C3I: Striking the balance - supporting defence capability

1 November 2007

By Charles Bateson

It is easy to get excited by new capability in a world where technological advancement is accelerating and every week brings wondrous news from the frontiers of science.

The move towards the network-centric warfare model is not only supported by the rapid advance of the underlying technology, but is driven by it through the need to maintain our warfighting edge.

This is a good and necessary thing; any delay in adopting new capabilities could leave us playing catch-up.

What we must not lose sight of in our pursuit of the shiny new toys is the need for systemic, sustainable support. It is too easy (and unfortunately, too common) for new systems to be acquired with insufficient thought, planning and attention given to the through-life support and maintainability of the system, especially when it comes to who will provide that support.

Fortunately we are presented with a range of support options for our capabilities, and striking the right balance between those options is the key to delivering robust, sustainable capability to the Australian warfighter.

Outsourcing: Contractors and Professional Support Providers (PSPs)
Contractors come into play when outsourcing support services in their entirety. They are engaged to provide specific deliverables, be they hardware, levels of service or whatever else the Department needs, and they confer a number of important advantages.

There is no requirement to manage and maintain in-house expertise for the service, with personnel and knowledge management becoming the responsibility of the contractors.

This allows Defence to focus on its core functions and outputs. If managed correctly, it also provides the flexibility for Defence to switch between vendors when circumstances dictate or if a particular service provider is not performing to expected standards, assisting the Department in obtaining value for taxpayer money.

Most importantly, however, is the ability of the larger players to provide invaluable industry reach back.

Industry reach back is the ability to maintain a line of communication between the contractor and the senior product developers within industry, typically their own parent company, an important function that contractors are able to provide and that insourced support cannot.

It is critically important that Defence have intimate access to the major players within industry (Boeing, Microsoft, HP, etc.) so that we can obtain rapid fixes to Commercial Off The Shelf (COTS) products, influence future design directions, and in general provide a reliable channel to facilitate communication between the two parties.

It is worth bringing on contractors purely to obtain this reach back ability for critical capabilities, even if a system is to be supported internally.

Professional Support Providers (PSPs) are contractors embedded in the Defence workforce acting under the day-to-day direction of Australian Public Service (APS) or ADF staff.

They are typically engaged under simple contracts with straightforward deliverables (“Under direction, provide ongoing support for system X”). They have an important role to play in building support capability within Defence, especially in areas that require highly specilised skill sets that Defence does not normally maintain.

The flexibility of having experts available to work under direction allows Defence to acquire support capability quickly, while at the same time providing Defence military and APS personnel with exposure to the PSP’s expertise, facilitating the transfer of skills and knowledge.

It is also a quick and easy process to reduce PSP manning levels when they are no longer required, or to boost manning levels to provide surge capacity.

Insourcing: The APS and ADF
APS personnel provide a very attractive option for the provision of core long term and ongoing support services. They form a consistent workforce in which the corporate knowledge is held internally to Defence, ensuring that the ability to deliver core support services is entirely within Defence control.

The salary cost (including superannuation and leave overheads) for APS personnel is lower than the cost of hiring industry equivalents, with the limiting restriction on staff numbers being the cap on Defence full-time equivalents (FTE).

APS personnel have access to the same industry training as do contractors and PSPs, but obtain preferential Defence rates, making the total cost of obtaining trained staff cheaper.

Overall, a properly developed, skilled and managed APS team will deliver high quality support services at a much lower total cost than engaging contractors for the provision of the same services.

Specialist ADF personnel fill an important area of support capability for Defence in that they can be deployed along with frontline troops.

This ensures that critical capabilities can receive immediate, on-site support when deployed. However, there are some very specific challenges that come with the use of a military support option.

The posting cycle mandates a very strict knowledge management and transfer regime in order to ensure that support if maintained at full capacity.

Perhaps more restrictive is the current pressure on ADF recruiting and manning; any request for additional military support capability will be subject to intense scrutiny.

Overall military support services should be reserved for only those systems with a genuine need for frontline support.

The Balancing Act
Every capability we acquire or develop will have different support requirements, and it will rarely be the case that the support arrangements for one will precisely match those of the next.

Accordingly we must consider all of the various strengths and weaknesses of the different support options and determine the mix that will best meet the service requirements for the capability.

Selecting the appropriate long-term support model is a strategic decision for senior policy makers, especially given the financial and personnel aspects of the decision, and it is vital that this decision be made at the front end of the project.

Support options with their budgetary and FTE impact need to be fully considered and properly costed and presented to the decision makers in the planning stages of the project.

Similarly, the adaptability of the various solutions needs to be addressed and the ability of different options to cope with changes should be included in the scoping document.

An option that is attractive when providing business hours support may not stand up to the rigours of 24x7 support, perhaps due to the cost implications of having contractors on-call or standing up shifts for APS staff.

Senior decision makers need to understand the limitations of the options they endorse and should reconsider the support model if a system is transitioned to a higher level of availability.

This will ensure that the level of support for the capability fits with the relative strategic importance of the capability, and that the cost of that support is considered with the overall cost impact of the capability.

A key element of the decision will be whether support for the capability (as opposed to the capability itself) falls within Defence core business. If it does, then the support options should be insourced to ensure ongoing provision of that core business.

This is a difficult decision given the cap on Defence FTE and the pressures on ADF availability, however if the support requirement genuinely is core business then there should be a sufficiently strong case to provide the necessary justification.

Why is insourcing support for core functions so important? Because of the alternative: If you outsource a core function, you will have considerable trouble getting it back.

After any significant period of a function being outsourced there will be significant (perhaps complete) knowledge decay within the corporate workforce. This in turn leads to a reliance on the outsourced service provider.

Without strong knowledge management controls in place it is even possible that that provider becomes the only viable option, eliminating the market competition which keeps service prices under control.

Furthermore, any attempt to rebuild the capability internally after dismissing the provider is a period of lost or reduced capability. This is not acceptable for a core service.

Accordingly, the cost savings of outsourcing support need to be weighed against the cost impact of recovering the service at a later date. As a general rule, core support services should be kept in house where the corporate knowledge can be properly managed and maintained.

Conversely, when a support function is determined not to be core business then there needs to be a genuinely compelling reason if it is not to be outsourced to industry.

Given the limitations mentioned earlier, it makes sense for as many non-core services to go out to contractors as possible. Again, this decision needs to be based on a solid business case in line with the core business of Department.

This reduces the FTE load on the Department and ensures that our precious uniformed resources are deployed where they are most needed. It also allows the Department to leverage the considerable advantages that contractors can bring to the table in terms of expertise and industry reach-back.

Defence can and should expect a high standard of service and best practice implementations from contractors; equally, the value for money principle does not dictate that the lowest priced competitor should be selected, and Defence should recognise that the contractors need to make a reasonable profit. Overall the relationship should be mutually beneficial and productive.

There are some traps to consider when engaging contractors to provide support services, particularly in the specialised Defence industry.

An extended reliance on one provider can result in none of their industry competitors having the requisite Defence knowledge to compete meaningfully for contracts, hence imposing the existing contractor on Defence even when it is no longer good value.

Poorly considered performance metrics in a service contract may, quite innocently, motivate the wrong behaviour in the contractor and leave Defence unable to seek redress.

It is therefore essential that contracts to outsource functions be carefully considered and vetted with the full weight of the Department’s experience, especially when outsourcing a specific function for the first time.

It is important to understand the difference in engaging PSPs and sourcing individuals from a contractor. When engaging PSPs, consider just how much experience the specific individuals joining your workplace personally have.

While a company may have extensive experience with a particular capability there is the distinct possibility that the individual supplied has only recently been trained and has no direct personal experience.

This negates the primary advantage of PSPs, the rapid acquisition of a skilled support capability. This is less of a concern when engaging individuals as they will clearly either have the skills or not, but when engaging PSPs through a contract with a larger company it is essential to write appropriate clauses into the contract to ensure that you are provided with staff who have the experience and training that you need to meet the strategic support objectives laid out for the capability.

The primary catch with PSPs is that they are too easy to keep when they do a good job. They do not impact on FTE, have highly relevant skills and experience, and work to direction under simple contracts without cumbersome contract management overheads.

Unfortunately this is the trap that leads to the “false economy” of contractors: the longer the PSP is engaged, the lower the value for money, as over time APS staff members provide far better value for money.

This is especially relevant with regards to training costs, as the PSPs will roll their training expenses into their contract price while Defence personnel can be trained at much lower and more cost-effective Defence rates.

Thus it is vitally important to understand the strategic objective in engaging the PSP, whether that is to transfer skills, support a surge in effort, or support a short term capability until it is decommissioned, and to cease the engagement when that objective has been met.

Finally, it is necessary to actively consider assigning different levels of support to different providers. It is perfectly acceptable to mix and match the support options available and this can indeed provide a much greater level of flexibility to meet corporate objectives.

Deployed systems often mandate a military support option for the immediate resolution of known issues; however support for the resolution of more complicated problems can be cleanly handed over to APS or contractor personnel who do not need to be deployed with the equipment.

When setting up these arrangements, ensure that the boundaries of responsibility are clearly defined so that problems do not bounce around between different areas. It is usual to define specific problems for resolution at each level, with the highest level of support forming a catch-all for everything else.

As long as each party is fully aware of their responsibilities then these arrangements can work particularly well; however, when the boundaries cannot be clearly defined then they should be strictly avoided.

The Final Word
There is no simple formula to decide which support option is best for any given capability, and no one support model will meet the requirements of every capability given the changing nature of the technology involved and the environment that the warfighter faces.

In the end a balance will always need to be struck between the different options to ensure that Defence capability is adequately supported and sustained into the future; we just need to make sure we keep our eyes open as we walk the tightrope.