Projects to acquire defence capabilities involve large amounts of public money and attract much public and political interest. Experience here and in other countries suggests that these types of projects are prone to difficulties, delay, and cost increases.
In my 2005/06 Annual Plan, I indicated my intention to carry out a performance audit to identify and report changes to costs, time frames, and essential user requirements in selected defence acquisition projects. It is inevitable that there will be changes during such projects, particularly in their early stages. Sometimes, these changes will be significant. The purpose of the audit was to improve the quality of reporting by the defence agencies, not to assess the quality of the decisions made in managing the projects.
My staff were unable to complete the audit as originally intended. A lot of the detailed information that I expected the defence agencies to have was not readily available. Also, my staff and the Ministry of Defence disagreed on the point in the acquisition process from which changes should be monitored and reported. Although the defence agencies' guidance states that cost estimates should be robust when they are submitted to Cabinet for approval to commence acquisition, in practice they are not.
This interim report does not make any conclusion about how well the defence agencies are managing specific projects, or on the causes or justifications for changes in forecast costs and time frames. As noted, the focus of our work was on the quality of the monitoring and reporting systems, not the quality of the decisions being made.
The defence agencies are adamant that they manage acquisition projects well. They are often questioned on this. In our view, they must be able to report better and more complete information to demonstrate how well they are managing defence acquisition projects. Better reporting will enable greater accountability to Ministers, Parliament, and other stakeholders on progress with these major acquisition projects.
I am committed to working with the defence agencies to find a way for them to provide effective assurance to Parliament on this area of spending. I am pleased to note that the defence agencies are similarly committed to providing Parliament with the necessary information for such reporting.