1. professionalise | re-prioritise | standardise | benchmark | improve industry relationships and industry performance | lead reform The Real Price? Corrina Tierney Executive Director Financial Investigation Service

2. FIS Role Overview FIS provides analysis, investigation and advice on the financial aspects of Strategic, Complex and Simple Procurements based on professional commercial cost accountancy expertise The service provided by FIS is a part of DMO's risk mitigation strategy, ensuring that financial due diligence is applied consistently with the overarching policy requirements FIS actively maintains the Commercial-in-Confidence nature of each Company’s financial data, maintaining Industry’s trust in FIS’ semi- independent role in considering their sensitive financial information Industry can expect FIS contact for: –sole source cost investigations –strategic, complex, high risk, or high value competitive tenders –Annual review of labour rates (large Primes) –financial queries during a tender evaluation process

3. FIS “Shared” Service Advice on financial aspects Sole/Direct Source Labour Rate Reviews Tender Evaluation RFTs DMO clients Competitive Tenders High Value High Risk Complex Strategic Procurements Cost Principles Viabilities Financial Due Diligence Commercial FMSFinancial Statement Analysis Overarching Policy Consistency True Ups Benchmarking Cost Data Models Tiger Teams Gate Reviews Simple Procurements Defence clients

4. APPROVALS (Government/Delegate) WHAT PRICE?? NEGOTIATIONS Focus is on the costs associated with the Cost of Capability and Whole of Life Cycle Costing including –Capability –Acquisition –Operation –Support –Disposal –Contract –Facility –Staffing/Resources –Intangibles Focus is on the tendered/contract costs and pricing (acquisition and sustainment) including – INDUSTRY COSTS – Assessing reasonableness of costs – ‘What If’ analysis of options – Financial comparisons of tenders – Reconciliation to original estimates Focus is on the contract/tender costs including –Materials - Profit –Insurance/Warranties/LDs - Risk –Escalation/Hedging - Staffing –Exchange Rates/Price Risk - Facilities –Contract Type (Fixed/Cost-plus) - Schedule Including – Engineering – Commercial – Logistic – Pricing – Statement of Work $ X $ Y$ Z INDUSTRY (TENDERS) FINANCIAL INVESTIGATION SERVICE (CONTRACTS) COST ANALYSIS BRANCH CDG (COST ESTIMATION) Capability and Value for Money Considerations

5. NEGOTIATIONS APPROVALS (Government/Delegate) Now… Gaps… Ambiguity Duplicated Effort Different Focus Sourcing information multiple times Information Overlaps / Gaps Rework- both Industry & Govt COST ANALYSIS BRANCH CDG (COST ESTIMATION) INDUSTRY (TENDERS) FINANCIAL INVESTIGATION SERVICE (CONTRACTS) Capability and Value for Money Considerations

6. Same Project Cost EstimationIndustry Financial Investigation Service Financing charges Securities Intellectual PropertyKPIs/KERs Payment Schedule Insurance Warranties Different Focus LDs/EDs Cost Capability Actuals Contract Price Capability Net Present Scope (+ growth) Acquisition + Sustainment Operating Costs Budget Cost Government Approval Estimated Costs plus profit Contract cost plus escalation Escalation Non-Farm GDP Forecasting Contract Indices Profit Only look at cost Shareholder Return Risk vs. Reward vs. Return Risk - Schedule - Government Process Costed Risk - Budget - Schedule (Risk Mitigation) - Capability - Technical Also:

7. One thing we could do better… –capture the same data once –data consistency –less duplication –improved evaluations and analysis –more timely decisions –reduced tender cost to industry –more effective and efficient use of Commonwealth and Industry resources NEGOTIATIONS INDUSTRY (TENDERS) COST ANALYSIS BRANCH CDG (COST ESTIMATION) Capability and Value for Money Considerations FINANCIAL INVESTIGATION SERVICE (CONTRACTS) APPROVALS (Government/Delegate) Use a uniform “Cost Model” COST MODEL

8. Future….. Bridge the Gap Single source of information Better Pricing Process More Uniform Approach Reduced Effort by all Reduced Tender Costs Better Quicker Result One Cost Model NEGOTIATIONS INDUSTRY (TENDERS) COST ANALYSIS BRANCH CDG (COST ESTIMATION) Capability and Value for Money Considerations FINANCIAL INVESTIGATION SERVICE (CONTRACTS) APPROVALS (Government/Delegate) COST MODEL

9. Which Price is the Real Price… Cost Estimation Industry Financial Investigation Service The Real Price?XYZ One Cost Model A combination of : XYZ

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