Sharon Grierson (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Joint Committee of Public Accounts and Audit, I present the following reports of the committee: Report 411: Progress on equipment acquisition and financial reporting in Defence; and Report 412: Audit reports reviewed during the 41st parliament.

Ordered that the reports be made parliamentary papers.

I will confine my comments to report 411. Defence, the largest of all Australian government departments by budget and personnel volumes, is an immense and complex portfolio. Over the last decade it has been the subject of a great deal of public and parliamentary scrutiny, with good reason. At the same time as it has been the beneficiary of generous funding, Defence has suffered from major deficiencies in its financial reporting and in its capacity to acquire major equipment both on time and on budget. Defence has been under intense pressure to make effective changes.

Two significant Defence related reports were published in 2003. The first, a Senate committee report into materiel acquisition and management in Defence, provided a snapshot of progress since the restructure of the Defence Materiel Organisation. The second, the Defence procurement review, or the Kinnaird review, recommended a number of important reforms to processes around developing and maintaining capability. The year 2003 also saw the initiation of a comprehensive financial remediation program to address Defence’s financial management challenges.

In March 2006, the Joint Committee of Public Accounts and Audit decided it was time to take stock of the progress that has been made by Defence since those important reviews. To that end, it resolved to conduct an inquiry into financial reporting and equipment acquisition at the Department of Defence and the Defence Materiel Organisation. The committee received 20 written submissions, including from the Department of Defence, Defence industry representatives as well as private individuals with an interest in the inquiry.

The committee took evidence at public hearings during 2006 and 2007 and two inspections were conducted at Qantas Airways Ltd to compare stores and procurement management processes. The evidence suggested that Defence has undertaken a substantial amount of work to remediate its financial management practices. Likewise, both Defence and the Defence Materiel Organisation have worked hard to implement the recommendations of the Kinnaird review. The committee commends the commitment of Defence’s senior leadership teams to driving these reforms through the department. However, there is more work to be done.

The committee found three key areas were still deficient. First, while it is clear the Kinnaird review recommendations have been implemented, it is not clear if the intent of the reforms is adequately reflected in performance outcomes. The intent of the Kinnaird reforms was to make the DMO a more businesslike, outcomes focused organisation so that optimum capability was realised. The extent to which this has occurred can be best determined through careful monitoring of acquisition projects outcomes.

Second, given the significant investment Defence has made in reforming its processes and practices, it is imperative that Defence develops techniques to evaluate the outcomes of its reform agenda, including documenting lessons learned. These techniques need to include creating and applying metrics to gauge the impact of the Kinnaird reforms on cultural change across the department. Embedding best practice into ongoing performance remains a major challenge.

Linking these first two elements is the final area of concern—that of improving transparency and accountability in capability procurement across Defence— (Time expired)