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Faulkner releases Defence Budget Audit ("Pappas Review")

by Staff Writers •
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The DBA or "Pappas Report" reveals the challenges faced by Defence as it seeks to save $20 billion over the next 10 years and underscores the push for greater transparency in Defence.

Defence Minister Sen. John Faulkner last week released the 2008 Defence Budget Audit (DBA) which was conducted by respected external consultant, George Pappas. The Audit was a key driver in the Government’s development of its Strategic Reform Program (SRP), released earlier in the year to accompany the Defence White Paper ("Force 2030") and the Defence Capability Plan (DCP).

The DBA specifically looked at the efficiency and effectiveness of the Defence budget and how to improve budget management. In releasing the Report, Defence Minister Faulkner also released the Defence response to the Pappas Report.

The Pappas Report, and Defence’s response to it also highlights the now pivotal role of effective and efficient ICT infrastructure and information management within Defence:

"Under the SRP, Defence will pursue opportunities for significantly increasing efficiency in the maintenance of military equipment, inventory and supply chain management."

This will involve:

  • Becoming more productive and eliminating waste in the maintenance and supply-chain processes,
  • Reducing inventory costs through smarter procurement processes; and
  • Reducing the size of inventory holdings.

These are all ICT-enabled activities. Defence has committed to invest an additional $668 million in its core information systems by 2012-13 to support the efficiencies and savings these systems will support.

Senator Faulkner pointed to his establishment of an oversight committee, the Defence Strategic Reform Advisory Board (DSRAB), to provide careful external scrutiny of the reform program. The board will be chaired by George Pappas, and will report to Senator Faulkner quarterly. Other board members include John Fletcher, David Mortimer and Linda Nicholls.

"DSRAB will enable Defence to draw on the combined insights of senior private-sector leaders with experience in large scale organisational reform as well as the broader whole-of-government perspectives of secretaries of key government departments," said Senator Faulkner.

In its response to the DBA, Defence noted that its "senior leadership group is personally committed to achieving these reforms and fostering a cost-conscious culture that allows Defence to deliver and sustain the capability that Australia requires, within the funding envelope agreed to by Government."

However, Defence could not agree to implement fully the Pappas recommendation regarding "over-planning" that remains obvious even in the current Defence Capability Plan:

"…the DCP contains more proposals than can be afforded in the indicated timescales. This level of over-planning is referred to as ‘financial over-programming’ and reflects the reality that not all projects deliver on time every time across the program. The DBA recommended that there should be no ‘over-programming’ of additional projects in the DCP. The Capability Development, and Procurement and Sustainment streams of the SRP will implement reforms to minimise the need for this into the future, however an appropriate level will still need to be retained. In the current environment, over-programming provides a prudent level of flexibility for the Government to manage Defence expenditure within changing circumstances."

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