Defence Update

Mr Bilney made these comments following a four week world tour, during which he visited seven countries for discussions on commercial support programmes in other Defence Forces. In London, Washington and Ottawa, he was briefed on how UK, USA and Canadian armed forces are using national industrial capacity to support their capabilities.

Concerning the ADF’s CSP, the Minister said that in days of constrained defence budgets, it was essential that relevant Defence support activities be performed on the most cost effective basis, whether that be by military personnel, by Defence civilians or by civilian contractors in the private sector.

“In England, Canada and the USA, I held extensive discussions with Ministers, senior officials and at the working level on the lessons they had learned from the contracting out of defence support activities to private industry,” he said. “In all three countries it was clear that, after initial reservations by those affected, there has developed an appreciation both of the value of contracted support and of the mutually beneficial relationships that come from this activity. It was noteworthy for example that civilian contractors from all of these countries provided in situ support to operational forces in the Gulf region during hostilities there.

“The range of defence support activities contracted overseas parallels those which are either already being put out to contract in Australia, or which are being evaluated for possible competition with industry,” the Minister said.

He said his discussions also confirmed that the Australian Commercial Support Programme is right in using competition between Defence in-house activities and industry to find the most cost effective way of supporting our operational forces. In a situation for example where Defence wins a particular competition with the commercial sector, on a level playing field, then it is most cost effective to retain that activity in-house.

“Commercialisation of defence support activities will bring a stronger connection between Defence and the community, and will significantly improve the ability of Australian industry to support our armed forces,” Mr Bilney said. “Overseas experience also reinforces my belief that worthwhile savings can come from better ways of supporting Defence. The Australian Government has decided that these savings will be used to improve our operational capability. ”

The Minister said that while Defence was already big business, he expected that initiatives like commercial support would make Defence managers more businesslike as they compete with industry. “They will emphasise performance rather than process, and will be seeking innovative solutions from their own workforce as much as from industry. This means that taxpayers will get increasing value from their Defence dollar,” he said “Following the announcement of the Defence Commercial Support Programme by the Government in May, 1991, the momentum of the programme is building rapidly in such areas as flying training, catering, aircraft maintenance and base support. Other support functions such as warehousing, distribution, and data processing are in the process of being evaluated for the programme. ” he outlined.

Mr Bilney said he was satisfied that Defence is well on track to put the first tier of commercialisation candidate activities to tender by the end of 1992, and to make decisions by mid 1993 on which further activities are to be contracted out or retained in house. He expected this process will result in some hundreds of millions of dollars worth of work being transferred to the private sector, creating several thousand jobs.

Activities in the second tier of the Commercial Support Programme are being brought forward for assessment, and the initial list will be announced shortly by Defence.

Twenty seven activities endorsed by Government in the areas of catering, base support, aircraft maintenance, clothing, training, transport and survey are currently undergoing evaluation as the momentum of CPS has built rapidly. As of late March the status of these activities is:

• Nineteen activities are undergoing the first stage of evaluation to develop a statement of requirement. This is a description of an activity in terms of required outputs and constraints and is the initiating document for defence and industry competition.

• Requests for tender/quote (RFT/RFQ) have been issued by Defence and are still open for four activities: – Lockheed P-3C Orion depot level maintenance, ie, major aircraft maintenance; – PC-9daily maintenance and some scheduled servicing; -provision of air terminal services in the Melbourne area; and – catering, accommodation and some base support at RA AF Fairbairn, ACT.

• Three tenders presently under evaluation are Iroquois helicopter maintenance; catering and accommodation management at Watsonia; and the operation of Woomera Hospital.

• One major contract has recently been signed. Flight screening/ initial flight training was contracted out on March 6 1992. The successful applicant being the British Aerospace/Ansett Training College at Tamworth NSW (refer story elsewhere this issue). This contract calls for 15 hours of flight screeningfor prospective pilots and a further 67 hours initial flight training for army students and 140 hours for PNGDF students.

The CSP process is open to public scrutiny as evidenced by the public release of the CSP Manual which includes a “ready reckoner ” of all personnel costs and related overheads. In addition a free newsletter “CSP Update” is distributed bimonthly throughout Defence and the community to publicise additional CSP information and provide advice to industry on the progress of CSP evaluations. Industry feedback confirms that open dialogue and extensive consultation have already led to a greater understanding of Defence CSP methodology. This open dialogue will continue Extensive consultation with industry, led by Commodore Paul Gashler, the Director General CSP, is ongoing. Briefings to industry, conducted in all Australian capital cities and major regional centres, were attended by representatives from a wide range of companies, industry associations and members of the general community. For example, during three weeks in November/ December 1991 direct contact and initial discussions were held with 78 companies and over 20 associations Australia wide. The dialogue emphasises Defence’s commitment to consultation and provides a forum for Defence to listen to industry’s views. Workshops are also being conducted throughout Defence to train Defence personnel in CSP evaluation methodologies and processes.

A comprehensive schedule for the evaluation and implementation of activities has been developed which meets the targets agreed by the Government. These targets are all high priority activities where:

(a) Commercialisation will not impair readiness and is consistent with the Force Structure Review;

(b) industry capacity exists;

(c) there is potential for major cost savings; and

(d) successful implementation will provide a useful precedent for further efforts.

All these activities are scheduled for evaluation progressively but no later than December 31 1992 with contracts, or preferred in house options, in place by June 30, 1993.

Activities in the second tier of the Commercial Support Programme are also underway. Right now eight such activities have entered the CSP process. These comprise:

• Operation of ground radio at Naval Air Station Nowra (NSW);

• Provision of base support at Jervis Bay (NSW ) range facility;

• Provision of base support at direct entry RAN officer training establishment HMAS Creswell;

• Provision of base support at the NavalHospital HMAS Penguin; • Management of living out accommodation in Sydney and Canberra;

• Provision of material testing and quality assurance services;

• Provision of forms and stationery; and

• Management voice/data telecommunications facilities.

A concerted effort is being made by the Department of Defence to involve Australian industry and the trade union movement in the commercialisation processes currently being pursued by the Department. To this end, a Commercial Support Program Consultative Forum with direct links to the Defence Industry Committee has been formed.

The Defence Industry Committee is an advisory body comprising leading business, union and Defence representatives. It provides advice to the Minister for Defence and the Department on matters relating to Defence policy for industry and the capacity of Australian industry to contribute to Australia’s Defence requirements. Ata meeting of the Defence Industry Committee on March 11 1992 the Terms of Reference of the Consultative Forum were endorsed. The Forum is to be cochaired by the Assistant Chief of the Defence Force for Logistics, Major General Steve Gower, and an industry nominee of the Committee, Mr Robert Dalziel who is the Managing Director of K-Mart.

It is intended that the Forum will meet three times each year, the first meeting being planned forApril. This Forum will:

• Provide a visible interaction between Defence and Australian industry for commercial support issues;

• Provide industry with the opportunity to establish dialogue with Defence early in the CSP process;

• Emphasise issues and opportunities between Defence and industry through industry associations; and

• Keep industry informed of CSP progress. Mr Bilney said he expected that the membership of this Forum, which will be drawn from representatives from industry associations and the ACTU, will be finalised shortly.