Defence efficiency and other mythical beasts
17 Feb 2014|

Desultory interest is stirring once again amongst the occasional Minister and the chattering classes in making Defence efficient. In this quixotic quest ASPI has recently made a wide-ranging, well-reasoned submission to the Committee of Audit. It contains many good ideas, with four areas in particular that might profit from further discussion.

Firstly, the biggest issue is that efficiency as a concept isn’t highly regarded within Defence. This may surprise many concerned about the success of future ADF combat operations. The ADF has nominated economy of effort as one of its ten principles of war (PDF), so surely efficiency would be a matter of significant concern to all? Well, not really it seems. The Secretary of Defence has said it best. Interest in improving efficiency has:

 … to a significant extent, run out of steam. In my view, this is due to… the understandable cynicism in the Department arising from the Strategic Reform Program launched in the context of the 2009 Defence White Paper. No sooner had this been announced and ‘sold’ within the Department when broader fiscal measures not only led to a moving of the [promised Defence budget] goal posts but to their cutting down for use as firewood. [This was followed by] The, perhaps inevitable, retreat of a large organisation to a comfortable status quo.

In short, if the money generated by reforms within Defence can’t be used by Defence, then no one wants to find efficiencies. Treasurers, Finance Ministers and taxpayers may be appalled but it is a simple matter of human nature that everybody is self-interested. From my experience, this reward has to be both personal and direct, not just simply for some remote, abstract greater good.

A small story from the trenches if I may be allowed. Many years ago, I found I was suddenly responsible for a small project—about $20m or so—that was markedly behind schedule. Circumstances had changed since it was approved and the gaining Service had formed the view that the project was now of marginal value. But the Service wouldn’t cancel the project and free up the funds as the money would be lost to it in the budgetary mire. If it had been allowed to keep say half the funds to spend on issues now more important to it, well of course the Service would willingly have cancelled the project and let the other $10m flow back into central coffers. I approached the people running the budget and asked if we cancel this project can the gaining Service keep some of the savings? The inevitable—and fiscally correct—answer was an emphatic ‘no way’. The project continued on its way to utter irrelevance.

Finding a solution to the Secretary’s identified problem will require some careful thought. This solution has to motivate people at both the individual and organisational level to be financially innovative. If the people within Defence aren’t rewarded for finding efficiencies they won’t find them. Tomes of well-meaning statements by highly paid reform consultants are unlikely to achieve this.

But Defence has a big advantage over many other large organisations: for most people a major personal ambition is making the ADF and Defence operationally better. Letting their organisation keep some of the savings that individuals find could motivate many. In that dreadful but useful American term, they would be incentivized. The remaining savings can flow into the distant budgetary mire but some needs to remain so there are discernable benefits at the local level. Self-interest rules.

Secondly, some small quibbles. ASPI suggests an independent audit of the affordability of the Defence Capability Plan (DCP) that will underpin the next defence white paper. The problem is that the DCP is fundamentally flawed, so it’s irrelevant who does the costings. The DCP is currently based on guess-timated costs of projects that haven’t yet been well defined. How can you get high accuracy costings of something that isn’t even identified? Instead of costing future equipment acquisitions when you don’t know what you’re buying, focus on the DCP being a defence investment plan—which is what it really is.

Thirdly, ASPI talk of cutting 20% of personnel from headquarters. But we’ve been there, done that and it cost us all a lot of money. The ‘best’ example is Navy, which the Rizzo review found had in earlier reform programs significantly cut their headquarters’ engineering expertise, saved minimal cash and ended up with poorly maintained amphibious vessels that required much money to put right. The Coles review of submarines was similarly scathing. To improve efficiency, Defence management needs to get better, not get cut.

Lastly, ASPI finishes on a clincher: ‘There can be no greater inefficiency in Defence than having the wrong force structure’. Absolutely. Trouble is there’s a strong push to rush decisions before the new Defence White Paper (DWP) is completed. The shipbuilding valley of death is looming while State governments smarting under manufacturing industries closing want immediate handouts, oops, decisions, now—not in twelve months’ time. Compounding this, there are apparently some big projects coming up programmed for key decisions before the DWP is written; the F-35 Joint Strike Fighter stands out. The problem is that premature major project decision-making, whether driven externally by the States or industry, or internally by adherence to long-planned schedules within Defence, may not lead to the right force structure and an efficient defence force. No one said improving Defence efficiency was going to be easy!

Peter Layton is an independent researcher completing a PhD on grand strategy at UNSW. He has been an associate professor at the US National Defense University. Image courtesy of Flickr user kevinzim.