The biggest Defence shake-up in 40 years is coming after an expert panel found the department was rife with “waste and inefficiency’’ but resisted change because of complacency and inertia.
The restructure, to be unveiled soon by the government, will streamline the top-heavy Defence Department and its agencies, slash the number of administrators and improve efficiency after an independent review warned processes were complicated, slow and inefficient.
The scathing report found that 80 per cent of the department’s managers supervised fewer than five staff and most had just one or two under their supervision.
The number of senior leaders on the civilian and uniformed sides of Defence jumped from 201 in 1998 to 374 last year. There were 200 committees operating within Defence and 12 decision-making layers where seven would work better.
The Defence Materiel Organisation, which buys everything for the Australian Defence Force from toothbrushes to tanks, came in for strong criticism from industry for its “lengthy and expensive” processes. The average submission to government was 70 pages long and took 16 months to work through the cabinet process, while acquisition teams had to comply with more than 10,000 DMO policies, procedures and controls running to 12,500 pages.
The exhaustive review was led by former Rio Tinto Australian head David Peever with a panel including former army chief Peter Leahy, former Coalition defence minister Robert Hill, former Labor finance minister Lindsay Tanner, and Jim McDowell, a former head of defence company BAE Systems.
The Australian has been told Defence Minister Kevin Andrews, who will soon release the report, is determined to make substantial changes and he has the full backing of Tony Abbott and cabinet.
The report, “One Defence, Case For Change”, says the department is better governed and more transparent than it was a decade ago but calls for a big shift in the way the department and the ADF are run.
It says recommendations need to be implemented as a reform package and not cherry-picked or selectively modified.
“Defence is suffering from a proliferation of structures, processes and systems with unclear accountabilities,” the report says. “These in turn cause institutionalised waste, delayed decisions, flawed execution, duplication, a change-resistant bureaucracy, over-escalation of issues for decision and low engagement levels among employees.”
It says success would require a major change in the Defence mindset and behaviour, with a greater focus on the corporate good. That would take “strong, clear, wise and uncompromising” leadership from the top levels of both the public service and the military. Given the lack of success of past reform efforts, the review team says the changes should be scrutinised externally for an extended period.
There are 56,000 men and women in the ADF and another 25,000 in the reserves. They are supported by about 20,600 public servants, down from 22,284 in 2012. The DMO has more than 7000 military, civilian and contracted staff.
As the government prepares its Defence white paper, the review team notes “it is imperative that Defence evolves into a single, integrated system”. “Defence must become one end-to-end organisation, not a federation of separate parts ...” it says.
The review warns bluntly that Defence can not continue as it is. Just as the modern ADF has to be able to fight across land, air and sea, and in intelligence and other domains to be effective, the agencies that support it have to be professional and effective. “The time is right to clear the decks and liberate the organisation for the future,” the report says. “It must transform itself in order to deliver the required public value.”
If the panel’s recommendations are acted on in full, the rebuilding of Defence will be the biggest overhaul since 1973, when Arthur Tange oversaw the merging of the departments of the army, navy and airforce into one Defence Department, supporting the ADF.
Sir Arthur also established the diarchy that involves the chief of the ADF and the department secretary as equal partners bridging the top of the two organisations.
The Peever report renews past calls for greater clarity about the roles of the Defence Department secretary, the chief of the ADF, the service chiefs and of Defence itself.
Ongoing problems in the relationship between the ADF and the parts of the organisation that support it have to be sorted out as well, it says.
The report says “recurring issues with a lack of accountability, ill-defined authority, unclear allocation of responsibility and great difficulty measuring and monitoring real performance”.
It also highlights the leadership churn that has seen nine defence ministers and six secretaries since 1998.
The report says while the Abbott government has undertaken to increase defence spending to 2 per cent of GDP within a decade of its election, “the current waste and inefficiency will continue if Defence remains in its current form, as it is neither equipped nor organised to make efficient use of whatever funding levels are available to it”.
The DMO came in for strong criticism from industry. “Project approval processes are lengthy and expensive,” the report says. The review panel also notes that Defence owns more property than it needs and resists disposing some of it.
The review panel concludes that “waste, inefficiency and rework are palpable” in Defence at a time when it needs simplicity, agility and timely delivery.
It finds an entrenched resistance to implementing business-like approaches that results in duplicated systems and processes. Without major change, including to attitudes within the department, waste and inefficiency will continue, it warns.
The review says Defence is risk-averse, resistant to change, difficult to manage and subsumed by box-ticking and process tinkering.
It lacks transparency, tends to obfuscate and “played the reform game” by adding veneers of process, papering over concerns of reviewers and auditors and avoiding fixing the underlying problems.
Defence is inward-looking, complicated and difficult to manage and it “games the system” to its own advantage. Because of that approach, it is not well trusted by other agencies. The review team says the department should have been able to reform itself but had not. The reviewers acknowledge that was in part because senior Defence management was focused on supporting the high tempo of ADF overseas operations for more than a decade.
It has also been dealing with funding uncertainty since the previous Labor government cut $18.2 billion from Defence’s forward funding. That led to reactive planning, deferred equipment purchases and a hollowing out of support systems such as information and communications technology