Senate Foreign Affairs, Defence and Trade Legislation Committee, , 1:19:34 to 1:29:37
Officials explain the use of "overprogramming" as a standard budgeting tool to manage complex multi-year projects and ensure full budget utilization.
Topics: Government spending, National security
Speakers: Meghan Quinn, Speaker 8, Robert Chipman, Unknown Speaker
>> thank you chair. I think uh I've got some questions about the defense budget uh and just with some of the recent speculation about cuts and what it all means. I think just good to get a few points of clarification. So >> if first if you can just clarify that through both the 2024 National Defense Strategy and the 2026 National Defense Strategy that government measures add up to $17 billion additional over the next decade of funding.
>> That is correct, Senator.
>> Right. And in this topic of overprogramming, I've heard that term a lot. If you could just explain what overprogramming is and I understand a big focus of the government has been making defense uh budget more sustainable. So the committee's already heard evidence about this at previous estimates. I understand overprogram is something that you use to manage the IIP, but perhaps you can just refresh everyone's memory with the explanation of what overprogramming is and how it's
So, so overprogramming is uh a situation where um you you guard against under the budget underperforming uh in terms of being being uh not able to spend all the money that you've been allocated by government within a certain particular year. Uh it's a method uh that's used in various different portfolios. It's not just uh constrained in defense. Uh it happens where you've got complex projects over multiple years where there might be shifts in milestones and schedule. And when you've got multiple projects of such a nature, you want to make sure that you're actually maximizing the capability delivery in any particular year. Uh and so it it can be the case that you the individual projects are financed and then you actually add in more projects than the total budget uh will ultimately support in within year with the intention that if there are if there is uh shifts in schedule uh that you that you can continue to fund uh the other ones that are ahead of schedule. So it happens in infrastructure projects, it happens in capability development, it also happens in sustainment activities within defense. So it's a a process that's used in the private sector. It's used in um across government. Uh it's something that I used as a secretary in the department of industry, science and resources relating to particularly capital projects. It's uh also the case for the infrastructure program that there is a level of overprogramming. Uh so it is a a natural way to ensure that we don't have a surplus at the end of the year that we're delivering within year to meet government's priorities.
>> Yeah. Okay. So it's effectively like a a budgeting tool.
>> It is absolutely a standard budgeting
>> Yeah. Okay. And so in uh the 2026 national defense strategy, what was the planned over over programming level in both the NDS and the integrated investment plan?
>> Yeah, I'll just I'll just call my uh So, so within the defense budget, we have uh the integrated investment program is the largest acquisition uh budget. Uh and it has a level of overprogramming. Uh historically, it's been very high. Uh and over time we've sought as a department and the government has supported uh to bring that down to uh to to lower levels partly because the nature of the processes and uh programs that we're now uh looking at uh suggests that we should move down from uh the high the low 40s down to a number around 20. Um and that the level of overprogramming you want to put into a program is going to depend on the precise activities that are being supported. um the uncertainty related to timing and slippage of of different activities is greater at the start of a significant program than it is at the end. So the timing and sequence of projects means that the the precise level of overprogramming uh that is prudent will shift over time. But I'll pass uh to to vice chief who was looking at the integrated investment plan overprogramming levels.
>> Thanks Secretary Marshall Rob Chipman vice chief of the defense force. Senator, the overprogramming targets that we set for ourselves in the 2026 integrated investment program were over the Ford estimates uh 21% 19% 17 and 16% respectively.
>> Right. And is that um significant lower than what was in the 2024 national defense strategy?
>> Yes, it was. So in 2024 the the we were working to caps that were at 28 24 22 and 22%.
>> Okay.
>> And and as I mentioned as we move further into a delivery cycle uh it makes sense for us to think about the over programming levels. We review what's appropriate uh every year and provide advice as part of the usual budget processes. So that overprogramming level does shift as I said depending on how how we're working with industry partners to deliver. You can understand if uh a project that's innovative technological project that's uh in spiral development where there's an iteration may have a different certainty on its milestones compared to uh a straightforward infrastructure project that wellestablished capability within industry well understood timelines of project management. There were some issues around um managing uh over pro managing the budget through uh postcoid period where supply chains were interrupted. Uh it's also an issue when there's been a change in the kind of relative priority stack within the integrated investment program that you also get some changes to the timing of delivery of projects. So it's a very uh focused effort uh from the department to think about what overprogramming level makes sense >> and within within any one year uh if you start the the financial year with a level of overprogramming the requirement of accountable authorities and all the delegated authorities within the department is to work within year to reduce that level of overprogramming. So the overall budget comes in uh as required by the budget rules. So every year there's a a me a mechanism of uh reducing overprogramming such that we end up on balance and the last few years uh the defense budget's been slightly over budget but much less than 1% of target. Previous years there was an underspend uh and so the other aspect is just making sure that we're thinking about the maturity of our capability system and other aspects of the department to make sure that we meet the budget requirements.
So, it sounds like quite a different shift from in the 2024 NDS um I think it was on target to get as high as 40% or something like that and now you're saying across the board estimates it might come down to 16 is the target.
>> That's right. There has been a shift as we've worked with industry uh as we've been uh clearer on their capability to deliver our capability to manage the requirements. It is a focus of the reform within the department uh on improving our capability system for us to be um work on the cost capability the schedule and timing and scope uh to make sure that we can reduce the level of overprogramming. Uh it would be better for everyone if we could be more targeted but in a very complex uh acquisition and sustainment uh with $40 billion any one year it is always going to be the case that we will have elements of overprogramming.
Can I just clarify though please Senator? So it was in the 2024 IIP that the overprogramming caps the overprogramming was set at caps 28 24 22 and 22. The number that you're referring to where overprogramming peaked as high as 42% was actually back in 2022.
So things are it sounds they are improving though in terms of how you're looking to manage the IP and do have you put in place new uh procedures processes uh in how you actually make sure you better targeted around achieving those overprogramming
>> so as I mentioned we are looking at our improving our capab our ability to manage the acquisition sustainment budget um and projects uh so there's a whole sequence of reforms that we're working through I mentioned some of them in my opening statement uh one aspect is the redesign of the capability uh uh the entire system so that we've got a focus on making sure that at the front end we've got commercial realities industry input and cost efficiency uh a greater focus on that uh including using market intelligence and and other data tools that are available to us now. um that would that that the intention there is that once uh projects are provided to the delivery agency they are scoped and uh and targeted in a way that allows for us to understand their milestones uh appropriately. Um that that's one aspect. The second aspect is just the improvement and the professionalization of our project managers to be able to manage those projects for them to have the skills and capability. Uh third aspect is working with industry. So industry is upskilled and the cooperation between the department um services and uh industry is close and well managed so that we've got a good understanding of where there are issues and how we can manage those quickly and effectively. The fourth aspect is the creation of the delivery agency uh which will be singularly focused on delivering against the IIP and supporting on sustainment projects. It has got to the intention over time is continue that professionalization that's already happening but it'll have a singular focus on managing the projects that will all go together to allow us to think about overprogramming but as I said we don't control all aspects of of a project there are reasons beyond our our capability to do with industry supply partners supply chains we've seen uh some some impact uh for example on cost of schedule as a result of the Middle East >> uh flow on consequences for the higher oil prices etc. So the all we are always going to have uh movements in in such a complex program so there will always be some level of overprogramming.
>> Okay. Thank you chair. You're welcome.