casg cost principles

49 of 51. Effective sustainment of naval, military and air assets is essential to the preparedness of the Australian Defence Force (ADF) and to enable Defence to conduct operations. address four tests to determine the allowability of costs. 24. This method produces a rough order-of-magnitude estimate, and is generally used early in the life cycle of a new asset/system when technical definition is immature and insufficient cost data is available. In practical terms, it would not make sense to calculate FCF all in one formula. It provides only a partial account of materiel sustainment within Defence and is potentially at odds with the One Defence model promoted by the First Principles Review. Dr Stephen Gumley was the DMO's chief executive officer from February 2004 until his retirement was announced by the Minister for Defence, Stephen Smith, on 7 July 2011. Defence subsequently increased the numbers of organisational units it considered to be Systems Program Offices from 54 to 78, with staff numbers ranging from three to 178.135. 5.46Work was then reinvigorated and Defences First Principles Review Implementation Committee approved the Business Framework on 1September2016. The Coles Review identified five root causes of the problems it observed. Many antiviral agents exert significant host cellular toxicity, a limitation that has hindered antiviral drug development. A 2016 Parliamentary inquiry into Capability of Defences physical science and engineering workforce noted that: Several submissions and witnesses emphasised the need for Defence to have a sufficient [science and engineering] workforce to allow it to be a smart buyer or an informed customer. Define and endorse an Asset Management Plan. Care would need to be taken to avoid any conflict of interest among vendors in these circumstances.173, 5.54Defence has long aspired to introduce a systematic approach to asset management for its specialist military equipment (see Appendix 6 of this audit report). 4.13In contrast to the advice to ministers, in September2012, an internal progress report on the action items from the 2011 health check showed that Smart Sustainment was still struggling to gain traction. 323. The DMO was a half-way house with a separate chief executive and badging, but staff and funds continued to be provided by the department. Defence advised the ANAO in March2017 that it was looking into what became of the [unquantified] residual seed funds. In its 201415 Annual Report, Defence claimed to have achieved $2billion of savings from the initiative in its first five years. We understand that there are in more than 580 panellists across 79 skills sets. In its 201415 Annual Report, Defence claimed to have achieved $2billion of savings from the initiative in its first five years. Develop and implement a strategy to address skills shortages in sustainment role. Systems Program Office consolidation and reform is one of the largest reforms to Capability Acquisition and Sustainment Group deriving from the 2015 First Principles Review. 1See, for example, ANAO Report No.40 201617, 201516 Major Projects Report. Implementing the Mortimer Review recommendations became, as a whole, one of the 15 streams of the Strategic Reform Program in 2010. This Key Health Indicator serves to measure the quality and appropriateness of the work undertaken during maintenance periods. Acquisition and sustainment salaries are held by [Capability Acquisition and Sustainment Group] and not funded by [Capability Managers], so reductions in this Commonwealth APS workforce do not generate a saving for [Capability Managers]. For example, in April 2015, Defences Lessons Learned report for the Air 87 Phase 2 Armed Reconnaissance Helicopter project stated: By its nature the project definition and contract negotiation stages of the project focus on cost-capability aspects of the weapon system. The absence of an asset management approach within Defence makes it difficult to piece together a holistic asset management view across the myriad individual policies which focused on discrete processes. 133Defence internal correspondence, April 2016. Eliminating complicated and unnecessary structures, processes, systems and tools. For example, Quarterly Performance Reports could include a section providing an update on how the issues identified in the sustainment gate reviews are being addressed over time. Specifically, the review identified instances where: 2.18Defence makes extensive use of external service providers and contractors to deliver acquisition and sustainment services. It is apparent, however, that different and additional items are included in the latter series. There had been limited progress on the 35 action items identified in the 2011 health check with seven action items implemented, five abandoned, and 23 outstanding (among which Defence intended to re-write 14). 19The capability manager for most assets is one of the three Service chiefs (Navy, Army or Air Force). Defence had not established a strong case for value for money for the continual renewals of supplier contracts. 96For example, in the Portfolio Additional Estimates 200708 (pp. It is apparent from this audit that Defence has developed information systems that could support the preparation of similar information for its sustainment work. In 201516, Defence spent about $6.3billion21percent of its total departmental expenditureon sustainment of specialist military equipment. Sustainment costs can exceed those of the original procurement and the challenges can be more complex.26. The tests are as follows: These four tests apply regardless of whether the particular category of costs is one specified in the cost principles The government-wide principles, issued by OMB (or, in the case of commercial organizations, the Federal Acquisition Regulation [48 CFR 21], or, in the case of hospitals, 45 CFR 75, Appendix IX, "Principles For Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals"), on allowability and unallowability of costs under federally sponsored agreements. Develop enterprise-wide IT strategy and information management strategy. %PDF-1.4 % 26. This encourages managers to exercise judgement and discretion to trade within that operating budget (assessing their need for how many staff and what levels, skills and contracted expertise are required) to most efficiently and effectively deliver the outcomes required.81. 71Defence, Rizzo Review, Chapter 4, p. 29. 1.4Parliamentary committees over several years have stated an interest in Defences reporting of its sustainment performance and, in particular, obtaining greater insight into that performance.7 In May2014, the JCPAA recommended that the DMO prepare a suitable methodology for reporting sustainment activity and expenditure, within six months.8 The Government disagreed on the basis that current arrangements balanced Parliamentary scrutiny of sustainment expenditure with the protection of classified information on the military capability, readiness and availability associated with that sustainment.9 In September2014, the Committee sought a sustainment options paper from the ANAO, which was made public by the Committee. 150D Abraham, Performance based contractinga panacea for supporting legacy aerospace platforms?, Defence Geddes Papers, 2005, available from [accessed 16 January 2017]. 3.67The estimates documents generally provide components of these estimates, divided among the Services and other Defence Groups (Navy sustainment, Army sustainment and so on). The following paragraphs provide an overview of the contents of the 201516 performance documents. They provide recommendations as to how government can become a smart buyer, knowing what it wants and judging better what it has bought. A Smart Buyer collaborates with Industry and engages early and throughout the Capability Life Cycle. 174Defence, Ship Zero Concept, (QL131 Report) 10 October 2016, p. 9. 2.11A simplified representation of the essential relationship among elements responsible for the sustainment of specialist military equipment is in Figure2.1 below. An ANAO performance audit in 2013 found that, in most cases, submissions to government included whole-of-life cost estimates. 140Defence, First Principles Review, p. 36. Recommendation 1 was that Navy and DMO should jointly establish practical methodologies for integrated through life asset and sustainment management. REVISED DECEMBER2022. [13], In March 2009, the Corporate general manager of the DMO, Jane Wolfe, was dismissed for unsatisfactory performance. For example, the Systems Program Office reviews are not yet complete and Defence has provided no evidence that decisions have been taken on changes to their structure and functioning. personnel and skill shortages in the DMO, delays due to industry capacity and capability, and. The ANAO found that, 18months after implementation commenced, there had been limited progress. Measures the number of occurrences where Cannibalisation was approved by the Capability Manager Representative. apply to all NIH award instruments, award mechanisms, and special programs and authorities, including modular awards and awards under SNAP with one exception: they do not apply to Kirschstein-NRSA individual fellowship awards. The term smart buyer is a term of art, with a specific meaning in public administration, relating to outsourcing, and which arose around 1990 following work in the USA by the GAO and the Brookings Institution.205 The key paragraph in an early GAO study states: The government must have an active role in the decision-making process. Other, related GAO work has used the term in relation to the management of sustainment: privatizing total support on new and future weapon systems can make it difficult for the organic depots [equivalent to Systems Program Offices] to acquire and sustain technical competence on new systems, leading edge technologies, and critical repair processes necessary to maintain future core capabilities, provide a credible competitive repair source, and be a smart buyer for those logistics activities that will be contracted out.207. 3.66There is no direct explanation in the estimates documents reconciling or explaining the difference or helping the reader to identify any trends. Defence advised that, during the course of this contract, a number of Systems Program Offices have merged into larger organisations, resulting in a total of 48 being reviewed (as at end February2017). Smart Sustainment was showing significant stress. Defence has clear and long-standing governance and organisational arrangements for managing the sustainment of specialist military equipment. This has occurred with the extension of DMOs earlier program of gate reviews to cover sustainment as well as acquisition.54. Value for Money 5. The review also found that while the cost effectiveness of the Collins Class submarine sustainment program was showing signs of improving as submarine availability increased, it was yet to achieve international benchmarks.d The review team recommended that Defence should now focus on cost reductions to improve the efficiency of the Collins Class submarine sustainment program.e. 3.69When sustainment costs are presented cumulatively, the contribution of items other than Navy, Army and Air Force sustainment to sustainment cost growth over the forward estimates can be seen. This proposal is regarded as a key principle, integral to the acquisition and reform agenda. It is also seen as needed to streamline and consolidate the Systems Program Offices. That review found sustainment is still being treated as a poor relation compared to the generally higher-profile acquisition work.27 The Sustainment Complexity Review (2010), which found 50 plus sustainment business models in DMOs Systems Program Offices, explained this diversity by reference to the greater attention Defence had given acquisition. depends on the type of organization (regardless whether domestic or foreign) making the expenditure. Defence lacked a single set of accurate information to inform decision makingThe review found that, whilst significant levels of information and analysis exist across the Collins Class Sustainment Program, the basis for long-term decision making was not always consistent or accurate, with multiple systems and datasets in use for financial, maintenance and supply chain activities. Defence has engaged Bechtel to assist [the] Deputy Secretary of Capability Acquisition and Sustainment, on an as required basis, to design and implement First Principles Review deliverables that relate to Capability Acquisition and Sustainment Group and its functions. Most recently, the First Principles Review recommended immediate implementation of measures of productivity, a related concept. 17. This equipment never made it into service before the project was cancelled, yielding no capability whatsoever at a cost of $1.5billion. The year-end spend performance indicator is blank. In a submission to the Joint Committee of Public Accounts and Audit inquiry into contract management in the Australian Public Service in 2000, Defence, through the then Under Secretary for Defence Acquisitionalmost a direct counterpart position to the current Deputy Secretary, Capability Acquisition and Sustainment Group stated that: Defence must see that it has available the technical, financial and managerial expertise to be a smart buyer. Principles of Antiviral Therapy | Clinical Gate 43 199798, Lifecycle Costing in the Department of Defence, examined Defences 1992 policy on lifecycle costing, finding that while Defences policy and procedures advocate the use of whole-of-life costings in acquisition decisions, in practice, Defences use of whole-of-life costing was uneven. 5.66The ANAO recommends that Defence develop and implement an evaluation plan to assess the implementation of the recommendations of the First Principles Review. Defence has continued a program offering its staff professional development options in asset management. It is an estimate of the differential cost above that of the current capability and is included in submissions to government for approval. 6. Defence materiel sustainment is about the maintenance and support of Defences fleets of specialist military equipment: the provision of in-service support for naval, military and air platforms, fleets and systems operated by Defence. It does not explicitly analyse the Coles Review and its lessons (such as the value of international benchmarking, discussed below).121 Rather, the report passes the task of learning from Coles back to Defence, stating that the implementation of the First Principles Reviews proposed approach should encompass the progress made through the Rizzo and Coles reforms. First Principles Review (April 2015) 2. inefficiencies in the processes leading to government approvals for new projects. The simplified formula is: Poor planningDefence lacked a clearly stated long-term strategic plan. The ANAO has recommended that Defence develop and implement an evaluation plan. 61Defence, First Principles Review, p. 40. In general, NIH grant awards provide for reimbursement of actual, allowable costs incurred and are subject to Federal cost principles The government-wide principles, issued by OMB (or, in the case of commercial organizations, the Federal Acquisition Regulation [48 CFR 21], or, in the case of hospitals, 45 CFR 75, Appendix IX, "Principles For Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals"), on allowability and unallowability of costs under federally sponsored agreements. Earned Value Management in CASG - pgcs.org.au Such cost reductions may be required to re-invest into inventory, obsolescence remedies, new infrastructure to manage an ageing fleet and the transition to future submarines. The last item of Support & Test Equipment requires codification before it can be formally accepted by the Commonwealth of Australia (CoA). 164Defence, First Principles Review, pp. Improving the How 4. DMO engaged the Helmsman Institute to review the complexity of DMO sustainment operations. The Pappas review had observed that sustainment was an area with significant opportunities for efficiencies.105. Therefore it was important to approach this from a Capability and Sustainment Group or Defence perspective.183. 4.10Defence gave examples of activities it considered successful in its 201011 Annual Report (pp. The development of an effective sustainment monitoring system remains a work in progress, and the effectiveness of Defences internal reporting system for sustainment could be improved in several areas. 201Defence sought, and gained the approval from the Defence Minister to rewrite Mortimer Review Recommendation 4.3. The Australian Government through the Defence Ministers (our owner). Free Cash Flow (FCF) Formula - Corporate Finance Institute The Commercial Division in Capability Acquisition and Sustainment Group expressed concern that Defence needed to articulate clearly its objective/end state before agreeing to contracts of this cost and magnitude. A Defence Central Contracts Register facility commenced operation in January2016.b This enables efficient collection of data for new Defence contracts: it does not include existing contracts, which can be added only by a separate stream of work. FIFO: What the First In, First Out Method Is and How . Defence analysed these targets and developed overall targets to finalise the Defence White Paper and design of the Strategic Reform Program. Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; Subpart E View Full Text; Previous; Next; Top; Details. 175ISO 55000 is an international standard for management of physical assets. 97The Pappas Review (2008, p. 30), in discussing the long-run cost of Defence, estimated the real growth rate of maintaining todays capability for military equipment (capital and sustainment) at 3.5 per cent. 4.6The Strategic Reform Program comprised 15 separate streams of reform, several of which were intended to reduce costs.106 Overall, Defence expected the program to yield $20.6billion, to be reallocated within Defence over the following decade, with Smart Sustainment contributing $5.5billion of that figure.107 This would make sustainment savings the largest single source of funds under the Strategic Reform Program. 3.31To develop sound measures of efficiency, Defence also needs to understand the cost of ownership of its assets (see paragraph 3.34 forward) and to take account of staff costs in assessing the total cost of its activities (see paragraph 3.44 forward). They identify, in general, the allowable and allocable items (see Section 2.0) of cost normally associated with MCC-financed contracts. Defences comments, and suggested editorial amendments, have been provided to the ANAO. Correct date believed to be July 2009.] located at 48 CFR Part 31.2 Federal Acquisition Regulation. This followed a joint speech by the Secretary of Defence and Chief of the Defence Force stating that improving Defence productivity was a priority. 69Defence Annual Report 199798, p. 224. Defence advised the ANAO that Capability Acquisition and Sustainment Groups expenses on all employees in 201516 were $490.4million. Notwithstanding these concerns, Defence adopted the term Systems Program Office where Systems Program Offices perform both functions. 20. As part of the governance system, create a forum to bring together all suppliers to raise issues and identify opportunities. 'Some Economic Aspects of the Weapons Systems Acquisition Process' (2003); available from, This page was last edited on 19 February 2023, at 03:28. Similarly, in an international seminar on Defence acquisition in July2000, an issue identified by Defence at the time was the challenge to be a smart buyer. 4. 86Department of Finance, Resource Management Guide No. 2.1The ANAO examined Defences governance and operational arrangements for managing the sustainment of specialist military equipment, with a particular focus on the clarity of: 2.2Defence has clear and long-standing arrangements for the management of materiel sustainment for specialist military equipment. Using internal and external expertise to provide the best advice so that the outcome is delivered in the most cost-effective and efficient manner. Revised KPIs could more effectively support more targeted performance based contracting outcomes. In August 2022, Chris Deeble was appointed Deputy Secretary CASG. CASG customers means internal customers: the Capability Managers for whom the Capability Acquisition and Sustainment Group undertakes sustainment. As noted in paragraph 5.14, in July2016, a former senior Bechtel executive was seconded to the position of First Assistant Secretary Program Performance in Capability Acquisition and Sustainment Group, under the day-to-day direction of the senior Capability Acquisition and Sustainment Group leadership. 167Deputy Secretary, Capability Acquisition and Sustainment Group, Defence, CASG Bulletin, Issue 4, 2015. Defence does not yet have a completed register of its acquisition and sustainment contracts though, since January2016, it has had a facility in place and had commenced populating it. Although the document provides a description of the intended new organisational structure and the functions and responsibilities of its elements, it is not apparent that a fundamental rebuild of all Group processes has yet been delivered. In particular, the other recommendations with substantial implications for the management of sustainment are as follows: 2.3 developing a new organisational design and structure as part of the implementation process for the Capability Acquisition and Sustainment Group with reduced management layers; 2.4 examining [and analysing] each Systems Program Office to determine where each fits within the smart buyer function, [and] the most appropriate procurement model [for delivering the capability] and achieving value for money; and, 2.11 significant investment to develop an operational framework which comprehensively explains how the organisation operates and the roles and responsibilities within it; a detailed set of life cycle management processes which provide project and engineering discipline to manage complex materiel procurement from initiation to disposal; and reviewing architecture to reinforce accountability at all levels and bringing together information upon which good management decisions can be made.123.

East Coast Drill Instructor Association, Moon Island Names Animal Crossing, Articles C