casg cost principles

internal reporting practices for sustainment; whether Defence has established measures of efficiency and productivity for sustainment activity; whether Defence assesses whole-of-life costs and the total cost of ownership of its assets; and. 86Department of Finance, Resource Management Guide No. Many antiviral agents exert significant host cellular toxicity, a limitation that has hindered antiviral drug development. In July 2005, DMO became a Prescribed Agency under Australian Financial Management and Accountability legislation, meaning that although it remains a part of the Department of Defence, it was separately accountable to the Minister of Defence for its budget and performance. The effectiveness of the reforms implemented following the 2003 Defence Procurement Review (the Kinnaird Review) were evaluated in 2008 by the Defence Procurement and Sustainment Review (the Mortimer Review).198 Mortimer made specific recommendations to improve sustainment, including that Defence create an independent Sustainment Efficiency Office to measure, benchmark, and find ways to improve the efficient delivery of sustainment. A key criterion in determining whether consulting contracts would be appropriate is whether the government could maintain sufficient in-house capacity to be thoroughly in control of the policy and management functions of the agency. However, it was not: complete; consolidated in one easy to locate area; prepared in a manner which permitted the comparison of actual expenditure against estimates; or consistent in its presentation of clear reasons for full-year variances. A Smart Buyer first and foremost achieves good outcomes for its Customers. since 2005, contract-like arrangements known as Materiel Sustainment Agreements between the specialist unit and the Australian Defence Forces capability managersprimarily the Chiefs of Navy, Army and Air Force; a mix of in-sourced and out-sourced service provision for sustainment activity; and. 29Defence, Operational Concept Document for DMO Sustainment Reporting System (Version A, December 2004, Sponsored by Director General Standardisation). However, Defence did not adequately assess the outcomes from the smart sustainment reforms. 3.16One potentially useful feature is a list of underperforming sustainment products.48 This is based on information provided through MRS, SPMS and gate reviews. Indirect fire support, radar and ground based air defence systems and associated simulation systems. Defence was urged to use lifecycle costing throughout the acquisition lifecycle by an ANAO performance audit in early 1998. 5.7Defences Capability Acquisition and Sustainment Group has its own CASG First Principles Review Implementation Plan, which contains a range of elements, some of which correspond directly to the summary set of recommendations in the First Principles Review (such as [Systems Program Office] Consolidation and Reform). They are mandatory for all procurements valued at greater than two million Australian dollars (AUD$2m), and guidance for all others, unless exemptions apply. For example, in April 2015, Defences Lessons Learned report for the Air 87 Phase 2 Armed Reconnaissance Helicopter project stated: By its nature the project definition and contract negotiation stages of the project focus on cost-capability aspects of the weapon system. Defence informed the ANAO that it had updated its procurement guidance in April2017 and intends to address the other concerns raised in the 2015 review over the next 18months. Inadequate contract management staffing levels, a lack of Commonwealth commercial acumen and poor leadership all contributed to a weakening of the Commonwealths position (p. 16). The Secretary of Defence and Chief of the Defence Force. As their names indicate, direct material . A primary example is the detailed, technical paper produced by Navy in 2006, A Quantitative Approach to Navy Performance Measurement. The audit had found, among other things, that it was not generally used in the in-service (sustainment) stage. Defence has drawn heavily on contracted industry expertise to support its implementation of the program of organisational change relating to acquisition and sustainment that has followed the First Principles Review. 175ISO 55000 is an international standard for management of physical assets. Defence has developed its own meaning for the term smart buyer, which does not clearly articulate the intent of the First Principles Review recommendation. 0000000516 00000 n Improve leadership skills, knowledge and experience. The Systems Program Office Director reviews the data and comments for each measure and provides comments for a set of key performance indicators and an additional set of key health indicators.35 Further comments can be added up the hierarchy to the relevant Capability Acquisition and Sustainment Group division head. Table A.1:Key data for each of Defences Systems Program Offices: staff, assets and major contracts, Assets under sustainment/consumables supplied, Number of sustainment contracts with a value greater than $1million, Total value of contracts with a value greater than $1million ($m), Maritime domain (17 Systems Program Offices), Amphibious fleet (excluding LHD) and supply ships, Directorate, Maritime Operational Support, Maritime targets and ranges and Dock Management at Garden Island, Hydrographic fleet, minor fleet support vessels and Army amphibious fleet, Mine hunting and clearance diving materiel, Small, Medium, and heavy arms, and surveillance systems, All clothing and apparel for all ADF elements, Health materiel and combat rations for all ADF elements. 5At the strategic level, guidance is given by the Chief of the Defence Forces Preparedness Directive. 5.10The ANAO considered how Capability Acquisition and Sustainment Group is managing the reform process, including by the extensive use of industry expertise. The value-for-money requirement remains, in the amended version, the core rule for all procurements (p. 11). Asset management is not mentioned in the 2007 DMO Acquisition and Sustainment Manual. In light of the Parliamentary interest in Defence sustainment (see paragraph 1.4 forward) the ANAO has considered, on the basis of the current audits findings, the issue of enhanced scrutiny of sustainment through a process similar to the existing Major Projects Report (MPR).1 The MPR has been prepared annually over the last decade to provide independent assurance of the status of selected Defence major acquisition projects. 133Defence internal correspondence, April 2016. In February2016, the Deputy Secretary, Capability Acquisition and Sustainment Group, informed the First Principles Review Implementation Committee that the business framework project has commenced and been resourced to deliver a fundamental rebuild of all Group processes.159 The completion date was extended to 1July2016 and the objective was to have a High-level business framework approved. for Institutions of Higher Educations (IHEs). 5.49Defence has developed its own meaning for the term smart buyer, which does not clearly capture the intent of the First Principles Review recommendation. The indicator was replaced with a measure CASG-related Product Cost per materiel-ready day, whose value could be generated automatically and would not require comment by the Systems Program Office.39 This would be reported in SPMS but not be represented as a key performance indicator40 because it did not include the cost of all the fundamental-inputs-to-capability and did not measure the cost per materiel-ready day. Three significant reviews into Defence sustainment around this time observed that Defence did not have an asset management approach to sustainment.176 An asset management approach seeks to derive the best possible value and return on investment from assets across their lifecycle.177 According to the standards, the approach is vital for organisations that are dependent on the function and performance of their physical assets in the delivery of services or products, and where the success of an organisation is significantly influenced by the stewardship of its assets.178. Information sharing about asset management was inconsistent and fractured. 1.9The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $422000. For example, a note to Table21: Army Deliverables, which in relation to the Armys Armed Reconnaissance (Tiger) Helicopter, states while Tiger reliability, availability and maintainability continue to improve, rate of effort is affected by the low rate of availability of aircraft with fully serviceable mission equipment due to poor but improving contracted sustainment support and the requirement for unscheduled maintenance. To be a smart buyer requires the capacity and technical knowledge to articulate its organisations requirements and recognise, independently of the vendor, whether the vendor is meeting those requirements.163 Past Australian use of the smart buyer concept (discussed in Appendix 7 of this audit report) is consistent with this approach. This is potentially useful information though not always written in clear language. The second series, commencing in 201314, represents the reported totals for Defences capability sustainment program. Unclear sustainment requirementsDefence lacked a clear unclassified top-level operational requirement for the platform. Defence advised the ANAO that it would have been difficult to implement the contract as a performance-based contract: Unlike standard Defence capability projects, Bechtel has been contracted to develop Defences capacity and capability to deliver rather than for Bechtel to deliver itself. 5.5A subsidiary recommendation (2.2 disbanding the DMO and transferring its core responsibilities in relation to capability delivery to a new Capability Acquisition and Sustainment Group) has led to the creation of Capability Acquisition and Sustainment Group in Defence. An output measure, which directly reflects achievement against the Materiel Availability outcome. It is both a lead and a lag indicator, which has a direct correlation to decreased near term and future unit availability and increased corrective maintenance and Priority 1 Urgent Defect. An amended version commenced on 1 March 2017. Opportunities remain to improve the quality and transparency of Defences publicly reported information regarding materiel sustainment, while being sensitive to national security concerns. Introducing performance-based contracting into Defence sustainment has been underway for over a decade. 142Defence, First Principles Review, p. 36. 3. The Pappas review had observed that sustainment was an area with significant opportunities for efficiencies.105. 1.6The ANAOs observations on this aspect of the audit are reflected in the Summary and Recommendations section of this report (paragraph 32 forward). Step 1develop a risk profile for the project, which identifies the severity of risk in nine categories for the acquisition phase and eight for the sustainment phase; and. 132Defence considered not using the term Systems Program Office as this could be confused with the use of the same term in the USA, where Systems Program Offices were said to be concerned only with acquisition and not sustainment. Three principal issues remain for the conduct of a process for sustainment parallel to the MPR for acquisition: 35. This approach is problematic as it does not inform government of the total cost of the project across the life of the capability. Ongoing legacy reform activities that continue to require oversight and do not align with current reform activities; SPOs continue to manage and perform work that industry may be able to do more effectively or efficiently, whilst insufficient resources are being applied to governing and assuring. It is now planning to implement a new model, which seeks to capture the full cost of ownership throughout the life of an asset, with implementation planned for completion in July2018.

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