Opinion: with a baffling review process, no wonder MSPs haven’t delivered for Defence

By John Glenn

Sunday March 14, 2021

Melissa Price and Linda Reynolds
Minister for Defence Linda Reynolds and Minister for Defence Industry Melissa Price at an event for industry achievements in the government’s F-35 program, December 9, 2020. (AAP Image/Mick Tsikas)

If you listen carefully you can hear the MSP quill pens scratching in rebuttal to last week’s opinion piece.  Paths being beaten to the minister’s door I am sure, and many a conversation in CASG is to be held. Without doubt there will be a defence of the status quo.

I thought I could save some time. The MSP model hasn’t delivered CASG’s anticipated outcomes. It is not as profitable or as easy as they thought it might be. They have invested in standing it up. They do bring IP to the table that, I suspect, they haven’t been able to properly unleash.

Word is that Defence’s expectations haven’t been entirely met either. Scale, capability, responsiveness, the development of skills all seem to be topical concerns.

I don’t hate MSPs, or CASG, or any of the people who work there. I don’t think we should pull the MSP model down and start again. Nor should we persevere with that which doesn’t work. It needs courage to face the reality of what is, and an open mind to fix it.

What I omitted to say in the last piece, however, was how to fix it — which is not through the ‘consultative process’ on which they have embarked. Read on for a better way.

MSPs, the fast food of consulting

MSPs are the fast-food segment of the consulting services industry, run by four franchisors created by CASG.  You get the same food, at the same price, delivered quickly — anywhere across the country. Slightly different flavours, but all of it a bit sweet, a bit easy. Convenient. Fast. Seductive in its simplicity.

The occasional pocket of fresh food is hidden within the bland convenience of a chain offering.

No one says don’t enjoy the convenience occasionally, but the world moved away from the chain restaurants. We now get better, more tasty food, more options that do not fatten us in an obesity epidemic. Right now, CASG is saying gorge on the fast food of the MSPs.

We could, with some thought, build an entire industry of gourmet food and flavour.

The rise and rise of CASG

I am long enough in the tooth to have followed the growth of CASG from its earliest predecessors, when the services had their materiel divisions. I do not suggest that we go back to the ‘good old days’, but one advantage was that service capability and acquisition were tightly coupled and responsive.

CASG is a shared service organisation — a central procurement agency. Undoubtedly, shared services optimises resources, but sometimes those shared services forget their role. From the early days of Gumley’s DMO, there was a drive to hold Defence at arm’s length. It was resisted, fortunately, but the attitude of intervention, intermediation, and ever-increasing control remains.

CASG derives its funding from the services — it receives $740 million in appropriation funding to sustain itself, and about $20-30 billion annually in project related transfers. It is working with other people’s money — the public purse directly in the first instance, and the services in the second.

The role of CASG is to facilitate the access of capability managers to the capabilities of industry, one of the fundamental inputs of capability. CASG delivers no capability uplift itself — but is in service of the capability managers and industry.

Changing its view of itself will change the way it behaves and engages.

CASG has an obligation to do more with the expenditure than build easy business practices that make its life simple. Its role is to provide access to and facilitate the development of the best of industry capability. It exists to service the capability managers and industry.

The MSP model, while simple to administer and requiring little thought for project staff to implement, is an expensive use of capability managers’ appropriated funds and drives an unhealthy industry.

The rise and rise of the MSPs and friends

The diagram below shows the dominance of the MSPs. In only three years, the majority of expenditure is concentrated in five consortia, out of the 570 on the panel. With each of these companies operating under multiple ABNs, the centralisation is even more marked.

The CASG MSP implementation is inconsistent with the intent of the First Principles Review, opting for the ease of ‘body shopping’ rather than thoughtful outcomes-based procurement. The gross centralisation, while simple to operate, is inconsistent with the principles of value for money, competition, or any rational industry policy.

The future of this model is a hegemony of four, in collaboration with CASG, driving the above-the-line industry to lowest common denominator, removing all chance of new entrants, future competition, or growth of an independent Australian consulting industry servicing the defence sector.

 

 

Figure 1- Contracts and extensions since inception (Feb 2018) MSP and DSS members

Visualisation courtesy of dataventures.com.auhttps://public.flourish.studio/visualisation/5541139/

A self-licking ice-cream

Following the food metaphor a little longer — a review of the MSP model by the organisation that designed and implemented it is a self-licking ice-cream. Those who dig a hole defend it. Left to their own devices, they will almost certainly adapt with micro-changes and bleed back to the status quo over time.

While a ‘consultative review’ is underway, CASG lost all credibility with the consultation during the establishment of the MSPs. That was more a series of presentations on how the MSP model would unfold, led by a revolving door CASG-senior-executive-turned-consultant who had architected the program in the first place.

The current one-way consultation, conducted via an ‘independent’ consultant’s questionnaire, without transparency or any declared plan to engage after the questionnaire, and commissioned by the organisation that designed and implemented a model, will not serve either defence or industry well.

As to the ‘independence’ — the consultant’s company has no website I could discover. It does have a name consistent with a 20-year veteran of the Big 4 that for the past six years has been part of an MSP consortia. The company was awarded a five-month $400,000+ contract through limited tender — code for sole source. Given CASG’s predilection for appearances, this choice is bewildering.

This is not a consultative process; this is ticking a box.

Here’s a thought

Leadership requires the courage to recognise your weaknesses and the reality of the situations in which you find yourself, and then to act to address them. The alternative is hubris.

It’s unreasonable to expect CASG, and indeed public sector professionals, to have a high level of commercial acumen. They simply do not have the experience. Views and actions are often biased and unsophisticated, based on a skewed perspective of behaviour and lack of understanding of the art of the possible.

Industry might know how to deliver a better outcome than Defence, for Defence! After all, industry understands industry better than Defence does, and given the number of ex-Defence employees in industry, probably knows Defence as well as Defence knows itself. Companies have self-interest of course, and the bigger the company, the greater the self-interest.

So, industry would have to be approached properly, like has been done before.

When RPDE was established over a decade ago, the most competitive of industry players were asked to cooperate — when it is competition that is in their DNA. They were asked to design an innovation hub in which they would share IP openly and the commonwealth would bear liability. It was an unnatural act for everyone involved. Working alongside the Services, the now extinct Capability Group and DMO (now CASG) created a contracting and operating construct that was very successful for many years.

It is possible to engage more openly, and more cooperatively — but you have to choose to do so.

The services, the MSPs, the SMEs, and CASG all have valid views. The trick to developing a more robust model, and conversion of the naysayers is to have those interests heard and considered. Dealing with the interests and agendas of each of the parties openly allows for the contribution of ideas and the easier acceptance of outcomes. It also opens the way for new opportunities.

I don’t suggest I know all the interests, but here are a few. We should be clear on them, because once you know the interest and objectives, you can design a better working model.

Figure 2- Some diverging interests?

Services CASG MSP SME Govt
Flexibility to choose support Standardisation Scale Access to the client in their own right A thriving SME industry
Innovation and ideas Ease of operation Margin/profitability Brand recognition Potential for export
Price Price Ability to differentiate with IP or USP
Margin/profitability

What to do now?

Here is a four-step process for a better outcome:

  • Establish an open, engaging and transparent industry engagement process. It can be hosted by CASG, but not run by it. Use an acceptable, independent facilitator.
  • Operate an engaging and transparent process. Seek submissions, consultation through debate, and participation. Understand the issues from all sides. Read those issues back to the participants. It will take longer, but having a say, and knowing it is heard, is as important as what is said.
  • Develop some options, with outline transition planning, and seek further input.
  • Defence, meeting the minister’s needs, chooses the most acceptable option and implements it according to the outline transition plan.

Not everyone will get what they want. It would be presumptuous to ‘throw out the MSPs’, and an open SME market would be unwieldy. But elements brought together in ways that may not even have been considered as yet might just yield a surprising outcome. Engagement takes longer but will build a more robust answer. It’s hubris to think that CASG has the answers, that CASG knows best: ‘tell me what you think, and I will tell you what to do’. That’s what they did last time — except for the first bit.

I doubt there is a perfect answer, but nor does the answer have to be perfect.  The result only has to be better than today, to allow an industry to flourish and offer the consumer the right to choose fast food or a culinary delight.


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