Concern over Defence's projects of concern regime

By David Donaldson

April 1, 2019

Defence is not applying its special process for troubled projects with “rigour”, and is more interested in maintaining relationships with industry, argues ANAO.

Failing projects at Defence end up on a special list, known as ‘projects of concern’.

The idea is “to remediate the project by implementing an agreed plan to resolve any significant commercial, technical, cost and/or schedule difficulties.”

Projects of concern receive targeted senior management attention and must be reported regularly to the government. The idea is to keep ministers informed and resolve troubled capability development projects through remediation or cancellation with the explicit involvement of ministers.

Of the 25 projects listed since 2008, Defence has cancelled two, and returned most of the remainder to normal management arrangements.

And it works — if you ask Defence management.

The auditor is not so sure, however.

“While the projects of concern regime is an appropriate mechanism for escalating troubled projects to the attention of senior managers and ministers, Defence is not able to demonstrate the effectiveness of its regime in managing the recovery of underperforming projects,” argues the Australian National Audit Office in a report released last week.

“Defence remains confident of the regime’s effectiveness but its confidence is based on management perception and anecdotal evidence, as it has not attempted any systematic analysis. Over the last five years, the transparency and rigor of the framework’s application has declined.”

ANAO notes Defence has not evaluated the regime over the decade it has been in place, nor set criteria for assessing success.

“There is no basis, therefore, for Defence to show that the projects of concern regime contributes materially to the recovery of underperforming projects and products.”

Defence “no longer has an appropriate framework” for projects of concern, says ANAO. Current implementation of the regime “lacks rigour”.

“Over the last five years, transparency has reduced, the level of formality has declined with explicit criteria replaced by unpublished principles, and processes have become less rigorous with a greater emphasis on maintaining relationships with industry,” the report reads.

There’s been “inconsistency” in its application.

“In particular, application of processes for entry onto the list have been inconsistent and summit meetings to address projects of concern have become less frequent,” says ANAO.

“Greater consistency has been maintained in preparing remediation plans and removing projects from the list, though there have been exceptions to both.”

In its response to the report, Defence said it “maintains that the projects of concern regime is a significant material factor and a strong commercial lever to influence the positive recovery of underperforming projects and products.”

It noted the “majority” of past projects of concern were remediated and went on the completion.

Defence also states that it does not agree with ANAO comments that it had avoided placing projects on the list of concern to protect relationships with industry.

Defence agreed to the two recommendations to make the regime more consistent and evaluate its performance.

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