casg cost principles casg cost principles

169Defence, Observations and conclusions of the Gate Review Board, CA48MRH90 Multirole Helicopter: Sustainment Performance Gate Review, 12 May 2016. 108-115, available from [accessed 20 April 2017]. Cost Accounting Standards Board Notice on Principles and Other Matters to Guide Conformance of the Cost Accounting Standards (CAS) to Generally Accepted Accounting Principles (GAAP) . 194Defence Annual Report 201516, Chapter 8, Web Table 8.11: Top 30 sustainment products by expenditure, as forecast in the Portfolio Budget Statements 201516, available from [accessed 20 April 2017]. This chapter examines Defences governance and operational arrangements for managing the sustainment of specialist military equipment. The Quarterly Performance Report is the primary way by which Defence provides information to government and senior Defence personnel about the status of major acquisition and sustainment activities. 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. Efficient, Effective, Economical and Ethical Procurement 7. Further, performance summaries were highly variable and inconsistent between public planning documentsDefences Portfolio Budget Statements and Portfolio Additional Estimates Statementsand the Annual Report. In July 2015, Defence issued a request for quote and tasking statement to Bechtel. 5.44Defence began development of the Capability Acquisition and Sustainment Group Business Framework as of 31July2015 with a view to completion on 1February2016. Final Operational Capability was declared in April2016 and ministerial advice was noted on 3May2016. Similarly, in an international seminar on Defence acquisition in July2000, an issue identified by Defence at the time was the challenge to be a smart buyer. The Commercial Division in Capability Acquisition and Sustainment Group expressed concern that Defence needed to articulate clearly its objective/end state before agreeing to contracts of this cost and magnitude. 34Defence, Decision BriefSustainment Performance Management System Development, 8 August 2011. 178British Standards Institution, Publicly Available Specification for the optimal management of physical assets PAS 55-1:2008: Asset Management, cited in Defence, Defence Asset Management Landscape Document, May 2012, p. 1. The Bechtel team assisting Defence comprises around 60 people (January 2017). In 2011, a health check by external consultants found some early successes with cost reductions and changes in practice. These estimates, based on the latest available figures each year (generally from the Portfolio Additional Estimates Statements) are set out below (in Figure3.3) for the period 200506 to 202021 (the end of the current forward estimates period as at May2017). 9. This matter is also taken up in the next chapter. The document details the cost principles that Defence and industry will utilise in costing contracts. 212Senate Foreign Affairs, Defence and Trade References Committee, Capability of Defences physical science and engineering workforce, April 2016, paragraph 3.16. http://www.defence.gov.au/annualreports/15-16/Chapters/chapter-8.asp, http://www.defence.gov.au/casg/AboutCASG/Accountability/, https://www.nasa.gov/offices/ocfo/nasa-cost-estimating-handbook-ceh, http://www.finance.gov.au/resource-management/performance/, http://www.defence.gov.au/Budget/17-18/PBS.asp, http://www.defence.gov.au/AnnualReports/15-16/Chapters/chapter-8.asp, https://www.aspistrategist.org.au/graphs-week-finally-getting-collins-class-paid/, http://www.defence.gov.au/ADC/publications.asp#Geddes, http://www.defence.gov.au/Budget/15-16/PBS.asp, http://www.defence.gov.au/annualreports/15-16/Chapters/Chapter8-WebTable8.11.xls, http://www.defence.gov.au/annualreports/15-16/Chapters/Chapter8-WebTable8.2.pdf, Auditor-General's responses to requests for audit, Systems Assurance and Data Analytics Group, Professional Services and Relationships Group, http://www.defence.gov.au/Budget/15-16/PAES.asp, http://www.gao.gov/products/T-NSIAD-97-110, Defences Management of Materiel Sustainment. 3.68For each Service, comparing the amounts presented in the first and last years of this analysis yields an average annual (compound) rate of growth in the estimates.97, Table 3.1:Increases in sustainment estimates by service, 200607 to 202021 ($m), Annual rate of growth (compound) from 200607 to 202021. 5.66The ANAO recommends that Defence develop and implement an evaluation plan to assess the implementation of the recommendations of the First Principles Review. Defence has not put in place plans to evaluate either the reforms themselves or its implementation of them. 94Defence has advised that around two-thirds of Systems Program Office staff are engaged in sustainment work. xref As noted in Figure 3.2, Systems Program Office staff have numbered between three thousand and four thousand over the last decade. DMO's stated vision was to become the leading program management and engineering services organisation in Australia. Minister Smith also said that he had asked Defence to review the effectiveness of its management of major projects. 24Navys Fleet Screening instructions state that the focus of Navys review has evolved beyond a financial emphasis in light of the Rizzo Review to include consideration of how Navy and Capability Acquisition and Sustainment Group are meeting their obligations for whole of life sustainment of Navy capability. MSAs include an agreed price for the sustainment work and performance indicators by which Capability Acquisition and Sustainment Group internal service delivery is measured and reported.22. 5.3Otherwise, the report does not discuss sustainment as a topic separate from the acquisition stage of the equipment lifecycle. As discussed, a quality assurance process for the Quarterly Performance Report would provide a firmer basis for internal and external scrutiny of sustainment reporting. In 2000, when the expected benefits were not being realised, Defence reviewed Support Command Australia and the Defence Acquisition Organisation, finding that serious problems persisted in capital acquisition and whole-of-life support. However, the departments approach to monitoring savings does not provide sufficient information to determine whether that occurred, and how the reported savings were achieved. Source:Defence, PMkeys Reporting, Full-time equivalent staff in all Systems Program Offices DMO/Capability Acquisition and Sustainment Group, by month, July2004 to June2016. This could have provided, for the first time, a systematic approach to the organisation of sustainment activities across the Systems Program Offices. 5.42A design guide for the establishment of the Centres of Expertise has been produced and initial establishment of these centres is scheduled for April2017, with the establishment of a balanced matrix expected to be over a two-year period.158. The review considered the causes of this complexity, made comparisons with commercial organisations with similar operations and analysed the impact of this complexity on DMO. 172Sir John Parker GBE FREng, An Independent Report to inform the UK National Shipbuilding Strategy, November 2016, p. 11. Aerospace Surveillance and Response Branch, Rotary, Aerospace and Surveillance Systems Division, Air and Space Surveillance Control Branch, Navy Aviation, Aircrew Training and Commons, Navy Army Aviation Acquisition Program Office, Intelligence, Surveillance, Reconnaissance and Electronic Warfare (ISREW) Branch, Joint Command, Control, Communications and Computer Systems (JC4S) Branch, Land Command, Control, Communications and Computer Systems (LC4S) Branch, Commercial and Financial Analysis Directorate (CFA), Commercial Policy and Practice Directorate (CPP), Ergas, Henry. The cash method provides an immediate recognition of revenue and expenses, while the accrual method focuses on anticipated revenue and expenses. How Are Principles-Based and Rules-Based Accounting Different? 39Capability Acquisition and Sustainment Group Cost is the MSA-related expenditure. In business, it is a key aspect of an organization's financial stability. Defence has initiated a reform project as part of its First Principles Review implementation. Poor Demand Satisfaction outcomes will ordinarily be reflected in the increase of Urgency of Need Designators A and B demands or directly in Priority 1 stores related Urgent Defect. 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. Smart Sustainment is examined in Chapter 4. 95Since 201314, Defence has also reported estimates for sustainment by Defence Group/Service. See Defence Portfolio Budget Statements 201718, Table 68: Top 30 Sustainment Products by End of Financial Year Outcome 201718, pp. Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; Subpart E View Full Text; Previous; Next; Top; Details. Defence subsequently increased the numbers of organisational units it considered to be Systems Program Offices from 54 to 78, with staff numbers ranging from three to 178.135. In general, NIH grant awards provide for reimbursement of actual, allowable costs incurred and are subject to Federal 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. 43The Quarterly Performance Report, introduced in late 2015, has evolved from earlier management reporting designed to identify potential problems in the formative stages of the project life cycle (Defence advice of March 2017). The Defence Audit and Risk Committee will therefore require appropriate information on sustainment reporting to enable it to provide this advice and assurance to the Secretary. 30Defence, Going to the Next Level, the report of the Defence Procurement and Sustainment Review [Mortimer Review], 2008, p. 49, Recommendation 4.2; Defence, Plan to Reform Support Ship Repair and Management Practices, [Rizzo Review] July 2011, p. 46. Can the Department assure the Government of the day and the Australian taxpayer that the resourcesthe people, processes and toolsused to create that output are being utilised in the most efficient way? Current proposals appear to be limited to an independent health check on progress.184 On the face of it, the scope of the health check is narrow, focused on closing recommendations and assessing progress. Examples include B Vehicles (Land Rovers, G-Wagons), Direct Fire Support Weapons, Aeronautical Life Support Equipment and Command and Support SystemsMaritime. In the 201718 Defence PBS Defence presents the estimates and descriptive information for its Top 30 sustainment products in a single table. For example, a small number of products could be selected, with rotation or other variation from year-to-year, limiting the risks that may flow from time-series analysis and the release of other material whose aggregation could add risk. The 2012 Coles Report identified five root causes of problems with the sustainment of Collins Class Submarines, and made 25 recommendations.196 Based on the ANAOs analysis, the recommendations with potentially broader application across Defence sustainment are listed below. 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. 158Defence, CASG First Principles Review Implementation Plan, version 2.9, 15 December 2016; Capability Acquisition and Sustainment GroupMatrix Management, 8 September 2016. 20. Learn why the cost principle is an important principle for your small business. Staff in the Capability Acquisition and Sustainment Group compile the report manually, incorporating information contained in MRS and, increasingly, SPMS. Ongoing legacy reform activities that continue to require oversight and do not align with current reform activities; SPOs continue to manage and perform work that industry may be able to do more effectively or efficiently, whilst insufficient resources are being applied to governing and assuring. In March2017, Defence informed the ANAO that work was underway to address this. Sustainment costs can exceed those of the original procurement and the challenges can be more complex.26. When conducting procurement, an official must consider the relevant financial and non-financial costs and benefits including, among other things, whole-of-life-costs.63 Sustainment expenditure is a major contributor to whole-of-life costsin some cases, the largest contributor. The Future PGCS 2019 Chloe Kempster www.pgcs.org.au/library/2019 2 Establishing the validity of the logistic support framework is a secondary consideration (p. 14). 33Defence internal documents. 199In its 200809 Annual Report, Defence stated that to implement this recommendation, it had created the Sustainment Reinvestment Office to co-ordinate DMOs role in achieving the $5.5 billion in savings expected from Smart Sustainment under the Strategic Reform Program. In 2016, the Coles review team found significant improvements in the performance of the Collins Class submarines. 130, Overview of the enhanced Commonwealth performance framework, July 2016. 442, Review of the 201213 Defence Materiel Organisation Major Projects Report. ~rEy0Eq2I;+t4NY1. Defences 201516 public reporting of sustainment activity included expenditure information and other descriptive material. 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. Develop and implement a contracting strategy to improve performance based contracting [Management Recommendation. During the course of this audit (9January2017) the Committee announced that it had commenced an inquiry into Defence Sustainment Expenditure. 3.32The First Principles Review found no direct measures of productivity in the existing management information systems, though some cost and schedule information is included in MRS and SPMS. However, they are not conducted according to any auditing standard. [1], As of 30 June 2021, Defence through the Capability Acquisition and Sustainment Group (CASG) was managing 161 major projects and 13 minor acquisition projects, at various phases in the Capability Life Cycle, worth a total of $121.6 billion, with an annual acquisition budget was A$9.3 billion. 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). During 2012 DMO endeavoured to capture and model the expected cost of ownership for the 47 MRH90 aircraft over the planned life of the aircraft. Failure to achieve planning milestones has been identified as a key constraint and has a direct impact upon the ability of Capability Acquisition and Sustainment Group to deliver platforms out of maintenance periods on time. As noted in paragraph 5.14, in July2016, a former senior Bechtel executive was seconded to the position of First Assistant Secretary Program Performance in Capability Acquisition and Sustainment Group, under the day-to-day direction of the senior Capability Acquisition and Sustainment Group leadership. The government agreed to the recommendation but Defence did not implement it.199 By December2013, some five years later, Defence decided that it would not meet the recommendations intent. Most recently, the First Principles Review recommended immediate implementation of measures of productivity, a related concept. 3In February 2017, Defence advised the Joint Committee of Public Accounts and Audit in a submission to the Committees Inquiry into Defence Sustainment Expenditure that A recent review by [the] Defence Intelligence Organisation determined that the current public reporting regime is safe.