Home' Future Building: The Australian Infrastructure Review : December 2011 Contents Spotlight on Defence procurement
Volume 2 Number 2
and training equipment. In 2008, the United King-
dom’s Ministry of Defence signed a £2.7 billion
tanker aircraft PPP. In fact, the engagement of the
UK Ministry of Defence with the private sector is so
deep that they have even contracted out the man-
agement of their nuclear weapon arsenal to Serco.
Mortimer correctly noted that PPPs don’t stack
up for all projects – but for many they do – and they
don’t appear to be receiving due consideration.
Freehills Partner Bill Napier said the willingness
of the United Kingdom to consider Defence PPPs
could resonate in Australia.
‘The United Kingdom has taken that extra step
when it comes to PPPs,’ says Napier, who advised on
a competing consortium vying for Phase 2 of Single
He explained that closer private sector
involvement in Australia’s military services may have
helped improve coordination between the Navy
and the DMO in ensuring that at least one of the
country’s amphibious ships was available in the
wake of Cyclone Yasi earlier this year.
‘If you outsource maintenance and require
the private sector to perform to certain agreed
benchmarks, you’d think that at least one of the ships
would have been available,’ Napier says.
The Rizzo Report pointed to the lack of a
‘business-like contract’ between the Navy and the
DMO as one of the underlying reasons for the HMAS
Tobruk, Kanimbla and Manoora being unavailable.
The Rizzo Report suggested that if the DMO has
to call in contractors to make up for maintenance
overlooked or neglected by the Navy, then the DMO
should hand over the bill to the Navy.
The Department of Defence has accepted all 24
of the report’s findings, which also include rebuilding
the Navy’s engineering capability and helping the
DMO and Defence work in closer partnership.
Commenting on the Rizzo Report in July, DMO
Minister Clare said: ‘The report found poor risk
management practices, a failure to manage assets on
a “whole-of-life” basis, negative aspects of a “can
do, make do” culture, the failure of Navy and the
Defence Materiel Organisation to work together
seamlessly, and perhaps most importantly, an overall
ineffectiveness of the Naval engineering function
in Navy and the maritime elements of the Defence
‘Collectively, these issues have compromised
the availability of Navy assets and potentially the
sustainability of Navy ships in the longer term.’
It’s clear that there are opportunities for broader
involvement by the private sector.
Dr Smith says that the Single LEAP accommodation
project has set new benchmarks in accountability
and efficiency, and there are opportunities for the
model to be extended throughout the Department.
He explained that there had been a shift in risk
assessments in the wake of the global financial
‘PPPs are an alternative procurement
methodology and risks are addressed in a different
manner than traditional procurement. The risks are
allocated to the best party able to manage them
between the public and private sectors,’ Dr Smith
‘Single LEAP Phase 2 was required to ensure an
appropriate risk allocation post-GFC. The HQJOC
and Single LEAP Phase 1 were pre-GFC and hence
the risk-sharing considerations were different.’
He said that with each project, the Department is
becoming more educated about the merits of PPP.
A short statement issued by a Department of
Defence spokesperson stated that ‘lessons will be
learnt’ as the PPP market continues to develop in
Dr Smith says that sustained, successful projects
like the Single LEAP project will only serve to fortify
the reputation of the procurement model.
‘There are always lessons learned on large
complex projects and, in hindsight, one can always
look back and say that things could have been done
‘However, Defence has successfully developed
and delivered two PPP projects and is well on its
way to delivering its third.’
With the Department plagued by missteps
and high-profile procurement failures, further
partnerships with the private sector are not only likely
for Defence to improve cost savings and efficiencies,
they are essential.
LEFT: Stephen Smith. Image
© Department of Defence
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