defence media release - australian defence organisation

8/8/2019 Defence MEDIA RELEASE - Australian Defence Organisation

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CONTENTS

ChapterI

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Chapter 10

ChapterI

Chapter I 2

Chapter I 3

Chapter I 4

Chapter I S

Chapter I 6

The Strategic Basis of Defence Planning

AfghanistanlPakistan: Operational and Policy Issues

Update on Other Significant Defence Operations

Progress with the Strateglc Reform Program

Implementation of Force 2030

Defence Funding over the Long Term

People in Defence

International Defence Relationships

Intelligence: A National Warfighting Capability

Acquisition and Sustainment

Defence Accountability Framework

Australian Labor Party Election Policy Proposals

Matters Requiring Early Ministerial AttentlonKey decisions in the next three to six months including events and visits ofsignificanceDefence Intelligence Organisation (DIO)- ntelligence BriefDlO's Assessment of Australia's Strategic Environment- he next three yearsEstablishing Effective Cabinet Arrangements

Industry Relationships

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The Strategic Basis of Defence Planning Chapter 1

CHAPTER1THE STRATEGIC BASIS OF DEFENCE PLANNING

1.1 -The 2009 Defence White Paper assessed that US globalprimacy would continue until 2030, although power relativities between the US,China, Japan and India would slowly change. It assessed that China would become

1.2 US strategic primacy in the Asia-Pacific, built on its capacity tode~lovormidable militarv ca~abil itv nvwhere in the reaion. has been a kev factor in

1.3 W S i n c e he 2009 Defence White Paper was drafted, the differingimpact on the major powers of the worst global downturn since the Great Depressionhas become clearer. The US, Japan, the United Kingdom and the Europeancountries are facing unprecedented levels of sovereign debt and high budget deficitsfor years to come, which will continue to slow the pace of economic recovery.Tight budgetary circumstances are putting an inevitable squeeze on defencebudgets. The US has announced a series of cuts that will reduce key Defenseacquisition programs including the F-22 fighter, C-17 transport aircraft and theDDG-1000 destroyer. Internal efficiency measures aim to find $100 billion in USdefence savings over five years. The UK is expected to announce savings measures


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to follow suit.pressure on defence spending for the next three to five years, limiting forcemodernisation and even maintenance of current capabilities.1.4 -China by contrast has emerged well from the Global FinancialCrisis. The International Monetary Fund judges that China is leading the globalrecovery and has made important changes to rebalance its economy such thatinternal demand is now a much stronger element in China's overall growth. Buoyedby this strong economic performance, China is exerting more influence in new forumssuch as the G20 and developing strong relations with countries throughout Africa andthe Middle East driven by its interest in securing access to natural resources.The US Department of Defense assesses in its 2010 public report to Congress thatChinese defence spending has been unaffected by the international financialdownturn. Based on China's own figures the defence budget has grown annually byan average of 11.8 per cent between 2000 and 2009. The US assesses that growthhas come off a much higher base, with real Chinese defence spending overUS$150 billion in 2009, which is more than double the official Chinese figure.1.5 China's sustained investment in develo~ina defence

The United States is on the public record as judging that 'the balance ofcross-[Taiwan] strait military forces continues to shift in the mainland's favour' basedon significant enhancements in Chinese missile technology and airpower.


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China Sea and waters close to Japan, it is patrolling with increased frequency and ingreater strength. Public US assessments report that a new PLA Navy base onHainan Island is essentially complete, including with underground facilities to housesubmarines. The base will enhance Chinese capability to deploy forces into theSouth China Sea. Further afield, naval support to anti-piracy missions around the

1.10 The US recognises these risks and is moving quickly toaddress them. The US Quadrennial Defense Review 2010 has established'defeating anti-access capabilities' as a core mission and is developing a new jointair-sea battle concept. Under the new concept, the US will pursue new technologies

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The- DECLASSIFIEDSECRETAUSTEOStrategic Basis of Defence Planning Chapter 1Thes e include:

1.19 -These issues are dealt with in more detail in Chapter 8 -International Defence Relationships. In addition, VIa range of evolving concerns associated with non--traditional threats tosecurity, including the impact of climate change and the potential for disputesto escalate over access to natural resources.


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AfghanistanlPakistan: Operational and Policy issues Chapter 2

CHAPTER2

AFGHANISTANIPAKISTAN: OPERA TIONAL AND POLICY ISSW ES

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The Strategic Setting

2.2 f6t Last November, President Obama agreed to a new approach to the war,matching a 30,000 troop surge with a COIN strategy aimed at winning Afghan popularsupport by regaining the military initiative, building Afghan security forces and deliveringbasic services. In the US,- resident Obama promised to begin drawing down troops frommid-201 1.

IS33o(a)(iiirl t h e verall picture will remain mixed, with the insurgency remaining

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Australia's interests

+ ) - W e do not want to see the return to Afghanistan of terrorists with the freedomto organise, plan and train for attacks on us and our friends and allies. Terroristsresponsible for the deaths of over 100 Australians over the last decade have haddirect links to Afghanistan.

Australia's current posture

are assigned to the operational control of Commander ISAF. We have agreed a statement ofprinciples and protocols with the other agency heads which set out the key requirements forwhole-of-government cooperation.2.12 +The ADF focus in Afghanistan is on two major elements: the Mentoring TaskForce (about 730 personnel) and the Special Operations Task Group (SOTG) (about 340personnel).

The ADF primary mission in Afghanistan is to train and mentor the AfghanNational Army 4th Brigade, based in Uruzgan Province, to a stage where it cantake on lead security responsibility for the province. The Mentoring Task Force isresponsible for these efforts through its Operational Mentor and Liaison Teams(OMLTs), and also undertakes reconstruction asks.The SOTG contributes to the Australian effort by providing enhanced provincialsecurity through disruption of the insurgent leadership and supply routes.The SOTG also contributes to national capacity building by partnering theUruzgan 'Provincial Police Reserve' Company.The remaining ADF units support the National effort and the campaign morebroadly, through strategic airlift aircraft, helicopter support, intelligence,surveillance and reconnaissance and embedded staff throughout InternationalSecurity Assistance Force.

2.13 +Over recent months, the ADF effort has been augmented by a comprehensivewhole-of-government contribution with an increase in non-~efence ivilians in Afghanistan toaround 50 personnel fom The ADF has responsibility for the IS33(l)(a)(ii)I2-6 DECLASSIFIEDSECRET AUSTEOLIMITED DISTRIBUTION


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provision of security to our whole-of-government effort.2.14 fRt Following the hand-over of Dutch leadership in Uruzgan in August, newleadership arraugements are in place under 'Combined Team - Uruzgan (CT-U)'. WhileCT-U will operate under the ISAF 'badge' rather than a national flag (the first province to doso) and will include contributions from Singapore, Slovakia and New Zealand, at its core is apartnership between Australia and the US. The US has provided a Commander (Colonel JimCreighton) and some staff officers for the combined headquarters and will replace most ofthe military and logistical enablers provided by the Netherlands. Australia fills the deputycommander CT-U position, the majority of staff positions in the headquarters, and theAustralian civilian lead of the Provincial Reconstruction Team (PRT) and most of the civilianpositions. The PRT mentors and supports the development of the local Afghan government,and manages political relations with tribal leaders and power-brokers in the province.

Declslons for this term of Government



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Decision for this term of Government

2.26 . . As part of the initial response, Defence assistedAusAlD in the transportation of emergency humanitarian aid and stores to Pakistan via C-17flights. Given the scale of the crisis, Defence has deployed medical teams with AusAlD toKot Addu near the major city of Multan, in the centre of Punjab province. The medical teamscomprise ADF health specialists as well as civilian doctors, nurses, paramedics and supportpersonnel drawn from state health agencies and coordinated by Emergency ManagementAustralia. Defence has provided C-17 airlift support to move the contingent. There is likelyto be pressure for further Defence assistance as the magnitude of the tragedy grows.

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DECLASSIFIEDSECRET AUSTEOCABINET-IN-CONFIDENCEUpdate on Other Significant D efence Operations Chapter 3

CHAPTER 3UPDATE ON OTHER SIGNIFICANT DEFEN CE OPERATIONS

3.1 (U) In addition to our commitment in Afghanistan, the ADF is engaged in EastTimor, the Solomon Islands and Iraq, and contributes to US-led maritime security operationsin the Middle East. Under Operation Resolute, the ADF also contributes naval assets to theCustoms-led, whole-of-government border protection effort.3.2 +)-Command and Control. The CDF commands and controls all operationsthrough the Chief of Joint Operations (CJOPS), Lieutenant General Mark Evans. CJOPSexercises his command through Joint Task Force Commanders in' Afghanistan and Iraq.(based in the United Arab Emirates), Dili, Honiara, and Canberra (Commander BorderProtection Command). The three Service Chiefs are not in the operational chain ofcommand and are responsible for raising, training and sustaining the forces which arerequired by CJOPS to conduct operations.EAST TlMOR

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3.3 (U)The International Stabilisation Force (ISF) in East Timor assists the Governmentof East Timor to maintain stability, conducts capacity building and provides security to theUnited Nations Integrated Mission in Timor Leste (UNMIT).3.4 *The ADF commands the ISF and contributes approximately 400 personnel.The main body of the ISF consists of a Task Group (currently the EighthINinth Battalion ofthe Royal Australian Regiment (8/9RAR), based in Brisbane) and three Black Hawkhelicopters from the Fifth Aviation Regiment (5AVIV), based in Townsville. 819RARcommenced its eight-month deployment to East Timor in February 2010 and is scheduled torotate in October 2010. The Black Hawk force rotates every four months. New Zealandprovides a contribution of approximately 70 personnel and Protected Mobility Vehicles, whichare integrated into the Task Group.3.6 (U) Defence Cooperation Program (DCP) spending in East Timor in recent yearshas been between $8m to $13m annually. In addition to ISF personnel, there are currently24 DCP personnel (22 ADF and 2 civilians) in East Timor, including advisors in the DefenceSecretariat, East Timor Defence Force (F-FDTL) and naval component headquarters. .

3.7 +?)-The UN Police is a multi-national policing force of up to 1,600 personnel that,

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DECLASSIFIEDSECRET AUSTEiOCABINET-IN-CONFIDENCEUpdate on Other Significant Defence Operations Chapter 33.9 The ADF commitment to the ISF reduced from 650personnel to 400 in February 2010 due to the improved security environment. This is the

SOLOMON ISLANDS

3.10 (U) Operation Anode is the ADF commitment to the Regional Assistance Mission tothe Solomon Islands (RAMSI). Australia's commitment is currently approved to 2013.

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Force 635 (CTF635), which comprises a headquarters (approximately 50 personnel) andthree platoons (approximately 35 personnel each). Australia currently has 113 personneldeployed to the Solomon Islands in support of CTF635, which includes most of theheadquarters personnel and two of the three platoons. New Zealand currently provides eight

3.12 (U) The Australian commitment will reduce to 83 in early December 2010, when oneof the two Australian platoons is replaced with a New Zealand platoon of 31 personnel.Tonga and Papua New Guinea each alternately deploy one platoon (approximately 35personnel) which comprises the third CTF635 Platoon. Rotations occur every four months.The Commanding Officer, an Australian, remains in theatre for 12 months.3.13 (U) The ADF contribution is predominantly provided by Reserve personnel from theArmy's 2nd Division. The Theatre Reserve Force based on units from 3 Brigade remains onstandby to assist if required. The current unit on standby is 3 RAR in Sydney.

3.16 (U) The ADF has funding responsibility ($29.6m for 2009-10) for all ADF expenses

engagement is to enhance the capacity of the Royal Solomon lslands Police Force MaritimeDECLASSIFIEDSECRET AUSTEOCABINET-IN-CONFIDENCE


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Wing with fuel subsidies, training for crew, maintenance funding, and in-country support.3.17 (C) The militaw component of RAMS1 reduced from five platoons to three in July

IRAQ AND MIDDLE EAST

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3.19 *Defence withdrew the last comba t, logistic and embedded personne l from lraqon 31 July 2009 to conclude Operation Catalyst. Defence has approximately 60 personnel inplace to provide security and support to the Australian Embassy and its staff in lraq underOperation Kruger. A further two officers are in lraq in support of the Un ited NationsAssistance Mission for lraq unde r Operation Riverbank. Agenc ies are currently workiqg totransition the provision of Embassy security from an ADF-led security operation to aDepartment of Foreign Affairs and Trade (DFAT) controlled, commercial solution.This reflects the improving security situation in lraq and both countries' intent to normalisebilateral relations. DFAT assumed the commercial security contracts for the Embassy on1 July 2010. The ADF presence is scheduled to reduce to 33 personnel from October 2010.

BORDER PROTECTION: OPERA'I'ION RESOLUTE3.22 fRt Protecting Australia's maritime approaches remains a constant challenge.Operation Resolute is the ADF's contribution to the Customs-led, whole-of-governmentborder protection effort. Under the Command of Border Protection Command, OperationResolute's mission contributes to the maritime enforcement elements of border protection.The maritime enforcement activity is directed against Australia's maritime security threats.These threats include illegal exploitation of natural resources, illegal activity in protectedareas, unauthorised maritime arrivals, prohibited imports/exports, maritime terrorism, piracy,comprom ise to bio-security and m arine pollution.3.23 ADF provides seven patrol boats, two AP-3C Orion maritime patrol aircraftand Renional Force Surveil lance Units to ~ a t r o l ustralia's mari time a ~ ~ r o a c h e s .dditional

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LlNCLASSlFlEDProgress with the Strategic Reform Program Chapter 4

CHAPTER 4I

PROGRESSWITH THE STRATEGIC REFORM PROGRAM

4.1 The SRP is a major public sector reform initiative and as large as any cost reductioninitiative ever undertaken in Australia. It is a once in a generation opportunity for Defence tobuild a better and more capable organisation. If Defence is to build and sustain Force 2030 itmust succeed. It will need strong leadership because what it requires that Defence do ishard. But the Defence workforce understands the purpose of SRP and the benefits it willbring. Commitment is high, but the challenge and risk should not be underestimated.4.2 The 2009 Defence White Paper recognised that achieving Force 2030 requiredfundamental and sustainable reform across Defence. A number of reviews undertakenduring the development of the White Paper included the eight internal 'Companion Reviews'and the 2008 Audit of the Defence Budget (DBA). They concluded that the reform activities,in which Defence has been engaged, should not only continue, but needed to beconsolidated and intensified.4.3 The SRP brings together the work of these reviews to form a comprehensive set ofreforms designed to improve Defence performance, accountability, planning and productivity.The SRP will achieve cost reductions of around $20 billion over the decade to be reinvestedin Defence capability.4.4 The SRP is a strategic, organisational transformation. Its core purpose is to build aDefence organisation capable of implementing and sustaining Force 2030. It seeks to freeup resources for investment by increasirlg Defence efficiency. It includes substantialinvestment in remediation of Information and Communications Technology infrastructure andlogistics systems. It will build Defence management capacity, strengthening our ability tohandle a tight budgetary environment.4.5 Defence is now implementing a comprehensive whole-of-portfolio implementationplan. This includes a detailed implementation schedule; a full risk analysis and riskmanagement strategy; governance; performance monitoring; and reporting. This plan wasapproved by the Government in March 2010.4.6 The SRP consists of over 300 separate initiatives which are managed through15 individual reform streams, as described in the diagram on page 4.

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4.7 We are implementing the SRP with a roll-out of complex and sustainable reforminitiatives over the next three years. Some streams will deliver direct cost reductions thathave been earmarked for reinvestment in Force 2030. Others will help put downwardpressure on costs through reform to planning and business process.4.8 The SRP is on track to date. Defence has already achieved the $797m of costreductions programmed for 2009-10. The bulk of these reductions, and much of the costreductions programmed for 2010-11,are a continuation of the Defence Savings Program thatcommenced prior to the SRP. In 2010-1 1 the cost reductions step up to $1,016m as newreforms roll out in 2010-1 1 and gains from sustainable reforms start to be realised.4.9 Risk identification and management is a major focus of implementation. Major risksinclude the complexity of the program and the interdependence of its elements. There aremany moving parts. Another major risk is the political and/or organisational sensitivitiesassociated with particular cost reduction proposals. SRP challenges many establishedcustoms and practices. Some proposals have already been ruled out because of theirsensitivity. Notwithstanding this, it is important not to rule out proposals before they havebeen examined and considered. To do so makes the achievement of cost reductions moredifficult and undermines the integrity of the program.4.10 The Secretary and CDF are responsible for ttie SRP. To support this, DefenceCommittee members have been assigned individual accountabilities for the implementationof specific reforms and achievement of accompanying savings. The Deputy SecretaryStrategic Reform and Governance is accountable and responsible for the oversight,integration and coordination of the SRP at the portfolio level. Each of the 15 reform streamsis led by an SES band threelmilitary three star officer.4.11 The Defence Audit and Risk Committee (DARC) is provided with regular updates onthe achievement of savings and management of the risks involved. The DARC will providethe Secretary and CDF with an annual assurance that Defence is implementing reform andachieving the required cost savings. The DARC provides robust and independent advice toDefence leaders on all aspects of governance.4.12 External governance arrangements include: progress reporting to the Minister forDefence; biannual progress reporting to the National Security Committee (NSC) of Cabinet;and quarterly reporting to the Minister for Defence by the private sector chair of the DefenceStrategic Reform Advisory Board (DSRAB). The next report to the NSC is due in October.We have commenced work on the report and will have it available for your consideration inlate Septemberlearly October. This report will include a comprehensive assessment of theSRP's performance against cost reduction targets and its impact on the DefenceOrganisation. The DSRAB was established by the Minister for Defence to provide carefulexternal scrutiny of the SRP.4.13 External scrutiny is an essential feature of the governance arrangements. It injectsdifferent perspectives and new ideas into the management of the SRP. It helps drive outcomplacency within Defence and builds confidence in our performance with stakeholderselsewhere in Government. The DSRAB is the key mechanism to provide this scrutiny.The DSRAB reports independently to the Minister for Defence.

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4.14 The DSRAB membership is: Mr George Pappas (external Chair), Mr DavidMortimer, Mr John Fletcher, Ms Linda Nicholls, the Secretary of the Department of Defence,the CDF, the Chief Executive Officer of the Defence Materiel Organisation, the Secretary ofthe Department of the Prime Minister and Cabinet, the Secretary of the Department ofFinance and Deregulation, and the Secretary of the Treasury. Mr Paul Rizzo, external Chairof the Defence Audit and Risk Committee, and Ms Jennifer Clark, external Chair of theDefence Material Audit Committee attend meetings as observers.

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I n P c l l i iQpaMlw. efence CapaMllty Plan . lommaRcl*wlnmPreparedness and Pwronnel DefffceRrmrementandand Operatinp tosshirticr STR*l'EBICREFORnPR. me &Technology

-lndumyCapadtyhbensflbost nduciionrncluding

ICi.Conaol1* 200dmmaes tolerrmrn ten.Create a sin@enterprisea r d r l w r e.StandardiseD e f mICT envimment.Review theeflectivanenof the two passpmoerr for1Crpmiectr

*1.*

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D LA SlFlEDS E ~ ~ E ?USTE:OImplementation of Force2030 Chapter 5

CHAPTER 6IMPLEMENTATION OF FORCE 2030

Implementation of Force 2030- Key Challenges5.1 *The irr~plementationof Force 2030 is on track but under pressure. It wasdeliberately designed to be an ambitious program and it will take constant effort to deliver.Risks to the program will emerge as a result of strategic change in the region which, over a20 year period, will require constant assessment. New developments may lead to changesin capability requirements. Budget pressures either in the Defence Capability Plan projectsor in areas where we have no budget flexibility will necessitate tough management and somedifficult choices to keep projects on time and on budget. That said, Force 2030 is a planwhich will deliver new capabilities to Defence every year from now to 2030 and beyond andultimately deliver a formidably capable ADF. It is not a plan for a one-off step up in capabilityin 2030. This, and successive, governments will need to actively manage force structuredecisions to ensure the program remains on course.

6.3 +6)-Defence's performance with respect to the approval rate of capabilitysubmissions over the past 15 months has not been optimal.5.4 ++The White Paper set a very ambitious timetable and in 2009-10, Defencestruggled to get the major capital projects predicted for consideration ready for approval bythe Government. In terms of Government consideration, we achieved approximately thehistoric average of approvals, but this was below what Defence anticipated and a visiblefailure against the White Paper's timetable.



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5.5 *The Porffolio Budget Statement 2009-10 foreshadowed 29 capability projects tobe progressed- 15 first pass approvals and 14 second pass approvals. Of these, Defenceachieved approval of (disappointingly) only two of the 15 projected First Pass approvals, andeight out of 14 Second Pass projects.5.6 f6t n addition to these, Defence received approval of an extra four First Passsubmissions and seven Second Pass submissions that were unplanned at the time of thePorffolio Budget Statement 2009-10, including a number of urgent operational requirementsthat were approved several days after the end of the financial year.5.7 f6t Overall, we therefore achieved approval of 22 major capital capabilitysubmissions. In addition, while the number of approvals was not optimal, we achievedGovernment approval of approximately $540m out of the $578m (that is 93 per cent) of thefunding allocated in 2009-10 for major capital equipment in the Defence Capability Plan.]5.8 +The capability development stream of the Strategic Reform Program aims toimprove the timeliness and quality of advice to Government on major capital equipmentsubmissions. It has four top-level reform deliverables - improving governancearrangements, better cost forecasting initiatives, improved management of funding for majoracquisitions, and reducing the cost of major equipment procurement. As many of thereforms address changes to process and education, they are designed to improveefficiencies and improvements to effectiveness over the medium and longer term.5.9 +In the shorter term, we have asked Defence to improve the rate, quality ofanalysis and timeliness of Cabinet Submissions through greater accountability, enforcedbusiness processes and additional reporting requirements. We will be pushing hard to helpaddress that objective.5.10 *The key challenges in implementing Force 2030 include:

ensuring capability is developed in accordance with strategic guidance;the timely development and approval of major capital investment proposals,incorporating all elements of the Fundamental Inputs to Capability (the standardDefence list for consideration of what is required to generate capability,comprising Personnel, Organisation, Collective Training, Major Systems,Supplies, Facilities and Training Areas, Support, and Command andManagement);ensuring adequate resourcing, both financial and personnel (with appropriateskills), to build and maintain the planned force structure;the difficulties associated with the introduction into service and operation ofseveral new capabilities as planned in the DCP; and



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Implementation of Force 2030- Key Decisions

Timeline for the Development of Force 20305.16 (U) Duriug the period to 2030, many of the key capabilities that comprise the currentforce structure will be progressively replaced based on planned withdrawal dates, or in someinstances new capabilities will be introduced. Force 2030 will therefore incrementallyintroduce new capabilities over the coming years. It does not represent a single step up incapability in 2030 but rather will deliver an ADF that is becoming steadily more capable.

B~ the following key capabilities will have entered service or bek:le course of being introduced into service:



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5.18 the ollowing key capabilities will have entered service or be IS33(l)(a)o(in the course of being introduced into service:

5.19 -@+ME0)the ey capability changes to the force structure will consist IS33(l)(a)olof:

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6.20 +MSFE0) the ey capability changes to the force structure will consist IS33(l)(a)ol

Force 2030: A refined force structure and capability development process6.21 (U) The 2009 Defence White Paper stated that "improved Defence planningprocesses will be crucial to the im plementation of Force 2030". To achieve this a five-yearplanning cycle would be adopted, including an institutionalised Force Structure Review (FSR)process to improve and strengthen the linkages between strategic guidance, forcedevelopment and capability decisions. No force structure option or capability requirement isto be considered unless it has been generated through this process.6.22 (U) As a result, Secretary and CDF directed the establishment of the ForceStructure Development Directorate in Military Strategy Branch, Strategic Policy Division toimprove the alignment between capability and strategy. The branch works very closely withCapability Development Group to ensure that capability proposals flow logically fromGovernment agreed strategic guidance.

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DECLASSIFIEDCONFIDENTIAI,CABINET-IN-CONFIDENCEDefence Funding Over the Long Term Chapter 6

CHAPTER 6DEFENCE FUNDING OVER THE LONG 'TERM

% (U) Wed

DEFENCE FUNDING MODEL6.1 (U) In the 2009-10 Budget, Defence was provided with a capped budget to fully fundthe 2009 Defence White Paper over the 21 years to 2029-30. The cap applies to all yearsindividually over the 21 year period and cannot be exceeded in any individual year. The onlyadditional funding that Defence is expected to seek is no-winlno-loss funding for DefenceOperations.6.2 (U) There will always be emerging funding pressures in Defence. As they arise,offsets will need to be identified within the capped budget; over time that is becomingincreasingly difficult to achieve.Funding Arrangements6.3 (U) Defence's current funding model originated in the 2009-10 Budget.The Government provided Defence with a fixed funding model to fully fund the 2009 DefenceWhite Paper over 21 years. This funding model is based on the following funding principles:

3 per cent average real growth to 2017-18;2.2 per cent average real growth from 2018-19 to 2029-30;2.5 per cent fixed price indexation from 2009-10 to 2029-30, with the 2.5 per centto be calculated from 2009-10 but applied only from 2013-14; andagreement that Defence will reinvest all savings ($20 billion gross) from theStrategic Reform Program (SRP) and other initiatives into higher priority Defencecapabilities.

6.4 (U) The funding package provides Defence with greater funding stability andcertainty, while requiring Defence to drive efficiencies and improve productivity.

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Funding arrangements for Operations

6.9 fRt Defence is also required to continue to absorb the costs associated with minoroperations (under $lorn), including longstanding United Nations and regional peacekeepingminor ope rations.Options for Balancing the Budget

BUDGET OVERVIEW6.12 (U) Defence's Total Resourcing in 2010-11 of $26,896.6m includes funding fromGovernme nt of $25,736.8m and funding from other sources of $1,159.7m. The structure ofDefence expend iture is a s follows:

2010-11 Budget % of the$m BudgetCapital Investment Program 7,876.2 29.3~ dr kf o rc e xpenses - 9,486.1 35.3Military Operations 1,853.7 6.9Operating Expenses 7,680.6 28.6

Total 26,896.6 100

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DECLASSIFIEDC:ONFIDENTIAL,CABINET-IN-CONFIDENCEDefence Funding Over the Long Term Chapter 6

Capital Investment Program

Workforce Expenses6.16 *The Military Employee Expenses (MEE) comprise 84 per cent of the totalWorkforce Expenses in Defence. The MEE component is made up of military salaries,allowances and superannuation paid to individuals, along with conditions of service such asfree healthcare, superannuation and subsidised housing. There is no flexibility in the MilitaryWorkforce as the number of Military is fixed by the government and military remuneration isset by the independent Defence Force Remuneration Tribunal.

Military Operations

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DECLASSIFIEDCONFIDENTIAL.CABINET-IN-CONFIDENCEDefence Funding Over the Long Term Chapter 6

Operating Expenses6.20 -(-Cj- Defence's operating budget represents the non-personnellnon-capital cost ofdelivering Defence capability. The majority of expenditure relates to the maintenance and .support costs for Defence assets. The remainder relates to garrison support, estatemanagement costs, information technology, delivery of intelligence capabilities, research anddevelopment costs. Human Resource management and financial management costs.m

TRATEGIC REFORM PROGRAM (SRP)6.21 (U) Defence has initiated a major reform program that will deliver gross savings ofaround $20 billion over the decade. SRP savings will be supplemented by further savingsinitiatives, reprogrammed funds and by new funding from the government to provide nearly$45 billion in total for investment in new initiatives.

MANAGEMENT OF DEFENCE'S FINANCIAL PRESSURES

'FAT AND BLOATED' PERCEPTION OF THE DEFENCE BUDGET6.23 (U) Defence consumes approximately 9 per cent of government outlays and istypically seen either as largely discretionary spending or at least more capable of beingfinancially reshaped than other government agencies. Indeed there still exists a view thatdespite the $44.9 billion of funds reinvested in the 2009 Defence White Paper, $20 billion(gross) of which were identified in the Pappas Audit, there still is "plenty of fat" withinDefence. These views, although ill-conceived, render Defence an obvious a target for anymajor budget reshaping.

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UNCLASSIFIEDPeople in Defence Chapter 7

CHAPTER 7PEOPLE IN DEFENCE

People In Defence7.1 The 'People in Defence - Gen erating the Capa bility for the F uture Force' documentsets out the Defence strategy to deliver reform and new initiatives by 2015 to ensureDefence is on track to meet the workforce required by the 2009 Defence White Paper.7.2 Defence faces some unique challenges in attracting and retaining its requiredworkforce that are in addition to the demographic challenges faced by all Australianemployers. These challenges relate particularly to the demanding nature of ADFemployment, the potential for life-long impacts and the demands placed on Defence families.'People in Defence' outlines what must be achieved by 2015 to achieve success in the eyesof the Australian Government, the Australian Community and people contemplating aDefence career.The Current Defence Workforce7.3 Defence employs in the order of 80,000 people in its permanent workforce andsome 25,000 Reserves. Specialist expertise is also provided by a contractor workforce - nthe order of 750 full time equivalent positions.7.4 The tables on the following page set out the current workforce numbers. The datashown is current as at 1 August 2010.

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ADF Workforce

PermanentReservists onContinuous FullTime ServiceGap YearTOTALActive ReservesTOTAL (InclActive Resewes)

Clvllian and Contractor WorkforceAPS W orkforce (including the Defence M ateriel Organisation)Contractors

Senior Executive Sewice and Star Ranks (including the Defence Materiel Organisation)

UNCLASSIFIED

Navy13,713476

22314,4124,30418,716

21,346742

TOTAL176140

316

AD FSESIChiefs ofDivisionIMedicalOfficersTOTAL

Army29,609676

28630,57116,58247,153

Air Force5.4%

Army7.3%

ADF 12 MonthRolllngSeparation Rate

4*11

2

TOTAL ADF7.0%

Navy8.3%

Air Force14,650147

10714,9043,41018,314

TOTAL ADF57,9721,299

61659,88724,29684,183

3*613

19

TL

3832

70

I *13194

225


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The Immediate Workforce Challenge7.5 The most critical workforce issue facing Defence is overachievement againstAverage Funded Strength (AFS). As at IAugust 2010, the ADF is 1,552 over its fundedstrength (the Army is 1,163 above, the Air Force is 470 above, and the Navy is 81 below).This situation results from strong recruitment and retention performance over the last 18months, reflecting firstly the impact of the 2006-07 and 2007-08 Recruitment and Retentionpackage ($3.1 billion) and then the impact of the Global Financial Crisis. Although thisposition represents a less than 3 per cent variance against target, it creates significantfinancial pressures in the order of $144.5m that must be addressed within the Defencebudget. This significant pressure coincides with challenges generated for Defence by theSRP savings plan.7.6 In order to reduce the AFS overachievement the ADF is using a range of tools toensure we do so, but retain a balanced and sustainable workforce. These tools includereducing ab-initio recruiting targets (by 25.9 per cent over the last two years), reducing theuse of Continuous Full Time Service, limiting lateral recruiting from overseas, reducing priorservice re-enlistment targets and reducing the number of people transferring from theReserve to Full Time Service.7.7 Due to the need to maintain a workforce with the required rank and occupationalcategory mix and appropriate skills and qualifications to support future capability, and the factthat the ADF workforce is largely grown from within, these are the limits of reductions inrecruitment at any point in time that are feasible.The Enduring Workforce Challenge7.8 The second workforce.challenge relates to current status on critical and perilousemployment categories. This situation has improved over the last 12 months with a reductionin the number of these categories (from 32 to 20). Continued effort focused on recruitingachievement, training systems effectiveness, retention, and employment category structureis required to ensure these critical skills are available to support ADF capability.The Target Workforce for 20307.9 The ADF and civilian workforce will need to grow to meet the force requirements setout in the 2009 Defence White Paper, to approximately 59,772, and the civilian workforce to22,971. These targets will be reviewed in the five-year White Paper planning cycle to ensurethat personnel targets keep pace with changes in strategic circumstances.Strategies for Success7.10 People in Defence outlines three Blueprint strategies for achieving success in 201 5:

The attraction of people willing to do extraordinary things by building andcommunicating an attractive and compelling employment offer.

Defence needs to create an attractive and compelling employment offer to ensure it iscompetitive in both the broader employment market and in attracting key talent.Supporting Defence people and their families to stay in the Defence workforce bycontinuing to develop a work environment and support arrangements that deliverour commitments to our people.

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Defence must support, engage, develop and empower Defence personnel and their familiesto continue in service. Defence Leaders and HR professionals must ensure that theemployment offer we have made is more consistently delivered to our workforce and theirfamilies.Development of an effective and efficient people system to achieve moreconsistently effective people outcomes, with greater efficiency Shared Servicereform must simplify and standardise HR business processes.

An assurance framework must operate to assess the effectiveness of programs and policies,progress in closing performance gaps, and the identification of steps to ensure thatDefence's offer to its workforce is refreshed and remains compelling.2009 Defence White Paper Funding7.11 $2.6 billion is committed over the next ten years toward a range of initiatives aimedat providing a highly attractive employment offer and sustaining a healthy and effectiveworkforce, including:

Improved support to ADF Families (a self reliance strategy to equip families offull-time members with the skills to develop social networks in new postinglocations), and access for Reserve families to Defence Community Organisationservices for up to 12 months following deployment;Diversity Strategies (recruitment and retention of women, indigenousemployment, multicultural recruitment and retention and ADF workplacediversity);Housing and Accommodation Assistance;ADF Health Support (including improved mental health management,improvements to ADF rehabilitation and compensation, and the development of acapacity for complex medical transition coordination to improve transition andseparation outcomes for members injured during service); andWorkforce Intelligence capability, providing an increased personnel researchcapacity to allow Defence to monitor, analyse and mitigate external and internallabour market risks to its current and future workforce.

The Future Defence Workforce-Key Strateglc ChallengesEffect of Economic Resurgence7.12 Defence is undertaking an Economic Resurgence Project, which gathers andanalyses data on the potential impacts of the expansion of the Australian resources andconstruction sectors on the Defence workforce. The project's findings will provide the basisfor determining the requirement for any action to mitigate the risks associated with the returnto economic growth. The project will be completed in the latter part of 2010 and will informadvice to government on these matters.

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Llmited Fundlng Flexibility7.13 Defence does not have any funding contingency to enable it to adjust itsemployment offer if the impact of economic resurgence produces a significant need to meetthe market on remuneration or benefits. Not all of the responses likely to be necessary willrequire funding, however any that do require funding will need to be found within the Defencebudget through reallocation of priorities.A Solution to Military Pay Issues7.14 Defence faces three main challenges in creating a more consistently accurate andefficient military pay system:

Effective Governance and Administration. Many of the causes of currentpayroll problems can be attributed back to poor administration, poor execution ofdelegated authority, inconsistent record keeping andtor members not checkingtheir pay slips to pick up anomalies. Most of the pay issues that generate debtshave their genesis in defective administration. Achieving full oversight of alladministrative actions that impact pay is difficult given that functions are beingcarried out in the Services as well as the Defence Support Group, and each yearthere are some 3,000,000 manual pay transactions.Response: On 2 February 2010, an ADF Payroll Remediation Task Force wasestablished to rectify current deficiencies in the ADF payroll system and toaccelerate the introduction of an improved pay system. The Task Force isco-chaired by the VCDF and the Deputy Secretary Defence Support. It is makingprogress in conducting audits and reviewing business processes, resulting inmuch needed earlier identification of potential pay issues and anomalies and theirrectification.Ageing technical systems with limited Integration. The Task Force hasidentified that contributing factors to high profile overtunder payments include theuse of multiple systems and manual interfaces. That is, once pay issues areidentified the current ICT system environment can make analysis and solutionsdifficult to progress in a timely manner.Response: The introduction of capability under the Technical Refresh project andJoint Project 2080 Phase 2B.1 will help to reduce the operation (system) risk inthe payrolltHR function. The Technical Refresh will generate a stable ICTenvironment for payroll while Joint Project 2080 will enable a modern andintegrated HR and payroll business process.Underlying Complexity In Pay and Allowances. Defence has undertaken aphased approach to remuneration reform since 2001 to recognise work valuethrough base salary and generate more relevant skills-based classificationstructures for both Officers and Other Ranks. There are over 1,000 activeallowances in ADFPAY alone. Many of these allowances haveinterdependencies - for example, when in receipt of Special Forces DisabilityAllowance, field allowance is not payable. Despite this program of reform thetraditional industrial structure of Defence Allowances results in the followingmetrics:

(1) 17 'pay related' allowances, with a complex set of just 100 categories ofthese allowances;7-5

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UNCLASSIFIEDPeople in Defence Chapter 7(2) Some of these allowances are paid continuously, while others are paid onan 'on occurrence' basis. Some allowances may be paid both on acontinuous basis or an on occurrence basis, depending on thecircumstances; and(3) Over 130 potential pay points according to circumstances.

Response. The final tranche of reform is the simplification and rationalisation ofthe ADF Allowances Framework. The simplification and standardisation processwill reduce the opportunity of administrative errors, and support a more efficientshared services payroll processing function that delivers SRP savings. High leveldesign of a simplified allowances framework is underway. Following Governmentendorsement of the concept, a comprehensive consultation process and detailedfinancial modelling will be required to achieve positive endorsement of theframework within Defence and from the Defence Force Remuneration Tribunal.

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DECLASSIFIEDSECRET AUSTEOlnternational De fence Relationshios

CHAPTER 8INTERNATIONAL DEFENCE RELATIONSHIPS

A challengi~gnternational outlook8.1 ++We maintain a wide network of international defence relationships as ameans to promote our national interests. Our alliance with the United States,founded on the ANZUS Treaty but strengthened over 60 years of close cooperation,



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DECLA SlFl DsECRE+ AU ~T E OInternational Defence Relationships Chapter 8

US Alliance8.5 +The US continues to focus on Afghanistan and Iraq, but the Obama



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D CLA SlFl DS E ~ R E ~U ~ T E , OInternational Defence Relationshi~sJapan, India and Korea

United Nations, Africa and Europe8.13 4GkDefence relations with the UN and Africa have expanded significantly

8.14 *The main focus of our engagement in Europe is with the UK, where wehave recently strengthened traditional and longstanding ties by finalising a jointreview of defence cooperation. Our other interests in Europe are in maintainingaccess and influence with NATO partners deployed in Afghanistan and supportingequipment purchases.



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DECLASSIFIEDSECRET AUSrE:OInternational Defence Relationships Chapter 8

South East Asia8.15 (Cl Indonesia is our most im~o rt an t efence relations hi^ in the near reaion.

8.16 *We have a close defence partnership with Singapore based on commonstrateaic understandinas and close coo~erat ion between our militanr forces.

8.19 *The FPDA with Sinnapore, Malaysia, the UK and New Zealand remains

8-4 DECLASSIFIEQSECRET AUS rE,O


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DECLASSIFIEDSECRET AUSTEIO

East Timor, the Pacific and New Zealand8.20 *As a close neinhbour, Australia has an enduring interest in assisting

8.23 -fSjAustralia's defence relationship with Fiji will remain suspended until the

8.24 f6tAustral ia has a long-standing and close bilateral defence relationshipwith Papua New Guinea (PNG). The PNG Defence Force is one of the largestrecipients of Defence Cooperation Program funding, this year worth around $1 1m,through which we provide training, joint exercises and infrastructure projects to assistthe PNG Defence Force to become a more efficient, sustainable and ~rofessional



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DECLASSIFIEQSECRET AUS TEOInternational Defence Relationships Chapter 8

8.25 +Our cooperation with the Solomon Islands is focused on enhancina the

8.26 (U ) The Pacific Patrol Boat Program is Australia's primary vehicle fordelivering security assistance to Pacific Island countries. The Program makes avaluable contribution to Australia's presence in the Pacific, providing maritimesurveillance and fisheries protection capabilities.The Middle East8.27 +Our key focus in the Middle East is to support ADF operations, assist

8.28 f6 fFol lowing the conclusion of Operation Catalyst, we fund a modestDefence Cooperation Program in Iraq focused on officer and logistics training.

ADF involvement in the security of the Australian Embassy in Baghdad .8.29 +)-Austral ia does not have a bilateral defence relationship with Iran.Defence supports United Nations Security Council (UNSC) resolutions, autonomoussanctions and other counter-proliferation measures against activities, entities andindividuals associated with Iran's nuclear program. Most recently, Australiasupported the adoption of UNSC resolution 1929 on 9 June, in response to Iran'sfailure to comply with international requirements relating to its nuclear program.

8.30 +We have a modest defence relationship with Israel, focused on the

8.32 (U) Afghanistan and Pakistan are dealt with in Chapter 2 - Afghanistan /Pakistan: Operational and Policy Issues.DECLASSIFIEDSECRET AUSTEO


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DECLASSIFIEDRESTRICTEDA cq u i si t io n a n d S u s t a i n m e n t C h a p t er 10

CHAPTER 10ACQUISITION AND SUSTAINMENT

'The DMO: Defence's Acquisition and Sustainrnent Organisation10.1 (U) The DMO's role is to equip and sustain the ADF. The DM0 has been aPrescribed Agency since 1 July 2005. Accordingly, the Chief Executive Officer (CEO),Dr Stephen Gumley, is directly accountable to the Minister under the Financial Managementand Accountability (FM A) Act 1997 for the DMO's performance, while remaining accountableto the Secretary under the Public Service Act 1999. The CEO DM0 has joint accountabilitiesto the Secretary and the CDF.10.2 (U) The acquisition and sustainment business that DM0 manages for Defence isworth over $120 billion in the next ten years. With a budget of more than $11.5 billion perannum, it includes over 200 major capital equipment projects and over 120 minor projects .and sustaining and upgrading when necessary over 100 existing fleets. There areapproximately 28,000 staff in private sector Australian defence industry (Australian content isabout 50-55 per cent, with $0.93 of every dollar going to private industry).10.3 +)-Support to ADF units deploying on military operations or humanitarian missionscontinues to be the highest priority for acquisition and sustainment. This involves a directlevel of responsiveness to urgent equipment demands along with the provision of specialistengineering and other technical support in environments that are subject to high levels ofnational security classification.

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Acquisition and Sustainment Chapter 1010.4 (U) Responsiveness to the ADF's operational requirements needs to be matched byresponsiveness to the Government and to its Defence partners. Performance in deliveringprojects to budget and schedule has improved since the implementation of the 2003 DefenceProcurement Review (Kinnaird Reforms), but further work to consolidate and sustainimprovements is necessary. This was recognised in the Mortimer Review. Defence and theDM0 are continuing to implement the plan agreed by the previous Government in responseto the Mortimer Review.10.5 (U) The DM0 is driving reform across all elements of its business operations.Current priorities for reform are focused on:

continuing to prioritise and meet the ADF's urgent operational demands inaddition to delivery of DCP projects;embedding stronger assurance and review processes that do not underminepersonal accountability, but allow for appropriate and timely intervention ifrequired;providing specialist commercial and technicallengineering advice earlier in thecapability development process to ensure that technical risks, costs andappropriate acquisition strategies are considered in the development of capabilityoptions;enhancing the DMO's advice to the Government on the capacity of industry todeliver desired capabilities and on cost and schedule estimates for newequipment;upskilling our defence industry sector to address workforce demands in areascritical to achieving the DCP and through-life support of existing platforms;benchmarking DM 0 performance in procurement and sustainment against bestcommercial practice and against international defence procurement agencies;andunder the SRP, reducing the cost of sustainment by 10-15 per cent in real termscompared with the 2007-08 baseline levels.

10.6 (U) The Government also expects the DM0 to provide independent and robustadvice on the commercial and industrial impacts of decisions on major equipment proposals.Fully implementing the Mortimer reforms and a disciplined approach to defence capabilityplanning will continue to be key challenges in the medium-term.SRP Savings10.7 (U) The DM0 has a major role in delivering $5.5 billion of SRP savings, over thedecade to 2018-19, through the Smart Sustainment reform stream that encompassesmaintenance and inventory reforms.10.8 (U) Progress to date has been very good, with full achievement of SmartSustainment savings targets in 2009-10 (in the order of $263m) in addition to the $23011-1fcosts of ownership reductions achieved in 2008-09, prior to the SRP announcement.The commitment to reinvest savings in Defence capability provides a significant incentive forboth Defence and its industry suppliers to achieve SRP targets.


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10.9 (U) Importantly, Defence, the DM0 and our suppliers are working closely to ensurethese measures are sustainable and will not compromise the agreed level of capability,quality or safety.10.10 (U) There is considerable synergy between the Mortimer and other SRP reforms.While Mortimer reforms are focused on effectiveness, Smart Sustainment focuses onefficiency. Defence partners and industry counterparts at both senior and project levels arebeing engaged and consulted. The goal is to ensure maximum efficiency is extracted fromequipment support programs, while retaining capability levels, safety and quality as tenetsthat cannot be compromised. Opportunities to achieve genuine reform includeimprovements in preliminary logistics support planning, better cost estimation practices,improved understanding of commercial risks and clarity in requirements and expectations asdetermined by the Capability Managers.10.11 (U) Examples of Smart Sustainment initiatives include re-tendering of the supportcontracts for major equipment fleets to reduce costs and introduce incentives if the industrysupplier can achieve ongoing efficiency targets. Servicing regimes are being adjusted andrepair pool arrangements are being implemented for vehicle fleets to deliver the requiredlevel of capability at a lower cost. In the naval ship repair sector, the Navy's major fleet unitsare being grouped, and performance-based contracts introduced, to deliver more certainty ofwork for Industry, better maintenance and availability planning information for Navy andlower costs for the taxpayer.10.12 (U) A more commercially astute DM0 presents a positive challenge in therelationship with Defence industry suppliers, as do the demands for increasing productivityand efficiency in through-life support contracts. Progress in the early days of thedecade-long SRP has been encouraging. The reform program encompasses changes indemand requirements, improvements in contracting processes and industry suppliersachieving efficiency and productivity gains. Since most equipment sustainment and supplyarrangements are provided under contract by industry suppliers, reform activities will result inreductions in payments to suppliers. Savings from the reforms will be returned to Defence tofund new capabilities. Over the decade of the SRP, it is anticipated that while there will bereductions in the flow of funding to industry for the sustainment of the current capabilities,this will be offset by additional demands on industry in acquisition and support of newequipment.10.13 (U) One of the Mortimer reforms is the inclusion of Project Directives. This providesa stronger connection between the equipment specifications agreed by Government,agreement of the Capability Managers to bring that equipment into service and theperformance expectations of the DM0 and providers of inputs in the delivery of materiel tothe Capability Manager. Another key outcome expected under the Mortimer reforms isimprovements to the rigour of planning information presented in the Defence Capability Plan(DCP). This requires sign-off from the key stakeholders in the capability developmentprocess. The first such sign-off occurred in 2009, however, there is room for continuingimprovement in cost and schedule estimates. The DM0 has a key role in providingassurances on the costs schedule and technical risks of equipment acquisition andsustainment options.Budget indexation10.14 +The DM0 continues to watch exchanae rate fluctuations and volatilitv in alobal



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Contracting Reform10.18 (U)The DM0 is committed to achieving further procurement reform. Enhancementsto contracting practices involve a balance between the retention of the Commonwealth'scommercial leverage and industry's demands for long-term certainty so that appropriateinvestments in workforce and infrastructure can be made.10.19 (U) The current focus for contracting reform is on optimising contracting templates toalign with the range of procurement activities undertaken (e.g. by risk and value), andstrengthening and increasing the use of performance-based contracts, particularly forsustainment activities. These forms of contracts provide incentives for industry suppliers toachieve cost reductions over the term of the contract, and give the Commonwealth leverageto extend or re-tender contracts based on the supplier's performance. The DM0 is alsoconsulting with industry suppliers and peak bodies to improve its procurement andcontracting policy, templates, training and advice to reflect contemporary commercialpractices and simplify the templates for complex but lower risk procurements.10.20 (U) The DM0 is currently undertaking a 'costs of tendering' reductions initiative todirectly address industry concerns about excessive information requirements in defencetenderirrg. However, benchmarking for dollar size, scope, scale and complexity shows thatthe DMO's tendering and contracting paperwork is similar to (or even lighter than) thatcurrently used in the Australian construction and infrastructure industries, and it should benoted that about 99 per cent of DMO's 112,000 contract transactions per annum occur viasimple purchase orders.



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AcquisiUm and Sustainment Chapter 10Projects of Concern10.21 f R t A moderate number of the 200t projects and 100+sustainment activities havesignificant risks or issues relating to schedule, cost, or the delivery of capability to Defence.These projects, subject to approval of the Minister for Defence Materiel and Science, werelisted as a 'Project of Concem' under the previous Government. The Project of Concemprogram has an intense management framework, aimed at either remediating projects or, ifnecessary, cancelling to avoid further ineffective expenditure. In addition, lessons learnedthrough the Projectsof Concem program are used.10.22 (U) High profile projects previously on the list have includedSEA 1411, which was todeliver the Seasprite helicopter, but was eventually cancelled by the previous Government.Another project experiencing significant schedule and capability risks was SEA 1390, theFFG Upgrade program, which was successfully remediated leading to Navy's acceptance ofthe final upgraded ship in late 2009.10.23 (U) Once a project is on the list of Projects of Concern, the clear aim is to developand execute an appropriatestrategy to remediate the project, actively engaging with both theDefence partners and the industry suppliers to achieve the optimal commercial outcome forthe Commonwealth. This has proved successful in removingthree projects fmm the list overthe past 12 months.10.24 (U) The objective now needs to shifl to developing projects in a way that minimisesthe likelihoodof them becoming Projects of Concern.10.25 ++)-There are 11 projects on the list, two of which have not yet been publictydisclosed andone is awaiting Government approval to be included (see footnote 3). The firstmonthly report to the incoming Minister will provide the context to each of the currentProjectsof Concem, including: detail on the project; why the project came to be added to thelist; and the current progress status against the remediation objectives. Thecurrent Projectsof Concern list is as follows:

Project Description Status1 CN10 I Collins Class Submarine Sustainment and Projects IAIR 5077 'Wedgetail' Airborne Early Waming and Control aircrafiI Phase3 I

Anti-Ship Missile Defence radar upgrades for ANZAC Class I2043 High Frequency Modernisation (HFMOD)-communications and

phase 3A data exchange capability for sea, air and land forces'Vigilare'-Aerospace surveillanceand commandandcontrolAIR5333 system

129 Tactical Unmanned Aerial Vehicles - airborne surveillance forphase2 land forcesI I 1DECLASSIFIEDRESTRICTED


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LAND 121 'Overlander' replacementfield vehicles, trailers and modules forphase3 land forces ('Medium Heavy' class of vehicles only)

I

I JOINT 2070 I Lightweighttorpedo replacementfor ANZAC andADELAIDEClass FrigatesMulti-RoleTanker Transport aircraft-Air to Air Refuelling/ 'IR 5402 / Capability'

JOINT 2048 LCM2000 Watercraft for Landing PlatformAmphibious ships2Phase 1AI ~~~~~ 1 ElectronicSupport Measuresupgradefor AP-3C Orion aircraft3 I

Legend:Red. There remain significant risks to be remediated or the project cannot deliver therequiredcapability to theADF.Amber. There are continued high risks of achieving the project objectives and the projectremainsunder close Projectsof Concern management.Green. The key project risks have been mitigated and the remediation objectives will likelybe met within 12 months, leading to removal from the Project of Concern list.1Not yet publicly disclosed.

Not yet pu bl i y disclosed3 A submission to Governmentwill be provided around September 2010 recommending adding AIR 5276 Phase88,AP-3C ElectronicSupport Measures (ESM) Upgrade to the Projects of Concam list.

1 0 6 DECLASSIFIEDRESTRETED


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UNCLASSIFIEDDefence Accountabili ty Framework Chapter 11

CHAPTER 11

DEFENCE ACCOUNTABILITY FRAMEWORK

11.1 Defence is a single organisation made up of many parts. Each part has its ownculture and history from which it draws capability. The art of leading and managing Defencelies in harnessing its diversity in ways that support an outcome that no organisation withinDefence could achieve by itself. Strategic leadership is the creation and deployment of OneDefence.11.2 The story of Defence reform since the mid-1970s has been the building of OneDefence. This idea recognises that Defence is best able to meet the challenge of ourstrategic circumstances if it has the capacity to operate as a single entity, organisationallyagile in support of a balanced force. This is easy to say, but hard to do.11.3 The diarchy is one of the foundations, and the major enabler of, One Defence.The diarchy is the means by which the Secretary and the CDF exercise their separateaccountabilities under legislation and jointly lead and manage Defence as a sirrgle,integrated organisation.11.4 The continuing legacy of Defence's origins in five Departments and separateServices has left Defence with complex accountability systems. These, along with Defence'sstructure, have evolved over time to support greater integration and increased organisationalcapacity to function as a single entity. As the demand for better performance from Defencein a tight budgetary environment has increased in the last five years, current accountabilityarrangements have come under greater stress. Their failure damages both the Governmentand Defence and weakens Defence's performance.11.6 Defence therefore needs to redesign its accountability system to strengthen itscapacity to drive better performance. This is necessary as a response to a tighter budgetaryenvironment and to the demands of our strategic environment, but also to support theeffective implementation of the SRP, which relies, for its success, on a strong culture ofperformance and accountability.11.6 The Review of Defence's Accountability Framework ('the review'), led by AssociateProfessor Rufus Black (formerly of McKinsey & Company), examined how accountability canbe strengthened to better support the ability of the Secretary and CDF to exercise strategiccontrol. The review has examined how accountability is exercised by Defence's senior

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UNCLASSIFIEDDefence Accountability Framew ork Chapter 11

executives, how clear that accountability is, how well it is understood throughout theorganisation, and how well that accountability is aligned with Defence's outputs. The reviewalso examined the effectiveness of the accountability framework as a whole, particularly itssupport for One Defence and its utility in driving performance. The review did not includeany consideration of the accountabilities associated with the exercise of military command.11.7 The review's focus is on decision making processes and culture. But it hasimplications for structure to the extent that, as a general principle, accountability andstructure should be as aligned as closely as possible. The review proposes changes to theinternal Defence decision making architecture to strengthen the capacity of the Secretaryand CDF to exercise strategic control. The key changes will include:

11.8 The review looks at the need to build an organisational culture of accountability andmakes recommendations to do this. Its philosophy is encapsulated in the idea that whenthings go wrong, we should ask first: Why? then Who?11.9 The implementation of the review's findings will take time but, provided it isrigorously pursued, it will change the way Defence manages and governs itself. It willchange Defence's leadership and management culture. Implementation of the changes isintegral to achieving long-term and sustainable success in the Strategic Reform Program.Most importantly, it is essential if we are to build a better Defence organisation.

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DECLASSIFIEDSECRET AUSTEOAustralian Labor Party Election Policy Proposals Chapter 12

CHAPTER 12

AUSTRALIAN LABOR PARTY ELECTION POLICY PROPOSALSOverview12.1 *This chapter provides our initial advice on how Defence will respond to each ofthe 52 policy proposals that were outlined in your Defence policy platform, 'Labor's Plan forDefence', that was released on 16 August 2010. We look forward to early discussions withyou to clarify the Government's thinking and plans in regard to a number of the proposals.Subject to your agreement, we will provide you with a quarterly report on progress with theimplementation of these proposals throughout the life of the Gillard Government.12.2 + ) - I n the lead up to and during the course of the 2010 election campaign, theAustralian Labor Party made references to a small number of other proposals that relatedirectly to the Defence Portfolio, but were not addressed in 'Labor's Plan for Defence'.These proposals relate to road improvements in Darwin; the relocation of houses fromLarrakeyah Barracks; aircraft noise at RAAF Williamtown; and Townsville wharf (seeparagraphs 12.1 10 - 12.1 18). While these matters were not addressed in 'Labor's Plan forDefence', we have provided initial responses below. You may wish to provide us with earlyguidance on your preferred way ahead with these proposals.12.3 *In addition to proposals that relate directly to the Defence Portfolio, we will alsoneed to address the implications for Defence of the proposal to maintain the 1.25 per centEfficiency Dividend across Commonwealth agencies, potential irr~plications or Defence ofchanges to taxation policy as well as reductions in Government advertising.12.4 *We look forward to early discussions with you on the implementation of theproposals outlined in 'Labor's Plan for Defence', and those proposals outlined in paragraphs12.2 and 12.3 above.

PROPOSALS OUTLINED IN 'LABOR'S PLAN FOR DEFENCE'Ensuring a Secure Australia

12.5 +?)-Defence is working towards delivering the next White Paper in 2014. This willbe preceded by a Force Structure Review, Strategic Risk Assessment and Defence BudgetAudit in 2013. In working towards White Paper 2014, Defence will continue to developDefence planning guidance. Defence Planning Guidance (DPG) 2010 was developed andsubmitted for Government consideration prior to the election; but the document was notagreed before the calling of the election. We intend to re-submit it for your consideration inOctober 2010.



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DECLASSIFIEDSECRET AUSTEOAustralian Labor Party Election Policy Proposals Chapter 12

embrace the Government's reform agenda for increasing transparency. We will alsoexamine options for more regular reporting on Defence issues.12.11 (U) The regular Ministerial statements on Afghanistan introduced by theprevious Minister and other reporting (see below) have also added to thistransparency.Ministerial Statements

* l s#% '"@P X l q a $ ~ gg g >& &'* ., " ?,r*Eedeg~ldLaborl a will continue .to make, regular M i n ~ s t e r i a l ~ ~ S ~ ~ e m e n t s ~ ~. ; , ,& * ax' -@&:"B4o tke x,ao+ar l iment to .&"gn .sh ie ha t $thG3"% ~ mustralia$i3u ~ i r l i $ h & z t ~ ~ d ~ ~ $ ~ t , ~ l i a n @ ~ e b ~ l +re informe?4; 'agoir t "our

P T' r,o$et$iot% in afg ha nis tan :''3'5 'i&+:&:kr$-". r.;@2q,%A ,, , , :+4 "$9 'iB k -& 41.1 ra,i.'kk+"i.jxj &*..ha12.12 *We will provide you with a draft Ministerial Statement on our operations inAfghanistan for you to deliver in the Spring 2010 session of the new Parliament.Wounded In Afghanistan

Public Reporting of Investigations into Incidents of Civilian Casualtiesp~- ~ ~ ~ # ~ * ~ @ = ~ ay+yji:~i~$pp:ii, . ~ ,r"~;4at;l.+a~fd~i;94wew- y$ ,& r3t g - . .p?eFece51 Labor; ig:also 4 ~ ~ 2 - E & T E d & ~ f f ~ i g t hk q ublic' Gfz s f e. ;70$comes t*df r an$Gnvestigatid!!~nto alleged civil~a n asualtiebbb~ilil v -% $ 3* %%,.'t , 4%., i ",i % .a .r. , g . ,% ,& 4% 41. .11.~4t ,a. .12.14 +Defence has a well-established policy of releasing the outcomes of inquiries intoalleged civilian casualty incidents and other sensitive matters to the public. We will ensurethat we continue this practice.12.15 *There is currently one inquiry that has yet to be released publically. This relatesto an incident in Afghanistan involving civilian casualties on or about 12 February 2009.The current status of this case is that the Director of Military Prosecutions has invited thechain of command to provide comment on matters of ADF interest in accordance with s 5A ofthe Defence Force Discipline Act 1982. This matter may result in serious criminal anddisciplinary charges being brought against ADF members. Throughout the process relatingto this inquiry, progress reports have been provided publically. Defence is committed toreleasing the inquiry outcomes once the legal processes have been concluded.International relationshipsThe United States



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the Alliance with the US is addressed in Chapter 8 International Defence Relationships. We

Australia United States Ministerial Meetings

12.17 -@+SMjhe next Australia-United States Ministerial (AUSMIN) meeting isscheduled for the first week of November 2010, and is expected to be in Australia. We willprovide YO U with a c om ~re he ns ive riefinn on the ranne of topics that will be proposed for

Relationships in the Region

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Close Neighbours: the Pacific and South East Asia

12.26 (U) Throughout the region, we continue to work closely with our partners to developcapacity in counter-terrorism, peacekeeping, and humanitarian assistance an d disaster relief.The majority of this work occurs bilaterally, through exercises and training.12-5DECLASSIFIEDSECRET AUSTEO


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12.27 *We will continue to work in cooperation with other Government agencies (suchas AusAlD and the Australian Federal Police) to promote greater professionalism andsustainability within developing security forces in the Pacific. Our major contribution to thePacific will continue to be through the Pacific Patrol Boat Program.

The United Nations and Multilateral Engagement

12.29 f R t l n the near region, you will be invited to attend the first ASEAN DefenceMinisters' Meeting-Plus forum in Vietnam during October. This new forum will also includevour counter~artsrom China. India. Japan. N ~ Wealand. the Republic of Korea. Russia.

12.30 +Defence will continue to support multilateral activities, such as the ProliferationSecurity Initiative (PSI),' that uphold United Nations sanctions obligations and discourageproliferation of Weapons of Mass Destruction (WMD) technology. Defence is to host aregional meeting of PSI supporters at Cairns in September 2010; will attend a South



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Humanitarian Assistance and Disaster Relief

12.33 (U) Defence continues to demonstrate its capability and responsiveness to assistingcivil agencies in humanitarian emergencies and natural disasters, as evidenced by thecurrent support to the floods in Pakistan or to last year's fires in Victoria. The ADF, with itshigh levels of training, readiness and capabilities remains well poised to assist at short noticewhen directed by government.Defence OperationsAfghanistan

12.34 -(RfAustralia's engagement in Afghanistan as part of the NATO led InternationalSecurity Assistance Force is the highest priority issue that we will discuss with you from theoutset of your tenure as Minister for Defence. A detailed brief on the strategic .and


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Force Protection Review

12.35 +?)-We will provide you with a brief on the acquisition and rapid deployment of a

12.38 *Defence will further advise you in mid-2011 of the intentions for the capabilityafter its first three years of operation in Afghanistan.

12.39 fRt A review of force protection measures was conducted in Afghanistan in late2009. The subsequent findings of the Review recommended 48 initiatives to enhance forceprotection for our deployed troops. The Government agreed to the initiatives and the ForceProtection Package (FPP) was tabled as part of the May 2010 budget.

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12.40 +As at 30 July 2010, the status of the delivery of the 48 initiatives is as follows:

12.42 -&We will provide a brief to you on progress with the implementation of the ForceProtection Review by mid-September 2010.

FPP Status

Completed and delivered capabilityProceeding on trackExperiencing issues, may affect schedule, cost or sdopeSignificant issues, have affected schedule, cost or scopeNot yet commenced

12.43 -@)-We will provide you with a progress brief on this matter by mid-September 2010.

No.ofInitiatives

10211115

12.44 fRt On 16 July 2010, the Government approved the acquisition of the SHADOW200 Tactical Unmanned Aerial Vehicles from the US Army through Foreign Wlilitary Sale(FMS) as Phase 2 of Joint Project 129. The FMS Letters of Offer and Acceptance weresigned on 11 August 2010.



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East Timor and Solomon Islands

12.49 +Our focus in East Timor is transitioning from security to streugthening theEast Timorese Defence Force. p i j qThe ADF commitment to the International Stabilisation Force reduced from650 personnel to 400 in February 2010 due to the improved security environment.

Intelligence and Security, . . . . , ; . . , , . . . -. * . . , .. . . , ,. ,, '.( _ % . ' . ' .{A Gillam' ~ a b o r d v & h i n 6 t ? t . ~i 1 1 ; ~ ~ ~ ~ t h ' i n ~. . . . , , an d strengthen,c o d P ~ ? ~ t i o n l a n d.,.- &., c o l l ~ b o r ~ t i o n. . with

.? .., .. , . . ,:. , .a//ied'inte//igence:.paflneJ~s.1 . .!+.,:;i. : -.,.,:,. ..;. . .: .. , :: . . a ; : . ,: : ;.?.. :'< , . 2.. .b i , , , < ' .. . , ., . : ..... , ..> . , .

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DefenceCapabilityand IndustryForce 2030 and the Defence Capablllty Plan


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New Submarine Capability9- scr 37 &44%-# g- 8np$3rar* * g$ j *3#*"*@: 6%&% @a#*sa*~*~* &*-* a,&,&*&3 3. q * ,sib (6 rQlda L~lbP&., r4 ir&,;ldX @ El, ,$%@ *+\* h b JC 1 -" b- -:d$ && fG * *' i%.t ~ ~ ~ b @ v w , N -nsub--th"ac, ,a* Y. w Defence-~ a ~ r n ~ e i ~ , ~ . - so n t ~ n u e s t s a n a l- s *IT,- plannmg .and4dbsigq yo$ ,forit4i$W % " & d " r * r a l * - B ' % *qmajorpnliancement~ fiour m a r i f i m e ~ ~ ? ~ ~ b i l iz ~ J J ~ ~ ~ ~, a el .a k ' 7 "*, L4 A v* 9 P b $@*%@*"w t>+.*** ?%, l#@hi* * :3:*k", < t"3 ek .A F & ' & , k . *i" dm *;,r)iP9#bt y,$;-*.,12.63 f R t W e will provide you with a brief on the Future Submarines Program, Project Sea1000 by October 2010. The p roject is a key compon ent of Force 2030 where Australia'sfuture strategic circumstances necessitate a substantially expanded submarine capability inorder to:

sustain a force at sea large enough in a crisis or conflict to be able to defend ourapproaches (including at con siderable distance from Australia, if necessary);protect and support other ADF assets; andundertake certain strategic missions where the stealth and other operatingcharacteristics of highly-capable advanced subm arines would be crucial.

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DECLASSIFIEDSECRET AUSTEOAustralian Labor Party Election~ o l i c y ' ~ r o ~ o s a l s Chapter 12IDefence Procurement Reforms

12.69 f R t A brief on Acquisition and Sustainment is in Chapter 10. The current focus forcontracting reform is oc optimising contracting templates to align with the range ofprocurement activities uydertaken (e.g. by risk and value), and strengthening and increasingthe use of performance-based contracts, particularly for sustainment activities. As part ofthis reform, the DM0 is .consulting with industry suppliers and peak bodies to improve itsprocurement and contracting policy, templates, training and advice to reflect contemporarycommercial practices and simplify the templates for complex but lower risk procurements.Defence lndustry Support

12.70 *We will provide vou with a brief bv Octob

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