Senate Foreign Affairs, Defence and Trade Legislation Committee, , 8:16:46 to 8:25:19
Inquiry into the 'health check' process for projects transferring to the DDA and whether projects are exceeding their original second-pass budget envelopes.
Topics: Government spending, Procurement
Speakers: Meghan Quinn, David Shoebridge, Speaker 31, Unknown Speaker
submission? What's the difference with
the health check? Uh so in substance not much um uh but there's just a need um potentially in moving in any one year we may not go all the way through all the projects uh there might be sort of a risk based assessment. Uh this year because we are separating uh projects uh and moving not all capability projects but quite a lot across to the delivery agency. We're having a more rigorous process uh on that than we may normally um because we want to make sure that uh the setup of the delivery agency is is set up for success and for us to be clear about the transition of projects from one entity to another.
>> And does that mean you've had a deeper dive into their financial position, their spending and the budget impacts than you would have had um in a standard annual review? Is that
yes but also partly because we've created a delivery group where we've put brought three uh different divisions together and we've had an interim NAD national arments director in place. So as part of looking at the structure of the DDA there's been additional focus on financial matters between uh divisions to bring them into a new entity. So there's a the reforms that we're going through necessitate us being very clear about the staffing, the projects, the funding uh and connections. Uh
>> and has that produced any significant reviews in terms of the budget situation of any project?
>> Uh so we we are working through working through as so there would be a normal B business as usual approach to to looking at things. there is heightened analysis because of the separation
>> and and that's what I'm asking you about is that heightened analysis identified a budget deterioration in any of these projects.
>> Uh we have there are not not specifically coming to mind. um there there is always project adjustments uh and elements and it's always the case at this year at this point historically defense has started with an overp program budget um it has done for the la at least the last five years that I've looked at um and yet it the department has come in close to budget slightly over slightly under for that that same period that has necessitated in each of those years um an active management of within year budgets to be able to meet it. That does entail um things moving in consultation with industry partners for lots of reasons uh to to meet the requirements of the PGPA act and the budget rules.
>> Now you said not every project not every capability project is being moved over to the delivery agency.
>> No, some of some of them will be maintained within the department particularly around the estate and uh IT for example.
>> All right. Could you provide to the committee a list of the projects that are going over to the delivery agency and those that are remaining inside the balance of the part the the the department?
>> Happy to take that on notice.
>> All right. What proportion is that? Sorry, is that the only dividing line estate and it holding in the department and the balance going across the delivery agency?
>> There's also a few that would be managed within the uh intelligence group. Um, so I'm happy to take it on notice. Most of the um external equipment, so all of Kazg's uh all of the ship building and all of the uh weapons are moving uh and the rest and the rest is are broadly staying in the department
>> and and and as a separate question.
>> Sorry, Senator, I've got uh someone who can just give a bit more clarity to my previous answer.
>> Um Nine Williams, National Arlon Director. Um just in terms of the projects that will move over, they will be projects that have been approved by government. So there'll be um postgate 2 approval. Um there will be other projects that are in um the unapproved program that remain with the department. And as the secretary said, >> these are predominantly the all or or these are military capability projects. So any other projects in a state or ICT as the secretary mentioned will remain with the department. They won't move.
>> Gate two is second pass. That's correct.
Senator,
>> is that just the new name for second pass gate 2? Should we
>> broadly? We tend to I sorry, I'm used the term interchangeable. Yes, that's
>> Okay.
>> Yeah,
>> we have changed the specification of what what in some elements we've added in some requirements for gate 2 as part of the reforms. >> So, increased cost assurance and and and various other things. So, uh you could call it gate 2.0.
>> Sorry.
>> Gate 2.0 as opposed to
>> second pass 2.0.
>> Yes. Either.
>> Yes. gate one, gate 2.1 or second bus 2.0.
>> Yeah. And we've got a gate zero as well.
uh thank you. Um could I also ask separately to the extent that your health checks and which are entirely appropriate or other budget checks have identified a budget deterioration in those projects as you've handed them over. could ask you if you'd provide um um attached to those projects what the budget deterioration is um and what the impact that will have in terms of
>> Can I ask you to clarify what you mean by a budget deterioration?
>> Well, if they are over budget
>> so the projects don't go over budget per se within uh they're not authorized to go over budget. So mostly when we're talking about assessing projects, it's it's that projects uh the time delivery might move uh or there might there might be issues about supply of the capability. Uh but but it's
>> I've not seen a project of any scope that hasn't gone over budget. I'll be honest, but the um so I'd be asking first of all if any of them are over the second pass gate 2 approved budget. So
just to be clear, the department operates against approved um budget envelopes approved by government.
Correct.
>> So if there was to be uh so if if a
>> the original gate 2/ second pass budget
>> so that's not necessarily something that we're looking at in this process. What we're looking at is where people are up to against the allocated funding. Well,
well, I'll be my question is the original second pass gate to however described budget where the budget now
>> that's not something we're currently would normally look at that is an
that's what my question is. So for the P projects that have been passed across to the delivery agency, if you could identify those that are above the original gate 2/ second pass approved budget >> and for those um and the same request for those that have been held within the department and not transferred across.
>> So Sen, could I just anchor that a little bit for you? Um the secretary mentioned the health checks. They are ongoing processes and they are essentially as you said due diligence before we pass these projects over to the defense delivery agency on the 1st of July 2027. So we will be working through those like you said a lot of projects. This is a big body of work. They are part of the work that's required before we establish the agency. So I just wanted to be clear that we will be working on these on a continuous b basis. They're not completed. um they will be something that we need to do and continue to do over the next couple of months.
>> Will I'm assuming it's a large body of work to transfer a bunch of pro um projects from within the department to the delivery agency. I'm not trying to minimize the amount of work, but I the department must have somewhere in its records what the original second pass/gate 2 budget was. You must know now what the budget is. And so that's what my request is comparing.
>> We're happy to take it on notice, but I just >> what the expenditure is. it may not meet the timelines of uh questions on notice and the like given the sequence and timing of which we have to do our work.
>> Um well the there are the obligations under the Senate rule so I'd ask you to comply with them. The um uh in relation to the the nightly story and the details that are contained in the nightly story. Um have has either the department or the ADF um commenced an investigation trying to seek um who provided that material? Is there a is there an investigation on foot either formal or informal of of