification, simulator development and aircrew training. The delays in the program have resulted in the contractor failing to achieve a critical milestone—initial operational capability—and, as a result, the DMO imposed a contractual stop payment from the milestone schedule delivery date of 1 June 2007. The stop payment does not preclude payment or service delivery on the through-life support contract for Tigers currently in ADF inventory, which will continue to be flown.



Schedule slippage due to delays in qualification and certification of the aircraft and systems.

The contractor and Defence are working together to manage these risks by implementing multiple strategies while aiming to ensure the project remains within budget. The strategies include the training of two ARH pilots at the Franco–German Tiger School at Le Luc in France during 2007 and the development of an integrated lead-in-skills training package for ARH pilot candidates. The contractor and Defence have also committed additional qualified personnel to support certification and acceptance of the aircraft and simulators.

These risks are assessed as medium.

Delays in aircrew training.



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SEA�1411�Phase�1�–�Anzac�Ship�Helicopter�(Super�Seasprite)Prime contractor: Kaman Aerospace International Corporation.

This project will acquire 11 Super Seasprite maritime combat helicopters for the Anzac class frigates. They will provide an enhanced capability for surface surveillance, anti-ship warfare, contact investigation and maritime utility tasks. The acquisition includes a full mission flight simulator and software support centre. Ten helicopters have been delivered to Australia, of which nine have been provisionally accepted in an interim training configuration. The tenth is in storage under the custody of the contractor, Kaman Aerospace International Corporation. The eleventh aircraft was retained in the United States for ongoing flight testing by the contractor.

Royal Australian Navy routine operations of the Seasprite were suspended in March 2006 in response to emerging safety and reliability concerns with the aircraft’s automatic flight control system. As a result of the suspension of flying and continuing delays in the tactical system development and testing, the future of the Seasprite program was subject to ministerial and government review.

On 25 May 2007, the Minister for Defence announced that the Government had approved the continuation of the Seasprite program, subject to acceptable contracting arrangements for an automatic flight control system remediation program. The remediation program will be funded through a real cost increase to the project budget.

Should acceptable contracting arrangements be agreed, it is expected that all Seasprite aircraft, with full tactical system functionality, will be delivered in 2010–11, following completion of the automatic flight control system remediation program. This represents a further three-year delay to the program.

The project did not achieve its 2006–07 budget estimate because completion of the mission system software testing was delayed; it is now expected to be completed during 2007–08.

Table 3.10—Key risks: SEA 1411 Phase 1


Integrated tactical avionics system capability.

The project is addressing these risks to achieve the best possible outcome. To this end, the risks are being managed predominantly through the ADF airworthiness management system processes.

These risks are assessed as high.

Certification of the automatic flight control system.

Interference with ship–helicopter interface.

Software development and system integration.


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AIR�5077�Phase�3�–�Airborne�Early�Warning�and�Control�Aircraft�(Project�Wedgetail)Prime contractor: The Boeing Company (United States).

This project will provide Defence with an airborne early warning and control capability, with the provision of six aircraft and associated supplies and support.

On 28 June 2006, Boeing announced a schedule delay of approximately 18 months due to problems associated with sub-system integration, supplier hardware availability, radar and electronic support measures maturity, and aircraft modification. On 1 February 2007, following a major replan of the schedule, Boeing announced that the full extent of the delay would be two years, with the result that the first aircraft would now be delivered in March 2009—a total delay of 28 months against the contract baseline. Boeing presented the formal results of the schedule replan to the Commonwealth on 8 March 2007. Defence is now planning to establish an initial operating capability by mid-2010 and final operating capability in mid-2011.

The second aircraft continued to undergo system integration and initial developmental testing throughout the year. Installation and verification of the mission system on the first aircraft were completed in June 2007; this aircraft will now enter the second stage of airworthiness testing. The sub-contractor, Boeing Australia Ltd, continued modification of the third and fourth aircraft at RAAF Amberley, and modification of the fifth aircraft began in January 2007. The sixth aircraft for modification was delivered to RAAF Amberley in June 2007.

Expenditure for 2006–07 was significantly less than estimated, due primarily to the slippage against the prime contract.



Radar technical maturity. These risks are being managed through close daily interaction between Commonwealth and contractor staff, with regular reviews of progress being undertaken by Commonwealth, contractor and principal sub-contractor senior management against a risk-based integrated master schedule, using schedule performance and technical maturity metrics.

The risk level will be reduced to low by the end of the acceptance test and evaluation process.

Electronic support measures technical maturity.

Software development.

System integration.

airbOrne early warninG and COnTrOl prOGram



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SEA�4000�Phase�2�–�Air�Warfare�Destroyer�Design�ActivityPrime contractors:

ASC Pty Ltd

Raytheon Australia

Gibbs & Cox

Navantia.

Phase 2 design agreements and not-to-exceed contracts are in place with each of the prime contractors.

The Air Warfare Destroyer Program completed a significant body of work that culminated in second pass consideration of the project by the Government in June 2007—a month earlier than forecast. Key outcomes for the period included completion of two fully costed options based on an ‘Australianised’ F100 design and an ‘evolved’ Gibbs & Cox design, detailed analysis and assessment of the two designs to support the preparation of robust decision-quality information for government consideration, and a government decision to select the Australianised F100 Air Warfare Destroyer. Based on the information provided, government approval included a revised total cost of about $8b to deliver the program—including the previously approved Phase 3.1 Aegis Acquisition and Phase 2 Design and an approved delivery date for the first ship of 2014.

The small decrease in expenditure for 2006–07 was caused by contractor delay in invoicing for work already completed.

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SEA�4000�Phase�3.1�–�Air�Warfare�Destroyer�–�Aegis�Weapon�System�ProcurementPrime contractor: Lockheed Martin under an FMS arrangement with the US Government

In 2005, on behalf of the Australian Government, the Air Warfare Destroyer Program entered into an FMS agreement with the US Government (represented by the US Navy) for Aegis weapon system engineering and design support. In July 2006, the scope of the FMS case was increased to include the production of three Aegis weapon systems. The Aegis weapon system will provide the core capability for the Air Warfare Destroyer; it includes sensors, a command and control capability, and missile launch equipment.

Under the FMS case, the US Navy has entered into contracts for system hardware as well as design and engineering assistance. US companies have commenced production work on elements of the system, with long lead times for delivery.

Technical information delivered under the FMS case to date has contributed to the information used by the Government in deciding to proceed with the Air Warfare Destroyer Program.

The increase in expenditure is due to a termination liability payment being brought forward because of the way the US Government administers FMS arrangements.

air warFare desTrOyer prOGram


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SEA�1444�Phase�1�–�Armidale�Class�Patrol�BoatPrime contractor: Defence Maritime Systems.

This project will deliver 14 Armidale class patrol boats, 15-years in-service support, and upgraded wharf facilities in Darwin and Cairns. The new patrol boats will improve the Royal Australian Navy’s capability to intercept and apprehend vessels suspected of illegal fishing, quarantine, customs or immigration offences. Seven vessels entered operational service with the Navy during 2006–07. Two further boats commenced ship and crew training. A total of 12 boats have been delivered to Darwin and Cairns within the current approved cost.

Table 3.12—Key risk: SEA 1444 Phase 1


Fuel system and reliability problems. The fuel systems have been modified in all boats except HMAS Bundaberg, which has had a partial modification, with the remainder planned for later in 2007. Trials will continue for the remainder of the year to ensure the fuel system works reliably and will cope with the environmental conditions in the northern wet season. The Navy has been able to operate the boats and fulfil its patrol role.

This risk is assessed as medium.

mariTime sysTems divisiOn



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SEA�1390�Phase�2�–�FFG�Upgrade�ImplementationPrime contractor: ADI Limited trading as Thales Australia .

The project will upgrade combat systems, including sensors, missile launchers and associated platforms systems in the Adelaide class guided missile frigates.

Upgrade and installation in HMAS Darwin continued. The ship successfully undocked ahead of schedule, on 7 June 2007. HMAS Melbourne commenced contractor sea trials in March 2007. The first ship upgraded, HMAS Sydney, was due for initial operational release in mid-2007, but this has been delayed by known deficiencies in the underwater warfare systems, electronic support system and combat system software. The prime contractor will continue to rectify deficiencies before acceptance. The Navy has begun early operational assessment of HMAS Sydney. An underspend occurred because the prime contractor was stabilising the new contract

master schedule and cost–performance regime against the contract amendment to allow for the reduction to four ships.

The expenditure variation of -$43m is attributable primarily to the suspension of prime contract earned–value payments, as agreed under a deed of settlement and release (29 May 2006), which occurred after the estimate was revised.



If contracted performance of the electronic support system is not achieved.

This risk is being managed by integrated Commonwealth, prime and sub-contractor product teams working to achieve the required outcomes. An underspend occurred during 2006–07, and the related major schedule risk was mitigated by negotiating the contract and schedule to provide a better, common understanding and milestone measurement of the deliverables.

The overall risk for the project remains at medium to high.

Production, system integration and test and trials activities.

These risks are strongly influenced by the availability of experienced, competent and skilled personnel in a limited and very competitive Australian commercial market. The prime contractor has implemented personnel recruiting and retention strategies and established a commercial industry alliance for the production work.


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SEA�1390�Phase�4B�–�Guided�Missile�Frigate�Standard�Missile-1�(SM-1)�Missile�ReplacementPrime contractor: The DMO is the Procurement Coordinator; it is supported by the US Department of Defense under an FMS arrangement and selected commercial contracts for equipment and launcher charges.

This project is to integrate the replacement Standard Missile-2 (SM-2) missile into four guided missile frigates, deliver missiles with mid-course guidance capability, and acquire initial ship outfit and inventory stock missiles. The delivery of missiles will commence in mid-2008.

The US Government’s missile production and procurement activities continued during the year. A government-to-government agreement with the United States for ships’ system integration design services was established. Contracts were also established to address commercial aspects and design development by commercial organisations. These include procurement contracts that are now established with Lockheed Martin and AAI Corporation for the delivery of modifications to the solid-state continuous wave illuminator radars and the onboard training systems and shore support facilities. Negotiations are well advanced with BAE Systems for a similar procurement contract for the modifications to the guided missile launcher.

System integration and software development are being progressed under FMS arrangements. Integrated development team activity has commenced with the US Navy, its FMS service providers and the project’s commercial product suppliers.

The expenditure variation of -$11m is attributable primarily to the US FMS case for SM-2 missiles payments not occurring as scheduled. There was no effect on actual schedule delivery. Minor delays occurred while amending a separate FMS case (for initial ship integration design technical support and software) and procurement contracts (Standard Missile-2 Block IIIA–related modifications to the Mk- 92 fire control system, guided missile launch system, and on-board training and land-based simulation systems) with US-based commercial suppliers.

Table 3.14—Key risks: SEA 1390 Phase 4B


Guaranteed interoperability of the systems, equipment and logistic support.

This risk is being managed by a combination of FMS acquisition cases and direct contracts with original equipment manufacturers. This will cover ship modifications, system hardware alterations and support equipment and will reduce the risk of access and availability of proprietary information and intellectual property necessary for system integration and the related technology.

These risks are assessed as medium.

System development schedule. This risk is being managed by the engagement of the US Government and experienced system integration agents for the major sub-systems and subsequent overall system integration and test and trial.



36

SEA�1348�Phase�2�–�Anzac�Ship�ProjectPrime contractor: Tenix.

All 10 Anzac class ships, including two ships for the Royal New Zealand Navy, and associated shore facilities and logistic support were delivered on time and on budget.

All ships and shore facilities are in-service with the Royal Australian Navy and the Royal New Zealand Navy. The ongoing delivery of spares, documentation and other integrated logistic support deliverables was achieved during 2006–07. Outstanding progress of milestones on the prime contract, against a conservative expectation, resulted in a $10m budget overachievement. This contributed to further progress against closure of the prime contract and other major contracts. Additionally, several in-service configuration changes were implemented to finalise outstanding class design and installation

issues, resulting in a further $5m overachievement against the forecast expenditure. Project risks have been retired and, when final in-service support deliverables are received in 2007–08, the project will be closed.

The Anzac Ship Project is the most successful warship building project that has been undertaken in Australia.


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SEA�1448�Phase�2A�–�Anti-Ship�Missile�DefenceAlliance agreement: Anzac Ship Alliance with Tenix and Saab.

This project will deliver an enhanced anti-ship missile defence capability by providing an improved level of self-defence against modern anti-ship missiles for the Anzac class frigates. Phase 2A will upgrade the combat management and fire control systems and install an infrared search and track system for improved detection of low-level aircraft and anti-ship missiles when the ship is close to land. Phase 2B is integrally linked with Phase 2A and completes the anti-ship missile defence capability with the integration of a phased-array radar and illuminator system. The phased-array radar system imposes high technical and schedule risks; these are mitigated by contract arrangements. The expected delivery date for the first of the class is June 2011, to be followed by an extended operational test and evaluation period of 12 months.

Major achievements in 2006–07 included:

a successful phased-array radar system functional review in August 2006

acceptance of anti-ship missile defence facilities in March 2007

completion of detailed design and production for the detection system for low-level aircraft

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anti-ship missiles and combat management sub-systems leading to environmental testing and extensive progress with platform preliminary design for installation in the Anzac class ships.

The leading-edge technology phased-array radar system has, under a risk-reduction program, recently demonstrated performance results that exceed expectations, and significant technical risks have been retired or reduced. Emerging technical cost drivers associated with this technology have led to a real cost increase in the order of $200m, for which government approval will be sought following the preliminary design review in August 2007.

The project budget variation is due to an agreed change in milestone deliverables from major sub-contractors and the delay in signing the phased-array radar production contract.

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SEA�1429�Phase�2�–�Replacement�Heavyweight�Torpedo�System�for�Collins�Class�SubmarinesPrime contractor: US Department of Defense under a memorandum of understanding, with work performed by Raytheon and the US Naval Undersea Warfare Center.

The project scope involves weapon acquisition, associated logistic support, weapon system interface equipment, operational support and test equipment, and transition into service.

The torpedoes were installed in HMAS Waller in 2006, with harbour acceptance tests completed successfully in February 2007. HMAS Waller is undertaking sea trials for the new system. Installation in HMAS Dechaineux has commenced. The first two shipments of torpedoes were delivered on schedule in Australia in December 2006 and May 2007.



Production cost exceeding the cost agreed in the memorandum of understanding signed in 2003.

Project contingency is sufficient to absorb reasonable cost increases and manage this risk.

This risk is assessed as low.

Weapon not achieving its performance requirements by project closure.

This risk is being managed by the collaborative joint development of the weapon with the US Navy to incorporate Australia’s requirements.



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SEA�1439�Phase�3�–�Collins�Class�Submarine�Reliability�and�Sustainability�ImprovementsPrime contractor: ASC Pty Ltd.

This project is implementing a significant number of reliability, sustainability and safety improvements to the Collins class submarine through an ongoing program to meet the McIntosh–Prescott report12 recommendations and rectify shortcomings in the submarine support infrastructure.

Firefighting and sewage system modifications were completed in HMAS Waller in April 2007. These modifications have commenced in HMAS

12. Details of the report are available at www.minister.defence.gov.au/1999/collins.html.

Dechaineux. Expenditure is less than estimated due to the reallocation of contractor resources to higher-priority submarine work under Project SEA 1439 Phase 5—Communications Mast and Antenna Replacement Class Fit.

Table 3.16—Key risk: SEA 1439 Phase 3


Limited capacity of the contractor for design and production activity. Maintenance and defect rectification for operational submarines, and higher priority capability upgrades occasionally causing specialist resources to be redirected, thereby placing risk on schedule.

This risk is being managed by the use of sub-contractor labour.




40

http://www.minister.defence.gov.au/1999/collins.html

SEA�1439�Phase�4A�–�Collins�Class�Replacement�Combat�SystemPrime contractors: US Department of Defense under an FMS arrangement and an Armaments Cooperative Project Arrangement.

Australian contractors:

Raytheon Australia

Thales

Sonartech Atlas

Cerulean Solutions

Acoustic Technologies

ASC Pty Ltd.

The project will provide Collins class submarines with the US Navy Tactical Command and Control System, minor improvements to the combat system augmentation sonar, and shore facilities for integration, testing and training.

The replacement combat system was installed in HMAS Waller, and the harbour acceptance test was completed successfully in April 2007, with sea trials from May 2007.

The joint Australian–US Project Office has made significant progress on development of the next

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version of the AN/BYG-1 Tactical Control System, to be installed in the remaining four Collins class submarines. Design and production of the related Australian systems for the third submarine have progressed to schedule. Installation has commenced in HMAS Dechaineux.

The project did not reach the full expenditure target because of cost savings and payment delays under the Armaments Cooperative Project with the United States.

Table 3.17—Key risks: SEA 1439 Phase 4A


Changes by the US Navy to the baseline tactical system—a risk to both cost and schedule.

This risk is being managed by the inclusion of Australian members in the joint Australian–US Project Office, located in the United States, to monitor scope changes early and minimise adverse impacts on the Collins installation program.


Change to the submarine docking program—a risk to the completion of installation.

This risk is being managed by the engagement with the Royal Australian Navy to ensure compatibility of the submarine docking and installation schedules.

This risk is assessed as high.

On 3 April 2007, The Prime Minister, the Hon. John Howard, MP, inspects the replacement combat system aboard HMAS Waller.


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LAND�907�Phase�1�–�Main�Battle�Tank�Replacement�ProjectPrime contractor: US Department of Defense under an FMS arrangement.

This project replaces the Army’s Leopard tank fleet with a modern, survivable and interoperable tank capability that will be supportable until at least 2020. The project includes the acquisition and through-life support of 59 M1A1 Abrams main battle tanks, seven M88A2 Hercules recovery vehicles, simulators, tank transporters, and fuel trucks. Support arrangements include additional equipment and spare parts, ammunition, facilities, and initial operator and maintainer training.

The project remains ahead of schedule to meet the in-service date for one squadron by December 2007. Significant milestones achieved during the year were the delivery of the first batch of 18 M1A1 Abrams tanks and five M88A2 armoured recovery vehicles on 21 September 2006, delivery of the remaining 41 tanks and two armoured recovery vehicles on 3 March 2007, and delivery of all 14 heavy

tank transporters. Deliveries of simulators, tank transporters and fuel trucks are complete. Operator and maintainer conversion will be complete by late 2007.

The new tanks will be operated by the 1st Armoured Regiment (Darwin, Northern Territory), the School of Armour (Puckapunyal, Victoria) and the Army Logistics Training Centre (Bandiana, Victoria).

The decrease in expenditure was due to lower-than-expected FMS case payments along with $10m in cost savings.

Table 3.18—Key risks: LAND 907 Phase 1


Failure to provide an Australian-based through-life support arrangement and the delay in the release of the through-life support request for tender.

The risk has been managed through the establishment of cooperative logistics services support arrangements directly with the US Government and the supplementation of technical staff through the provision of field service representatives to provide maintenance advice and deeper-level maintenance capability in Darwin and Puckapunyal.

Cooperative logistics support arrangements with the US Government are in place during the interim period. These arrangements continue effective support for the vehicles until the Australian-based contract is in place.

Provision of the off-platform element of the Battle Management System.

Defence is yet to successfully negotiate a contract with the preferred supplier of the off-platform elements, so the Army has been unable to train with the Battle Management System. The Chief Information Officer Group is continuing to pursue the provision of the off-platform element, while the Project Office is investigating an interim terrestrial solution for training purposes only.

This risk will be significantly mitigated with the signing of a contract expected in August 2007 between Defence and Optus for the provision of satellite services.[1]

Note1. This contract was signed on 27 August 2007.

land sysTems divisiOn



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LAND�106�–�Upgrade�of�M-113�Armoured�VehiclesPrime contractor: Tenix.

This project is upgrading 350 of the Army’s fleet of M-113 armoured vehicles that provide transport and fire support for the Army’s mechanised forces. It will improve protection, firepower, mobility and habitability. The upgrade replaces most of the existing vehicle, retaining only the hull, hatches, rear door and communications systems. It also includes appliqué armour, a new armoured turret and machine gun, a new engine, drive train and suspension, and the stretching of the armoured personnel carriers and other variants.

The need to resolve a number of problems identified in initial vehicle testing has delayed vehicle development, and this has continued to place pressure on the project schedule. Testing by Defence resumed following vehicle modifications by Tenix. Brake problems were encountered, causing the introduction into service date to be further delayed, from July 2007 to November 2007.

Expenditure was much lower than the budget estimate of $118m because of the delays in resolving the technical problems. The contractor has commenced production to deliver the initial capability into service. Crew and maintenance training has begun, and initial spares and special tools and test equipment are being purchased to support introduction into service. Actual expenditure was higher than the revised plan of $8m due to early delivery of spares, support documentation, armour steel and contract change proposals for vehicle stowage solutions and training materials.

Table 3.19—Key risks: LAND 106


Delays caused by technical problems.

The contractor developed a number of design modifications in parallel with the ongoing testing to reduce the risk to schedule. Defence assesses that the target date of November 2007 for introduction of vehicles for the initial capability may slip to the second half of 2008. The contractor advises that the delivery of the last vehicle will be in late 2010.

The overall risk level for this project remains high until all solutions to the technical problems have been fully tested.

Inadequate logistic support documentation to support introduction into service.

This risk was reduced through the deployment of Project Office personnel to work alongside the contractor to reduce development and review times for documentation.


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LAND�116�Phase�3�–�Project�BushrangerPrime contractor: Thales Australia.

Project Bushranger is acquiring 443 vehicles in six variants—troop, command, mortar, assault pioneer, direct-fire weapon, and ambulance. The vehicles will provide protected land mobility to Army combat units and RAAF Airfield Defence Guards.

Thales delivered all troop, command, assault pioneer and direct-fire weapon variants, plus 16 mortar variants, in 2006–07. The last variant, ambulance, is planned for delivery in late 2007. In December 2006, the Government approved the purchase of an additional 143 Bushmaster vehicles for the Enhanced Land Force Phase 1. Delivery of these vehicles will commence in late 2007 and is scheduled to be completed by early 2009. In July 2006, the Government approved the rapid acquisition of

44 protected weapon stations to further enhance the protection level of those vehicles currently deployed on operations. The fitting of the stations to deployed vehicles commenced in February 2007 and was completed in April 2007.

Expenditure for 2006–07 was more than estimated due to the delivery of the mortar variants ahead of schedule.

Table 3.20—Key risks: LAND 116 Phase 3


Production acceptance test and evaluation of vehicles.

This risk is being managed by monitoring contractor activities through technical progress meetings.

The risk remains high.

Configuration management. This risk was reduced to medium from high by monitoring and reviewing all contractor procedures.

The overall risk level of this project is medium.



44

AIR�5416�Phase�2�–�Echidna—Electronic�Warfare�Self-Protection�for�Selected�ADF�AircraftPrime contractors: Phase 2A—BAE Systems; Phase 2B—Tenix Defence.

Phase 2A of the Echidna project has taken responsibility for implementing onto 12 Black Hawk aircraft a missile warning system and counter-measures dispensing system, developed under an approved Army minor project that provides interim early delivery of a subset of the Echidna 2A capability. As a consequence, delivery of the full Echidna 2A capability on the first Black Hawk aircraft has been extended by six months. The full Echidna Phase 2A detailed design review is planned for October 2007, with the first aircraft due for induction in late 2007. Modification of the first Black Hawk aircraft has commenced against the Army minor project. However, because cracking was found in the aircraft tail cone, requiring remedial work, the overall Army minor project has incurred a five-week slippage. The Chinook program continues to go forward, although, because of operational requirements, the Army has advised that delivery of a Chinook to Echidna 2A for modification might not occur next year as planned.

The decrease in expenditure was the result of a delay in procuring the ALR-2002 radar warning receiver following the withdrawal of the AIR 5376 Hornet Upgrade Phase 2.3 project from the program and

the six-month schedule extension associated with inclusion of the scope of the Army minor project to provide an early interim capability for Black Hawk aircraft.

Phase 2B of the Echidna project involves the modification of the C-130H fleet of aircraft with a comprehensive electronic warfare self-protection capability. The first five C-130H aircraft modified under the project were completed by Tenix Defence on schedule by the end of June 2007. The schedule for the full modification program for all 12 C-130H aircraft will see the final aircraft returned to the RAAF by mid-2008.

As the Echidna Phase 2B project has entered the production phase and the first five aircraft have been accepted, there are no significant risks remaining with this phase of the project. Expenditure for phase 2B was achieved to plan.



Development of the software for the electronic warfare controller.

The risk is being managed by restructuring the program into a three-build approach, which allows for incremental delivery of capability and the spreading of risk over three increments in lieu of the original one-build delivery.

The risk is now moderate.

The possibility that aircraft would not be made available on time by the Army for induction into the aircraft modification program.

This risk is being managed through intensive aircraft fleet management. With a much smaller fleet and current high operational demand, Chinook aircraft availability is a high-risk.

The risk remains high.

eleCTrOniC and weapOn sysTems divisiOn


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JP�2070�Phase�2�–�Lightweight�Torpedo�Replacement�(MU90)Alliance agreement: Commonwealth of Australia, EuroTorp and Thales.

Phase 2 of this project will introduce the EuroTorp MU90 lightweight anti-submarine warfare torpedo into ADF service, to replace the US Navy Mk-46 lightweight torpedo. Delivery of the initial batch of MU90 torpedos was expected in late 2006, but technical problems arising during European test firings early in 2007 have further delayed delivery of the weapons to Australia until late 2007.

Integration onto the last Anzac class ship and partial integration onto two of the four Adelaide class ships (guided missile frigates) was achieved during the year. Completion of the frigate integration is expected by mid-2008, depending on the frigate update program and general ship availability. Work continued to refine the scope and cost for the integration effort onto the P-3 Orion maritime patrol aircraft and helicopter platforms.

Actual expenditure was $19m lower than planned, due primarily to the delay from April until July 2007 of the factory weapons acceptance testing and the follow-on delivery and acceptance of this equipment13.

13. Factory acceptance testing was successfully completed in July and delivery of the initial batch of weapons will occur in late 2007.

Table 3.22—Key risks: JP 2070 Phase 2


Delivery of acceptable MU90 weapons.

This risk was managed by greater insight into and closer cooperation with the manufacturer and the French Navy. The French weapons have now passed French Navy acceptance testing.

The risk level was reduced to low from medium.

Integration onto the air platforms. This risk is being managed by seeking more detailed cost and schedule estimates of the integration effort on each of the air platforms.

The overall risk level remains high.



46

JP�2070�Phase�3�–�Lightweight�Torpedo�ReplacementAlliance agreement: Commonwealth of Australia, EuroTorp and Thales.

Phase 3 of this project involves the assembly of locally and internationally produced torpedo components into MU90 torpedoes using facilities at Fleet Base West, Western Australia. Phase 3 will establish an Australian manufacturing and support capability for the EuroTorp MU90 lightweight torpedo and see delivery of a number of warstock rounds.

Principal activities during the year included development of definition documentation for a modelling and simulation capability for future support of the MU90 lightweight torpedo and the conduct of a system requirements review for a portable post-exercise facility in support of exercise firings remote from the Western Australian exercise area.

Actual expenditure was $12m lower than planned due to a delay by the contractors in delivering major software documentation and the late ordering of long-lead items. These activities are now scheduled for completion in late 2007.

Table 3.23—Key risk: JP 2070 Phase 3


Identification of potential difficulties in transferring overseas supplier skills and technical knowledge for a complex weapon system into Australian industry.

The project has instituted close management of the transition plan. The initial in-service support period will be undertaken by the original equipment manufacturer, with the inclusion of Commonwealth personnel for skills transfer.

The risk level remains medium until completion of the remaining design reviews, planned to be undertaken during 2007–08.


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JP�2085�Phase�1B�–�Explosive�Ordnance�Reserve�StocksPrime contractors: Multiple purchase contracts with Australian and overseas munitions suppliers.

This project seeks to acquire, over the period 2005 to 2008, a range of approximately 120 different explosive ordnance items to increase reserve stock holdings. The range includes anti-armour, medium/field artillery, mortar, and Navy projectile ammunition, as well as demolition stores, pyrotechnics and bombs.

A number of new contracts were raised in 2006–07, and significant deliveries against existing contracts were also received, including Bolide short-range air defence missiles and Mk 82 bombs. New contracts for the procurement of precision-guided munitions for Army 155-millimetre artillery, 5-inch ammunition for the Navy and a number of pyrotechnics and demolition stores

are scheduled for approval in 2007–08. All deliveries are expected to be received by the end of 2008–09, the project closure date. The cost of acquisition has increased from the 2003 budget estimates as a result of the escalation of international prices for a significant number of items under procurement.

The $9m decrease in expenditure in 2006–07 was due to the inability to progress the acquisition of SMArt 155, one of the 155-millimetre precision-guided munition natures being acquired by the project. The acquisition was delayed pending the outcome of the Senate Standing Committee on Foreign Affairs, Defence and Trade Committee’s inquiry into the Cluster Munitions (Prohibition) Bill 2006 because under the very broad definitions of this bill the acquisition of the SMArt 155 (or similar munitions) would have been prohibited. The Senate Committee’s report recommended that the Bill not be passed.

Table 3.24—Key risk: JP 2085 Phase 1B


Acquisition of 155-millimetre precision guided munitions from overseas sources.

Some of the products being considered are under development, and regular communication with the relevant overseas government agencies is being maintained to manage emerging technical issues and any costs or schedule changes.

The risk level is medium to high for ammunition technical aspects.



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JP�2025�Phases�3�and�4�–�Jindalee�Operational�Radar�NetworkPrime contractor: RLM Management Pty Ltd.

The Jindalee Operational Radar Network—consisting of the network control centre at RAAF Edinburgh and two over-the-horizon radars, one near Longreach, Queensland, and the other near Laverton, Victoria—was delivered in April 2003. This brought to a close the major acquisition phase of the prime contract with RLM Management Pty Ltd. The initial maintenance and support contract was due to expire on 17 February 2007 but, after a brief extension, expired on 30 June 2007. The new maintenance and support contract will be funded from the sustainment budget.

The residual activities on this project include upgrades to the Longreach radar electrical power supply, which will realise net savings to operating costs over the life of the radar, and final integration of the software support environment into the

Over the Horizon Radar System Program Office. The remaining risk to the acquisition project is rated as low since residual activities are based on commercially available products.

Actual expenditure was in excess of original estimates. This was due to final payment of the maintenance contract being made ahead of schedule as a result of earlier than expected Commonwealth verification of the contractor’s work and accounts.


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AIR�5333�–�Vigilare—New�Air�Defence�Command�and�Control�Systems�for�Control�and�Reporting�Units—2CRU/3CRUPrime contractor: Boeing Australia Ltd.

This project will replace the existing Air Defence command and control system with two new systems located at RAAF Tindal and RAAF Williamtown. It will also design and deliver an integrated ADF Air Defence System communications network.

Acquisition and logistic support contracts were signed with Boeing Australia Ltd in March 2004. The first command and control system is expected to be installed at RAAF Tindal in the second half of 2009, some 30 months later than agreed at contract signature.

The project’s critical design review is expected to be completed in early 2008, which will also see the commencement of the integration and test phase. Both of these activities were expected to be completed in 2006–07, but delays have resulted from an underestimation of the effort required and delayed delivery of required interfaces by Defence. Mitigation action is under way to address delivery delays and the contractor is applying greater resources to complete the work. Because of the overall complexity of integration and the large number of unique interfaces involved, the project risk remains high.

The revised budget was due to the delay in the project’s critical design review milestone beyond 2006–07 and deferring payment of that milestone and all earned-value payments.

Table 3.25—Key risks: AIR 5333


Software development. This risk is being managed through the use of Commonwealth resident teams and independent software review teams and active monitoring of contractor performance through software development-related metrics.

The risk level will be reduced to medium through these strategies.

Integrated tactical datalinks. This risk is being managed through the employment of tactical datalink experts, close liaison with the ADF tactical datalink authority and through increasing the tactical datalink expertise within the Commonwealth Project Team.

The risk level remains high.



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SEA�1654�Phase�2A�–�Maritime�Operations�Support�CapabilityPrime contractor: Tenix Defence Pty Ltd.

This project seeks to replace the Navy’s existing afloat support capability, HMA Ships Westralia and Success, with planned withdrawal dates for the ships of 2006 and 2015 respectively. HMAS Westralia was withdrawn from service in October 2006.

Commencing in early 2001, this project was for the delivery of a purpose-built $450m support ship to replace the Navy’s ageing auxiliary oiler HMAS Westralia by 2009. In late 2003, changes to international maritime regulations forced the schedule to be brought forward to 2006, with a revised budget of $140m. With a purpose-built ship no longer an option, the only feasible way of maintaining this essential capability was to purchase and convert a commercial oiler. The DMO was able to secure an as-new commercial tanker, develop fully costed specifications for the conversion to Navy requirements, and award and manage a demanding conversion contract in record time. HMAS Sirius was delivered in 2006, ahead of schedule and under budget.

The current afloat support capability is provided by HMAS Success and HMAS Sirius. These ships support the two-ocean basing policy and provide

the sustainment necessary for surface combatant task groups to operate in the extensive waters of the region.

Initial operational release for HMAS Sirius was achieved in October 2006. The vessel is now operating as a Navy Fleet Unit and is home-ported at HMAS Stirling in Western Australia.

The variation in expenditure was due to charter revenues exceeding operational costs in 2005–06, late delivery of long lead time spares and prime equipment from the Replenishment At Sea (RAS) system supplier REXMOTH. Remaining RAS spares and additional RAS equipment (capability upgrade – sliding pad eyes for heavy and light jack stay) will be delivered and installed on HMAS Sirius during 2007–08.

Table 3.26—Key risk: SEA 1654 Phase 2A


Completion of maintenance manuals to meet Navy requirements—not in the original scope.

This risk was managed by close liaison with the Navy and placement of a contract for the development of manuals that meet the Navy’s requirements, reducing the risk to low.

The risk level is low. Project closure should occur in mid-2008.

amphibiOus vessels


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AIR�6000�–�Joint�Strike�Fighter�System�Development�and�Demonstration—New�Air�Combat�CapabilityMemorandum of understanding: US Government.

This project aims to introduce a new air combat capability with the air superiority and strike functions currently provided by the Hornet and F-111 aircraft fleets and to maximise Australian industry participation in the global Joint Strike Fighter (JSF) program. The project is currently working towards second pass approval, scheduled for late 2008. This phase funds Australia’s contribution to the nine-nation System Development and Demonstration stage of the JSF program. Other approved funding comprises initial funding for the Production Sustainment and Follow-on Development (PSFD) stage of the program and project office funding to achieve the second pass outcome. Significant milestones met in 2006–07 included first pass government approval, first

flight of the JSF conventional take-off and landing variant, agreement to industry participation plans between Australia and the JSF prime manufacturers, and signature of the PSFD memorandum of understanding by all nine partners.

The project faces the technical challenges inherent in any complex, software-intensive project, but these are being well managed by the JSF Program Office and the Lockheed Martin–led industry team.

Table 3.27—Key risk: AIR 6000


The potential for cost increases associated with uncertainty surrounding the US congressional budget process.

This risk is being managed primarily through senior Defence and Australian Government representation to the United States and also by Australia’s decision to defer delivery of the first JSF aircraft to 2013.

This strategy has reduced the overall project risk level to medium to high. The decision to acquire 24 Block II F/A-18F Super Hornet aircraft has reduced the risk level for the overall air combat capability to low.

new air COmbaT CapabiliTy



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Previously reported projects

The status of projects that were in the top 30 in previous financial years but dropped out due to low expenditure are described in the online version of this volume.14

14. The online version of this report can be found at www.defence.gov.au/annualreports.

New projects

During 2006–07, 24 new acquisition projects were approved, as shown in Table 3.28. The DMO classifies a project as having been approved on the signing of a Material Aquisition Agreement (MAA) between the DMO and Defence. This is in contrast to Defence, to which agreement by the Government (first or second pass) constitutes approval.

Table 3.28—New projects approved, 2006–07


Original�budget

($m)

Actual�expenditure

($m) Phase�scope

Aerospace�Systems�Division

Multi-Mission Unmanned Aerial Vehicle

AIR 7000Phase 1B

3.1 1.7 This phase is intended to acquire high-altitude, long-endurance unmanned aerial systems for maritime patrol and other surveillance.

AP-3C Capability Assurance Program

AIR 5276CAP 1

3.6 2.9 This project is intended to acquire additional electro-optics capabilities and new high-speed datalinks for the AP-3C.

Bridging Air Combat Capability

AIR 5349Phase 1

– 54.9 This project provides for the establishment of a bridging air combat strike capability. Twenty-four Boeing F/A-18F Block II Super Hornet aircraft will be acquired to give the ADF a bridging air combat capability.

Helicopter�Systems�Division

Helicopter Aircrew Training System

AIR 9000Phase 7

1.8 – This phase is intended to provide a rotary wing training capability for the Navy and the Army, to meet training needs for future ADF rotary wing aircraft.

Seahawk Penguin Missile Integration

AIR 9000Phase 3E

– 0.2 Phase 3 will include a range of initial scoping studies to determine capability shortfalls and to identify potential technical upgrade options.

Maritime�Systems�Division

Ships Self Defence Capability—Rapid Acquisition

SEA 1779Phase 1

12.4 9.6 This project will provide a dual-level ship self-defence capability for HMA Ships Kanimbla, Manoora and Tobruk. This capability will provide better defence against watercraft, land targets, helicopters and floating mines. It will consist of an integrated fire control system and Toplite electro-optical director system. The 25-millimetre Bushmaster naval variant cannons are to be integrated to provide the cannon for the Typhoon system. Operational release of the first ship is scheduled for August 2008, with project completion in February 2009.


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http://www.defence.gov.au/annualreports/


Original�budget

($m)


($m) Phase�scope

Communications Mast and Antenna Replacement—Class Fit

SEA 1439Phase 5B.1

1.5 3.9 This phase provides for a class-wide UHF SATCOM mast replacement as part of the wider continuous technology update program to sustain the capability advantage of the Collins class submarines.

Collins Improvement Program High Data Rate Communications

SEA 1439Phase 5B.2A

0.1 – This phase is intended to provide a class-wide high-data rate communications antenna for the Collins class submarines.

Collins Class Continuous Improvement Program

SEA 1439Phase 5B.2B

0.8 0.2 This phase is intended to deliver focused upgrades to the Collins class submarine fleet to sustain the capability relative to regional capabilities.

Land�Systems�Division

Counter Mine Capability LAND 144Phase 1

0.3 0.1 This phase is intended to provide high-readiness units with an enhanced counter-mine capability based on proven off-the-shelf solutions.

ASLAV Enhancement System Development and Demonstration Phase

LAND 112Phase 4

0.6 – This phase is a survivability enhancement and mid-life upgrade of the ASLAV.

Direct Fire Support Weapon

LAND 40Phase 2

0.6 0.1 This phase seeks to provide a range of direct-fire support weapons for use by an infantry battalion.

Electronic�and�Weapon�Systems�Division

Evolved Sea Sparrow Missiles

SEA 1428Phase 4

8.3 7.4 This phase is a follow-on acquisition of Evolved Sea Sparrow Missiles to equip the Navy with further missile stockholdings for the surface combatant force.

Battle Management System

LAND 75Phase 3.4

2.0 0.5 This phase is intended to provide further roll-out of the Battlefield Command Support System and acquire an interim Battle Management System capability to equip a battle group.

GPS Enhancement for ADF Platforms

JP 5408Phase 2B

22.1 4.4 This phase is intended to incrementally implement the enhancements and replacements to the ADF’s GPS-equipped platforms, as recommended by Phase 1 studies.

GPS Enhancement JP 5408Phase 3

3.0 – Phase 3 will continue the work for platforms that were not included in Phase 2B.

Joint Command Support Environment

JP 2030Phase 8

1.6 1.2 This phase is intended to build on the capability delivered under previous phases of JP 2030 and, in particular, extend the functionality through the development of applications that support the planning and conduct of ADF networked operations.

Mulwala Redevelopment Project

JP 2086Phase 1

18.5 0.3 This project will deliver a modernised propellant manufacturing capability at Mulwala, New South Wales, to replace the existing capability, which dates back to the 1940s.

Table 3.28 continued



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Original�budget

($m)


($m) Phase�scope

High Grade Cryptographic Equipment Secure Telephony

JP 2069Phase 1B

3.1 5.7 This phase is the initial acquisition phase and is intended to acquire the next generation of secure telephony.

Replacement for Air Defence Targets

JP 66Phase 1

0.4 – This phase is intended to address a shortfall in ADF air defence targets by introducing a new air target system to support operational training and test and evaluation.

ADF SATCOM Terrestrial Enhancements

JP 2008Phase 3F

0.5 0.4 This phase is intended to upgrade the existing terrestrial infrastructure to improve the operational performance of the ADF satellite network. The two major initiatives being considered are a second satellite ground station and advanced satellite communications modems.

General�Manager�Corporate[1]

ADF Deployable Logistics Systems

JP 2077Phase 2B.2

12.4 0.3 Phase 2B.2 aims to improve the information management support available to the ADF. Phase 2B is intended to deliver an upgraded enterprise resource planning system with an enhanced materiel finance capability, an integrated consignment tracking application and a deployable capability. Phase 2B has received first pass approval from the Government. The DMO is to present the phase for second pass approval in two parts (2B.1 and 2B.2).

New�Air�Combat�Capability

New Air Combat Capability—Detailed Analysis and Acquisition Planning

AIR 6000Phase 1B

8.9 6.3 This project aims to replace the air dominance and strike functions currently provided by the F/A-18 Hornet and F-111 aircraft fleets with the Joint Strike Fighter. This phase funds project office activities leading up to second pass approval and initial contributions to the collaborative production, sustainment and follow-on development stage of the program, which Australia joined in December 2006.


Note1. Previously under the Chief Operating Officer Division.


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Closed projects

Four projects closed during 2006–07, as shown in Table 3.29.

Table 3.29—Projects closed, 2006–07

Project�name Project�number Reason�for�closure

Coalition Network Exchange Capability Technology Demonstrator

JP 2090Phase 1A

Project financial closure was achieved in July 2006.

Very Low Level Air Defence Weapon System Advance Air Defence Simulator

LAND 19 Phase 2B

Project closed under budget (approximately $17,000).

Improvements to the Logistics Information System

JP 2077Phase 1

This phase had a $9,000 commitment outstanding.

Defence Messaging and Directory Environment E-Defence Project

JP 2054Phase 1

This project was closed in the DMO, with remaining scope and funding transferred to the Chief Information Officer Group.



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PROJECTS OF INTEREST

ClOThinG prOCuremenT prOGram

The Clothing Review Report, released by the Minister for Defence in July 2006, prompted a major program of procurement reform in clothing throughout the year. Twenty-two of the 29 recommendations in the report were fully implemented, and work is continuing on the remainder. A new Clothing System Program Office was established to support the ADF, both in Australia and during operational deployments overseas, through the acquisition of military clothing and personal equipment. The office has been staffed and trained and has delivered more uniforms and personal equipment than in previous years, although significant shortages persisted throughout the year, particularly in non-combat uniforms.

Items supplied cover 4,000 separate product groups across 18,500 different items of inventory. Noteworthy purchases during the year included about 170,000 sets of disruptive pattern combat uniforms ($18.5m), 70,000 pairs of assorted boots, including combat boots ($6.4m), 14,000 field packs ($1.5m), 100,000 men’s and women’s utility shirts ($2.9m), and 60,000 assorted items of sportswear, including footwear ($2.0m). The combat uniforms, combat boots and utility shirts were all made in Australia.

Throughout the year, staff effort also focused on implementing the recommendations from the Clothing Review Report. This included implementation of a new logistics information system to help with the management of technical and commercial work flows, improved relationships with industry, improved procurement practices, and ongoing review of the total supply chain (requirement identification to supply) to further improve and resolve shortages. Intensive effort continues to address the backlog of technical and procurement requirements.

The Hon. Dr Brendan Nelson MP, Minister for Defence,addresses Melbourne media organisations on Tuesday, 25 July about the outcomes of the Government’s response to the recommendations of the clothing review team. General Peter Leahy, Chief of Army introduced soldiers from 1 RAR B Company who displayed current combat apparel. Victoria Barracks Melbourne hosted the event.


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miliTary inTeGraTed lOGisTiCs inFOrmaTiOn sysTem

The Military Integrated Logistics Information System (MILIS) will replace the Standard Defence Supply System as Defence’s core logistic management capability. It will also rationalise the numerous systems that make up the existing logistic information system environment and assist in the standardisation of logistics business processes across Defence. Specifically, MILIS will provide the foundation for integrated supply, inventory management, maintenance, movements and distribution throughout the Australian Defence organisation. This will include support to logistics processes for ADF units and headquarters in barracks and in the field, including to deployed locations without access to reliable communications.

MILIS is one of the largest information technology projects currently under development in Australia. It is being delivered through Joint Project 2077 in several phases, with each phase representing a major project in its own right.15

15. More information can be found at www.defence.gov.au/dmo/coo/jp2077/index.cfm.

Phase�2B.1This phase is due for delivery in late 2008 and will replace the core Standard Defence Supply System, including enhanced interfaces with the ROMAN financial management system.

Phase�2B.2This phase is due for delivery in late 2009 and will deliver deployable logistics capabilities designed for use in a communications-interrupted environment in the field, down to the sub-unit level.

Phase�2CThis phase was delivered in March 2007 and provides automated stores tracking through the introduction of radio frequency identification-enabled ‘Track & Trace’ capabilities.

Phase�2DDelivery of this phase will commence in 2010. This phase is planned to provide the delivery of an enhanced information systems capability for the following materiel logistics support processes: engineering and maintenance, enterprise reporting, architecture integration, repairable items management, classified assets management, security management, and automated identification technology.

Samantha Holliss, Deputy Project Manager for the RFID-enabled ‘Track &Trace’ project, field tests the equipment before her departure to the Middle East Area of Operations.



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http://www.defence.gov.au/dmo/coo/jp2077/index.cfm

Minor capital investment projects

Minor capital investment projects are undertaken to address emerging requirements—often to enhance or replace existing capability. They are funded from outside the Defence Capability Plan and are usually of relatively low value. There are currently about 200 such projects, with an average value of less than $5m. A total of $161m was expended on minor capital investment projects during 2006–07, compared to $138m in 2005–06.

The five most significant minor projects in 2006–07 are shown in Table 3.30.

Table 3.30—Top five minor projects



expenditure($m)

Cumulative�expenditure�to�

30�June�2007($m)

Budget�estimate2006–07

($m)

Revised�estimate2006–07

($m)


2006–07($m)

Medium Grader Replacement

AMP007.22 16 15 14 15 15

Medium Bulldozer Replacement

AMP007.21 16 15 14 15 15

Air Combat Manoeuvring Instrumentation System

AFM00920 17 12 7 11 12

Surface Combatant Force Protection Upgrade

NMP1874PH2 9 8 - 9 8

Artillery Orienting System

AMP042.15 11 9 5 6 6


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Output 1.2 manaGement Of capabIlIty SuStaInment

The planned resource use for Output 1.2 was revised from $3,717.8m to $4,003.0m in the Defence Portfolio Additional Estimates Statements 2006–07. The DMO’s actual result against this output was $4,079m.

Output 1.2 represented just over 46.4 per cent of the DMO’s expenditure in 2006–07, compared to 47.3 per cent in 2005–06.

All DMO Systems Divisions contributed to this output. Their divisional contributions and achievements are set out in the following pages.

Sustainment involves the management and provision of services and products needed to meet the capability, preparedness and performance requirements of the ADF. Typical services include maintenance, engineering, supply, configuration management and disposal action. Common products include spares, technical data, support and test equipment, training equipment and materials. The DMO also provides sustainment support for Defence operations; much of this is funded through this output.

The DMO’s sustainment services to Defence, and the price the DMO receives for these services, are formalised in materiel sustainment agreements between the DMO and Defence Capability Managers. Sustainment agreements are based around the DMO sustainment products, which have been defined by each of the Systems Divisions to reflect the output of their sustainment activity.



Performance targets agreed between the DMO and Defence Capability Managers, consistent with enabling the ADF to deliver its operations and capability preparedness requirements as directed by the Government.

Deliver quality, timely and cost-effective maintenance, repair, and supply services to the levels and standards agreed by Defence including support to ongoing operations.

Achieved. The DMO achieved its budgeted target for Output 1.2 and delivered in-service support to 100 diverse categories of Defence specialised military equipment, ranging from major platforms such as aircraft and ships to individual items such as vehicles, rifles, tents, support and clothing.



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Aerospace Systems Division

Aerospace Systems Division provides through-life support to 13 fixed-wing weapons systems, among them the F/A-18 Hornet fleet, C-17 Globemaster III, air-to-air refuelling capability, and advanced flight simulators.

The Division adopted new approaches to acquisition and sustainment during the year. Central to this was a commitment to performance-based contracting with industry and the development of improved business acumen and financial management skills among the Division’s staff, to support a more commercial approach to contract management.

aChievemenTs

A North-West Shelf unmanned aerial vehicle system trial was conducted in September–October 2006 to investigate a joint surveillance capability involving an unmanned aerial vehicle, an Armidale class patrol boat, a border protection command aircraft, and land forces of the Pilbara Regiment. The trial also involved a modelling and simulation exercise in which a virtual unmanned aircraft was flown to assess various conditions and situations not encountered during the real-world trial.

A logistics supply and support framework for the C-17 Globemaster III was implemented under the Globemaster Sustainment Partnership, in time for the arrival of the first aircraft in December 2006.

The first four C-130H aircraft were modified to provide improved an electronic warfare self-protection capability.

A new follow-on in-service support contract with BAE Systems Australia was established for the A 27 Lead-in Fighter Hawk. This is a performance-based contract covering full logistic support for the 33 aircraft and associated maintenance trainers and flight simulators. BAE Systems is responsible for all support other than operational maintenance, which is performed by the RAAF.

A life-of-type performance-based contract with Australian Aerospace (Platform System Support Contract) was introduced for deeper maintenance of the AP-3C aircraft and structural repairable items.

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A performance-based contract was signed with Raytheon Australia for deeper maintenance of electronic surveillance measures and radar components. The new contract consolidates the existing Raytheon avionics workshop contract and electronic surveillance measure and radar maintenance contract.

A performance-based contract was signed with Raytheon Australia for life-of-type maintenance support for F/A-18 Hornet APG-73 radar assemblies.

Implementation of the F/A-18 Hornet structural safety-by-inspection program continued and rolling out of the F/A-18 Hornet structural condition monitoring system to RAAF Williamtown squadrons continued.

Acquisition and support contracts were signed with Boeing Australia Ltd on 14 December 2006 and 2 February 2007 for JP 129 Phase 2.

A range of significant tactical training upgrades were made to the C-130 full-flight simulators at Air Lift Group in RAAF Richmond. These upgrades provide increased realism in training and assist aircrew in preparing for overseas deployment.

Under Project AIR 5216 Phase 1, enhanced C-130J capability was delivered through completion of the Block 5.4 upgrade aircraft modification.

The joint service electronic combat system tester was accepted into service for F/A-18 Hornet electronic warfare systems maintenance.

The upgrade to the F/A-18 Hornet engine test cell at RAAF Williamtown was accepted into service.

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ChallenGes

Challenges for the Division included:

managing ageing aircraft platforms, including PC-9/A training aircraft, C-130H Hercules, Caribou and Boeing B707

maintaining logistics support for C-130J and C-130H Hercules, Caribou and Boeing 707

beginning initial development of a performance-based through-life support contract for the C-130J-30 Hercules weapon system

introducing a new logistic supply and support framework for C-17 Globemaster III before the first arrival in December 2006

planning the withdrawal of the B-707 from service by 30 June 2008

starting development of a new safety-by-inspection fatigue management regime to replace the existing safe-life policy for the ageing AP-3C aircraft

managing aircraft structural integrity and systems supportability for the ageing F-111 aircraft platform, including replanning for F-111 sustainment based on the announced withdrawal of the aircraft in 2010

commercialising the Engines and Workshops Business Unit to ensure engine reliability, safety and availability through to the planned F-111 withdrawal date of 2010 and completing wing fatigue testing to ensure the F-111 wing life

negotiating and implementing performance-based logistics contracts for the C-130 Hercules and P-3 Orion aircraft engines, elements of sustainment support of the P-3 Orion aircraft and PC-9/A Pilatus and the next five years of the through-life support arrangements for the A-27 Lead-in Fighter Hawk aircraft.

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new prOjeCTs

AIR�5349�F/A-18F�Block�II�Super�HornetThe F/A-18F Block II Super Hornet has been accepted as an accelerated acquisition project. Table 3.32 provides details of project expenditure.

Table 3.32—Project expenditure: AIR 5349


expenditure�($m)

Cumulative�expenditure�to�

30�June�2007�($m)

2006–07�actual�expenditure�

($m)

3,984 54.9 54.9

The project will acquire 24 F/A-18F Block II Super Hornet16 multi-role aircraft to ensure that Australia’s air combat capability edge is maintained through the transition to the F-35 Joint Strike Fighter during the coming decade. Second pass approval was achieved in March 2007. Defence has established an FMS contract with the US Navy, valued at approximately A$2.9b, for the acquisition of 24 US Navy common F/A-18F Block II Super Hornets and associated support systems. Additional cases will be established in 2007–08 for weapons acquisition and sustainment of the aircraft. Local industry involvement will be a key factor in developing the through-life support concepts for the Super Hornets. The total program investment is approximately $6.6b over 13 years, which includes acquisition and all support costs, as well as personnel.

16. More information can be at www.defence.gov.au/dmo/lsp/fa18F_Block_II_Super_hornet.cfm.



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http://www.defence.gov.au/dmo/lsp/fa18F_Block_II_Super_hornet.cfm

Helicopter Systems Division

In August 2006, Helicopter Systems Division was formed in the DMO and assigned responsibility for equipping and sustaining the ADF helicopter capabilities of the Navy and the Army. The helicopter elements of Aerospace Systems Division were transferred to Helicopter Systems Division, which, under the leadership and management of a two-star officer, addresses the demands of sustaining helicopter operations as well as the high level of current and future helicopter acquisition projects.

The Division provides through-life support to 11 rotary wing weapons systems through Aviation System Program offices based at Nowra, New South Wales, for Navy Aviation and Oakey, Queensland, for Army Aviation.

The demand on sustainment tasks was driven by the high tempo of operational units overseas, with Seahawks in the Gulf and Chinooks in Afghanistan. Operational needs required the rapid acquisition of equipment and modifications to meet the demands of operating Chinooks in Afghanistan and Black Hawks and Kiowas in Timor-Leste, as well as unmanned aerial vehicles for Iraq and Afghanistan.

aChievemenTs

A program was successfully implemented combining the Project SEA 1405 (Forward-looking Infrared and Electronic Self-protection Measures for S-70B-2) modification program into a single production line with deeper maintenance. An industry coalition was negotiated between the major contractors, resulting in a combined program, with inherent efficiencies, to reduce the number of aircraft unavailable due to DMO activities such as deeper maintenance and the fitting of the forward-looking infrared/electronic support measures.

Six Seahawk aircraft completed the Project SEA 1405 production line, with incorporation of forward-looking infrared and electronic self-protection measures and a crash data recorder capability.

A computerised Seahawk aircraft maintenance trainer was introduced into service to provide simulated maintenance training for aircraft technicians.

ChallenGes

Challenges for the Division in 2006–07 included:

soliciting industry for support of Army aviation training under a new performance contract arrangement

maintaining Seahawk availability during upgrades, including rectification of corrosion

maintaining Chinook availability during rapid acquisition and engine upgrade modification programs

managing ageing aircraft platforms, including the Black Hawk, Seahawk and Sea King

commencing remediation actions arising from the Sea King Board of Inquiry

implementing support arrangements for the ARH Tiger.

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prOduCTs

S-70B-2�SeahawkThe Navy Aviation Force includes 16 Seahawk helicopters, which form organic frigate-based aviation assets. These aircraft are part of, or extend substantially, the sensor and weapons systems of the Navy’s frigates. Seahawk helicopters have been deployed to guided missile frigates and Anzac class frigates on task rotation, providing maritime surveillance and force protection to ADF and allied forces on Operation Catalyst.

S-70A-9�Black�Hawk�The Army is equipped with 34 S-70A-9 Black Hawk helicopters, a full-flight and mission simulator, a maintenance training aid and other facilities.

The Black Hawk uses a multi-contract support philosophy, with significant repairable item work conducted under a rotable pool arrangement with Sikorsky Australia. BAE Systems provides deeper maintenance support for the fleet, using a performance-based contract that also covers support for the Chinooks.

The main sustainment risk to the Black Hawk is the continuing high operational tempo which, in conjunction with similar demands on the Chinook, presented a significant challenge to the contracted deeper maintenance support in 2006–07. System obsolescence is also increasing the risk to achievement of sustainment targets. This is being managed through selected upgrades to ensure operational viability until the Black Hawk is replaced under Project AIR 9000 Phase 4.

CH-47D�Chinook�The Australian Chinook capability consists of six CH-47D helicopters based in Townsville, Queensland. Due to the small fleet size, initial training is conducted in the United States. Following a rapid acquisition and modification program, a detachment of two Chinooks was sustained in Afghanistan for 12 months, from April 2006 until April 2007. Five aircraft were rotated through the detachment, enabling a deeper level maintenance and modification program to be conducted in Australia. All Chinooks are scheduled for post-deployment refurbishment and engine upgrade modification by December 2007.

Other�in-service�helicopters

Helicopter Systems Division is also responsible for sustainment of:

six Sea Kings—to be replaced by six MRH-90 from 2010

thirteen Squirrels—to be replaced under Project AIR 9000 Phase 7

forty-one Kiowas—the ARH Tiger will replace the operational unit aircraft, but the Kiowa will be retained for training until replacement under AIR 9000 Phase 7. Four Kiowas have been sustained on operational deployment in Timor-Leste

twenty-five Iroquois—to be withdrawn from service by the end of 2007.

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Electronic and Weapon Systems Division

Within the DMO, the through-life support of electronic and weapon systems materiel is managed across 20 System Program and System Support offices. These cover command and control systems, communications, airspace surveillance and control systems and their supporting radars, electronic warfare systems (including self-protection), guided weapons, and explosive ordnance of all types. The primary focus in 2006–07 was providing support to ADF operations during this period of high operational tempo.

Operational support was achieved while the Division maintained a high level of availability of the various systems to support the ADF.

aChievemenTs

The in-service support arrangements for the recently delivered Australian Defence Air Traffic System—including radar mechanical maintenance—commenced.

Under Project Genesis, work continued to improve the integration of the Defence and Airservices Australia air traffic control capabilities.

Support was provided for the first deployment of the Transportable Air Surveillance Radar.

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The availability and serviceability of the Nulka Active Missile Decoy System fitted to Australian warships remained excellent. The sustainment organisation was involved in developing improvements to the current systems and supporting the growth of this Australian-developed capability in overseas markets. The system is now fitted to 100 warships, and there is potential for this number to increase.

A number of obsolete ship-based external communications equipment and systems were upgraded or replaced, enhancing ship–shore communications.

The Evolved Sea Sparrow Missile maintenance facility at the Defence Establishment Orchard Hills was commissioned, and interim certification was provided to process missiles through the facility. The full spectrum of maintenance activities for the missile is expected to be in operation by mid-2008.

The DMO was able to provide the Australian National Audit Office with evidence to support the pricing on computer system armaments of $720m in the land-based capability explosive ordnance inventory, which was previously qualified because of uncertainty in the method of price calculation. Removal of this

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qualification represented a significant level of effort in accounting knowledge and the testing of pricing methodologies by DMO staff.

Javelin and one variant of the Hellfire missile were transitioned into service, along with ammunition types required to support the M1A1 Abrams battle tank.

The in-service support arrangements for the Tactical Air Defence Radar Systems commenced following delivery of these systems. One of the four new systems was prepared and deployed to the Middle East Area of Operations in support of Operation Slipper.

A Tactical Interface Cabin to integrate the Tactical Air Defence Radar System and the Mobile Control and Reporting Centre was delivered. A significant effort to remediate obsolete Regional Operations Centre hardware commenced, to extend the life-of-type until new systems are delivered.17

Two major upgrades to the interim Regional Operations Centre software were implemented, which led to improved interfaces with Air Services Australia radars and interim Link 16 and Link 11 capabilities.

A contract was signed with Australian Defence Industries Ltd, now trading as Thales Australia, that combines heavy-grade repair, engineering and supply support for a range of combat net radio systems. The contract provides a firm base for the sustainment of existing battlefield communications systems during a period of high operational use. This streamlining of support and rationalisation will allow resources to be reallocated to support the ageing fleets of battlefield communications systems until their planned replacement under a number of major capital equipment projects in progress.

The Maintenance and Operational Support Agreement contract with Optus for the sustainment of the Defence Mobile Communications Network was amended to extend support to the network until the end of 2010.

In response to land-based threats in current operations, an additional electronic warfare self-protection organisation was created. This organisation is heavily involved in the provision

17. Life-of-type is the estimated time, for planning purposes, for which an item will be a current service requirement.

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and support of high-technology, rapidly evolving systems to provide protection to land-based capabilities against an array of developing threats—including those posed by improvised explosive devices, which are commonly used by adversaries in the Middle East Area of Operations.

The availability of the two Navy very low frequency communication sites—Naval Communications Station Harold E Holt, located in Exmouth, Western Australia, and Navy Transmission Station Darriman in Sale, Victoria—continued to be maintained at a level consistently meeting or exceeding the level prescribed by the Navy.

The ADF’s over-the-horizon-radar wide-area surveillance capability, which includes the Jindalee Operational Radar Network, regularly exceeded the operational availability requirements of the Air Force, providing surveillance over the sea and air approaches to northern Australia. Support to the three major ground stations in Western Australia, Queensland and the Northern Territory and the control elements in South Australia was further rationalised and standardised through the renegotiation and re-letting of the two primary support contracts for these systems.

suppOrT TO OperaTiOns

Support to military operations has placed greater pressure on the DMO’s ability to sustain non-guided explosive ordnance as a result of the rapid acquisition and urgent procurement of new and existing items of inventory and the diverse environmental conditions under which the explosive ordnance is being used.

Battlefield Command Support System support was provided for systems deployed for operations in Afghanistan (Operation Slipper) and Timor-Leste (Operation Astute). Software support during the reporting period comprised the delivery of a major system upgrade, providing enhanced situational awareness and improved networking capabilities. Hardware support included the roll-out of upgraded ‘ruggedised’ laptop computers and the purchase of additional spare radio interface devices. A range of system components approaching the end of their useful life were assessed for inclusion in the 2007–08 hardware upgrade program.

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Land Systems Division

The sustainment of land systems is now managed through nine System Program Offices; an additional office has been established to manage ADF clothing. Land materiel products span more than 1,200 equipment fleet types and tens of thousands of consumable line items. Land materiel is supported by the Land Systems Division throughout Australia and in several concurrent overseas operational theatres. During 2006–07, these products were managed across 26 separate materiel sustainment agreements. The range of land materiel is significant and includes:

armoured vehicle fleets

wheeled vehicle fleets

engineer plant

bulk liquid distribution and storage systems

electrical equipment fleets

weapon systems—from small arms to mobile guided missile systems

medical and dental equipment, tentage and defence stores, and uniforms and consumable stores such as combat rations.

aChievemenTs

Planning and loading of over 50,000 maintenance jobs to Joint Logistic Group was accomplished, using 940,000 hours of labour—increases of 66 per cent and 76 per cent, respectively, on 2005–06.

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A 15 per cent increase was achieved in small arms maintenance, with over 8,000 weapons loaded to Thales Australia Ltd for repair. Of these, 3,600 were fully rebuilt to the latest build standard and a further 835 heavy machine guns were overhauled.

Considerable improvement was made in the operational availability of M-113A1 vehicles within Land Command—increasing from 40 per cent to nearly 80 per cent. This was attributable to better operator maintenance and reporting, improved data quality and performance measurement, and an overall reduction in the size of the operational fleet in preparation for the M-113 upgrade project.

Operational availability levels of more than 95 per cent were consistently achieved for deployed Steyr weapons.

suppOrT TO OperaTiOns

The greatest challenge for land materiel sustainment during 2006–07 was support to operations. The ADF has significant quantities of materiel deployed on operations in two separate theatres in the Middle East and in Timor-Leste and Solomon Islands.

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Significant operational support achievements included:

short-notice development, manufacture and installation of protected weapon stations for the deployed Bushmaster fleet. Some of this work was performed within the area of operations

development and manufacture of armoured crew cabins for engineer plant deployed to Afghanistan

deployment and continuous support of weapon-locating radar

completion of 15 rapid acquisition projects, at a cost of $50m

sustainment of more than 500 vehicles and trailers

preparation of forces for deployment to assist in the evacuation of Australians from Fiji and Tonga

satisfaction of over 2,500 demands per month for materiel items from overseas operations—an increase of 25 per cent on 2005–06.

prOduCTs

B�Vehicle�Program

A total of 249 vehicles were refurbished under the operational remediation program (including 106 Land Rovers, 46 Unimogs, 69 Mack trucks, 28 trailers, and 962 repairable items).

An engineering and sustainment program to improve the reliability and operational availability of the Special Forces long-range patrol vehicle was completed.

A total of 256 vehicles were refurbished under the B Vehicle Logistic Shortfall Project—131 Land Rovers, 105 Unimogs and 20 Mack trucks, and 1,673 repairable items.

Commercial�Vehicle�ProgramDuring 2006–07, the Defence Commercial Vehicle Program replaced 2,056 vehicles at a cost of $71.17m. This involved:

1,894 light vehicles procured from standing offers—Toyota, Ford, Nissan, Mitsubishi and Holden—to the value of $57.4m

139 trucks procured to the value of $12.3m

23 vehicles procured for Royal Malaysian Air Force Base Butterworth, Malaysia, to the value of $1.4m

$41.0m in revenue realised through the sale of replaced vehicles.

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M-113A1 vehicles continued to be withdrawn from units where they were no longer required.

The only active fleet is now located with the 1st Brigade in Darwin. In all, 120 M-113A1 vehicle hulls have now been stripped in preparation for the M-113 upgrade project.

A review of depot-level maintenance management was completed.

Several initiatives aimed at improving sustainment management were implemented, including:

– development and publication of the Land Systems Division Fleet Management Manual

– implementation of a Maintenance Management Improvement Program

– development and introduction of a new sustainment performance measurement system for key land fleets, to improve the quality and repeatability of performance data and management decision making. These new performance measures were then introduced into materiel support agreements.

Projects�transitioned�into�serviceTwo significant new capabilities were introduced into service during 2006–07.

Throughout the year the�new tank and support systems were progressively brought online. These include 59 M1A1 AIM Abrams tanks, seven M88A2 Hercules heavy recovery vehicles, gunnery and driving simulators, and a new fleet of tank transport vehicles. The official introduction into service was celebrated during a parade at Robertson Barracks in Darwin on 7 July 2007.

More than 200 armoured multi-role accommodation shelters were delivered to, and installed in, Afghanistan. These shelters provided deployed personnel with protected accommodation, laundry, bathroom and messing facilities in theatre and were acquired under the Rapid Acquisition Program.

ClosuresSignificant support activities completed included the withdrawal from service of the Leopard main battle tank.18

18. The ceremonial withdrawal of the last vehicles occurred in Darwin on 7 July 2007.

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Maritime Systems Division

The sustainment of maritime materiel is managed by 10 System Program Offices. All depot-level maintenance is contracted out. In-service support is managed under a variety of arrangements, ranging from integrated logistics support and maintenance provided by a single prime contractor to a System Program Office acting as the prime contractor with separate commercial contracts and in-house support. The Logistic Support Agency—Navy provides the majority of inventory and repairable item management for most classes (except the hydrographic ships, the Armidale class patrol boats, and the Huon class coastal mine hunter vessels).

aChievemenTs

Following the introduction into service of HMAS Sirius, Maritime Systems Division established a comprehensive contract for ongoing in-service support.

prOduCTs

Adelaide�class�guided�missile�frigateThe support concept is to provide product provides through-life materiel support for, and maintenance of, the Adelaide class platforms HMA Ships Adelaide, Sydney, Darwin, Melbourne and Newcastle. This provides the Navy with vessels that meet the

operational requirements of the Joint Operations Command and frigate availability constraints of the Fleet Activity Schedule.

All ships met their operational requirements in 2006–07. The Division continued work on new integrated materiel support contracting arrangements for the Adelaide class. It also further refined the inventory investment plan to meet maintenance requirements for the ships. The Division began preparing for the planned withdrawal of HMAS Adelaide in January 2008, the Government having agreed to the ship’s disposal to the New South Wales Government as a dive wreck.

Anzac�class�guided�missile�frigate

The support concept is to provide through-life materiel support for, and maintenance of, the eight Anzac class ships and operator training facilities to meet the operational requirements of the Joint Operations Command and frigate availability constraints of the Fleet Activity Schedule. Actual ship repair and equipment maintenance are contracted to the maritime industry progressively under the new ship repair ‘batching’ concept.


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The new Anzac Ship Integrated Material Support Program Alliance was finalised. This contract is a form of alliance agreement between the Commonwealth, Saab and Tenix to provide support of the Anzac class ships for at least the next 10 years. All maintenance schedules were met, with implementation of an improved shipkeeping concept that shared responsibilities between the contractor and Navy resources during long maintenance periods. Three frigates were successfully prepared for international deployment on operations.

Collins�class�submarinesThis support concept is to maintain the Australian submarine materiel capability, optimise the logistic costs of ownership of the submarines, and provide sustainable and cost-effective design, engineering and logistics support.

Completion of the five-year full-maintenance cycle docking and capability upgrades to the heavyweight torpedo and combat system in HMAS Waller provided the most capable Australian submarine yet. HMAS Dechaineux commenced a five-year full-maintenance cycle docking. Intermediate and mid-cycle maintenance work was achieved with other submarines. Submarines were also supported overseas during deployments.

Coastal�mine�hunter�vesselsThis support concept is to maintain materiel capability, optimise the logistic costs of ownership, and provide sustainment and cost-effective design, engineering and logistic support to the six coastal mine hunter vessels.

Operational mission availability targets were achieved, under a revised contract structure for performance-based support for the coastal mine hunter platform and combat systems, excluding sonar.

Major preventative maintenance activities included 12 maintenance periods and one refit. Team performance and service delivery were better identified, analysed and improved by reliability and performance modelling of system availability and maintenance and inventory cost control, standardisation of asset configuration management, and business performance analysis.

Fuels�and�lubricants�for�the�NavyThe support concept is to provide petrol, oil and lubricant products by the Defence supply chain and industry delivery methods to the Navy operational and support capability.

Despite global price fluctuations, the Navy’s national tasking and operations were achieved within budget expectations, while participation costs for Exercise Talisman Sabre ’07 will be recovered from the US Navy under the exchange agreement.

Chief Operating Officer Division

For the Chief Operating Officer Division, the major challenge for sustainment of logistics information systems was the implementation and operation of a formal information technology control framework designed to ensure that users operate and manage the Standard Defence Supply System in a manner that achieves the highest possible level of data accuracy in financial reporting. This outcome was achieved with significant success, as evidenced by Australian National Audit Office audits in October 2006, February 2007 and June 2007 revealing a compliance rate of 94 per cent.

Information Technology Infrastructure Library processes were also fully implemented, with an audit revealing 100 per cent compliance in both consistency and maturity of process and 90 per cent of in-service staff gaining certification.



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Output 1.3 prOvISIOn Of pOlIcy aDvIce anD manaGement ServIceS

During 2006–07, the DMO’s expenses for Output 1.3 totalled $49m and covered the following:

procurement and contracting advice to Defence and the DMO and contracting advice to the rest of Defence

industry policy and advice to both Defence and the Government

corporate governance and reporting to meet government requirements.



Delivery of quality policy advice and management services.

The DMO will continue to evaluate the delivery and quality of advice and services, as well as drive the materiel reform agenda through the Change Program initiatives.

Achieved: The DMO and Defence made significant progress with regard to the maturity of the framework supporting Output 1.3, including the way that internal financial and other input controls are costed and managed. The DMO continued to pursue a program of internal reforms aimed at improving the way it does business.

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Delivery of the Defence Industry Policy Review was a major policy initiative in 2006–07.

The 1998 Defence and Industry Strategic Policy Statement, authored by the then Minister for Defence Industry, Science and Personnel, the Hon Bronwyn Bishop MP, created a solid foundation for the Government’s defence industry policy. The underlying reasons for Australia maintaining a capable in-country defence industry have not changed. On 17 May 2006, the Minister for Defence met with about 40 senior representatives of large and small companies, peak industry associations, Government departments and research institutes. The Minister subsequently released a discussion paper on 20 June 2006. Submissions in response to the discussion paper were received, and the Government released its new Defence and Industry Policy Statement on 1 March 2007. The new policy statement details the following strategies to achieve cost-effective delivery of equipment and support to the ADF, in line with Australia’s strategic circumstances:

A strategic approach to equipping and sustaining the ADF

Maintaining priority local industry capabilities

Securing value-for-money through best-practice procurement

Creating opportunities for Australian firms

Encouraging small and medium sized enterprises

Supporting the development of skills in defence industry

Facilitating defence exports

Driving innovation in defence technology

Defence and industry working together.

Work has commenced on all nine implementation strategies, with a strong focus on schedule delivery and coordination of activity across Defence, industry and other stakeholders. Defence continues to meet the Cabinet-endorsed deadlines for implementation of the strategies.

Over the next six months, policy implementation will be centred on seven key deliverables—development of a Defence Self-reliance Plan, publication of an Australian Industry Capability Manual, establishment of a Defence Export Unit, procurement improvement initiatives, enhanced skill development initiatives, enhanced defence industry innovation, and an enhanced Defence–industry relationship.

A Senior Executive Steering Committee has been established to directly oversee implementation of these deliverables. Chaired by the Chief Executive Officer DMO, it also comprises the Deputy Secretary Defence Support Group, the Chief Information Officer, the Chief Defence Scientist and the Chief Capability Development Group. Industry is represented by Mr Lucio Di Bartolomeo, former Chief Executive Officer of Australian Defence Industries Ltd.

In addition to overseeing policy implementation, the primary role of the Committee is to allocate resources within key Defence stakeholder areas to drive timely and effective implementation of the new policy and to provide advice to the Minister on implementation issues.

For more information, visit www.defence.gov.au/dmo/id/dips/DIPR_Policy_Statement_2007.pdf.

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http://www.defence.gov.au/dmo/id/dips/DIPR_Policy_Statement_2007.pdf

Ministerial support

Providing policy advice and support to the Minister for Defence is a key function of the DMO. Table 3.34 shows a breakdown of correspondence provided to the Minister’s office during 2006–07.

Table 3.34—Advice provided to the Government, 2006–07

Type�of�advice Number

Submissions 563

Speeches 62

Responses to parliamentary questions on notice 41

Questions taken on notice in the course of parliamentary inquiries 65

Media releases 33

Ministerial correspondence 689

Responses to possible parliamentary questions 65

Total 1,518


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$9.6�billion�in�goods�and�services

The 2007–08 Budget includes almost $1.1b in additional funding for the DMO and a total of $9.6b of goods and services to be supplied to the ADF. This will have a significant impact on the DMO—particularly in terms of how it delivers the new initiatives, on top of its existing business—and help to ensure that the DMO meets the requirements of Defence and the Government.

The DMO already manages (on Defence’s behalf) one of the largest inventories of physical assets in the country, with $23.2b of

specialised military assets, $8.8b of assets under construction, $1.8b of general stores and fuel, and $2.1b of explosive ordnance. The demands of the Defence Capability Plan require more than a 20 per cent increase in the DMO’s and industry’s new project work rate over the next five years.

Over more than $4.6b—which represents 49 per cent of the DMO’s forecast expenditure in 2007–08—will go to sustainment.

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The goal for the DMO is to ensure that the size, shape, skills and culture of the workforce meet the business requirements of the organisation, so that the DMO becomes more business-like, accountable and outcome driven.

The achievements of DMO staff during 2006–07 were significant. They met the challenges of increased budget allocation, more complex project delivery and sustainment, further implementation of Kinnaird reforms, and ongoing scrutiny by the Government, the media and the community.

The DMO continued to emphasise the importance of reprioritising work, leading reform, and improving working relationships with industry.

tHe DmO’S peOple StrateGy

In 2006–07, the DMO’s strategy to address workforce challenges focused on enhancing the attractiveness of its employment offer compared with that of other employers. Key features of the new employment value proposition are detailed at Chapter 1.

Chapter�4People management

Retiring Head Maritime Systems Division, Rear Admiral Trevor Ruting (left), is congratulated on this retirement by the Chief of Defence Force, Air Chief Marshal Angus Houston.

� defence annual report 2006–07 / volume two76

The Defence Procurement Review and subsequent Government decisions stressed the need for the DMO to develop professional, highly skilled staff to deliver modern military capability in a business-like manner.

The CEO’s Professionalisation Agenda is a central strategy in the DMO’s efforts to meet this challenge. The initiative focuses on implementation of an integrated, consistent and disciplined approach to workforce skilling and professional development, with activities closely aligned to DMO business practices. Professionalisation within the DMO incorporates two main elements:

obtaining skills achieved through accredited education and training programs

chartering and certifying processes involving the assessment of competence against the highest professional standards available and ongoing professional development.

The DMO is delivering the Professionalisation Agenda through:

the DMO Institute, which is responsible for the design, development and administration of tailored and accredited corporate learning and development

the engagement of peak professional bodies to provide best-practice chartering and certification processes.

The business acumen training course is a further initiative of the CEO DMO, introduced to help increase awareness and understanding of the DMO’s workforce in dealing with industry. The course aims to provide an insight into the way the defence industry operates and the business drivers that influence industry in its dealings with the DMO. The success of the training course continues: the 1,000th

participant attended the course in late 2006.

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In February 2007, the DMO hosted the inaugural International Project Management Symposium, which was attended by over 120 participants from the DMO, defence industry, the Public Service and overseas organisations. As the Deputy CEO DMO, Mr Kim Gillis, said, ‘The intention of the symposium was for DMO project managers to network and learn from each other, their peers in comparable organisations, and experienced international project managers’.

The symposium was followed by a four-day project management simulation delivered by the DMO in partnership with Boeing International. Participants—notably 40 of the DMO’s most senior project managers—worked on realistic scenarios, were observed by and received feedback from executive project managers in Boeing and the DMO. Both events are significant elements of the certification program for senior project managers in the DMO (covering Executive Level 2 to SES Band 2/Military Equivalent). The skilling program for DMO project managers is underpinned by the Project Management Certification Framework, which has four levels of certification linked to the acquisition category of a project. Under the Acquisition Categorisation (ACAT) Framework, there are four categories of capital equipment projects in the DMO, based on cost, complexity, schedule and commercial attributes. The most complex projects are categorised as ACAT I and the least complex projects are ACAT IV.

Beyond the symposium and simulation, the DMO is implementing a flexible learning and development program. This will include an Executive Level Master’s Degree to be developed in partnership with the Defense Acquisition University, US, and the Military Defence College, Schrivenham, UK.

Making the DMO workforce more professional


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people management :�chapter�4

perfOrmance aGaInSt peOple prIOrItIeS

Table 4.1 reports on performance against the priorities included in the ‘People’ chapters of the Portfolio Budget Statements 2006–07 and the Portfolio Additional Estimates Statements 2006–07.

Table 4.1—Performance against people priorities, 2006–07

Priority:

Manage the implementation of changes in employment conditions included in the Defence Collective Agreement 2006–2009.

Performance:

The DMO: worked in partnership with the Defence Personnel Executive to implement the Defence Collective Agreement, which came into operation on 29 June 2006. Revised delegations and guidance were issued to support the use of increased flexibilities available under the agreement to recognise and remunerate the DMO employees contributed directly to policy development for the Group Productivity Award to reward high performers and to the Building Defence Capability Payment, a salary premium aimed at addressing attraction and retention issues in critical job categories continued to participate in the joint management–union working group established under the Collective Agreement to review the operation of Defence work-level standards and particularly focused on work in this area to translate the remaining retained pay points into the existing Australian Public Service classification structure. This may ultimately benefit the DMO in providing more flexible remuneration outcomes for particular employment categories, such as project managers supported the implementation of key initiatives in the Collective Agreement in the areas of change and performance management, including the Performance Feedback Assessment and Development Scheme, which the DMO used to revise its Employee Performance Agreement form. The new form enables the recording and reporting of more meaningful and robust key expected results, linked directly to its corporate priorities and business outcomes.

The Collective Agreement also sought to improve efficiency and effectiveness through continuous performance improvement processes, and this will be supported by the development of a change management framework that seeks to retain the skills and knowledge of DMO employees.

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Priority:

Continuing to establish industry-recognised programs to professionalise the workforce across key job families: project management, engineering and technical, commercial and business, and logistics.

Performance:

The DMO continued to work in partnership with peak professional bodies to provide certification and professional recognition programs for DMO job families. In November 2006, a memorandum of understanding was signed with the Institute of Chartered Accountants to provide professional recognition pathways and continuing professional development for chartered accountants. The DMO also became a corporate partner of the Royal Institute of Naval Architects, in recognition of the importance of the naval architecture discipline to the DMO.

The Materiel Logistics Professionalisation Project is currently developing units of competency to underpin the materiel logistics workforce. (Integrated logistics support competencies have already been developed.) The units of competency are to be packaged into qualifications, and a certification framework is to be developed to reflect the vocational requirements. Industry will be engaged as part of this process since it is intended to nationally endorse all units of competency and qualification under the Australian Qualifications Framework. The Materiel Logistics Council has endorsed the project, and the wider materiel logistics community was updated on the progress of the project at the Materiel Logistics Conference in August 2007.


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peOple numberS: StaffInG, by averaGe StrenGtH

This section provides information on average staffing levels for 2006–07 and compares personnel numbers with estimates for the year.

The DMO average workforce strength in 2006–07 was 6,931—that is, 39 above the revised estimate of 6,892. This was a consequence of the significant growth in projects and funds under management and the use of alternative labour, including Reservists, to meet the shortfall in the ADF permanent workforce.

Priority:

Ongoing establishment of a professional framework for project managers that incorporates independent assessment against industry standards and the Australian Qualifications Framework, assessment of knowledge and experience, and performance assessment.

Performance:

The full Project Managers Certification Framework was implemented in September 2006. The framework ensures that personnel with accountability for managing DMO capital acquisition projects have the appropriate industry professional status, knowledge, work experience and performance attributes. The framework has four levels of certification, which were developed to correspond to the project management requirements for each acquisition category of project. These levels are referred to as Certified Professional Project Manager Levels 1–4. This is a DMO-specific accreditation that extends the professional project management accreditation provided by the Australian Institute of Project Management. A suite of accredited project management training courses and education programs have been developed to support the framework. The courses range from practitioner-level training to postgraduate qualification–level programs.

Table 4.2—The DMO average funded strength, 2005–06 and 2006–07

Actual�2005–06



Actual�2006–07


Variation�2006–07�[1]

(No.) (%)

Australian�Public�Service

Senior executives 29 30 30 29 32 –1 –3

Senior officers 1,064 1,140 1,260 1,225 1,339 –35 –3

Other APS staff 3,409 3,450 3,716 3,697 3,741 –19 –1

Sub-total APS[2] 4,502 4,620 5,006 4,951 5,112 –55 –1

Backfilling of ADF vacancies 165

Sub-total�APS[2] 4,502 4,620 5,006 4,951 5,277 –55 –1

PSP workforce[3] 393 374 298 298 301 – –

Sub-total�APS�and�PSP 4,895 4,994 5,304 5,249 5,578 –55 –1

Navy

Star-ranked officers 6 6 7 7 6 – –

Senior officers 49 49 46 50 47 4 9

Table 4.1 continued


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Table 4.2 continued

Actual�2005–06



Actual�2006–07


Variation�2006–07�[1]

(No.) (%)

Junior officers 98 141 109 97 136 -12 -11

Other ranks 124 156 120 127 156 7 6

Sub-total�permanent�Navy[4] 277 352 282 281 345 1 –

Reserve forces[5] 74 56 71 113 110 42 59

Sub-total�Navy 351 408 353 394[7] 455 41 12

Army

Star-ranked officers 5 7 5 7 6 2 40

Senior officers 42 44 39 43 47 4 10

Junior officers 170 218 166 167 210 1 1

Other ranks 194 215 178 172 219 -6 -3

Sub-total�permanent�Army[4] 411 484 388 389 482 1 –

Reserve forces[5] 84 59 50 86 75 36 72

Sub-total�Army 495 543 438 475[7] 557 37 8

Air�Force

Star-ranked officers 6 6 7 8 8 1 14

Senior officers 73 74 68 79 79 11 16

Junior officers 355 413 365 356 414 -9 -2

Other ranks 328 348 323 320 350 -3 -1

Sub-total�permanent��Air�Force[4]

762 841 763 763 851 – –

Reserve forces[5] 33 43 34 50 50 16 47

Sub-total�Air�Force 795 884 797 813[7] 901 16 2

Sub-total�ADF�workforce 1,450 1,677 1,433 1,433[7] 1,678 – –

Expected ADF shortfalls[6] -165

Sub-total�ADF�workforce 1,450 1,677 1,433 1,433 1,513 – –

Sub-total�Reserve�workforce 191 158 155 249 235 94 61

Sub-total�APS�and�PSP 4,895 4,994 5,304 5,249 5,578 -55 -1

Total�DMO�workforce 6,536 6,829 6,892 6,931 7,326 39 1

Notes1. 2006–07 actual compared with the revised estimate as a difference and a percentage.2. Staffing numbers for APS are based on average full-time equivalent and include ongoing and non-ongoing personnel.3. Professional Service Providers (PSPs) are individuals under contract filling line positions.4. Staffing numbers for permanent forces are based on average funded strengths and include Reservists undertaking full-time

service. The number of Reservists undertaking full-time service at 30 June 2007 was 33 (Navy 20, Army 10 and Air Force 3).5. Represents Reservists who undertook paid service.6. A civilianisation process is planned for 2007–08 for up to 200 DMO ADF positions.7. Average funded strength does not include ADF members on part-time leave without pay and maternity leave with half pay.

The total of 1,433 is different to that at Note 14 in the Financial Statements (Refer Appendix 17) due to this reason.



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auStralIan publIc ServIce StaffInG

The APS full-time equivalent average strength for 2006–07 was 4,951, which is in line with the revised estimate of 5,006. This reflects modest growth from 2005–06 in line with forecasts, to meet the DMO’s increasing workload and is offset by a corresponding decrease in the military and contractor workforces.

prOfeSSIOnal ServIce prOvIDerS

As part of its total workforce, the DMO engages Professional Service Providers to fill APS line positions due to an inability to recruit or retain civilian staff with these skills. PSPs are not DMO employees but are employed under contractual arrangements.

The PSP full-time equivalent average strength for 2006–07 was 298, the same as the revised budget estimate. This represented four per cent of the total DMO workforce.

permanent mIlItary StaffInG: mIlItary wOrkfOrce aGreementS

The CEO DMO and the Service Chiefs recognise that the posting of military personnel into the DMO benefits both the DMO and the Services, in that it supports the DMO’s understanding of the operational environment, brings in specialist military skills, and allows for Service interests to be represented within the DMO’s internal processes.

Individual military workforce agreements were established between the CEO DMO and the three Service Chiefs on 1 July 2005. The agreements govern the employment of military personnel within the DMO and address a range of matters, including:

command and control of military personnel

establishment and management of military positions

selection and employment of military personnel

performance of military personnel

tenure of military personnel

career management and professional development

associated funding arrangements.

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The agreements are subordinate to the principles established in the Defence Policy for Military Staffing in the DMO, approved by the Minister for Defence on 21 July 2004. They are reviewed and updated annually by the CEO DMO and the Service Chiefs. The Policy for Military Staffing in the DMO was reviewed for its effectiveness during February–May 2007. Recommendations to amend some aspects of the policy have been forwarded to the Minister for his consideration.

The permanent ADF average strength in 2006–07 was 1,433, against the Chief Financial Officer Defence guidance of 1,701. This shortfall reflects the low permanent military staff numbers across the three Services, particularly in critical employment categories. The DMO has employed alternative civilian labour in vacant military positions, in line with the Policy, where personnel with the necessary skills and experience can be found. Military staff accounted for about 20 per cent of the total DMO workforce.

aDf reServIStS

The number of Reservists who rendered paid service with the DMO during 2006–07 was 249, which equates to 11,621 reserve days, or 47 days per Reservist. This was an increase of 2,112 reserve days on the previous financial year. The increased achievement is due primarily to a communication and promotion strategy implemented in 2006, and a revised employment process developed to ensure that the DMO maximises its use of reserve funding. Reservists accounted for about four per cent of the total DMO workforce.


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emplOyee expenSeS

APS employees

As Table 4.3 shows, the actual result for employee expenses in 2006–07 was $409.3m.

Permanent military staff

Permanent military staff allocated to the DMO are provided on a fee-for-service basis, with Defence being the principal employer. The fee for service is reflected in the price agreed with Defence, and those expenses are funded from suppliers’ expenses.

Reserve staff

The Services provide the DMO with a number of reserve days under a free-of-charge understanding, with any requirement above the agreed level being purchased from suppliers’ expenses under contractual arrangements.

Professional service providers

The DMO spent $85.4m on Professional Service Providers, which was funded from suppliers’ expenses under contractual arrangements.

actual StaffInG

This section outlines the changes in the workforce that occurred during 2006–07, and provides personnel information up to 30 June 2007. It includes information on numbers of personnel, employment categories and locations, gender, and recruitment and separations during the year.

At 30 June 2007, the DMO had 5,268 APS employees and 1,452 permanent military members. The number of APS personnel recorded as employees includes full-time, part-time, ongoing and non-ongoing, and unpaid employees. This was 304 more personnel than at 30 June 2006 and represents an overall increase of approximately four per cent. Table 4.4 provides details.

Table 4.3—Variations in employees expenses, 2006–07

Australian�Public�Service

Budget�estimate�

($m)

Revised�estimate�

($m)

Actual�result�

($m)

Variations

($m) (%)

Salaries, allowances, superannuation and leave liability

362.075 418.857 409.262 -9.595 -2

Total�employee�expenses 362.075 418.857 409.262 -9.595 -2



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Table 4.4—The DMO personnel, 30 June 2006 and 30 June 2007[1]

APS Navy Army Air�Force Total

Total 2005–06 4,952 284 400 780 6,416

APS separations[2] -550 -550

APS additions[3] 866 866

Military staffing variation -3 -12 3 -12

Total�variation 316 -3 -12 3 304

Total�2006–07 5,268 281 388 783 6,720

Notes1. Figures are actual staff numbers as at 30 June 2006 and 30 June 2007. They include paid and unpaid staff but exclude locally

engaged civilians overseas.2. Includes all personnel who have left the DMO workforce through voluntary and involuntary redundancy, age or voluntary

retirement, resignation or transfer to other agencies.3. Includes all personnel who have joined the DMO workforce through direct recruitment action, enlistments from overseas, and

re-enlistments (including transfers from other agencies and non-ongoing personnel).

Gender and employment category

Table 4.5—APS personnel and DMO permanent forces by gender and employment category as at 30 June 2006 and 30 June 2007[1]

As�at�30�June�2006 As�at�30�June�2007

Women (%) Men (%) Women (%) Men (%)

APS

CEO DMO – – 1 – – – 1 –

SES 7 0.1 19 0.4 6 0.1 22 0.4

Executive Level 236 5 942 19 277 5 1,086 21

Other APS 1,220 25 2,527 51 1,336 25 2,540 48

APS�total 1,463 30 3,489 70 1,619[2] 30 3,649[2] 70

Navy�total 30 11 254 89 32 11 249 89

Army�total 28 7 372 93 19 5 369 95

Air�Force�total 78 10 703 90 72 9 711 91

Total 1,599 25 4,818 75 1,742 26 4,978 74

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Table 4.6—APS personnel by gender and category as at 30 June 2007[1]

Category Gender Full-time Part-time Total

Ongoing employees Men 3,530 7 3,537

Women 1,549 16 1,565

Non-ongoing employees Men 112 – 112

Women 54 – 54

Total men 3,642 7 3,649

Total women 1,603 16 1,619

Total�APS�personnel 5,245 23 5,268

Note1. Figures are actual staff numbers as at 30 June 2007, including paid and unpaid staff but excluding locally engaged

civilians overseas.

Senior management

Table 4.7—Star-ranked officers as at 30 June 2007[1]

Total�star�rank[2]� 2006–07�promotions[3] 2006–07�separations[4]

Service Men Women Total Men Women Total Men Women Total

Two-star Navy 1 – 1 – – – – – –

Army 1 – 1 – – – 1 – 1

Air Force 3 – 3 1 – 1 – – –

One-star Navy 6 – 6 2 – 2 2 – 2

Army 5 – 5 3 – 3 3 – 3

Air Force 5 – 5 2 – 2 2 – 2

Total 21 – 21 8 – 8 8 – 8

Notes1. No three-star officers were posted to the DMO during 2006–07.2. Officers on acting or higher duties are not included.3. Includes those officers promoted between levels.4. Includes only those officers who have separated from the DMO.

Table 4.8—APS Senior Executive Service as at 30 June 2007[1][2]

Total�SES 2006–07�engagements[3] 2006–07�separations[4]

Men Women Total Men Women Total Men Women Total

SES Band 3 1 – 1 – – – – – –

SES Band 2 6 2 8 1 – 1 1 – 1

SES Band 1 15 4 19 4 2 6 – 2 2

Total 22 6 28 5 2 7 1 2 3

Notes1. Figures show actual staff numbers at their substantive level and officers on higher duties pending permanent filling action.2. Gains and losses do not reflect movement of officers between levels.3. Includes new engagements, promotions and transfers from other agencies for ongoing employees only.4. Includes resignations and redundancies and promotions and transfers to other departments for ongoing employees only.



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Staff employment locations

Table 4.9—Distribution of APS and military personnel by employment location as at 30 June 2007[1][2]

NSW Vic. Qld SA WA Tas. NT ACT[3] Overseas[4] Total

CEO DMO – – – – – – – 1 – 1

SES – 3 – – – – – 24 1 28

Executive Level 201 323 53 54 42 – 6 657 27 1,363

APS 1,156 1,266 250 142 181 – 28 843 10 3,876

APS 1,357 1,592 303 196 223 – 34 1,525 38 5,268

Navy[5] 131 10 12 13 69 – 5 34 7 281

Army[5] 8 222 70 9 – – 1 62 16 388

Air Force[5] 276 111 46 117 1 – – 144 88 783

Total 1,772 1,935 431 335 293 – 40 1,765 149 6,720

Notes1. Figures show actual staff numbers at 30 June 2007, including personnel who are on unpaid leave. They do not reflect the DMO’s

average funded strengths.2. APS levels include staff in information technology, professional, technical, trade/physical streams, and full-time, part-time,

ongoing and non-ongoing personnel.3. Includes Jervis Bay.4. Includes personnel posted for long- and short-term duty as at 30 June 2007.5. Includes paid and unpaid members and Reserves on continuous full-time service. Personnel are shown in the location from

which they are administered.

Recruitment

The DMO recruited 866 members—578 men and 288 women—in the 12 months to 30 June 2007, as shown in Table 4.10. This amounts to an increase in new personnel compared with 2005–06. The overall recruiting achievement for 2006–07 was 15 per cent, which was an improvement on 2005–06 by four per cent

Table 4.10 APS recruitment, 2005–06 and 2006–07[1]

NSW Vic. Qld SA WA Tas. NT ACT Overseas Total

2005–06

SES – – – – – – – 5 – 5

Executive Level 12 20 6 5 3 – 1 65 3 115

APS 165 180 59 30 32 – 12 233 – 711

Total 177 200 65 35 35 – 13 303 3 831

2006–07

SES – 1 – – – – – 2 – 3

Executive Level 15 39 12 9 1 – – 64 1 141

APS 177 173 41 24 28 – 8 271 – 722

Total 192 213 53 33 29 – 8 337 1 866

Note1. Figures show actual staff numbers as at 30 June 2006 and 30 June 2007.


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Separations

In the 12 months to 30 June 2007, 550 (11 per cent) APS employees separated from the DMO. This figure is a slight increase on the 2005–06 result of 366 (eight per cent).

Table 4.11—APS separations, 2005–06 and 2006–07[1]

Voluntary[2] Involuntary[3]

Resignation/�retirement[4] Transfers[5] Total

2005–06

SES – – 3 1 4

Senior officers 10 1 65 24 100

Other staff 10 32 204 16 262

Total�APS 20 33 272 41 366

2006–07

SES – – 2 – 2

Senior officers 13 5 76 23 117

Other staff 136 19 261 15 431

Total�APS 149 24 339 38 550

Notes1. Figures show actual staff numbers as at 30 June 2006 and 30 June 2007.2. Non-effective personnel (personnel on maternity leave and leave without pay) are not included.3. Includes abandonment (forfeit), breach of conduct, death, invalidity retirement, involuntary redundancy, lack of qualifications,

non-performance and term probation.4. Includes completion of non-ongoing employment, resignation and retirement.5. Includes transfers and promotions to other agencies.

OccupatIOnal HealtH anD Safety

The DMO is continuing to develop a strong workplace health and safety culture. The focus for occupational health and safety for 2006–07 was a number of initiatives, including:

Health and safety strategy. The DMO Safety Council has approved an approach for the development of a Workplace Safety Strategic Plan and integrated OHS Management System to align with the Defence OHS Strategy.

Chrysotile asbestos management. In accordance with government regulatory requirements, the DMO has been managing an identification and substitution program to remove chrysotile asbestos from its inventory holdings.

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Safety audits. A program of annual health and safety systems audits has been conducted and action plans are being developed to address areas requiring attention.

Notification and reporting of incidents

Under the Occupational Health and Safety Commonwealth Employment Act 1991 the DMO is required to provide annual statistics on any accidents or dangerous occurrences that arose out of the conduct of undertakings by the department or authority and that required the giving of notice under section 68 of the Act.

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Investigations by Comcare

Table 4.13 provides details of Comcare investigations and notices issued in relation to health and safety matters from 2004–05 to 2006–07.

Table 4.12—DMO incident reports, 2004–05 to 2006–07

2004–05 2005–06 2006–07

Required�to�report�to�Comcare

Death – – 1

Serious personal injury[1] 19 20 16

Dangerous occurrences[2] 25 31 46

Incapacity[3] 5 2 9

Total reports to Comcare 49 53 72

Total�incident�reports 279 277 309

Notes1. Defined as an injury or disease in a person caused by a work-related incident for which the person needs to be given emergency

treatment by a registered medical practitioner or be treated in hospital as a casualty without being admitted to hospital.2. Defined as a near-miss event that could have resulted in incapacity, serious personal injury or fatality but did not.3. Being unable to perform DMO work for five or more consecutive days or shifts.

Table 4.13—Comcare investigation of the DMO, 2004–05 to 2006–07

2004–05 2005–06 2006–07

Planned investigation 4 – 1

Targeted investigation – – –

Reactive investigation – 2 –

Whole-of-agency investigation 1 – –

Review of previous investigation 1 – –

Total 6 2 1

Notices issued by Comcare investigators

Table 4.14—Comcare notices issued, 2004–05 to 2006–07

2004–05 2005–06 2006–07

Improvement notice – – –

Prohibition notice – – –

‘Do not disturb’ notice[1] – 1 –

Letter of statutory obligation – – –

Removal of plant or sample – – –

Total� – 1 –

Note1. Issued for a specific period to remove a threat to the health or safety of personnel.


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The DMO safety awards

In May 2006, the DMO established an annual health and safety awards program to recognise and reward health and safety excellence within the DMO. The program is linked into the Defence Safety Awards and ultimately to the national health and safety awards program conducted by the Safety, Rehabilitation and Compensation Commission. In 2006, the Air Lift System Program Office won a DMO Award for best Workplace Health and Safety Management System; it was also awarded a commendation through the Defence Safety Awards.

cOmplaIntS HanDlInG

All DMO personnel have the right to work in an environment free of harassment and discrimination and are obliged to treat others fairly and inclusively. Commanders and managers across the DMO are responsible for promoting this ethos in their workplaces and for managing complaints about unacceptable behaviour sensitively, seriously and expeditiously. Unacceptable behaviour in the DMO is managed in accordance with two policy instructions—Defence Instructions (General) Personnel 35-3 and 35-4 of 11 February 2004.

Complaints about unacceptable behaviour that arise in the DMO are reported to the Defence Fairness and Resolution Branch, which manages a database of reported claims. The reporting of claims increased by an average of nine per cent a year from 2004–05 to 2006–07 (see Table 4.15). The reasons for the increase in reporting are:

an increased awareness of what constitutes unacceptable behaviour

mandatory training in the last two years that has emphasised the process for making and managing a complaint

greater confidence that managers will address complaints

a well-established equity adviser network in the DMO, providing advice and assistance to staff and managers in the reporting and management of unacceptable behaviour complaints

inclusion of mandatory training as a measurable criterion in Employee Performance Agreements.

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Table 4.15—Reported unacceptable behaviour complaints, 2004–05 to 2006–07

2004–05 2005–06 2006–07

Number of complaints

31 33 37

Alternative dispute resolution

The DMO engages closely with the Alternative Resolution and Equity Directorate of the Defence Fairness and Resolution Branch. A significant milestone for the program was achieved in June 2003, when the Secretary and the Chief of the Defence Force issued Defence Instructions (General) Personnel 34-4, Use and Management of Alternative Dispute Resolution in Defence.

The DMO strongly encourages the use of alternative dispute resolution as a way of resolving workplace conflict and seeks assistance from the directorate in relation to mediation issues as required.

Officer Commanding Air Lift System Program Office, Group Captain Adam Brown, receives the office’s 2006 DMO Safety Award from CEO DMO Dr Stephen Gumley.



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Redress of grievance and review of actions

The Complaint Resolution Agency is responsible to the Chief of the Defence Force and the Secretary of Defence for providing independent investigation, review and handling of internal complaints. The agency is involved in reviewing:

military redresses of grievance, which are managed in accordance with the Defence Force Regulations 1952 (made under the Defence Act 1903)

applications for review of actions for APS employees, which are managed in accordance with the Public Service Act 1999.

Data for 2004–05 and 2006–07 are reported in Volume 1 of this report.

Defence whistleblower scheme

The Inspector General Division manages the Defence Whistleblower Scheme on behalf of the department. Any complaints involving DMO staff are referred by the Inspector General to the DMO for investigation and action. The DMO considers any allegations seriously and has instigated misconduct action against employees where whistleblower allegations have been proven. To encourage employees to come forth with complaints of inappropriate and poor practices, the scheme allows employees to lodge complaints anonymously, without fear of reprisal.

perfOrmance pay

Under the Joint Committee of Public Accounts and Audit Requirements for Annual Reports June 2007, the DMO and Defence are required to report performance bonuses paid to Senior Executive Service and APS staff during 2006–07.

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Senior executives

All Senior Executive Service employees in the DMO are covered by individual Australian workplace agreements.

Performance pay, in the form of performance bonuses for sustained high levels of performance, is available to some Senior Executive Service employees covered by the DMO Australian workplace agreements. During 2006–07, eight Senior Executive Service employees within the DMO received performance pay.

Non–senior executive staff

Performance-related pay was available to non–Senior Executive Service staff under the Defence Collective Agreement 2006–2009. Subject to performance, employees may be entitled to progress to a higher pay point within the salary band for their classification. This salary advancement is not considered performance pay.

During 2006–07, salary advancement within an employee’s pay band was 3.8 per cent or, for an employee at the top of a pay band (or on a retained pay point), a lump-sum payment of the greater of $500 or one per cent of the employee’s rate of pay (adjusted for part-time hours, if applicable).

Salary advancement in the form of 3.8 per cent is not considered performance pay, but the lump-sum payment made to employees at the top of the pay band, which does not affect the employee’s nominal salary, is considered performance pay.

Australian workplace agreements

Individuals covered by Australian workplace agreements may have access to performance-based pay in the form of performance bonuses. At 30 June 2007, 52 DMO non–Senior Executive Service employees were covered by individual Australian workplace agreements.

Table 4.16 provides details of the aggregated amount of performance payments by classification level, the average bonus payment and range for each level, the number of employees in each classification who received a performance payment, and the aggregate bonus payment for the agency as a whole.


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Table 4.16—Performance pay, 2006–07[1]

Level�of�staff�Number�of�staff�

eligibleNumber�of�staff�paid� Amount�paid�($)

Average

Payment�($) Range�($)

APS 1 18 17 8,411 495 411–500

APS 2 160 158 78,183 495 250–500

APS 3 361 349 172,743 495 200–500

APS 3–4 85 78 41,767 535 328–538

APS 4 193 181 96,667 534 323–538

APS 4–5 27 27 15,696 581 468–586

APS 5 670 651 379,838 583 234–591

APS 6 745 713 484,673 680 273–685

APS 3 – Executive Level 1 (Legal)

2 – –

Executive Level 1 516 483 401,740 832 356–927

Executive Level 2 148 119 121,842 1,024 411–1,046

Total 2,925 2,776 1,801,562 – –

Note1. Data are for employees who were paid performance pay at any point during 2006–07.

nOn-OperatIOnal traInInG

The DMO Institute is a corporate partnership established between the DMO and DeakinPrime with the aim of professionalising the DMO workforce and encouraging lifelong learning. The institute is responsible for the design, development and administration of training courses that are aligned to the DMO job families. It offers a range of targeted practitioner, vocational, tertiary and postgraduate education and training programs. Current training programs include Leadership Development, Business Acumen, Writing for Results, and specialist practitioner courses.

The DMO Leadership Development Programs commenced in August 2005 and seek to provide improved leadership capability for the DMO. The programs are currently targeted at Executive Levels 1 and 2 (and military equivalent) and APS 5 and 6 (and military equivalent) staff and are based on the DMO Leadership Capability Framework. The programs recognise that good leadership is essential at all levels within the DMO and seek to provide participants with the necessary skills and abilities to be effective leaders and achieve high-level business outcomes.

Table 4.17 shows that 2,735 students undertook non-operational training during 2006–07.

Table 4.17—Non-operational training, 2006–07[1]

Type�of�training Total�student�days Number�of�students

Leadership�Development[2]

Catalyst 1,134 189

Gateway 1,208 210

Sub-total 2,342 399



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Type�of�training Total�student�days Number�of�students

Business�Acumen[3]

Leaders 900 300

Practitioners 915 305

Sub-total 1,815 605

Writing�for�Results[4]

Practitioner 223 223

Manager 56 56

Sub-total 279 279

Practitioner�courses�

Graduate Certificate in Project Management 370 41

Diploma of Project Management[5] 965 193

Fundamentals of Project Management[5] 648 324

Scheduling 436 218

Open Plan Professional 360 120

Open Plan Professional Advanced 34 17

Workforce Breakdown Structure 101 101

Materiel Logistics Introduction Course[6] 398 199

Materiel Logistics Practitioners Course[6] 390 39

Graduate Certificate in Value Chain Management[6] 155 22

Graduate Certificate in Engineering Management[6] 200 19

Graduate Certificate in Accounting and Financial Management 66 22

Australian Defence Contracting (ASDEFCON) Complex Volume 1 16 16

ASDEFCON Complex Volume 2 Not yet available

ASDEFCON Support Not yet available

Foreign Military Sales 385 77

Quality and Environment Management System 88 44

Sub-total 4,612 1,452

Grand�total 9,048 2,735

Notes1. Data are for courses run over the fiscal year and by individual modules.2. The DMO-specific leadership programs are Catalyst, targeted at Executive Levels 1–2/military (equivalent) staff, and Gateway,

targeted at APS 5–6/military (equivalent) staff. The programs are delivered by Mt Eliza School for Executive Education and are linked to the Employee Performance Agreement. All leadership programs are aligned with the DMO Leadership Capability Framework.

3. Business Acumen for Leaders is targeted at Executive Levels 1–2/military (equivalent) and Business Acumen for Practitioners is targeted at APS 5–6/military (equivalent). They are linked to the Employee Performance Agreement.

4. Writing for Results for Managers is targeted at Executive Levels 1–2/military (equivalent) and Writing for Results for Practitioners is targeted at APS 5–6/military (equivalent).

5. The professional education framework for project management is aligned to the Acquisition Categorisation and Certified Practicing Project Manager Frameworks.

6. The professional education solution for logistics is based on two separate streams, with a total education initiative for each stream from diploma to a master’s level; the streams are Acquisition Logistics Engineering and In-Service/Supply Chain Logistics.



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GraDuate DevelOpment prOGramS

Graduates are recruited to the DMO in engineering and commercial disciplines. They complete three six-month rotations in the organisation during their graduate program, which includes accounting, logistics, information technology, business and commerce. In 2007, 81 graduates began work in the DMO as part of the Materiel Graduate Scheme; this was almost double the 2006 intake and was a response to organisational demand.

Table 4.18 provides a breakdown of graduate numbers for 2004 to 2007.

Table 4.18—The DMO graduate program: recruitment numbers, 2004 to 2007

Graduate�program 2004 2005 2006 2007

Engineering stream 22 18 19 43

Commercial stream 8 15 25 38

Total 30 33 44 81



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