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Defence deploys procurement reforms to protect budget bottom-line

by Paris Cowan •
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In the lead up to what Wayne Swan has described as a “very responsible” Federal Budget, Defence has announced a crackdown on expenditure that will impact in its ICT procurement and other back-office functions.

The Department of Defence and the Defence Materiel Organisation (Defence DMO) are the two largest purchasers of ICT in the Federal Government market. Together, they entered into $1.6 billion worth of contracts in 2008-09 and $1.7 billion in 2009-10.  Intermedium has tallied $1.3 billion worth of ICT contracts from the beginning of the 2010-11 financial year to date for the two Defence agencies.

On Friday 6 May, Defence and Defence Materiel Ministers, Stephen Smith and Jason Clare, announced a raft of measures that will form part of Defence’s Strategic Reform Program (SRP), which is designed to find $20 billion in efficiency savings to be reinvested into Defence capability over ten years.

The latest announcement includes the application of a rigorous cost-benefit analysis to all procurements that are not ‘off-the-shelf’ purchases, which will result in extra scrutiny of any future bespoke software procurements.

“There will be off-the-shelf contestability at every important and relevant stage of a project so as to ensure that there is contestability with an off-the-shelf capability if one is available,” said Stephen Smith at a Defence press conference.

Furthering a clampdown on underperforming projects, Smith and Clare announced that a two-pass approval process would be extended to all ‘minor projects’ with a budget between $8 and $20 million, where it was previously only applied to projects with a budget over $20 million. The two-pass process means that following the approval of a formal business case by the Minister, tender quality data must be supplied upon which implementation decisions will be based.

According to a Defence press release, projects which have undergone two-pass approval are 20-25 percent more likely to reach implementation milestones on time and budget.

It was also announced that all major projects managed by Chief Information Officer Group (CIOG) will be subjected to an annual diagnostic review known as a Gate Review, to be conducted by the Australian National Audit Office.

Gate Reviews were previously restricted to selected high value and complexity projects managed by Defence DMO, but will now be applied to all projects over a certain value undertaken by the CIOG and the Defence Support Group as well.

Defence will is looking towards shared services to find the biggest savings measures, especially when it comes to the rationalisation of back-office staff.

“As a result of our Strategic Reform Program, a thousand civilian employees will not be required as a result of the introduction of greater efficiencies, particularly in the shared services area,” said Smith.

Unlike other savings generated by the SRP however, the $300 million this measure is projected to save the Department will be channelled back into the federal budget to assist a return to surplus, rather than being injected into Defence capability.

“Further improvements to shared services design and implementation” are high on the agenda at Defence, according to a media release, with planning due to be completed this July and implementation to commence August 2011.

Also on the Defence agenda are two major ICT projects which play key roles in the Strategic Reform Program.

Defence has announced that approval to conduct pre-first pass analysis from the Minister Stephen Smith has been extended to Phase 2B.1 of Joint Project 2080, meaning a funded definition study for the Defence Personnel Systems Modernisation will soon be underway.

JP 2080 is a major project being undertaken by Defence to enhance its Human Resources and Financial Systems. The Defence Personnel Systems Modernisation aims to provide a single, unified human resources and payroll system to replace the existing PMKeys system.

Phase 2B.1 is projected to cost Defence between $100 and $500 million.

Defence will be approaching the market for systems integrators and commercial-off-the-shelf software for the project sometime between 2011-12 and 2012-13.

Complete First Pass Approval has been given by Minister for Defence Science and Personnel, Warren Snowdon, to begin the Next Generation Desktop initiative, which also forms part of the SRP.

The project will involve the utilisation of thin client and application virtualisation technology across the Defence Information Environment and aims to reduce the costs involved with support, and software and equipment upgrades.

In May 2010, Defence invited vendors to respond to an EOI for the project, which it explained would be followed by either a one or two-stage RFT process.

Selected vendors would be expected to supply:

  • Technical design, supply and installation of a solution which covers desktop delivery, application presentation and single desktop security environment;
  • Implementation of the pilot and proposed solution;
  • Integration of the solution with Defence’s current environment;
  • Implementation and project management of the pilot and solution; and
  • Support of the system components and pilot.

The SRP is made up of 15 streams, one of which is a dedicated ICT reform program. The ICT reform program aims to generate $1.9 billion in savings over a ten-year period to 2019.


Related Articles:

Defence releases ICT Strategy

ICT Opportunities of the Defence White Paper

Defence to upgrade ID Verification System

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  • Federal
  • IT Services
  • Defence
  • 2011-12 Budget
  • Defence
  • Defence DMO
  • Defence Strategic Reform Program
  • Jason Clare
  • JP 2080
  • Next Generation Desktop for Defence
  • Shared Services
  • Stephen Smith
  • wayne swan