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Defence struggling under current ICT project load

by Sam Murphy •
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It is far from rare for the Department of Defence to embark on big, complex ICT projects.  Much rarer is an admission that it has taken on more than it can manage. 

On 9 January 2014, the Department of Defence issued a brief statement announcing that it was not proceeding with the planned market testing of its Distributed Computing Bundle.  Its reason was that its Information and Communications Technology (ICT) transformation program required a focused and sustained effort.  

‘An efficiency dividend as high as 2.25% and further federal fiscal tightening’ were the reasons for removing approximately $16 billion from its 2009 Defence Capability Plan forecasts, Defence Chief Finance Officer (CFO), Phillip Prior told the 2013-14 Supplementary Budget estimates hearings on 21 November 2013.

Prior said, “We have attended to that re-profiling of our budget by moving projects in our Defence Capability Plan to a later period. That has been a big part of that. We have also moved projects in the major facilities program to later years. We have also attended to deferring some major ICT projects to later years.”

The landmark 2009 Defence Capability Plan (the Plan) listed a number of transformational ICT projects, aimed at significantly reducing Defence’s administrative overheads, but in the five ensuing years, much has changed.

At the Senate Estimates Hearing in May 2012, former Defence Chief Information Officer (CIO), Greg Farr, said that “when we first started on the reform journey back in 2009-10 we had an imperfect view of the defence ICT environment… There was a lack of understanding, a lack of visibility and a lack of total governance”.

The following projects have been impacted by Defence’s overloaded schedule.

JP 2080

JP 2080 was intended to enhance “Defence’s core financial and personnel information systems to accommodate changes in user requirements, technical platforms and upgrades to the commercial applications on which they are based”, according to the Plan.

The project consists of three phases. The first (Phase 2b.1) was the upgrade of Defence’s Human Resources platform PMKeys which is being completed by Accenture under a $50 millioncontract. Accenture is also responsible for the implementation of a single payroll system to cover Defence’s 99,000 strong workforce. A $58.5 million contract was signed in October 2013 with the system expected to be operational by 2015.

Phase 3, due to be approved by Finance in 2013-14, focussed on enhancing Defence’s financial management capabilities, however, a Defence spokesperson has told Intermedium that Phase 3 “has been deferred and will be considered by Defence in the first half of this year (2014)”. The current financial system (ROMAN) is built on an SAP platform. Defence confirmed to Intermedium that it expects the eventual enhancement will also be based on SAP.

Phase 4 is defined as the subsequent upgrade of the financial management information system. It was due to receive First Pass approval in the 2013-14 financial year, however, as it is dependent on Phase 3, it is likely it has also been deferred. The 2012 Defence Capability Plan forecasts its completion date at 2020.

Infrastructure Outsourcing

In 2010, Defence indicated that ICT infrastructure would be outsourced in three ‘bundles’:

  1. Telecommunications
  2. Centralised Processing
  3. Distributed Computing

The telecommunications bundle was awarded to Telstra in April 2013, in a $1.1 billion contract. Known as ‘Terrestrial Communications’, it will take six and a half years to implement. The contract registers an annual average value of just over $169 million which is 94 per cent of Defence’s average annual telecommunications spend calculated from 2007-2008 to 2012-13.

Hewlett-Packard, IBM and Lockheed Martin were shortlisted for the Centralised Processing bundle which followed a successful Data Centre Migration project to transfer Defence’s primary business applications from its original facility in Canberra to a new Global Switch centre in Sydney.

The Centralised Processing Project aims to consolidate more than 200 Defence data centres into under ten domestic facilities. In September 2013, Defence announced that it had ‘down selected’ IBM and Lockheed Martin to proceed in parallel negotiations with Defence to the next phase. According to Defence, the preferred supplier is expected to be announced in the first (calendar) quarter of 2014, with contract signing due by the end of 2014.  The major ‘transition in’ activity attendant to this contract is no doubt one of the key factors in Defence deciding to postpone the Distributed Computing Approach to Market.

Distributed Computing

In May 2013, Defence confirmed that it expected to Approach the Market (ATM) to outsource the management of its distributed computing environment, which is estimated to be worth $90 million per annum. The environment is currently managed by Fujitsu (Canberra and environs) and Unisys (Defence sites around Australia).

Following the announcement that it had “decided not to proceed with the planned market testing of the Distributed Computing Bundle”, Defence has extended its existing Unisys Regional ICT Services contract from November 2014 to October 2016 at a cost of an additional $52 million.

The Schedule Overload

In addition to those outlined above, other significant ICT projects currently underway are contributing to the schedule overload.

Next Generation Desktop

In November 2013, a $28.2 million contract was signed with Thales for the Next Generation Desktop project. The project aims to centralise access to multiple Defence networks through a single desktop and system, supported by thin client technology and a consolidation of the Department’s existing data centre infrastructure. It is expected to cover 100,000 Defence workstations by August 2014.

Staff Reductions

According to Defence’s 2012-13 Annual Report, these various projects are all being managed in a context where Defence has shed 1,278 jobs within the Australian Public Sector (APS) over 2012-13.   In the 2012-13 Budget, $550b was cut over the four year period to 2016-2017.


An October 2013 report from the Australian National Audit Office (ANAO) on the Strategic Reform Program recommended changes to the Department’s management of major capability development projects, including better consideration of off-the-shelf products, improved risk assessments, and changes to project approval processes.

“When projects are delayed, run into difficulties or, as sometimes happens, fail altogether, the consequences are serious: these include the likelihood of a gap in ADF [Australian Defence Force] capability developing or persisting, and a poor return on a generally substantial public investment,” the report said.

According to the 2012 Capability Plan, Defence expects to seek $153 billion in funding for communications systems, aircraft, weapons and other military equipment over the next four years.

Related Articles:

Reform needed at Defence

New Defence ICT Strategy underway

Defence reveals timeframe for Distributed Computing approach to market

For more information, please contact the Editor (02) 9955 9896.


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