Defence Update- CSP Update

The February-March issue of the “Commercial Support Programme Update” outlines that CSP activities will again be a major focus for Defence in 1994. “The success of CSP outcomes to date, the Review of CSP conducted in 1993, and industry, union and Defence responses to the recommendations of the Review have brought the Programme to a major crossroad,” it says.

Decisions on the balance of the total programme are due by June 30. At February 1, 1994, CSP Evaluation Decisions numbered 49. Of this, 31 (69%) have gone to commercial contracts, 14 (31%) to In-House Directives, while in four the status quo was retained. The projected recurring annual savings to date are estimated at $81 million, while projected annual savings as a percentage of current costs represents 32%. The number of positions (both service and public service) tested is 4600, and the total value of Commercial contracts and In-House Directives awarded represents $650 million.

In a recent interview, Group Captain Dick Hedges, Director, Commercial Support Programme – Air Force in the Air Force Office in the Department of Defence, Canberra, outlined how decisions had been made in all but one of 12 RAAF activities tested under the Tier 1 schedule. That schedule was developed from the Wrigley Interdepartmental Committee (IDC) report in May 1991. Seven contracts were awarded to commercial companies, and four were retained by competitive in-house bids.

By April 12, 1994, Air Force activities evaluated under the CSP numbered 16, and the total annual value of them, before testing, was nearly $76.6 million. The transition cost was $29 million, and the expected annual cost of these same activities now is $43 million. The number of positions competed was 1456 (1352 RAAF, 104 Australian Public Service) after the removal of MRU (manpower required in uniform) and rationalisation of activities for market testing. The number of positions displaced at that point was 1265 (1172 RAAF, 104 APS). Redundancies processed are at 684 (640 RAAF, 44 APS), while the number of positions established in successful in-house options is 290 (180 RAAF, 110 APS).

Under the CSP, which seeks to commercialise Defence support activities where operationally feasible, practicable and cost-effective, the Air Force cost reduction annually under Tier 1 is some $25 million, representing a 44% reduction in baseline costs which previously occurred. Four RAAF Tier 2 activities contracts also have been awarded (and taken into account in our early figures in this article), and more are to come.

The scheme, which originally flowed from a report tabled in June 1990 by Mr Alan Wrigley, a former senior public servant in Canberra, and an Interdepartmental Committee report which followed, also envisaged Tier 3 determinations at the unit or base level later in the programme, with contracts for money saved. However, this may be subjected to some fresh thinking before long. Theoretically, Tier 3 determinations are to follow the Tier 2 processes due to run in two-yearly increments until mid-1998.

In any case, as Group Captain Hedges explains, the future of the whole Commercial Support Programme may rest with what is “distilled” by the three services — Navy, Army and Air Force — in a current review of the composition of core and non-core activities. This report should be finalised soon. The MRU (Manpower Required in Uniform) obviously creates a constraint. While the CSP has so far been judged as reasonably successful, it has not been without hiccups. A lot, nevertheless, has been learned from early experiences.

Group Captain Hedges explains that the only RAAF Tier 1 activity which has not been completed concerns Technical Trade Training at Wagga, NSW. Process in Air Force began in August 1991. The CSP Service offices about that time were required to issue Requests for Tender by the end of 1992 and to start, whatever the decision to put commercial contracts in place, or choose in-house options by mid-1993. The Technical Trade Training scheme was deferred with the agreement of the Minister for Defence Science and Personnel (then Mr Gordon Bilney) because during the timeframe of Tier 1, the RAAF’s Technical Trade training was being restructured, and the School of Radio was being moved from Laverton, Victoria to Wagga, NSW. “It didn’t make sense to be testing that in the timeframe until we better defined what the particular training requirements were,” Hedges said.

Apart from that deferral, the only RAAF Tier 1 activity where source selection slipped was for F-111C and TF30 engine deeper maintenance at Amberley base, Queensland. This was due to the sheer complexity of what was being tested, Hedges said. After an activity review, which shaped the activities to be tested and precluded a number of deeper level maintenance functions actually being tested, an In-House option was successful. It will be fully implemented in July 1994. It shaves nearly $9.2 million off the annual cost of the F-111C deeper maintenance, and involved testing 343 RAAF and 10 Australian Public Service positions. One of the areas precluded was R5 airframe deeper level F-111 maintenance, Hedges explained. But seven workshop activities were tested, including TF30 engine maintenance, electroplating and metal machining services. So the F-111 area has occupied a lot of CSP evaluation and testing time.

But we should go back right to the beginning; in fact before the Commercial Support Programme was officially programmed. The first RAAF activity identified in the Wrigley IDC Report and contracted out was Basic Flying Training, which is run by the British Aerospace — Ansett Flying College at Tamworth, northern NSW. It stemmed from a Pilot Training Rationalisation Study which determined that the Air Force should screen aspiring pilots before bringing them into the RAAF. Positions were not tested and there was no In-House Option, but it was determined that the flight screening of potential RAAF pilots and the flying training of Navy and Army pilots would be carried out at Tamworth. This contract was signed on March 6, 1992.

The first Air Force activity where the CSP methodology was applied was for Iroquois helicopter R3 and R4 maintenance. “I guess that was a test case for us; a pilot run,” Hedges said. “It came about because when the CSP was going through the Defence process, the Iroquois helicopter R4 servicing contract was due for renewal.” The seven-year contract went to Hunter Aircraft Services, Archerfield, Brisbane, and was signed on July 21, 1992.

While this early assessment and contract awards were going on, Group Captain Hedges was the Director, Integrated Logistic Requirements, RAAF, and was involved in the development of the CSP on a part-time basis. He was seconded to the CSP working party that developed the policy and procedures, and recommended establishment of the RAAF’s CSP directorate in July 1991. Hedges was involved in writing the first draft CSP manual, the first issue of which was released in August 1991. But the Air Force had been working on the policy development before the Wrigley Report was tabled in Parliament in June 1990. “Wrigley gave CSP an impetus,” the Group Captain noted. The RAAF’s inaugural CSP Director was Group Captain Peter Rusbridge, who ran the 707 tanker conversion programme, and is now retired. Hedges took over in December 1991.

Gradually other Air Force support activities were evaluated and tested; the Air Movements section at Laverton had to move as the base was closing, and the contract went to the Melbourne Jet Base at Tullamarine. RAAF in-house options for the relocation of the Air Movements section function also included Essendon. The P-3C Orion deeper maintenance at Richmond on Sydney’s northwestern outskirts also drew an in-house bid, and a strong one from Air New Zealand, but they were narrowly beaten by Hawker de Havilland, Hedges explained.

He said that in the early days the RAAF tried “to apply its limited internal skills to providing better ways of doing business, avoiding salami-slicing and starting with a clean slate. It was a question of brainstorming.” “We were building up an organisation that could perform in the function being evaluated,” he said. “In those early days we didn’t use consultants, so we didn’t have access to the best commercial practice.” “We simply didn’t have highly commercial business skills in the Service, so it is not surprising that it was some time before the RAAF got an In-House Option up.”

Hedges said that in more recent times the Air Force had been using consultants quite extensively in putting together In-House Options. “We’ve had excellent service out of our consultants, even when some of the bids have not been successful.” “This has taught us lessons on better ways of doing business. Some of those lessons are being applied across the Air Force,” he added.

One area where the Air Force has not been successful, at least as yet, has been in retaining base catering contracts. This also applies to the Navy and Army, except that the Army won one base catering contract with an In-House Option. Two RAAF catering contracts at Fairbairn, ACT (Advanced Food Systems) and Williams, Victoria (Spotless Catering), come under Tier 1 activities. The third, at Wagga (RM Australia), is Tier 2. Group Captain Hedges feels that major reasons for this lack of success are that catering skills are fairly well entrenched in the community, there are six large contractors bidding most of the time, and those contractors have greater employment flexibility. After some early problems which were ironed out, the quality of commercial catering at military bases is considered good. “I’ve heard one story from the Officers’ Mess at Fairbairn about a complaint that they were sick of getting five-star meals, and occasionally wanted hamburgers just like they get in the Airmen’s Mess,” Hedges said.

One recent contract for PC-9 trainer maintenance at Pearce (WA) and East Sale (Vic) created headaches for the RAAF, and has been the subject of some publicity, especially in the west. The RAAF accepted as valid a complaint from Airflite Pty Ltd (WA) that the option to use a dual-level inspection system, which uses self-supervising technicians, had not been available to commercial tenderers. An original In-House Option decision was reversed, following a review of the tendering process. The RAAF invited Airflite to submit a new price. On the repricing, Airflite was assessed as offering better value for money than the In-House Option and was awarded the PC-9 maintenance contract at Pearce and East Sale.

As we have indicated earlier in this article, RAAF In-House Options have been accepted in four CSP Tier 1 activities. Already mentioned is the F-111C Deeper Maintenance at Amberley. The others are the HS.748 Avionics Workshops at East Sale, Vic; the Fairbairn, ACT Base Support, including the clothing store, but excluding security; and Corrosion Control servicing at Amberley and Richmond.

At the time of going to press the offers for provision of a major part of Technical Trade Training at Wagga were being evaluated. Two of the most recent Tier 2 contracts have been the Base Calibration Services to the RAAF which was won by Australian Defence Industries (ADI), with annual savings put at $3.1 million; and Williams Base Support, awarded to Serco Pty Ltd. Statements were being prepared on requirements for Wagga Base Support, and for East Sale, including catering.

Group Captain Hedges’ office also is attempting to scope the needs for maintenance of RAAF ground telecommunications equipment, after taking into account the MRU and the replacement cycles of the equipment. Hedges expects that by mid-1994 his directorate should be in a position to identify future CSP Tier 2 activity candidates. “This will be a global view of core and non-core functions,” he said. “In effect it’ll size the service, and indicate what non-core functions can be tested for the CSP,” he said. As for Tier 3 activities, we’ll perhaps have to wait and see a few years down the track.