Budget 2010: The 2010-2011 Budget - Just like Lego | ADM Jun 2010
The pieces are all there - but like any good Lego set, some assembly and creativity are needed to fit it all together into a coherent whole.
Katherine Ziesing | Canberra
The Rudd Government has committed to average real increases of three per cent over the years through to 2017-2018.
But this and the following two years may be when the average falls into the negative rather than the positive.
The Strategic Reform Program (SRP) aims to deliver $1 billion worth of savings in 2010-2011 through savings in the 15 streams already identified by the government.
Defence also plans to invest $384 million in SRP initiatives this year as part of the wider $2.3 billion reform spending package.
The total government spending on Defence once again is less clear.
In a speech the day after the release of the budget, Minister for Defence Materiel and Science Greg Combet was keen to point out that spending was increasing.
"This year the Government has committed to total Defence resourcing of $30.8 billion in 2010-11," Combet said.
"This compares to the 2009-10 estimated actual spending of $29.4 billion.
"Over the 2010-11 budget year and the three Forward Estimates years, we will have committed $122.7 billion to the defence of the nation.
"Total funding provided from Government, excluding administered items in real 2008-09 dollars, of the three defence budgets under the Rudd Labor Government totalled $71.2 billion.
"By contrast the last three budgets under the Coalition delivered $63.1 billion.
"This constitutes a 12.8 per cent real increase in the defence budget under the first Rudd Labor Government compared to the last Coalition Government."
But looking at the Major Capital Investment Program, or the Defence Capability Plan (DCP) in Budget terms, it paints a story that follows political lines rather than Defence technology and development lines.
These figures see a 2010-2011 estimate of $5.79 billion, $5.18 billion in 2011-2012, $4.65 billion in 2012-13 and $5.518 billion in 2013-2014.
This sees a drop of almost $1 billion in only two years, which lines up with the election timetable as the spending ratchets back up to $5.518 billion in 2013-2014 for the next round of elections.
Minister Combet however is right in pointing to some of the successes for the Defence Materiel Organisation (DMO) over the last three years of the Rudd Government.
"In 2008, as Parliamentary Secretary for Defence Procurement, I gave a similar briefing to this on the defence budget.
"In the briefing I detailed how $1 billion of the Approved Major Capital Investment Program (AMCIP) from 2008/09 and $1.78 billion over the then forward estimates had been reprogrammed into later years.
"The majority of this reprogramming had been caused by industry delays, including an inability to meet contracted milestones by payment dates.
"Other reasons for this reprogramming included DMO processes, FMS delays and the unavailability of platforms for upgrades.
"The original projects of concern list contained over $13 billion worth of projects.
"Since then we have been able to remediate projects worth around $6 billion and they are no longer on the list."
Some problem children have left the Projects of Concern list, with Wedgetail, FFG upgrade and HF mod all being introduced into service over the last few months.
"Between the years 2009/10 and 2012/13, $1.4 billion in approved major capital investment funding has been brought forward due to improved project performance," Combet said, acknowledging the role that industry has played in these deliveries.
Out in the field
The government has allocated $1.4 billion in 2010-2011 for ADF operations, but down from last year's $1.7 billion.
This figure does not include other specific measures outlined by the Defence Minister Senator John Faulkner for new troop protection measures.
The government will provide $1,135.5 million to enhance force protection measures for troops in Afghanistan between 2009-2010 and 2012-2013 that include:
• Route clearance capabilities
• Enhanced protection and firepower for Protected Mobility Vehicles
• New night fighting equipment
• Improved body armour
• Counter rocket, artillery and mortar sense and warn capability
• New biometric capabilities
• Additional working military dogs
• Improved ISR assets
However, this investment will be predominantly funded from within Defence's existing capital program, with $911.9 million to be met from within the Department's current resources.
This could see some programs related to these areas moved to the left in order to fulfil the program in the timeframe outlined.
Platform deliverables
The budget papers can be interesting for what they don't say.
Elements of deliverables from each of the three services are all clearly outlined in terms of unit ready days, rate of effort or flying hours - except for the Navy.
Unit ready days for the Navy are an amorphous dollop of figures on a page, grouped by major and minor combatants, amphibious and afloat support, maritime teams and hydrographic force.
This means that readers are unable to see how many unit ready days are being reported for individual Navy platforms.
Even new and retiring capabilities such as Army helicopters and Air Force jets can be seen in such terms, as can the other platforms operated by these services.
Then again, neither of these organisations operates the Collins class submarine.
Oz industry involvement
The Australian defence industry may not be too impressed with some of the forward forecasts and what these will mean for their bottom line.
As mentioned earlier, the spending pattern seen in the Major Capital Investment Program is not ideal for industry looking to smooth their planning.
This year alone, the DMO will only spend $277.9 million on DCP projects, which will see a very tight year for Defence industry.
This fall on the acquisition front also comes in the wake of SRP-driven Smart Sustainment reforms looking to cut costs on the sustainment side of the business.
This spending pattern will see projects pushed out to the right to bring these figures together.
As to which projects will be affected, the budget is silent.
Major projects
The budget does provide some concrete information on the DMO's major projects, which makes for refreshing reading with figures on the approved project expenditure, cumulative spend to June 30 this year, and the budget estimate for 2010-2011.
And while at first glance the fact that the total estimated major program spending is at roughly $6.32 billion while allocated funding is only at $5.68 billion, this can be explained.
Defence won't be able to spend the money, as the schedule will fall behind on at least one or more of the 30 projects listed, allowing funds to be juggled.
There has also been an interesting change of language between Defence and the DMO.
The budget statements uses several terms to describe schedule milestones, which reflects that the DMO is in the process of transitioning from using Initial Operating Capability (IOC) and Final Operating Capability (FOC) to using Initial Materiel Release (IMR) and Final Materiel Release (FMR).
IOC and FOC are Defence milestones that represent the estimated timeframe for when a capability system, comprising of all fundamental inputs to capability, will achieve full capability.
The DMO's materiel supplies are just one element of a number of fundamental inputs needed for a capability to be operationally deployable by a Capability Manager.
Consequently, the budget papers this year report that the new baseline reporting milestones of IMR and FMR would, in future, mark the delivery and release to Capability Managers of materiel supplies from the DMO.
DMO will then support the Capability Manager in achieving IOC and FOC.
This transition process to the use of new terminology for reporting purposes is expected to be completed at the end of 2011.
No doubt these terms will be appearing in future editions of the DCP, contracting templates and other planning documents.
Interestingly, there was a caveat on this list of programs that project development activities and some sensitive projects would not be listed here.
Infrastructure
While there was detail about the infrastructure investment defence plans to make (a state-by-state breakdown complete with state and federal electorate details no less), no decisions, let alone announcements, had been made about the fate of various Defence estate assets at the time of ADM going to press.
The previously announced Defence Estate Review will no doubt shed more light on the fate of various bases and assets but the Budget papers understandably do not mention any of these nor make provision for them.
But if the 2009 White Paper still holds true, then "Defence should consolidate into fewer, larger and sustainable multi-use bases" and will invest accordingly.
Estate upkeep spending listed in the budget for 2009-2010 was $428 million but falls this year to $400 million.
However, the 2010-2011 budget includes over $1.7 billion to maintain, upgrade and build new Defence facilities across the country ($1.3 billion of which will go to existing programs such as the Enhanced Land Force and other base upgrades/redevelopments).
But wait, there's more
In an interesting turn of events, Defence Minister Senator John Faulkner released a huge explanation statement on the Budget and its effects on Defence on June 1, a good three weeks after the Budget release.
The statement had a huge emphasis on the Force Protection measures for troops in Afghanistan, previously mentioned here, alongside a series of extracted and collated portfolio statement tables.
With the completion of the Force Protection Review that he commissioned in July 2009, not long after being appointed Defence Minister and visiting troops in Afghanistan, the recommendations from that report are in the process of being implemented.
"The outcome of this work put forward 48 recommendations for enhancements to our force protection measures, particularly reflecting the escalating improvised explosive device (IED) and rocket attacks in Oruzgan Province," Senator Faulkner's statement said.
"It ensured a coherent, comprehensive and complete approach to force protection.
"The force protection improvements recommended from the review cover a variety of active and passive measures, which range from personal protective equipment for our soldiers, to unmanned surveillance systems.
"Since the review was completed, Defence has been working hard to progress and implement the outcomes of the Force Protection Review.
"Some measures have already been implemented, including improving counter measures against IEDs and improving IED detection equipment.
"Progressing the other recommendations is well underway, including enhanced medical support, the upgrading and hardening of living and working accommodation in Tarin Kowt, as well as other capability enhancements.
"Other measures required additional budget funding, which was provided in the Budget.
"A key initiative in the package is the acquisition of a C-RAM system for use in Afghanistan, which provides advance warning of rocket attacks.
"This is a timely and important protective measure which will increase the security for troops in Tarin Kowt and elsewhere.
"The approved force protection Budget measures, costing a total of $1.1 billion, will minimise the vulnerability of personnel, facilities and equipment so that our deployed forces enjoy more freedom of action in support of Afghan National Security Forces.
"In addition to the $1.1 billion in the specific Force Protection Budget measure, Defence has also received $485 million for force protection through Operation Slipper supplementation which traditionally funds ongoing aspects of operations including force protection.
"Further ongoing operating costs for force protection initiatives of $48 million will be sought in the context of future budgets.
There was no explanation as to the timing and or emphasis of the release but ADM suspects that Defence has been questioned on the Budget funding arrangements in terms of past, current and new funding details.
Workforce: now and in the future
Katherine Ziesing | Canberra
As usual there are two sets of workforce numbers for the Australian Defence Force, depending on how you want to look at it.
The DMO segment of the equation is separated out from the general defence figures.
It is interesting to note that the DMO workforce (APS, contractors with full-time and part-time military) looks set to expand from 7,954 in 2010-2011 to 8,412 in 2013-2014, a percentage increase of 5.8 per cent with the workforce expanding by roughly 120 people annually on average over the period.
Over that period, Reserve numbers will remain the same but the breakdown between the three services as to who has postings with the DMO is telling.
The RAAF have twice as many people in DMO than the other two services combined (a long-term trend) but the bulk of DMO Reserves come from Navy.
Reserves are also set to play bigger roles in operations in both East Timor and the Solomon Islands.
Defence, excluding the DMO, is set to grow to 96,084 in 2010-2011, up from 94,671 in the previous year, a negligible increase of 1.5 per cent.
The budget this year has a provision of $6.3 billion for approximately 57,000 full-time ADF personnel, plus recruiting for another 6,000 full timers.
Recruitment and retention has seen its best result in years with Defence Force Recruiting reaching 94 per cent of its target and the separation rate at seven per cent, the lowest rate in 20 years.
What's in a name?
Initial Operational Capability (IOC) - the point in time at which the first defined subset of a capability system that can be operationally deployed is realised.
IOC is a capability state endorsed at project approval at Second Pass, and reported as having been achieved by the Capability Manager.
Final Operational Capability (FOC) - the point in time at which the final subset of a capability system that can be operationally deployed is realised.
FOC is a capability state endorsed at project approval at Second Pass, and reported as having been achieved by the Capability Manager.
Initial Materiel Release (IMR) - a milestone that marks the completion and release of DMO acquisition project supplies required to support the achievement of IOC.
Final Materiel Release (FMR) - a milestone that marks the completion and release of DMO acquisition project supplies required to support the achievement of FOC.
Initial Operational Release (IOR) - the milestone at which the Capability Manager is satisfied that the initial operational and materiel state of the capability system - including any deficiencies in the fundamental inputs to capability - are such that it is sufficiently safe, fit for service and environmentally compliant to proceed into a period of operational test and evaluation leading to an endorsed capability state.
In-Service Date (ISD) - the point in time that symbolically marks the beginning of the transition of a capability, in part or in full, from the acquisition phase to the in-service phase.
ISD coincides as closely as possible with IOR.
Budget win for DSTO
The 2010 Federal Budget has delivered an additional $138 million in funding to help the nation's best Defence scientists and engineers protect and defend Australia and its national interests.
Greg Combet, the Minister for Defence Materiel and Science, said the funds would help equip the Australian Defence Forces' research and technology arm, the Defence Science and Technology Organisation (DSTO), with additional staff, resources and investment.
"The $138 million in funding will help DSTO employ 200 more of the country's best scientists and engineers," Combet said.
The funds will also go towards strengthening DSTO's Corporate Enabling Research Program, which focuses on technologically challenging areas of Defence significance for current and future operations, including cyber and electronic warfare, hypersonics, intelligence, surveillance and reconnaissance.
"The funds will also enable the DSTO to upgrade some of its laboratories and technical facilities, and ensure that Defence scientists and engineers have access to resources they need to carry out highly classified research."