casg cost principles

5.12Bechtel had made contact with Defence in July2013 seeking an opportunity to help with reform of the DMO, presenting a paper Australian Defence OrganisationDMO Transformation Opportunities. The cost principles The government-wide principles, issued by OMB (or, in the case of commercial organizations, the Federal Acquisition Regulation [48 CFR 21], or, in the case of hospitals, 45 CFR 75, Appendix IX, "Principles For Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals"), on allowability and unallowability of costs under federally sponsored agreements. 5.21The report found that the lack of Systems Program Office commonality added complexity, blurred accountability and confounded the ability to build enterprise solutions for common services. 180Defence engaged a consulting firm to carry out a high level Asset Management maturity assessment of the CASG policy and guidance documentation against the requirements of the Asset Management Standards. Second and Combined approvals were selected, as Defence is expected to understand costs better at the Second Pass approval stage, than at First Pass. Inadequate contract management staffing levels, a lack of Commonwealth commercial acumen and poor leadership all contributed to a weakening of the Commonwealths position (p. 16). 141Defence, DMO End State Design Final Report, December 2013. 2.1The ANAO examined Defences governance and operational arrangements for managing the sustainment of specialist military equipment, with a particular focus on the clarity of: 2.2Defence has clear and long-standing arrangements for the management of materiel sustainment for specialist military equipment. examining each Systems Program Office to determine where each fits within the smart buyer function, and the most appropriate procurement model for delivering the capability and achieving value for money. 50ANAO Report No.40 201617, 201516 Major Projects Report. The 201516 Defence Corporate Plan did not include an explicit reference to sustainment in the Purposes statement. Products are those that deliver a capability based on smaller but more numerous systems often involving regular replacement of all, or components of, the capability. A service optimisation program for Army Land Rovers, saving $590000 a year. Capability Acquisition and Sustainment Group also undertook in July2016 that over the next 12months, Capability Acquisition and Sustainment Group will commence effort capture (where staff time is tracked against the projects and products we support), led by the Group Business Manager.85. Defence has not implemented measures of efficiency and productivity for all sustainment products. Key health indicators are, generally, lead indicators of factors contributing to future outcomes, for example, external maintenance backlog. 23. Defence was able to provide the ANAO with copies of a suite of standard letters of assurance from managers throughout DMO, each stating that, to the best of their knowledge, cost reductions of various values had been implemented for the respective financial year. Defence lacked a single set of accurate information to inform decision makingThe review found that, whilst significant levels of information and analysis exist across the Collins Class Sustainment Program, the basis for long-term decision making was not always consistent or accurate, with multiple systems and datasets in use for financial, maintenance and supply chain activities. There are others which relate to the more detailed findings of the First Principles Review, including those identified in the paragraph above (such as a common approach to project management).125 All elements have implications for both acquisition and sustainment. 2.19Following the First Principles Review, Capability Acquisition and Sustainment Group is undertaking a project to reform and consolidate Systems Program Offices. 5.44Defence began development of the Capability Acquisition and Sustainment Group Business Framework as of 31July2015 with a view to completion on 1February2016. Defence informed the minister there was a significant risk that Defence would fall short of the cost reduction target for the Program ($20.6billion) by some $4billion, almost one quarter of the remaining target ($17.6billion). 5.35The problem of existing contract arrangements was described as follows by an RAAF officer in 2005, with a special focus on ageing aerospace platforms: The typical [support entity] entails a Systems Program Office managing a variety of small to large volume-based, process-oriented contracts. Reform is expected to lead to greater outsourcing of functions currently performed in-house by Defences Systems Program Offices. 5.32Defence is in the early stages of the Systems Program Office reform envisaged by the First Principles Review. The Review found a need for the Ministry of Defence to rebuild its capability as an intelligent client for warship design and build.172 It concluded that, to ensure pace could be maintained additional technical expertise in the form of a Client Friend (or Friends) is procured early, in particular to assist in the development of a detailed specification. On 26 November 2010, the Minister for Defence, Stephen Smith, in adding project AIR 5418 Joint Air to Surface Stand-off Missile (JASSM) to the 'Projects of Concern' list, stated that the listing was because of "our poor management, our failure to keep government properly and fully informed about the project and its difficulties." 3.67The estimates documents generally provide components of these estimates, divided among the Services and other Defence Groups (Navy sustainment, Army sustainment and so on). 58ANAO Audit Report No.52 201314, Multi-Role Helicopter Program. Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; Subpart E View Full Text; Previous; Next; Top; Details. The Defence Science and Technology Groups Aerospace Division had concluded that a systematic and top-down approach such as enterprise-wide asset management was particularly suitable to address the challenges of reforming sustainment management in Capability and Sustainment Group. 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 main insights into what became of the initiative can be derived only from external consultancy reports. Source: K. Horn, C. Wong, E. Axelband, P. Steinberg, and I. Chang, RAND white paper, Maintaining the Armys Smart Buyer Capability in a Period of Downsizing, 1999. . Defence advised the ANAO that it would have been difficult to implement the contract as a performance-based contract: Unlike standard Defence capability projects, Bechtel has been contracted to develop Defences capacity and capability to deliver rather than for Bechtel to deliver itself. Source:Defence, Portfolio Budget Statements and Additional Estimates Statements, 200607 to 201718. 2.7In most cases, a major platformsuch as an aircraft type or class of shipis managed by a single Systems Program Office.18 Systems Program Offices maintain a relationship with industry bodies, particularly those providing maintenance services, spares, engineering and other support, and with the representative of the relevant capability manager.19 Each Systems Program Office has contracts with industry suppliers of services, parts and consumables. 9Executive Minute on Joint Committee of Public Accounts and Audit Report No. Kettl, Sharing Power, Brookings Institution, 1994; and GAO/GGD-92-11 Government Contractors: Are Service Contractors Performing Inherently Governmental Functions?, 1991. or an F&A cost Necessary costs incurred by a recipient for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. Defence has elaborated on its approach to being a smart buyer in its submission to the Joint Select Committee on Government Procurement, April 2017. Benchmarking the performance of the Collins Class submarines gave Defence a baseline against which to measure its progress in remediating the sustainment program. Such visibility would enhance Defences ability to benchmark its sustainment performance against allied countries with similar equipment. Source:Defence, Portfolio Budget Statements and Additional Estimates Statements; ANAO analysis. 164Defence, First Principles Review, pp. These are all fundamental skills in an organisation seeking to engage more with industry and contract out sustainment work wherever that represents value for money. 98Australian Strategic Policy Institute, The Cost of Defence: ASPI Defence Budget Brief 201617, p. 58. the project was approved in March1999 with a budget of $1.58billion (December1999 prices). 3.26Moreover, there is an opportunity for Defence to extend the use of its Sustainment Gate Review program to have those reviews consider the quality of the information provided in the most recent Quarterly Performance Report for the asset under review, to help quality assure the accuracy, clarity and completeness of that information. Box 3: Systemic issues identified by Defence in the reform of Systems Program Officesa. Part of the context for this audit is to inform the Parliament as to whether Defence has developed its management reporting sufficiently to facilitate a program of ANAO assurance reviews of selected sustainment activities. The performance of the Armed Reconnaissance (Tiger) Helicopter is reported thus in the Quarterly Performance Report for April June2016, produced in August2016: The Final Acceptance Milestone under the Acquisition Contract with Airbus Group Australia Pacific (formerly Australian Aerospace) was declared achieved on 28May2013, approximately five years later than originally contracted. 5.4Although sustainment does not attract a separate focus in the First Principles Review, the reviews findings and recommendations have major implications for how sustainment is performed. The Commonwealth's discretion, and a reasonableness test, will apply with regard to the use of the Cost Principles for tendered contracts. Three principal issues remain for the conduct of a process for sustainment parallel to the MPR for acquisition: 35. Please direct enquiries relating to reports through our contact page. A separate reform stream began in July2010, when consultants engaged by DMO found its sustainment business model was strikingly different from those in the private sector. 37The performance framework was set out in some detail in ANAO Report No.30 201415, Materiel Sustainment Agreements, p. 103 forward. There are no standardised reporting mechanisms (reporting is informal, anecdotal, local or crisis based) or management processes, with all divisions having different methodologies and management systems. A preference in the report of the First Principles Review for a whole-of-life focus (rather than on acquisition and sustainment as distinct spheres) is evident from the discussion of total cost of ownership (pp. 1. Defence had developed, by the time of that review, a consistent approach to acquisition. In this context any proposal for new reporting requirements will need to consider if the new information might be aggregated to disclose classified information on capability readiness and availability.. SPOs prevented from engaging industry using optimised outcome-based performance contracts. Those prices comprise only the costs incurred by the relevant Systems Program Office for goods and services supplied under contract.

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