A DMO reform recipe – four starting ingredients
20 Jun 2013|

ARH2 on Assembly Line February 2004, Marignane FranceWhichever party wins the upcoming Federal election is going to have to prioritise reform of Defence’s procurement processes and capability delivery to address looming problems, including capability gaps, base consolidation and upgrade requirements. It’s also going to have to deal with the increasingly justifiable malaise within Defence-related industry, at both prime-contractor and SME levels. These priorities exist in the context of a 2013 White Paper which failed to deliver the needed clarity on the funding and capability ‘supply side’ required to deliver DCP aspirations, as well as the stuttering Strategic Reform Program within the Department of Defence.

No doubt, the incoming ministerial team will be bombarded over the coming months with long lists of reform suggestions from stakeholders trying to influence their thinking on these matters, and in particular to effect change on the Defence Materiel Organisation (DMO), whose current organisational settings have clearly been the source of discontent for many stakeholder groups (including both of its primary partners—the ADF capability managers and industry).

I’ll suggest four simple strategic decisions as a starting set of ‘reform ingredients’ which in my view will be catalysts for the ‘unblocking’ of a range of chronic DMO pathologies:

  1. The incoming government needs to categorically define the DMO’s purpose and scope as Contract Management, and abandon pretensions (fostered in the middle parts of the last decade) of being a Project Management organisation. This simple statement of strategic intent will prompt movement across a whole suite of stalled or conflicted initiatives, including evolution of cooperative contracting philosophies, effective and progressive use of above-the-line service providers and integrators, and innovative management of capabilities and assets using whole-of-life productivity and lifecycle management criteria (all of which are long-stated but inadequately implemented objectives for a variety of structural and political reasons).
  2. The incoming government needs to divorce the DMO from its role as ‘industry custodian’, which is often incoherent with, or distracting to, its primary role as capability purchaser. That’s not to say that the fostering of a domestic defence industry isn’t vitally important, especially for sustainment outcomes, but the development of industry policy, the management of industry programs (both stand-alone and alongside other governmental business and export support initiatives), and the attributed responsibility for the health of the sector and its participants  belong elsewhere.
  3. The incoming government needs to commence the process of striking a strategic Foreign Military Sales-type agreement with the UK, structured so that all capabilities developed by European-based prime contractors (including the major continental primes, through their UK subsidiaries) could be made available to Australia on a Government-to-Government basis. This would provide a needed competitive dimension to the FMS lever currently only enjoyed by the USA and its primes, and would strategically balance Defence system procurement by allowing the twin instruments of competitive tender and government-to-government sourcing across all of its major industrial relationships.
  4. Most importantly, the incoming government should hire a senior executive team for the DMO which is empowered to lead and reform the organisation without resorting to extensive and time-consuming precursor reviews. The DMO at its heart is a commercial entity with a commercial mission, and the money spent on a top-notch leadership team used to driving strong change and strategically reviewing in an ongoing iterative concurrent-action process (as is normal practice in private industry) will inevitably cost less than the money that would be wasted—directly and in time taken—by the usual clunky, linear public practice of navel-gazing before ‘decisive’ appointment and action.

Bernard Mills is a defence industry executive with career experience in Australia and Europe. He holds an MA from the ANU’s Strategic and Defence Studies Centre, and an MBA from HEC Paris. Image courtesy of Defence.