Year-to-date, the Defence Materiel Organisation (DMO) leads Federal ICT procurement with a market share of 34.4%. In contrast, the Department of Defence (Defence) is flat-lining at 15.3%.
One large contract drives the DMO result – a $221.4 million agreement between DMO and Raytheon for Australian Defence Air System Support services.
DMO’s year-to-date total contract value (TCV), according to Intermedium’s Analyse IT database of ICT contracts published via AusTender, is over $488 million, a 920 percent increase on the 2012-13 result. The DMO’s spike in procurement activity follows a three year lull in which no year had a TCV more than $60 million.
In contrast, Defence’s ICT procurement profile year-to-date is currently almost identical to 2012-13. Defence has signed $501 million year-to-date in TCV while by the same point in 2012-13, it had signed $500 million in TCV.
In February 2014, Defence’s Secretary Dennis Richardson told a Senate Estimates Committee that “ICT in Defence is not in great shape”.
According to the Chair of the Senate Estimates Committee, GDP spend on Defence is at its lowest point since 1938, impacting strongly on Defence’s extensive reform program. Richardson compared the diminishing budget to “goalposts not only being moved but being chopped down and used for firewood”.
Richardson said “that reform program was predicated on an assumption of the Defence budget, as said, growing by three per cent real out to 2018-19, then growing by 2.2 per cent real out to 2028-29.” Instead, Richardson estimates somewhere between $17 billion and $20 billion has been taken from the Defence budget.
In Defence’s Senate Estimates appearance in November 2013, its Chief Finance Officer (CFO) Phillip Prior confirmed that Defence had to defer projects worth a total of $16 billion to later years.
One of the projects affected was the outsourcing of its distributed computing environment, estimated to be worth $90 million per annum. In January 2014, Defence confirmed that it had “decided not to proceed with the planned market testing of the Distributed Computing Bundle”. Instead, Defence has extended its existing Unisys Regional ICT Services contract from November 2014 to October 2016 at a cost of an additional $52 million.
Defence’s core financial and personal information systems enhancement, JP2080 has also been deferred. While the upgrade of Defence’s PMKeys Human Resources platform is underway through a $50 million contract with Accenture, the enhancement of its financial management capabilities has been deferred. 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)”. This means the subsequent upgrade of its financial management systems has also likely been deferred as it is dependent on Phase 3.
The Major Projects Report (MPR) indicates that DMO has the largest ICT budget of any Federal agency, allocated an estimated $100 million per year.
In 2013-14, DMO has signed a number of major contracts. The largest is the previously mentioned $221.4 million agreement between DMO and Raytheon for its redeveloped Australian Defence Air Traffic System. This is accompanied by a $33.3 million contract with Boeing for Vigilare support.
A $71.4 million contract was also signed with the supplier registered as ‘FMS Account’ (Foreign Military Supplier) for the acquisition of the Future Naval Aviation Combat System which was followed by a $28.4 million contract also under the ‘FMS Account’ for the system’s sustainment.
In 2012-13, DMO’s largest contract was an $8.7 million agreement with Lockheed Martin for Visibility Applications Licenced Management Support Services.
DMO plans to deploy an Integrated Project Management System in FY 2015-16 in response to the ANAO’s concerns that there were a range of disconnected systems used to manage different projects. According to the MPR, DMO currently has 540 business applications in use. The report states that this creates an issue for the DMO “in ensuring reliable and consistent information to properly inform project management and decision making”.
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