Introduction

Major Defence equipment acquisition projects (Major Projects) are the subject of considerable Parliamentary and public interest, in view of their high cost, planned contribution to national security and the challenges involved in completing Major Projects within budget, on time and to the required level of capability.

The Defence Materiel Organisation (DMO) contributes to the development and sustainment of capability for the Australian Defence Force (ADF) and expended some $5.6 billion on major and minor capital acquisition projects in 2010–11.¹

Over the next 15 years, the Government intends to replace or upgrade up to 55 per cent of the ADF’s equipment.² This will include the purchase of equipment in all of the major elements of ADF capability, including Land, Air, Sea and Joint capabilities, as publicised in the Defence White Paper. These procurements by the DMO do not generate new capability for the Defence Organisation until they have been successfully introduced into service with the ADF. Thus, while the DMO’s role is only part of the introduction into service of new capability, it is a significant one.

Report objective and review scope

The objective of this report is to provide:

• a formal conclusion on the review of the Project Data Summary Sheets (PDSSs) by the Auditor-General (contained in Part 3 of this report);
• comprehensive information on the status of projects as reflected in the PDSSs prepared by the DMO;
• ANAO analysis on the three key elements of the MPR: cost, schedule and capability, in particular longitudinal analysis of projects over time; and
• further insights and context by the DMO on issues highlighted during the year (not included in the scope of the review by the ANAO).

The ANAO’s review of the PDSSs was conducted under an agreement with the DMO, and was performed in accordance with the Australian Standard on Assurance Engagements (ASAE) 3000.³ The agreement excluded from the scope of the ANAO’s review PDSS data on the achievement of future dates or events (including forecasts on delivering key capabilities, also called Measures of Materiel Capability Performance), and major risks and issues. By its nature, this information relates to events and depends on circumstances that have not yet occurred or may not occur, or have occurred but have not yet been identified. Accordingly, the conclusion of this review does not provide any assurance in relation to this information.⁴

While our work is appropriate for the purpose of providing a review report in accordance with ASAE 3000, our review is not as extensive as individual project performance audits conducted by the ANAO, in terms of the nature and scope of project issues covered, and the extent to which evidence is required by the ANAO. Consequently, the level of assurance provided by this review in relation to the 28 Major Projects is less than that typically provided by our performance audits.

[1] Department of Defence, Defence Annual Report 2010–11, Volume 2 Defence Materiel Organisation, p. 25. [2] Minister for Defence Materiel, the Hon. Jason Clare MP, Defence Skills Plan to Meet the Challenges Ahead, Brisbane 2011. [3] Australian Standard on Assurance Engagements (ASAE) 3000 Assurance Engagements other than Audits or Reviews of
Historical Financial Information, issued by the Australian Auditing and Assurance Standards Board. [4] Further information on the scope of the review is set out in paragraphs 1.9 and 1.10.