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Not the last word on the first principles review

Posted By on May 22, 2015 @ 06:00

First Principles Review

Reform programs come and go in the Australian Defence establishment. Sometimes they fulfil their intent; sometimes they don’t. The extent to which the changes sought by the First Principles Review occur will depend on the vigor with which its recommendations are implemented. As to the improvements sought (which are more than mere organisational changes), only time will tell whether intended consequences outweigh those that are unintended.

If nothing else, Defence is going to be shaken up and some—but not all—of its managerial overheads are going to be cut. The planned changes will provide the opportunity to improve governance, accountability, corporate planning, management information, performance monitoring, risk management and budget discipline. Of course, we’ve been promised this before (repeatedly) and yet here we are again. You can lead a horse to water but you can’t make it drink.

The merits of many of the substantial changes are far from self-evident—if they were, they would’ve occurred a long time ago. The best that can be said is that the ideas are new and might be worth a try. In the long run, Defence reform is more an exercise in trial and error than intelligent design. With luck, we keep the things that work and reject those that don’t. Sometimes we can’t make up our mind. The ‘in again–out again’ routine with acquisition is one example. Does anyone remember the Department of Supply?

You don’t have to be a pessimist to see the risks in some of the changes ahead. Creating a ‘stronger strategic centre’ in two parts is a bold move. To succeed, the tensions from contestability will have to be held in check to avoid thwarting cooperation between the newly created civilian and military sub-empires. And even if relations remain cordial, it’s far from clear why a headquarters divided in two will work better than a single integrated one.

There’s no arguing that the new ‘One Defence’ model is less ambiguous about accountabilities than its predecessor. But accountability isn’t an end in itself—it’s a means to ensure that the things that need to happen do happen. Nothing’s gained by dividing a task into two artificial parts if they’re tightly interdependent. For example, it’s an illusion to think that a budget can be developed independently of the outcomes sought, and vice versa. Many of the things ostensibly divided between the civilian and military sides of the house are, in fact, opposite sides of the same coin. Reductionism has limits.

Nowhere are the risks greater than when it comes to the new ‘end-to-end’ approach to capability development. We’re told that the new capability and acquisition group will prepare the business cases for first and second-pass approval of projects, yet the people presently performing that role are slated to go back to the Services. Has this been thought through? We’ll find out soon enough, with two mega-projects to be decided over the next couple of years; the replacement submarines and the future frigates. It won’t help that the top layer of DMO’s acquisition expertise is about to be shown the door.

Fortunately, continuity will be the order of the day throughout much of Defence. In fact, many of the recommendations simply reaffirm established practices. For example, the recommendation to ‘fast-track’ some projects rather than automatically resort to process-heavy competition. Defence has been doing this for years—the Superhornets, C-17, C-27 and Aegis combat system for the AWD are just some examples. Unfortunately, circumventing competition doesn’t always end well—the debacle of the lightweight torpedo project had its origin in a truncated process that avoided a formal tender evaluation.

On the positive side, the First Principles Review has avoided the errors of the past by not promising a treasure trove of implausible savings. To the contrary, although some modest personnel reductions are proposed, the review identifies a number of areas where additional investment will be required to build the corporate capacity to operate more effectively—both in terms of human capital and information technology. It’s entirely possible that the cost of additional investment will exceed any savings that might arise. That should be taken as a sign of maturity, not failure.

On balance, it’s hard to know what to say. Change brings risks and opportunities. It will be up to the senior folks in Defence to make of it what they can. With the largest boost to defence funding since the Menzies era on the horizon, let’s hope they succeed.

Today ASPI launches a compilation of Strategist posts; Reviews and contestability; New directions for Defence [link]. It includes commentary on the First Principles Review from Ross Babbage, Allan Behm, Michael Clifford, Andrew Davies, Graeme Dobell, Jan K Gleiman, Paddy Gourley, Peter Jennings, John O’Callaghan and Mark Thomson.

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