Entity Resources and Planned Performance

Department of Defence

Entity Resources and Planned Performance

Section 1: Defence Overview and Resources

1.1 Strategic Direction Statement

1.2 Defence Resource Statement

1.3 Budget Measures

1.4 Capital Investment Programme

1.5 People

Section 2: Defence Outcomes and Planned Performance

2.1 Outcomes and Performance Information

Section 3: Defence Explanatory Tables and Budgeted Financial Statements

3.1 Explanatory Tables

3.2 Resource Summary

3.3 Budgeted Financial Statements

Department of Defence

Section 1: Defence Overview and Resources

1.1 Strategic Direction Statement

The following changes have been made to the Strategic Direction Statement since the Portfolio Budget Statements 2015-16:

A new Defence White Paper will be released in early 2016. The White Paper will set out the

Government’s strategic direction for Defence, and will be accompanied by a ten-year Integrated Investment Programme and a new Defence Industry Policy Statement.

The First Principles Review was announced by the then Minister for Defence on 1 April 2015. The focus of the review was on ensuring Defence is fit for purpose, its business structures support the Australian Defence Force and it can deliver on future requirements, which will be outlined in the forthcoming

Defence White Paper.

The Government agreed or agreed-in-principle to 75 of the 76 recommendations. A two year implementation timeframe has been agreed. In combination, the recommendations will change the structure, governance arrangements, accountabilities, processes and systems of Defence. The combined effect will be a more unified and integrated organisation that is more consistently linked to its strategy and clearly led by its centre. It will involve:

· a stronger and more strategic centre able to provide clear direction, contestability of decision making, along with enhanced organisational control of resources and monitoring of organisational performance;

· an end-to-end approach for capability development with capability managers having clear authority and accountability as sponsors for the delivery of capability outcomes on time and to budget, supported by an integrated capability delivery function and subject to stronger direction setting and contestability from the centre;

· enablers that are integrated and customer-centric with greater use of cross-functional process, particularly in regional locations; and

· a planned and professional workforce with a strong performance management culture at its core.

Department of Defence

1.2 Defence Resource Statement

Table 1: Total Defence Resourcing

Department of Defence

Annual Appropriations

Table 2: Appropriation Bill (No 3) 2015-16

Table 3: Appropriation Bill (No 4) 2015-16

Drawdown of Appropriations Carried Forward

Table 4: Revised Appropriation Receivable

Funding from Other Sources

Own Source Revenue

Table 5: Variation in Own Source Revenue

Department of Defence

1.3 Budget Measures

2015-16 Budget Measures and Other Budget Adjustments

Table 6: Variation to Defence Funding

Department of Defence

Operations Summary

Table 7: Net Additional Cost of Operations from 1999-00 to 2018-19

Department of Defence

1.4 Capital Investment Programme

Table 8: Capital Investment Programme

Table 9: Capability Sustainment Programme

Table 10: Retained Net Capital Receipts

Table 11: Variation in Estimates of Net Capital Receipts

Department of Defence

1.5 People

Workforce Overview

ADF Workforce

No significant change from the Portfolio Budget Statements 2015-16.

Civilian Workforce

In line with Government commitments, Defence continues to reduce its Australian Public Service (APS) workforce through natural attrition, disciplined recruiting practices and a limited Voluntary Redundancy program aimed at reducing the number of staff at middle management levels.

Implementation of the recommendations of the 2015 First Principles Review, Creating One Defence, continues to reshape Defence’s structures, systems and processes. This will inform the size and shape of Defence’s APS workforce in coming years, and work is progressing to develop a strategic workforce plan outlining the distribution, skill requirements and other details of the workforce.

The tables below show the APS workforce reaching 17,500 by the end of 2015-16 before stabilising at an indicative 17,800 from 2016-17. The forthcoming Defence White Paper and Force Structure Review will influence the size and shape of Defence’s workforce, as each of these Reviews may change the workforce allocation for a range of capabilities over the coming years.

Table 12: End of Financial Year Full Time Equivalent (FTE) Estimates for 2015-16 and the Forward Estimates

Workforce Summary

The total Defence fulltime workforce average, is now forecast to be 76,548 in 2015-16, comprising:

· Permanent Forces (76 per cent) of:

– 14,249 Navy Personnel

– 29,648 Army Personnel

– 14,172 Air Force Personnel

· 18,100 APS staff (24 per cent)

· 379 Contractors (less than 1 per cent)

The revised forecast for the Reserve Forces in 2015-16 is 915,000 days of service provided by 19,360 members.

Over the forward estimates period, the total fulltime average workforce will grow by 1,252 from the forecast of 76,548 in 2015-16 to 77,800 in 2018-19. The number of days served by the Reserve workforce will increase by 25,000 from 915,000 to 940,000.

The total planned strength of the Defence workforce is shown in Tables 14 and 15, while a breakdown by Service and rank or level appears at Table 16.

Defence People

No changes have been made to the Defence People section since the Portfolio Budget Statements 2015-16.

Table 13: Planned Workforce Allocation for the 2015-16 Budget and Forward Estimates—Average Fulltime[1]

Table 14: Planned Workforce Allocation for the 2015-16 Budget and Forward Estimates—Reserve [1][2]

Table 15: Breakdown of Average Personnel Numbers by Service and Rank [1]

Department of Defence

Section 2: Defence Outcomes and Planned Performance

2.1 Outcomes and Performance Information

Government outcomes are the intended results, impacts or consequences of actions by the Government on the Australian community. Commonwealth programmes are the primary vehicle by which Government agencies achieve the intended results of their outcome statements. Agencies are required to identify the programmes which contribute to Government outcomes over the Budget and forward years.

Each outcome is described below together with its related programmes, specifying the performance indicators and targets used to assess and monitor the performance of the Department of Defence in achieving Government outcomes.

Figure 1: Structure of Defence’s Outcomes

Outcome 1: The protection and advancement of Australia’s national interests through the provision of military capabilities and the promotion of security and stability

Outcome 1 Strategy

The following changes have been made to this outcome strategy since the Portfolio Budget Statements 2015-16:

· delivering on the Government’s commitment to release a Defence White Paper.

Department of Defence

Outcome 1 Resources

Table 16: Total Budgeted Resources Available for Outcome 1

Table 17 (Continued): Total Budgeted Resources Available for Outcome 1

Department of Defence

Contributions to Outcome 1

Programme 1.1: Strategy

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Programme 1.1 Objective

The Strategy Group provides policy advice on the central issues of Australia's defence policy, including ADF operations, international defence relations, industry policy, arms control, and defence export controls.

Table 17: Cost Summary for Programme 1.1 Strategy

Programme 1.1 Deliverables

· Lead the development of the Defence White Paper and Defence Industry Policy Statement.
· Manage the Defence-industry relationship, ensuring alignment of industry programs with Defence capability requirements and manage innovation programs.
· Administer the use of co-existence, by way of the time-share model, in the Woomera Prohibited Area.

Programme 1.2: Navy Capabilities

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Table 18: Cost Summary for Programme 1.2 Navy Capabilities

Table 19: Navy Deliverables (Unit Ready Days)[1]

Table 20: Navy Deliverables (Unit Availability Days)[1]

Table 21: Navy Deliverables (Products)

Table 22: Navy Deliverables (Flying Hours)

Programme 1.3: Army Capabilities

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Table 23: Cost Summary for Programme 1.3 Army Capabilities

Table 24: Army Deliverables (Rate of Effort – Flying Hours)

Programme 1.4: Air Force Capabilities

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Table 25: Cost Summary for Programme 1.4 Air Force Capabilities

Table 26: Air Force Deliverables (Flying Hours)

Programme 1.5: Joint Operations Command

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Table 27: Cost Summary for Programme 1.5 Joint Operations Command

Programme 1.6: Intelligence Capabilities

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Table 28: Cost Summary for Programme 1.6 Intelligence Capabilities

Programme 1.7: Vice Chief of the Defence Force

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Programme 1.7 Objective

The Group enables Defence to meet its objectives through the provision of: military strategic effects and commitments advice and planning; joint professional military education and training; logistics support; health support; ADF Cadet and Reserve policy; joint capability coordination; preparedness management; and joint and combined ADF doctrine.
VCDF Group is committed to drive reform in line with Defence’s Pathway to Change Programme and the First Principles Review.

Table 29: Cost Summary for Programme 1.7 Vice Chief of the Defence Force [1]

Programme 1.8: Capability Acquisition and Sustainment

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Programme 1.8 Objective

No changes have been made to the Objectives since the PBS 2015-16.
On 1 July 2015, the Defence Materiel Organisation (DMO) transitioned to the newly established Capability Acquisition and Sustainment Group (CASG) within the Department of Defence as recommended by the Defence First Principles Review. CASG continues to have the former DMO’s objective to provide the materiel equipment and sustainment elements of capability for the ADF in an effective, efficient, economical and safe manner.

Table 30: Cost Summary for Programme 1.8 Capability Acquisition and Sustainment [1]

Department of Defence

Table 31: Major Capital Investment Programme by 2015-16 Forecast Expenditure

2015-16
Budget
Estimate
$m / 2015-16
Revised
Estimate
$m / Variation
$m
A / Top 30 Projects Gross Plans / 5,873 / 4,882 / -991
B / Other Approved Project Gross Plans[1] / 832 / 1,651 / 819
C / Total Gross Plan Project Estimates (A+B) / 6,705 / 6,533 / -172
D / Management Margin: Slippage[2] / -548 / -253 / 295
E / Payments Required for the Approved Programme (C+D) / 6,157 / 6,280 / 123
F / Projects Planned for Government Consideration / 625 / 254 / -371
Total Estimated Funds Available (E+F) / 6,782 / 6,534 / -248
Notes
1. Includes new project approvals and other adjustments yet to be actioned.
2. Management margin is an estimate of possible overall approved capital programme expenditure slippage that may occur as the 2015-16 financial year progresses.

The above table reflects the cash programmed to fund the current Approved Major Capital Investment Programme. The Total Programme Estimate for Major Capital Projects (serial C) is referred to as the Programme’s ‘Gross Plan’ estimate and is based on project expenditure expected to occur during the year in accordance with project schedules. The Management Margin (serial D) reflects an estimate of possible overall programme slippage that may occur during the year. This management margin is deducted from the Gross Plan estimate to calculate the estimated cash required for the Approved Programme (serial E). An estimate for projects that are planned for Government consideration and transfer to the approved programme during 2015-16 (serial F) is then added to obtain the total estimated funds available for the Major Capital Investment Programme.

The management margin is applied because of the inherent uncertainty in a programme with a large number of complex and long lead time projects. Unknown project events will occur which will impact on funding requirements. These events include cost savings and better payment terms, variations to project schedules, withholding of planned payments due to contractor non-performance, and variations to payments required under the US Government’s FMS Program. CASG estimates and applies a slippage model to determine the appropriate management margin and annual cash requirement for the programme.

The slippage model is predicated upon the assumption that for each year, a certain percentage of project Gross Plan estimates will slip or be accelerated. The percentages applied vary with the composition of the programme, the estimates update being conducted and the probability assessments of expenditure plan achievement provided by projects.

Table 32: Minor Capital Investment Programme by 2015-16 Forecast Expenditure

2015-16
Budget
Estimate
$m / Revised Estimate
2015-16
$m / Variation
$m
A / Top 10 Projects Gross Plans / 33 / 29 / -4
B / Other Approved Project Gross Plans / - / 7 / 7
C / Total Gross Plan Project Estimates (A+B) / 33 / 36 / 3
D / Management Margin: Slippage / -2 / 1 / 3
E / Total Approved Programmes (C+D) / 31 / 37 / 6
F / Projects Planned for Government Consideration / 105 / 48 / -57
Total Estimated Funds Available (E+F) / 136 / 85 / -51

Department of Defence

Programme 1.9: Defence Executive Support

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Table 33: Cost Summary for Programme 1.9 Defence Executive Support

Programme 1.10: Estate and Infrastructure

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Table 34: Cost Summary for Programme 1.10 Estate and Infrastructure [1]

Programme 1.11: Chief Information Officer

Performance information is as reported in the Portfolio Budget Statements 2015-16 except for the following revisions.

Programme 1.11 Objective

The programme objective is supported by the CIOG Organisational Review Project which was closed in the first quarter of the 2015-16 financial year and the activity subsumed into the wider Defence First Principles Review Workforce Alignment activity.

Table 35: Cost Summary for Programme 1.11 Chief Information Officer