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Defence has welcomed the findings of the Audit Office’s annual review of major defence projects, despite the identification of scheduling and capability challenges.
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The Australian National Audit Office (ANAO) has published its 2019-20 Defence Major Projects report, which outlines the progress and performance of 25 of Defence’s largest programs.
The audit found that the approved budget for the major projects included in the report increased by $24.2 billion (30.7 per cent) since initial second phase approval (excluding non-acquisition costs), taking the total to $78.7 billion.
However, the increase largely reflects variations to the programs, including Defence’s decision to order 58 additional Joint Strike Fighters ($10.5 billion), 34 additional MRH-90 helicopters ($2.3 billion), and four additional P-8A Poseidon aircraft ($1.3 billion).
The audit also found that delivering Defence projects on schedule “continues to present challenges”, with the total schedule slippage for the 25 selected major projects totalling 507 months as at 30 June 2020 — representing a 21 per cent increase since second pass approval.
Across the 14 projects that have experienced schedule delays, the average slippage is approximately three years.
However, total slippage is 144 months lower than the total in 2018-19 of 651 months, reflecting:
- the exclusion of projects which have exited the MPR removing 218 months of slippage from the total reported in 2018-19;
- a reduction of six months of slippage due to the Collins Comms and EW project recovering this slippage in 2019-20;
- the addition of 68 months of in-year slippage; and
- the Battlefield Command System project adding 12 months of slippage to the total of 507 months.
Meanwhile, in assessing the progress of the projects in achieving capability, the audit found that 19 projects are set to deliver all of their key capability requirements.
However, five projects — Joint Strike Fighter, MRH90 Helicopters, Hawkei, Battlefield Command System, and Battlefield Airlifter — are “under threat” but “manageable”.
The AWD Ships project, however, has reported that it is unable to deliver all of the required capability by final operational capability (FOC).
Accordingly, the ANAO has rated the expected capability performance of the major projects at 98 per cent.
Impact of COVID-19 pandemic
The audit also shed light on the impact of the COVID-19 pandemic on the progress of the major projects.
Six projects reported an impact on project budget as a result of the pandemic (four cited ‘underspend’ and two cited ‘overspend’), with two projects highlighting an impact to the budget as an “emerging issue”.
Meanwhile, 15 projects reported an impact on scheduling as a result of the COVID-19 pandemic, relating to:
- supplier disruption (supplier production and/or shipping delays);
- workforce limitations – travel (specialists and crew were due to travel both interstate and from other countries to work with/on the projects); and/or
- contractor delays (scope, delivery and certification delays).
None of the 25 major projects reported a COVID-19 impact on capability.
Reflecting on the findings of the audit, Defence stated that the report has demonstrated the success of the government’s program of delivery, noting key achievements outlined in the report, which include:
- the declaration of initial operational capability for the medium and heavy fleet of next-generation logistics vehicles, modules and trailers;
- the acceptance of 12 Joint Strike Fighter aircraft during the reporting period to 30 June 2020, and a further four since, bringing the total Australian fleet to 30 aircraft;
- progress in the government’s Naval Shipbuilding Plan, with HMAS Sydney commissioned over the reporting period; and
- the delivery of all three Hobart Class destroyers to the Royal Australian Navy, marking a significant milestone for the Air Warfare Destroyer Program.
However, Defence conceded that some projects are “highly complex”, often requiring the management of high technical risk.
“Defence acknowledges some delays to key projects, but for many, they are already providing a level of capability and benefits to the ADF, such as the Spartan C-27J which supported the government Bushfire Assist,” Defence stated.
Defence added that it remains committed to improving capability delivery and performance in collaboration with industry, noting the launch of the Defence Transformation Strategy earlier this week.
“The government is committed to efficiently and effectively equipping and sustaining the sailors, soldiers and Air Force personnel and building Australian industry capability in the national interest,” Defence concluded.
[Related; MINDEF announces launch of Defence Transformation Strategy]
