11 June 2009

Defence reform: components of the savings

On Thursday 4 June Defence Secretary Nick Warner and Chief of the Defence Force Angus Houston jointly released a document entitled The Strategic Reform Program: Delivering Defence Force 2030. This document sets out the “Strategic Reform Program” that is intended to deliver gross savings $20 billion over the ten years to 2019. These savings are to be reinvested in military capability, remediation in previously underfunded areas, and modernisation of Defence’s “enterprise backbone”.

The document is interesting in that it nominates the areas and the amounts in which the savings are intended to be achieved:

Non-equipment procurement $4.4 billion

- Targets 23 categories of travel and training

- Better buying and contracting practices

- Centres of excellence

- 60% of savings driven by hard decisions affecting demand

Smart maintenance $4.4 billion

- Increase productivity and availability across 100 platforms and systems

- Reduce waste

- Standardise

- Provide flexibility

Inventory management $700 million

- Reduce holdings

- Improve stock

- Target setting

Information & Communication Technology $1.9 billion

- Consolidate 200 data centres to less than 10

- Create a single enterprise architecture

- Standardise Defence ICT environment

- Review the effectiveness of the two pass process for ICT projects

Reserves $380 million

- Better integration of the part time/full time capabilities

- Sponsored reserves

Logistics $320 million

- Rationalation of warehousing from 24 to 7 sites

Workforce and shared services $3.3 billion

- Civilianisation

- Conversion of contractors to Australian Public Service

- Lean administrative backbone

- Shared services

Defence Savings Program $5.1 billion

- Savings from other categories previously identified, said to be

· A general belt tightening exercise involving reallocation of funds which in the past were held centrally ($3.9 billion)

· Reductions to funding in the major capital facilities program and minor capital equipment programs, to drive greater efficiency and remove low priority activities ($750 million)

· Removal of minor administrative activities considered to be of low priority ($70 million)

· Anticipated savings from mature, ongoing productivity savings ($350 million).

In subsequent posts I will look more deeply into these components of the savings program and make some observations about the criteria for success, and the likelihood of the savings being achieved.

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