Home' Defence Magazine : Issue 7 2009 Contents 22
efence buys a vast array
of items – from pencils and
paper through to ships and
planes. Defence also buys
services from a large number
of contractors, including
from those who maintain equipment,
look after bases and provide expert
Defence is a major user of water, electricity
and telecommunications infrastructure and spends
$15 billion or more across Defence and the Defence
Materiel Organisation in payments to industry each
year for goods and services.
The Strategic Reform Program (SRP) seeks to
make sure that Defence’s purchasing gets best value
for money. Any money saved can be used to buy more
capability – ships, tanks and planes.
When people think about Defence purchasing,
they often focus on the equipment side, and assume
that the rest is largely ‘rats and mice’. In fact,
Defence spends less each year on purchasing military
equipment than it does on all its other purchases.
Non-equipment procurement (NEP), which refers
to all the goods and services Defence buys, apart from
military equipment and its sustainment, costs around
$4 billion to $5 billion every year. It’s a lot more than ‘rats
and mice’. In fact, it represents around $16,000 that each
of us will contribute from our taxes during our lifetime.
NEP is complex, as it covers a vast array of goods and
services, including such things as:
Utilities – water and power
Garrison support services at out bases, including
catering, gardening, cleaning and security
Purchase of office requisites and office furniture, and
Arranging for the removals of Defence people and
their families when posted.
The advantage of having such a large annual spend on
NEP is that you don’t need to do much to save a lot of
money. If Defence can shave as little as one per cent
off its costs, $50 million is freed up every year – that’s
half a billion dollars in a decade.
But Defence can do a lot better than one per cent.
The independent budget audit carried out last year
assessed that as much as 15-20 per cent can be saved
in some NEP categories. All together, it is estimated that
Defence can save more than $400 million every year –
around 8-10 per cent of current annual spend on NEP.
In a number of cases Defence will not be able to
deliver the savings overnight and they will come only
as contracts are renewed and old habits, systems and
policy are changed. But where it can, Defence will
move quickly to implement necessary reform.
Savings can be made in two main ways – by
reducing unnecessary demand and by improving supply
arrangements. The following examples illustrate the
sorts of opportunities we have:
Travel: We should only travel when we
absolutely need to. If as little as one trip in every
five carried out by Defence people is eliminated,
we will achieve more than the NEP target saving
Payment and Debt Processing: Defence’s
travel allowances are very generous by wider
community standards. In some cases, people
lodge requests to be paid adjustments of as
little as a dollar – and even less. Under present
arrangements it costs Defence about $70 to
process that request or to recover a debt of that
amount. We need to see if we can change policy
and behaviours to avoid this inefficient practice.
catering: How much would you pay for lunch?
On Defence bases the cost to Defence of a meal
varies from as little as a few dollars up to $60
or more. Why is there this variance? We clearly
need to ensure people have access to quality
food, including in remote areas, but no-one can
argue that Defence should be paying $60 for a
lunch worth a few dollars.
Reform will not happen if it is left to a few in Russell
Offices. It needs to engage all of us. It needs the
commitment of all of us. Most importantly, it needs
everyone in Defence to see themselves as leaders of
reform; looking for ways to be more efficient.
People are often discouraged from proposing
change because it has been rejected in the past
or because it contravenes a policy. The SRP is the
opportunity to change that outlook. We can review
policy if it is not sensible and by adopting a ‘we can
if...’ approach to make real and sustainable changes.
But as well as thinking about reforms, people also
need to be prepared to accept change. We need to be
realistic in our expectations and be willing to accept
different ways of doing business.
more than ‘rats and mice’
sPotLIGHt on reForM
Defence Magazine intends to publish regular articles to update readers on
the progress from the 15 streams of the Strategic Reform Program. Below,
Dr Ian Williams focuses on the Non-Equipment Procurement stream.
AbOve: Lunch is served at the Airmen's Mess at RAAf base Darwin. Improvements to
catering services such as this have been identified under the strategic Reform Program.
Photo: CPL Michael Davis
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