1. DMO Purpose: Equip and sustain the Australian Defence Force (ADF) and provide advice to Government DMO’s two goals: (i)To deliver projects on time, on budget and to the required levels of capability, quality and safety (effectiveness); and (ii) Make DMO more business-like, accountable and outcome-driven (efficiency) ABOUT THE DMO

2. DMO: SOME HIGHLIGHTS In 2011, nearly 50 projects or phases approved worth more than $6B Navy: In 2011, HMAS Choules purchased and successful ANZAC ASMD trials Significant improvements in schedule performance since Kinnaird Air Force: In 2011, 24 Super Hornets, 3 Multi Role Tanker Transport aircraft and a fifth C-17 heavy lift aircraft Army: In 2011, new lighter body armour and enhancements to combat uniform, upgrade to Bushmaster vehicles and Counter IED systems deployed Conduct nearly $45 million of business each working day Sign more than 2,500 contracts worth more than $100,000 every year

3. CEO DMO KEY PRIORITIES Support and equip ADF by delivering quality capability with a high focus on safety Exercise ‘measured urgency’ in the workplace – simplifying processes and speeding up outputs Improving business acumen of DMO workforce Engaging with Industry in a strongly commercial but not combative way Establishing a major projects negotiation cell Piloting 'managed contractor' arrangements for selected projects Rebalancing the organisation

4. SUPPORT TO OPERATIONS Continues to be our first priority Has involved an enormous amount of effort by many people right across the DMO (not just in the coordinating ops cells) including sustainment staff Has provided a model for success in terms of level of responsiveness to our customers, taking user feedback seriously and focused engagement with Industry Our long-term focus must now begin to shift to planning for DMO’s contribution to the staged withdrawal and refresh of equipment from the MEAO as directed by Government

5. 2011 $27,500 1999 $3,600

6. GATE REVIEWS An effective tool for exposing issues, directing projects, improving outcomes and soliciting stakeholder support. ‘The forest and the trees’ - external reviewers provide critical input with fresh eyes Applying “Lessons Learned” DMO is continuing to develop and expand our Gate Review capacity. PROJECTS OF CONCERN Highly effective way of focusing attention on real issues Once a project is listed it only comes off by remediation or cancellation EARLY INDICATORS & WARNINGS A set of internal mandatory triggers that would require projects to be reported to Ministers if schedule, cost, capability, industry performance or risk thresholds are breached. BETTER PROJECT MANAGEMENT

7. MAJOR PROJECTS REPORT 2010-11 ANAO assurance of DMO’s performance on 28 major equipment projects Project cost performance is good Project Schedule – remains a concern. Driven by underestimation by industry and/or Defence of technical maturity or complexity Aggregate Cost Performance Aggregate Schedule Performance (over project life) -0.9%1.28 (or 28%)

8. SCHEDULE VARIANCE (PROJECT TYPE) 2010-11 MAJOR PROJECTS REPORT Project TypeAverage Schedule Variance as at 30 Jun 10 (against FOC) % Range % Project Type Average Schedule Variance as at 30 June 11 (from FOC) % Range % Developmental 74%0%-128% Australianised Military-Off-The Shelf (AMOTS) 24%0% - 74% Military-Off- The-Shelf (MOTS) 0%0% - 0% Integration risk is insufficiently understood (MOTS + MOTS ≠ MOTS)

9. DEFENCE ACQUISITION COMPLEXITY (2)

10. DEFENCE SUSTAINMENT COMPLEXITY (2) Complexity Frontier for Maintenance Activity for Most Large Australian Organisations

11. BACKUP

12. THE 2011-12 DEFENCE BUDGET Defence: $26.4 billion in 2011-12 Plus DMO’s direct appropriation relating to workforce & operating expenses (Approx $0.9 billion) TOTAL = $27.3 billion Approximately 1.8% of Australia’s GDP DMO: DMO’s 2011-12 budget represents 37% of Defence portfolio budget Approximately 0.7% of Australia’s GDP (Figures taken from PAES 2011-12)

13. $10.1 billion of funding to support the ADF –$4.6 billion on Acquisition ($5.8 billion 2010-11 actual) –$5.4 billion on Sustainment ($4.8 billion 2010-11 actual) –$0.1 billion on Policy Advice, Management Services & Industry Programs BUT: the “sting” is next year – 2012/13 THE 2011-12 DMO BUDGET (as at PAES 2011-12)

14. DMO ACQUISITION AND SUSTAINMENT SPEND 2 4 6 8 10 12 14 11/1212/1313/1414/1515/1616/1717/1818/1919/2020/21 Forecast Activity in Australia = 53% Forecast Activity Offshore = 47% AUD Billions - constant 10/11 16 Most of 2012/13 reduction taken by imports