Laura Rayner, Foreign Affairs, Defence and Security Section

Genesis and aims

The next Senate Estimates Committee hearings on the 2010–11 Defence Budget will be an opportunity for the Parliament to examine the progress made during the first year of the Defence Strategic Reform Program (SRP). The aim of the SRP is to reform Defence business processes and practices over the next decade, allowing resulting savings to be reinvested within the Defence portfolio.

The SRP was introduced in 2009 as a key element in the Rudd Labor Government’s financial plan to fund the objectives of its 2009 Defence White Paper, Defending Australia in the Asia Pacific century: Force 2030. The May 2009 publication which outlined the SRP, The Strategic Reform Program 2009: delivering Force 2030, lists its three key elements: improved accountability, improved planning, and enhanced productivity.

The aims of the SRP include $20.6 billion in gross savings (cost reductions) to help fund Defence’s planned capital investment and to remediate previously underfunded areas. Defence estimates that reform implementation will cost $2.404 billion, resulting in a planned net saving of $18.258 billion by 2018–19. On its SRP webpage, Defence candidly states that if it does not achieve the reforms set out in the SRP, it will not be able to ‘deliver the organisation that can deliver and sustain Force 2030’.

The SRP, which is now in its implementation phase, is a complex and ambitious program. In an April 2010 publication, The Strategic Reform Program: making it happen, Defence estimates that it will take between two and four years for the benefits, cost reductions and savings opportunities of the SRP’s 15 reform streams, and the more than 300 associated initiatives, to ‘fully mature’.

The Savings Streams and their targets

The Savings Streams and their gross savings targets, are listed in the April 2010 publication. These figures differ, sometimes markedly, from the original 2009 estimates, and one particular 2009 stream, Inventory ($0.71 billion), is no longer listed separately.

The Non-Savings Streams

The Non-Savings Streams aim for more efficiency and effectiveness rather than for direct cost reductions. They are described in detail in the 2009 and 2010 documents, as well as in the information sheets on the SRP webpage:

• Strategy and Planning (establishing a five yearly Defence White Paper cycle and a strengthened Defence Planning Guidance process)
• Capability Development Process (providing a more informed basis for government decisions and streamlining the decision making process)
• Procurement and Sustainment (Mortimer Review) (imposing commercial discipline on procurement and sustainment processes, and making the Defence Materiel Organisation more business-like)
• Preparedness and Personnel and Operating Costs (increasing understanding of the cost of preparedness for military operations, including the costs of readiness and sustainability)
• Output Focused Budget Model (improving accountability and management of resources, including improved visibility of the cost of goods and services)
• Intelligence Human Resources (HR) and Information Communications Technology (ICT) (consolidating the management of HR and ICT across the Intelligence and Security Group by providing scope for centralisation, integration and collaboration)
• Estate (improving management of contracts and service delivery), and
• Science and Technology (‘future proofing’ Defence by ensuring that its science and technology capabilities match its future needs).

Progress

In evidence to a Senate Budget Estimates hearing on 31 May 2010, the Secretary of the Department of Defence stated that Defence was ‘on track to deliver the $797 million in cost reductions programmed for this year’, and ‘well placed to achieve the target of around $1 billion in cost reductions for 2010–11’. In his evidence, the Secretary listed three cost reductions making up $484 million of the $797 million target for 2009–10: $263 million for Smart Sustainment; $172 million for non-equipment procurement cost reductions (e.g. travel and training); and $49 million for communications technology.

How should success be measured?

Mechanisms have been set up by Defence to keep track of the SRP’s progress (e.g. an advisory board, and regular monitoring). However, the success of the SRP could be difficult to gauge, especially for those outside Defence. Over half of the initiatives are not targeting direct cost reductions, but aim to promote a cost-conscious and business-like cultural change across the Defence organisation. There is also little indication on the public record of how any actual cost reductions will be measured or reported over the next decade, and no guarantee that the method used will remain consistent and thus allow valid comparison. According to the Australian Strategic Policy Institute’s 2010–11 Defence budget brief, The cost of Defence, the success or otherwise of previous Defence programs in increasing efficiency and reducing costs has not been easy to measure or possible to verify.

Parliamentary accountability

Given the vital importance of the SRP to future defence planning, and the scope, scale and complexity of the program, the new parliament could expect that Defence would be ready to provide it with easily accessible and comprehensive information on the progress of the SRP. This information should be made available to the parliament and its relevant committees in sufficient detail, and with sufficient clarity and frequency to enable parliament and taxpayers to be assured that Defence is achieving its SRP targets.

Library publications and key documents

Department of Defence, The Strategic Reform Program 2009: delivering Force 2030, Department of Defence, Canberra, 2009, http://www.defence.gov.au/publications/reformBooklet.pdf

Department of Defence, The Strategic Reform Program: making it happen, Department of Defence, Canberra, [April] 2010, http://www.defence.gov.au/srp/docs/srp.pdf

Parliamentary Library, Budget Review 2010–11, Research paper, no. 17, 2009–10, Parliamentary Library, Canberra, 2010, http://www.aph.gov.au/library/pubs/RP/BudgetReview2010–11/DefenceSRP.htm

M Thomson, ‘Chapter 5–Strategic Reform Program’ The cost of Defence: ASPI Defence Budget brief 2010–11, Australian Strategic Policy Institute, Canberra, 2010, pp. 131–158, http://dpl/Ejournals/ASPI_TheCostOfDefence/2010-2011.pdf