Thursday, 22 June 2017
First Principles Review of Defence
On behalf of the Minister for Defence, Senator Payne, I table a ministerial statement on the implementation of the First Principles Review of Defence and seek leave to have the statement incorporated in Hansard.
The statement read as follows—
Over the past two years the implementation of the First Principles Review has helped create a Defence organisation that is far more strategic, far more efficient, and far more effective than the one we inherited when we were elected in 2013.
The First Principles Review was commissioned in August 2014 by my predecessor, David Johnston, to ensure Defence was fit for purpose, able to respond to future challenges and was able to deliver against the Government' s strategy with the minimum resources necessary.
The First Principles Review team, as initially constituted, was chaired by Mr David Peever who was formerly the Managing Director of Rio Tinto. He is also a Non-Executive Director of the Australian Foundation Investment Company and Chairman of Cricket Australia. Other team members included Professor Robert Hill, a former Minister for Defence, Mr Lindsay Tanner, a former Minister for Finance, Professor Peter Leahy, a former Chief of the Army, and Mr Jim McDowell, the Chancellor of the University of South Australia and former Chief Executive of BAE Systems Australia.
When we announced the Review there was much scepticism about another review of Defence; and for good reason. There have been 35 major reviews of Defence since the early 1970s. However because of the frequency of those reviews many of the recommendations were never able to be implemented before the next review was initiated.
This is why the First Principles Review is so important. It is an end-to-end review of Defence that considered structures, systems and processes. Nothing on this scale had been attempted since the creation of the Department in 1976, which involved the amalgamation of the previously separate three armed services with the civilian department.
As the Review stated, while Defence had a strong and proud history of delivering military capability for Australia, the Defence organisation structure at the time was resulting in processes that were complicated, slow and inefficient. The Review did was highly focused in its criticism of Defence:
"Waste, inefficiency and rework are palpable. Defence is suffering from a proliferation of structures, processes and systems with unclear accountabilities. These in turn cause institutionalised waste, delayed decisions, flawed execution, duplication, a change-resistant bureaucracy, over-escalation of issues for decision and low engagement levels amongst employees.1"
When we came to office in 2013 the challenges for Defence were clear. Defence was faced with delivering "a significant capability modernisation program against a backdrop of strategic uncertainty including, but not limited to: rapid technological change; budget uncertainty; substantial economic growth in our region; and increasing demand for military responses to various regional and expeditionary crises.2"
In the period since those words were written none of those challenges identified by the First Principles Review team have diminished. If anything, they have only become more pressing.
With the release of the Defence White paper in February last year the Turnbull Government set out its responsible and long-term plan for securing Australia' s national security.
We set out our plans to increase Defence spending to 2 per cent of GDP by 2020-2021 and set out a fully-costed ten year integrated investment program that will create a more capable, agile and potent Australian Defence Force.
This is the capability modernisation program foreshadowed by the First Principles review. These projects must be carefully planned and they require resources – unique skills and expertise – to ensure we are able to deliver the capability our ADF needs to retain its capability edge. That is why we said in the White Paper that successful implementation of the First Principles Review would be critical to realising our plans.
Regionally our strategic environment has become more uncertain over the past four years.
As only one example, weeks of fighting in Marawi in the southern Philippines have highlighted the risk the region faces from violent extremists who claim allegiance to the toxic ideology of Daesh.
Concurrently the rapid advances in technology and rise in prosperity across our region have continued unabated.
The First Principles Review, released on 1 April 2015, recommended that Defence needed to become a single, integrated system, not a federation of separate parts. This is One Defence.
There are four key features of the One Defence approach:
o The strategic centre comprises key senior leadership positions with clear roles and responsibilities that strengthen accountability and top-level decision making
Given its strong criticism of the Defence organisation it may have been expected that there would be some resistance to the recommendations contained in the review.
It is very important to note that to the credit of the Defence leadership, in particular the then Secretary Dennis Richardson AO and Chief of the Defence Force Air Chief Marshal Mark Binskin AC, the organisation has worked assiduously to implement the recommendations of the Review.
The review team were subsequently invited to form an Oversight Board, which was supplemented with the addition of Ms Erica Smyth, the Deputy Chair of the Australian Nuclear Science and Technology Organisation, and were tasked with overseeing implementation of the recommendations that we agreed should commence immediately. An Implementation Office was also established within the Department to support the Board, as was an Implementation Committee that has met weekly, chaired by the Secretary.
We have now reached the end of the two year implementation period and very significant progress has been made in delivering on the reforms.
As of today we have implemented 63 of the 75 recommendations of the review. I will focus on some of the detail to illustrate just how these reforms have created a leaner, stronger, more efficient Defence organisation.
A fundamental of the review was to deliver on Government decisions by creating the Capability Life Cycle. The cycle links the early capability concept all the way to its delivery and to its disposal, and greatly simplifies and reduces the time taken for capability decision making. We now have arm' s length contestability, alignment with strategic direction, earlier and better interaction with external stakeholders, and increased accountability for Capability managers.
A key enabler of the new Capability Life Cycle was the review recommendation to bring the former Defence Materiel Organisation back into Defence, which we did, with the creation of the Capability Acquisition and Sustainment Group.
This one change eliminated the administrative burden of having to manually process 72,000 financial transactions between Defence and the DMO every year.
Defence has also drastically simplified its commercial policies and practices. For example, the Defence Procurement Policy Manual has been reduced from 450 pages to 60 pages.
The number of mandatory procurement requirements we ask of suppliers has been reduced from 290 to 53.
We have also implemented the new Smart Buyer framework for all projects in Capability Acquisition and Sustainment Group, while the Chief Information Officer Group and Estate and Infrastructure are now piloting the program.
This approach enables the tailoring of each project by the accountable Capability Manager to ensure that they are delivered with the optimum risk balance between capability, cost and schedule. Industry best practice tools and techniques are used to execute projects in a way that strikes the optimum balance between performance, time and cost. Importantly, industry is now involved much earlier in the process, recognising the key role it plays as a partner in the delivery of Defence capability.
Not only is this simplification making it easier and more efficient for industry to engage with Defence, but it is also making it much simpler for Government.
Prior to the FPR the average submission to government totalled 70 pages, took 16 weeks to move through the cabinet preparation process and took an average of 46 months – that is almost four years – to move from first pass initiation to second pass approval.
Implementation of the First Principles Review recommendations has resulted in the average government submission reducing to less than 20 pages, taking 6 weeks for the cabinet preparation process and in some instances taking less than 12 months to progress from first to second pass.
This of course strongly reflects the Government' s unequivocal commitment to our Defence White Paper, Integrated Investment Program and Defence Industry Policy Statement initiatives across air, land and sea platforms, across the enablers and in fact across Defence.
It would have been impossible without the FPR reforms that we have delivered.
These changes have enabled Defence to progress far more submissions than it has previously, resulting in more efficient delivery of capability. This enables us to deliver the hardware our personnel need to carry out their mission effectively.
Improving the delivery and management of capability acquisition is only one part of the reforms of Defence this Government has driven.
We have created a much stronger strategic centre for Defence and strengthened accountability in support of more effective and efficient enterprise-level decision-making.
We have done this by clarifying the roles and responsibilities at the most senior levels of the Department
- Legislative changes were made to the Defence Act 1903 to formally identify the role of the Chief of the Defence Force and Vice Chief of the Defence Force.
- The individual and joint responsibilities of the Secretary and the Chief of the Defence Force were clearly described in a ministerial joint directive.
- The role of Service Chiefs as capability managers was strengthened, clarifying their responsibility for identifying, developing and delivering Defence' s capability needs.
- Role charters for all members of the senior leadership group have been established, setting out individual and shared accountability, decision rights and agreed leadership behaviours.
These clearer responsibilities have meant the number of committees chaired by senior members of defence has been slashed from 72 to 35, ensuring the Defence executive spends less time meeting, and more time doing.
Another key feature of creating a stronger strategic centre has been the formation of the new integrated Australian Defence Force Headquarters. The stand-up of the headquarters began in April this year, and the model establishes a strategy-led and integrated approach to the development of advice and managing the ADF. To mitigate any single service approaches to ADF capabilities, VCDF has been appointed as the Joint Force Authority, and a new Chief of Joint Capabilities will be established in the next fortnight. The new headquarters is ultimately improving the quality of advice and decision making in Defence.
The review also focussed on improving accountability via specific behaviours. Based on the implementation of several related recommendations Defence has established a culture of personal accountability to drive high performance, foster talent, and effectively manage underperformance.
We have amended Senior Executive Service performance agreements, which now measure individual performance by both outcomes achieved and the demonstration of One Defence Leadership Behaviours in the delivery of those outcomes. Defence is also providing stronger support and coaching to managers and supervisors. A key element of this is having a formal definition of ' good people management' in the context of the One Defence Leadership behaviours, which is embedded in occupational profiles and recruitment processes.
These changes have resulted in a common understanding of performance and behavioural standards, and what is expected when managing people. This ultimately increases accountability, fosters a strong performance culture and enhances productivity.
These are just some examples from many reforms of the Defence organisation made as part of the FPR over the past two years.
The future of the First Principles Review
Implementing the Review has been one of the largest organisational change programs in the country and has both national and international significance.
The process followed to deliver the change serves as a valuable example of successfully managing a large scale reform program.
While significant reform has been achieved since implementation began in mid 2015, critical work remains to ensure the full extent of change is realised.
The challenge for Defence and Government now is to ensure we embed the cultural change so that it is routine business and to ensure that the organisation does not revert to its old systems and behaviours. We need to pass the point of no return.
To ensure these changes are fully realised the government will extend the oversight board for another year to provide the necessary guidance and expertise to Defence and Government.
The remaining work will require perseverance and strong leadership, but I am confident given the commitment I have seen from all involved – from the Prime Minister, the oversight board to the senior leadership in Defence – that the One Defence model will be embedded for the future.
Over the past two years we have laid the necessary foundations to enable Defence to continually improve towards the One Defence model.
The Defence organisation of 2017 is a significantly more agile and efficient organisation than the one of 2015, that is better able to support Government decision making and deliver on its operational requirements.
This has not happened by chance. It is the result of the Coalition government recognising a clear problem, initiating a comprehensive review and then driving that change with the clear support of the Oversight board and Defence leadership.
I thank the strong leadership within the department, led by the former Secretary, Dennis Richardson, the Acting Secretary, Brendan Sargeant, and the Chief of the Defence Force, Air Chief Marshal Mark Binskin.
Their unwavering and steadfast leadership has been essential in delivering these reforms. I also acknowledge and thank David Peever and the Oversight Board for ensuring Defence remained on track in implementing the First Principles Review the way it was intended.
Finally, I would like to thank the personnel, uniformed and APS, within Defence who have worked tirelessly to deliver these reforms on a day to day basis.
The Turnbull Government has helped deliver a Defence organisation that is more strategic, more efficient and more engaged; that can create the future ADF that we envisaged in the 2016 Defence White Paper and respond to a dynamic strategic environment.