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Defence Publications

First Principles Review

Terms of Reference

  1. Ensure that the Department of Defence's business structures support the ADF's principal tasks, as determined by the 2015 Defence White Paper, and other whole of government responsibilities out to 2030;
  2. ensure a commercially astute, focused and accountable materiel acquisition and sustainment capability;
  3. improve the efficiency and effectiveness of Defence;
  4. guide the implementation of recommendations from the Commission of Audit not otherwise covered above; and,
  5. ensure the ongoing delivery and reporting of agreed recommendations.

Issues for Consideration

In addition to any issues the review team considers important to examine in addressing the Terms of Reference, the Review team should also consider the following matters:

  1. Ensure that the Department of Defence's business structures support the ADF's principal tasks, as determined by the 2015 Defence White Paper, and other whole of government responsibilities out to 2030, including by:
    1. Reviewing the cost, efficiency, timeliness and appropriateness of Defence's current business model and processes, including compliance with external processes and responsiveness to Government, with an aim to simplify and improve accountability;
    2. Reviewing the capacity of Defence to develop strategy and key policy options, particularly, future White Papers, Force Structure and prioritisation of capability investment;
    3. Examining the efficient arrangements of the intelligence functions, particularly those involving geospatial intelligence; and
    4. Examining the functioning of the separate and shared responsibilities and accountabilities of the Secretary and Chief of Defence Force.
  2. Ensure a commercially astute and focused materiel acquisition and sustainment capability, including by:
    1. Examining the benefits and costs of the following three approaches to reforming the Defence Materiel Organisation (DMO) and recommending a preferred option and how it should be implemented:
      1. Current model with improvements to commercial skills and improved arrangements to manage larger and more complex projects;
      2. DMO to be re-integrated into Defence with a focus on contract management, as recommended by the Commission of Audit; and
      3. An independent and commercialised DMO in whole or in part.
    2. Either as part of 2a, or separately, undertake an examination of specific initiatives to improve business processes including, but not limited, to the following:
      1. Options to further improve the professional knowledge and skills within the capability development function, particularly program and project management, systems engineering and cost and schedule estimation (particularly at DCP entry);
      2. Options to provide greater assurance to Government on the capital and sustainment costs and schedule of large complex capabilities including utilising relevant private sector experience;
      3. Options to significantly accelerate the capability development process, including examination of whole of government issues and risk based approaches;
      4. How Defence sustains and supports capabilities and extending lessons from the Coles review across all areas of sustainment;
      5. Options for improved project control particularly through the mandatory use of Earned Value Management for all elements of projects that meet an appropriate threshold; and
      6. Opportunities for improved certainty in program-level cash flow estimation, project and program level funding arrangements for DMO and alternatives to the use of over-programming as a management tool in the DCP.
  3. Recommend further options to improve the efficiency and effectiveness of Defence by:
    1. Assisting Defence to develop appropriate implementation plans, including appropriate benefits realisation plans, to deliver agreed outcomes of the Commission of Audit and the First Principles Review, to be followed by a progress review in March 2016 to measure the effectiveness of the implementation of the recommendations;
    2. Developing recommendations for the further rationalisation of IT systems, particularly financial and personnel, and further clarify accountability for them and their cost effectiveness;
    3. Examine and recommend options for reaching and maintaining a sustainable balance between Defence's personnel, operating and capability budgets;
    4. In the above context, specifically consider what can be done about rising personnel costs, particularly for the ADF, that are putting the capital investment budget under significant pressure;
    5. Examine outstanding recommendations from other reviews and make recommendations on whether they might be retired or re-invigorated; and
    6. Recommend further options for the enhanced commercialization of Defence functions, including DSTO but excluding DHA.
  4. Recommendations from the Commission of Audit not otherwise covered above.