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Last Updated: Mon Jan 27 11:18:09 UTC 2014

Australia's Failing Defence Structure and Management Methodology

Air Power Australia Analysis 2011-04
  28th December 2011

A Monograph by
Air Commodore Ted Bushell AM (Retd)

Text © 2011 E. J. Bushell

The unnecessary premature retirement of the F-111 fleet and consequentially unnecessary procurement of combat-ineffective F/A-18F aircraft is an excellent case study of dysfunction across the Defence portfolio management system (Image © 2011 Carlo Kopp).

Executive Summary

There have been many inquiries into the Department of Defence, the Services and the Defence Materiel Organisation (DMO), over the past two decades and more - none of which has resulted in any significant improvement. Most, if not all, have merely called for more inquiries and reviews, added more administrative process, increased the number and level of executive oversight bodies, and facilitated further civilian intrusion into matters critical to military efficiency and effectiveness. No root and branch functional review has ever been permitted.

The civilian management model that has evolved within the Defence bureaucracy has now become more of a Service Industry one, structured along common user lines, and reliant upon widespread outsourcing - a solution that has failed in Australia as well as in the US and UK, nations used as benchmarks by Defence and the DMO.

Furthermore, the DMO, which also functions within this overarching model, has departed from accepted project and technology management systems and adopted a contract-centric, process-driven, 'business' model administered by generalists, and often legal professionals, which has resulted in the organisation making the same costly mistakes in capability acquisition project after project. The deficiencies seen in the DMO's ability to provide critical through life support of weapon systems, where the bulk of Defence funds is spent, may also be traced to the same factors.

The management models that have evolved within Defence, the Services and the DMO are wholly inappropriate for the functions they perform, and represent the root cause behind the major problems being seen increasingly in all three areas.

Under these models, accountability and objective measures of performance are largely avoided in Defence and the DMO, while the Service Chiefs, who carry primary responsibility for the force capabilities required by Government, are made unable to exercise their accountability.

Until these models are redesigned and rationalised to align authority and resources with accountability, structural and performance weaknesses and failures will continue and increase.

While this situation is able to be reversed, a pre-condition must be an open and honest acceptance of the fact that the fundamental models used in the management and governance of Defence, DMO and the Services do not work and can not be made to work.



Over the past decade or more, there has been an increasing flow of Press reports of major Defence acquisition and sustainment problems and failures that have affected all three Services as well as Australia's national security.

In March of 2003, the Foreign Affairs, Defence and Trade Reference Committee noted that there was relatively poor visibility on the progress of Defence major projects as far as Parliament and the Australian public were concerned, and as a result it called for the Attorney - General to produce an annual report on the progress of major Defence projects.

The Defence Materiel Organisation (DMO) has now raised three Major Project Reports (MPRs). However, detailed analysis of these reports indicates that nothing of substance has been achieved that will improve Defence/DMO major projects transparency and public accountability, or project management performance.

Both Defence and the DMO are locked into a process - driven, contract - centric, 'business' approach to acquisition and sustainment that, under contract and 'generalist' managers, has not been successful. Serious project problems and failures have continued to arise within the two organisations.

The root cause for this situation may be traced to the abandonment, over the period 1998 to 2001, of the successful project and engineering based management systems, skills and competencies that had been built up within the three Service Departments over decades of experience, coupled with the introduction of 'commercial' approaches controlled by generalist managers and often legal professionals. At the same time, Project Management Boards were replaced by Project Governance Boards - bodies that also lacked critical project and engineering skills and competencies - resulting in internal governance systems that have not only proven to be ineffective, but are compounding problems and failures.

Similar problems have been encountered increasingly in the higher management of Australia's Military Services following the structural changes introduced by Sir Arthur Tange during the early 1970s. Under these changes, and those imposed later under the DRP and CSP, the Military have come increasingly under civilian (principally Public Service) control rather than civil (Parliamentary) control, blurring the historical, constitutional boundary that existed between Military and civil (Parliamentary) roles and responsibilities.

The impacts of these changes on the management of Defence, the DMO and the Services have been corrosive and are increasingly being shown to be quite unsuited to the management of Australia's military during both peace and hostilities.

In identifying why and how the fundamental management models that have evolved both within Defence, DMO and the Services have failed, and will continue to fail, this paper will:
Firstly, analyse the causal factors that the Minister maintains led to the decayed state of Australia's Naval capabilities as a good, topical example, while noting that these factors are also common to RAAF and Army.

Secondly, analyse, from the top down, how the management methodologies that have evolved within Defence and the DMO have led to the problems and failures being seen in the management of the Military and the acquisition and sustainment of Australia's military capabilities, and hence Australia's national security.

A Case Study - The Decay of Australia's Naval Capabilities

When the RAN had to advise that none of its three supply ships could be made available to assist with the clean-up following Queensland's Cyclone Yasi in February of this year, the Minister for Defence immediately and publicly accused Navy of not keeping the fleet seaworthy and available for action, and of needing to change its culture.

The following analysis of what really happened will show that accountability for the unseaworthy state of the supply fleet did not lie with Navy, and that the Minister was simply shifting the blame - a tactic common in Defence when faced with embarrassment.

From 'The Australian', 16th February 2011:

"Smith slams Navy over seaworthiness issues".

"Mr Smith said a report by defence chief Angus Houston and department Secretary Ian Watt into reasons for the maintenance failure made grim reading. Their advice which I am releasing today, was a frank appraisal which identifies systemic and cultural problems in the maintenance of our ship fleet for a decade or more. It outlines the side-effects of a 'can-do and make-do' culture and a lack of sufficient adherence to verification, certification and assurance processes". In short, the Minister felt that the Navy had "effectively failed to keep the fleet seaworthy and ready for action."

Some newspapers, without further thought, even called for the head of the Chief of Navy.

It is important to note here that the "frank appraisal" provided to the Minister by the CDF and Secretary (the Diarchy) found Navy responsible for the failure to keep the fleet seaworthy and ready for action, and that this finding was accepted by the Minister, seemingly without question. There was no suggestion that the Department or the DMO were in any way accountable, and only a carefully tailored mention was made of the findings of the November 2009 Strategic Review of Naval Engineering, conducted by Chief of Navy, who seemed to be focussed more upon identifying the root cause than attributing blame.

'The Weekend Australian', 19-20 February 2011 went on to report on the Navy's engineering review, which was 'leaked' to The Australian, highlighting:
  • A critical shortage of engineers.
  • 'Cancerous' morale problems, including a negative attitude.
  • A massive shortfall in Navy numbers.
  • A broken management system.
  • A poor state of engineering policy.
  • Two decades of multiple 'reforms' and efficiency and cost-savings initiatives that have diluted and fragmented Navy engineering resources.
Most importantly, the Navy review emphasised that:

"Navy is fundamentally a technological Service. Its war-fighting ability is critically dependent upon the engineering design of its platforms and systems, and the state of serviceability in which they are maintained."
One reporter, quite correctly, described Navy as being "technologically bankrupt".

HMAS Manoora (LPA-52) in 2006 (US DoD).

As with so many Defence media releases, the Diarchy's assessment of the causal factors behind the Landing Platform Amphibious (LPA) debacle (1) would seem to have two major objectives:
  • To redefine and so limit the circumstances surrounding Navy's problems with the LPA Fleet, so as to
  • focus accountability on Navy, and away from the Department and the DMO.
This conclusion is supported by the analysis of the Diarchy's statement of the 'causal factors' that follows:

Para Ref Causal Factor Seen
by the Diarchy (1)
Primary Accountability
2 - No logistics support provided when vessel purchased.
- Inadequate or no configuration baseline or maintenance requirements established when vessel purchased.
- Vessels in poor state when purchased.
- Inadequate time to enable required engineering and maintenance to be undertaken due to operational demands.



- DMO responsible for deeper maintenance support.
- Defence responsible for over tasking the Fleet.
*Downsizing of uniformed personnel resulted in excessive outsourcing of deeper maintenance, leading to the loss of knowledge based skills and competencies within Navy and greater outsourcing cost.
- DMO responsible for deeper maintenance support.
- Defence policies directly responsible for downsizing and de-skilling Navy and disbanding Naval Technical Services.

*(In fact, the reverse was the case. It was Defence's policy to outsource deeper level maintenance that resulted directly in the downsizing and de-skilling of the Services - and resulted in the higher maintenance costs involved)
Seaworthiness Board
(See separate comments on this aspect)
Neither Defence nor DMO understand the nexus between Service-unique engineering and maintenance management and Airworthiness, Seaworthiness and Battleworthiness standards.
6 - Situation due to systemic and cultural problems.
- A 'can do' and 'make do' culture.
- A lack of conformance to assurance processes.
-A lack of proper LPA priority.
-Insufficient resources to "address shortcomings".
(See also 7 below.)
All of these 'symptoms' have resulted inevitably and directly from Defence policies. In particular, the Sanderson Report of (1989) laid the groundwork for the destruction of the Services' engineering and maintenance management skills and competencies.
Australia is not alone in these symptoms.
(See Note 1)
7 The 2009 Strategic Review of Navy Engineering "highlighted a number of organisational shortcomings and recommended reform of the Naval Engineering Sector".

This section carefully ignores the critical findings arising from the Navy Review. The problems identified by Navy go far beyond "a number of organisational shortcomings". They extend over every aspect of Navy Technical Services (Engineering and Maintenance) management, where the problems were imposed and hammered home by conscious Defence policies.
The central problems that have resulted in the LPA debacle relate to:
- The change in Navy Office role from a functional orientation to a 'business unit' one.
- The disbandment of the Chief of Naval Technical Services, his management organisation, his functions and his policies, systems and procedures.
- The downsizing and de-skilling of Navy engineering and the miss-employment of engineers.
- The imposition of a civilian culture to replace Navy's traditional military culture.
8 Lack of competence in the DMO System Program Office (SPO) leading to its loss of certification, its recertification, and subsequent loss of certification again by the Naval Technical Regulating Authority.
"Action is now underway to rebuild business processes and review organisational structures".
Defence and DMO
This problem has arisen as a result of inadequate technical organisation, management, expertise and effort.

The solution sought by Defence through "business processes" indicates that the core problem and its solution are not understood.
9 Constant change in Defence masked the situation with the LPA Class
"The recent Seaworthiness Board provided a focus on the situation that was not previously evident through the complex Naval operating and regulatory systems".

Defence and DMO

This statement is false and designed to deflect blame.
The situation evolved in full view of the CDF and the Secretary, Department of Defence (the Diarchy), and the DMO, for a decade. That it was left 'unidentified' and unmanaged over that time is an indictment of Diarchy, Defence and DMO management.
10 - The LPA story was protracted, not always a happy one, with seeds sown long ago.
- Appeal to the Sea King disaster for emphasis. 'Navy has learnt from that accident, and understands the enormous challenge of cultural reform'.
- Defence has a number of initiatives underway to remediate current shortcomings.
Defence and DMO
This blatantly 'spun' section may be summarised as follows:
'Navy is responsible for the LPA disaster. Navy is capable of learning, but needs to change its culture. Defence will fix current shortcomings (presumably through business processes).'
In fact:
- Navy was not primarily responsible.
- It is in part a cultural problem (but not in the way seen by the Diarchy or Defence) - it is primarily a hard function, organisation and technology management problem.
- Defence has proven incapable of even comprehending the problem and has demonstrated little willingness to identify problems, let alone fix them.
- The problems seen with the LPA fleet have and will continue to spread to infect other Navy capabilities, and erode Australia's security markedly.
Nobody learnt from the Sea King disaster.
(See Note 2)

Note 1
: The symptoms identified by the LPA Fleet debacle, and their widespread impacts upon Australia's security, mirror those that led to the loss of RAF Nimrod MR2 Aircraft XV230 and its 14 crew members in Afghanistan in 2006. This accident was investigated in great detail by Charles Haddon-Cave QC (2) His report was appropriately sub-titled "A Failure of Leadership, Culture and Priorities."

The causes he found behind the accident included:
  • A 'can do' attitude.
  • A torrent of changes and organisational turmoil.
  • The imposition of 'business' principles.
  • Cuts in resources and manpower - deskilling.
  • The dangers of outsourcing to contractors.
  • The dilution of risk management practices/processes.
  • The abolition of the 'Chief Engineer RAF'.
  • The dilution of Air Technical Support Services.
  • The dilution of aircraft engineering skills.
The Haddon-Cave Review is a fine example of an inquiry that strives openly and in detail to get to the facts and identify the accountabilities, rather than simply avoiding or containing the fallout to protect the guilty and avoid accountability, as is characteristic of Australia's Defence Department inquiries. Rather than being ignored, it should be held up as a model for all future inquiries.

Note 2: There is a direct link between the root cause behind the LPA Fleet debacle and the Sea King disaster that needs to be recognised. The lengthy and very expensive Board of Inquiry Report into the Sea King accident that occurred on 2nd April 2005 was submitted to the Fleet Commander on 18th December 2006, some 21 months after the accident. The Media Release that followed announced, somewhat proudly, that:
  • The Board considered 44 Terms of Reference.
  • Took evidence from over 160 witnesses.
  • Reviewed 560 exhibits.
  • Conducted hearings over 111 days.
  • Produced about 10,000 pages of transcript.
  • Made 759 findings.
  • Made 256 recommendations (to be implemented by 27 Implementing Authorities).
The Media Release went on to assure all that "By improving aviation safety, Navy and Defence demonstrate that it has learnt from this tragedy." Finally, the Chief of Defence assured all that every recommendation would be implemented in full, so all would be well in the future.

The Report was subjected to lengthy and costly legal review, but there was no technical review - the findings were just accepted without question. Most importantly, nobody questioned the effectiveness of a Naval Airworthiness Organisation that required 27 different agencies to act upon 256 recommendations to correct a single maintenance error.

In the end, Navy accepted full responsibility for the tragedy. No breath of accountability was allowed to reach the Department of Defence, the Diarchy, the Minister or government. The Sea King disaster was not primarily Navy's fault - its root cause was the disbandment of Navy's Technical Services Branch, followed by the downsizing and de-skilling of Navy's Technical personnel - precisely the same circumstances that caused the LPA debacle.

In the end, also, all that was achieved by the Sea King Inquiry was the application of 256 very expensive band aids to a Navy management system that is not organised, manned or skilled to discharge its responsibilities for the airworthiness of its aircraft, or the seaworthiness of its vessels.

The history leading up to the Sea King disaster, an analysis of the Sea King Board of Inquiry findings, and identification of the root cause for that accident are contained at Reference (3).

The Navy's Seaworthiness Board

The formation of a Naval Seaworthiness Board has been heralded as a great advance in ensuring Navy's seaworthiness standards are established and maintained, but this will not be achieved because Navy, since the disbandment of its Technical Services Branch, is no longer a technological Service able to ensure that high seaworthiness (or airworthiness) standards are in place and functioning at all times and places. In short, there is nothing of substance for the Board to audit.

A similar misconception arose during the Sea King Inquiry (3), when the Director General Technical Airworthiness - ADF (DGTA-ADF) was called upon to provide Navy with such services as engineering and maintenance advice to Navy Units, become involved with the amendment of technical publications, conduct maintenance performance audits, become involved in maintenance management and also with training and maintenance regulations - all of which are technical services management functions that must reside within the operating Service (in this case, Navy). This situation arose from the Inquiry's incorrect assumption, or interpretation, of the proper and limited nature and scope of the responsibilities of DGTA-ADF. He can not and must not be saddled with tasks of the type recommended. To do so would place him in a position of gross conflict of interest, as well as charge him with responsibility for managing Navy functions over which he has, rightly, absolutely no authority. DGTA-ADF is a regulatory body and is thus responsible for the regulation (audit) of ADF Technical Airworthiness. He is part of a management feed-back loop that ensures that aircraft operating Units can demonstrate that they have in place the policies, systems and procedures, as well as the skills and competencies base, that are required to maintain airworthiness standards.

That is, the operating Service has to have the organisation, policies, systems and procedures, as well as the skills and competencies base, to ensure that airworthiness standards are maintained within its units at all times - DGTA-ADF can only check that this is the case.

The Navy's Seaworthiness Board will thus not be effective in assuring seaworthiness standards are established and maintained when there is no Naval Technical Services organisation that ensures that its operating and support units possess the necessary numbers, skills and competencies, and function within an organisation that establishes the policies, systems and procedures designed to ensure that seaworthiness standards are established and maintained at all times, in all places, and under all circumstances.

On The Critical Role of Management Control Loops

Of the four primary sub-functions of sound management, the Control function is the most important. The first three - Planning, Organising, and Directing are functions that are focussed upon ensuring that the objectives of the organisation are stated clearly and planned soundly, are managed in response to changes in circumstances, that all functions are well defined and resourced, and that all functions are directed effectively and efficiently in line with the organisation's plan. The Control function is a feed-back loop that checks continually that what is happening in the functional areas is in accordance with the organisation's plans and objectives. This is achieved mainly through routine reports and returns from functional areas. In this way, task status and problems are reported, and assistance provided, before problems impact the organisation adversely. In addition, visits by specialist staff are made to ensure that conditions are as represented, to provide on-the-spot assistance, arrange external assistance as necessary, and discuss any planned changes in organisational objectives. The key objective of the control loop is to maintain visibility and control and so avoid expensive 'surprises'.

It is quite clear from Navy's LPA Fleet debacle that neither Defence nor the DMO's management (or rather bureaucratic administrative) systems contain any Control Loop - otherwise the debacle that was allowed to develop for over a decade would have been identified and redressed promptly.

The problem with Control Loops, as seen by Defence and the DMO, seems to be that they pin point functional accountability - which they do, but their primary function is a positive one - to keep the organisation headed in the right direction, gain awareness of problems before they become serious, provide help as necessary, and so correct problems promptly.

A reliable litmus test for the soundness of an organisation is the extent to which it relies upon external consultants and reviews to tell it what its ills are and how they might be cured. Such a need immediately identifies an organisation with an inadequate or missing management feed-back loop, often accompanied by one or more instances of poor planning, an inappropriate organisation, a lack of management direction, and/or the intrusion and impact of bureaucratic/political imperatives. A soundly-managed, manned and skilled organisation will know when, where, and what remedies are required, and be able to implement them before symptoms become problems. Defence has failed this simple litmus test consistently since the Tange reorganisation of 1972.

The Scope of the Navy's Capability Problem

While the LPA debacle is serious, Navy's operational capabilities have also been badly degraded by the failure of Defence and the DMO to keep the Collins Class Submarine Fleet operational. Two failed DMO major projects come together to make this fleet largely useless - again, a situation that has been allowed to develop over many years:
  • SEA 1439 Phase 4A - Collins Replacement Combat System. This project is now 6 years late and will not provide the capability required (DMO MPR 2009-10).
  • SEA 1439 Phase 3 - Collins Class Reliability and Sustainability. This project resembles the LPA debacle in many ways. Completion dates for the 24 planned capabilities covered by this project, under current estimates, ranges from 16 to 102 months late. It also calls into question the effectiveness of DMO's Through Life Support Agreement (DMO MPR 2009-10).
Other major Navy projects facing problems include:
  • SEA 1390 - FFG Update - the operational capability for which is currently delayed by more than 5 years.
  • SEA 1448, Phases 2A and 2B - ANZAC Anti-Missile Defence - currently over 4 years late.
  • JP 2070 - Problems with the provision of the Lightweight Torpedo, and impending problems with the supply of the Heavyweight Torpedo.
  • SEA 4000 Phase 3 - Air Warfare Destroyer Build
To these might be added continuing problems with the Armadales' outstanding rectifications. These vessels were criticised soundly by their crews from the time of their introduction into service, while senior Navy officers, supporting the Defence/DMO line, insisted that they were safe to operate. Such actions serve only to break down the chain of morale and trust within Navy.

In short, Defence and the DMO have been able to keep Navy tied up in port to an extent not achieved by any enemy force.

The Question of Accountability

The question of accountability within Defence has been raised many times over the past decade or more in various reviews, including those conducted by Mortimer, Pappas, McKinsey, and Proust, but never in any fundamental way. The approach taken has been to look at accountability from within the constraints of the current organisational and functional structures and the authorities embedded by the Tange, DRP and CSP changes imposed by Defence, under government authority (4 and 5).

No fundamental study has ever been made of the proper allocation of accountability, and resources between the Services and the Defence bureaucracy where major problems have arisen and been left to fester, some for over three decades. Similarly, no study has been made into whether any cost, schedule or capability improvements have been made as a result of the Tange/DRP/CSP changes.

There are important differences between the way accountability is embedded within Service organisations and within civilian bureaucracies such as Defence and the DMO. These differences and the fault lines that have resulted are analysed in detail at (4 and 5).

Very briefly, Military organisations, to be effective, depend upon a set of characteristics that are unique to them - firstly, a military ethos, grounded in ethics, that stresses the trust and loyalty that must exist between peers and their subordinates, and the mutual respect that must exist between peers. Discipline and tradition then provide the environment within which newcomers can not only develop their trust, but also gain the respect of the organisation that they seek. Secondly, Military organisations depend upon short and direct lines of command and control (communication and management), sharply defined functions with clear accountabilities, real measures of performance, and sound management of the resources needed to achieve functions. Management feed back loops are ever present to monitor and correct status and performance, and to ensure unity of direction. In the absence of such structures, battles and lives will be lost.

In describing what civilians will bring to his department, one Defence Secretary explained: "Civilians are generally more readily able to tolerate, and even be comfortable with, unclear lines of command, divided authority, and open ended guidance or ambiguous instructions." (5) In reality, the civilian bureaucracy is concerned primarily with exercising and expanding its authority (normally through financial control), by means of administrative process, clouding functions and accountability with the inevitable side-effect that no hint of blame for failures is allowed to penetrate the organisation.

The fundamental conflict between these two approaches to management, and the inevitable consequences that will arise when civilian administrative processes are allowed to penetrate the Military, were of great concern to Sun Tzu, who warned rulers (5): "By attempting to govern his army in the same way as he administers a kingdom, being ignorant of the conditions which obtain in an army. This causes restlessness in the soldiers' minds." - the very thing that is happening today.

Sun Tzu also emphasised the need for a fighting capability grounded in strict discipline, operating within an organisation arranged such that strict functions fall to all involved, including all supporting specialists. Channels of communication must also function so that all parts act as a whole to face ever-changing challenges. Today, such military imperatives are simply ignored.

Historically, and for good reason, accountability for military capabilities and their management rested wholly with the Service Chiefs who reported directly to their ministers. Under this system, the Air Force Service Chief, for example, was accountable for managing his Service so that he was capable of:
  • Maintaining his Force at a high state of readiness. (Availability)
  • Ensuring his Force can be launched quickly in response to a wide range of tasks. (Preparedness)
  • Ensuring that his Force, once launched, can be sustained. (Sustainability)
  • Providing a high degree of choice in the application of his Force in time, space and role. (Flexibility)

That the Chief of Air Force was able to discharge his responsibilities was due to his having command and control of his force, as well as control of the resources required to sustain and develop it.

Today, the Service Chiefs no longer manage their Services, they merely administer them to meet bureaucratic imperatives (objectives and priorities) dictated by Defence. The Chiefs do not have command and control of their Services, are not organised to manage their Services, and do not have the resources needed to discharge their accountabilities.

The Service Chiefs cannot thus be held accountable for the responsibilities that they have been given.

The Minister and the Diarchy

Today, the head of the Defence Force is the Minister. Nothing seems to be done until the Minister senses public criticism. He may then visit Afghanistan (with the CDF) to determine what, if any, further support Army needs, or take up Navy's "failure to manage the LPA Fleet". His excuse for not identifying and fixing the Navy's problem well before it became public was the usual "I was not advised", while the CDF could only muster "I was not told".

That Navy's LPA capabilities were allowed to waste away for over a decade without the two key players involved, the Secretary (accountable for supporting Navy and oversight of the DMO) and the CDF (accountable for monitoring ADF capability) is inexcusable and points to the ineffectiveness of the Diarchy in other than shielding the Department from criticism. The push by the Diarchy for greater 'strategic control' requires very suspicious attention, as the primary objective will more likely be aimed at extending bureaucratic control rather than improving the management of the military and its capabilities, and in turn Australia's security.

The Clash of Cultures

The Charters of the Service Chiefs, which now read more like public service job statements, are remarkable documents. Several sections stand out:
  • "You are accountable to us (the Diarchy) for your performance .....Your priorities will be reviewed and set annually by us, in the form of an Organisational Performance Agreement (OPA). We will measure your performance and provide feedback against these priorities."
  • "You are to command the (Service) Force ....Deliver force capability for the defence of Australia and its interests, including the delivery of (Service ) capability , enhancing the Force's reputation and positioning the Force for the future."

The first point places the Service Chiefs directly under Defence bureaucratic control and so wholly responsive to bureaucratic imperatives. Military imperatives are simply overridden. The second gives the Service Chiefs an accountability that, as discussed above, they are unable to discharge.

The Charter goes on to list an odd mix of functional responsibilities and concludes with a number of guidelines - altogether a very non-military document. A very important directive, however, relates to the Chief's responsibility for "Developing leadership and behaviours that advance and embed the Results Through People Leadership Philosophy." It is here that we find a direct conflict between the cultures and accountabilities that are critical to military organisations and those that have evolved within public service bureaucracies.

One of the factors that caused the Navy's LPA debacle was identified by the Diarchy as "systemic and cultural problems." However, one of Defence's major objectives over the past two or more decades has been the replacement of Australia's traditional military culture by a liberal, civilian culture. This move parallels similar changes in other government departments, changes introduced to inject a bureaucratic culture within the organisations that they administer, one with which they will feel comfortable, and one that can be used to impose their policies and processes more readily than having to interface directly with functional experts.

Defence has pursued its policy of 'cultural cleansing' at two levels:
  • Through the Charters of the Service Chiefs, as discussed above, and
  • though the Services' senior officer corps, as discussed below.

As Service officers (above Group Captain/Captain/Colonel) vie for higher rank, they are selected by Defence not upon their military professionalism, but rather on their ability to become military bureaucrats. Under this system, senior officers are required to transfer their primary allegiance from their Service to the Defence bureaucracy, becoming 'affably compliant' members of the Minister's staff. This trend was analysed at reference (6).

The affect of this upon Australia's Services has been threefold:
  • Senior officers are put into a position of conflict of interest, and must follow the Department's line ( whether or not it be in the best interests of their Service), or suffer the career consequences.
  • Their change in loyalty does not go unnoticed within their Service, as ambitious officers moving up the ranks seek advantage by adopting and demonstrating civilian rather than military behaviours and values.
  • Such changes in approach are also noted down the ranks, giving rise to a general feeling that members can no longer rely upon their officers, the chain of command, or the Service generally to protect them or their interests.
The result of Defence's two-pronged efforts to replace Australia's traditional military culture with a civilian culture has been to weaken the ethics, ethos, morale and trust central to military professionalism, and so erode the system of command and control within the Services. This may well be the major cause behind the attitudes and behaviours seen with the LPA debacle, as well as other Navy, RAAF and Army personnel management problems.

Certainly, the statement made by the CO Cerberus following the recent fatal motor accident involving Navy trainees strengthens the perception that command and control of Navy has been eroded severely. As CO, he would be expected to fix any problem with alcohol abuse summarily. Instead, like a true bureaucrat, he advises:

"We continually look at ways to improve our business and we'll look at this incident like any other in the context of how we might learn lessons from it. But we have a review process and that will be looked at, and a review will be undertaken." (7)

This failure to take prompt corrective action mirrors the approach adopted throughout the DMO, under which generic acquisition problems that arise are allowed to accumulate on a Lessons Learned Database and later given a generic Category of Systemic Lessons. Attempts are then made to avoid the mistakes 'identified' through amendments to administrative process. However, the core problems, which in the main relate to the use of 'generalist managers / legal professionals' and the absence of Project and Engineering Management Systems, skills and competencies, are avoided studiously.

This type of culture is being is being driven home at all levels of the Services, under Defence policies being implemented by the Diarchy (8).

It is bizarre that in the centennial year of the Anzac Spirit, Australia's Department of Defence, with government approval, is well along the way to destroying the very culture that gave rise to the Anzac Spirit.

Summary of Navy's Problem

The LPA debacle was not primarily or wholly a problem of Navy's making, as charged by the Minister for Defence, as well as the Secretary and the CDF (the Diarchy).

The seeds of the debacle were sown by the DMO which failed to exercise due diligence in the selection and procurement of the two vessels, and in not providing the configuration and documentation baselines critical to the engineering and maintenance management and the modification of the vessels over their lives. Throughout the relatively short lives of these vessels, the DMO also failed to discharge its responsibilities for the deeper level maintenance requirements that arose.

The problems sown by the DMO were not able to be corrected by Navy due to the impacts of the structural and functional changes imposed by Defence over the previous three or so decades, principally:
  • The reorganisation of the Navy Office following the Sanderson Report.
  • The disbandment of the Chief of Naval Technical Services, and the resulting breakdown of his policies, management systems and procedures.
  • The downsizing and de-skilling of Navy's technical capabilities, compounded by inadequate manning levels.
  • The outsourcing of maintenance tasks that traditionally provided the skills and competencies needed to support the operation and sustainment of the Fleets.
  • The dispersion of scarce technical resources into small, isolated, inefficient and ineffective groups within force elements which lacked any engineering management focus.
  • The insidious effects of cultural change.

In summary, the Diarchy's assessment of the causal factors behind the debacle merely focussed upon "systemic and cultural problems", that require Navy to 'change its culture', while assuring all that "Action is underway to rebuild business processes and review organisational structures." Clearly, there has been no attempt by Defence, the Diarchy or the DMO to identify and correct the real causes. That the LPA Fleet problems were not identified and corrected much earlier by the Minister, his Secretary, the CDF and the DMO is an indictment of current Defence, Diarchy and DMO organisation and management.

The root cause(s) behind the LPA capability debacle still lie embedded within Defence, the DMO, Industry and the three Services and, until remedied, their cumulative effects will continue to erode not only the command and control, and the ethics, ethos and morale of the Services, but also Australia's defence capabilities.

Management Methodologies Within Defence and the DMO

The analysis above concentrated upon the actual causes behind the LPA debacle. This section will now analyse the way in which the management methodologies adopted by Defence and the DMO have increasingly eroded the capabilities of all three Services as well as Australia's national security.

Department of Defence Management Trends

Pre-Tange, the Services were organised strictly along functional lines. Each Service Chief was supported by a Board, the members of which managed the critical dependencies of the Service - such as Operations, Technical Services, Supply, Personnel, and so on. Civil oversight was provided directly by a Service Minister, with his Secretary being a member of the Service Board. This organisational structure was direct and responsive, with short lines of communication and control, and the Service Chief had control of the resources he needed to discharge his responsibilities. Civil oversight and governance were both direct, visible and effective.

Post-Tange, the new Defence organisation changed to a highly centralised bureaucracy administrating all aspects of the Services through a 'common user' concept, notwithstanding the many major differences between the Services in function, operational environment and support needs, technologies, skills and competencies, and Service ethos and morale. Under the new organisation, the critical dependencies of the Services were centralised along common user lines, and managed largely as cost centres accessed only through a maze of public service administrative processes that materialised as organisational, functional, cultural, and financial interfaces that had to be negotiated by the Services. As each of these interfaces acts as a separate element in the reliability chain of functional management, the overall management system reliability and effectiveness must inevitably degrade rapidly to an unacceptable level.

The management methodology that has evolved within Defence has thus departed from the traditional Australian Public Service administrative model to become more of a Service Industry model, much along the lines of that adopted for the management of other government departments. Under this approach:
  • The three Services were centralised to become the Australian Defence Force, and the management structures within the Service Offices were standardised to facilitate central administration and control by the Department.
  • The Services' materiel acquisition and sustainment functions, including their Support Commands, were centralised and moved under Defence.
  • Cultural change was then imposed upon the Services, particularly at senior ranks, so that this level of management would better identify with and support the culture and processes within the Defence bureaucracy.
  • The Services' integrated operational capabilities were broken down to become small Force Element Groups reporting to the Chief Defence Staff (CDF) - so becoming the 'supported capabilities'.
  • Support was 'simplified' along 'common user' lines without regard for the unique needs of the Services..
  • The provision of capability and sustainment 'services' were centralised and then largely outsourced to major foreign prime contractors in an attempt to avoid risk.
Whether in Defence, Education, Health or any other department, this model, in the hands of unskilled generalists, has proven to be a failure, as attested by the string of representative critical reports issued by the Australian National Audit Office.(9) However, in Defence, management failures at any level will translate directly into weaknesses in Australia's national security, and an unacceptably high risk to military capabilities as well as the safety of those who have to take them into combat.

Civil Versus Civilian Control of the Military

The major restructuring of Australia's higher defence machinery implemented by Sir Arthur Tange during the early 1970s was contentious then and has remained contentious since. Rather than evolve the structure that had proven fundamentally sound during and since WWII:

"Tange used the opportunity of the impatient Whitlam Government, and the anti - military atmosphere of the Vietnam War, to force through without due process the abolition of the statutory Service (and Supply) Boards - and the direct Minister to Service Chief (and vice versa) strategic, financial and moral accountability (and mutual knowledge) that existed". (10) In effect, the tight and effective civil (Parliamentary) control of the Services that existed was lost and not adequately replaced.

Dr T.B. Miller, a well-respected defence analyst at the time, warned that the Tange changes would result in "A giant step along the road to Public Service (as opposed to Parliamentary) control of the armed forces." An so it has come to pass.

Having absorbed the Service Departments, Defence, via the DRP and CSP, then proceeded to downsize and de-skill the Services and take over their capability acquisition and sustainment functions as well as their Support Commands. Throughout this process, the constitutional separation between civil (Parliamentary) control of the Military and Military command of the Services has become blurred and eroded. The result has seen civilian (principally Public Service) intrusion into Military affairs, and even Ministerial abrogation of Military authority. The importance of preventing this happening seems to have gone either unnoticed or ignored by both Defence and Parliament.
"Civil control of the military is a constitutional function limited to Ministers (representing parliament) alone, not one that can or should somehow be shared with public servants or civilians generally. Our tried and tested Westminster constitutional model deliberately separates control and command. This has long removed the gun from politics and the party politics from the institutional culture and operations of our military." (10)

The Spread of Generalist Managers

Traditionally, technology-dependent organisations were characterised by having a strong technological backbone, with technical tasks being managed by technologically skilled engineering professionals. This management model was followed by Australia's Military Services, where it was underpinned by technical policies, systems and procedures for all phases of the equipment life cycle, developed and honed through experience over time to meet the changing needs of each Service.

However, from the mid-1970s, the Department of Defence, with the consent of the Whitlam Government, and all successive governments, swept this management structure aside, replacing its technology skilled engineering professionals with technologically unskilled generalists, both civilian and military. The evolution of this change and its consequences may be traced in the analysis at reference (4 and 5).

Under the traditional management model, technology managers (in conjunction with operational staffs) were wholly focussed upon achieving required outcomes - essentially the specification of functional and engineering requirements, and the subsequent management of evaluation and selection, and acquisition and sustainment activities, to meet those requirements. Equipment manufacturers, in turn, interfaced with their Service customers primarily through their operational and engineering organisations, manufacturers' marketing arms playing only a minor role in the evaluation, selection and sustainment phases.

The introduction of the generalist manager, however, led to marked changes in the relationship between the customer and the manufacturer:
  • The generalist, being technologically illiterate, and consequently having an inadequate grasp of the functional and technical requirement or the technologies involved, is unable to communicate coherently with the manufacturer's engineering organisation. Hence, the generalist is unable to understand and evaluate what he is being told (and sold), and can not identify the appropriate questions to ask - an ideal customer to any commercial enterprise.
  • In addition, the generalist is forced by his technological illiteracy to rely upon the detailed documentation and formalised processes for which he is nominally responsible, as well as the accreditation of those processes by supposedly competent third parties. As a result, the generalist is alienated from the detail of his responsibilities.
  • As a result, the point of contact between the generalist customer and the manufacturer is shifted to the marketing division, where seemingly 'complex' technology aspects are pushed into the background and replaced by comforting, simplistic statements of promised capabilities. These now form the basis for any subsequent discussion and contract negotiation and management. The era of the PowerPoint Presentation had arrived.
  • The marketing organisation also noted that, in most Western nations, the decision process had moved up to government level, so marketing effort is now increasingly directed not at the operational customer with his technical requirements, but directly to government. In Australia, the Super Hornet and JSF procurement decisions, for example, reflect this clearly.
  • Not surprisingly, manufacturers' system performance claims often become ambiguous at best and highly inflated at worst, but the generalist has little, if any, ability to identify, qualify and quantify any false and misleading claims. Again, the Super Hornet and JSF are excellent examples.
  • However, having accepted a manufacturer's proposal, the generalist also takes ownership of it, as well as any ambiguous, absent or inflated capabilities embedded within it. Should any operational or technical aspects of the system being procured be subsequently questioned, the generalist then feels constrained to defend his decision, calling upon the manufacturer to provide any refuting 'evidence'. The generalist and the manufacturer thus begin to function as one, avoiding governance or due diligence mechanisms.
  • Where criticism is valid, but the generalist and the manufacturer as well as government refuse to admit it, all become progressively divorced from reality, and so major risk to the project soon matures.
Under these circumstances, the generalist, the contractor, and government too frequently display a hypersensitivity to criticism, which in turn prompts inappropriate defensive behaviours, ranging from ignoring soundly-based criticism, denigrating the critic (playing the man, not the facts), making threats and 'blackballing', to shifting blame, usually to 'complexity' or contractor shortcomings.

Indeed, 'complexity' has now become one of DMO's principal pleas for its problems, reinforcing its earlier plea of 'immaturity of its systems'. Complexity is now embedded in a DMO Complex Risk Management Standard, as well as the recently - commissioned Helmsman Report, both of which attempt to formalise 'complexity', now appearing in many new guises, as the key factor behind the many problems that it keeps encountering. In fact, both the Standard and the Report merely identify an organisation lacking appropriate project and engineering management systems and disciplines.

One measure of the extent to which inappropriate responses have been allowed to become characteristic of Defence and the DMO is the size of the Public Relations arsenal formed "to shape journalists' perceptions of issues and manage the story." - not to identify and correct the problem. In this way, ambiguity, misleading information and disconnects from reality are triggered and spread widely. In mid-2009, there were 98 civilians, four contractors, and 64 military personnel employed in Defence PR, with more added since. (11)

It should be noted that the replacement of technologist managers by generalists has also occurred in both government and private enterprises, especially throughout Western nations, but the adverse effects have been more entrenched and costly in government organisations because they are not measured against any commercial yardstick of solvency, or open to proper public scrutiny.(12)

Generalists manifest themselves as comfortable people in air conditioned offices who are indifferent to the effects of their actions and who avoid accountability.

Management in the Defence Materiel Organisation (DMO)

In March 2003, the Senate Foreign Affairs, Defence and Trade Reference Committee reported on materiel acquisition and management within Defence, finding that there was relatively poor visibility on the progress of major projects as far as Parliament and the public are concerned. The Committee then called for the Auditor-General to produce an annual report on the progress of major Defence projects. The first of these reports (a trial) was issued on 20th November 2008.

Since then, two further reports have been issued, the last covering 22 major projects for the period 2009-10. All three reports have been qualified by the Auditor-General. The problems encountered by the DMO have been attributed consistently to 'the immaturity of DMO's management systems', now reinforced by 'terrible complexity', giving rise to the proposal that the organisation, after a decade, has yet to learn more lessons to populate its Systemic Lessons Learned data base, which in turn will indicate where systemic changes in process need to be made. The DMO suggests that it may take another five years or so before the problems that it is encountering will be identified sufficiently before any improvement in performance becomes apparent.

All three Major Projects Reports, as well as the evidence given before the JCPAA hearings that followed them, have been analysed (13 to 17), and provide a detailed history of the problems that have been encountered by the DMO and Defence in major projects and their causes.

Examples of the problems being encountered by the DMO may be seen in extracts from an Analysis of DMO MPR 2009-10, which is at Annex A. This identifies the reasons behind DMO's failure to demonstrate any improvement in its capability acquisition and sustainment functions over the past decade. DMO's repeated problems stem directly from its entrenched, process-driven, contract-centric approach to acquisition management, in preference to traditional Project, and Engineering Systems Management methodologies which were developed specifically for managing technology - dependent projects.

The problems that have been encountered by the DMO have been institutionalised firstly by the fundamental models used in the management and governance of the acquisition and sustainment bureaucracy, both within Defence and the DMO, and secondly by the practice of replacing technologically-skilled engineering professionals with technologically unskilled generalists, and more than often, no less technologically unskilled legal professionals. That is, the imposition of bureaucratic administrative processes over professional project and systems engineering management.

The decline seen in the management of Defence and Defence capability development, acquisition, preparedness, and sustainment (both in Australia and overseas) may also be traced in an analysis conducted by a group of three senior (retired) RAAF officers in 2009 (18).

Some Realities of DMO's 'Business' Approach

When delivering services, businesses adopt business processes designed to maximise return on investment, normally measured as profit. However, within Defence and the DMO, a vacuum is seen in regard to the motives of its generalist management for adopting business processes in service delivery, as maximising profit is surely not the aim. As a result, the reason for Defence and the DMO adopting business processes is, prima facie, incomprehensible. Indeed, there may well be a basic incompatibility between the aims of business and those of the DMO, assuming that the DMO will ever be able to enunciate any credible, identifiable and measurable aims.

This incompatibility flows from the observation that profit is maximised when business processes have been standardised, made repeatable, and have all variability, as well as redundant and surplus resources, stripped from them. Although the DMO has an ostensible need to eliminate surplus or redundant resources for efficiency of its operations, particularly in its sustainment services, this need conflicts with the critical requirement for operational readiness, sustainment and flexibility and for reliable surge capabilities. In short, an organisation cannot be at maximum efficiency and at the same time have any flexibility or surge capability.

There are many instances where the DMO, in its various requests, seeks an ever more efficient service from Industry, one that can be provided only by excluding flexibility and surge requirements. Industry, for its part, unless contracted otherwise, will always adopt a minimum resource approach. In high technology projects, effective reconciliation of these two conflicting business models raises complex technical compromises that that are well beyond the competence of generalist managers or legal professionals to resolve.

This is but one example of how the imposition of unskilled bureaucratic process over military imperatives impacts force capability and sustainment.

In summary, the DMO has focussed upon an inappropriate commercial, contract/purchasing, process-driven, 'business methodology', rather than adopting technology-focussed project and systems management methodologies that focus upon outcomes in both equipment acquisition and sustainment, and the adverse results on military capabilities of this approach are now becoming increasingly evident.


In conclusion, the problems that have arisen increasingly at the operational 'sharp end' of the Services, such as in Navy, are symptomatic of systemic failures in the management and governance models used within both Defence and the DMO.

The root cause may be traced to the policies that led to the restructuring of the Defence Departments under Tange, followed by the DRP and CSP changes that resulted in the widespread restructuring, downsizing and de-skilling of the Services, particularly:
  • The reorganisation of the Service Offices.
  • The disbandment of the Service Technical Services Branches.
  • The loss of Service Support Commands.
  • The replacement of technical professionals by generalists or more recently, legal professionals.
  • The imposition of a civilian bureaucratic culture to replace traditional military values, which carries the potential to destroy Australia's capability to counter future military challenges.
Within the DMO, failures in capability procurement and sustainment may be traced primarily to:
  • The move from Australia's traditional capability and evidence-based, technology-focussed, project management driven methodology to a commercial, 'business' - orientated, contract-centric methodology.
  • A lack of relevant project, systems and engineering management skills and competencies.
  • The use of 'generalist' managers following largely rigid process, and the adoption of project review boards, both lacking in required technology and management skills and competencies.
  • The resulting inability to manage projects having any hint of complexity, especially those carrying system integration challenges.
  • An inability to manage sustainment (engineering, maintenance and supply) requirements.
  • The adoption of through-life support policies that dictate against Australia ever becoming self-reliant, and will result in the Services and Industry being further de-skilled and downsized.
Both Government and the DMO have failed to recognise:
  • The importance of technological and project management skills and competencies, and that these are bred, not bought.
  • The fundamental models being used in the management and governance of Defence and the DMO, with their premise that technologically skilled engineering professionals may be replaced with technologically unskilled generalists or legal professionals, and that process takes precedence over management, have been shown not to work and indeed cannot be made to work.
While able to be reversed, Parliament, Government, and Defence need firstly to understand and accept that the fundamental models used in the management and governance of Defence need to be changed, and generalists or legal professionals replaced by personnel having the technological and project management skills and competencies critical to the management of military capabilities.


  1. Media Release by the Secretary of Defence and the Chief of Defence, 9th February 2011.
'Causal Factors Contributing to the Unavailability of the Navy's Two LPAs'.
  1. Charles Haddon-Cave QC, 'An Independent Review Into the Broader Issues Surrounding the Loss of the RAF Nimrod MR2 Aircraft XV230 in Afghanistan in 2006', 28th October 2009, London:The Stationery Office, HC 1025.
  2. Bushell E.J., 'The Never Ending Story of Airworthiness Versus Murphy's Law', Air Power Australia Analysis 2007-04, 12th November 2007.
  3. Bushell, E.J., "An Analysis of Defence Materiel Organisation Major Projects Management and What Needs to be Fixed", Air Power Australia Analysis 2011-02, 23rd February 2011.
  4. Bushell E.J., 'Rebuilding the Warrior Ethos', Air Power Australia Analysis 2008-10, 27th December 2008.
  5. Bushell E.J., "Evolution in Management Approaches - The Product Versus the Process", Air Power Australia Analysis 2011-02, Annex B, 23rd February 2011.
  6. Deery, Shannon, "Sailors Graduate and Crash Grief", Herald Sun, 2nd April 2011.
  7. Australian Government, Department of Defence, 'People in Defence - Generating Capability for the Future Force'. Issued by the Secretary for Defence and CDF, November 2009.
  8. Representative Examples of ANAO Reports:
No 38 (2005-060 - Management of the Tiger Armed Reconnaissance Helicopter Project.
No 27 (2006-07) - Management of Air Combat Fleet In-Service Support.
No 11 (2007-08) - Management of the FFG Capability Update.
No 41 (2008-09) - The Super Seasprite.
No 37 (2008-09) - Lightweight Torpedo Replacement Project.
No 24 (2009-10) - (Procurement of Explosive Ordnance for the ADF.
No 11 (2010) - (Direct Source Procurement).
No 09 (2010-11) - Green Loans Program.
No 12 (2010-11) - Home Insulation Program.
  1. James, Neil, Executive Director, Australian Defence Association, "Arthur Tange: Last of the Mandarins" , reviewed in ADA Journal "Defence", Autumn 2006. James notes that Tange's biography gives useful background to one viewpoint on why the Department of Defence is now the way it is. However, he adds that a more complete understanding is available from Professor David Horner's biographies of Sir Frederick Shedden and Sir John Wilton, and Associate Professor Eric Andrews' superbly balanced volume, "The Department of Defence", part of the 2000 Centenary History of Defence Series (which senior officials in Defence attempted to censor). More recent observations of the confusion between 'civil' and 'civilian' control were included in the ADA's "Defence Brief" No 144, June 2011.
  2. Oakes, Dan, Defence Correspondence, 'Military Reinforces its PR Arsenal', Age, 22-23 April 2011. The figures were given in response to a question put by the shadow Minister for Defence. Oakes should, however, have attributed the PR arsenal to Defence, not the Military.
  3. Bushell, E.J., "The Widespread Consequences of Outsourcing", Air Power Australia Analysis 2010-03, 31st December 2010.
  4. An Analysis of DMO MPR 23007-08, dated 18th March 2009.
  5. Comments on JCPAA Hearing of 19th March 2009, dated 15th April 2009.
  6. An Analysis of DMO MPR 2008-09, dated 10th March 2010.
  7. Comments on JCPAA Hearing of 15th March 2009, dated 22nd September 2009.
  8. An Analysis of DMO MPR 2009-10, dated 14th March 2011.
  9. Bushell, E.J., Green, R.G., Graf, B.J., "The Decline in the Management of Defence and Defence Capability Development, Acquisition, Preparedness and Sustainment.", Air Power Australia Analysis 2009-05, 5th September 2009.



Analysis of the Defence Materiel Organisation (DMO) Major Projects Report (MPR) for 2009-10 indicates that nothing of substance has happened that will improve the performance of the organisation in acquiring and supporting Australia's military capabilities. As with previous reports, there has been only the addition of more process to an already process-bound organisation. The core problems have not been identified and no management initiatives have been taken.

The DMO continues to demonstrate a systemic inability to manage projects which are in any way 'complex', particularly those that include any degree of system development or integration. It also demonstrates difficulties in providing in-service support on time.

These congenital problems stem directly from an entrenched, process-driven, contract-centric approach to project management, rather than employing sound Project, Systems and Equipment Engineering management systems and procedures developed especially for controlling technology projects. The situation that has persisted for more than a decade is an inevitable consequence of the 'not thought through' de-skilling and downsizing of the Services and the structural changes imposed by the Defence Reform Program (DRP) and Commercial Support Program (CSP).

The problems being encountered have been institutionalised firstly by the fundamental models used in the management and governance of the acquisition bureaucracy, and secondly by the practice of replacing technologically skilled engineering professionals with technologically unskilled generalists. That is, the imposition of administrative process over project and systems engineering management. For more than a decade, the approaches adopted have been shown not to work, and can not be made to work.

The slightly modified project status metrics now used continue to lack substance, and so will not provide the objective and auditable status of projects required by ANAO. Furthermore, Major Challenges, Measures of Effectiveness, Major Risks and Major Issues are, and will remain, outside the scope of Australian National Audit Office (ANAO) reviews. Hence, given the ANAO's qualification of the DMO's costing base and the role contingencies play, the status of DMO major projects is, for all practical purposes, not auditable, and as a result, the ANAO has been unable to provide the assurance of good governance sought by government through the Senate Foreign Affairs, Defence and Trade Reference Committee in March of 2003.

The Defence Industry policies being pursued by Defence and the DMO, in the absence of any coherent and informed government policy, continue to undermine the skills, competencies and facilities bases in both the Services and Defence Industry, leaving Australia dangerously dependent upon overseas facilities for the engineering, maintenance and supply support of its military capabilities.

Finally, over the more than a decade that Defence and the DMO have faced major, but avoidable, capability acquisition problems, the higher governance mechanisms upon which Australia depends to identify and correct deficiencies in Departmental performance have been either unable or unwilling to pursue the rigorous governance disciplines required to reform Defence and its capability acquisition organisation. This analysis emphasises the need to start real reform of the Defence/DMO organisations before Australia's military capabilities deteriorate beyond repair.



This review builds upon an analysis of Defence Materiel Office (DMO) Major Projects Report (MPR) for 2008-09 (1), and it is important that this review be read in conjunction with its predecessor as that analysis covered the changes that gave rise to the current Defence capability acquisition organisation, as well as many of the broader factors that have molded the organisation over the years.

Complexity and Risk

Over the past decade, DMO has been increasingly generating the impression that its acquisition functions face extreme complexity and high risk, and that the problems that the organisation faces stem from those factors. The 2009-10 MPR dwells very heavily upon complexity and risk and their impacts upon DMO (Pages 83-87). Indeed, DMO had the Helsman Institute undertake a study in 2009 into the complexity faced by DMO in comparison with general industry. That report merely confirmed what every serviceman employed in new project or sustainment planning and management well knew before the DRP/CSP programmes disbanded the Services' well established and successful capability definition, acquisition and sustainment skills and competencies base, that had been developed over 70 or more years of experience. The Helsman Report has been mere window dressing, an attempt to excuse failures, and a total waste of money.

Part of DMO's solution to its problems with complexity and risk, which supposedly make it difficult for the organisation to maintain project schedule, is reflected in the recent Defence/DMO policy requiring the benchmarking of Military Off-The-Shelf (MOTS) and Commercial Off-The-Shelf (COTS) equipment “against which a rigorous cost-effective analysis of the military effects and schedule aspects of all proposals (ie, military capability requirements) will be undertaken.” Two important potential dangers stem from this decision:
  • Firstly, the policy reverses the traditional onus upon MOTS/COTS equipment (in common with all other equipment offered) having to demonstrate that it meets specified operational and technical requirements. Under this benchmarking policy, the potential for mainly US-sourced MOTS/COTS equipment to be purchased by DMO over equipment that will better meet Australian - unique Service requirements is acute. In this sense, 'unique' means equipment that will perform, as specified in Australia's likely operating environments and suits Australian modus operandi, special military skills and capabilities. These factors are too easily dispensed with or denigrated where an apparently 'cheap and easy' procurement, seemingly without commercial risk, presents itself, and the imperative of 'interoperability' is invoked. DMO should have learned from its unsuccessful Army and Navy purchases to understand the factors involved and the nasty implications for those who have to use such equipment in battle, a well worthwhile lesson that appears not to have been learned. The path set by this policy will inevitably lead to Australia's Services, over time, becoming captive to being equipped to fight someone else's threats in someone else's threat environment and geography, using someone else's strategies and tactics.
  • Secondly, it sends a clear message that DMO is incapable of managing successfully any projects that contain any measure of technical complexity, especially those having any hint of systems integration – a disturbing admission by an organisation that is charged with the national security responsibility for equipping and sustaining Australia's military services. For over a decade, Defence and its acquisition organisations have struggled to meet their responsibilities, but with declining success, and the DMO now warns that it must continue to make generic mistakes before it can identify any need for systemic reform. The DMO was formed as, and remains, a simple purchasing organisation, centred upon complex contract /procurement 'business' structures and processes, an organisation that shows no understanding of the central role and importance of the project and engineering management systems that are needed to drive the contracting/procurement functions, not be a slave to them.
The management of technology reliant systems demands firstly staff with a sound technical knowledge of the equipment involved. Secondly, they must work as System and Equipment engineers within a robust Project Management organisation, otherwise the litany of generic 'lessons unlearned' by DMO will have to be repeated over and over, as is the case now.

How Technology Management Works

In acquisition project management, management of technology-based capabilities requires Project, Systems and Equipment Engineering skills and competencies to be applied rigorously from the Requirements Definition Phase, and throughout all subsequent phases of a project. Project Management Plans are needed to state how the project will be managed at the top level, while Systems and Engineering Management Plans are needed to drive all systems and engineering functions to meet the objectives of the Project Management Plan.

System Engineering Management Plans must have a range of Sub-plans to manage and integrate tightly all supporting project functions, such as Facility Plans, Manning and Training Plans, Maintenance Plans, Support Equipment Plans, Test and Acceptance Plans, Equipment Support Plans and so on. The objective of several of these sub-plans is to ensure that all lines and levels of support will be in place by the time that the system is delivered and accepted into service. With this approach, DMO's problems with integration and complexity and establishing capability support on time do not arise, and any risks to the project are able to be qualified and quantified and redressed promptly, at the lowest level, with least impact upon project objectives. In particular, there needs to be only one project completion date, not six as now introduced by DMO's new wave of processes.

The inevitable consequences of not doing things properly in Defence acquisition are analysed at Annex A, which identifies the following major causes behind the problems and failures being encountered by Defence/DMO:
  • The restructuring of Defence and the Services, coupled with the wholesale downsizing and de-skilling of the Services under the DRP and CSP, resulting in their inability to provide the skills and competencies needed for the proper management of military capabilities. This is especially evidenced by the inadequate statements of requirements that have driven projects, and the difficulties in managing design changes and other engineering challenges that have arisen throughout almost all projects.
  • The abandonment by Defence and the DMO of project and engineering management systems over the period 1998 to 2001, and the introduction of commercial, process-driven administration to capability acquisition and sustainment, resulting in the risks and problems being seen with DMO projects today.
  • The absence of effective governance at all levels - where Defence, Government and Parliament have been unable or unwilling to understand what is happening and to insist upon corrective action.
No amount of process can redress these problems.

Reporting Project Performance

In MPR 2008-09, DMO stated (page 55) that DMO's Project Maturity Score “quantifies the maturity of a project by way of an objective score based on the Project Manager's judgement ...The score is then compared against an ideal benchmark score ..”. As pointed out at (1), DMO's MOE score is, by definition, not objective, but an unsupportable, subjective estimate open to a wide range of influences and competencies.

In the 2009-10 PR, DMO now states (at page 37): “Key project performance information is important in monitoring whether the required capability is expected to be delivered on schedule and within budget. Such information has the potential to act as an alert to under-performance and a focus for management action.” The organisation then identifies four measures “to provide a snapshot on project performance”, paired to generate two scores:
  • The percentage of budgeted cost expended in relation to the percentage of the elapsed schedule time, (page 37 and Fig 2), and
  • Project maturity progress as a percentage of the key capabilities expected by DMO to be delivered, (Page 39 and Fig 3).
The first measure assumes that these factors combine to provide a measure of progress in achieving the required capabilities, whereas no nexus exists between project expenditure and time elapsed on the one hand, and the extent to which required capabilities have been or will be achieved on the other. Having spent, say, 80% of budget and 80% of the scheduled time does not mean that 80% of the required capabilities have been achieved. Fig 2 is thus simply magical thinking and baseless.

The second measure is based upon DMO's assumption that assessment of the likelihood of any project delivering all its key capability requirements should “become better informed as a project maturity score increases”. However, Page 39, and Fig 3, which purports to show progress in providing the capabilities required, lacks both substance and logic. It merely proposes that all the projects listed (with the exception of Wedgetail) will be delivered such that they will satisfy all their key capabilities. In addition, Fig 3 does not indicate when the optimistic forecast 100% of required capability will occur in relation to when the White paper and Project Schedule requires it. In short, it attempts to put the very best face on capability achievement, but ignores schedule delays.

Furthermore, DMO now cautions (para 2.5, page 38), that “While the DMO's key capability measures should be interpreted with some caution due to their lack of rigour as a data system and the high level of uncertainty in forecasting outcomes overall, the DMO's assessment is that 20 of the 21 projects with key capability data in this year's MPR will deliver all their key capability requirements “. Footnote 40 further warns that “The DMO's assessment involved high levels of uncertainty which may cause actual outcomes to differ materially from that stated in the PDSSs”.

It should be remembered that these measures drive not only project status reports to ANAO and the Joint Committee Public Accounts and Audit (JCPAA) , but also support the advice given and the proposals made to Government, especially at Gate Review Assurance Boards, which, as DMO states, "depend upon an expert assessment of project development and status, and the prospects of a project achieving the agreed outcome”.

The presentation of Project Maturity Scores and Measures Of Effectiveness as metrics of project status has now evolved into bar charts, percentages, and 'traffic signals', but the measures upon which these are based remain unchanged - they are simply subjective opinions lacking in any hard metrics, and do not give any real measure of project status.

The Problem With Numbers

Numbers are mostly meaningless if the objects to which they are attached cannot be measured with repeatable accuracy. It is important therefore to look closely at what is being measured and how. DMO makes use of numbers, and their cousins – such as bar charts, percentages and traffic lights of various types - to measure project and capability status, but in the main these measures are useless, and inherently misleading. They are based on what are called 'Potemkin Numbers' (2).

Potemkin Numbers are the mathematical equivalents of Potemkin Villages. They are merely numerical facades made to look like real data. Potemkin Numbers aren't meaningful because either they are borne out of a nonsensical measurement or they are not tied to a genuine measurement at all, springing forth fully formed from a fabricator's head. As Charles Siefe observed: “Creators of Potemkin Numbers generally care little about whether their numbers are grounded in any sort of reality. From afar, however, they seem convincing”. When used, they are often a powerful tool to prop up an argument and even the flimsiest can do tremendous damage. Fortunately, the power of Potemkin Numbers is limited as they evaporate as soon as they are made subject to examination.

Project Maturity Scores and their benchmarks and Measures of Effectiveness, with their wide ranging affects, thus need to be seen for what they are

The Enterprise Risk Management Framework (ERMF)

The management of risk within the DMO was analysed in detail at (1), but the steps now being taken (pages 86, 87) indicate that the organisation continues to ignore, or not understand, how risk must be managed in a technology intensive project. Risk is still seen only in contract management terms, and the DMO still expects risks to become visible and manageable following the retrospective (longitudinal) analysis of long-accumulated, generic 'lessons learned', which are now being allocated to another generic Category of Systemic Lessons. This is merely distracting attention from the core reason behind risk and its mismanagement within the DMO, while trying to give an impression of progress.

Until the DMO accepts that risk arises primarily from the technology (engineering) aspects of a project and must therefore be managed by skilled technologists employing project and engineering management methodologies, risk will continue to ravage all capability and sustainment projects. Unskilled generalists using 'high-end' risk management tools are doomed to failure.

Project Milestones (Pages 88, 89)

This MPR details the third significant change to project milestones introduced by the DMO, adding additional milestones to make a total of six. Essentially, these limit the DMO's function to providing equipment, not capability, which now rests with the Capability Manager. This arrangement will be implemented through the Capability Manager becoming a signatory to the Materiel Acquisition Agreement (MAA) and, inevitably, a range of amended and additional paperwork and processes must follow. The new milestones are:
  • Initial Materiel Release (IMR).
  • Initial Operational Capability (IOC).
  • Initial Operational Release (IOR).
  • In-Service-Date (ISD).
  • Final Materiel Release (FMR).
  • Final Operational Capability (FOC).
This can be described only as process gone mad, and cannot be shown to contribute to improving project outcomes. This can be demonstrated by simply drawing an activity diagram for all of these processes so as to identify all organisational, functional, and financial interfaces.

Under pre – DRP/CSP service organisations, the RAAF, for example, had one operational milestone – the date when the system became not only operational but fully supported at all lines and levels in both the Service and Industry. The DMO's performance can hardly be said to be an improvement on that.

The Continued Growth of Process Over Outcomes

Reference A discussed the flight to process resulting from DMO MPR 2008-09, and identified an organisation focussed upon process rather than management changes that would lead to the outcomes required being achieved. MPR 2009-10 continues a flight to process that impacts almost every area of the DMO's activity, instead of an analysis of the organisation's management structure, policies, systems and procedures. Changes resulting from MRP 2009-10 include, examples only:
  • Gate Review 'business improvements', which will distance DMO from Capability Development responsibilities, but the soundness of the guidance given government will still be based upon the unreliable metrics of Measures of Effectiveness.
  • Risk management 'improvements' centred upon “The identification of the lessons identified by internal and external audits undertaken in the DMO over the past five years”, aimed at understanding business level risks and their sources to become input to DMO's lessons learned methodology. This included the inputs in Ernst & Young's Internal Audit Report on the DMO's Enterprise Risk Management Framework (ERMF), which led to the development of a Chief Executive Officer Instruction on risk management, and the compilation of risk management controls for acquisition and sustainment activities. For the reasons given above, nothing should be expected from these changes except more administrative complexity and greater inertia.
  • In regard to project lessons learned, amended guidance will be given on a range of Capability Definition documents, a Requirements Management System will be developed, as well as a Defence Materiel Instruction on requirements management, and a Requirements Management Guide, and a tailored requirements management training course has been developed.
  • The introduction of additional capability delivery milestones to a new total of six, which will essentially restrict the DMO's activity to delivering procured equipment to the capability managers for their provision of the actual capability, distancing the DMO from direct accountability for providing required capabilities. This will simply introduce more organisational, functional, administrative and financial interfaces that will have to be coordinated and administered.
  • Contract changes that include a new Standing Order for Off-The-Shelf components, new AUSDEFCON Performance Based Support Contracting conditions, development of a new AUSDEFCON (Shortform Support) statement of work template, and industry improvements to reduce business costs.
  • Schedule management changes that include improving project performance measuring and monitoring systems to mitigate project risks. As identified earlier, the DMO's methodology and measures have no sound basis, so nothing of substance should be expected from these changes. In addition, a Schedule Measurement Capability Model has been developed, termed Schedule Compliance Risk Assessment Method (SCRAM). Offered as a “model of Schedule Management best practice”, it is unlikely to achieve anything as the project/engineering/risk management systems and procedures appropriate to the management of military technology are not in place. It cannot function in the manner suggested within the DMO's current contract/procurement-centric organisation.
  • Internal and external performance reports will be subjected to review and management reporting changes made.
This continuing flurry of changes to process are symptomatic of an organisation trying to plug a myriad of holes to keep the ship afloat, but the crew seem to have lost sight of where they should be heading and how best to get there.

Project Lessons Learned (Page 87)

Detailed analysis of DMO's Lessons Learned and Project Longitudinal Analysis was included in (1). The Lessons Learned in the 2009-10 MPR continue to be generic in type, but are now grouped under a 'Category of Systemic Lessons', including:
  • Schedule Management.
  • Requirements Management.
  • Contract Management.
  • First of Type Equipment.
  • Military Off-The-Shelf Equipment
However, the DMO warns that “A new contract approach will have to be used on a number of projects before all lessons will have been learned.”, so the process is intended to be on-going. This is a strange methodology for any organisation to adopt, in that it only 'learns' retrospectively, through making mistakes, whereas standard project management methodologies are based upon prospective risk management, identifying risks and problems with a project as they arise or are forecast, and correcting them so that they do not impact the project adversely, or their effects are minimised on schedule, cost and capability. Retrospective analysis has a retrospective role to play, but it is of no use unless the project and engineering management systems appropriate to the equipment involved are in place and are managed by persons having a sound knowledge of the technologies involved, and managing risks as and when they arise or are forecast.

So, DMO remains committed to making mistakes so that generic 'lessons', ones that should not have been made in the first place, may be identified and then used to populate a data base from which they are segregated into a broad category aligned with selected management areas and sources of procurement. This is an expensive way of mismanaging projects.

DMO's approach is much like trying to drive a car by looking only through the rear vision mirror, with driving skills and competencies being dependent upon making mistakes.

Governance (Page 93)

Governance improvements identified by the DMO include Gate Review Assurance Boards that rely heavily upon the DMO's “
expert assessment of project development and status and the possibility of achieving the agreed outcome”. However, DMO's expert assessments remain challenged by the weaknesses identified above in the project performance metrics adopted. More importantly, the reluctance or inability of our parliamentary governance mechanisms, despite clear warnings, to seek out and rectify the root cause(s) behind the problems that have persisted with capability acquisition and sustainment for well over a decade, is the real governance weakness.

Defence Industry Policy (Page 97-100)

This is the first time that an MPR has included the subject of Defence Industry. Australia's Defence Industry Policy has undergone many reviews, and statements come and go, leaving little, if any, evidence of their passing. Unfortunately, this is characteristic of all Defence and DMO reviews. Many of the problems we now have are a function of Government/Defence indecision and waffle and the DMO's 'supply and support' policy – seemingly adopted from the recently disgraced US Defense Acquisition's Total System Performance Responsibility (TSPR) approach. Applied by the DMO as a perceived project de-risking strategy, this has:
  • Caused a flow of work from Australia's Services and Defence Industry to overseas (principally US) facilities, and
  • Resulted in the closing of long-established and very efficient and effective weapon system and equipment support facilities that existed within the Services and Defence Industry.
In particular, the identification and establishment of strategically important industry capabilities was the subject of a recent Defence Industry Review, from which nothing resulted, except the further loss of critical Service and Industry capabilities. Defence Industry policy and practice have been a total and expensive failure for some two decades or more, and unless tackled seriously both Service and Defence Industry capabilities will largely disappear.

The disconnect between the DMO's policies and Defence Industry objectives is exemplified by the critical need for systems engineering expertise within the DMO to manage systems integration and other complex engineering tasks on the one hand, and the DMO's decision (for example) to close down the highly successful Boeing systems engineering and integration facility that had been built up over the years to support the F-111 Fleet on the other. This strange and short sighted decision seemed to be a matter of saving money at any cost in the short term.

Management within Government Departments, including Defence and the DMO, has been focussed upon outsourcing what are in fact core competencies, a policy and practice that carries considerable hazards, especially for Australia's military capabilities and national security, because of Defence/DMO inabilities to manage the risks involved.

Major Project Challenges (Page 105)

After a decade, these continue to be as vague and unqualified and unquantified as the Project Risks and the Project Lessons Learned. The DMO still focusses upon Schedule, whereas Schedule, Capability and Cost cannot be excised from one another – they must be managed together under tight project management methodologies to ensure that the impacts of one upon the others are identified and managed properly while avoiding risk from all sources. To attempt to manage one in isolation is to court risk and generally failure.

Project Data Summary Sheets (PDSSs)

The PDSSs forming part of MPR 2009-10 have been analysed, with no significant variation in trends seen from the 2008-09 MPR. Comments on the 2009-10 PDSSs are included at Annex C, with Attachment 1 to Annex C providing a Risk Consequence Level for each project, based upon Australian and DMO risk management standards.
This annex and its attachment have not been included in this extract from the submission made to the Joint Committee Public Accounts and Audit (JCPAA). The full submission may be accessed through the JCPAA website.(1)


Analysis of the Defence Materiel Organisation (DMO) Major Projects Report (MPR) for 2009-10 indicates that nothing of substance has happened that will improve the performance of the organisation in acquiring and supporting Australia's military capabilities. As with previous reports, there has been only the addition of more process to an already process-bound organisation. The core problems have not been identified and no management initiatives have been taken.

The DMO continues to demonstrate a systemic inability to manage projects which are in any way 'complex', particularly those that include any degree of system development or integration. It also demonstrates difficulties in providing in-service support on time.
These congenital problems stem directly from an entrenched, process-driven, contract-centric approach to project management, rather than employing sound Project, Systems and Equipment Engineering management systems and procedures developed especially for controlling technology projects. The situation that has persisted for more than a decade is an inevitable consequence of the 'not thought through' de-skilling and downsizing of the Services and the structural changes imposed by the Defence Reform Program (DRP) and Commercial Support Program (CSP).

The problems being encountered have been institutionalised firstly by the fundamental models used in the management and governance of the acquisition bureaucracy, and secondly by the practice of replacing technologically skilled engineering professionals with technologically unskilled generalists. That is, the imposition of administrative process over project and systems engineering management. For more than a decade, the approaches adopted have been shown not to work, and can not be made to work.

The slightly modified project status metrics now used continue to lack substance, and so will not provide the objective and auditable status of projects required by parliament. Furthermore, Major Challenges, Measures of Effectiveness, Major Risks and Major Issues are, and will remain, outside the scope of Australian National Audit Office (ANAO) reviews. Hence, given the ANAO's qualification of the DMO's costing base and the role contingencies play, the status of DMO major projects is, for all practical purposes, not auditable, and as a result, the ANAO is unable to provide the assurance of good governance sought by government through the Senate Foreign Affairs, Defence and Trade Reference Committee in March of 2003.

The Defence Industry policies being pursued by Defence and the DMO, in the absence of any coherent and informed government policy, continue to undermine the skills, competencies and facilities bases in both the Services and Defence Industry, leaving Australia dangerously dependent upon overseas facilities for the engineering, maintenance and supply support of its military capabilities.

Finally, over the more than a decade that Defence and the DMO have faced major, but avoidable, capability acquisition problems, the higher governance mechanisms upon which Australia depends to identify and correct deficiencies in Departmental performance have been either unable or unwilling to pursue the rigorous governance disciplines required to reform Defence and its capability acquisition organisation. This analysis emphasises the need to start real reform of the Defence/DMO organisations before Australia's military capabilities deteriorate beyond repair.


1. E.J. Bushell, '
Review of 2008-09 DMO Major Projects Report (MPR), an unsolicited submission to to the Australian National Audit Office, 10th March 2010. The author's Analysis of DMO MPR 2009-10, 24th March 2011 may also be found at: (
2. Seife, Charles, "Proofiness - The Dark Arts of Mathematical Deception", 2010, Penguin.



Many of the problems that have been encountered by Defence/DMO over more than a decade, without sign of substantial improvement, may be traced to government, in 1998 to 2001, directing its acquisition organisation to abandon the successful project and engineering management systems and procedures that had been built up by the Services over decades of experience, and to replace them with standard contract management processes common to government purchasing organisations. (1)

The project and engineering management systems designed specifically to specify,evaluate, select, acquire, operate and sustain technology-based systems were then downgraded to become merely inputs to Contract/Procurement Managers and their administrative processes. The adverse impacts of this change in acquisition methodology have been increasingly evidenced in the Major Projects Reports produced by DMO over the past three years in response to Parliament's requirement for better visibility over major Defence projects.

The following table, drawn from DMO MPR 2009-10, highlights the consequences of not adhering to rigorous Project, Systems and Equipment Management Systems throughout the acquisition and sustainment phases of projects. The examples given are not exhaustive, but only representative of the underlying causes behind projects failing to achieve their objectives in capability, schedule and cost.

Problems Encountered Comments
Project: Air Warfare Destroyer Build:
  • Sub-contractor quality deficiencies.
  • Shortage of skills.
  • Configuration management problems.
  • Design changes.
  • Change Management procedures.
  • Shipyard capabilities and capacity.
  • System integration.
  • Project Office expertise.
  • Drawing management and delivery.
  • Tech assistance from US Navy.
  • Alliance Contract risks.
  • Contract escalation indexation.
  • Support data availability.
  • Unclear Certification requirements.
  • Certification data not available.

All of these problems should have been identified, scoped, and included in early project management planning. Several (such as configuration, design changes, and change management) are covered by standard engineering management systems.
Others require project planning effort to identify project requirements and procedures, and negotiate how they will be managed, in consultation with interfacing organisations (eg, US Navy and contractors). Project planning should also have stated the maintenance policy to drive support activities, and through inspection verify the capabilities and quality at contractors.
All of these problems were largely avoidable.
Project: AEW&C:
  • Project effort underestimated.
  • Project time underestimated.
  • Technical complexity underestimated.
  • Contract complexity underestimated.
  • Risk management underestimated.
  • Inadequate Contractor resourcing.
  • Inadequate support from 'stakeholders'.
  • Inadequate resources and time to provide in-service support

These problems also indicate an absence of proper, early project management planning and subsequent management. As a result, the problems encountered have resulted in capability, schedule and cost penalties that were quite avoidable.
Project: Multi-Role Helicopter:
  • Inability to meet capability requirements not understood.
  • Maturity of aircraft design not assessed or understood.
  • Limited intellectual property rights affected impacted capability development, value for money, availability of required data, and system integration.
  • Maintenance documents inadequate.
  • Inadequate in-service support.
  • Delays due to manufacturing defects.
  • Capability targets delayed by design and reliability problems.
  • Certification delayed by immaturity of design.
  • Training impacted by lack of rate of flying effort available.

Each of these problems should have been identified, scoped and management approaches determined as part of early project management planning. In this way, many would have been avoided, while others would have been identified early and appropriate management procedures determined.

Government and DMO entered into this project with eyes wide shut. The inevitable consequences have and will continue to haunt the Services so long as it is in service.

Project: Amphibious Deployment:
  • Wide impacts of regulatory requirements.
  • Requirements creep.
  • Combat and Communication Systems may not meet requirements.
  • Insufficient funds for logistics support, training and spares.
  • Unable to certify Air Space Management System.
  • Lack of clarity surrounding ship acceptance process.
  • Integration complexity underestimated.

Again, this project has suffered from a lack of early project management planning.

Each problem reflects a failure to identify, scope and plan the activities that the project will have to manage before the project was submitted by DMO for Government decision.

This project is fated to encounter more problems as it proceeds.

Project: Bushmaster:
  • In the early planning phase of the project, the operational concept and functional performance were not clearly defined, making it difficult to understand and undertake appropriate cost-capability trade-offs.
  • Lack of Contractor ability to provide adequate cost estimates, and inability by Defence to evaluate the validity of the cost data.
  • Testing was not sufficiently planned.

These 'Lessons Learned' reflect wholly inadequate project planning and was also a high risk project to put before government.

Project: FFG Upgrade:
  • Requirements and specifications must be well defined.
  • How the capability should be acquired should be resolved at the time of capability and project definition.
  • Verifying and validating software development should be contractually covered.
  • Upgrades should always follow the acceptance of the first platform.
  • The risk associated with complex software changes and integration must be properly managed.
  • The contract schedule should be realistic and contain:

- milestones to assess contractor performance.

- payments should be should be subject to achievement of clear project milestones.

- milestones should reflect delivery of contracted requirements.

- ILS milestones should carry the same weight as primary equipment milestones.

- Contractors should focus more upon ILS requirements.

- The contract should be clear on Configuration Management.

- Objective acceptance criteria are required.

- Progressive acceptance methodology should be implemented for all project data, documentation, supplies and requirements acceptance.

These "Lessons Learned" reflect a total absence of any effective Project Management disciplines. They ensure that the project will fall victim to costly, continual problems and frustrations that are entirely unnecessary.

Every item on this list of lessons learned should have been qualified and quantified and included in a Project Management Plan (or Sub-Plan). They are not contract manageable - they require technical management!

They are an indictment of the current acquisition methodology being pursued by the DMO.

Other Projects:

Similar problems affecting other projects are identified in the Project Data Summary Sheet analysis at Annex A.

The problems reported with other projects generally follow those exampled above, varying only with the type and 'complexity' of the project.

Why Project/Systems/Engineering Management? - Very Briefly.

Requirements Definition.

Projects start with a stated capability requirement, normally initiated by Government, often via a Defence White Paper, or a Service to meet an already agreed capability, or to replace current equipment that needs upgrading or replacing. Planning to meet the requirement starts with an operational analysis which, must be done by the Service that will operate the equipment, reflect accurately the threat that will be faced over time, and be supported by a Technical Specification which covers the technology aspects of the requirement and how these will be managed to meet capability and sustainment requirements. These form the input to all subsequent Project Management Planning.

If these activities are not conducted thoroughly and coherently, then all subsequent activities will be laden with high capability, schedule and cost risks.

Project Definition.

This phase defines capability and sustainment requirements in sufficient detail so that potential suppliers and others involved are fully aware of what is required, when, and how the elements of the project will be managed. The core skills and competencies required for this phase are essentially Project, Systems and Equipment Engineers experienced in the technology being procured. If this stage has been completed to a verifiable, high standard, the project may then go forward to government for approval to proceed. While some contract input will be needed, it is critical that contract imperatives do not drive the project - otherwise deficiencies and inadequacies will be embedded over the life of the project, as is the case now. Contract management should be focussed upon how best the project might be supported in accordance with project management planning.

It is critical that projects having significant levels of development or integration include Systems Engineering skills within the Project Management organisation, for it is not until systems engineering problems are managed and resolved that many other engineering and project activities can proceed.

If project management planning is inadequate, then all subsequent activities will carry high risk.

Source Evaluation and Selection.

The evaluation of contenders also relies upon Project, Systems and Equipment Engineering skills, with contract administration input. It is here that the ability of contenders to meet defined capability and technical requirements are identified, scoped and evaluated, and potential risk areas identified. Project Management must ensure at this stage that all project requirements are fully and accurately identified and scoped, are reasonable, and made clear to all contenders. If this is not done rigorously, then high risk will flow from the evaluation and selection phases into all subsequent acquisition phases.

At source selection, Project Management planning becomes far more detailed, and a Project Management Plan with its fully-integrated Sub-Plans (such as the Systems Engineering Plan, Manning and Training Plan, Facilities Plan, Ground Support and Test Equipment Plan, and so on) is developed . This Plan identifies and integrates all project activity so that all involved know what has to done, by whom, and when. When the Project Management Plan and its Sub-Plans are finalised and Project Milestones established, final contractual arrangements may proceed. At no stage should the contract get ahead or drive the project, as this is a proven way for contract and contractor imperatives to complicate and conflict with Project Management Plans.

Acquisition Phase.

If the project management activities above have been conducted properly, the project will proceed as smoothly as possible and should not encounter the protracted problems identified in the DMO MPR Project Data Summary Sheets (PDSSs). Any problems that do arise will generally be identified early and rectified at the lowest level, in the minimum time and with least impact on the project.

Skills and Competencies.

This analysis, and statements made in the MPR PDSSs, indicate clearly that sound Project Management has been missing in DMO projects since 1998 - 2001, and the consequences of this have been widespread and unnecessarily expensive in capability, schedule and cost outcomes.

Traditionally, the skills and competencies needed for specifying and managing operational and technical requirements resided within the Services, where total responsibility for capability definition, acquisition, and sustainment resided. However, the Defence Reform Program (DRP) and the Commercial Support Program (CSP) resulted in the Services being de-skilled, downsized and relegated to undertaking only the lowest level of engineering and logistic support which required the lowest level of skills and competencies. In particular, the Services' engineering branches were disbanded, the effects being especially felt within the two high-technology Services - the Navy and the RAAF. The damage done was further compounded by the disbandment of the Services' Support Commands. Government and Defence planning was for these skills to be replaced by Defence Industry, but this did not occur, with Defence Industry now facing much the same problems as the Services, and would never have been able to provide the skills and competencies that reflect military requirements.

The result has been that the skills and competencies required within DMO are not available from the Services or industry, and cannot be developed within the DMO, as the skills and competencies required must have experience in the operation and technology of the capability being acquired, and DMO has no means of achieving this. In addition, the skills and competencies required to manage technology vary over the equipment life cycle, and DMO has no means of responding to such changing circumstances. Outsourcing any but the simplest of tasks carries high risk, as Defence/DMO do not have the technological skills and competencies required to manage outsourced tasks (2). Finally, both Government and DMO fail to recognise that technological skills and competencies are bred, not bought.

In addition, the fundamental models used by Government/DMO in the management and governance of the acquisition bureaucracy, and the premise that technologically skilled engineering professionals may be replaced with technologically unskilled generalists, and that process takes precedence over management, have been shown not to work, and indeed cannot be made to work.

Governance Problems.

This leaves parliament, government, and DMO with very uncomfortable decisions to be taken. Unfortunately, all three have been reluctant to even acknowledge that there is a problem, let alone that it goes to the very core of Australia's sharply declining military capabilities and national security, is urgent, and needs to be rectified before even greater damage is done. This stark assessment is based upon a total lack of response to a body of substantial analyses and submissions made to DMO, Defence, and governance agencies, especially the various inquiries and hearings conducted by Foreign Affairs Defence and Trade (JSCFADT) and the Joint Committee Public Accounts and Audit (JCPAA). Despite the substantial input to these governance bodies, nothing has eventuated. Not a relevant question has been put to Defence or to the DMO. From all appearances, governance bodies have elected to become part of the problem rather than the solution.

The presentations referred to may be accessed through the JCFADT and JCPAA websites.


1. Bushell, E. J., "An Analysis of Defence Materiel Organisation Major Projects Management and What Needs to be Fixed", Air Power Australia Analysis 2011 - 02, 23rd February 2011. 2. Bushell, E.J., "The Widespread Consequences of Outsourcing", Air Power Australia Analysis 2010 - 03, 31st December 2010.

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