Has Defence forgotten a key part of industry?

The Defence + Industry Conference 2019 held last week in Canberra is a key Defence and industry collaboration event where Defence and industry and network, share perspectives and generally try to make the system work better at producing defence capability. 

There is a key part of defence industry that is often forgotten and likewise it went unmentioned at D+I.

The ‘line’

Defence has recognised and articulated that industry is critical in delivering defence capability both above- and below-the-line. For those not familiar with ‘the line’, there is the distinction between the industry that assists Defence run Capability Life Cycle (CLC) processes ‘inside the tent’ and the generally large primes who operate ‘below-the-line:

•  ‘Below the line’ contractors are typically responsible for the delivery or direct support of the physical mission system or other military equipment
• ‘Above the line’ contractors are typically engaged to provide a range of technical or business services in support of project, Capability Manager and CASG functions

Of course, with industry becoming one of the Fundamental Inputs to Capability, the general focus is on ‘below-the-line’ industry, delivering great technology, platforms and systems to the ADF. 

This is a good and laudable thing. But with the above-the-line industry trending towards a $1bn p.a. enterprise can we afford to not consider how it is performing? It’s efficiency? How the commercial model is stacking up?

How does Defence know it’s managing its investment spend?

The above-the-line industry provides the professional services intended to flexibly and innovatively support and augment CLC processes. The CLC is needed to ensure that Defence properly spends over $12 billion each year on Defence acquisition and sustainment. Getting the investment right is essential to ensuring the ADF is ready to respond and maintain a secure and safe Australia. 

The capability development processes that determines exactly what and how these capabilities are acquired and sustained is paramount.   

This is no small task with the level of effort only going to increase as the ADF tries to achieve a joint force and as geopolitical and technology forces require the continual reprioritisation of investments.

FPR and the ever-shrinking CASG

Following recommendation 2.3 of the First Principles Review (FPR), the DMO was transformed (some might say, re-transformed) into the CASG on 01 July 2015 and since then - depending on what numbers you look at - has reduced staff from something over 7,000 to nearer 5,000. 

With the increase in investment – 69% over the forward estimates to FY22 – to meet the Integrated Investment Program it seems there is more to do with less staff. 

The difference is made up with above-the-line workforce who are expected to provide contractor support to both CASG and Capability Managers across a range of skills sets, including engineering, project management, integrated logistics, and commercial.

So how is CASG's capability and capacity being managed?

Stemming also from FPR and a major factor in above-the-line support was the creation of the Major Service Provider (MSP) construct in February last year. 

The intent of MSP was more effective engagement with above-the-line industry to better leverage its resources and experience through, among other initiatives, larger, longer term integrated work packages (IWPs). This would realise better value for money and help industry operate in a more effective and efficient manner.

Achievement of MSP ‘joint objectives’

After 18 months of operation it is time to ask how the MSP construct is performing; is it delivering the outcomes required, and has it received the attention and direction to gain traction? Is the MSP commercial model achieving the improvements sought, or has strengthening the incumbents failed to grow new resources and produce new ideas? 

Is it just labour hire via another name?

Now is the time to assess the MSP joint objectives:

• Is the MSP PMO in place and effective?
• Has the construct allowed better leveraging of resources, or are resources still 100% purchased but not fully utilised?
• Are above-the-line teams well integrated with internal resources?
• How collaboratively is everyone working together; Defence with MSPs and MSPs with their supply chains?
• Is the model being sensibly evolved towards an outcomes basis with understood and appropriately managed risks? Or is there still a preponderance of time and materials contracting?
• Have economies of scale been realised or proved elusive?
• Have operating costs – including for tendering – been reduced for everyone?
• Has the MSP workforce been truly stable? 
• Has there been a genuine increase in capability and capacity? 
• Is the future workforce profile becoming clearer and planned for?

Performing such a crucial role in capability development and acquisition, the above-the-line industry must be performing at peak to ensure money is not spent in inefficiencies that could otherwise be spent on capability.

Genuinely interested in peoples’ thoughts, please tell me what you think in the comments section below.