DEFENCE ANNUAL REPORT 1999-2000

DEFENCEANNUALREPORT

1999-2000

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Contact Officer

The production of this document was coordinated by the Portfolio Reporting andEvaluation staff of the Department of Defence.

The contact officer to whom comments and inquiries about this report may beaddressed is:

DirectorPortfolio Reporting and EvaluationR1-2-A028Department of DefenceCANBERRA ACT 2600

Telephone: (02) 6265 6277Facsimile: (02) 6265 6246E-mail: [email protected]

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� Commonwealth of Australia 2000

ISSN 1323 5036ISBN 0 642 29542 5

This work is copyright. Apart from any use as permitted under the Copyright Act 1968,no part may be reproduced by any process without prior written permission from theCommonwealth available from AusInfo. Requests and inquiries concerningreproduction and rights should be addressed to the Manager, Legislative Services,AusInfo, GPO Box 1920, Canberra ACT 2601 or by email [email protected]

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CONTENTSContact details ............................................................................................................................ iiLetter of Transmittal ................................................................................................................ iiiUser Guide...............................................................................................................................viii

SECTION ONE – OVERVIEW.............................................................................................1

Review by the Secretary and the Chief of the Defence Force ...................................3Year in Review .........................................................................................................................8

Contributing to the Defence Outcome .....................................................................8Significant Issues and Developments ........................................................................9ADF Operations in East Timor ................................................................................17Financial Performance.................................................................................................19

- Summary of Defence Appropriations............................................................19- 1999-2000 Financial Performance ..................................................................22- Administered Items...........................................................................................28- Capital Budget....................................................................................................32- Defence Reform Program................................................................................46

Personnel .......................................................................................................................54Accountability Arrangements............................................................................................56

Corporate Governance................................................................................................56- Organisational Changes....................................................................................56- Senior Executive Changes................................................................................56- Defence Organisational Structure Charts......................................................58- Senior Committees............................................................................................60- Internal Audit Arrangements and Risk Management Strategies................63- Ethical Standards...............................................................................................65- Portfolio Evaluations........................................................................................66

External Scrutiny..........................................................................................................68- Parliamentary Committees...............................................................................68- Auditor General’s Reports ...............................................................................72- Defence Force Ombudsman...........................................................................74- Decisions of Courts and Tribunals.................................................................74

Report on the Operation of the Defence Service Charter for 1999-2000..........75People.............................................................................................................................79

- Staffing Overview..............................................................................................79- Workplace Relations .........................................................................................79- Non-Operational Training and Development..............................................80- Social Justice and Equity ..................................................................................81

Purchasing .....................................................................................................................84Assets Management .....................................................................................................86External Consultants ...................................................................................................88Competitive Tendering and Contracting..................................................................89

SECTION TWO – FINANCIAL STATEMENTS .............................................................93

Summary of the 1999-2000 Financial Statements ........................................................951999-2000 Financial Statements ......................................................................................103

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SECTION THREE – OUTPUT PERFORMANCE .......................................................157Resourcing of Defence Outcome and Outputs .........................................................158Defence Operations ...........................................................................................................160

Output 1 ......................................................................................................................161Output 6 ......................................................................................................................165Output 20....................................................................................................................171Output 21....................................................................................................................176

Navy Capabilities................................................................................................................181Output 3 ......................................................................................................................182Output 4 ......................................................................................................................187Output 5 ......................................................................................................................191Output 7 ......................................................................................................................195Output 8 ......................................................................................................................199Output 9 ......................................................................................................................203

Army Capabilities ...............................................................................................................207Output 10....................................................................................................................208Output 11....................................................................................................................212Output 12....................................................................................................................218Output 15....................................................................................................................222

Air Force Capabilities ........................................................................................................225Output 13....................................................................................................................226Output 14....................................................................................................................231Output 16....................................................................................................................237Output 17....................................................................................................................242Output 18....................................................................................................................247Output 19....................................................................................................................253

Policy Advice ........................................................................................................................257Output 2 ......................................................................................................................258Output 22....................................................................................................................260

Appendix A: Australian Defence Force Operations................................................264Appendix B: Australian Defence Force Exercise Program ..................................267Appendix C: Defence Cooperation ..............................................................................275

SECTION FOUR – SUPPLEMENTARY INFORMATION ........................................285Financial Statistics..................................................................................................................286Personnel Statistics ................................................................................................................288Occupational Health and Safety..........................................................................................293Ecologically Sustainable Development and Environmental Performance...................297Freedom of Information ......................................................................................................298Advertising and Market Research .......................................................................................307Annual Report on the Administration and Operation of the

Defence Force (Home Loans Assistance) Act 1990........................................................312

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INDEX.....................................................................................................................................315Glossary...................................................................................................................................316Acronyms ................................................................................................................................320Compliance Index..................................................................................................................323Alphabetical Index.................................................................................................................324

Output Progression 1999-2000 to 2000-01 Chart (fold-out insert inside back cover)

FURTHER INFORMATION AVAILABLE ON THEINTERNET

Available at http://www.defence.gov.au/budget/99-00dar.htm.

CONTENTS

Output Performance InformationGroup Performance InformationDefence Reform Program (summary tables)Consultancy Services (details of individual consultancies)Capital Facilities Expenditure by ElectorateAustralian Defence Force Units and Establishments

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USER GUIDEThe format and content of this annual report reflect the new requirements developedby the Department of the Prime Minister and Cabinet and approved by the JointCommittee of Public Accounts and Audit in May 2000 under subsection 63(2) of thePublic Service Act 1999.The Defence Annual Report 1999-2000 addresses the Department of Defence and theAustralian Defence Force (ADF), which are collectively referred to as ‘Defence’, whilethe Department of Veterans’ Affairs, which is part of the Defence portfolio, has aseparate annual report.The primary purpose of annual reports of departments is accountability, in particular tothe Parliament. Annual reports serve to inform the Parliament (through theresponsible Minister), other stakeholders, educational and research institutions, themedia and the general public about the performance of departments in relation toservices provided.Annual reports and portfolio budget statements are the principal formal accountabilitymechanisms between government, departments and the Parliament. Portfolio budgetstatements set out performance targets for departmental outputs and contributions tooutcomes when funds are appropriated, and annual reports state achievement againstthose targets. This annual report, together with further information available on theinternet, covers all the targets for Defence set out in the Minister for Defence’s PortfolioBudget Statements 1999-2000, as revised, in the Portfolio Additional Estimates Statements1999-2000.

Printed ReportThis report is divided into four sections. Section One contains a review of the year bythe Secretary to the Department of Defence and the Chief of the Defence Force, anoverview of performance for 1999-2000 as well as accountability arrangements. It alsoincludes organisational charts that show the formal structure of Defence as at 30 Juneand 1 July 2000.Section Two contains a summary of the 1999-2000 financial statements, including acomparison with the 1998-99 statements, and the financial statements themselves,required under section 49 of the Financial Management and Accountability Act 1997, whichwere independently audited by the Australian National Audit Office.Section Three contains achievement against performance targets for each of Defence’soutputs as well as information on output expenses, including explanations forsignificant variations from budget estimates. Three appendices are included in thissection covering ADF operations, exercises and Defence cooperation activitiesrespectively.Section Four contains supplementary statistical information, as well as otherinformation required under specific statutory provisions relating to the annual reportsof all Commonwealth departments.Finally, the Index section of this report includes a compliance index which identifieswhere those matters required by the Joint Committee of Public Accounts and Audit tobe included in annual reports are located; a glossary; a list of acronyms; and analphabetical index.

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Electronic ReportThe report can be found at: http://www.defence.gov.au/budget/99-00dar.htm. Theelectronic version of Defence’s annual report has been extensively bookmarked toprovide easy access to relevant sections of the report.

Further Information Available on the InternetThis information has been divided into six segments and has been extensivelybookmarked for easy reference.The first segment, Output Performance Information, reports on achievement againstinitiatives, such as capability enhancements, identified in the Portfolio Budget Statements1999-2000. The second segment, Group Performance Information, reports on achievementagainst performance targets set out in the Group section of the Portfolio Budget Statements1999-2000. The third segment contains summary tables in relation to Defence ReformProgram progress from 1997-98 to the present. The fourth segment contains details ofall individual consultancies for which payment, or part payment, was made during 1999-2000. The fifth segment contains details of capital facilities expenditure by electorate,while the sixth segment contains details of Australian Defence Force units andestablishments.

STYLE CONVENTIONS

In general, figures provided in the tables in this report are rounded to the nearest$1,000, although there are some tables in which the figures are rounded to the nearest$100,000 where appropriate. Figures referred to in the text are usually to the nearestmillion for ease of reading. The rounding convention used is that rounding downwardsoccurs if the end digit is less than five, and rounding upwards occurs if the end digit isfive or more. Totals are the sums of unrounded figures.

SECTION 1

OVERVIEW

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REVIEW BY THE SECRETARY ANDTHE CHIEF OF THE DEFENCE FORCE

INTRODUCTION

This year has been characterised by the breadth and complexity of challenges facingDefence, the foremost of which has been the Australian Defence Force’s operations insupport of the United Nations in East Timor. The departure of the former Secretary,Mr Paul Barratt, in the latter half of 1999 attracted considerable media attention. Issuesrelated to current and future capabilities, retention and recruitment of personnel, andaccountability for decisions have called for innovative solutions and renewedcommitment and dedication from our people. We are addressing these challenges at atime of close public scrutiny of the way Defence does business.

The focus of these challenges centred on a hard-nosed assessment of Defence’sperformance and in charting a clear way ahead; an endeavour that has requiredconsiderable effort during the year.

THE STRATEGIC ENVIRONMENT AND OPERATIONAL ACHIEVEMENTS

Our strategic interests are engaged directly in relations among the Asia-Pacific’s majorpowers, and our most immediate strategic interests are in the arc of islands stretchingfrom Indonesia to the islands of the South-West Pacific. The region is extraordinarilydynamic and complex, and the strategic situation has been quite volatile. It is againstthis backdrop that operations in East Timor, Bougainville and the Solomon Islandstook place during the last year.

The ADF’s performance in East Timor has been marked by widespread and deservedrecognition. Australia assumed a major role in assembling and leading the internationalforce to restore peace and security in East Timor, to protect and support the UnitedNations Assistance Mission in carrying out its tasks, and to facilitate humanitarianassistance operations. At the peak, more than 6,000 Australian personnel wereinvolved in the Interfet operation. A significant part of Defence was involved in oneway or another to provide the necessary support within very short timeframes to ensurethe success of the operation. ADF operations in support of the United NationsTransitional Administration in East Timor peacekeeping force are continuing during2000-01 – there are still over 1,600 troops deployed in East Timor.

In addition to East Timor, the ADF continued to provide significant contributions topeacekeeping operations in other places, such as Bougainville, the Persian Gulf, theSinai and Bosnia. Our operational tempo has increased dramatically in recent years,and in 1999-2000 surpassed the level set in any year since 1972.

PEOPLE MATTER

The key differentiator for any organisation moving into the 21st century lies in itspeople. While there is little doubt that Defence attracts high calibre people, therecruitment, development and retention of quality people is a significant issue. We arefinding it increasingly difficult to attract and retain the people we need. A range ofmeasures are planned to address these issues.

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A ‘results through people’ approach is critical. Defence’s people are highly skilled,willing and able to make a full contribution. They need and deserve an environmentwith clear goals, timely and constructive feedback on their performance, andappropriate terms and conditions of service.

We devoted considerable effort in 1999-2000 to ensuring that Defence’s people werecompetitively remunerated. The new ADF Enterprise Productivity Arrangementcovers members up to and including the rank of Colonel (equivalent) and a separatearrangement covers one and two-star-level ADF officers. The new DefenceEmployees Certified Agreement was accepted by Defence non-Senior ExecutiveService civilian staff and new Australian Workplace Agreements for Defence SeniorExecutive Service officers were put in place.

New accountability and governance arrangements were announced on 23 June 2000.

The 1999 Defence Attitude Survey indicated that most of our people believe thatDefence is a fair and equitable workplace, and that attitudes towards immediatesupervisors are generally positive, whether military or civilian. The survey identifiedmany areas that require improvement to ensure that Defence is more effective and abetter place to work. The ‘results through people’ initiative will assist this end.

DEFENCE PLANNING AND FORCE STRUCTURE

Considerable effort was put into preparing for the Government’s White Paper, due tobe completed later in 2000. A key feature involved the development and release of apublic discussion paper in June 2000 to facilitate an extensive community consultationprocess. This, the first major review of defence policy since 1985, is intended to delivera response to Australia’s strategic circumstances which provides a force structure thatwill enable the ADF to continue to deliver the performance required of it well into thenew millennium.

1999-2000 saw the introduction into service of important new capabilities. Theseincluded the first of two amphibious landing ships, HMAS Manoora, two of the newminehunter vessels HMAS Huon and HMAS Hawkesbury, and two new hydrographicships HMAS Leeuwin and HMAS Melville. Two of the Collins class submarines, HMASWaller and HMAS Collins, performed well during deployments to the United States,demonstrating our ability to understand and resolve the submarines’ shortcomings, andthe considerable value the submarine ‘fast track’ program will contribute to the muchneeded improvement in that capability.

Additional night fighting, radar and thermal surveillance systems for the Land Forceswere acquired under an accelerated acquisition program. This equipment provedparticularly effective in East Timor.

Enhancement of the Air Force’s lead-in fighter capability continued, with theHawk 127 commencing test flights in December 1999. The strategic airlift capabilitywas also enhanced through the delivery of twelve new C-130J Hercules aircraft.

The reduction in ADF personnel numbers continued in 1999-2000 as a result of theongoing market testing activities and in a way consistent with the primary objective ofcontinued movement of uniformed personnel to the sharp end of the ADF.

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FINANCIAL PERFORMANCE

In 1999-2000, Defence achieved an operating result before capital use charge of$5,316m. After payment of the capital use charge of $4,600m, the operating result was$717m.

The 1999-2000 Defence budget strategy included a $380m reduction in major capitalinvestment spending to accommodate increased Defence output costs. A number offactors contributed to these increased costs, including the Government’s decision toincrease the readiness of a second Army brigade, a slower than planned drawdown to50,000 full-time ADF personnel and increased ADF housing, health and removal costs.

A major change in funding occurred part way through the financial year when theGovernment provided $860m in supplementation to the Defence budget to supportAustralia’s military contribution to East Timor. The success of our contribution inEast Timor, and the extent of support provided by a number of other contributingnations without cost recovery, meant that the forecast requirement was not all needed,so Defence was able to return $215m to the Government. The East Timor deploymentresulted in a greater than expected reduction in ADF training exercises and otheractivities and, coupled with ADF recruiting shortfalls, had the effect of Defence outputcosts not increasing to the extent expected. This enabled Defence to partially restorethe reduction in major capital investment towards the end of the financial year.

During 1999-2000, we undertook a fundamental reappraisal of Defence’s financialposition and the underpinning financial management arrangements. In essence,Australia can no longer afford a balanced, self-reliant, capable, and ready Defence forceof 50,000 with its current capabilities within the forward estimates.

A joint review of Defence’s financial management by the Departments of Finance andAdministration and Defence was completed during the year. A number of significantimprovements will be introduced during 2000-01, including a new planning framework,the introduction of performance price arrangements and refinements to the applicationof accrual accounting. These changes should place Defence’s financial managementarrangements on a firmer footing and facilitate progress towards accepted best practice.

The Australian National Audit Office conducted a cross-agency performance audit ofCommonwealth Foreign Exchange Risk Management Practices (Audit Report No. 45), tabled inMay 2000, which resulted in adverse media comment. The report, which was quitecritical, misrepresented Defence’s foreign exchange risk management practices.Defence had conducted its foreign exchange risk management in accordance with aresource arrangement agreed with the Department of Finance and Administration.Under this arrangement, supplementation for currency movements was provided toDefence on a ‘no gain/no loss’ basis. Defence assists in whole-of-government foreignexchange risk management by providing forward projections of its foreign exchangeexposure to Treasury and the Reserve Bank.

DEFENCE REFORM PROGRAM

Implementation of the Defence Reform Program remained on target and substantiallyahead of its initial savings achievement schedule. Cumulative savings increased bysome $130m during the course of the year, bringing the total to date to $476m perannum. This has enabled us to enhance combat capabilities and cover increases in per

Section One

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capita personnel costs. The market testing of garrison support and clerical supportfunctions, as well as some logistics support activities, progressed well throughout theyear. The surge capacity of industry to meet Defence’s operational requirements wasdemonstrated in the response to operations in East Timor as well as Operation SafeHaven, which provided temporary refuge for displaced persons from Kosovo.

The Defence Reform Program has been succeeded by a continuous organisationalimprovement program. This will enable good ideas within the organisation to beharnessed and ensure that we continue to enhance our organisational effectiveness.

MATCHING THE QUALITY OF OUR BUSINESS PERFORMANCE WITH THEADF’S OPERATIONAL PERFORMANCE

The effort that East Timor has taken, in terms of the strain on people and financialresources, has also focused the Government, the community and Defence itself moreacutely on our shortcomings. We have acknowledged that, in certain respects,Defence’s business performance has not matched the ADF’s operational achievements.

We have recognised, in particular, that our relationships with Ministers, theGovernment, the Parliament, the central agencies and industry are not what they shouldbe. We accept this credibility problem and that improved performance over the wholespectrum of our activities is essential to restoring confidence in the Defenceorganisation. This is primarily an issue of leadership and requires an improvement inaccountability and performance, by bringing the organisational, accountability andfinancial structures into alignment.

During 1999-2000, we commenced the task of building and sustaining better workingrelationships with our stakeholders. We set in train an ‘organisational renewal program’to strengthen fundamental linkages between Government policy and Defence’scorporate strategy. We are seeking fundamental renewal of the organisation fromwithin, through a strong focus on leadership and performance. This means an ethos ofachieving results through people. The renewal agenda acknowledges the changes thathave occurred within Defence over the last decade and encourages a more adaptable,efficient and effective organisation – one which is marked by a program and philosophyof continuous organisational improvement, while recognising that people are our mostimportant strength.

A new top structure and simplified committee system that emphasises accountabilityand responsibility in accordance with the chain of command and is aligned with ourfinancial framework was put in place on 1 July 2000. These steps will help to improvedecision-making, and decision support processes and structures, which are currently amajor impediment to functional effectiveness and efficiency. A new business planningcycle was also introduced which focuses on the Government’s strategic priorities,building on the work being done for the White Paper and involving the development ofan annual corporate plan – the Defence Plan.

In addition to these initiatives, considerable effort was expended in 1999-2000 on thereform of acquisition processes. The aim of these reforms is to shorten acquisitiontimes, provide better whole-of-life costing for equipment, reduce transaction costs withindustry and provide the Government with greater transparency and oversight of theacquisition process. These efforts, coupled with the results of an external review of theAcquisition and Support Command organisations, led to the creation on 1 July 2000 of

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the Defence Materiel Organisation, with a view to improving business performance andthe whole-of-life support of Defence equipment.

Following an extensive review into the public affairs function within Defence, thePublic Affairs and Corporate Communication Division was established this year.Significant restructuring has produced a more streamlined organisation with the abilityto focus on the improvement of Defence’s reputation in the community and among itsstakeholders. The new organisation provides a more strategic approach tocommunication delivery to both external and internal stakeholders, with a strategy to bedeveloped to guide and oversee the whole Defence communications effort.

KEY CHALLENGES IN 2000-01Completion of the White Paper in 2000-01 will provide Defence with the guidancenecessary to develop an annual Defence Plan. This will provide clear direction on whatDefence needs to do to deliver the outputs that the Government requires in the nearterm, and what we need to do to ensure that we have in place the capabilities that theGovernment requires to defend Australia 10-20 years from now.

We will continue to implement, monitor and evaluate the strategies set in place toembed the renewal agenda across the organisation. ‘Defence Matters’ is the term beingused to describe Defence’s balanced scorecard that reflects our unique characteristics.It will report on our performance and communicate our strategy. The aim inimplementing the scorecard is to engage everyone in shaping the future of Defence andto help each individual in the organisation to align their efforts with the Government’sstrategic direction.

Our immediate imperative is to build the confidence of the Government and the publicin the way Defence does business. An internal ‘Defence Matters’ balanced scorecardthat focuses explicitly on the results sought by the Government is one way ofcommunicating that imperative.

Defence has experienced one of its most challenging, yet exciting years during1999-2000. The organisation is now well placed to move ahead into a new phase ofgreater accountability and effectiveness – through the development of better businesspractices and the implementation of clearer leadership principles. The key challenge isto create a more adaptable organisation that is built to last and able to renew itself fromwithin, both now and in the future.

Section One

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YEAR IN REVIEW

CONTRIBUTING TO THE DEFENCE OUTCOMEDefence contributes to a single outcome:

The prevention or defeat of armed force against Australia or its interests.

This outcome provides a comprehensive focus for both combat-related and non-combat tasks that Defence delivers for the Government now and in the longer term.

In 1999-2000, Defence faced considerable challenges in achieving planned andunplanned deliverables required of it by the Government. The Australian DefenceForce (ADF):

Combat Capability

• substantially met the levels of preparedness set in the Chief of the Defence Force’sPreparedness Directive, and subordinate directives, against each capability output.These levels of preparedness refer only to military response options with a warningtime of less than 12 months;

• largely met its major training/exercise program. Exceptions were mainly due tooperations in East Timor;

• successfully undertook operations in East Timor and other operations required bythe Government, including in Bougainville and the Middle East, as well aspreparations for the Olympics; and

Non-Combat Tasks

• fully met all planned and unplanned tasks. These included assistance to the civilcommunity, the Army/ATSIC Community Assistance Project, assistance to civilsearch and rescue, support to civil surveillance, VIP operations and civil emergencyand natural disaster relief. For detailed achievement against performance targets,see Output 21 in Section Three of this document.

While the ADF met immediate operational requirements in 1999-2000, it was fullystretched in many areas to achieve this and, and was at the expense of the longer-termsustainability of Defence capabilities. It was necessary, for example, to draw extensivelyupon equipment, stores and personnel from across the three Services, including thereserve force, to meet operational commitments during the year. In the medium tolonger term, the ADF's ability to undertake higher intensity, concurrent or prolongedoperations is likely to be constrained by personnel shortages, which are exacerbated bycurrent recruitment and retention difficulties, logistic support deficiencies and theincreasing obsolescence and reduced serviceability due to ageing equipment. Furtherdiscussion of these issues continues below and in Section Three.

Significant Issues and Developments

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SIGNIFICANT ISSUES AND DEVELOPMENTS

DEFENCE OPERATIONS

By any standards 1999-2000 was a momentous year for Defence. The operationaltempo set during the year surpassed that set in any year since 1972. At a peak of over6,000 personnel, operations in East Timor represented our largest overseas deploymentsince Vietnam. Australia assumed a major leadership role in building and then leadingthe multinational forces. These operations demonstrated to the nation – and the worldmore generally – the professionalism of the ADF. There are still over 1,600 troopsdeployed in East Timor and the ADF operations in support of the United NationsTransitional Administration in East Timor (UNTAET) peacekeeping force arecontinuing during 2000-01.

The significance of this task in East Timor cannot be overstated – our major allies andregional neighbours demonstrated their confidence in our leadership by placing theirforces under Australian command for the first time. Our efforts in the field would nothave been possible without the commitment and dedication of those in supportingroles, both civilian and military. Personnel at all levels worked long hours to producethe plans, secure the resources, and put into effect highly professional operations.Supporting forces have been, and remain, critical to the deployment and sustainment ofour operations.

Concurrently, Defence continued to support and plan operations in Papua New Guinea(Bougainville), the Middle East, Bosnia, Africa and Cambodia. The deployment ofHMAS Melbourne to the Persian Gulf as part of the Maritime Interception Force fromMay-October 1999 was the ADF’s ninth such deployment. Additionally, the ADFconducted a heavy exercise program throughout the year.

The Government has committed to support the United Nations activities in EastTimor for the long term and Defence will need to adapt to these demands. The Sydney2000 Olympics has again placed Australia squarely in the international spotlight, andconsiderable effort was devoted in 1999-2000 to preparing the ADF to play asignificant supporting role.

Specific aerial surveillance and patrol boat resources were dedicated to support civilsurveillance and these were fully utilised during 1999-2000. Civil surveillance tasksresulted in the apprehension of 65 foreign fishing vessels and assistance in theapprehension of 69 vessels suspected of transporting illegal immigrants.

Other national support tasks were accepted where resources were available withoutdetriment to Defence activities. During 1999-2000, these included assistance to theDepartment of Immigration and Multicultural Affairs in provision of temporaryaccommodation facilities at RAAF Curtin and at Woomera. A second major task wasassistance to the civil community, through Emergency Management Australia, duringthe cyclone season in northern Australia, where the ADF assisted in fuel deliveries toisolated communities. Other examples of assistance included support following theGlenbrook train disaster and assistance in the clean up of an oil spill in SydneyHarbour.

Thirteen search and rescue tasks were undertaken which required a significantcommitment and involvement of ADF equipment and personnel. The ADF was on

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standby for the Sydney to Hobart Yacht Race and assistance was provided in the searchfor a missing person near Tennant Creek. Assistance was also provided for therecovery of personnel from the dismasted yacht Ibis, and in a search for missingpersons in the Snowy Mountains.

DEFENCE WHITE PAPER

On 27 June 2000, the Government launched the Defence Review 2000 Public DiscussionPaper, a precursor to a White Paper which is expected to be released later in 2000. Thissignified the first step in a fundamental review of defence policy. A review of thisdepth was last undertaken in the mid-1980s and the last White Paper was produced in1994. Since that time we have seen significant changes in the strategic environment,rapid development of new military technologies and increasing costs and budgetarypressures on Defence.

The public discussion paper facilitated an extensive public consultation process todetermine the views of the Australian people. The aim of the paper has been topromote public consideration of the key defence and security issues facing Australiaand to outline the decisions that the Government will need to make to ensure thatAustralia has a defence force that can meet Australia’s needs. There are policy choicesthat have to be made about:• what we want our armed forces to be able to do;• where we want our armed forces to be able to operate;• the best way to structure the ADF; and• the best way to spend the Defence budget.The public discussion paper provided information about these choices to enable allAustralians to have their say on these important issues.

MORE COMBAT-READY CAPABILITY

The focus on improving our combat capabilities within a largely static budget hasrequired good leadership and sound management. East Timor graphicallydemonstrated not only the political dimension of our current security situation, but alsothe benefits of many of the changes that have been put in place in recent times.

Very close attention has been given to our changing strategic circumstances and to thepreparedness of the ADF. This was tangibly reflected in the Government’s decisionearly in 1999 to increase the preparedness of a second brigade group based on the 1stBrigade in Darwin and to lease a Tasmanian-built catamaran. In addition, in May 2000the Government increased the number of full-time infantry battalions from four to sixand approved an increased number of personnel in the Air Force.

Navy

A key challenge for the Navy throughout the year has been to manage the workforcewith a shortage of personnel and trained staff in key categories. Prioritisation of billets,retention bonuses for personnel in key categories, and the establishment of thePersonnel Action Team were implemented to redress this issue.

The fleet continues to be improved with the introduction into service of newcapabilities. HMA Ships Anzac and Arunta were provisionally accepted into naval


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service and have proven to be valuable additions assisting with the RAN’s presence inthe region. In July 1999, HMAS Waller became the third Collins class submarine to becommissioned. HMAS Manoora, the first of two amphibious landing ships to enterservice, was delivered from the contractor in December 1999 and, after successfullycompleting initial sea trials in March 2000, was deployed to the Solomon Islands inJune.

HMAS Huon was commissioned in May 1999 and HMAS Hawkesbury was delivered inDecember 1999 and commissioned in February 2000 as scheduled. These represent anew generation of minehunter coastal vessels that will significantly improve thatcapability. In addition, the hydrographic fleet was augmented with the commissioningof HMAS Leeuwin and HMAS Melville in May 2000.

In March 2000, the Navy's management processes were reconfigured into forceelement groups to promote a whole-of-life focus upon Navy capability and to betterintegrate the provision of support by other elements of the Defence organisation. Thisshift enables the Chief of Navy to better discharge his responsibilities.

Army

In the case of the Army, the high tempo of operations in 1999-2000 highlighted anumber of capability issues. These included equipment and personnel deficiencies, andfinancial and sustainability issues. The Army required supplementation to achieve bothGovernment-directed operational goals and to meet the costs of reconstituting theRegular Force and remediating the equipment and stores taken from the Reserve Forceto support the East Timor operations.

A modularised recruit training trial, designed to increase the recruitment of part-timesoldiers by providing training options for those people unable to complete 45 days ofcontinuous training, was undertaken. A phased replacement program has beendeveloped with Support Command to address the equipment deficiencies.

Negotiations for procurement of 144 light armoured vehicles have been completed andcontract signature is expected in 2000-01. Under an accelerated acquisition program,the night fighting surveillance capability project introduced additional night fighting,radar and thermal surveillance systems into service that provided the Land Forces witha much needed capability in time for operations in East Timor.

Air Force

The high tempo of recent operations has highlighted an imbalance between resourcesand required Air Force results. This has led to high and unsustainable workloads andhas placed excessive pressure on Air Force personnel. These issues will be the keyfocus for the Air Force in the immediate future with the aim of:

• delivering adequate Air Force capability at sustainable levels; and

• retaining the right people in the Air Force to meet future challenges.

A particular focus during the year was the development and implementation of astrategy to improve recruitment, selection and training of fast jet aircrew to increase thenumber available. The Central Pilot Selection Agency was established to improve themethods of selecting pilots. While the full impact of this change will take some time tobe felt on the front-line, initial indications are positive.

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Enhancement of the Air Force’s lead-in fighter capability continued with the Hawk 127commencing test flights in December 1999. Delivery of the first aircraft is nowexpected in October 2000, with at least six additional aircraft to be available foracceptance by that date. Although this represents a delay, the Macchi jet trainer will beretired in December 2000 as planned.

The strategic airlift capability is also being enhanced through the C-130J project. Allaircraft have been accepted in the first of three post-delivery block upgrades. TheAustralian Defence Force Airworthiness Board recommended and accepted in June2000 that the C-130J-30 aircraft be granted endorsement of an Australian Military TypeCertificate, and the issue of a Limited Service Release for operations.

STRONGER FUTURE CAPABILITY

Defence has focused on its combat capabilities and its people as it has sought to build ahigh-technology defence force. Australia’s enduring geo-strategic situation drivesDefence to this. Australia’s vast distances and small population mean that Defencemust be able to deploy joint forces rapidly, and to apply superior combat powerdecisively, where and when the Government requires – and do it better than anybodyelse. This requires a focus on technology, mobility and quality people to make theessential difference.

Submarine Fast Track ProgramIn accordance with the Government’s decisions arising from the McIntosh/Prescottreport on the Collins class submarine project, a Submarine Capability Team wasappointed in July 1999 to “achieve a fully operational and sustainable submarine capability asquickly as possible, within the approved resources.” At that time, Defence had alreadycommenced a new project to improve the operational capability of the Collins class byevaluating a number of prototype modifications in HMAS Collins. The interimminimum operating capability achievements included:• modifications to the external casing and fin to reduce the noise signature; and• provision of a more reliable and functional combat system through some limited

enhancement of the existing system and the addition of stand-alone equipmentsourced from both the RAN and the United States Navy.

Defence built on the success of the modifications to HMAS Collins to develop a moreextensive proposal to achieve a limited capability in two submarines. This would allowdeployments in a range of operations while options for longer-term improvements tothe combat system deficiencies were reviewed and implemented. The Governmentapproved $266 million in December 1999 to incorporate the limited capability packageinto the next two submarines due for delivery from the Australian SubmarineCorporation – Dechaineux and Sheean. This initiative is known as the ‘fast track’program (Sheean commenced contractor’s sea trials with the majority of platformchanges already incorporated). Both submarines are planned to be available foroperational service in early 2001 with improved capability.

Other InitiativesInstallation of the Phase 1 modifications to the F/A-18, which will improve theaircraft’s self-protection and offensive capabilities and the associated ground supportsystems, is being progressed. Modification of the initial two prototype aircraft forPhase 1 commenced on schedule in April 2000, and modification of all aircraft is due to


13

be completed by the end of 2001. The foreign military sales case for the Phase 2 radaracquisition was agreed in October 1999.

Progress continued in 1999-2000 towards Anzac ship combat system integration andthe upgrade of Anzac shore and maintenance facilities to support the EvolvedSeaSparrow Missile. Anzac Ship 05 – Warramunga will be the first Anzac ship to receivethe Evolved SeaSparrow Missile capability. The first missile firings will be conductedfrom Warramunga during post-delivery trials that are scheduled in mid-2001.

Four frigates (FFGs) have been fitted with the active missile decoy system. Thequalification of the active missile decoy fire control system software has been delayedand, as a consequence, acceptance into naval service was not achieved as planned in1999-2000. Software acceptance is now scheduled for early 2001, followed by the RANoperational readiness evaluation in mid-2001 and acceptance into naval service in late2001.

The FFG upgrade, awarded to Australian Defence Industries (ADI) Ltd, is to beconducted at ADI’s Garden Island facility, commencing with HMAS Sydney in mid-2002 and completing with HMAS Newcastle in late 2005.

The Jindalee Operational Radar Network contract has been novated to RLM. Theprime contractor has taken over control of the radar sites from BAE Systems (formerlyGEC-Marconi), so that all responsibilities for the contract now reside with RLM.Major initial capability demonstrations (detection and tracking) for the Queenslandradar occurred in September 1999 and for the Western Australian radar in December1999. These verified the integrity of the design and interoperability of the basic radarsystem building blocks using ‘legacy’ software. Improved software developed by RLMhas since been installed at all sites and more sophisticated integration validation andtesting is now under way.

The ‘restructuring the Army’ trials were concluded in late 1999 and a final reportdelivered to the Minister in June 2000. The trials generated a large number of insightsthat will inform capability options for the enhanced combat force. The development ofthose options and the design of the enhanced combat force are an ongoing task.

Defence increased its research on technologies related to smart weapons, electronicwarfare, joint systems and information superiority in order to gain greater militaryadvantage from the information revolution, the so-called ‘revolution in military affairs’.In addition, a new Joint Systems Branch in the Defence Science and TechnologyOrganisation was established to give advice on the consequence of the informationrevolution for joint warfare.

CLOSER ALLIANCES AND INTERNATIONAL RELATIONSHIPS

The management of our defence relationships in South-East Asia was tested andhighlighted during the Interfet deployment. The strength of our defence relationshipwith Indonesia contributed directly to the success of Interfet’s deployment, while ourdefence relationships with Thailand, the Philippines, Singapore and Malaysia gave thosecountries the confidence to operate under Australian command.

Defence relations with the United States and New Zealand were pursued through awide range of exercises, training activities and exchanges which have served tostrengthen existing defence ties and provide opportunities to enhance ADF capabilities.

Section One

14

Australia’s network of defence relationships throughout the South-West Pacific regioncontinued to influence the regional strategic environment in which ADF operationsmay be required. Australia remains well positioned to support Bougainville peaceinitiatives and to provide timely support to the Government on developments in Fijiand the Solomon Islands.

1999-2000 saw continued growth in our level of engagement with most regionalcountries, particularly Thailand, the Philippines, Vietnam and Brunei. Thedevelopment of the initial Defence international engagement plan facilitated a morerobust linkage between our strategic policies and the specific objectives of the DefenceCooperation program.

ENHANCED NATIONAL SUPPORT

The market-testing program continued with the aim of improving services and reducingcosts by utilising support services from industry in order to release further funds tocapability. Initiatives during 1999-2000 included the completion of the rationalisationand market testing of garrison support services and most clerical and administrativeservices, the rationalisation of civilian personnel administration and the establishmentof civilian personnel administration centres.

A five-year contract with Qantas to provide travel services to Defence came into effecton 1 March 2000. Under the contract, Qantas will progressively assume responsibilityfor the provision and management of all travel services in Defence, including theeventual move to full e-commerce and the delivery of on-line travel services.

Market testing of logistic support functions continued with 13 market-testing activitiesbeing undertaken throughout Support Command. Decisions were made to outsourceworkshop support to F-111 aircraft, the deeper maintenance of C-130 Hercules aircraftand also the provision and management of medical and dental materiel support to theADF. The functions currently being tested include warehousing and distribution,maintenance of aircraft and other technical equipment and the provision of specialistservices such as laboratories and proof and experimental functions.

As part of the policy of encouraging open and effective competition along withpromoting the development of indigenous industry capabilities, Defence has continuedwith the privatisation of its manufacturing facilities. The sale of ADI was completed inNovember 1999 and the Government embarked on a process that will lead to the saleof its stake in the Australian Submarine Corporation.

The Defence Industry Advisory Council, chaired by the Minister for Defence, mettwice during 1999-2000 and the Industry Policy Consultative Forum met on fiveoccasions. The Defence procurement regional briefing program, which aims to informsmall to medium enterprises of Defence procurements, reached more than 1,200attendees around Australia.

Of the 49 initiatives identified in the Defence and Industry Strategic Policy Statement, 47 arenow complete. A highlight of recent achievements was the launch of the personnelexchange program between Defence and industry. The two remaining tasks are releaseof the F/A-18 Replacement Discussion Paper, which is awaiting release of the WhitePaper, and enhanced contracting support for several trial projects, which has beendelayed so it can be properly embedded in the new acquisition reform agenda.


15

GROWING SKILLS AND KNOWLEDGE

A key focus in 1999-2000 was ensuring that new agreements were in place for allDefence personnel. The Defence Force Remuneration Tribunal endorsed inNovember 1999 the ADF Enterprise Productivity Arrangement for members up to andincluding the rank of Colonel (equivalent) and in December 1999 the arrangement forone and two-star-level ADF officers. New Australian Workplace Agreements forDefence Senior Executive Service officers were approved by the EmploymentAdvocate in April 2000. The Defence Employees Certified Agreement was accepted byDefence non-Senior Executive Service civilian staff in a ballot held in June 2000 andwas certified by the Australian Industrial Relations Commission in July 2000.

The Defence Employees Certified Agreement introduced new civilian performancemanagement arrangements as well as a number of efficiency measures, including theabolition of isolated establishment allowance, streamlined classification arrangementsand simplification of many complex entitlements into a principles-based regime toenable managers and staff to negotiate the best results in each situation in relation tosuch things as removals and travel. Similar efficiencies were introduced, wherepracticable, in the other arrangements and agreements.

The recruitment and retention of quality people are among the highest priorities for theServices. Defence recruited 74% of the ADF full-time (permanent) target and 31% ofthe part-time (Reserve) target. Total enlistments, full-time and part-time, in 1999-2000were 6,646, an increase of 667 compared with 1998-99. The results for the threeServices were mixed. Recruiting for the ADF remains difficult due to the continuingshrinkage of the primary target group of 17-24 year olds, changes in career perceptionsand lifestyle expectations, increased competition in the market place for qualityapplicants, and the current relatively high rate of job availability in the community.

In an endeavour to improve ADF recruiting numbers, an intensive marketing strategy,the ‘lifestyle’ campaign, was introduced to dispel some of the more commonmisconceptions of Service life. Efforts have also focused on reducing barriers toeffective recruitment, in relation to such issues as education standards, medicalstandards and testing, security assessments, and financial constraints. Retentionbonuses for some specialist categories were also implemented in an effort to improveretention rates.

The Defence Service Centre is being developed to provide a free national inquiryservice to Defence personnel and their families on a range of personnel andadministrative matters. The Centre, which is to be located in Cooma, will commenceoperations in November 2000.

During the year, progress was made on a number of education and training initiatives,including the rationalisation of common training schools and courses. Work on theintegration and use of the national training framework has progressed well and a largenumber of Defence education and experience programs have received accreditation.These include medical assistant, catering, aviation, Navy mechanical and electricalengineering and Army trade training.

Parliament approved the Australian Defence College project in December 1999 andconstruction is proceeding on a tight schedule with a completion target of lateDecember 2000 to enable the new course to commence in early 2001.

Section One

16

In line with recommendations of the Defence Efficiency Review in 1997, selectedrecruiting functions were market tested. The successful tenderer, Manpower Services(Australia) Pty Ltd, commenced in September 2000 a twelve-month ‘pilot’ contract toprovide recruiting services to the ADF in Victoria and Tasmania. If the pilot issuccessful, Manpower will be contracted to provide ADF recruiting services Australia-wide for a further five years.

STRONGER LEADERSHIP AND BETTER MANAGEMENT

There has been ongoing work to improve Defence’s decision-making ability in relationto preparedness. During the year, a series of directives was produced to articulate thelevels of preparedness that the ADF is to be able to achieve. These form the basis forthe evaluation of preparedness across the portfolio. Particular focus is currently beingpaid to Defence’s ability to respond to contingencies such as East Timor and theSolomon Islands. A preparedness task force was established to further refine thecurrent preparedness management system by recommending how to improve linkagesbetween strategic guidance, preparedness (both readiness and sustainability), capabilitydevelopment, capability evaluation, and resources.

The implementation of the capability assessment reporting process continued with thepreparation of the 1999-2000 capability assessment reports in April 2000. Anoverarching Defence capability plan is being developed to support implementation ofthe White Paper. The Defence capability plan will define those capabilities required bythe ADF to meet the needs of the Government’s defence strategy.

Considerable effort was devoted to implementing and upgrading the three primarycorporate management information systems. Phase 1 of the Personnel ManagementKey Solution (PMKeyS) project was implemented in September 1999, to provideorganisational structures, personnel administration, recruitment and payroll largely forthe Defence civilian workforce. Implementation of Phase 1 was delayed by some tenmonths due to the unavailability of appropriately skilled Defence personnel and therequirement to redefine and re-scope some of the deliverables.

Project Roman, the new financial information system, continued to be rolled out in1999-2000. The roll-out of Phase 2 has taken longer than originally planned but is nowproceeding in accordance with its revised schedule.

The Standard Defence Supply System is being upgraded to standardise supply-chainmanagement. The logistics enterprise architecture project is developing the policy,procedures and supporting systems required to ensure integration of both existing andfuture systems, including joint logistics systems enhancements.

While the individual systems are being progressively developed or upgraded, it is clearthat the corporate management information systems as a whole are not delivering theinformation required by decision makers, both administratively and operationally. The2000-01 budget included $40m to address these limitations and development ofeffective solutions is a high priority in 2000-01.

Improvements to the major capital acquisition process continued. A comprehensiveacquisition reform program proposal was developed for Government consideration inthe second half of 2000. This program will build on earlier initiatives such as thebusiness process re-engineering project (now into its implementation phase) andincludes measures addressing Government involvement, industry involvement,


17

capability requirements development, acquisition processes, the cost of acquisition, anda range of personnel reforms including career management and development. Thesereforms are in response to concerns raised about Defence’s major capital acquisitionprocess and more generally are part of Defence’s ongoing process improvementactivities.The prime focus of asset management is to assist with the maintenance andimprovement of Defence outputs. During 1999-2000, Defence Estate progressivelyreplaced some 350 individual maintenance contracts, which had been previouslyadministered by the single Services and Science and Technology, with twelvecomprehensive maintenance contracts. The contracts provide for buildingmaintenance, runway and wharf upkeep, dredging and environmental services on allmajor and minor Defence establishments. Full implementation of the contracts isexpected to be achieved by January 2001.The corporate and operational information systems supported by Defence InformationSystems experienced negligible failures or disruptions through the Year 2000 eventperiod. Defence’s Year 2000 preparations were overwhelmingly successful, with noYear 2000-related failures or disruptions reported in any of the mission-critical systemsor equipment it supports.

Defence Information Systems negotiated several enterprise-wide corporate softwarelicensing agreements with specific vendors, an approach which has resulted insignificantly better product pricing to Defence than would otherwise have beenavailable through a more fragmented approach. This enterprise-wide approach hasensured that software procurement appropriately aligns with the preferred commonoperating environment or systems architecture. Discussions to further broaden thescope for these types of software enterprise-wide agreements are currently under waywith selected vendors.

ADF OPERATIONS IN EAST TIMORFollowing a request from the United Nations in September 1999, Australia assembledand led an international force to East Timor to address the deteriorating humanitarianand security situation. This operation was known as Interfet – International Force EastTimor.

With contributions from 22 nations, Interfet was a strong and dedicated force whichsucceeded in meeting its mandate under Chapter VII of the United Nations Charter.That mandate required the force, under the command of then Major General PeterCosgrove from the Australian Army, to restore peace and security in East Timor, toprotect and support the United Nations Assistance Mission in East Timor (UNAMET)in carrying out its tasks and, within force capabilities, to facilitate humanitarianassistance operations.

At its peak, Interfet consisted of approximately 10,000 personnel with Australiacontributing just over half of the force with three infantry battalion groups,headquarters and support units, and maritime and air assets.

In October 1999, the United Nations authorised the establishment of the UnitedNations Transitional Administration in East Timor (UNTAET) to replace the former

Section One

18

UNAMET operation. UNTAET would also incorporate a military component, with anauthorised strength of up to 9,150 personnel including up to 200 unarmed militaryobservers.

To support its contribution to UNTAET, the Australian Government agreed to theraising of two new battalion groups, for at least two years, increasing approvednumbers in the Army from 23,000 to 26,000. The Government also increased approvedAir Force numbers by around 500 to just over 13,500 to provide for an additionalairfield defence squadron and to meet the increase in supporting operations.

The transition from Interfet to a United Nations-mandated peacekeeping operation,under UNTAET, was completed in February 2000. Although its formerresponsibilities as the coalition leader have ceased, Australia continues to make asubstantial contribution to the operation. In June 2000, the strength of thiscontribution was approximately 1,640 personnel. In addition, an Australian, MajorGeneral Mike Smith, is the Deputy Force Commander of UNTAET.

ADF operations support to the UNTAET peacekeeping force is continuing during2000-01.

Table 1.1 shows expenditure on ADF involvement in East Timor in 1999-2000 forboth Interfet and UNTAET.

Table 1.1: Expenditure on ADF Involvement in East Timor – 1999-20001999-2000

Budget Estimate1999-2000

Actual$’000 $’000

Deployment 431,000 429,717Force Generation (Mobilisation) 279,000 97,994Investment 135,000 70,428Capital Use Charge 14,667 9,409Expenditure 859,667 607,548Surplus Funds(1) 36,954Appropriation Drawn Down 644,507

Note1. Funds returned to the Official Public Account in 2000-01.

Financial Performance

19

FINANCIAL PERFORMANCE

SUMMARY OF DEFENCE APPROPRIATIONS

The 1999-2000 direct appropriation for the Department of Defence of $17,593m was$221m higher than the revised estimate of $17,372m. This was primarily due to thespecial appropriation provided for East Timor, the changed accounting treatment of anadvance to Defence last financial year and an increased administered appropriation.

Defence was provided with a special appropriation for East Timor after the finalisationof the 1999-2000 additional estimates. The East Timor appropriation was $860m ofwhich $215m was refunded to government, resulting in appropriations drawn down forEast Timor of $645m.

The administered appropriation of $1,235m represents a reduction of $421m over therevised estimate of $1,656m. This was a result of a different accounting treatmentapplied to the actual result than that applied at budget, in accordance with Departmentof Finance and Administration direction.

Revenues from independent sources were $323m higher than the revised estimate,mainly an accrual adjustment of $250m for the recognition of assets for the first time.Capital receipts were $94m lower than the revised estimate.

Defence recognised a $179m revenue adjustment. This adjustment was made at thedirection of the Department of Finance and Administration, and required that Defencetreat the $179m prior period advance as revenue in 1999-2000. No additional cash wasreceived as a result of this change.

Table 1.2 provides a summary of the estimated funding available to Defence for1999-2000 and that actually received.

Section One

20

Table 1.2: Total Funding for the Department of Defence for 1999-2000

1999-2000Budget

Estimate$’000

RevisedEstimate

$’000

Actual

$’000

Variation

$’000Departmental Items

(A) Appropriation for outputs(1) 14,277,978 15,025,706 15,025,706 0(B) Special appropriation for East Timor 0 0 644,507 644,507(C)Appropriations for departmental outputs 14,277,978 15,025,706 15,670,213 644,507

C=A+B

Administered Items(D) Special appropriations 1,949,673 1,655,936 1,235,154 -420,782(E) Young Endeavour(1) 3,201 2,976 0 -2,976(F) Total administered appropriations 1,952,874 1,658,912 1,235,154 -423,758

(G) Total appropriations net of departmental equity injections 16,230,852 16,684,618 16,905,367 220,749

G=C+F(H) Departmental equity injection 1,278,230 687,170 687,170 0(I) Total appropriations 17,509,082 17,371,788 17,592,537 220,749

I=G+H(J) Capital receipts 223,535 226,547 132,906 -93,641(K) Revenues from independent sources 309,857 302,672 625,181 322,509(L) Revenue adjustment 0 0 179,354 179,354(M)Total Defence funding 18,042,474 17,901,007 18,529,978 628,971

M=I+J+K+L

Note1. The appropriation for the Young Endeavour was transferred to Departmental Items. The actual

appropriation for 1999-2000 is contained in the Departmental Output Appropriation.

Graph 1.1: Source of Defence FundingActual 1999-2000

(A)

81%

(B)

4%(F)

7%

(H)

4%

(J)

1%

(K)

3%

Graph 1.1: Source of Defence Funding Revised Estimate 1999-2000

(A)84%

(B)0%

(F)9%

(H)4%

(J)1%

(K)2%


21

The overall level of financial resources available to Defence was largely determined byDefence’s global cash funding limit, which in 1999-2000 was based on theGovernment’s commitment to maintain Defence cash funding in real terms. Table 1.3sets out total departmental appropriations net of the capital use charge, which equatesbroadly to Defence’s global funding limit.

Table 1.3: Total Departmental Appropriations net of Capital Use Charge

1999-2000Budget

Estimate$’000

RevisedEstimate

$’000

Actual

$’000

Variation

$’000Departmental Items

(A) Appropriation for outputs 14,277,978 15,025,706 15,025,706 0(B) Special appropriation for East Timor 0 0 644,507 644,507(C) Appropriations for departmental outputs 14,277,978 15,025,706 15,670,213 644,507

C=A+B(H) Departmental equity injection 1,278,230 687,170 687,170 0(M)Total departmental appropriations 15,556,208 15,712,876 16,357,383 644,507

M=C+H(N) Capital use charge for outputs 4,463,092 4,536,083 4,536,083 0(O) Capital use charge for East Timor 0 0 9,409 9,409(P) Total capital use charge 4,463,092 4,536,083 4,545,492 9,409

P=N+O(Q) Revenue adjustment 0 0 179,354 179,354(R) Total departmental appropriations net

of capital use charge 11,093,116 11,176,793 11,991,245 814,452R=M-P+Q

Section One

22

1999-2000 FINANCIAL PERFORMANCE

Operating ResultDefence recorded an operating result (net of the capital use charge) of $717m. Thiswas the result of a combination of higher than estimated revenue ($1,111m), higherthan estimated expenses ($331m) and a higher than estimated capital use charge ($64m).The operating result is detailed in the Departmental Operating Statement at Table 1.4below.

Table 1.4: Departmental Operating Statement – Statement of Revenuesand Expenses

1999-2000Budget

Estimate$’000

RevisedEstimate

$’000

Actual

$’000

Variation

$’000REVENUE FROM INDEPENDENT SOURCES

Sale of goods and services 273,288 243,588 296,766 53,178Interest and dividends 14,019 14,019 30,992 16,973Net gain on sale of assets 0 0 3,675 3,675Net gain on foreign exchange 0 0 12,932 12,932Write-back of assets previously expensed 0 0 250,270 250,270Other revenues 22,550 45,065 30,546 -14,519Total revenues from independent sources 309,857 302,672 625,180 322,509

REVENUE FROM GOVERNMENTOperating appropriation 14,277,978 15,025,706 15,205,060 179,354Special appropriation for East Timor 0 0 607,467 607,467Resources received free of charge 0 0 1,898 1,898Total revenues from government 14,277,978 15,025,706 15,814,424 788,719

Total revenue 14,587,835 15,328,378 16,439,604 1,111,227

EXPENSESEmployees 4,414,181 4,772,475 4,964,902 192,427Suppliers 4,026,816 4,221,153 3,847,042 -374,111Depreciation and amortisation 1,653,696 1,781,326 1,800,300 18,974Write-down of assets 0 0 478,173 478,173Net loss on sale of assets 12,077 863 0 -863Interest and other financing costs 1,110 1,141 532 -609Subsidies, benefits and grants 0 0 3,872 3,872Other costs of providing goods and services 16,863 15,337 28,315 12,978

Total Expenses 10,124,743 10,792,295 11,123,136 330,841

Operating result before capital use charge 4,463,092 4,536,083 5,316,468 780,385Capital use charge paid 4,463,092 4,536,083 4,599,955 63,872

Operating result after capital use charge 0 0 716,513 716,513Accumulated results at 1 July 33,404,290 35,024,036 34,904,682 -119,354Adjustment to opening accumulated results 0 0 1,274,258 1,274,258

Total accumulated results at 30 June 33,404,290 35,024,036 36,895,453 1,871,417


23

Revenues from government were substantially higher than the revised estimate as aresult of the special appropriation for the deployment to East Timor. The funding forEast Timor was largely directed to the payment of overseas salaries and allowances tothose deployed in East Timor and to suppliers of goods and services. Table 1.4 showsthat Defence recognised $607m in revenue from government for East Timor, whichincluded an additional $9m revenue to cover the cost of capital (capital use charge) inrelation to East Timor activities. Total drawdowns, reported in Tables 1.2 and 1.3,were $645m, some $37m higher than the revenue requirements for East Timor. Thesefunds were returned to government in the 2000-01 financial year.

Revenues from independent sources exceeded the budget estimate by $323m. This waslargely attributable to the write-back of assets that had previously been expensed. Thisamount represents the growth in depreciable assets held on the Standard DefenceSupply System that were not identified through the procurement process. These wereidentified during a review of items reported on the Standard Defence Supply System.Defence also received higher than anticipated revenue from the sale of goods andservices to foreign governments. Under the new devolved banking arrangements,Defence was able to retain a portion of the interest earned on its bank accounts. Theestimate for 1999-2000 of $14m in interest was exceeded by $17m.

Employee expenses were $192m higher than the revised estimate. This was the resultof the inclusion of East Timor expenditure ($226m), partly offset by an underspend insalaries primarily due to the inability of the Services to meet recruiting targets andhigher than expected separation rates.

Suppliers expenses were lower than anticipated, the main contributing factor beinglower than anticipated inventory consumption, partly offset by increased repair andoverhaul costs. The deployment to East Timor was the most significant contributingfactor, as some scheduled training exercises were cancelled due to the deployment.Depreciation expense was slightly higher than anticipated, largely as a consequence ofthe significant revaluation of assets undertaken in 1999-2000.

Defence does not budget for the write-down of assets other than expensed assets underconstruction, that is the costs of assets under construction that are expensed ratherthan capitalised upon the completion of construction of the asset. The $478m write-down includes expensed assets under construction ($199m), the forgoing of a $93mloan to ADI, and write-downs to specialist military equipment ($46m), inventory (net$72m), land and buildings ($21m), and other infrastructure, plant and equipment($46m). Write-downs and write-offs occur as a part of asset management programs andinclude the writing-off of equipment that is obsolete or damaged beyond repair.

Graph 1.3: Defence Operating Expenses

0 1000 2000 3000 4000 5000

Employ e e s

S upplie rs

De pre c ia t ion a nd a mort isa t ion

Writ e down of a s se t s

$ m

Ac tua l Re vis e d Es tima te

Section One

24

Balance Sheet

The most significant change to the Defence balance sheet was in non-financial assets.Defence does not budget for the revaluation of assets in accordance with establishedaccounting practice. During 1999-2000, approximately 80% of Navy and Air Forcespecialist military equipment assets were revalued resulting in an increase of $3,518m tothe gross value of these assets. Table 1.5 provides a summary of the estimated andactual assets and liabilities as at 30 June 2000.

Table 1.5: Departmental Balance Sheet – Statement of Assets andLiabilities

1999-2000Budget

Estimate$’000

RevisedEstimate

$’000

Actual

$’000

Variation

$’000FINANCIAL ASSETS

Cash 18,514 86,857 137,913 51,056Receivables 307,327 286,509 363,446 76,937

Total financial assets 325,841 373,366 501,359 127,993

NON-FINANCIAL ASSETSLand and buildings 6,335,870 7,483,350 7,605,459 122,109Specialist military equipment 26,344,340 25,685,454 29,196,801 3,511,347Infrastructure, other plant and equipment 3,609,467 3,469,623 3,815,427 345,804Inventories 2,607,844 2,675,027 2,933,463 258,436Intangibles 71,755 92,042 90,263 -1,779Other assets 533,753 915,072 679,036 -236,036

Total non-financial assets 39,503,030 40,320,568 44,320,449 3,999,881Total assets 39,828,871 40,693,934 44,821,807 4,127,874

DEBTFinance leases 0 -678 556 1,234

Total Debt 0 -678 556 1,234

PROVISIONS AND PAYABLESCapital use charge 0 0 51,357 51,357Employees 2,054,680 2,373,302 2,459,591 86,289Suppliers 581,759 453,611 502,375 48,764Other provisions and payables 0 67,009 108,515 41,506

Total provisions and payables 2,636,439 2,893,922 3,121,838 227,916Total liabilities 2,636,439 2,893,244 3,122,394 229,150

Net assets 37,192,432 37,800,690 41,699,413 3,898,724

EQUITYEquity injection appropriation 2,517,004 687,170 687,170 0Asset revaluation reserve 1,271,138 2,089,484 4,116,791 2,027,307Accumulated results 33,404,290 35,024,036 36,895,453 1,871,417

Total equity 37,192,432 37,800,690 41,699,414 3,898,724


25

The higher than budgeted total net asset position is largely a result of $2,027m inupward revaluations, and $1,274m of assets re-recognised under the transitionalprovisions of Australian Accounting Standard 29 (AAS 29). The ownership of all ofDefence’s communications and information technology assets now resides withDefence Information Systems. As a result of this consolidation of asset management,some assets that had previously been expensed as they fell under the $25,000 assetrecognition threshold have been brought back onto the books.

Graph 1.4: Non-Financial Assets 1999-2000

0 5000 10000 15000 20000 25000 30000 35000

La nd a nd building s

S pe c ia lis t milita rye quipme nt

Infra s truc ture , o the r pla nta nd e quipme nt

Inve nto rie s

$ m

Re vis e d Es tima te Ac tua l Outc ome

Section One

26

Cash FlowDefence’s closing cash position at 30 June 2000 was $138m. As mentioned earlier,$37m is East Timor-related, and was repaid in 2000-01. The remainder of the amountwas retained in order to meet payments due before the first 2000-01 cash drawdown on6 July 2000. Table 1.6 provides a summary of the estimated and actual cash flows forthe financial year ending 30 June 2000.

Table 1.6: Departmental Statement of Cash Flows

1999-2000Budget

Estimate$’000

RevisedEstimate

$’000

Actual

$’000

Variation

$’000OPERATING ACTIVITIES

Total cash received 14,587,835 15,328,540 15,973,816 645,276Total cash used 8,047,872 8,871,654 8,262,530 -609,124

Net cash from operating activities 6,539,963 6,456,886 7,711,286 1,254,400

INVESTING ACTIVITIESTotal cash received 223,535 226,547 132,906 -93,641Total cash used 3,578,636 2,822,056 3,913,912 1,091,856

Net cash from investing activities -3,355,101 -2,595,509 -3,781,006 -1,185,497

FINANCING ACTIVITIESTotal cash received 1,278,230 687,170 687,170 0Total cash used 4,463,092 4,548,547 4,560,603 12,056

Net cash from financing activities -3,184,862 -3,861,377 -3,873,433 -12,056

Net increase/(decrease) in cash held 0 0 56,847 56,847Cash at 1 July 18,514 86,857 86,857 0Derecognition of Woomera opening balance 0 0 -10,588 -10,588Effect of exchange rate movements on 1 Julybalance 0 0 4,796 4,796

Cash at 30 June 18,514 86,857 137,912 51,056


27

Net cash inflows from operating activities were $1,254m higher than the revisedestimate. This is a result of a combination of the receipt of the East Timorappropriation ($645m) and a categorisation adjustment ($982m). This categorisationadjustment concerns the treatment of inventory purchases. Inventory purchases wererecorded as an operating activity for budgeting purposes and an investing activity foractual reporting.

Net cash outflows from investing activities were $1,185m higher than the revisedestimate. This result reflects the recategorisation of the inventory purchases as aninvesting cash outflow ($982m), a redirection of funds to make major capital payments($256m), and lower than anticipated proceeds from the sale of capital items ($94m).

Net cash outflows from financing activities were $12m higher than the revised estimate,largely attributable to the higher capital use charge paid, of which $9m was East Timor-related.

Section One

28

ADMINISTERED ITEMS

Administered items are assets, liabilities, revenues and expenses, which are controlledby the Government and managed by the Department on behalf of the Government. Inprevious financial years, operations associated with the Young Endeavour have beenreported as administered items. The appropriateness of this reporting has beenreviewed, and agreement obtained from the Department of Finance and Administrationand the Australian National Audit Office that control of these operations rests with theRoyal Australian Navy. As a result, from 1 July 1999 the operations of the STS YoungEndeavour have been reported as departmental.

In 1999-2000, Defence recorded administered revenue of $1,926m. This comprised theadministered revenue from government of $1,235m, interest of $25m and $666m ofother sources of non-taxation revenue. Other sources of non-taxation revenueincluded contributions for the Defence Forces Retirement and Death Benefits Scheme($253m), the Military Superannuation and Benefits Scheme ($332m), and $80m forforeign governments and the United Nations reimbursements for East Timor.

In relation to the Defence Forces Retirement and Death Benefits Scheme and theMilitary Superannuation and Benefits Scheme contributions, Defence, acting uponadvice from the Department of Finance and Administration, has included the employerand member contributions to these schemes in the 1999-2000 Administered FinancialStatements. In 1998-99 Defence reported member contributions only for theseschemes.

Administered expenses reported a variation of $982m over the revised estimate for1999-2000, attributable to the personal benefits category. Actuarial advice resulted in asubstantial increase in the provision for military superannuation, which was reflected inthe increased expense reported for the 1999-2000 financial year.


29

Table 1.7: Administered Operating Statement – Statement of Revenuesand Expenses

1999-2000Budget

Estimate$’000

RevisedEstimate

$’000

Actual

$’000

Variation

$’000OPERATING REVENUES

Non-taxation revenuesRevenue from government(1) 1,952,874 1,658,912 1,235,154 -423,758Interest and dividends 0 0 24,649 24,649Other sources of non-taxation revenue 81,798 92,626 666,204 573,578

Total non-taxation revenue 2,034,672 1,751,538 1,926,006 174,468

EXPENSESPersonal benefits 1,938,173 1,650,936 2,633,250 982,314Suppliers 0 0 0 0Subsidies 5,000 5,000 4,625 -375Depreciation and amortisation 439 449 0 -449Write-down of assets 0 0 2,470 2,470Other expenses 9,262 2,527 1,028 -1,499

Total expenses 1,952,874 1,658,912 2,641,374 982,462

Operating result – contribution to budget result 81,798 92,626 -715,368 -807,994Extraordinary item -413,709 -318,509 0 318,509Operating result after extraordinary item -331,911 -225,883 -715,368 -489,485

TRANSFERSCash transfer to the Official Public Account 81,798 92,626 578,767 486,141Operating result after transfer -413,709 -318,509 -1,294,135 -975,626Accumulated results at 1 July -22,745,267 -23,248,083 -23,245,613 2,470Adjustments to opening accumulated results 0 0 -6,568 -6,568

Total accumulated results at 30 June -23,158,976 -23,566,592 -24,546,316 -979,724

Note1. The budget and revised estimate contain revenue for the Young Endeavour. As per the note in

Table 1.2, Young Endeavour was transferred to Departmental Items.

Section One

30

Table 1.8: Administered Balance Sheet – Statement of Assets andLiabilities

1999-2000Budget

Estimate$’000

RevisedEstimate

$’000

Actual

$’000

Variation

$’000FINANCIAL ASSETS

Cash 0 0 207 207Receivables 1,504,985 411,631 84,323 -327,308Investments 1,785,035 1,785,035 1,785,029 -6Accrued revenues 1,946 0 0 0

Total financial assets 3,291,966 2,196,666 1,869,559 -327,107

NON-FINANCIAL ASSETSInfrastructure, plant and equipment 7,905 7,949 0 -7,949

Total non-financial assets 7,905 7,949 0 -7,949Total assets 3,299,871 2,204,615 1,869,559 -335,056

PROVISIONS AND PAYABLESPersonal benefits 24,327,735 23,665,270 24,605,042 939,772Other provisions and payables 25,738 563 25,804 25,241

Total provisions and payables 24,353,473 23,665,833 24,630,846 965,013Total liabilities 24,353,473 23,665,833 24,630,846 965,013

Net assets -21,053,602 -21,461,218 -22,761,287 -1,300,069

EQUITYReserves 2,105,374 2,105,374 1,785,029 -320,345Accumulated results -23,158,976 -23,566,592 -24,546,316 -979,724

Total equity -21,053,602 -21,461,218 -22,761,287 -1,300,069


31

Table 1.9: Administered Statement of Cash Flows

1999-2000Budget

Estimate$’000

RevisedEstimate

$’000

Actual

$’000

Variation

$’000OPERATING ACTIVITIES

Cash receivedAppropriations 1,146,442 1,250,112 1,235,154 -14,958Interest and dividends 0 0 24,649 24,649Superannuation contributions 0 0 584,209 584,209Other 81,798 92,626 10 -92,616

Total cash received 1,228,240 1,342,738 1,844,021 501,284Cash used

Personal benefits 1,144,092 1,247,762 1,260,692 12,930Suppliers 0 0 0 0Subsidies 0 0 4,354 4,354Cash to the Official Public Account 81,798 92,626 578,767 486,141Other 2,350 2,350 0 -2,350

Total cash used 1,228,240 1,342,738 1,843,814 501,076Net cash from operating activities 0 0 208 208

INVESTING ACTIVITIESCash received

Cash from the Official Public Account 0 0 0 0Total cash received 0 0 0 0Cash used

Purchase of property, plant and equipment 0 0 0 0Total cash used 0 0 0 0

Net cash from investing activities 0 0 0 0

Net increase/(decrease) in cash held 0 0 208 208Cash at 1 July 0 0 0 0

Cash at 30 June 0 0 208 208

Section One

32

CAPITAL BUDGET

The Capital Budget was reduced by $757m in revised estimates to cover increasedoperating expenses of $380m and an accounting adjustment of $377m for thereclassification of asset purchases as inventory purchases. However, Defence outputcosts did not increase to the extent expected, due to reductions in ADF trainingexercises and other activities arising from the East Timor deployment and ADFrecruiting shortfalls. This enabled $267m to be returned to the Capital Budget afteradditional estimates.

Table 1.10 provides a summary of the estimated and actual capital budget for the1999-2000 financial year.

Table 1.10: Departmental Capital Budget (excluding East Timor)

1999-2000Budget

Estimate$’000

RevisedEstimate

$’000

Actual

$’000

Variation

$’000CAPITAL BUDGET PAYMENTS

Purchase of infrastructure, plant and equipment 3,190,400 2,594,000 2,849,628 255,628Purchase of land and buildings 377,700 196,800 216,377 19,577Other capital purchases 10,500 31,300 23,078 -8,222

Total capital payments 3,578,600 2,822,100 3,089,083 266,983

FUNDING FOR CAPITAL PAYMENTSEquity injection 1,278,230 687,170 687,170 0Self funding 2,076,835 1,908,383 2,208,117 299,734Capital receipts 223,535 226,547 193,796 -32,751

Total funding for capital payments 3,578,600 2,822,100 3,089,083 266,983

CAPITAL RECEIPTSProceeds on asset disposal 128,560 131,572 132,906 1,334Other capital receipts 94,975 94,975 60,890 -34,085

Total capital receipts 223,535 226,547 193,796 -32,751


33

MAJOR CAPITAL EQUIPMENT

The following table and descriptions provide details on progress and expenditure foreach of the most significant major equipment projects in 1999-2000.

1.11: Top 20 Projects by Forecast 1999-2000 ExpenditureApproved

ProjectCost

(Dec 99)

CumulativeExpenditure

to30 June 2000

1999-2000Budget

Estimate

1999-2000RevisedEstimate

1999-2000Actual

$m $m $m $m $mDec 99 Prices Dec 98 Prices Dec 99 Prices

Maritime and GroundAnzac Ship 6,163.5 4,759.8 365.3 377.3 391.7FFG Upgrade 1,296.3 235.1 - 101.3 106.5Minehunter Coastal 1,217.9 962.5 106.4 97.6 95.1New Submarines 5,046.0 4,836.8 110.2 80.9 110.2Submarine Interim MinimumOperating Capability 93.1 43.9 - 77.3 43.9Night Fighting SurveillanceCapability 150.7 122.7 52.0 60.2 55.9Evolved SeaSparrow Missile 310.4 131.3 74.0 34.0 14.5AerospaceLead-In Fighter Capability 1,023.5 690.4 241.8 280.2 244.5Strategic Airlift Capability 1,059.5 882.5 150.3 168.2 180.2Anzac Helicopter Capability 938.5 551.4 158.5 147.7 115.4P-3C UpdateImplementation

855.1 558.2 129.1 87.9 41.7

Air-to-Air WeaponsCapability 285.0 96.4 - 55.6 49.6F/A-18 Hornet Upgrade 270.9 120.4 40.6 50.6 42.5Electronic SystemsJindalee Operational RadarNetwork 1,198.4 836.1 69.6 83.5 74.4Tactical Air Defence RadarSystems 188.1 79.4 39.3 52.2 41.7Military SatelliteCommunications 328.7 56.1 - 47.5 49.8HF Modernisation 557.0 97.2 80.4 43.1 46.2Active Missile Decoy 178.5 153.1 37.7 38.8 35.4Projects not yet at ContractProjects which have yet to award all significant contracts:• Airborne Early Warning and Control Aircraft• Australian Light Armoured Vehicles – Additional

Section One

34

Anzac Ship Project

Partially Achieved as ForecastPhase 2 of the project is on schedule with Anzac Ship 04 Te Mana, the second of NewZealand's two ships, delivered in October 1999. Anzac Ship 07 Parramatta, waslaunched in June 2000. The keel of Ship 08 Ballarat, is scheduled to be laid in the thirdquarter of 2000. A revision to the delivery schedules for ships 05-10 was agreed withthe prime contractor in July 1999 to accommodate the inclusion of capabilityenhancements in these ships.

Phase 3 of the project, the undersea and surface warfighting upgrade, will enhance thesurface and sub-surface warfare capabilities of all eight Australian Anzac ships. Subjectto agreement on scope and price, the enhancements will be procured through theAnzac ship prime contract by way of contract amendment proposals.

FFG Upgrade

Partially Achieved as ForecastThe prime contract, awarded to ADI Ltd in June 1999, is to be conducted at ADI’sGarden Island facility, commencing with HMAS Sydney in mid-2002 and completingwith HMAS Newcastle in late 2005. The decision to change the lead ship from HMASAdelaide (west coast-based) to HMAS Sydney (east coast-based) allows ADI access to aneast coast-based FFG for shipchecks prior to the installation phase.

The detailed design of the upgrade has progressed, with the preliminary design reviewnow scheduled to be fully completed in the second half of 2000, several months laterthan planned. The critical design reviews will follow. A recovery plan to retrieveschedule is currently being developed, but the slippage is expected to be containedwithin the contracted window for delivery of the upgraded FFGs.

Minehunter Coastal Project

Achieved as ForecastHMAS Hawkesbury (Ship 02) was delivered in December 1999 and commissioned inFebruary 2000. Ship 03 Norman, was delivered in July 2000, four weeks later thanscheduled due to a delay in the provision of modified auxiliary propulsion unitssupplied from Italy. Ships 04-06 are currently under construction and are expected tobe delivered on schedule. Ship 04 Gascoyne, is planned for delivery in early 2001.

New Submarines

Partially Achieved as ForecastAction to acquire and install United States Navy combat system equipment and toimprove the noise characteristics of the Collins-class submarines has progressed.HMAS Collins achieved an interim minimum operating capability by June 2000. Theaim of achieving an interim minimum operating capability in the two ‘fast track’submarines, Dechaineux and Sheean, by the end of 2000, while still achievable, is nowtight with no room for further schedule slippage.


35

Trials of several alternative propellers have been conducted throughout the year, asplanned, but further extensive trials will be required before the optimum propeller/hullshape configuration is finally determined.

Due to a commercial requirement to separate the build contract from the ‘fast track’improvements, Defence accepted delivery of Dechaineux and Sheean in July and August2000 respectively.

Options to bring all six submarines to full capability by the end of 2006 will be putbefore the Government in 2000-01.

Due to the concentration of resources on earlier submarines, progress in launching anddelivering Rankin was not achieved as planned. Launching and delivery of Rankin areboth forecast for 2001.

Night-Fighting Surveillance Capability

Partially Achieved as ForecastDeliveries of night-fighting equipment are continuing. The main production deliverieswill be largely complete by November 2000, with minor deliveries continuing until mid-2001. Contract negotiations for the radar systems are complete and the contracts areready for signature. Source selection for the thermal surveillance systems andunattended ground sensors projects are both complete, with contract signatureexpected for thermal surveillance systems and for unattended ground sensors in the lastquarter of 2000. The project introduced additional night-fighting, radar and thermalsurveillance systems for service in East Timor under an accelerated acquisitionprogram.

Evolved SeaSparrow Missile

Achieved as ForecastThroughout 1999-2000, progress continued towards Anzac combat system integrationand the upgrade of Anzac shore and maintenance facilities to support the missile.Anzac Ship 05 Warramunga will be the first Anzac ship to be delivered with the EvolvedSeaSparrow capability. Missiles are being procured through the Nato SeaSparrowprogram in which Australia is one of thirteen participating governments. Missiledeliveries are scheduled to commence in the first quarter of 2001. The first missilefirings will be conducted from Ship 05 Warramunga, during post-delivery trialsscheduled in mid-2001. A change in the payment schedules for the production missileshas resulted in a more favourable payment profile for the Commonwealth with noimpact on the planned missile deliveries.

Lead-In Fighter Capability

Partially Achieved as ForecastThe first Hawk 127 commenced test flying in December 1999. Delivery of the firstaircraft is now expected in October 2000, with at least six additional aircraft to beavailable for acceptance by that date. This delay, despite considerable effort by thecontractor in completing its obligations under the contract, has caused the RAAF torevise training plans and divert resources from other activities. Contractual provisionswill be invoked to redress this impact. The delay will not affect the imperative for theMacchi jet trainer to be retired in December 2000.

Section One

36

Strategic Airlift Capability

Partially Achieved as ForecastAll 12 C-130J aircraft were accepted by June 2000, a delay of three months. The first ofthree post-delivery upgrades (Block 5.2) was installed on all aircraft by July 2000. TheAustralian Defence Force Airworthiness Board reviewed acceptance of the C-130J-30aircraft into operational service in June 2000 and recommended endorsement of anAustralian Military Type Certificate and the issue of a Limited Service Release foroperations in the Block 5.2 configuration. The second and third upgrades are currentlyscheduled to be completed by October 2001. C-130E aircraft are being withdrawnfrom RAAF service progressively, with the final aircraft retiring at the end ofNovember 2000.

Anzac Helicopter Capability

Partially Achieved as ForecastThe prototype aircraft first flew in October 1999, and the hardware is ready to acceptmost aircraft systems. The contractor has introduced a new schedule for developmentand delivery of software for weapons and sensor integration which has led to a stageddelivery of the helicopter. Contractor delays in software development have impactedon both the full development of the mission simulator and aircraft prototype test flying.Delivery of the first production aircraft in early 2001 will be with an interim capabilitythat will allow initial flight qualification trials and aircrew training. The In-ServiceSupport Centre contract, which extends to 2010, is now in place and ready to supportthe delivery of the first helicopter in April 2001. The final helicopter is due foracceptance in mid-2002, as scheduled. The associated Project Sea 1414 (PenguinMissile) is on schedule for the delivery of missiles for this helicopter.

P-3C Update Implementation

Partially Achieved as ForecastThe delivery of the AP-3C prototype aircraft is not expected before late November2000. This is a direct result of a slower than expected rate of clearance of systemintegration issues within the data management system and navigation system software.An independent review commissioned by the Aerospace Acquisition Division indicatedthat there were no systemic design problems with the data management system and thatthe slow resolution of integration issues was reflective of the complexity of the projectand of highly aggressive scheduling by the contractor. The Commonwealth is pursuingaction to recover the costs incurred as a result of the delays and remains confident thatthe capability sought under this project will be delivered.

Delivery of the mission replay and analysis module was achieved in June 2000.

Delivery of the operational mission simulator and the Systems Engineering Laboratoryhave been delayed as a direct result of slower than expected progress on the AP-3Cprototype aircraft. Delivery of the operational mission simulator remains dependent onthe establishment of an acceptable prototype design baseline. Slower than expectedprogress through operational mission simulator integration and anomaly resolution hasalso impacted upon delivery, which is now not expected until early 2001. The delay inthe delivery of the Systems Engineering Laboratory was due to the system being


37

retained in Greenville, Texas, to support prototype integration and testing. Delivery isnow expected in late 2000.

Air-to-Air Weapons Capability

Achieved as ForecastWork continued on the project to acquire an operational air-to-air weapons capabilityand support infrastructure for the F/A-18. This includes the acquisition of within-visual-range air-to-air missiles and beyond-visual-range air-to-air missiles. Contracts forboth types of missiles were signed in November 1998 with options for further missilestaken up in 1999. Further beyond-visual-range missiles are planned under Phase 3 ofthe project. Deliveries of the beyond-visual-range missiles are scheduled to commencein early 2001 and are anticipated to conclude in 2003. Deliveries for the within-visual-range missile will commence in late 2001 and will conclude in 2002. Work continuedon the integration of advanced short-range air-to-air missiles and advanced medium-range air-to-air missiles on to the F/A-18.

F/A-18 Hornet Upgrade

Achieved as ForecastInstallation of the Phase 1 modifications to the aircraft and ground support systems arebeing progressed as contract changes to the Phase 1 prime contract following detailedplanning and selection of Australian sub-contractors. Modification of the initial twoprototype aircraft for Phase 1 commenced on schedule in April 2000 with modificationof all aircraft due to be completed by the end of 2001.

The Phase 2 radar acquisition foreign military sales case was accepted in October 1999.Installation of the radar and upgrade of associated support systems is planned to occurimmediately following the Phase 1 modifications, commencing with a prototypeinstallation during the second quarter of 2001 with modification of all aircraft due to becompleted by the end of 2002. Source selection of the remaining Phase 2 primeequipment has commenced.

Jindalee Operational Radar Network

Achieved as ForecastThe Jindalee Operational Radar Network contract has been novated to RLM. Theprime contractor has taken over control of the radar sites from BAE Systems (formerlyGEC-Marconi), so that all responsibilities for the contract now reside with RLM.Major initial capability demonstrations (detection and tracking) for the Queenslandradar occurred in September 1999 and for the Western Australian radar in December1999. These verified the integrity of the design and interoperability of the basic radarsystem building blocks using ‘legacy’ software. Improved software developed by RLMhas since been installed at all sites and more sophisticated integration validation andtesting is now under way.

The overall level of technical risk for the project has reduced but there is some schedulerisk. The contractor’s schedule projections indicate that operational release will occurin the first half of 2002 and final acceptance in the second half of 2002. A viable (butunverified) wide area surveillance capability could be made available during the secondhalf of 2001, if required.

Section One

38

Tactical Air Defence Radar Systems

Partially Achieved as ForecastThis project will acquire four tactical air defence radar systems to replace obsoletesystems. The project will also provide a transport capability for the new systems, andsatellite communications between the new systems and the fixed air defence sites. Asforecast, the critical design review was conducted during 1999-2000 but some actionsarising from the review are still to be completed. System production anddevelopmental and acceptance testing has commenced but is experiencing delays.Delivery of the new systems is expected during 2001-02.

Military Satellite Communications

Achieved as ForecastContracts for the provision of an ADF satellite capability, as part of a sharedmilitary/commercial satellite were signed with Cable & Wireless Optus in October1999. The satellite is due for launch in early 2002 and is expected to enter service bymid-2002. Work is continuing on the Defence mobile satellite communicationsnetwork project, which will provide upgraded satellite communication services totactical ADF elements during 2000-01. The theatre broadcast technology demonstratorwas developed further and was successfully deployed to East Timor and also inmaritime trials. After a review of the operational requirement for satellitecommunications for certain aircraft, orders for radios for C-130H aircraft have beenplaced via the United States foreign military sales arrangements. Fitment of the radiosis expected to commence in 2001.

High Frequency Network Modernisation

Partially Achieved as ForecastThe system preliminary design review was completed in early 2000. Access roads to theRiverina sites and the Townsville receiver site have been completed, as have thedetailed design reviews for building and facilities construction at all sites.

Construction work has commenced on the Riverina and North-West Cape sites.Commencement of construction work at the Darwin sites and the Townsvilletransmitter site slipped until the third quarter of 2000 due to delays in getting thenecessary site agreements in place with local authorities. Site building construction atTownsville and Darwin is now scheduled to be completed in late 2000/early 2001. Fit-out of the network management facility in Canberra has been deferred by the primecontractor because of delays in finalising the design. This is now due to commence inlate 2000. These delays will not affect the schedule for completion of the core networkin late 2002.


39

Active Missile Decoy

Partially Achieved as ForecastFour frigates (FFGs), HMA Ships Canberra, Darwin, Melbourne and Newcastle, have beenfitted with the active missile decoy system. The two remaining frigates will follow inearly 2001. The first Anzac ship is planned to be fitted in mid-2001 and the last inDecember 2004. The qualification of the active missile decoy fire control systemsoftware has been delayed and remains a risk. Consequently, acceptance into navalservice was not achieved as planned. Software acceptance is now scheduled for early2001, followed by the RAN operational evaluation in mid-2001 and acceptance intonaval service in late 2001.

Airborne Early Warning and Control Aircraft

Not Achieved as ForecastFinal Government approval for this project was deferred in August 2000 so that theproject can be considered within the context of the Defence White Paper.

Australian Light Armoured Vehicles

Not Achieved as ForecastNegotiations for the procurement of 144 vehicles have been completed and contractsignature is expected in 2000-01. A reduction of six vehicles to 144 has been necessaryto preserve contingency funds and stay within the approved project cost. An optionfor the additional six vehicles may be taken up later in the program. Delivery isexpected in the period 2002-05. This will be confirmed after contract signature.

Other Major Projects Planned for 1999-2000

2CRU/3CRU Control and Reporting Units

Not Achieved as ForecastThis project will provide a ground-based command, control, and communicationssystem at Numbers 2 and 3 Control and Reporting Units. The award of the primeequipment and logistics support contracts did not occur as planned. The contractingstrategy for this project was subsequently amended to allow for the systemrequirements analysis phase to be conducted in advance of contract signature for theprime equipment contract. Contract signature for the prime equipment contract is nowplanned to occur in 2001-02, with the support contract to follow later.

Light Tactical Airlift Capability

Not Achieved as ForecastAs a result of the need to review the competing priorities of all Defence’s current andfuture capability requirements, progression of the light tactical airlift capability projecttender process has been cancelled. The future requirement for such a capability will bereconsidered in the context of the Defence White Paper.

Section One

40

SIGNIFICANT MAJOR FACILITIES

The following table and descriptions provide details on progress and expenditure foreach of the most significant major facilities projects in 1999-2000.

1.12: Significant Major Facilities ProjectsPROGRAM OF WORKS(state, federal electorate andlocality)

ApprovedProject

Cost

$’000


to30 June 2000

$’000

1999-2000Budget

Estimate

$’000


$’000

1999-2000Actual

$’000QUEENSLANDHerbertTownsville – Redevelopment ofLavarack Barracks Stage 2 139,308 25,735 27,700 25,200 23,342Townsville – Redevelopment ofRAAF Base Stage 1 70,100 903 2,000 1,500 891Townsville – Facilities for BlackHawks 22,132 21,533 2,000 2,000 163BlairAmberley – Redevelopment ofRAAF Base 77,400 15,471 30,000 30,000 13,795LeichhardtCairns –Facilities for 51 Far NorthQueensland Regiment 22,517 21,509 17,700 18,800 18,137NEW SOUTH WALESEden/MonaroTwo Fold Bay – NavyAmmunitioning Facility(1) 40,000 1,400 3,600 900 1,400GilmoreHMAS Albatross – Redevelopmentof Naval Base 110,000 46,817 44,600 38,000 38,099PatersonWilliamtown – Eastern RegionOperations Centre Development 18,000 15,362 16,500 15,500 13,970VICTORIACorioPoint Wilson – Navy InterimAmmunitioning Facility(1) 6,100 6,208 1,100 2,700 1,745MaribyrnongAlbion – Decontamination Works 28,635 21,597 8,000 10,900 10,108WESTERN AUSTRALIABrandHMAS Stirling – DevelopmentStage 2 Phase b/c 122,837 122,837 3,000 3,000 22HMAS Stirling – DevelopmentStage 2d 39,471 31,025 1,000 1,000 262HMAS Stirling – DevelopmentStage 3 19,000 17,090 8,373 8,373 7,581


41

PROGRAM OF WORKS(state, federal electorate andlocality)

ApprovedProject

Cost

$’000


to30 June 2000

$’000

1999-2000Budget

Estimate

$’000


$’000

1999-2000Actual

$’000NORTHERN TERRITORYNorthern TerritoryDarwin – Joint Army DeploymentFacility Development Stage 2 268,300 213,263 45,400 29,000 25,589RAAF Darwin – Development ofOperational Facilities 59,458 51,607 29,000 30,900 22,019RAAF Tindal – DevelopmentStage 4 31,377 29,848 500 2,800 843Delamere – Air Weapons RangeDevelopment 12,300 0 500 500 0Timber Creek – Bradshaw StationInfrastructure 53,666 2,739 26,000 1,300 944ACTFraserRussell – Redevelopment ofRussell Offices 226,705 226,705 9,400 800 992CanberraWeston – Collocated Staff Colleges 28,000 5,553 5,000 7,000 5,416

Note1. The Portfolio Additional Estimates Statements 1999-2000 erroneously reported the approved project cost

for the Navy Ammunitioning Facility at Eden, NSW as being $73.1m, which in fact included theapproved cost for the interim facility at Point Wilson (Victoria). In addition, the scope of work for theworks at Eden has been reduced, together with the approved cost for the project.

Lavarack Barracks Redevelopment Stage 2: Continuing

Substantially Achieved as ForecastThis project will provide various facilities and infrastructure, including new singlesoldier living accommodation, to ensure the long-term viability of Lavarack Barracks asthe major base of the ADF Rapid Deployment Force. The project commenced inNovember 1999 as forecast, but minor elements were delayed due to a wet season thatwas more intensive than expected. Stage 3, which is due to commence in 2000-01, willcomplete the redevelopment of the barracks.

RAAF Townsville Redevelopment Stage 1: Continuing

Partially Achieved as ForecastThis project provides new facilities including loading aprons, a combined vehiclemaintenance facility, and aircraft support infrastructure to support the operational roleof RAAF Townsville. An important element of the land acquisition process for theproject, the negotiation of an indigenous land use agreement, is nearing completion.The managing contractor was appointed in February 2000, design work is under way,and construction is expected to commence in October 2000.

Section One

42

RAAF Townsville – Facilities for Black Hawk Helicopters: Completed

Achieved as ForecastThis project provides facilities including hangars, aprons, wash down facilities, fireprotection systems, maintenance workshops and equipment storage areas for thehelicopters operated by the Army’s 5th Aviation Regiment. The project was completedas forecast in November 1999.

RAAF Amberley Redevelopment: Continuing

Partially Achieved as ForecastThis project is to overcome immediate deficiencies in the existing facilities at RAAFAmberley and to provide improved aircraft maintenance, operation, support andtraining facilities. Construction started in mid-2000, and is expected to be completedon schedule by mid-2002.

51 Far North Queensland Regiment: Completed

Substantially Achieved as ForecastThis project provides new and upgraded facilities for 51 Far North QueenslandRegiment at a number of sites. Construction of the main sites was completed asplanned, but a number of minor regional sites were delayed several months by wetweather and access constraints. Work on the last site was completed in June 2000.Three regional sites were deleted from the scope of works when land tenurearrangements could not be agreed.

Navy Ammunitioning Facility: Continuing

Partially Achieved as ForecastThis project will provide a naval ammunitioning facility at Two Fold Bay near EdenNSW to replace the former facility at Newington on the Sydney Olympic site. PointWilson in Victoria is being used as an interim facility. Parliament approved theproposal in June 2000. The project received environmental clearances from theMinister for Environment and Heritage in early June 2000, but native title issues requireresolution. Construction is planned for commencement in September 2001, andcompletion in December 2002.

HMAS Albatross Redevelopment Stages 1 and 2: Continuing

Achieved as ForecastThis project will update various facilities including aircraft support, storage andmaintenance facilities, the air traffic control tower, explosive ordnance storage andloading facilities, and training facilities. Stage 1 is within budget and is expected to becompleted in April 2001. Parliamentary approval to proceed with Stage 2 works wasreceived in May 2000.


43

RAAF Williamtown, NSW Eastern Region Operations Centre: Continuing

Achieved as ForecastThis project provides new facilities to accommodate air defence operations andtraining. The major part of the project (the Eastern Region Operations Centrebuilding) was completed on schedule in August 2000. It is anticipated that minorancillary works associated with the project will be completed in June 2001.

Point Wilson Interim Navy Ammunitioning Facility: Complete

Achieved as ForecastPoint Wilson is being used for ammunitioning until completion of the facilities at Eden,New South Wales. The works at Point Wilson included the upgrading of existingexplosive ordnance storehouses and security systems, construction of transit andmaintenance activity facilities, and increasing the cathodic protection of the wharves.These works were completed at the end of June 2000.

Albion Explosives Factory Decontamination: Continuing

Achieved as ForecastThis project will decontaminate and remediate the former Albion Explosives Factorysite. Work commenced in March 1999 and is progressing on schedule and withinbudget for completion by January 2001. Progressive transfer of the site to the UrbanLand Council for development and public sale commenced in May 1999 and isscheduled for completion by August 2009.

HMAS Stirling Stage 3: Completed

Achieved as ForecastThis project was the final stage to complete the development of HMAS Stirling as partof the two-ocean basing policy. The project was completed under budget and ahead oftime in January 2000.

Joint Army Deployment Facility Development Stages 1 and 2: Continuing

Achieved as ForecastThis project provides facilities in support of the Army’s programmed relocation of the1st Brigade to Darwin. The first stage of this project, approved by the Government in1992, was completed in 1999, within budget. The second stage, approved in 1995, hasbeen increased in scope and will be completed in February 2001, within the amendedprogram and within the original budget.

RAAF Darwin, Development of Operational Facilities: Continuing

Partially Achieved as ForecastThis project provides enhanced operational works at RAAF Darwin, including aircraftloading aprons, fuel farm, operations/technical facility and a base command post, andthese works are substantially complete. Some parts of the project have been delayed bycoordination difficulties with the air traffic control equipment project and budgetaryconcerns. Subject to budgetary constraints, construction of the central emergencypower station and engineering services is intended for late 2000-01.

Section One

44

RAAF Tindal – Development Stage 4: Continuing

Partially Achieved as ForecastTindal Stage 4 is substantially complete. Tindal Stage 5 has been deferred to 2003-04for a decision on the future of the project.

Delamere Air Weapons Range, Electronic Range Development: ToCommence

Not Achieved as ForecastFacilities provided by this project will support the Air Combat Training System (ProjectAir 5395), and will include emitter sites, domestic accommodation, maintenancefacilities and associated civil works in the Delamere area. Consideration by the JointStatutory Committee on Public Works is anticipated in mid-November 2000, withconstruction starting in April 2001 and concluding in August 2002. Facilities works willcommence after Parliamentary endorsement of the project has taken place, and afterDefence has signed the required contracts for this project (intended for November2000). Construction is also dependent upon the acquisition of land, including thedevelopment of an indigenous land use agreement.

Bradshaw Station Infrastructure: Continuing

Not Achieved as ForecastThis project provides the necessary infrastructure to allow the use of the Bradshawproperty as a field training area for the 1st Brigade. Significant delays have beenexperienced and the project is now some three years behind its original program. Thereis a native title claim and an Aboriginal land rights claim over the property and someadjoining areas required for access. An indigenous land use agreement is currentlybeing negotiated between Defence, the claimants and the Northern Land Council.

Russell Offices Redevelopment: Continuing

Achieved as ForecastThis project replaces sub-standard facilities and will enhance the capability for strategicand operational command in an integrated and joint environment. Construction of thetwo new buildings and the refurbishment of four older buildings was completed byDecember 1999 (buildings R3 and R4 were occupied in April 1999, R8 in May 1999,and R7 in December 1999), and 4,600 staff have been relocated into their new workingenvironment. Remaining roads, carparks and landscaping will now be completed byDecember 2000, within the cost cap, and eight months early.

Collocated Staff Colleges: Continuing

Achieved as ForecastThis project will collocate the existing single-Service staff colleges with the AustralianDefence College at Weston Creek, ACT. Parliament approved the project in December1999 and construction is proceeding on a tight schedule with a completion target of lateDecember 2000 to enable the new course to commence in early 2001.


45

New Major Projects in 1999-2000

Enoggera Barracks – Rationalisation of Catering Service: Continuing

Not Achieved as ForecastThis project will redress inefficiencies at Gallipoli Barracks, Enoggera, throughrationalisation of the existing messing facilities and upgrade of selected living-inaccommodation. This project was targeted for submission to the Joint StatutoryCommittee on Public Works in mid-2000. However, because of changing activities andrequirements in the 7th Brigade, largely due to the East Timor commitment,presentation to the committee has been re-scheduled to early 2001.

DSTO Rationalisation, Melbourne: Continuing

Achieved as ForecastThis project relocates functions from Maribyrnong to Fishermans Bend, includingintegration of common functions, and construction of enhanced facilities, permittingdisposal of Maribyrnong. After approval by Parliament in late June 2000, work isexpected to start in early 2001, with Stage 1 planned for completion in September 2002,and Stage 2 in December 2003.

RAAF Edinburgh Redevelopment Stage 1: Continuing

Partially Achieved as ForecastThis project will provide new facilities in the technical area and includes newadministrative, warehousing and aircraft shelter facilities. Due to budgetary pressures,Stage 1 is now planned to commence in 2000-01. With the completion of requireddepartmental processes, the Joint Statutory Committee on Public Works held a hearingon Stage 1 in August 2000, and parliamentary consideration is anticipated by the end of2000.

RAAF College Development: Continuing

Not Achieved as ForecastThis project will collocate initial officer training, currently at Point Cook, and other-rank recruit training, currently at Edinburgh, to achieve economies in training andadministration and replace sub-standard facilities. The project has been delayed untilfurther studies are undertaken to determine the preferred location for the College.

Section One

46

DEFENCE REFORM PROGRAM

Overview

The Defence Reform Program was instituted in April 1997. The principal aim was toensure that Defence focused clearly on the achievement of its primary mission. Thebenefits of reform have been reflected through improved management arrangements,some rationalisation of higher Defence committee structures, and an increasedemphasis on long-term planning. Throughout 1999-2000, efficiencies have continuedto flow from improvements in the control of supporting functions. Resources madeavailable through these efficiencies continue to be redirected to improving combatcapabilities.

1999-2000 saw a joint review of Defence financial management arrangementsundertaken in conjunction with the Department of Finance and Administration. Thisreview proposed a new planning framework, the introduction of performance pricearrangements and further refinement of the application of accrual accounting. Thesechanges, together with ongoing structural change, severely challenge our ability topursue the baseline first established in 1996 during the Defence Efficiency Review.Clearly, the Defence Reform Program needed updating and it was decided to move to aprogram of continuous organisational improvement. As part of implementing thischange, the Defence Reform Program Strategic Management and Reporting Team wastransformed into the Organisational Effectiveness Branch with ongoing responsibilitiesfor management and reporting of improvement activities.

With the move to a new planning environment to operate from 2001-02, the DefenceReform Program will be closed both administratively and from an accounting sense.An internal review in 2000-01 will reconcile the original list of initiatives againstachievements. Completed initiatives will not be carried forward within a cumulativereporting regime, while current and yet to be commenced initiatives will be includedwithin the new Defence Plan as elements of an ongoing improvement program.

Resource Efficiencies

The implementation of the Defence Reform Program remains on target andsubstantially ahead of its initial savings achievement schedule. By 30 June 2000, theongoing gains were $476m per annum, compared with a revised estimate of $523m perannum (a shortfall of $47m or 9%). The bulk of this shortfall was due to an error inthe additional estimates, which incorrectly identified $22m as unallocated administrativesavings when it had been counted elsewhere. The remainder of the variation isexplained in the following paragraphs. The final achievement was $2m or 0.4% abovethe budget estimate.

Science and Technology

During the year, the decision was made not to proceed with the contracting out ofsome test and evaluation functions. This resulted in a shortfall in science andtechnology savings of $1m.


47

Logistics

The market-testing program is now addressing major activities in Support Command.Some large projects, including the explosive ordnance storage maintenance anddistribution system, have suffered some delays. This has consequently delayed savingsin operating costs, predominantly in salaries resulting in a $13.4m shortfall against therevised estimate.

Administrative Support

Administrative support realised $10m in excess of the additional estimates whichalready had been adjusted upwards at additional estimates. The savings have beenharvested based on the anticipated results in commercialisation activities related toSydney fire services, and clerical and administrative activities in south-west Sydney andthe south coast of NSW, and the Riverina Murray Valley region.

Unallocated Savings

No unallocated savings have been identified during the period. This method oftargeting savings will be changed after the full reconciliation of the Defence ReformProgram. Savings will be identified against specific initiatives.

Capital Facilities

A $2m shortfall in savings required from the capital facilities program is due to delays inthe transfer of properties to state governments under the Federation Fund.

$125m Administrative savings

The $125m pa administrative savings program is reported in note 6 to Table 1.13. Theunallocated $22m was added in error at the 1999-2000 additional estimates when in factit had been allocated to Land Force capabilities. Shortfalls in expenditure were due tothe non-occurrence of planned F-111 documentation ($1.2m) in strike; the fitting ofAnzacs 01 and 03 with ex-DDG equipment, which enabled the deferral of $1.8m inexpenditure on C3I equipment; fewer members than anticipated taking up the pilotretention bonus ($1.8m); and fewer Reservists than expected taking up the HomeOwners Loan Scheme consequent on its extension to them ($1.8m) in PersonnelInitiatives. Additional expenditure of $49m was paid into the United States ForeignMilitary Sales trust account from Strike ($6m) and Maritime and Air Defence ($43m) toassist in meeting the March 2000 quarterly payment.

Section One

48

Table 1.13: Defence Reform Program Cumulative Resources Available forReinvestment(1)

Defence Reform ProgramInitiative

1999-2000Budget

Estimate


1999-2000Actual

Variation(99-00 Actual lessRevised Estimate)

$m $m $m $m %Defence Command andManagement 17 16 16 0 0Intelligence 3 3 3 0 0Capability Development 0 0 0 0 0Acquisition and Industry 31 32 31 -1 -3.1Science and Technology 3 3 2 -1 -33.3Facilities and Long Term ForceDisposition 10 10 10 0 0Logistics 107 102 88 -14 -13.7Personnel Planning 70 10 10 0 0Education and Training 39 44 44 0 0Administrative Support 259 371 381 10 2.7Information Management 18 15 15 0 0Defence Cooperation 0 0 0 0 0Total 557 606 601 -5 -0.8Other:Unallocated(2) 17 17 0 -17 -100Superannuation 82 93 90 -3 -3.2Fringe Benefits Tax 18 21 20 -1 -4.8Total Gross ResourcesAvailable(3) 674 737 711 -26 -3.5Provision for contractor support– Contracts Funded(4) -220 -256 -254 2 -3.1Total Net Resources Available 455 482 457 -24 -5Add One-Off Savings(5)

Capital Facilities 15 15 13 -2 -13.3Equipment and Stores 0 0 0 0 0In-year Handbacks 0 0 2 2Defence Cooperation (one-offelements) 4 4 4 0 0Total One-Off Savings 19 19 19 0 0Unallocated $125mAdministrative Savings(6) 0 22 0 -22 -100Total Resources Available forReinvestment 474 523 476 -47 -9


49

Notes1. Figures may not add due to rounding.2. Unallocated funds will no longer be reported in this format and will be rolled into the continuous

program of improvements in future.3. The resource reallocations listed in the table are the gross resource reallocations to be achieved,

including the salary and operating costs of support areas to be market tested.4. This line represents the cost of contracts for service delivered by external providers as a result of

Defence Reform Program initiatives.5. One-off gains relate to the facilities sales program, Defence Cooperation gains, and other one-off

reform program-related gains.6. In the 1996-97 budget, Defence made a reduction in administrative expenditure totalling $125m per

annum (subsequently increased to $136m per annum), which has been reallocated to a range ofcapability-related expenditure initiatives. Reinvestment of the unallocated savings from 1998-99onwards has been combined with the Defence Reform Program reinvestment for reporting purposes.Reinvestment details for the $125m administrative savings are as follows:

1999-2000Budget

Estimate


1999-2000Actual

Variation (99-00Actual less Revised

Estimate)$m $m $m $m %

Programmed Savings 136 136 136 0 0-Land Force Capabilities 118 60 62 2 3.3-Strike 51 29 33 4 13.8-Maritime and Air Defence 44 3 48 44 1,466.6-C3I 7 4 2 -2 -50-Personnel Initiatives 17 17 13 -4 -23.5-Other Government Initiatives 1 1 1 0 0

Total Reinvestment 238 114 158 44 38.5Unallocated Savings -102 22 -22 -0 0

The budget allocation of $238m was reduced for additional estimates to $114m with a subsequentactual of $158m. Major expenditure activities comprised personnel retention initiatives including thepilot retention bonus; and a range of combat-capability enhancements, including the acquisition ofnight fighting equipment; additional Harpoon missiles; and air-to-air and air-to-surface weapons.

Section One

50

Table 1.14: Cumulative Defence Reform Program Military PersonnelReductions(1)(2)


1999-2000Budget

Estimate


1999-2000Actual


%Defence Command andManagement 195 180 148 -32 -17.8Intelligence 22 22 26 4 18.2Capability Development -1 -1 -1 0 0Acquisition and Industry 238 238 198 -40 -16.8Science and Technology 44 44 30 -14 -31.8Facilities and Long Term ForceDisposition 56 56 56 0 0Logistics 1,397 1,397 901 -496 -35.5Personnel Planning 604 604 604 0 0Education and Training 621 725 731 6 0.8Administrative Support 2,908 3,421 3,421 0 0Information Management 126 126 126 0 0Total Service Reductions 6,210 6,812 6,240 -572 -8.4

Notes1. These savings represent cumulative ongoing totals of actual personnel numbers to be reduced or

redirected to priority combat positions in any given year as a result of rationalisation, streamlining ormarket testing activities carried out as part of the Defence Reform Program. They do not representaverage strength figures because of uncertainties due to the market testing program.

2. These figures do not include the reinvestment of Defence Reform Program resources in ADF or APSpersonnel (see Table 1.16).


51

Table 1.15: Cumulative Defence Reform Program Civilian PersonnelReductions(1)(2)


1999-2000Budget

Estimate


1999-2000Actual


%Defence Command andManagement 181 183 185 2 1.1Intelligence 32 32 32 0 0Capability Development 0 0 0 0 0Acquisition and Industry 295 307 307 0 0Science and Technology 10 10 1 -9 -90Facilities and Long Term ForceDisposition 91 91 91 0 0Logistics 903 903 770 -133 -14.7Personnel Planning 239 239 239 0 0Education and Training 118 121 94 -27 -22.3Administrative Support 1,107 1,965 1,965 0 0Information Management 181 76 76 0 0Total Civilian Reductions 3,157 3,927 3,760 -167 -4.3

Notes1. The figures in the table represent the cumulative ongoing reductions of actual personnel numbers

rather than the average strength.2. These figures do not include the reinvestment of Defence Reform Program resources in ADF or APS

personnel (see Table 1.16).

Defence Reform Program Reinvestment

A total of $554m was reinvested in Defence capability in 1999-2000. The focus ofreinvestment changed from new capital investment and the recovery of logisticsshortfalls to support for current capability (reflecting the deteriorating regional strategiccircumstances) and the maintenance of the ADF full-time strength at no lower than50,000. As at 30 June 2000, cumulative Defence Reform Program savings of $1,138mhave been reinvested in current and future capability ($848m) and in transition costs($290m).

New Capital Investment

1999-2000 was the first year Defence Reform Program reinvestment has occurred innew capital investment. An additional $85m was transferred to the new capitalinvestment program as part of the budget. Some of the immediate benefit of this waslost when specific project schedules were adjusted as part of the additional estimatesprocess. Nevertheless, the overall position of new capital investment is $85m better offthan it would have been without Defence Reform Program savings.

Section One

52

Amphibious Capability

In 1999-2000, the Defence Reform Program contributed $34m to improving andmaintaining ADF amphibious capability, bringing the cumulative total to $67m. Themajor achievements have been the retention and continued operation of HMAS Tobruk($6m), a contribution to the refurbishment of HMA ships Kanimbla and Manoora ($11m)and the lease of HMAS Jervis Bay ($16m).

Capability-Related Logistics

In 1999-2000, $181m was allocated to capability-related logistics, bringing thecumulative total to $391m. $84m was provided to offset the costs associated with theincreased readiness of the 1st Brigade and related units in 1999. Similar reallocationswill apply in 2000-01. The balance of expenditure in 1999-2000 was directed to NavalAviation ($23m), Army Aviation ($19m), F/A-18 support ($29m), Maritime Patrol($8m) and Airlift ($18m).

New Capabilities – Net Personnel and Operating Costs

1999-2000 expenditure totalled $66.3m, bringing the cumulative total to $146m. Thisallocation is to augment the net personnel and operating costs associated with bringinginto service new capabilities. Expenditure has been directed to the Anzac frigates($8m), Collins submarines ($6m), Super SeaSprite helicopters ($9m support, $10msalaries and training), hydrographic ships ($4m), Army aviation ($4m), the lead-infighter ($9m) and the B-707 simulator ($3m).

Defence Science

To date, $30m, including $15m in 1999-2000, has been invested in support of a rangeof capability outputs. This investment has facilitated additional science and technologyresearch projects in support of land operations, command and control, informationwarfare, weapons systems, the new submarine fleet, defence against biological weapons,surveillance, and the survivability and maintainability of ADF weapons platforms.

Provision for 50,000 ADF

The Defence Reform Program proposed reductions in the ADF permanent force to42,700 personnel (from a baseline of 56,600) through reductions and the results of themarket testing of Service positions. The subsequent decision to maintain the ADF atabout 50,000 represents by far the largest proposed reinvestment of Defence ReformProgram savings. To date $118m has been provided ($64m in 1999-2000) and themature annual reinvestment would be $649m were the policy to be pursued. A recentdecision that the ADF will not pursue an arbitrary minimum number necessitatesongoing review of this reinvestment. The $32m variation from the revised estimate toactual relates largely to Navy’s lower than planned reinvestment in personnel due to thedeterioration in recruiting and retention.

Pilot Training

$9m has been invested to enhance Defence capabilities for Air Strike/Reconnaissanceand Tactical Fighter Operations by addressing the fast jet pilot shortfall. Theinvestment seeks to increase the number of fast jet-suitable graduates from the pilots’course from around 10 per year to between 20 and 25 per year.


53

Transition Costs

Transition costs of $102m were expended in 1999-2000 bringing the cumulative total to$291m. This expenditure was lower than expected by some $30m due to slippage ofsome major market testing activities from: the RAAF ($8m) including delays at theRAAF School of Technical Trades, Aircraft Research and Development Unit Package 2and RAAF civilian redundancies in Garrison Support at 305/306 Wing; SupportCommand ($3m) due to slippage of Naval Aviation Logistic Management Squadronvoluntary redundancies; and Defence Personnel Executive ($19m) due to slippage inthe establishment of the Defence Service Centre in Cooma.

Table 1.16: Reinvestment of Available Defence Reform ProgramResources(1)


1999-2000Budget

Estimate


1999-2000Actual


$m $m $m $m %Net Ongoing Resources Available 455 482 457 -24 -5Defence Reform Program One-Off Savings 19 19 19 0 0Unallocated $125mAdministrative Savings 0 22 0 -22 -100Total Resources Available forReinvestment 474 523 476 -47 -9Reinvestment Initiative Details-New Capital Investment 85 85 85 0 0-Amphibious Capabilities 26 26 34 8 30.7-Capability-Related LogisticsCosts 120 120 181 61 50.8-New Capabilities – NetPersonnel and Operating Costs 68 68 66 -2 -2.9-Defence Science – CapabilityProjects 15 15 15 0 0-Provision for 50,000 ADF 45 95 64 -32 -33.7-Pilot Training 5 5 5 0 0-DRP Transition Costs 82 133 102 -30 -23.0Total Reinvestment(2) 446 547 554 7 1.2

Notes1. Totals may not add due to rounding.2. Gross expenditure levels for these initiatives exceeded savings as additional funding was directed to

capability-related logistics to accord with changing strategic priorities. The additional funding occurredas part of additional estimates and anticipates ongoing savings.

Section One

54

PERSONNELA summary of personnel estimates and actual numbers for 1999-2000 is provided in thefollowing table. The permanent ADF average strength for 1999-2000 was 51,027, anincrease of 914 from the estimated actual for 1999-2000 of 50,113. This increase islargely a result of Reservists becoming full-time to assist in East Timor.

The 1999-2000 Reserves actual numbers were 22,007, a decrease of 8,688 from the1999-2000 estimated actual of 30,695. This decrease is due to ongoing problems withrecruitment and separation, 966 Reservists who transferred to the permanent force aswell as other Reservists becoming full-time, on a temporary basis, to assist in the ADF’sEast Timor operations.

The Government will provide additional funding to Defence in 2000-01 to enhance theoperational effectiveness of the Reserves. Initiatives being considered by theGovernment include promoting retention of Reserve personnel by improving trainingof individuals and by providing support for their employers.

Total civilian average strength for 1999-2000 was 16,417, an increase of 126 from the1999-2000 estimated actual of 16,291. This broadly reflects the impact of civilianisationacross the Defence organisation.

More detailed information on personnel can be found in the personnel statisticssegment in Section Four of this document.

Table 1.17: Defence Staffing(1)(2)

Personnel 1999-2000Budget

Estimate


1999-2000Actual


Personnel Numbers – Average Strength %Permanent Forces

Navy 13,550 13,190 12,887 -303 -2.3Army 23,200 22,885 24,089 1,204 5.3Air Force 13,250 14,038 14,051 13 0.1

Total Permanent Forces 50,000 50,113 51,027 914 1.8

ReservesNavy 1,803 1,803 1,746 -57 -3.2Army 26,850 26,850 18,528 -8,322 -31.0Air Force 2,042 2,042 1,733 -309 -15.1

Total Reserves 30,695 30,695 22,007 -8,688 -28.3

Civilian 16,471 16,237 16,362 125 0.8Trust Account Staff 89 54 55 1 1.9Total Civilian 16,560 16,291 16,417 126 0.8

Total Staffing 97,255 97,099 89,451 -7,648 -7.9Notes1. Staffing numbers are average funded strengths.2. The figures for Reserves represent the average number of personnel funded, rather than full-time staff-

year equivalents.

Personnel

55

Table 1.18: Breakdown of Personnel Numbers by Service and Rank byAverage Funded Strength(1)

1999-2000Budget Estimate

1999-2000Revised Estimate

1999-2000Actual

NAVY1 Star Officers and above 33 33 35Senior Officers(2) 379 356 357Officers 2,569 2,432 2,421Other Ranks 10,569 10,369 10,074Reserves 1,803 1,803 1,746Total Navy 15,353 14,993 14,633

ARMY1 Star Officers and above 44 45 45Senior Officers(2) 508 541 551Officers 4,244 4,300 4,462Other Ranks 18,404 17,999 19,031Reserves 26,850 26,850 18,528Total Army 50,050 49,735 42,617

AIR FORCE1 Star Officers and above 33 35 36Senior Officers(2) 476 452 471Officers 3,634 3,614 3,468Other Ranks 9,107 9,937 10,076Reserves 2,042 2,042 1,733Total Air Force 15,292 16,080 15,784

CIVILIANSSenior Executives 99 99 104Senior Officers(2) 3,126 3,054 3,157Others 13,246 13,085 13,101Total 16,471 16,237 16,362

Trust Account Staff 89 54 55Total Civilians 16,560 16,291 16,417TOTAL DEFENCE 97,255 97,099 89,451

Notes1. The 1999-2000 average funded strength of the Permanent Force by Service was: Navy 12,887; Army

24,089; Air Force 14,051.2. Senior Officers are Executive Levels 1 and 2.

Section One

56

ACCOUNTABILITY ARRANGEMENTS

CORPORATE GOVERNANCE

ORGANISATIONAL CHANGES

Several organisational changes occurred during 1999-2000 as part of continuingimprovements to Defence management. The number of Groups was reduced from 14to 12, with effect from 1 July 1999. Groups Seven and Eight (the Joint Education andTraining and Defence Personnel Executive Groups) were amalgamated to reflect theirassociated functions and future rationalisation. Group 14 (Finance and InspectorGeneral) was incorporated into the Defence Headquarters. Defence Public Affairsfunctions were transferred from the Defence Corporate Support Group to DefenceHeadquarters.

From 28 October 1999, the functions of the Defence Intelligence Organisation, theDefence Signals Directorate and the Australian Imagery Organisation were overseenand coordinated by the new Defence Intelligence Board.

On 23 June 2000, the Secretary and the Chief of the Defence Force announced a newbusiness model for Defence to take effect from 1 July 2000. The business model, andconsequent organisational restructuring, focus on the two key dimensions of Defence’srelationship with the Government: the Government as the purchaser of our outputs –Defence’s primary management focus will be on the delivery of outputs toGovernment, largely capabilities; and the Government as the owner of our business –stronger corporate governance arrangements will be introduced, including cleareraccountabilities, to reinforce the focus on Defence’s ability to sustain its delivery ofoutputs and achieve budgeted financial results.

The revised structures are depicted on pages 58 and 59. One diagram shows theorganisational structure as at 30 June 2000, while the other shows the structure from1 July 2000 onwards.

SENIOR EXECUTIVE CHANGES

Dr Allan Hawke succeeded Mr Paul Barratt as Secretary in October 1999. AdmiralChris Barrie’s appointment as Chief of the Defence Force was extended until 2002. Anew appointment – Under Secretary Defence Acquisition – saw Mr Mick Roche joinDefence from the Australian Customs Service in November 1999. Vice Admiral DavidShackleton assumed the role of Chief of Navy in July 1999. Air Vice Marshal ErrolMcCormack’s appointment as Chief of Air Force was extended until August 2001 andDefence bade farewell to Lieutenant General Frank Hickling after his long anddistinguished career. Lieutenant General Peter Cosgrove replaced him as Chief ofArmy in July 2000.

Air Marshal Doug Riding, Vice Chief of the Defence Force, retired in June 2000 andwas replaced by Lieutenant General Des Mueller, formerly Support CommanderAustralia. Mr Rob Tonkin, formerly Deputy Secretary Resources and Management, leftDefence to take up an appointment with the ACT Government and Mr Garry Jones,former Deputy Secretary Acquisition, accepted an offer of voluntary redundancy. MrMartin Brady was appointed Chairman of the Defence Intelligence Board.

Corporate Governance

57

SENIOR EXECUTIVE OFFICERS – REMUNERATION FOR PERIOD IN OFFICE

Senior executive officers’ remuneration in the table below includes salaries, employersuperannuation contributions, long service leave accrued during the period of officeand other benefits. Not all of the benefits included in the calculations can be cashedout and some are net of an employee contribution. Performance bonuses were notpaid to executives in 1999-2000.

Secretary

Dr Allan Hawke from 21 October 1999 $210,000-$219,999

Chief of the Defence Force

Admiral Chris Barrie AO $330,000-$339,999

Vice Chief of the Defence Force

Air Marshal Doug Riding AM DFC to 5 June 2000 $240,000-$249,999

Lieutenant General Des Mueller AO from 5 June 2000 $20,000-$29,999

Chief of Navy

Vice Admiral David Shackleton AO $260,000-$269,999

Chief of Army

Lieutenant General Frank Hickling AO $270,000-$279,999

Chief of Air Force

Air Marshal Errol McCormack AO $280,000-$289,999

Under Secretary

Mr Mick Roche from 10 November 1999 $130,000-$139,999

SENIOR PUBLIC OFFICIALS’ STUDY OF PARLIAMENTARY PROCESSES

Following a resolution of the Senate requiring that Senior Executive Service officersundertake study of the principles governing the operation of, and accountability to, theParliament, Defence, along with all Commonwealth departments, was required by theSenate to report on compliance with the resolution. Defence’s report was tabled inNovember 1999 and is included in the Senate Committee of Privileges 89th Reporttabled in April 2000.

Defence committed, inter alia, to ensuring that Senior Executive Service and military-equivalent officers attended a seminar on Public Servants’ Accountability, Rights andResponsibilities – The Impact of the Parliamentary Privileges Act conducted by the PublicService and Merit Protection Commission. To date, 139 Senior Executive Service andmilitary-equivalent officers have attended the seminars.

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Section One

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SENIOR COMMITTEES 1999-2000

Defence Executive

Membership comprised the Secretary (Chair), the Chief of the Defence Force, ViceChief of the Defence Force, Chief of Navy, Chief of Army, Chief of Air Force, DeputySecretary Strategy, Deputy Secretary Acquisition, Chief Defence Scientist and DeputySecretary Resources and Management, as well as two independent external members.

Chiefs of Staff Committee

Membership comprised the Chief of the Defence Force (chair), the Vice Chief of theDefence Force, Chief of Navy, Chief of Army and Chief of Air Force. The Secretary isa permanently invited member and attends all meetings. The Deputy Secretaries andappropriate officers may be invited to attend meetings for matters affecting theirfunctional areas of responsibility.

The Defence Audit and Program Evaluation Committee

Membership comprised the Deputy Secretary Resources and Management (chair), theVice Chief of the Defence Force, Under Secretary Defence Acquisition, CommanderSupport Australia and an appointed independent member. The Auditor General, orrepresentative, were accorded observer status. The committee was advised by the FirstAssistant Secretary Resources and Financial Programs, the Head of Management andReporting Division and the Inspector-General. In May 2000, Mr Paul McGrath AM,an independent member, was appointed to succeed the former Deputy SecretaryResources and Management as chair of the committee.

The Defence Capability Committee

Membership comprised the Vice Chief of the Defence Force (chair), Deputy SecretaryStrategy, Deputy Secretary Acquisition and Deputy Secretary Resources andManagement. Appropriate officers were invited by the Chair to attend meetings formatters affecting their functional areas of responsibility. These included the Chief ofNavy, Chief of Army, Chief of Air Force, Chief Defence Scientist and Head DefenceEstate. The Assistant Secretary, Defence, Foreign and Legal, and the Department ofFinance and Administration had a standing invitation to attend all meetings.


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SENIOR COMMITTEES 2000-01 ONWARDS

On 23 June 2000, the Secretary and the Chief of the Defence Force announced newgovernance arrangements in Defence, with a view to providing greater assurance to theMinister. The first step in implementing comprehensive new governance arrangementsinvolved simplifying and clarifying the committee structure. From 1 July 2000, therehave been five key committees:

Minister’s Defence Improvement Committee

Membership comprises the Minister for Defence (chair), the Secretary, the Chief of theDefence Force, and two independent external members appointed by the Minister –Mr Graeme McGregor and Dr John White.

The Defence Improvement Committee is a major vehicle for overseeing continualimprovements at all levels of Defence in management and accountability. Its purposeis to ensure that the Government receives value for money for the dollars expended onDefence.

Defence Committee

Membership comprises the Secretary (chair), the Chief of the Defence Force, the ViceChief of the Defence Force, Chief of Navy, Chief of Army, Chief of Air Force, UnderSecretary Defence Materiel, Deputy Secretary Strategy, Chief Finance Officer, ChiefDefence Scientist, Chair Defence Intelligence Board and Deputy Secretary CorporateServices.

MINISTER


Minister’s Defence Improvement Committee

CDF SEC

Defence Committee

Defence Capability andInvestment Committee

Defence Audit Committee

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The Committee focuses on the strategic direction of Defence – the key issues involvingimplementation of the Government’s Defence policy and priorities. It has an explicitadvisory role to the Secretary and the Chief of the Defence Force in their role asexecutive decision makers.


Membership comprises the Chief of the Defence Force (chair), the Vice Chief of theDefence Force, Chief of Navy, Chief of Army and Chief of Air Force. The Secretary isa permanently invited member.

The Chiefs of Staff Committee provides military advice to the Chief of the DefenceForce to assist him in discharging his command responsibilities and providing militaryadvice to the Government.

Defence Capability and Investment Committee

Membership comprises the Vice Chief of the Defence Force (chair), the UnderSecretary Defence Materiel, Deputy Secretary Strategy and the Chief Finance Officer.

The Defence Capability and Investment Committee is charged with ensuring thatGovernment is provided with sound options for major capital investments. Eachmember of the Committee is required to sign off, as far as his or her area ofresponsibility is concerned, that the options put to Government are sound andachievable.

Defence Audit Committee

Membership comprises Mr Paul McGrath, AO (chair) and Mr Will Laurie ofPricewaterhouseCoopers (deputy chair), both independent external members of thecommittee, along with Mr Frank Lewincamp, Mr Rod Corey and Major General PeterDunn. The Chief Finance Officer and Inspector General attend as advisers. TheAuditor-General, or representative, attends as an observer.

The Defence Audit Committee, as required by section 46 of the Financial Managementand Accountability Act 1997, is responsible to the Secretary for: approval of internal auditplans; provision of advice on action to be taken on matters raised in internal auditreports and Defence-related Auditor-General and Joint Statutory Committee of PublicAccounts and Audit reports, and assurance that all identified matters of concern arebeing addressed; and reviewing the preparation and audit of the Defence financialstatements and provision of advice on their adequacy.


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INTERNAL AUDIT ARRANGEMENTS AND RISK MANAGEMENT STRATEGIES

Defence Audit and Program Evaluation Committee

The Defence Audit and Program Evaluation Committee met nine times (July,September (twice), December, February, March, May and June (twice)) in 1999-2000,compared to four times in 1998-99. During the year, the composition and functions ofthe committee were revised and agreed to by the Secretary to the Department ofDefence as Chief Executive to better accord with section 46 of the Financial Managementand Accountability Act 1997 and the associated Financial Management and AccountabilityOrders (Finance Minister’s Orders).

In May 2000, Mr Paul McGrath AM, an independent member, was appointed tosucceed the former Deputy Secretary Resources and Management as chair of thecommittee. The balance of the committee's membership was drawn from the thenDefence Executive and comprised the Vice Chief of the Defence Force as deputy chair,Under Secretary Defence Acquisition, Commander Support Australia, and an appointedindependent member (Mr Will Laurie – PricewaterhouseCoopers). The Auditor-General, or representative, had permanent observer status, while the committee wasadvised by the First Assistant Secretary Resources and Financial Programs, the Head ofManagement and Reporting Division and the Inspector-General.

During 1999-2000, the committee addressed the following subjects:

• Management Audit Branch annual report for 1998-99 and audit work program for2000-01;

• 1999-2000 ANAO performance audit work program;

• Defence Financial Statements 1998-99 progress report;

• Consideration of the 1998-99 Defence Financial Statements, including lessonslearned and issues arising and an ANAO audit report on the 1998-99 FinancialStatements audit;

• Progress report on the 1999-2000 portfolio-level evaluation results;

• Progress report on the follow-up of internal and external audit and Joint StatutoryCommittee of Public Accounts and Audit recommendations on Defence’s auditrecommendations management system;

• Management strategy for the 1999-2000 Defence Financial Statements;

• Medium-term audit strategy 2000-03;

• Schedule of portfolio-level evaluations 1999-2001;

• Implementation of Defence Fraud Control Plan No. 3;

• Fraud, theft and loss information;

• Management Audit Branch – October 1999 Report to Group Managers;

• Management Audit Branch – October 1999 to March 2000 Report to GroupManagers;

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• Progress report on the ANAO performance audit of Management Audit Branch(ANAO Report No. 50 Management Audit Branch – Follow-up);

• Report on progress on program evaluation report: Defence Community Organisation;

• Group risk assessments for the February and May 2000 trial ‘hard closes’ ofDefence accounts; and

• Defining matters of concern to meet responsibilities of an audit committee undersection 2.1.2(c) of the Financial Management and Accountability Orders.

On 23 June 2000, the Secretary to the Department of Defence announced that thecommittee would be replaced by the Defence Audit Committee as part of a newDefence corporate governance structure to take effect from 1 July 2000.

Risk Management Strategies

There has been a growing recognition across the Australian Public Service of riskmanagement as a central element of good corporate governance. Defence iscommitted to establishing a comprehensive and systematic approach to riskmanagement, consistent with its core values and leadership behaviours.

Defence has established a strategic risk management unit with responsibility forimplementing a systematic and cohesive management framework covering the fullrange of Defence’s operational and financial risks, and while taking account of extantrisk management arrangements.

Achievements during 1999-2000 include significant progress towards the inclusion ofDefence’s insurable risks in Comcover, the Commonwealth’s self-insurance fund. Aschedule of cover in respect of Defence’s legal liabilities has been in place since 1 July2000 with insurance policies covering property and assets expected to be in place earlyin 2001.

A strategic risk management policy will be in place during 2000-01. This policy willestablish senior management’s commitment to risk management, establish a Defence-wide standard for managing risk and provide a framework for conducting riskmanagement programs at all levels of the organisation.

The Portfolio Evaluations segment contains a summary of the 1999-2000 evaluation onrisk management.


65

ETHICAL STANDARDS

Initiatives during 1999-2000 in relation to revitalising ethical standards in Defenceinclude:

Organisational Renewal ProgramThe organisational renewal program which commenced within Defence in 1999-2000 isunderpinned by the Australian Public Service (APS) values in the Public Service Act 1999and Defence’s own values, and will minimise the stifling impact on innovation of a‘rules-bound’ culture.

Civilian Performance FrameworkFollowing the certification of the Defence Employees’ Certified Agreement 2000-2001, arevised civilian performance scheme, the Civilian Performance Framework, has beenintroduced. The Civilian Performance Framework comprises two elements – the‘performance exchange’ and the ‘plan on a page’. The ‘performance exchange’ is aformal meeting between supervisor and employee to talk about their work, theirexpectations and responsibilities, how their work relates to broader workplans and anylearning and development needs. Performance exchanges are expected to occur at leasttwice each year. The ‘plan on a page’ is a simple, yet important, way of recording theperformance exchange discussion.

A mandatory key expected result of each ‘plan on a page’ is: ‘Adheres to Defencevalues, demonstrates behaviours consistent with those values and with APS values.’The intention is that performance exchanges must involve active consideration ofworkplace behaviour and its alignment with prescribed values.

In addition, as well as a continuing focus on the link between individual performanceand organisational performance, the Civilian Performance Framework incorporates agreater emphasis on the relationship between supervisors and employees, including:

• better communication channels;

• the development of trust and honesty; and

• a commitment to growth and development.

Governance and Accountability StructuresIn the latter half of 2000, in line with such initiatives as the Civilian PerformanceFramework, Defence is overhauling its governance and accountability structuresincluding achieving better alignment with business goals, building better decisionsupport tools and promoting Defence values in ways that increase trust. It is intendedthat these revised governance arrangements will, to the greatest extent practicable, bevalues-based.

Review of APS Employment ActionsA policy document, Review of Employment Actions in the Department of Defence, has beenproduced and made available to all employees to ensure Defence has in place a fairsystem of review of decisions taken in respect of APS employees.

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Procedures for Dealing with MisconductA policy document, Policy and Procedures Concerning Breaches of the Code of Conduct, has beenproduced and made available to all employees.

Ethical Standards in the Use of Electronic CommunicationEthical standards of behaviour for the use of email, internet and intranet are continuallybeing promulgated via:

• log-in prompts;

• departmental instructions;

• supporting examples published in Defence’s ethics newsletter, Ethics Matters; and

• intranet ethics web pages.

Policy on the Receipt of Gifts and Other BenefitsDefence has a range of instructions addressing the non-acceptance of offers of freetravel and accommodation, receiving gifts, official hospitality, frequent flyer schemesand conflict of interest matters. Specific guidance was issued in March 2000concerning offers to Defence employees in relation to activities connected with theOlympic Games. The Secretary and the Chief of the Defence Force issued a revisedpolicy on conflict of interest in September 2000.

The Code of Conduct and Employee Dealings with ContractorsDefence has published instructions, guidelines and supporting material on working withindustry since 1992. A code of conduct for personnel in Defence and industry waspublished and distributed in a policy statement, Defence and Industry – An EthicalRelationship, in 1999.

PORTFOLIO EVALUATIONS

Portfolio Evaluation Strategy

The Defence portfolio evaluation strategy is promulgated as a Defence Instruction(General). In accordance with that strategy, the then Defence Executive authorised aschedule of portfolio evaluations covering 1999-2000 and 2000-01. In 1999-2000, theprincipal evaluation topics included Strategic Workforce Management, Risk Management,Strategic Management of Defence Contracting and Australian Public Service Career Management inDefence, plus further activity on Customer-Provider Arrangements.

In 2000-01, the principal evaluation topics will include Enterprise Resource Planning inDefence and Defence Progress in Pursuing the National Support Agenda. Reports on theseevaluations will be forwarded to the Defence Committee through the Defence AuditCommittee.


67

Schedule of Portfolio-level Evaluations for 1999-2000:

The following evaluation activities were completed in 1999-2000:

Strategic Workforce Management – The final evaluation assessment report was presented tothe Secretary and the Chief of the Defence Force. The principal recommendation inthe report was the need for Defence to set in place a defined strategic workforcemanagement system. The report concluded that a great deal of attention was focusedon the recruitment, training and career management of personnel but with insufficientlinkages to strategic policy direction and capability development proposals. To ensureworkforce considerations are an integral component to the achievement of overallDefence capability, further recommendations were made regarding the role of HeadDefence Personnel Executive, as a full member of the then Defence Executive, as wellas a clarification of the roles of other key players. The report noted that specificattention needed to be concentrated on compiling reliable and accessible personneldata, with a better exposure and understanding of both internal and externaldemographic and labour market realities.

Customer-Provider Arrangements – The final assessment report was forwarded to theSecretary and the Chief of the Defence Force. The evaluation was conducted as an‘assessment’ only, to build on the previous survey undertaken and to take account ofthe evolving situation. The report concluded that Defence had the basis of goodcustomer-provider arrangements on which a more effective and relevant purchaser-provider regime could be developed as a natural progression.

Risk Management – This activity was also undertaken as an evaluation assessment,although the completion of the report was delayed due to staff shortages. The finaldraft was endorsed by the evaluation advisory group in May 2000 and presented to theSecretary and the Chief of the Defence Force. The report’s recommendationshighlighted that, while there were elements of effective risk management at lower levels,there was no evidence of an overarching framework across Defence. The draftrecommendations also suggested that a Defence-wide commitment to risk managementbe embraced by senior executives, that the Australian/New Zealand Standard for riskmanagement be adopted and that a risk management regime be implemented, notingthat there would be cost implications. For further information, see the RiskManagement Strategies segment earlier in this section.

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EXTERNAL SCRUTINY

PARLIAMENTARY COMMITTEES

The Department dealt with a number of parliamentary committees over the course ofthe year. This segment reports on the status of inquiries or other action byparliamentary committees in relation to the Defence organisation in 1999-2000.

Joint Statutory Committees

Public Accounts and AuditReport 370, November 1999 – Review of Auditor-General’s Reports 1997-98, Fourth Quarter

This report considered life-cycle costing in the Department of Defence andmanagement of Commonwealth guarantees, indemnities and letters of comfort. Aspreviously reported, Defence provided a submission and attended a hearing in 1998-99.

Report 372, December 1999 – Corporate Governance and Accountability Arrangements forCommonwealth Government Business Enterprises

Defence provided a submission to the inquiry and attended the subsequent publichearing that was held on 22 October 1999.

Inquiry into Contract Management in the Australian Public Service

Defence attended a public hearing held on 31 March 2000.

Review of Auditor-General’s Reports, First Quarter 1999-2000

Defence attended a public hearing held on 3 December 1999. The hearing examinedAudit Report No. 2, 15 July 1999, Use of Financial Information in Management Reports andAudit Report No. 10, 10 September 1999, Control Structures of Major Commonwealth Agencies.

Review of Auditor-General’s Reports, Second Quarter 1999-2000

Defence attended a public hearing held on 16 May 2000. The hearing examined AuditReport No. 13, October 1999, Management of Major Equipment Acquisition Projects.

Briefing on Collins Class Submarines Project

The Secretary was invited to a private briefing on 16 February 2000 to address mattersarising from the committee’s watching brief on the Collins class submarines project,together with issues arising from the Government response to Report 368, NewSubmarine Project Department of Defence.

External Scrutiny

69

Public WorksRedevelopment of Darwin Naval Base

The project will provide a new 146-metre wharf, three additional dry land berths forpatrol vessels, increased fuel holding capacity and other upgraded facilities. The projectis in construction and will be completed in June 2001. The project was referred to thecommittee on 6 July 1999 and approved by Parliament in September 1999.

HMAS Albatross Redevelopment Stages 1 and 2

This project will update various facilities including aircraft support, storage andmaintenance facilities, the air traffic control tower, explosive ordnance storage andloading facilities, and training facilities. Construction work on Stage 1 is within budgetand is expected to be complete in April 2001. Stage 2 of the project was referred to thecommittee on 1 March 2000 and parliamentary approval to proceed was received on 11May 2000.

Navy Ammunitioning Facility

This project will provide a naval ammunitioning facility at Two Fold Bay, near Eden,NSW to replace the former facility at Newington on the Sydney Olympic site. PointWilson in Victoria is being used as an interim facility.

The project was referred to the committee on 2 March 2000 and parliamentaryapproval was received in June 2000, while environmental clearances from the Ministerfor Environment and Heritage were granted in early June 2000, but native title issuesrequire resolution. Construction will commence in September 2001 with completionexpected by December 2002.

Collocated Staff Colleges

This project will collocate the existing single-Service staff colleges with the AustralianDefence College at Weston Creek ACT. The project was referred to the committee on30 March 1999 and Parliament approved the project in December 1999. Constructionis proceeding on a tight schedule with a completion target of late December 2000 toenable the new course to commence in early 2001.

DSTO Rationalisation, Melbourne

This project relocates functions from Maribyrnong to Fishermans Bend, includingintegration of common functions, and construction of enhanced facilities, permittingdisposal of Maribyrnong. The project was referred to the committee on 28 March 2000and was approved by Parliament on 29 June 2000. Work is expected to start in early2001, with Stage 1 planned for completion in September 2002, and Stage 2 inDecember 2003.

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Joint Standing Committees

Foreign Affairs, Defence and TradeInquiry into Military Justice Procedures

The Government response had not been tabled by 30 June 2000.

Inquiry into the Level of Funding Required for the Australian Defence Force

Discussions between the Departments of the Prime Minister and Cabinet and Defencein November 1999 led to the conclusion that the Government response should bemade in the context of the Defence White Paper due for release later in 2000.

Inquiry into the Suitability of the Australian Army for Peacetime, Peacekeeping and War

Defence witnesses appeared before the inquiry on 17 March and 2 June 2000. Thedepartment provided answers to a series of questions asked by the committee on23 June 2000.

Inquiry into the Circumstances of the Sinking of HMAS Sydney off the Coast of Western Australiain November 1941

The Government response was tabled on 29 June 2000.

Inquiry into the Bougainville Peace Process and Prospects for the Future

The report of the inquiry was tabled on 27 September 1999. Defence contributed tothe Government response which had not been tabled as at 30 June 2000.

Inquiry into Australia’s Relations with the Middle East

The Defence submission to the inquiry was submitted on 18 April 2000.

Inquiry into Australia’s Relations with the United Nations in the Post-Cold War Environment

The Defence submission to the inquiry was submitted on 4 May 2000. Defencewitnesses appeared before the committee on 19 May 2000.

Visit of the Defence Sub-Committee of the Joint Standing Committee on Foreign Affairs, Defence andTrade to Sydney Harbour Foreshores Defence Properties 14 November 1997

The Government response was tabled on 9 March 2000.

National Capital and External TerritoriesInquiry into the Provision of Health Services to Norfolk Island

The Defence submission to the inquiry was submitted on 29 February 2000.

Treaties‘An agreement to extend the period of operation of the Joint Defence Facility at Pine Gap’

The Government response was tabled on 22 June 2000.

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Senate Standing Committees

Finance and Public Administration Legislation CommitteeInquiry into the Format of the Portfolio Budget Statements

Defence provided a submission to the committee on 21 July 1999. The committee’s(second) report was tabled on 29 October 1999.

Foreign Affairs, Defence and Trade Legislation CommitteeDefence witnesses appeared before the committee on four occasions. Each appearancerelated to Defence’s ongoing performance and external reports, including the DefenceAnnual Report 1998-99, the Defence Portfolio Additional Estimates Statements 1999-2000 andthe Defence Portfolio Budget Statements 2000-01. The Secretary and the Chief of theDefence Force appeared by invitation of the committee in late May 2000 to answerquestions related to the Defence Portfolio Budget Statements 2000-01.

Approximately 190 questions were taken on notice at the hearings and responsesprovided. Responses are available on the Senate committee web site together withtranscripts of the hearings.

The committee also produced a report examining the Defence Annual Report 1998-99.The committee was pleased with the improvement shown in the annual report,especially in the area of performance assessment where Defence addresseddepartmental performance against performance measurement as forecast in the DefencePortfolio Budget Statements 1998-99.

Foreign Affairs, Defence and Trade References CommitteeInquiry into East Timor

A briefing on East Timor was provided to members of the committee on 8 September1999.

Inquiry into the Sale of ADI Limited

The committee released its report on 16 February 2000. The Government responsehad not been tabled by 30 June 2000.

House of Representatives Standing Committees

Communications, Transport and the ArtsInquiry into Managing Fatigue in Transport

Defence witnesses appeared before the inquiry on 9 November 2000.

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AUDITOR-GENERAL’S REPORTS

Six Auditor-General’s reports relating specifically to Defence were tabled during theyear. The findings and recommendations of each report have been referred to therelevant functional area within Defence for implementation.

Audit Report No. 13, 11 October 1999 – Performance Audit – Management of Major EquipmentAcquisition Projects

The audit objective was to assess Defence’s higher-level management of majorequipment acquisition projects. The audit aimed to formulate practicalrecommendations that would both enhance Defence’s management of majoracquisition projects and provide a degree of assurance about its continuing apparentcapacity to do so efficiently and effectively.

The ANAO made six recommendations with which Defence agreed, four withqualification.

Audit Report No. 26, 14 January 2000 – Performance Audit – Army Individual Readiness Notice

The objective of the audit was to assess the efficiency and administrative effectivenessof the readiness notice and to identify possible areas for improvement.

The audit focused on all aspects of the notice from its development andimplementation to its current operation and results. The scope of the audit includedfull-time and part-time Army members.

Defence agreed, or agreed-in-principle, with six of the recommendations and disagreedwith two.

Audit Report No. 35, 3 April 2000 – Performance Audit – Retention of Military Personnel

The objective of the audit was to review the management of personnel retention withinthe ADF with a view to evaluating the measures Defence has in place to monitor andcontrol the flow of trained personnel from the Services.

The ANAO made nine recommendations designed to assist Defence in managingmilitary personnel retention and improving retention rates. Defence agreed with therecommendations, but with qualifications in respect of one.

Audit Report No. 37, 4 April 2000 – Performance Audit – Defence Estate Project Delivery

The objective of the audit was to assess the efficiency and administrative effectivenessof the project delivery function, with a view to highlighting effective practice and,where appropriate, making practical recommendations to enhance facilities projectmanagement.

The audit examined two major projects as case studies. These were the facilitiesrequired for the increased Army presence in the north and the Russell officesredevelopment. Three smaller projects were also reviewed.

The ANAO made eight recommendations, aimed at improving the efficiency andadministrative effectiveness of Defence estate project delivery. Defence agreed with allof these recommendations.

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Audit Report No. 40, 26 April 2000 – Performance Audit – Tactical Fighter Operations

The audit objectives were to assess whether the resources used to provide the F/A-18tactical fighter force operational capability are managed cost-effectively and to identifyareas for improvement in the coordination, planning and practices employed in theadministration of tactical fighter operations.

The ANAO made 11 recommendations designed to improve management. Defenceagreed with all recommendations, two with qualification.

Audit Report No. 50, 29 June 2000 – Performance Audit – Management Audit – Follow-up

The objective of this follow-up audit was to assess whether Defence had takenappropriate action on the recommendations in a 1995 audit report and to assesswhether the effectiveness of the internal audit function could be improved.

The ANAO made four recommendations relating to Management Audit Branch’soperations and to the then Defence Audit Program and Evaluation Committee’scharter. Defence agreed with the recommendations, one in principle.

Defence also participated in or contributed to the following cross-agency Auditor-General’s reports:

• Audit Report No. 2, 15 July 1999 – Financial Control and Administration Audit – Use ofFinancial Information in Management Reports

• Audit Report No. 9, 25 August 1999 – Performance Audit – Managing Pest and DiseaseEmergencies

• Audit Report No. 18, 15 November 1999 – Performance Audit – Electronic Service Delivery,including Internet Use, by Commonwealth Government Agencies

• Audit Report No. 21, 10 December 1999 – Financial Statement Audit – Audits of theFinancial Statements of Commonwealth Entities for the Period Ended 30 June 1999

• Audit Report No. 22, 22 December 1999 – Performance Audit – Weather Services in theBureau of Meteorology

• Audit Report No. 25, 5 January 2000 – Performance Audit – Commonwealth ElectricityProcurement

• Audit Report No. 38, 6 April 2000 – Performance Audit – Coastwatch

• Audit Report No. 39, 13 April 2000 – Performance Audit – Coordination of ExportDevelopment and Promotion Activities Across Commonwealth Agencies

• Audit Report No. 41, 28 April 2000 – Performance Audit – Commonwealth EmergencyManagement Arrangements

• Audit Report No. 45, 31 May 2000 – Performance Audit – Commonwealth ForeignExchange Risk Management Practices

• Audit Report No.47, 20 June 2000 – Performance Audit – Survey of Fraud ControlArrangements in APS Agencies

• Audit Report No. 52, 30 June 2000 – Financial Statement Audit – Control Structures asPart of the Audits of Financial Statements of Major Commonwealth Agencies for the PeriodEnded 30 June 2000

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DEFENCE FORCE OMBUDSMAN

During the year, one formal report was referred to the Chief of the Defence Forcepursuant to section 15 of the Ombudsman Act 1976. That report related to a previouslyreported incident at an Air Force base. The Defence Force Ombudsmanrecommended that apologies should be made and compensation paid to the partiesinvolved in the incident and remedial action be taken on various aspects ofadministration. The matters are being settled in accordance with the recommendations.Administrative reforms that were agreed by Defence are being implemented.

While there were no other formal reports issued by the Ombudsman relating to theoperations of the ADF during 1999-2000, the Defence Force Ombudsman has raisedagain the matter of ongoing delays in the processing of redresses of grievance for ADFmembers. In May 2000, Defence accepted the Ombudsman’s proposal to jointlyreview the ADF redress system and the Ombudsman’s interaction with that system.This review builds upon the performance audit of the redresses of grievance system inthe ADF tabled by the Australian National Audit Office in June 1999. The report ofthe review was handed to the Secretary and Chief of the Defence Force on 5September 2000.

A new manual, Australian Defence Force Publication 202 (ADFP 202) – AdministrativeInquiries Manual was released on 15 May 2000. This manual is based on theOmbudsman’s recommendations following his identification of systemic issues relatingto the way the ADF handled allegations of serious offences.

DECISIONS OF COURTS AND TRIBUNALS

During the year, there were no decisions of a court or tribunal in relation to mattershandled by the Defence Legal Office which resulted in a significant change to currentlaw.

Litigation continued in relation to common-law actions for negligence by former crewmembers of the former HMAS Melbourne. Generally, the plaintiffs are claiming post-traumatic-stress disorder arising out of the collision of former HMA Ships Voyager andMelbourne in 1964. All claims have been lodged and are subject to the defence that theclaims are statute-barred under statute of limitations legislation. Matters are beingsettled on a case-by-case basis.

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REPORT ON THE OPERATION OF THE DEFENCESERVICE CHARTER FOR 1999-2000The Defence Service Charter was introduced on 1 August 1998. As part of itsreporting obligations under the charter, Defence provides input to an annual whole-of-government report compiled by the Department of Finance and Administration andreports to the Minister for Defence annually on the extent to which it is meeting theperformance standards relating to the charter. The following report, which is a fullreprint of the departmental report to the Minister for Defence, includes all theinformation provided by Defence in relation to the whole-of-government report.

BACKGROUND

The Defence Service Charter was developed as part of a whole-of-government initiativeto provide better service to the public across Commonwealth departments andagencies.

The Defence Service Charter is a short plain-language document which sets out thequality of service customers can expect to receive from the Department of Defence.The term ‘customer’ refers to the people whom the department is seeking to serve,bearing in mind that Defence is not a traditional ‘service provider’ with a well-definedcustomer base. The charter also outlines avenues for taking up complaints, the meansof commenting on the charter and the way the charter is kept up to date.

The Defence Service Charter assists Defence in focusing on identifying the needs of itscustomers, the level of service it is committed to provide and what it will do if it doesnot meet that goal. By monitoring compliance with the charter and reviewing itsrequirements regularly, Defence will keep the charter current and challenging, so as toensure that the quality of service provided is of the highest standard possible.

PERFORMANCE STANDARDS

The key performance standards in the Defence Service Charter are that:• dealings with customers will be handled in a professional manner with courtesy and

cooperation;• privacy and confidentiality will be observed;• responses to any questions or complaints will be open and accurate;• all telephone inquiries will be answered promptly during normal business hours;• officers will identify themselves to customers on the telephone by name or section;• officers will listen to what customers have to say and strive to use language which is

clear to customers;• if Defence cannot answer a query immediately, officers will take customer contact

details and ensure that a response is provided within two working days;• if a customer writes to Defence, a response will be sent, in writing, within 15

working days and will contain a contact name and telephone number; and• if Defence does not meet these standards, officers will explain what has happened

and try to put things right. Defence will not hesitate to apologise if it is wrong.

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PERFORMANCE MONITORING

Individual business units within the Defence organisation have systems in place to trackcomplaints and collate information to forward to a portfolio coordination area withinDefence. Portfolio policy and procedures have been put in place in relation to the typeand extent of information collected.• Monitoring and reporting, under Australian Standard 4269 on Complaints

Handling, is targeted at external complaints/compliments (ie from members of thepublic) rather than at internal complaints. Complaints are reported only if theyrelate to services provided (ie the process), not to decisions made.

• Reporting is on a ‘by exception’ basis. This means that reporting occurs for writtencomplaints only. Written complaints referred to first assistant secretary (two-star)and equivalents or above are recorded.

• Where a complaint is resolved either by the desk officer or within the regionaloffice without recourse to senior levels, no information is recorded for servicecharter purposes.

• Information on feedback and compliments is collected from a variety of sources(surveys, conferences, orally to regional offices or bases, contact with customers orthe general public) and is collected by individual business units.

Defence currently reviews the Defence Service Charter on an annual basis and willcommission an independent external review of the charter in 2001.

PERFORMANCE IN 1999-2000The extent to which all standards were met during the year has improved in 1999-2000with an 18% drop in complaints compared with 1998-99. Increased awareness of staffservice obligations has resulted in an improved level of service provided to clients. Ofnote was the significant improvement in the amount of time taken by the departmentto prepare material to enable the Ministers to reply to correspondence. This wasidentified as a particular problem in last year’s report and a number of initiatives totighten up processes have been taken to improve performance in this area. Theseinitiatives have included the introduction of an evaluation proforma developed inconsultation with the Ministers’ and the Parliamentary Secretary’s offices. Theproforma essentially is a quality-control mechanism providing feedback from Ministersand their staffs. In addition, higher priority has been given to improving responsetimes and better reporting procedures are now in place. The improvement in responsetimes resulting from these changes can be seen in the following table:

Table 1.19: Percentage of Departmental Response Times AgainstStandard Requirement of 15 Days

1997-98 1998-99 1999-2000Number of Letters Received 8,867 8,428 9,421Average % of Responses that met 15-Day StandardRequirement 54% 50% 75%

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Another portfolio performance indicator which measures customer service is that ofpayment of accounts. Defence has set its account payment benchmark at 95% of allaccounts to be paid and cheques to be with recipients within the nominated tradingterms which is generally 30 days from receipt of a correctly rendered invoice andreceipt of the goods or services. As can be seen in the table below, Defence’sperformance has fallen short of the benchmark, although it should be noted that 99%of claims were paid within 30 days of the due date.

While Defence’s performance in 1999-2000 was below the desired performancestandard, a design feature has been added to the new Defence financial managementsystem which should facilitate the timely payment of accounts in future. This designfeature enables accounts to be paid automatically based on goods receipt advice.

Table 1.20: Percentage of Accounts Paid by Due DateFinancial Year Number of

Accounts PaidAccounts Paid by

Due Date% of Accounts Paid

by Due Date1999-2000 1,126,057 924,579 82.11998-99 1,142,887 979,914 85.71997-98 994,547 923,032 92.81996-97 1,164,865 1,081,368 92.81995-96 1,262,037 1,067,125 84.6

Cooperation and consultation with industry groups and the Australian community wasalso an area in which Defence continues to improve its performance. In particular, theGovernment is conducting a fundamental review of defence policy and, as part of thereview, is running an extensive consultation process taking into account the views ofthe Australian community. The public consultation program is led by Mr AndrewPeacock, former politician and past Australian Ambassador to the United States, andincludes public meetings across Australia. The program will ensure that all interestedpeople and groups have an opportunity to have their views heard and that these arepassed to the Government. Particular care has been taken to ensure that regional andrural Australia will be able to participate. Feedback from this consultation process willbe reported in the 2000-01 report.

CUSTOMER FEEDBACK AND COMPLAINTS

The avenues open to customers to complain or to provide feedback, together withcontact details, are stated in the charter in a step-by-step format. They include phoningor writing to the Defence contacts listed in the charter, the particular area concerned,the supervisor of the area, or through the Minister for Defence or their local Memberof Parliament or Senator. In addition, clients can contact the Commonwealth DefenceForce Ombudsman.

During 1999-2000, Defence recorded 307 complaints. Although the average time takento resolve complaints varied across the Defence organisation, most complaints wereable to be resolved within the stated performance standard of 15 working days.Business units report that the most common complaints were related to general aircraftnoise from a number of locations, concerns regarding the proposed disposal ofDefence sites, concerns regarding the outsourcing of Defence services, and recruitmentissues, particularly the speed of processing applications for enlistment.

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The most common compliments business units received were for the success of theEast Timor deployment, the overall level of Defence assistance to the civil community,especially in relation to assistance with Aboriginal community projects, professionalismin service delivery and customer service within the Careers References Centres.

Business units reported that approximately 90% of complainants considered thatDefence handled their complaint in a satisfactory way. This was measured primarily bythere being no repeat complaints.

A number of improvements to service delivery have been made as a result of customerfeedback. As noted above, there has been a significant improvement across theorganisation in providing timely responses to departmental and ministerialcorrespondence, including more use of interim responses. More specifically, individualbusiness units report the following improvements having been made:• The Air Force has ensured that, where possible, complainants have been contacted

by telephone by RAAF staff to acknowledge their concerns and to try to resolvethe issue as soon as possible.

• The Army has made it a priority to reduce complaints related to specific incidentsby identifying potential problems and providing advance warning to the generalpublic through briefings, media releases and letter box drops about potentialdisruption to communities by Army activities.

• Defence Personnel Executive has introduced a standard operating procedure toensure that, in more complex cases where procedures could take some time,applicants are periodically informed of the status of their applications.

• To facilitate the timely payment of accounts, a design feature was added to the newDefence financial management system which enabled accounts to be paidautomatically based on goods receipt advice.

AWARENESS OF CHARTER

The Defence Service Charter has been distributed throughout the Defenceorganisation, it is available electronically on the internal and external Defence web sitesand is included in induction training of new staff. Copies of the charter have also beendistributed through Canberra and the regions and displayed in prominent places atbases, public information, recruiting and acquisition offices.

A review was undertaken during the year to evaluate the awareness of the ServiceCharter within Defence. This review, inter alia, highlighted patchy awareness across theorganisation, with some areas reporting 100% awareness while others were close tozero. Action arising as a consequence of the review will occur during 2000-01 andresults will be reported in the 2000-01 report.

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PEOPLE

STAFFING OVERVIEW

The strength of the permanent component of the ADF as at 30 June 2000 was 50,755(comprising 12,527 Navy, 24,164 Army and 14,064 Air Force personnel). Enlistmentsfor the twelve months to 30 June 2000 were 4,947 made up of 4,247 men and 700women. This is 1,242 (33%) more than for 1998-99. Navy enlistments decreased by 74(7%), Army enlistments increased by 951 (48%) and Air Force enlistments increased by365 (54%) when compared with the figures for 1998-99. Although this represents aslight improvement, none of the Service recruiting targets was met. Navy met 57% ofits target, while Army and Air Force achieved 83% of their full-time targets.

Separations for the twelve months to 30 June 2000 were 6,467. This is 178 (2.68%) lessthan for 1998-99. Navy separations decreased by 13 (0.75%), Army separationsincreased by 8 (0.25%) and Air Force separations decreased by 173 (9.63%) comparedwith the same period last year.

Since June 1999 the number of Reserves with training obligations has decreased by14% from 24,848 to 21,346. The Navy increased by 5 (0.40%) to 1,222, the Armydecreased by 4,056 (18%) to 17,903 and the Air Force increased by 549 (32%) to 2,221.Of concern was poor Army General Reserve enlistments, which achieved only 33% ofthe target.

Army and Air Force numbers reflect the continued drawdown to the post-DefenceReform Program strengths of 23,000 and 13,000 respectively by 1 July 2001. However,Government also funded those Services for increased workforce strengths of 3,000 and555 respectively for ongoing operations in East Timor.

Failure to meet recruiting targets, combined with separations, is creating increasingworkforce gaps within the Services. Navy is most affected with vacancies of almost2,000 against requirements, resulting in higher workloads to be shared among itspeople. Chief of Navy has released strategies aimed at rectifying the shortfalls in Navy.

At 30 June 2000 there were 16,295 Defence civilian personnel. This is a decrease of896 compared to 30 June 1999.

A corporate-level Defence workforce plan is being developed. It will articulate allcategories of personnel (military and civilian) required to develop and deliver currentand future ADF capabilities at required performance levels. The plan will recognisethat the requirement for military personnel is based not only on immediate staffingrequirements, but also on the need to develop professional military skills and expertise,and will take account of Service trade and rank structures, training throughputs, andretention and recruiting issues.

WORKPLACE RELATIONS

Civilian

The Department successfully negotiated a new certified agreement, the ‘DefenceEmployees Certified Agreement 2000-2001’, with employees and their representatives.

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The agreement built upon the Department’s extensive program of change under theDefence Reform Program. The efficiency gains from productivity initiatives such asthe Personnel Management Key Solutions project and the Government’s performanceimprovement processes, including the Commercial Support Program, will help fund thecompetitive pay increase that employees receive under the agreement. As well as thepay increases, the agreement streamlines leave conditions and introduces improvedstructural and salary progression arrangements. The Department benefits by increasedproductivity in personnel processing activities and in further implementation ofefficiency measures.

Military

The Department also successfully negotiated a new workplace arrangement withmembers of the ADF. The ADF Enterprise Productivity Arrangement: 1999-2002 wasapproved by the Defence Force Remuneration Tribunal on 11 November 2000 for aperiod of three years.

The arrangement delivered an initial pay increase of 3% with subsequent increases overthree years totalling 10%. Improved conditions of service for ADF members includeincreases in reunion travel and discharge removal entitlements.

NON-OPERATIONAL TRAINING AND DEVELOPMENT

In 1999-2000, Defence spent $44.2m on purchasing non-operational training anddevelopment activities. This included expenditure on professional service providers fordelivery of training courses, and on activities such as attendance at conferences andseminars, external training courses, information technology training and attendance forboth Service and civilian members at university for an approved course of study.

Major initiatives included the provision of training for the roll-out of the civilianperformance management scheme (now the Civilian Performance Framework) acrossDefence.

Defence continued to give high priority to the recruitment of graduates. In 1999-2000,Defence employed 56 graduates under the general Australian Public Service scheme, 47graduate acquisition trainees and 36 graduate acquisition trainee engineers. Thecorresponding figures for 1998-99 were 50, 46 and 20 respectively.

As a result of devolving responsibility for training to individual Groups, a consolidatedrecord of attendance of personnel at external training courses is no longer available.The corporate personnel management system, which is currently under development,will include a professional development and training database that will record non-operational training statistics. On current timing, the first statistics to be recorded willbe during 2000-01.

Major internal training providers in Defence have recorded the following informationon attendances and training days for the non-operational training and development thatthey manage. This includes the areas of resource management education and training,acquisition education and training, the joint education and training agency (now thepeople development agency) and regional education, training and development units.

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Table 1.21: Non-Operational Internal Training Statistics – MajorProviders Only

Person-Days Spent on Training Non-Operational Training Course Attendances44,617 26,382

SOCIAL JUSTICE AND EQUITY

Defence’s personnel policies and practices are based on merit and a ‘fair go’ for all staffphilosophy. During 1999-2000, Defence continued to report and manage incidents ofunacceptable behaviour, launched an equity and diversity website, increased the numberand diversity of trained equity advisers and developed awareness training and aneducation competency framework.

Equity and Diversity

Defence has a commitment to equity and diversity in the workplace and in itsmanagement practices. In 1997, the Defence Equity Organisation was established toembed equity and diversity in Defence. To ensure a commitment to equity throughoutDefence, the Defence Equity Organisation has developed and implemented a numberof specific initiatives.

The Workplace Equity and Diversity Plan 1998-2001, issued in October 1998, helps tocreate an environment in which equity and diversity are recognised as being essential tobest practice and need to be incorporated into day-to-day business in Defence.

During 1999-2000, two new Defence policy instructions were issued to explain equityand diversity and the responsibilities of leaders, managers and supervisors:

• Equity and Diversity in the Department of Defence, Departmental Personnel InstructionNo. 4/99.

• Equity and Diversity in the Australian Defence Force, Defence Instruction (General)Personnel 50-1.

Three free-call 1800 equity advice lines and a comprehensive network of more than1,700 trained equity advisers provide support and advice on equity matters toindividuals, managers and commanding officers. At the second annual AustralianPublic Service Workplace Diversity Awards in March 2000, Defence was presentedwith a commendation in the ‘open’ category for its equity adviser network and 1800free-call equity advice lines.

The Defence Equity Organisation maintains websites on both the internet and Defenceintranet to promote equity and diversity and to offer access to equity advice, trainingand publications. In addition, a series of promotional publications have been preparedto ensure a high profile of equity and diversity issues across Defence.

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Unacceptable Behaviour Policy

All personnel have a basic right to work in an environment free from harassment anddiscrimination. All personnel also have an individual responsibility to treat others fairly.Any behaviour that constitutes, accepts or promotes discrimination or harassment isunacceptable.

Defence has a total commitment to the policy of zero tolerance of any form ofharassment, discrimination, sexual offences and any other unacceptable behaviour.Even though the zero tolerance policy exists, incidents of unacceptable behaviour mayoccur. Irrespective of whether a formal complaint is made, Defence has aresponsibility to:

• prevent and eliminate all forms of harassment and discrimination in the workplaceand not to tolerate such behaviour;

• investigate complaints seriously in a timely, sensitive and thorough manner; and

• take firm, corrective action.

To raise staff awareness of workplace harassment as an issue, Defence has implementeda number of initiatives.

Defence has developed and promulgated anti-harassment policy instructions. Theinstructions define unacceptable behaviour, and detail the management of suchbehaviour and incident reporting procedures. The instructions are:

• Preventing, Managing and Eliminating Discrimination, Harassment and UnacceptableBehaviour in the Department of Defence; Departmental Personnel Instruction No. 3/99.

• Discrimination, Harassment, Sexual Offences, Fraternisation and other Unacceptable Behaviourin the Australian Defence Force, Defence Instruction (General) Personnel 35-3.

In May 2000, the Defence Plain-English Guide to Managing and Eliminating UnacceptableBehaviour in the Workplace was issued to provide an overview of the procedures involvedin the management of unacceptable behaviour in the workplace.

Education and Training

Defence expends considerable resources on training its people in equity and diversity.To this effect, a competency-based education framework and a broad and multi-facetedtraining strategy have been developed. The strategy will provide training opportunitiesat all levels of Defence, varying in complexity commensurate with the workplacecircumstance. The strategy has four aspects:• equity awareness training;• equity adviser training;• general presentations to commanders, workshops and conferences; and• an ADF/APS career development equity training course.

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Disability

A Defence Disability Action Plan 1999-2003 was issued in September 1999 to ensure thatDefence APS staff with a disability receive fair treatment and are not unfairlydisadvantaged in any aspect of their employment.

Indigenous Australians

A Defence Indigenous Staff Recruitment and Career Development Action Plan 1999-2003 wasissued in December 1999. The plan provides implementation action to focus attentionand resources on the employment of Defence APS indigenous Australians.

An ADF Aboriginal and Torres Strait Islander recruitment and career developmentstrategy aims to increase the proportion of Aboriginal and Torres Strait Islander peoplein the ADF.

Women

The primary role of the ADF is to protect Australia and its citizens. To perform thattask effectively, the ADF aims to attract and retain people of high quality to maintainAustralia’s defence capabilities. Women are fundamental to this requirement and theADF does not seek to become divorced from the social, economic, organisational andindustrial trends occurring in this country. The reality of increased involvement ofwomen in all aspects of Australian society and life cannot be ignored. To deny womenthe opportunity to participate as full members of the ADF would deny the ADF accessto their talents.

The current policy is to provide equality of opportunity consistent with operationaleffectiveness. Men and women compete equally for all employment except for thefollowing types of combat units:

• Navy – clearance divers;

• Army – armour, artillery, infantry, combat engineer; and

• Air Force – ground defence officers and airfield defence guards.

Approximately 88% of ADF employment categories are open to women. A restrictionhas been imposed on women within some employment areas for occupational healthand safety reasons, where use of embryo-toxic substances could endanger their health;for example, surface finishers and electroplaters within the Air Force.

In August 1999, the Minister Assisting the Minister for Defence agreed thatcompetencies should be developed for engineers, artillery, armour and infantry(including airfield defence guards).

The competencies for employment categories and critical mass limits are beingdeveloped before bringing forward proposals to open up further employmentcategories to women. The Navy is separately progressing the issue of women in theclearance diver category.

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PURCHASINGThe Defence Purchasing Policy Manual outlines how Defence will abide by Commonwealthprocurement guidelines in its purchasing activities. The core policies and principles are:• value for money;• open and effective competition;• ethics and fair dealing;• accountability and reporting;• national competitiveness and industry development; and• support for other Commonwealth policies.To ensure that staff involved in procurement activities are aware of the Commonwealthguidelines and their responsibilities under them, Defence runs a procurement trainingprogram. In 1999-2000, 1,400 Defence personnel undertook training in ‘simple’procurement and 2,400 modules of the ‘complex’ procurement program werecompleted. In addition, 33 people achieved the graduate certificate in strategicprocurement.

Defence places responsibility on the liability approver to ensure that value for moneyhas been achieved in every contract. The Department of Finance and Administration’spurchasing advisory and complaints service has advised that it received no complaintsconcerning Defence procurement in regard to the issues of open and effectivecompetition and ethics and fair dealing during the year. It did advise that there werequeries about how to do business with Defence and, consequently, additional ways tocommunicate requirements to industry are being examined by Defence. Defencecurrently utilises advertising, gazettal, the Industrial Supplies Office network and (forsome procurements) the internet.

Defence uses the Commonwealth Government Gazette to report all contracts over $2,000except where the liability approver gained a gazettal exemption. In addition, Defenceuses its ‘Buying Australian’ website to promulgate purchases over $100,000 and toadvise reasons why these purchases were made off-shore. The level of complianceagainst this requirement is improving but is less than satisfactory and an audit ofpurchases that have not been promulgated is currently under way. The liabilityapprover for each non-reporting contract will be identified and asked to explain whythis has not occurred.

Defence has an Australian industry involvement program which seeks to encourage thedevelopment of Australian and New Zealand industry. All contracts worth more than$5m are required to have an industry involvement plan, along with tenderers’ having toapproach the Industrial Supplies Office network to identify opportunities for Australianand New Zealand industry. For militarily significant acquisitions (usually capitalequipment acquisitions), more stringent industry requirements apply with the aim ofdeveloping support for ADF capabilities. As part of the policy of encouraging openand effective competition along with promoting the development of Australian andNew Zealand industry capabilities, Defence has continued with the privatisation of itsmanufacturing facilities. Last November, the sale of ADI was completed and theGovernment is currently undertaking a process which will lead to the sale of its stake inthe Australian Submarine Corporation.

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85

The Defence Purchasing Policy Manual emphasises the need for Defence purchasingactivities to be in line with government policies. In the past year, there has been aparticular emphasis on ensuring the effective implementation of the Defence policy onintellectual property. This policy offers Australian industry the use and/or ownershipof intellectual property, including intellectual property developed under a contract,where it will be exploited to the benefit of national defence capability and where theintellectual property is not subject to constraints.

A major program of reform to Defence acquisition procedures is currently beingimplemented. The aim of these reforms is to shorten acquisition times, provide betterwhole-of-life costing for equipment, reduce transaction costs with industry and providethe Government with greater transparency and oversight of the acquisition process.These reforms are in response to concerns raised by the Minister for Defence aboutDefence’s major capital acquisition process and, more generally, are part of Defence’songoing process improvement activities.

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ASSETS MANAGEMENT

Land and Facilities

The Defence Estate Organisation is responsible for all land, buildings andinfrastructure assets. It manages the estate functions of investment, reinvestment,repairs and maintenance, acquisition, leasing and divestment.

Land and facilities asset management is undertaken under the framework of an estatestrategic plan. This plan influences decisions at all stages of the asset management cyclewith existing assets being classified as having a short-term, a medium-term or a long-term use.

Defence property management is significantly influenced by operational requirementswith many properties providing the platform from which capabilities are launched forboth training and operational purposes. Notwithstanding this influence, feasiblealternatives to ownership are examined during the pre-acquisition phase of projectdevelopment, including non-budget financing where possible.

The linkages between the various activities in the asset management cycle have beenimproved to ensure a holistic approach. Comprehensive maintenance contracts are inplace with industry to assist the ongoing reform of maintenance planning and executionwhich incorporates asset appraisals. A three-year revaluation program has beenimplemented and monthly reporting of assets has been adopted as part of the accrualaccounting regime.

Rationalisation of the Defence estate is continuing within the broader Commonwealthreforms to ensure the most effective use of Commonwealth property assets. Acomprehensive disposal plan has been established which is being carefully managed tomaximise the return to government, although the issues associated with the sale ofDefence properties are inevitably complex and highly sensitive.

The Defence Estate Management Guide has been developed covering policy andprocedures for all aspects of the management of Defence real estate.

Information Technology and Telecommunications

Information technology and telecommunications strategic planning was undertaken bythe Defence Information Environment Board in conjunction with the development ofrelevant financial plans. The assessment of technical application, functionality, age, costeffectiveness, benefits and risk analysis are considerations in the decision to acquireassets. Sale and lease back arrangements are under consideration for equipment. Acompetitive and cost-effective approach to asset disposals has been established. During1999-2000, a national census and valuation of all information technology andtelecommunications assets was undertaken. A detailed asset profile and improvedrecording and reporting arrangements have been developed as a result.

Inventory Holdings

Support Command Australia had responsibility for the management of Defenceinventory holdings which, at 30 June 2000, included some 1.6 million line items ofinventory with a gross value of $3,600m.

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87

During 1999-2000, Support Command Australia applied significant attention to themanagement of inventory holdings including identifying and disposing of obsolete andsurplus stock holdings. This resulted in a considerable reduction in the provision madein the accounts for obsolesence from $935m at 30 June 1999 to $693m at 30 June 2000.

Defence inventory has been subjected to considerable audit and management scrutinyover the past three years. A number of projects to rationalise, standardise and improvelogistics business processes have been initiated, including Supply Chain Managementand a major upgrade of the Standard Defence Supply Systems. Through these projectsand other initiatives, Defence is currently seeking to improve inventory managementincluding data integrity, personnel skills, processes and information. The otherinitiatives include improved vendor-held stock arrangements and inventorysegmentation which have been subject to a number of trials.

Implementation of a new ammunition information system project was progressedwhich will provide full tri-Service functionality and enhance financial reporting,management reporting and explosives ordnance inventory management, includingobsolesence.

Overall, significant improvements have been made, with opportunities being pursuedfor further improvements.

Repair and Maintenance

Some $642m was spent by the Support Command Australia organisation on repair andmaintenance in 1999-2000.

Naval repair and refit of major fleet vessels (FFG and Anzac class ships), Collins classsubmarines, Fremantle class patrol boats and minor fleet vessels was carried out andhelicopters maintained together with technical and engineering support to meetregulatory requirements. The major activities completed during this period included therefits of HMA Ships Westralia, Newcastle and Canberra and the docking of HMAS Tobruk.The scheduled post-delivery availability for HMAS Collins was progressed at Adelaidethroughout the year and the acceptance of HMAS Manoora after substantial repair andmaintenance work was achieved. The life-of-type extension for the landing craft heavycommenced in Cairns in October 1999 with final completion of the sixth landing craftscheduled for 2002. Much effort was directed into improving the processes employedin maintenance management and work package development. The implementation ofthese processes should lead to an increase in the effectiveness of ship repair activities.

Army Mack and Mercedes trucks, Land Rovers, Leopard tanks, M113 and ASLAVvehicles, communications equipment and Army helicopters were repaired. Vehicles arerepaired to a taskworthy state that meets safety requirements. There is an increasingrepair liability across all B-class vehicles (trucks) and critical items are given a highpriority for repair. Some backlog continues for less critical items.

Air Force repair work was carried out in accordance with the planned maintenancecycle for the F/A-18 Hornet, F-111 aircraft and lead-in fighter. Deeper-levelmaintenance of B-707 airframes and engines, C-130 airframes and T56 engineoperational maintenance assisted the airlift and maritime patrol groups to sustainrequired rates of effort and aircraft availability. Technical services support and routinemaintenance on the Falcon special purpose aircraft were also provided.

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EXTERNAL CONSULTANTSA ‘consultancy’ is a contract which is let for the investigation, review or evaluation (butnot implementation) of policy, proposals or activities with a requirement:• to provide information and advice on the development or refinement of Defence

processes; or• to assist Defence management in decision making.

In seeking value for money, external consultancy services are contracted for one ormore of the following reasons:• the need for specialised skills;• rapid access to the latest technology and experience in its application;• need for independent study;• need for a change agent or facilitation.

When contracting for a consultant, value for money considerations relate not only tocost, but to the experience and previously demonstrated capabilities of the consultant;the location of the consultant and the associated travelling costs; the capacity of theconsultant’s locally-based resources to provide continuing services at levels likely to berequired during the course of the engagement; and the consultant’s professionalstanding and reputation.

The terms and conditions governing the relationship between the Commonwealth andthe consultant are contained in the contract for the provision of those services.

The table below summarises Defence use of consultants, on a Group basis, for1999-2000. For a more detailed breakdown of consultancies, please refer toConsultancy Services in the additional annual report information available on theDefence website.

Table 1.22: Defence Use of Consultants for 1999-2000Group Number of Consultants Expenditure in 1999-2000

$Defence Headquarters 53 3,009,509Navy 23 1,508,532Army 10 108,290Air Force 5 39,137Intelligence 4 100,540Support Command 49 6,047,283Personnel Executive 97 5,471,315Acquisition 87 4,144,988Science and Technology 33 319,539Defence Estate 60 907,970Information Systems 11 736,915Corporate Support 6 235,765Total 438 22,629,783

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COMPETITIVE TENDERING AND CONTRACTING

COMMERCIAL SUPPORT PROGRAM

Overview

The Commercial Support Program is Defence’s primary mechanism for undertakingCompetitive Tendering and Contracting. The program, which began in 1991 aftergovernment endorsement of an interdepartmental committee’s recommendations, aimsto ensure that support services are provided to Defence in the most cost-effectivemanner.

The program seeks to maximise the use of civilian infrastructure by contracting outsupport services suitable for market testing where it is operationally feasible, a viablemarket exists and industry can demonstrate better value for money. This market testinghas resulted most often in Defence support being provided through service contractswith industry, less often in Defence support being provided by in-house teams and,occasionally, in the retention of the original support structure. As at 30 June 2000, theprogress summary showed:

CSP Evaluation Decisions Made 103Commercial Contracts 71 (69%)In-House Team Directives 26 (25%)Status Quo (Original Support Structure) 6 (6%)

Number of Positions Tested 12,447Projected Annual Recurring Savings $310mMean Projected Savings Percentage 31.5%

Market Testing Decisions for 1999-2000

The Portfolio Budget Statements 1999-2000 (page 12) contained an ambitious market-testing program with 28 decisions expected to be made within 1999-2000. The focus ofthe program was on the completion of garrison support, clerical and administrative andmajor logistics activities and the commencement of the health services activities.

Market testing of all garrison support (messing, cleaning, guarding and domesticservices) activities has been completed. The clerical and administrative decisions wereannounced in the September 2000 quarter, with the major logistics decisions expectedbefore December. A significant portion of the health services program has beenrescoped with two activities now at or near the tender stage.

The table below lists the 12 activities for which decisions were announced during1999-2000. Decision announcements for the first three activities slipped from 1998-99.

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Table 1.23: Decisions Announced during 1999-2000Activity Name Expected

ContractValue

$m

ContractPeriod

(years)(1)

ExpectedAnnualSavings

$m

TotalPositionsEvaluated

DecisionDate

Garrison Support –Southern Victoria 285.0 5 10.9 440

August1999

Aircraft Research and DevelopmentUnit – Maintenance Services 11.8 5 1.7 71

September1999

Class 8 Medical and Dental SupplyChain Management 25.5 5 1.4 67

October1999

Garrison Support– Riverina and Murray Valley 65.0 4 2.4 154

October1999

Garrison Support– South Coast of NSW 81.5 5 5.6 198

November1999

Garrison Support– Western Sydney 68.4 5 5.0 213

November1999

Clerical and Administrative Support– South Australia 24.8 5 2.7 115

November1999

501 Wing (RAAF Amberley) –F-111 Workshop 13.8 3 0.2 60

December1999

503 Wing (RAAF Richmond) C-130Deeper Maintenance 202.6 7 2.6 243

February2000

Clerical and Administrative Support– Queensland 21.1 5 2.8 91

February2000

Clerical and Administrative Support– Southern Victoria 27.7 5 6.4 190

April2000

ADF Recruiting(2) 250.0 6 25.7 481 June 2000

Notes1. Options to extend the contracts may exist.2. Pilot phase for one year. If successful, second phase for five years.

Due to the scale of activities, their complexity and initial tight tendering timelines someslippages were expected. The decision announcements which have slipped beyond30 June 2000 are listed in the table below.

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Table 1.24: Decisions Announced after 30 June 2000Activity Name Forecast Date Expected Date501 Wing (RAAF Amberley) – Avionics Workshop April 2000 July 2000501 Wing (RAAF Amberley) – F-111 Weapons System May 2000 August 2000503 Wing Avionics April 2000 July 2000Australian Defence Force Explosive Ordnance Project November 1999 October 2000Defence Integrated Distribution System March 2000 October 2000Army Engineering Agency Laboratories/Ranges(1) May 2000 October 2000Re-testing of Facilities and Property Operations – DSTOMelbourne December 1999 July 2000Clerical and Administrative Support – ACT/Southern NSW May 2000 August 2000Clerical and Administrative Support – Sydney Central(2) June 2000 September 2000Clerical and Administrative Support – Sydney West/South(2) June 2000 September 2000

Notes1. Became two activities.2. Sydney Clerical and Administrative activities combined into one activity.

Some activities in the Portfolio Budget Statements 1999-2000 table had not been fullyscoped when the timelines were estimated. For example, at the minor end of the scale,the Australian Defence Force Explosive Ordnance Project included some positionslater moved to another activity. At the major end of the scale, the Non-OperationalHealth Services activity (more properly the rationalisation and market testing ofNational Support Area Health Services) has been split into as many as eight regionalactivities. The status of the remainder of the 28 activities listed in the Portfolio BudgetStatements 1999-2000 is in the table below.

Table 1.25: Other Market Testing Activities(1)

Activity Name StatusNaval Materiel Requirements DataManagement

Scope being reviewed.

Joint Logistics Unit – SouthEdinburgh Airfield Services

Scope reviewed, activity combined primarily withmechanical engineering operational maintenance function

Mechanical EngineeringOperational Maintenance Function

Scope reviewed, function rationalised with some partsplaced to service contracts

Defence Personnel Records Subsumed within Clerical and Administrative Support –ACT/Southern NSW

Routine Pathology Services Scope reviewed, timeline yet to be re-announcedVictorian Health Services Scope reviewed, timeline extended, in tendering processNon-Operational Health Services Split into regional Commercial Support Program activitiesRoutine Radiology Services Subsumed within other Commercial Support Program

health activitiesNote1. Optometry was erroneously included in the Portfolio Budget Statements 1999-2000 as a market testing

activity. The activity related to optometry services was, in fact, a re-advertising of service-providercontracts.

SECTION 2

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95

SUMMARY OF THE 1999-2000 FINANCIALSTATEMENTS

This is the sixth year for which Defence has prepared a set of accrual financialstatements. The statements have been compiled to meet the requirements of theFinancial Management and Accountability Act 1997, the Finance Minister’s Orders andAustralian Accounting Standards. The audited 1999-2000 Financial Statements for theyear ended 30 June 2000 are at page 103.

The financial statements compare the 1999-2000 performance with the 1998-1999performance. Although efforts have been made to provide comparative data, as1999-2000 was the first year under the new accrual framework it includes items forwhich no comparative data are available, such as the capital use charge and the equityinjection.

Readers of the Financial Statements need to be aware that, while items in the facestatements can be compared, the breakdown of these items to achieve a greater level ofdetail has resulted in a number of cases where meaningful comparison at that level isnot possible. This is largely due to changes in the accounting treatment of a number ofitems during the preparation of the 1999-2000 budget, the first accrual budget.

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COMPARATIVE ANALYSIS OF THE 1999-2000 FINANCIAL STATEMENTS

Table 2.1: Departmental Operating Statement – Comparing 1998-99 and1999-2000

Actual1999-2000

$’0001998-99$’000

Variation$’000

REVENUEOperating appropriation 15,814,424 10,981,927 4,832,497Sale of goods and services 296,766 278,947 17,819Interest and dividends 30,992 187 30,805Net gain on sale of assets 3,675 0 3,675Net gain on foreign exchange 12,932 0 12,932Write-back of assets previously expensed 250,270 0 250,270Other revenues 30,546 477,506 -446,960

Total revenue 16,439,604 11,738,567 4,701,037

EXPENSESEmployees 4,964,902 5,286,374 -321,472Suppliers 3,847,042 3,384,118 462,924Depreciation and amortisation 1,800,300 1,470,444 329,856Write-down of assets 478,173 1,339,748 -861,575Net loss on sale of assets 0 96,784 -96,784Net loss on foreign exchange 0 6,495 -6,495Interest and other financing costs 532 3,047 -2,515Subsidies, benefits and grants 3,872 2,169 1,703Other costs of providing goods and services 28,315 4,920 23,395

Total Expenses 11,123,136 11,594,100 -470,964

Operating result before capital use charge 5,316,468 144,467 5,172,001Capital use charge paid 4,599,955 0 4,599,955Operating result 716,513 144,467 572,046Accumulated results at 1 July 34,904,682 33,404,290 1,500,393Adjustment to opening accumulated results 1,274,258 1,355,925 -81,667

Total accumulated results at 30 June 36,895,453 34,904,682 1,990,772

Summary of the Financial Statements

97

Defence budgeted for an operating surplus of $4,463m in 1999-2000. The financialstatements report an operating surplus of $5,316m.

Revenue

Revenue was substantially higher in 1999-2000 due largely to the introduction of thenew accrual framework. In particular, Defence received a higher operatingappropriation to cover the requirement to pay a capital use charge. Defence alsoreceived a special appropriation for East Timor of $645m, of which $607m was drawndown. The special appropriation for East Timor included $9.409m for capital usecharge. This charge is reported as part of the $4,545m capital use charge appropriationin Table 2.1.

Revenue from the sale of goods and services increased by $18m, while interest earnedwas $31m higher than 1998-99. Under the new devolved agency banking arrangements,Defence drew down appropriation revenue from government in equal instalmentsthroughout the financial year. Where Defence draw downs exceeded money requiredto meet its commitments, the devolved banking arrangements enabled Defence toinvest funds surplus to immediate requirements.

Other revenues were substantially lower in 1999-2000 than in the previous financialyear. In 1998-1999 other revenues amounted to $478m, which was the result of anupward revaluation of assets for which no revaluation reserve existed.

In 1999-2000, Defence wrote-back $250m of assets previously expensed. The write-back is the result of a program instigated to improve the accuracy of items reported onthe Standard Defence Supply System and the Defence balance sheet. In essence thisitem represents the growth in depreciable assets that were not identified as assets on thecorporate information management systems through the procurement process.

Graph 2.1: Selected Defence Operating Expenses 1999-00 and 1998-99

0 1,000 2,000 3,000 4,000 5,000 6,000

Employees

Suppliers

Depreciation and amortisation

Write down of assets

$m

1999-2000 1998-1999

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98

Expenses

Employees expense was lower in 1999-2000 than the previous year. Defenceexperienced a decrease in the salaries and wages costs of both military and civilianpersonnel partly due to the decline in personnel numbers. Overseas salaries andallowances were significantly higher due to the deployment of personnel to East Timor.Civilian superannuation was marginally higher than the previous year, largely as a resultof an increase in the superannuation rates during the year, a higher end-of-periodaccrual adjustment and an increase in superannuation expense associated with the payincrease which was backdated to April 2000.

The large decrease in the military workers compensation expense reported in Note 7 tothe Defence Financial Statements is attributable to two main factors. Firstly, in1998-99 there was a large increase in the provision, which resulted in an increase in theexpense of $217m together with the payment of a premium in the order of $110m.These two amounts comprise the compensation expense balance of $327m incurred1998-99. In 1999-2000 an actuarial figure was obtained for the liability. This resultedin a decrease in the provision of $40m. The premium paid was again in the order of$110m resulting in a net expense figure of $71m for 1999-2000.

Suppliers expense was significantly higher in 1999-2000 than the previous year. Some$271m of suppliers expense was related to the deployment to East Timor. Otherfactors were higher repair and overhaul costs, and asset purchases under the assetpolicy thresholds which were greater than the previous year. These were offset bylower communications and information technology costs due to a combination of thenew asset management practices in Defence Information Systems, the completion ofYear 2000 activities, and lower facilities operations and inventory consumptionexpenses. The deployment to East Timor was the most significant contributing factorto reduced inventory consumption, with some scheduled training exercises cancelleddue to the deployment.

Depreciation and amortisation expenses were some $330m higher in 1999-2000 thanthe previous year. This was largely the result of the growth in the balance sheet due tothe componentisation and revaluation of assets and the recognition of assets under thetransitional provisions of Australian Accounting Standard 29 (AAS29).

Write-down of assets was $478m in 1999-2000, considerably less than the $1,340mreported in the previous year. During 1998-99 Defence undertook a significant amountof activity in relation to accounting for a number of asset classes. This program noteddifferences between asset holdings recorded on various asset registers maintained byDefence and the actual asset holdings identified by physical inspection. As a resultadjustments were made to the asset accounting records to reflect more accuratelyphysical asset holdings. In addition, further work was undertaken in 1998-99 tostrengthen the reliability of the obsolete inventory provision, which resulted in theprovision for obsolescence being increased by a further $326m in that year.


99

Table 2.2: Departmental Balance Sheet – Comparing 1998-99 and1999-2000

Actual1999-2000

$’0001998-99$’000

Variation$’000

FINANCIAL ASSETSCash 137,913 86,857 51,056Receivables 363,446 445,184 -81,738

Total financial assets 501,359 532,041 -30,682

NON-FINANCIAL ASSETSLand and buildings 7,605,459 7,656,528 -51,069Specialist military equipment 29,196,801 24,992,905 4,203,896Infrastructure, other plant and equipment 3,815,427 3,411,801 403,626Inventories 2,933,463 2,501,915 431,548Intangibles 90,263 57,277 32,986Other assets 679,036 912,638 -233,602

Total non-financial assets 44,320,449 39,533,064 4,787,385Total assets 44,821,807 40,065,105 4,756,703

DEBTLoans 0 179,354 -179,354Finance leases 556 11,785 -11,229

Total Debt 556 191,139 -190,583

PROVISIONS AND PAYABLESCapital use charge 51,357 0 51,357Employees 2,459,591 2,363,922 95,669Suppliers 502,375 448,869 53,506Other provisions and payables 108,515 67,009 41,506

Total provisions and payables 3,121,838 2,879,800 242,038Total liabilities 3,122,394 3,070,940 51,455

Net assets 41,699,413 36,994,165 4,705,248

EQUITYEquity injection appropriation 687,170 0 687,170Reserves 4,116,791 2,089,484 2,027,307Accumulated results 36,895,453 34,904,682 1,990,772

Total equity 41,699,414 36,994,166 4,705,248

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EquityDefence equity increased from 1998-99 by $4,705m. This was largely a result of theequity injection of $687m, a total of $2,027m in upward revaluations and $1,274m ofassets being brought to account in accordance with the AAS 29 transitional provisions.The remaining $717m of the increase in equity represented the surplus of revenues overexpenses after the capital use charge.

Assets

Defence did not budget for an increase in the cash balance as at 30 June 2000. As at30 June 2000, Defence had $138m cash balance, an increase of $51m from 1998-99.

Receivables were lower than in 1998-99, primarily as a result of the write-off of a $93mloan from Defence to Australian Defence Industries (ADI) at the direction of theDepartment of Finance and Administration. The write-off was associated with the saleof ADI, and the transfer during the sale process to the Office of Asset Sales andInformation Technology Outsourcing of the Commonwealth’s investment in ADI.

The most significant increase in non-financial assets was in specialist militaryequipment. Specialist military equipment increased from the previous year by $6,161min gross terms, and in net terms by $4,204m. Approximately 80% of Navy and AirForce specialist military equipment assets were revalued during 1999-2000, resulting inan increase of $3,518m to the gross value of these assets.

While inventory holdings increased in the 1999-2000 financial year to $2,933m, theratio of obsolete inventory as a proportion of total inventory was reduced from one-quarter to one-fifth. This reduction reflects improved inventory managementprocedures undertaken by Support Command.

Other assets comprise capital and operating prepayments, that is, payments in advanceof assets or services being delivered. Prepayments were $679m in 1999-2000,representing a decline of $234m. The 1998-99 prepayment balance of $913m wassignificantly higher than usual, due to the early payment of claims at the end of the1998-99 financial year as a risk mitigation measure to ensure a smooth transition to thenew devolved agency banking arrangements introduced in 1999-2000.

Graph 2.2: Selected Non-Financial Assets 1999-2000 and 1999-99

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Land and buildings

Specialist military equipment

Infrastructure, other plant and equipment

Inventories

Other assets

$m

1999-2000 1998-1999


101

Liabilities

The balance of finance leases in 1999-2000 was $0.6m, which is $11.2m lower than inthe previous year. This result reflects the transition of the finance lease for the VIPaircraft to an operating lease during 1999-2000.

A $179m advance from future appropriations was reported in the 1998-99 DefenceFinancial Statements. At the direction of the Department of Finance andAdministration, the full amount has been included in the revenues from governmentfigure in the operating statement for 1999-2000.

Defence pays the capital use charge on its actual net asset position at the end of thefinancial year, adjusted for revaluations and the equity injection. Having reported anoperating surplus at 30 June 2000 Defence is liable, after adjustments, to pay anadditional $51m to government for the cost of capital. This has been remitted to theDepartment of Finance and Administration in the 2000-01 financial year.

Employee provisions increased by $96m in 1999-2000 over the 1998-99 balance. Therise was partly attributable to an increase in the number of days between the last payperiod and the end of the financial year, and increased provisions for annual leave andmilitary long service leave. Supplier provisions increased by $54m over the 1998-99balance.

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Table 2.3: Statement of Cash Flows – Comparing 1998-99 and 1999-2000

Actual1999-2000

$’0001998-99$’000

Variation$’000

OPERATING ACTIVITIESTotal cash received 15,973,816 11,458,943 4,514,873Total cash used 8,262,530 8,231,208 31,322

Net cash from operating activities 7,711,286 3,227,735 4,483,551

INVESTING ACTIVITIESTotal cash received 132,906 83,510 49,396Total cash used 3,913,912 3,398,621 515,291

Net cash from investing activities -3,781,006 -3,315,111 -465,895

FINANCING ACTIVITIESTotal cash received 687,170 179,354 507,816Total cash used 4,560,603 23,614 4,536,989

Net cash from financing activities -3,873,433 155,740 -4,029,173

Net increase/(decrease) in cash held 56,847 68,364 -11,517Cash at 1 July 86,857 18,514 68,343Derecognition of Woomera opening balance -10,588 0 -10,588Effect of exchange rate movements on 1 July balance 4,796 -21 4,817

Cash at 30 June 137,912 86,857 51,055

Net cash inflow from operating activities increased in 1999-2000 by $4,484m, largely asa result of the increase in appropriation to cover the capital use charge introducedunder the accrual budgeting framework.

Net cash outflows from financing activities increased by $4,029m, largely as a result ofthe payment of the capital use charge under the financing category. The capital usecharge outflow is partially offset by the $687m capital injection received fromgovernment.

The audited financial statements follow.

Financial Statements

103

Section Two

104


105

Section Two

106

Department of DefenceOPERATING STATEMENTfor the year ended 30 June 2000

1999-2000 1998-1999Notes $'000 $'000

Operating revenuesRevenues from Government 3 15,814,424 10,981,927Sale of goods and services 4 296,766 278,947Interest and dividends 5 30,992 187Net gain on sale of assets 3,675 -Net gain on foreign exchange 12,932 -Write back of assets previously expensed 250,270 -Other revenues 6 30,546 477,506

Total operating revenues 16,439,604 11,738,567

Operating expensesEmployees 7 4,964,902 5,286,374Suppliers 8 3,847,042 3,384,118Subsidies, benefits and grants 9 3,872 2,169Depreciation and amortisation 10 1,800,300 1,470,444Write down of assets 11 478,173 1,339,748Net loss on sale of assets - 96,784Net loss on foreign exchange - 6,495Interest and other financing costs 12 532 3,047Other expenses 13 28,315 4,920

Total operating expenses 11,123,137 11,594,100

Net operating surplus/(deficit) 14 5,316,468 144,467

Equity interestsNet surplus/(deficit) attributable to the

Commonwealth 5,316,468 144,467Accumulated surplus/(deficit) at beginning of the

reporting period 34,904,682 33,404,290Adjustments to opening accumulated results (under

the transitional provisions of AAS29) 2.23 1,274,258 1,355,925

Total available for appropriation 41,495,408 34,904,682

Capital use provided for or paid 2.19 4,599,955 -

Accumulated surplus/(deficit) at end of thereporting period 36,895,453 34,904,682

This statement should be read in conjunction with the accompanying Notes.


107

Department of DefenceSTATEMENT OF ADMINISTERED REVENUES AND EXPENSESfor the year ended 30 June 2000

1999-2000 1998-1999Notes $'000 $'000

Operating revenuesNon taxation revenues

Revenues from Government 3 1,235,154 1,186,586Interest and dividends 5 24,649 8,115Other sources of non taxation revenue 6 666,204 99,602

Total non taxation revenues 1,926,006 1,294,303

Total operating revenues 1,926,006 1,294,303

Operating expensesPersonal benefits 7 2,633,250 1,589,146Suppliers 8 - 1,810Subsidies 9 4,625 -Depreciation and amortisation 10 - 439Write down of assets 11 2,470 -Other expenses 13 1,028 434

Total operating expenses 2,641,374 1,591,829

Net contribution to Whole of Government result (715,368) (297,526)

Cash transfers to the Official Public Account 2.21 (578,767) (107,620)

Net surplus/(deficit) (1,294,135) (405,146)

Accumulated results at the beginning of thereporting period (23,245,613) (22,840,467)Adjustments to opening accumulated results(under the transitional provisions of AAS29) 2.23 (6,568) -

Accumulated results at the end of the reporting period (24,546,316) (23,245,613)

This statement should be read in conjunction with the accompanying Notes

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108

Department of DefenceBALANCE SHEETas at 30 June 2000

1999-2000 1998-1999Notes $'000 $'000

AssetsFinancial assets

Cash 15 137,913 86,857Receivables 16 363,446 445,184

Total financial assets 501,359 532,041

Non financial assetsLand and buildings 18 7,605,459 7,656,528Specialist military equipment 18 29,196,801 24,992,905Infrastructure, other plant and equipment 18 3,815,427 3,411,801Software and other intangibles 18 90,263 57,277Inventories 19 2,933,463 2,501,915Other non financial assets 20 679,036 912,638

Total non financial assets 44,320,449 39,533,064

Total assets 44,821,807 40,065,105

LiabilitiesDebt 21

Finance leases 556 11,785Loans from future appropriations - 179,354

Total debt 556 191,139

Provisions and payablesCapital Use Charge 2.19 51,357 -Employees 22 2,459,591 2,363,922Suppliers 24 502,375 448,869Other provisions 25 108,515 67,009

Total provisions and payables 3,121,838 2,879,800

Total liabilities 3,122,394 3,070,940

Net assets 41,699,413 36,994,165

Equity 26Capital injection 687,170 -Asset revaluation reserve 4,116,791 2,089,484Accumulated surplus 36,895,453 34,904,682

Total equity 41,699,414 36,994,166

Current liabilities 1,473,296 1,502,177Non current liabilities 1,649,098 1,568,763

Current assets 1,681,472 1,865,942Non current assets 43,140,335 38,199,164



109

Department of DefenceSTATEMENT OF ADMINISTERED ASSETS AND LIABILITIESas at 30 June 2000

1999-2000 1998-1999Notes $'000 $'000

AssetsFinancial assets

Cash 15 207 -Receivables 16 84,323 4,807Investments 17 1,785,029 2,103,544

Total financial assets 1,869,559 2,108,351

Non financial assetsInfrastructure, other plant and equipment 18 - 8,398

Total non financial assets - 8,398

Total assets 1,869,559 2,116,750

LiabilitiesProvisions and payables

Personal benefits 23 24,605,042 23,232,484Other provisions 25 25,804 24,505

Total provisions and payables 24,630,846 23,256,989

Total liabilities 24,630,846 23,256,989

Net liabilities (22,761,287) (21,140,239)

Equity 26Reserves 1,785,029 2,105,374Accumulated results (24,546,316) (23,245,613)

Total equity (22,761,287) (21,140,239)

Current liabilities 1,259,094 1,195,044Non current liabilities 23,371,752 22,061,945

Current assets 84,530 4,807Non current assets 1,785,029 2,111,943


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Department of DefenceSTATEMENT OF CASH FLOWSfor the year ended 30 June 2000

1999-2000 1998-1999Notes $'000 $'000

OPERATING ACTIVITIESCash Received

Appropriations for outputs 15,670,115 11,002,041Sales of goods and services 259,116 282,608Interest and dividends 29,730 -Other revenue 14,855 174,294

Total cash received 15,973,816 11,458,943

Cash usedEmployees (4,927,534) (4,967,037)Suppliers (3,304,547) (3,256,328)Subsidies, benefits and grants (3,872) -Interest and other financing costs (28) (3,047)Other goods and services (26,549) (4,796)

Total cash used (8,262,530) (8,231,208)

Net cash from operating activities 27 7,711,286 3,227,735


Sale of land and buildings 102,658 39,095Sale of specialist military equipment 30,248 44,415

Total cash received 132,906 83,510

Cash usedPurchase of land and buildings - (151,062)Purchase of specialist military equipment (3,608,534) (3,219,840)Purchase of other property, plant and equipment (305,378) -Cost of sales of land and buildings - (27,719)

Total cash used (3,913,912) (3,398,621)

Net cash from investing activities (3,781,006) (3,315,111)

FINANCING ACTIVITIESCash received

Equity injection 687,170 -Advance of appropriations - 179,354

Total cash received 687,170 179,354

Cash usedRepayment of borrowings (12,005) (23,614)Capital use paid (4,548,598) -

Total cash used (4,560,603) (23,614)

Net cash from financing activities (3,873,433) 155,740

Net increase/(decrease) in cash held 56,847 68,364Cash at the beginning of the reporting period 86,857 18,514Derecognition of Woomera opening balance (10,588) -Effect of exchange rate movements on cash atbeginning of reporting period 4,796 (21)

Cash at the end of the reporting period 137,912 86,857This statement should be read in conjunction with the accompanying Notes


111

Department of DefenceSTATEMENT OF ADMINISTERED CASH FLOWSfor the year ended 30 June 2000

1999-2000 1998-1999Notes $'000 $'000

OPERATING ACTIVITIESCash Received

Appropriations 1,235,154 1,186,545Superannuation contributions 584,209 99,403Interest and dividends 24,649 8,217Other 10 -

Total cash received 1,844,021 1,294,166

Cash usedPersonal benefits (1,260,692) (1,184,769)Subsidies and other (4,354) (1,777)Cash to the Official Public Account (578,767) (107,620)

Total cash used (1,843,814) (1,294,166)

Net cash from operating activities 27 208 -


Cash from the Official Public Account - 41

Cash usedPurchase of property, plant & equipment - (41)

Net cash from investing activities - -

Net increase/(decrease) in cash held 208 -Cash at the beginning of the reporting period - -Cash at the end of the reporting period 208 -


Section Two

112

Department of DefenceSCHEDULE OF COMMITMENTSfor the year ended 30 June 2000

1999-2000 1998-1999Notes $'000 $'000

BY TYPECapital commitments

Land and buildings 287,789 269,438Specialist military equipment 5,521,534 5,921,525Other capital commitments 378,530 388,424

Total capital commitments 6,187,853 6,579,388

Other commitmentsOperating leases 94,624 165,980Other non capital commitments 1,073,576 655,029

Total other commitments 1,168,201 821,009

Total commitments 7,356,054 7,400,397

BY MATURITYAll commitments

One year or less 2,569,756 2,551,067From one to two years 2,053,740 1,859,364From two to five years 2,316,446 2,345,618Over five years 416,111 644,346

Total commitments 7,356,054 7,400,397

Operating lease commitmentsOne year or less 26,183 50,022From one to two years 11,287 33,834From two to five years 13,162 30,350Over five years 43,992 51,774

Total operating leases 94,624 165,980

Note: Commitments do not incorporate the effects of GST.



113

Department of DefenceSCHEDULE OF CONTINGENCIESfor the year ended 30 June 2000

1999-2000 1998-1999Notes $'000 $'000

Contingent lossesClaims for damages/costs 103,037 104,293Redundancies 55,119 20,056Military compensation 27,200 27,900

Total contingent losses 185,356 152,249

Unquantifiable Contingencies

One hundred and thirty eight claims for damages have been made by former membersof the crew (of approximately 954) of the HMAS Melbourne arising out of the HMASVoyager/HMAS Melbourne collision of 10 February 1964. It is unclear whether anyfurther claims for damages will be made by any of the remaining former members ofcrew of the HMAS Melbourne.

A number of claims for damages by dependants of deceased former members of thecrew of the HMAS Voyager have also been foreshadowed in respect of the HMASVoyager/HMAS Melbourne collision of 10 February 1964 but are not currently thesubject of any legal proceedings. It remains unclear how many further dependancyclaims might be made in the future. Those additional but currently unidentifieddependancy claims are unquantifiable at this time.

One claim for damages has been made by a former member of the crew (complementof about 1300) of the HMAS Melbourne arising out of the HMAS Melbourne/USS FrankE Evans collision of 3 June 1969. It remains unclear to what extent further claimsmight be made in respect of that collision.

Remote contingencies are disclosed at Note 35. There were no Administeredcontingencies as at 30 June 2000.


Section Two

114

Department of DefenceNOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2000

CONTENTS

Note:

1 Objective of the Defence Organisation2 Summary of Significant Accounting Policies3 Revenues from Government4 Sale of Goods and Services5 Interest and Dividends6 Other Revenue7 Employee Expenses8 Suppliers Expense9 Subsidies, Benefits and Grants10 Depreciation and Amortisation11 Write Down of Assets12 Interest and Other Financing Costs13 Other Expenses14 Net Operating Surplus/(Deficit)15 Cash16 Receivables17 Administered Investments18 Analysis of Property, Plant, Equipment and Intangibles19 Inventories20 Other Non Financial Assets21 Debt22 Employee Provisions23 Administered Personal Benefits Payable24 Supplier Provisions25 Other Provisions26 Analysis of Equity27 Cash Flow Reconciliation28 Appropriations29 Financial Instruments30 Auditor's Remuneration31 Act of Grace Payments32 Defective Administration Payments33 Waivers34 Future Commitments35 Remote Contingencies36 Remuneration of Executives37 Special Public Money38 Reporting Against Outcomes


115


NOTE 1 OBJECTIVE OF THE DEFENCE ORGANISATION

The objective of the Defence organisation is to prevent or defeat the use of armedforce against Australia and its interests. The organisation contributes to a single outcome: The prevention or defeat of the use ofarmed force against Australia and its interests.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 BASIS OF ACCOUNTING

The financial statements are required by section 49 of the Financial Management andAccountability Act 1997 and are general purpose financial reports. The financialstatements have been prepared in accordance with Schedule 2 to the FinancialManagement and Accountability (FMA) Orders made by the Minister for Financeand Administration for the financial year 1999-2000. Schedule 2 requires thatagencies comply with the relevant requirements of Australian AccountingStandards, related Guidance Releases, Consensus Views of the Urgent IssuesGroup, and have regard to Statements of Accounting Concepts and accountingpolicies issued by the Secretary of the Department of Finance and Administration. The financial statements have been prepared on an accrual basis and are inaccordance with historic cost conventions, except for certain assets which, as noted,are at valuation. Except where stated, no allowance is made for the effect ofchanging prices on the results or financial position. The continued existence of the Department in its present form is dependent onGovernment policy and on continuing appropriations by Parliament for theDepartment’s administration and programs.

2.2 DEPARTMENTAL AND ADMINISTERED ITEMS

The Department administers, but does not control, certain resources on behalf ofthe Commonwealth. The basis of accounting described in Note 2.1 has been usedin accounting for both Departmental and Administered items which are disclosedseparately in the financial statements and related notes. Departmental items are assets, liabilities, revenues and expenses, which are controlledby the Department, including military items associated with the Australian DefenceForce. Administered items are assets, liabilities, revenues and expenses, which arecontrolled by the Government but managed by the Department on behalf of theGovernment.

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2.3 TRANSFER FROM ADMINISTERED TO DEPARTMENTAL

In previous financial years the Young Endeavour operations have been reported asAdministered. The appropriateness of this reporting has been reviewed, andagreement obtained from the Department of Finance and Administration and theAustralian National Audit Office that control of these operations rests with theRoyal Australian Navy. As a result from 1 July 1999 the operations of the STSYoung Endeavour have been reported as Departmental. This change has had noimpact on the Young Endeavour Training Scheme operations which are managedas special public money - see Note 37.

2.4 ROUNDING

Amounts reported in the financial statements have been rounded to the nearest$1,000 except for the following which have been rounded to the nearest dollar:• Act of Grace Payments and Waivers;

• Remuneration of Executives;

• Remuneration of Auditors; and

• Special Public Money. Totals are the sum of unrounded amounts.

2.5 FOREIGN CURRENCY

Transactions denominated in a foreign currency are converted at the exchange rateat the date of the transaction. Foreign currency receivables and payables aretranslated at the exchange rates as at balance date. Associated currency gains andlosses are not material.

2.6 COMMITMENTS

In the Schedule of Commitments, Capital Commitments are obligations arisingunder agreements equally proportionately unperformed for capital expenditurecontracted for as at 30 June 2000. Defence also reports in Note 34 details on‘Future commitments’. The period between approval of a capital project toproceed and the awarding of contracts is a period of ‘future commitment’.


117


2.7 REVENUE

Departmental appropriations Appropriations to Defence for its Departmental outputs are recognised as revenue tothe extent they have been received into the Department’s Bank account or areentitled to be received by the Department at year end. Appropriations of equityinjection are recognised in equity rather than as revenue. In past years appropriations for Departmental operations including capitalacquisitions were recognised as revenue in the year of appropriation, except whereamounts unspent at year-end were not automatically carried over into the newfinancial year.

Administered appropriations Administered appropriations include certain special appropriations, which arerecognised as revenue.

Other revenue Revenue is recognised to the extent that it is probable that the economic benefitswill flow to Defence and the revenue can be reliably measured.

• Sale of goods - revenue from the sale of goods is recognised upon delivery of thegoods to customers.

• Rendering of services - revenue from the provision of services is recognised where aright to be compensated has been ascertained and can be reliably measured.

• Interest - revenue is recognised on a proportional basis taking into account theinterest rates applicable to each financial asset.

• Dividends - revenue is recognised when the right to receive the dividend has beenestablished.

• Net gain on sale of assets – revenue from disposal of assets is recognised when controlof the asset has passed to the buyer, resulting in either a net gain or loss on disposal.

• Net foreign exchange gains – foreign exchange gains and losses are recognised on theday that cash is received as the difference between the exchange rate on the day therevenue was recognised and the day the cash is received.

• Revaluation increments - revenue is recognised when revaluation decrements previouslyexpensed in relation to an asset class are recovered through the revaluation process.Any increments greater than previous decrements are reflected in the AssetRevaluation Reserve.

Resources received free of charge Services received free of charge are recognised in the Operating Statement asrevenue when and only when a fair value can be reliably determined and theservices would have been purchased if they had not been donated. Use of thoseresources is recognised as an expense.

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118


2.8 EMPLOYEE ENTITLEMENTS

Liabilities to employees comprise salaries, allowances, annual leave, long serviceleave, superannuation, redundancies and military workers compensation.

Leave The liability in respect of annual leave for Australian Defence Force (ADF)personnel reflects an estimate of the total value of annual leave entitlements as at 30June 2000. The liability is recognised as the best estimate required to settle theobligation as at the reporting date. The provisions for long service leave in respect of the ADF personnel have beenmeasured with regard to the probability that long service leave will either be takenor have to be paid. They also take into account employee attrition rates andcertified pay increases. The determination of the current component is based onactual leave taken in 1999-2000. The provision is measured as the estimatedpresent value of future cash outflows to be made in respect of ADF members. Superannuation on-costs have been added to the provisions for annual leave andlong service leave, in respect of both ADF and civilian employees. No provision has been made for sick leave entitlements.

Redundancies The provisions for redundancies for both ADF and civilian personnel arise fromobligations flowing through redundancy programs and ongoing market testing ofvarious Defence activities under the Commercial Support Program. Thecalculation does not include efficiency savings expected to flow from normalattrition where staff are not replaced. Contingent redundancies have been includedin the Schedule of Contingencies and are generally contingent upon the results ofmarket testing.

Military workers compensation The provision for military workers compensation reflects the actuarial assessmentof the liability for outstanding claims for injuries incurred up to the reporting date. In 1999-2000 a reduction of $256m is reported in Note 7 – Employee expenses,against Workers Compensation – Military. The difference between years can beattributed to a large increase to the provision being booked in 1998-1999 (up$218m) and a downward adjustment being booked for 1999-2000 (down $40m).Defence calculated the 30 June 1999 provision, whereas the AustralianGovernment Actuary updated the 30 June 2000 provision. The Australian Government Actuary has been engaged by Defence to providefuture annual updates of the provision.


119


Employee workplace agreements As a result of workplace agreements in place for non-executive Defence employeesa number of pay increases for both Civilian and Military personnel are due to bepaid in ensuing years. Civilians are to receive a 2.5% increase on 29 March 2001.Military personnel are due increases of 2% on 6 July 2000, 2% on 1 March 2001,2% on 8 November 2001 and 1.5% on 9 May 2002. The impact of these increaseshas not been included in 30 June 2000 Employee Provisions, but will be recognisedwhen the pay increases take effect.

2.9 CASH

For the purposes of the Statement of Cash Flows, cash includes notes and coinsheld and deposits held at call with a bank or financial institution.

2.10 DEVOLVED BANKING

The responsibility for managing banking and investing Departmental funds wasdevolved to Commonwealth agencies on 1 July 1999, enabling the Department toinvest money on a restricted basis and retain interest earned during the year. Inprior years the Department’s funds were managed centrally by the Department ofFinance and Administration. Therefore, there are no comparative data for interestfrom term deposits as detailed in Note 5.

2.11 FINANCIAL INSTRUMENTS

Accounting policies for financial instruments are detailed in Note 29.

2.12 BAD AND DOUBTFUL DEBTS

A provision is maintained for doubtful debts. The provision is calculated as apercentage of accounts receivable based on an analysis of the expected realisationof outstanding debts and write-off experience from prior years. Bad debts arewritten off as they are identified.

2.13 PROPERTY, PLANT AND EQUIPMENT

Asset recognition threshold A capitalisation threshold of $25,000 has been adopted for all classes of property,plant and equipment. Items below this threshold may be recognised as groupassets if, as a group, they are valued over $25,000.

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120


Revaluations All classes of property, plant and equipment not under construction with valuesgreater than established revaluation thresholds are progressively revalued inaccordance with the ‘deprival’ method of valuation over a three-year revaluationcycle. The current progressive revaluation cycle began on 1 July 1999 and will endon 30 June 2002. Any total net revaluation increment or decrement in relation toan asset class is reflected in the Asset Revaluation Reserve. Exceptions, where thechange is reflected in the Departmental Operating Statement, occur when anincrement reverses a previous decrement that was expensed or the Reserve has noamount relating to an asset class against which a decrement can be charged. Assets within each class acquired after the valuation of the asset type within thecurrent revaluation cycle are reported at cost for the duration of the cycle unlesssignificant changes in the value of the asset have occurred, in which case the assetwill be subject to revaluation. Assets under construction are not revalued but are accounted for at cost and areseparately identified as ‘Under Construction’ in Note 18. The Department has implemented its progressive revaluations as outlined below.Land, buildings and infrastructure The selection of assets to be revalued in a particular reporting period is madeaccording to revaluation plans that are based on location and whether the asset hasbeen identified for disposal. Independent valuers revalue land, buildings andinfrastructure assets. Of $2,038.567m land held at valuation (market selling price) at 30 June 2000 (seeNote 18), $955.671m (1998-1999 $1,979.363m) is carried at a valuation determinedin 1999-2000. Because of restrictions on the disposal of land, most is valued atdeprival value. In some instances, the nominal highest and best use value for theland is greater. The highest and best use value for land valued in 1999-2000 is$1,331.716m. The additional value relates to a small number of properties, anddoes not take account of any rebuilding or relocation costs that would arise on thedisposal of any property. The following valuers from the Australian Valuation Office undertook revaluationsof land, buildings and infrastructure carried out in 1999-2000:

Anthony Galvin AAPI, Brendan Barber AAPI, Bruce Pearce AAPI, C Fratzia AAPI,Cameron Heath AAPI, Chris Tuttle FAPI, Danny Bach PAAPI, David Bradford AAPI,David Conigrave AAPI, David Millie AAPI, Dennis Parkes AAPI, Frank AndreattaAAPI, Fred Marrone FAPI, Graeme Tosh FAPI, Graham Weaver AAPI, Helena EasonAAPI, Ian Flynn AAPI, Ian Krelle AAPI, J Chappell AAPI, J Persse FAPI, J TrevethickAAPI, James Baxter AAPI, Jim Power AAPI, John Bell AAPI, John Bishop AAPI, JohnFlynn AAPI, John Forson AAPI, John Hackett AAPI, John Picard AAPI, John SaxelbyAAPI, John Starr AAPI, John Telford FRICS FAPI, Kim Adams AAPI, MatthewShadbolt AAPI, Mervyn Booth AAPI, Michael Becker FAPI, Michael Dyson AAPI,Mike West AAPI, Norm Jackson AAPI, Paul Farnham AAPI, Paul Lee GAPI, Peter BoxFAPI, Phil Keim AAPI, Phillip Harris AAPI, R Andrews AAPI, R Lewis AAPI, RobertRixon AAPI, Robert Russo AAPI, Ross Burvill AAPI, Stephen Thredgold AAPI, SteveGreenhalgh AAPI, T Collins AAPI and Warren Day AAPI.


121


Specialist military equipment The selection of specialist military equipment assets to be revalued in a particularreporting period is made according to revaluation plans that are based on forceelement groups. Defence personnel, including personnel with knowledge of capitalprocurement activities and personnel with specialist knowledge of Defence strategicand capability requirements in general and for the equipment being valued, carryout these valuations. Where Defence has a continuing requirement for the functions performed by anasset, the deprival valuation framework normally requires that assets are valued atdepreciated replacement cost. To derive that value for an asset type, the functionsof the particular specialist military equipment, in Defence strategic terms, areidentified. A proportion, reflecting for example the relative time applied to aparticular function or the relative importance of that function in the asset, is thenassessed for each function. A suitable “replacement” or reference asset is thenidentified, which could perform these functions and any other required Defencestrategic functions. The reference asset is compared to the existing asset in termsof their capability to perform the identified functions. The assessments of relativecapabilities in functions, and the assessments of the importance and time allocatedto those functions, are combined to give an overall assessment of the existing assetagainst the reference asset in performing the required functions. This relativeassessment is applied to the new cost of the reference asset to determine a grossvalue for the existing asset. An assessment of the total and remaining useful life ofthe existing asset is then used to determine the appropriate accumulateddepreciation amount.

Recoverable amount test Schedule 2 to the FMA Orders requires the application of the recoverable amounttest to Departmental assets in accordance with AAS 10 Accounting for the Revaluation ofNon-Current Assets. Since revenue received by Defence is almost totally fromappropriations, and these are not associated with individual assets or groups ofassets, the test was applied to all Departmental assets as one group. Other sources ofrevenue, and the assets associated with them, are insignificant. Expected net cashflows used in the test were not discounted to their present value. Cash flows from Government are based on the rolling Five Year Defence Programagreed with Government and the Department of Finance and Administration. Inthe absence of indications to the contrary, levels of funding reflected in the currentprogram were assumed, for the purpose of the test, to continue or not to fall fasterthan operating costs for the relevant period. This period may approach thirty yearsin relation to some Defence assets.

Section Two

122

Department of DefenceNOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2000 Future Defence funding is undergoing a significant review following the issue bythe Government of the Public Discussion Paper Defence Review 2000 – Our FutureDefence Force in June 2000. Consideration of additional funding for future assetprocurement is not relevant to the test. It is likely that future operating costs,taking account of achievable cost reductions, will be covered by future funding foroperations. That funding would include an amount based on depreciation expensefor existing assets. Note 2.1 refers to the dependence of the Department on futuresupport from the Government and Parliament.

Depreciation and amortisation Items of property, plant and equipment are written-down to their estimated residualvalues over their estimated useful lives to the Department using in all cases the‘straight-line’ method of depreciation from the time they are first held ready for use.Leasehold improvements are amortised on a straight-line basis over the lesser ofthe estimated useful life of the improvements or the unexpired period of the lease. Depreciation/amortisation rates (useful lives) and methods are reviewed at eachbalance date and necessary adjustments are recognised in the current, or currentand future reporting periods, as appropriate. Residual values are re-estimated for achange in prices only when assets are revalued. Depreciation and amortisation rates applying to each class of depreciable asset arebased on the following useful lives:

Class 1999-2000 1998-1999

Buildings 5 to 100 years 5 to 100 yearsInfrastructure 5 to 100 years 5 to 100 yearsSpecialist military equipment 2 to 54 years 2 to 54 yearsOther plant and equipment 2 to 30 years 2 to 10 yearsEquipment under finance lease Lease term Lease termAdministered plant and equipment 30 years 30 years

The aggregate amount of depreciation allocated for each class of asset during thereporting period is disclosed in Note 10.

Asset disposals An amount has been provided for decontamination costs associated with propertieslisted for disposal. This provision has been determined on the basis of remediationsurveys and technical assessments. The gain or loss on disposal of property, plant and equipment is determined as thedifference between the carrying amount of the asset at the time of disposal and theproceeds of disposal.


123


2.14 INTANGIBLES

Intangible assets of Defence include software (purchased, enhanced and internallydeveloped), patents, licences, computer models, copyright and other intellectualproperty. Defence carries reliably measured intangible assets at cost or replacement valuewhere original costs are unknown. Acquired intellectual property forms part of the acquisition of particular tangibleassets and in such cases is reflected in the value reported for property, plant andequipment in the Departmental Balance Sheet. Defence has not recognised in the Departmental Balance Sheet intangible assets thatcannot be measured reliably. These assets include some internally developedsoftware and certain items of intellectual property of a Defence-specific nature.

2.15 INVENTORY

As historic cost information is not available in all instances, inventory not held forsale is brought to account at average cost, replacement cost or last purchase cost.Costs are assigned to issued inventory on the same basis. Provision for inventory obsolescence Inventory is considered obsolete or obsolescent based upon current inventorylevels and expected usage of such assets in light of expected equipment platformphaseouts.

2.16 LEASES

Assets held under finance leases are brought to account at the present value ofminimum lease payments at lease inception. Operating lease payments are treatedas expenses when incurred. Lease incentives taking the form of ‘free’ leasehold improvements and rent-freeperiods are recognised as liabilities in accordance with Urgent Issues GroupAbstract 3, Lessee accounting for lease incentives under a non-cancellable operating lease. Theseliabilities are reduced by allocating lease payments between rental expense and areduction of the liability.

2.17 INVESTMENTS

Investments held on behalf of the Commonwealth are included as Administeredassets and are brought to account as the value of the Commonwealth’s share of thenet assets of the entity as at 30 June 1997. This is a requirement of Schedule 2 tothe FMA Orders.

2.18 TAXATION

The Department’s activities are exempt from all forms of taxation except fringebenefits tax and the goods and services tax.

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124


2.19 CAPITAL USE CHARGE

From 1 July 1999, a Capital Use Charge of 12% has been imposed by theCommonwealth on net Departmental assets. The charge is adjusted to take accountof asset gifts, revaluation increments and adjustments made under the transitionalprovisions set out in AAS 29 Financial Reporting by Government Departments, section15.3, during 1999-2000. In determining the price of outputs the capital use charge is taken into account.The corresponding payment to the Commonwealth may be greater or less than thenominal funding for this item in the output price.

2.20 INSURANCE

Since 1 July 2000 Defence has had insurance to cover its legal liabilities and iscurrently negotiating with COMCOVER to insure assets. Premiums for civilianworkers’ compensation are paid to COMCARE which assumes liability in respectof payments made under the Safety, Rehabilitation and Compensation Act 1988. Thebenefit costs for military compensation are met by the Department on an emergingcost basis.

2.21 SUPERANNUATION

The Defence Force Retirement and Death Benefits (DFRDB) Scheme, theDefence Forces Retirement Benefits (DFRB) Scheme and the MilitarySuperannuation and Benefits Scheme (MSBS) are defined benefit superannuationplans for ADF members. ADF employer superannuation contributions, pensionpayments, member contributions and the provision for unfunded superannuationare reflected in the Administered accounts. Acting upon advice received from DoFAin 1999-2000, Defence has included for the first time the DFRDB and MSBSemployer contributions. Previous years have reported only the DFRDB and MSBSmember contributions. The military superannuation provision has been adjustedupward by $1,400m for 30 June based upon advice received from the AustralianGovernment Actuary. Civilian employees of the Department contribute to the CommonwealthSuperannuation Scheme or Public Sector Superannuation Scheme. No liability isshown for civilian superannuation in the Departmental Balance Sheet as the liability iscarried by COMSUPER. Provisions are also included to cover the unfunded superannuation liability,together with annual leave and long service leave liabilities for certain University ofNew South Wales staff employed at the Australian Defence Force Academy.


125


2.22 COMPARATIVE FIGURES

Comparative figures have been adjusted to conform to changes in presentation inthese financial statements where possible. Comparative figures are not presented inNote 28 Appropriations and Note 38 Reporting against outcomes which are required in1999-2000 for the first time with the implementation of the accrual budgeting,accounting and reporting framework.

2.23 TRANSITIONAL PROVISIONS

Australian Accounting Standard AAS 29 Financial Reporting by GovernmentDepartments contains transitional provisions. The provisions require that, wherebefore 30 June 2000, pre-existing but previously unidentified assets or liabilities arerecognised for the first time, or corrections are made to amounts previouslyrecognised as assets or liabilities, the corresponding adjustment must be applieddirectly to accumulated results. Note 26 Analysis of equity, details the net assetmovements in accordance with the transitional provisions.

Section Two

126


1999-2000 1998-1999$’000 $’000

Note 3 Revenues from GovernmentGeneral

Price of outputs 15,205,060* 10,980,041Resources received free of charge 1,898 1,886

Total general appropriations 15,206,957 10,981,927

East Timor deployment 607,467* -

Total revenues from Government 15,814,424 10,981,927

* The 1999-2000 price of outputs includes a notional $4,536 million of funding forCapital Use Charge. The East Timor appropriation includes $9.409 million of fundingfor Capital Use Charge. There was no Capital Use Charge and associated funding in1998-1999 (see Note 2.19).

Administered Revenues from GovernmentAdministered drawdowns - 3,642Special appropriations 1,235,154 1,182,944

Total administered revenues fromGovernment 1,235,154 1,186,586

Note 4 Sale of Goods and ServicesRevenues from foreign Governments 30,628 -Housing rentals 105,045 -Rental of Defence property 6,283 4,396Sale of land and buildings 959 -Sale of surplus inventory 6,612 8,058Sale of other Defence assets 73,782 24,243Rations and quarters 29,140 138,582Other goods and services 44,318 103,668

Total sale of goods and services 296,766 278,947

Note 5 Interest and DividendsTerm deposits 25,803 -Other accounts 5,189 187

Total interest and dividends 30,992 187


127


1999-2000 1998-1999$’000 $’000

Note 5 Interest and Dividends (continued)

Administered Interest and DividendsAdministered dividends

Defence Housing Authority 21,984 -

Administered interestADI Capital Debt - 3,397Interest on Foreign Military Sales advance 2,665 4,717

Total administered interest 2,665 8,115

Total administered interest and dividends 24,649 8,115

Note 6 Other RevenueRevaluation increments - 445,916Woomera revenue on consolidation 6,993 9,948Other minor revenues 23,553 21,642

Total other revenue 30,546 477,506

Administered Other Sources of Non TaxationRevenue

DFRDB contributions (see Note 2.21) 252,807 99,602MSBS contributions (see Note 2.21) 332,111 -Revenue from the Departmental entity 1,766 -Foreign governments and the United Nations

reimbursements for East Timor79,520 -

Total administered other sources of nontaxation revenue 666,204 99,602

Note 7 Employee ExpensesSalaries and wages - military 2,353,519 2,514,412Salaries and wages - civilian 693,486 773,210Overseas salaries and allowances 191,417 91,813Superannuation - military 528,394 550,624Superannuation - civilian 112,943 106,600Medical and dental - military 69,520 69,044Medical and dental - civilian 896 919Workers compensation - military 71,420 326,669COMCARE premiums 11,877 12,758Housing - military 288,213 397,552Fringe Benefits Tax 202,614 213,227Other allowances 281,774 103,434Redundancies - military 6,364 6,591Redundancies - civilian 17,883 33,159Other employee expenses 134,582 86,361

Total employee expenses 4,964,902 5,286,374

Section Two

128


1999-2000 1998-1999$’000 $’000

Note 7 Employee Expenses (Personal Benefits)

Administered Personal BenefitsRetention Benefits 18,865 -DFRDB/DFRB (see Note 2.21) 1,408,528 1,184,769MSBS (see Note 2.21) 1,205,858 404,377

Total administered personal benefits 2,633,250 1,589,146

Note 8 Suppliers ExpensesGoods and services 419,641 424,195Research and development 66,445 20,955Property disposals 52,635 19,122Overseas travel 48,190 38,202General travel 156,540 162,923Freight and storage 42,899 41,697Removal costs 116,868 112,429Communications and information technology 126,043 265,519Utilities 91,825 103,981Facilities operations 378,353 508,071Consultants and professional services 189,597 84,076Woomera consolidation 13,666 14,684Advertising 35,748 17,817Assistance to States/Territories 8,611 6,822Training 131,270 114,884Security services 21,314 25,034Repair and overhaul 690,732 473,964Inventory consumption 618,195 700,398Purchases not capitalised under the policythresholds 160,328 -General consumables 296,936 121,559Operating leases 181,205 127,784

Total suppliers expenses 3,847,042 3,384,118

Administered Suppliers ExpensesYoung Endeavour operations

Salaries and allowances - 431Supply and support - 1,030Other operating costs - 349

Total administered suppliers expenses - 1,810


129


1999-2000 1998-1999$’000 $’000

Note 9 Subsidies, Benefits and GrantsGrants to the Royal United Services Institute 87 95Grant to the Defence Family Support Program 3,072 1,289Research and other grants 713 784

Total subsidies, benefits and grants 3,872 2,169

Administered Subsidies, Benefits and GrantsDefence Home Owner Subsidy 4,625 -

Note 10 Depreciation and AmortisationBuildings 255,002 250,747Specialist military equipment 1,252,720 988,994Infrastructure, other plant and equipment 280,157 213,261Intangibles 2,295 4,877Software 5,934 -Assets under finance lease 4,193 12,565

Total depreciation and amortisation 1,800,300 1,470,444

Administered Depreciation and AmortisationDepreciation - STS Young Endeavour - 439

Note 11 Write Down of AssetsFinancial assets

Written off cash 54 212Write down of loan to ADI 93,000 -Bad and doubtful debts 547 442

Total financial assets 93,601 654

Non financial assetsLand and buildings 21,472 99,259Specialist military equipment 45,863 392,384Other infrastructure, plant and equipment 45,870 170,845Intangibles - 191Inventories

Write down of inventories 175,623 62,807Net inventory obsolescencewritedown/(writeback) (103,889) 325,836

Total non financial assets 184,940 1,051,321

Assets under construction not capitalised ondelivery into use due to policy threshold

199,632 287,774

Total write down of assets 478,173 1,339,748

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130


1999-2000 1998-1999$’000 $’000

Note 11 Write Down of Assets (continued)

Administered Write Down of AssetsWrite down of accrued interest on loan to ADI 2,470 -

Note 12 Interest and Other Financing CostsFinance leases 505 3,023Bank charges 27 24

Total Interest and other financing costs 532 3,047

Note 13 Other ExpensesDemolition of Defence properties 21,814 -Act of Grace and Defective Administration 137 1,619ADF compensation 1,014 1,085Other miscellaneous 5,350 2,217

Total other expenses 28,315 4,921

Administered Other ExpensesExpense - payment to OPA 1,766 -Australian Defence Force Academysuperannuation (movement in the provision)

(737) 434

Total administered other expenses 1,028 434

Note 14 Net Operating Surplus/(Deficit)

The net operating position after payment of the Capital Use Charge of $4,599.955million is $716.513 million (see Note 2.19)

Note 15 CashCash on hand 5,389 1,682Cash at bank 97,524 85,175Term deposits 35,000 -

Total cash 137,913 86,857

Administered CashCash at bank 207 -


131


1999-2000 1998-1999$’000 $’000

Note 16 ReceivablesCurrent receivables

Advances and loans 266 93,257Interest 1,262 -Receivables from sale of capital assets 82,563 80,288Goods and services 60,539 13,899Other receivables 27,761 12,070

Total current receivables 172,391 199,515

Non current receivablesAdvance - FMS base level funding 67,159 76,138Receivables from sale of capital assets 125,002 170,938Goods and services 751 -

Total non current receivables 192,913 247,076

Total receivables 365,304 446,592Less: Provision for doubtful debts (1,858) (1,408)

Total net receivables 363,446 445,184Receivables are aged as follows

Not overdue 158,863 183,626Overdue by:

less than 30 days 2,427 67030 to 60 days 1,341 1,47560 to 90 days 2,575 13,744more than 90 days 7,184 -

Total current receivables 172,391 199,515

Administered ReceivablesReceivables from foreign governments and theUnited Nations for East Timor reimbursements 79,511 -Interest on loans - 2,470Receivable from the Departmental entity 1,766 -Military superannuation 3,047 2,337

Total administered receivables 84,323 4,807

Note 17 Administered InvestmentsShares in Commonwealth companies

Defence Technologies of Australia - 6Defence Housing Authority 1,785,029 1,785,029ADI - 318,509

Total administered investments 1,785,029 2,103,544

The Commonwealth interest in these entities:Defence Technologies of Australia - the Commonwealth liquidated its 100%interest in Defence Technologies of Australia.Defence Housing Authority - 100%.ADI - the Commonwealth sold its 100% interest in ADI.

The principal activity of Defence Housing Authority is:To provide total housing services that meet Defence operational and client needs.

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9,45

9)(3

9,45

9)1,

700,

403

23,5

551,7

23,9

58-

1,684

,499

Ass

ets t

rans

ferr

ed o

ut-

(2,4

65)

(2,6

21)

(5,0

87)

- (5

,087

)Re

class

ifica

tions

8,10

28,

102

(8,1

02)

(8,10

2)-

-W

rite

offs

(36,

096)

(36,

096)

(1,7

15,5

58)

(228

,938

)(1

,944

,496

)-

(1,9

80,5

92)

Disp

osals

(726

)(7

26)

(93,

704)

(20,

778)

(114

,482

)-

(115

,208

)O

ther

mov

emen

ts(8

,167

)(8

,167)

573,

557

573,

557

-56

5,39

0Ac

cum

ulat

ed d

epre

ciat

ion

at 3

0 Ju

ne 2

000

103,

611

2,67

7,93

12,

781,5

4216

,230

,492

2,18

6,15

418

,416

,645

17,3

7023

,789

41,15

921

,239

,347

Net

val

ue a

t 30

June

200

02,

062,

310

5,54

3,14

87,

605,

459

29,19

6,80

13,

815,

427

33,0

12,2

2871

,667

18,5

9690

,263

40,7

07,9

50

132

Section Two

Dep

artm

ent o

f Def

ence

NO

TE

S T

O T

HE

FIN

ANCI

AL S

TAT

EM

EN

TS

for th

e yea

r end

ed 3

0 Ju

ne 2

000

Not

e 18

Ana

lysi

s of P

rope

rty, P

lant

, Equ

ipm

ent a

nd In

tang

ible

s (con

tinue

d)

PRO

PER

TY,

PLA

NT

AND

EQ

UIP

ME

NT

– AT

COST

Land

Build

ings

Tot

al la

ndan

d bu

ildin

gsSp

ecia

list

mili

tary

equi

pmen

t(S

ME

)

Oth

er p

lant

and

equi

pmen

t

Infra

stru

ctur

eT

otal

SM

E,

infra

stru

ctur

e,pl

ant a

ndeq

uipm

ent

Tot

al

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

As a

t 30

June

200

0G

ross

valu

e –

unde

r con

stru

ctio

n-

177,

200

177,

200

11,4

39,6

853,

094

69,7

7811

,512

,557

11,6

89,7

57G

ross

valu

e –

in u

se23

,743

202,

271

226,

014

3,11

3,12

81,

254,

993

95,9

514,

464,

072

4,69

0,08

6A

ccum

ulat

ed d

epre

ciatio

n-

(11,

506)

(11,5

06)

(1,2

11,0

02)

(515

,055

)(4

,547

)(1

,730

,604

)(1

,742

,110)

Tot

al n

et v

alue

– a

t cos

t23

,743

367,

965

391,7

0813

,341

,811

743,

032

161,1

8214

,246

,025

14,6

37,7

33As

at 3

0 Ju

ne 19

99G

ross

valu

e –

unde

r con

stru

ctio

n-

319,

590

319,

590

10,0

29,4

762,

274

91,9

4810

,123,

698

10,4

43,2

88G

ross

valu

e –

in u

se24

,221

120,

420

144,

641

949,

675

697,

421

59,6

471,7

06,7

431,8

51,3

84A

ccum

ulat

ed d

epre

ciatio

n-

(2,3

01)

(2,3

01)

(277

,212

)(3

50,8

81)

(1,6

42)

(629

,735

)(6

32,0

36)

Tot

al n

et v

alue

– a

t cos

t24

,221

437,

709

461,9

3010

,701

,939

348,

814

149,

953

11,2

00,7

0611

,662

,636

PRO

PER

TY,

PLA

NT

AND

EQ

UIP

ME

NT

UN

DE

R F

INAN

CE L

EAS

E -

AT C

OST

Prop

erty

,pl

ant a

ndeq

uipm

ent

$'00

0As

at 3

0 Ju

ne 2

000

Gro

ss v

alue

974

Acc

umul

ated

amor

tisat

ion

(384

)T

otal

net

val

ue59

0As

at 3

0 Ju

ne 19

99G

ross

valu

e12

5,17

7A

ccum

ulat

ed am

ortis

atio

n(1

20,6

64)

Tot

al n

et v

alue

4,51

3

133


Dep

artm

ent o

f Def

ence

NO

TE

S T

O T

HE

FIN

ANCI

AL S

TAT

EM

EN

TS

for th

e yea

r end

ed 3

0 Ju

ne 2

000

Not

e 18

Ana

lysi

s of P

rope

rty, P

lant

, Equ

ipm

ent a

nd In

tang

ible

s (con

tinue

d)

PRO

PER

TY,

PLA

NT

AND

EQ

UIP

ME

NT

- AT

RE

PLAC

EM

EN

T VA

LUE

Build

ings

-In

depe

nden

tva

luat

ion

Spec

ialis

tM

ilita

ryE

quip

men

t(S

ME

)-O

ffice

rsva

luat

ion

Oth

er P

lant

and

Equ

ipm

ent

- Offi

cers

valu

atio

n

Infra

stru

ctur

e -

Inde

pend

ent

valu

atio

n

Tot

al S

ME

,In

frast

ruct

ure,

Plan

t and

Equ

ipm

ent

Tot

al

$'00

0$'

000

$'00

0$'

000

$'00

0$'

000

As a

t 30

June

200

0G

ross

valu

e - p

revi

ous r

evalu

atio

n5,

094,

322

12,4

99,9

0067

,013

2,56

4,39

915

,131,3

1220

,225

,634

Acc

umul

ated

dep

recia

tion

(1,8

69,4

05)

(7,3

40,7

14)

(28,

042)

(1,0

12,4

79)

(8,3

81,2

35)

(10,

250,

640)

Net

val

ue -

prev

ious

reva

luat

ion

3,22

4,91

75,

159,

186

38,9

711,5

51,9

206,

750,

077

9,97

4,99

4G

ross

valu

e - c

urre

nt c

ycle

2,50

0,03

918

,374

,580

101,

887,

771

20,2

62,3

6122

,762

,400

Acc

umul

ated

dep

recia

tion

(742

,677

)(7

,678

,776

)-

(605

,640

)(8

,284

,416

)(9

,027

,093

)N

et v

alue

- cu

rrent

cyc

le1,7

57,3

6210

,695

,804

101,2

82,13

111

,977

,945

13,7

35,3

07T

otal

net

val

ue4,

982,

279

15,8

54,9

9038

,981

2,83

4,05

118

,728

,022

23,7

10,3

01As

at 3

0 Ju

ne 19

99G

ross

valu

e - p

revi

ous r

evalu

atio

n14

6,57

41,

348,

998

32,0

83-

1,381

,081

1,527

,655

Acc

umul

ated

dep

recia

tion

(146

,574

)(4

85,7

59)

(20,

937)

-(5

06,6

96)

(653

,270

)N

et v

alue

- pr

evio

us re

valu

atio

n-

863,

239

11,14

6-

874,

385

874,

385

Gro

ss v

alue

- cur

rent

cyc

le7,

220,

893

26,9

38,4

3122

,346

4,33

2,74

631

,293

,523

38,5

14,4

16A

ccum

ulat

ed d

epre

ciatio

n(2

,252

,504

)(1

3,51

0,98

3)(5

08)

(1,5

04,0

45)

(15,

015,

536)

(17,

268,

040)

Net

val

ue -

curre

nt c

ycle

4,96

8,38

913

,427

,448

21,8

382,

828,

701

16,2

77,9

8721

,246

,376

Tot

al n

et v

alue

4,96

8,38

914

,290

,687

32,9

842,

828,

701

17,15

2,37

222

,120,

761

134

Section Two

Dep

artm

ent o

f Def

ence

NO

TE

S T

O T

HE

FIN

ANCI

AL S

TAT

EM

EN

TS

for th

e yea

r end

ed 3

0 Ju

ne 2

000

Not

e 18

Ana

lysi

s of P

rope

rty, P

lant

, Equ

ipm

ent a

nd In

tang

ible

s (con

tinue

d)

PRO

PER

TY,

PLA

NT

AND

EQ

UIP

ME

NT

- AT

MAR

KET

VAL

UE

SE

LLIN

G P

RIC

E

Land

-In

depe

nden

tva

luat

ion

Build

ings

-In

depe

nden

tva

luat

ion

Tot

al la

nd a

ndbu

ildin

gs -

Inde

pend

ent

valu

atio

n

Infra

stru

ctur

e -

Inde

pend

ent

valu

atio

n

Tot

al

$'00

0$'

000

$'00

0$'

000

$'00

0As

at 3

0 Ju

ne 2

000

Gro

ss v

alue

- pre

viou

s rev

aluat

ion

1,18

6,50

722

1,81

51,4

08,3

2250

,104

1,458

,426

Acc

umul

ated

dep

recia

tion

-(4

4,64

5)(4

4,64

5)(1

6,64

2)(6

1,287

)N

et v

alue

- pr

evio

us re

valu

atio

n1,1

86,5

0717

7,17

01,3

63,6

7733

,462

1,397

,139

Gro

ss v

alue

- cur

rent

cyc

le95

5,67

125

,432

981,1

038,

468

989,

571

Acc

umul

ated

dep

recia

tion

-(9

,699

)(9

,699

)(3

,749

)(1

3,44

8)N

et v

alue

- cu

rrent

cyc

le95

5,67

115

,733

971,4

044,

719

976,

123

Prov

isio

n fo

r lan

d de

cont

amin

atio

n(1

03,6

11)

-(1

03,6

11)

-(1

03,6

11)

Tot

al n

et v

alue

2,03

8,56

719

2,90

32,

231,4

7038

,181

2,26

9,65

1As

at 3

0 Ju

ne 19

99G

ross

valu

e - p

revi

ous r

evalu

atio

n10

6,39

74,

131

110,

528

40,7

2215

1,250

Acc

umul

ated

dep

recia

tion

-(4

,131

)(4

,131)

(10,

096)

(14,

227)

Net

val

ue -

prev

ious

reva

luat

ion

106,

397

-10

6,39

730

,626

137,

023

Gro

ss v

alue

- cur

rent

cyc

le1,

979,

364

337,

827

2,31

7,19

124

,427

2,34

1,618

Acc

umul

ated

dep

recia

tion

-(8

5,60

1)(8

5,60

1)(8

,216

)(9

3,81

7)N

et v

alue

- cu

rrent

cyc

le1,9

79,3

6425

2,22

62,

231,5

9016

,211

2,24

7,80

1Pr

ovis

ion

for l

and

deco

ntam

inat

ion

(111

,778

)-

(111

,778

)-

(111

,778

)T

otal

net

val

ue1,9

73,9

8325

2,22

62,

226,

209

46,8

372,

273,

046

The

reva

luat

ions

of L

and,

Bui

ldin

gs a

nd In

fras

truct

ure

durin

g th

e cu

rren

t cyc

le w

ere

carr

ied

out i

n ac

cord

ance

with

the

prog

ress

ive

reva

luat

ion

polic

y st

ated

in N

ote

2 an

d w

ere

all in

depe

nden

tly u

nder

take

n by

the

Aus

tralia

n V

aluat

ion

Offi

ce.

The

reva

luat

ions

of S

peci

alist

Mili

tary

Equ

ipm

ent d

urin

g th

e cu

rren

t cyc

le w

ere

carr

ied o

ut in

acc

orda

nce

with

the

prog

ress

ive

reva

luat

ion

polic

y st

ated

inN

ote

2 an

d w

ere

all u

nder

take

n by

dep

artm

enta

l offi

cers

. Th

ese

offic

ers a

re re

cogn

ised

expe

rts in

thei

r fiel

d of

ope

ratio

ns a

nd a

re su

ppor

ted

by a

rang

e of

logi

stics

per

sonn

el w

ho p

rovi

de sp

ecifi

c ad

vice

and

supp

ort.

135


Dep

artm

ent o

f Def

ence

NO

TE

S T

O T

HE

FIN

ANCI

AL S

TAT

EM

EN

TS

for th

e yea

r end

ed 3

0 Ju

ne 2

000

Not

e 18

Ana

lysi

s of P

rope

rty, P

lant

, Equ

ipm

ent a

nd In

tang

ible

s (con

tinue

d)

INT

ANG

IBLE

SSo

ftwar

epa

ckag

esw

ithm

odifi

catio

ns

Pate

nts,

copy

right

s,lic

ence

s, et

c

Tot

al

$'00

0$'

000

$'00

0As

at 3

0 Ju

ne 2

000

Gro

ss v

alue

- und

er c

onst

ruct

ion

--

-In

use

- at

cos

t82

,120

5,37

087

,490

In u

se -

at re

plac

emen

t valu

e6,

917

37,0

1443

,931

Acc

umul

ated

am

ortis

atio

n(1

7,37

0)(2

3,78

9)(4

1,159

)T

otal

net

val

ue -

at c

ost

71,6

6718

,595

90,2

62As

at 3

0 Ju

ne 19

99G

ross

valu

e - u

nder

con

stru

ctio

n21

,907

-21

,907

In u

se -

at c

ost

19,0

265,

092

24,11

8In

use

- at

repl

acem

ent v

alue

6,91

737

,014

43,9

31A

ccum

ulat

ed a

mor

tisat

ion

(11,

203)

(21,

477)

(32,

680)

Tot

al n

et v

alue

- at

cos

t36

,647

20,6

2957

,276

136

Section Two

Dep

artm

ent o

f Def

ence

NO

TE

S T

O T

HE

FIN

ANCI

AL S

TAT

EM

EN

TS

for th

e yea

r end

ed 3

0 Ju

ne 2

000

Not

e 18

Adm

inis

tere

d An

alys

is o

f Pro

perty

, Pla

nt, E

quip

men

t and

Inta

ngib

les

Land

Build

ings

Tota

l Lan

d an

dBu

ildin

gsSp

ecia

list

Mili

tary

Equ

ipm

ent

(SM

E)

Infra

stru

ctur

e,O

ther

Pla

ntan

d E

quip

men

t

Tota

l SM

E,

Infra

stru

ctur

e,Pl

ant a

ndE

quip

men

t

Com

pute

rSo

ftwar

eIn

tang

ible

sTo

tal

Com

pute

rSo

ftwar

e an

dIn

tang

ible

s

Tota

l

$'00

0$'

000

$'00

0$'

000

$'00

0$'

000

$'00

0$'

000

$'00

0$'

000

Gro

ss v

alue

at 1

July

1999

--

--

13,2

2913

,229

--

-13

,229

Gro

ss V

alue

– ad

just

men

ts(1

3,22

9)(1

3,22

9)(1

3,22

9)G

ross

val

ue -

adju

sted

bal

ance

1 Ju

ly 19

99-

--

--

--

-A

dditi

ons

--

--

Reva

luat

ion

incr

emen

t/(d

ecre

men

t)-

--

-A

sset

s tra

nsfe

rred

in/(

out)

--

--

Recla

ssifi

catio

ns-

--

-Ch

ange

in a

ccou

ntin

g po

licy

--

--

Writ

e of

fs-

--

-D

ispos

alsO

ther

mov

emen

ts-

--

-To

tal g

ross

val

ue a

t 30

June

200

0-

--

--

--

--

-Ac

cum

ulat

ed d

epre

ciat

ion

at 1

July

1999

--

--

4,83

04,

830

--

-4,

830

Acc

umul

ated

dep

recia

tion

- adj

ustm

ents

--

(4,8

30)

(4,8

30)

--

-(4

,830

)Ad

just

ed a

ccum

ulat

ed d

epre

ciat

ion

1 Jul

y 19

99-

--

--

--

-D

epre

ciatio

n/A

mor

tisat

ion

char

ge fo

r ass

ets h

eld a

t 1 Ju

ly-

--

--

Dep

recia

tion/

Am

ortis

atio

n ch

arge

for a

dditi

ons

--

--

Reva

luat

ion

incr

emen

t/(d

ecre

men

t)-

--

-A

sset

s tra

nsfe

rred

in/(

out)

--

--

Recla

ssifi

catio

ns-

--

-Ch

ange

in a

ccou

ntin

g po

licy

--

--

Writ

e of

fs-

--

-D

ispos

als-

--

-O

ther

mov

emen

ts-

--

-Ac

cum

ulat

ed d

epre

ciat

ion

at 3

0 Ju

ne 2

000

--

--

--

--

--

Net

val

ue a

t 30

June

200

0-

--

--

--

-

137


Section Two

138


1999-2000 1998-1999$’000 $’000

Note 19 InventoriesCurrent 694,144 668,340Non current 2,931,887 2,768,806Total inventory 3,626,031 3,437,146

Less: Provision for obsolescence (692,568) (935,231)Net inventories 2,933,463 2,501,915

Note 20 Other Non Financial AssetsCapital prepayments 621,105 830,355Non capital prepayments 57,931 82,283

Total other non financial assets 679,036 912,638

Note 21 DebtFinance leases

Current finance leases 286 11,480Non current finance leases 270 306

Total finance leases 556 11,785

Finance lease commitments are due for payment:Not later than one year 331 11,967Later than one year and not later than two years 138 259Later than two years and not later than five years 184 65Later than five years - -

653 12,290Less: Future finance charges (98) (505)

Total finance leases 556 11,785

Loans from future appropriations - 179,354

Total debt 556 191,139

Note 22 Employee ProvisionsAccrued salaries - military 65,529 48,622Accrued salaries - civilian 19,438 15,078Annual leave - military 374,703 337,625Annual leave - civilian 115,642 103,035Long service leave - military 599,690 529,374Long service leave - civilian 187,458 231,396Military compensation 1,031,000 1,070,448Superannuation - military 12,747 9,649Superannuation - civilian 2,804 2,013Redundancies - military 7,373 4,619Redundancies - civilian 1,947 12,063Employee taxation payables 30,264 -Other employee provisions 10,996 -

Total employee provisions 2,459,591 2,363,922


139


1999-2000 1998-1999$’000 $’000

Note 23 Administered Personal Benefits PayableDFRDB/DFRB liability (see Note 2.21) 4,755 30,591MSBS liability (see Note 2.21) 287 1,893Military superannuation provision (see Note 2.21) 24,600,000 23,200,000

Total personal benefits payable 24,605,042 23,232,484

Note 24 Supplier ProvisionsCapital trade creditors 245,189 210,111Non capital trade creditors 195,454 187,965Operating lease creditors 662 4,996Other creditors 61,070 45,797

Total supplier provisions 502,375 448,869

Note 25 Other ProvisionsFederation fund monies received in advance 64,653 66,000Lease incentive obligations 455 1,009Other liabilities 43,407 -

Total other provisions 108,515 67,009

Administered Other ProvisionsCurrent ADFA provisions 1,940 2,484Non Current ADFA provisions 21,752 21,945Payable to the OPA 1,766 -Other provisions 347 76

Total administered other provisions 25,804 24,505

Section Two

140


Note 26 Analysis of Equity - Departmental Accounts

AccumulatedResults

AssetRevaluation

Reserve

Capital Total Equity

$'000 $'000 $'000 $'000Equity balance - 30 June 1999 34,904,682 2,089,484 - 36,994,166Opening equity adjustments (see below) 1,274,258 1,830 - 1,276,088Adjusted opening equity - 1 July 1999 36,178,940 2,091,314 - 38,270,254Operating result and extraordinary items 5,316,468 5,316,468Capital Use Charge provided for/(paid) (4,599,955) (4,599,955)Asset revaluations -

Net revaluation - non financial assets -Net revaluation inc/(dec) – land 67,898 67,898Net revaluation inc/(dec) – buildings 96,060 96,060Net revaluation inc/(dec) – specialistmilitary equipment 1,817,717 1,817,717Net revaluation inc/(dec) - infrastructure,other plant and equipment 43,803 43,803

Total asset revaluations 2,025,477 2,025,477Capital Injection 687,170 687,170Equity at 30 June 2000 36,895,453 4,116,791 687,170 41,699,414

$’000

Adjustments to opening equityAssets recognised under AAS 29 transitional provisions (see Note 2.23) 1,278,278Derecognition of Woomera opening balance (10,588)Transfer of STS Young Endeavour from Administered entity (net book value) 6,568Transfer of STS Young Endeavour from Administered entity (revaluation reserve) 1,830

Total adjustments to opening equity 1,276,088


141


Note 26 Analysis of Equity - Administered Accounts

AccumulatedResults

AssetRevaluation

Reserve

AdministeredInvestments

Reserve

Total Equity

$'000 $'000 $'000 $'000

Equity balance - 30 June 1999 (23,245,613) 1,830 2,103,544 (21,140,239)Opening equity adjustments (see below) (6,568) (1,830) (6) (8,405)Adjusted opening equity - 1 July 1999 (23,252,182) - 2,103,538 (21,148,644)Contribution to Whole of Governmentresult (715,368) (715,368)Amount to Official Public Account (578,767) (578,767)Transfer to/(from) reserves - - (318,509) (318,509)

Equity at 30 June 2000 (24,546,316) - 1,785,029 (22,761,287)

Adjustments to opening investment reserve $'000Derecognition of Defence Technologies of Australia (6)Transfer of STS Young Endeavour to Departmental entity(net book value)

(6,568)

Transfer of STS Young Endeavour to Departmental entity (revaluationreserve) (1,830)

Total adjustments to opening investment reserve (8,405)

Section Two

142


1999-2000 1998-1999$’000 $’000

Note 27 Cash Flow ReconciliationReconciliation of operating surplus to net cash provided by operating activities

Operating surplus/(deficit) before capital useprovided for or paid

5,316,468 144,467

Depreciation and amortisation 1,800,300 1,470,444(Profit)/loss on sale of assets (3,675) 96,784Net (gain)/loss on foreign exchange (12,932) 6,475Net adjustment for recognition and write down ofproperty, plant and equipment and intangibles 736,695 950,452Assets not capitalised due to policy thresholds - 287,774Net revaluation (increment)/decrement - (445,916)Finance lease charges 505 -(Increase)/decrease in property, plant andequipment (8,167) -(Increase)/decrease in non capital receivables (38,838) (158,481)(Increase)/decrease in net inventories (19,170) 471,652(Increase)/decrease in non capital prepayments 24,352 27,102Increase/(decrease) in employee provisions 35,169 311,230Increase/(decrease) in supplier provisions 18,428 44,240Increase/(decrease) in other provisions 41,506 (488)Advance of appropriations (179,354) -Net carryovers - 1997-1998 appropriations - 22,000Net cash from operating activities 7,711,287 3,227,735

Administered Cash Flow ReconciliationReconciliation of net contribution to Whole of Government result to net cashprovided to operating activities

Net operating surplus/(deficit) (715,368) (297,526)Cash to the Official Public Account (578,767) (107,620)Depreciation/amortisation - 439Write down of assets 2,470 -(Increase)/decrease in non capital receivables (81,985) (97)Increase/(decrease) in personal benefits payable 1,372,558 -Increase/(decrease) in other provisions 1,299 404,804Net cash from administered operating activities 208 -


143


1999-2000 1998-1999$’000 $’000

Note 28 Appropriations

Annual appropriations for Departmental items(price of outputs)

Balance at 1 July 1999 -Appropriation Act (No 1) 1999-2000 14,277,978Appropriation Act (No 3) 1999-2000 747,728Funding for repayment of prior year borrowings 179,354FMA s31 revenues 590,037

Total appropriations available for the year 15,795,097 -Expenditures during the year 15,442,327Balance of appropriation for outputs at 30 June2000 352,770 -

Annual appropriations for Departmental nonrevenue items (Equity Injection)

Balance at 1 July 1999 -Appropriation Act (No 2) 1999-2000 1,278,230Appropriation Act (No 4) 1999-2000 -Agreed savings (591,060)

Total appropriations available for the year 687,170 -Expenditures during the year 687,170 -Balance of Equity Injection at 30 June 2000 - -

Special appropriations East Timor deploymentBalance at 1 July 1999 -

Appropriation (East Timor) Act 1999-2000 859,667

Total appropriations available for the year 859,667 -Refunds against appropriations (215,160)Expenditures during the year 607,548 -Balance of East Timor Appropriation at 30June 2000 36,959 -

Special appropriations (unlimited drawdowns)for administered items

Appropriation BudgetEstimate

ActualExpenditure

$’000 $’000

Special Appropriations (various DFRDB, DFRBand MSBS Acts)

1,949,673 1,843,814

Dep

artm

ent o

f Def

ence

NO

TE

S T

O T

HE

FIN

ANCI

AL S

TAT

EM

EN

TS

for th

e yea

r end

ed 3

0 Ju

ne 2

000

Not

e 29

- Fi

nanc

ial I

nstru

men

ts

Ter

ms,

cond

ition

s and

acc

ount

ing

polic

ies.

The

Dep

artm

ent's

acc

ount

ing

polic

ies,

incl

udin

g th

e te

rms a

nd c

ondi

tions

of e

ach

clas

s of f

inan

cial

asse

t, fin

anci

al lia

bilit

y an

d eq

uity

inst

rum

ent,

both

reco

gnise

d an

dun

reco

gnise

d as

at 3

0 Ju

ne 2

000,

are

as f

ollo

ws:

Fina

ncia

lin

stru

men

tsN

otes

Acco

untin

g po

licie

s and

Met

hods

(inc

ludi

ng re

cogn

ition

crite

ria a

nd m

easu

rem

ent b

asis

)N

atur

e of

und

erly

ing

inst

rum

ent (

incl

udin

g si

gnifi

cant

term

s & c

ondi

tions

affe

ctin

g th

e am

ount

, tim

ing

and

certa

inty

of c

ash

flow

s)Fi

nanc

ial A

sset

s

Fina

ncial

ass

ets a

re re

cogn

ised

whe

n co

ntro

l ove

r fut

ure

econ

omic

ben

efits

is e

stab

lishe

d an

d th

e am

ount

of t

he b

enef

itca

n be

relia

bly

mea

sure

d.Ca

sh15

Cash

incl

udes

cas

h on

han

d, a

t ban

k an

d re

serv

ed m

oney

hel

d in

the

OPA

. Cas

h he

ld in

fore

ign

curr

enci

es is

con

verte

d to

AU

Dat

the

exch

ange

rate

s rul

ing

at 3

0 Ju

ne 2

000.

The

Dep

artm

ent i

nves

ts fu

nds w

ith th

e Re

serv

e Ba

nk a

t call

and

on te

rm d

epos

it. D

aily

inte

rest

is e

arne

d on

Dep

artm

enta

l ban

kba

lance

s hel

d in

the

Rese

rve

Bank

usin

g ra

tes p

rovi

ded

byD

oFA

. A

t call

dail

y in

tere

st ra

tes r

ange

d fr

om 3

.75%

- 5.

00%

p.a.

and

term

dep

osit

inte

rest

rate

s ran

ged

from

4.6

8% -

5.95

%p.

a. In

tere

st is

paid

at m

onth

end

.Re

ceiv

able

s for

good

s and

serv

ices

16Re

ceiv

able

s are

car

ried

at n

omin

al am

ount

s les

s a p

rovi

sion

for

doub

tful d

ebts

. Th

e pr

ovisi

on is

a p

erce

ntag

e of

out

stan

ding

rece

ivab

les b

ased

on

analy

sis o

f the

reco

vera

bilit

y of

out

stan

ding

debt

s and

writ

e-of

f exp

erie

nce

from

prio

r yea

rs.

Rece

ivab

les a

re w

ith e

ntiti

es e

xter

nal t

o th

e Co

mm

onw

ealth

.Cr

edit

term

s are

30

days

(199

8-99

: 30

days

).

Rece

ivab

les -

FM

Stru

st a

ccou

nt16

The

balan

ce o

f the

Fed

eral

Rese

rve

Bank

acc

ount

is h

eld

atno

min

al am

ount

s in

USD

and

con

verte

d to

AU

D a

t bala

nce

date

.

Und

er th

e fo

reig

n m

ilita

ry sa

les p

rogr

am a

pre

scrib

ed a

mou

nt is

requ

ired

to b

e m

ainta

ined

in a

Fed

eral

Rese

rve

Bank

acc

ount

.

Rece

ivab

les -

sale

of

prop

erty

, plan

t and

equi

pmen

t

16Re

ceiv

able

s for

the

sale

of p

rope

rty, p

lant a

nd e

quip

men

t are

carr

ied

at n

omin

al am

ount

s.Te

rms a

nd c

ondi

tions

are

con

tract

ually

det

erm

ined

at t

he ti

me

of sa

le.

Thes

e co

nditi

ons v

ary

depe

ndin

g on

a ra

nge

of is

sues

that

are

neg

otia

ted

at th

e tim

e of

sale

.

144

Section Two

Dep

artm

ent o

f Def

ence

NO

TE

S T

O T

HE

FIN

ANCI

AL S

TAT

EM

EN

TS

for th

e yea

r end

ed 3

0 Ju

ne 2

000

Not

e 29

- Fi

nanc

ial I

nstru

men

ts (c

ontin

ued)

Reco

gnise

d fin

anci

alin

stru

men

tsN

otes

Acc

ount

ing

polic

ies

Term

s and

con

ditio

ns

Fina

ncia

l lia

bilit

ies

Fina

nce

leas

e lia

bilit

y21

The

leas

e lia

bilit

y is

acco

unte

d fo

r in

acco

rdan

ce w

ith A

AS

17A

ccou

ntin

g fo

r Lea

ses a

nd A

AS

20 F

orei

gn C

urre

ncy

Tran

slatio

n. T

he le

ases

are

pay

able

in U

SD.

As a

t bala

nce

date

the

Dep

artm

ent h

ad fi

nanc

e le

ases

with

an

aver

age

leas

e te

rm o

f 8.

9 ye

ars (

1998

-99:

9 y

ears

). T

he in

tere

stim

plic

it in

the

leas

es a

vera

ged

9.92

% fo

r the

yea

r (19

98-9

9:10

.09%

).

Supp

lier T

rade

cred

itors

and

acc

ruals

24Li

abili

ties a

re re

cogn

ised

for a

mou

nts t

o be

paid

in th

e fu

ture

for

good

s and

serv

ices

rece

ived

, inc

ludi

ng a

mou

nts n

ot y

et b

illed

.Se

ttlem

ent i

s usu

ally

mad

e w

ithin

30

days

.

Unr

ecog

nise

d fin

anci

al li

abili

ties

Inde

mni

ties/

Gua

rant

ees

35A

ll in

dem

nitie

s/gu

aran

tees

are

con

sider

ed re

mot

e an

d ar

ere

porte

d in

a se

para

te n

ote

to th

e fin

anci

al st

atem

ents

unl

ess

they

hav

e be

en sp

ecifi

cally

iden

tifie

d ot

herw

ise.

Inde

mni

ties i

ssue

d co

ver p

oten

tial l

osse

s for

whi

ch th

eCo

mm

onw

ealth

may

oth

erw

ise b

e lia

ble

at la

w a

lthou

gh th

ein

itial

loss

wou

ld a

ccru

e to

the

othe

r par

ty, o

r pot

entia

l los

ses o

rda

mag

es fo

r whi

ch th

e Co

mm

onw

ealth

, with

out h

avin

g iss

ued

the

inde

mni

ty, w

ould

not

oth

erw

ise b

e lia

ble.

145


Dep

artm

ent o

f Def

ence

NO

TE

S T

O T

HE

FIN

ANCI

AL S

TAT

EM

EN

TS

for th

e yea

r end

ed 3

0 Ju

ne 2

000

Not

e 29

- Fi

nanc

ial I

nstru

men

ts (c

ontin

ued)

Inte

rest

rate

risk

.

The

Dep

artm

ent's

exp

osur

e to

inte

rest

rate

risk

s and

the

effe

ctiv

e in

tere

st ra

te o

f fin

ancia

l ass

ets a

nd li

abili

ties,

both

reco

gnise

d an

d un

reco

gnise

d at

bala

nce

date

, are

as f

ollo

ws:

Fina

ncial

inst

rum

ent

Not

esFl

oatin

g in

tere

stra

teFi

xed

inte

rest

rate

Non

-inte

rest

bear

ing

Tota

lW

eight

ed a

vera

geef

fect

ive

annu

alin

tere

st ra

te1

year

or l

ess

1 to

2 y

ears

2 to

5 y

ears

grea

ter t

han

5ye

ars

1999

-00

$'00

019

98-9

9$'

000

1999

-00

$'00

019

98-9

9$'

000

1999

-00

$'00

019

98-9

9$'

000

1999

-00

$'00

019

98-9

9$'

000

1999

-00

$'00

019

98-9

9$'

000

1999

-00

$'00

019

98-9

9$'

000

1999

-00

$'00

019

98-9

9$'

000

1999

-00

1998

-99

Fina

ncia

l ass

ets

Cash

at b

ank

1597

,524

-35

,000

--

--

--

--

85,1

7513

2,52

485

,175

5.32

%0.

00%

Cash

on

hand

155,

389

1,68

25,

389

1,68

20.

00%

0.00

%G

oods

and

serv

ices

rece

ivab

les16

88,7

2124

,819

88,7

2124

,819

0.00

%0.

00%

Prop

erty

, plan

t and

equi

pmen

t rec

eivab

les16

148,

251

183,

226

59,3

1468

,000

207,

565

251,

226

0.00

%0.

00%

Loan

s to

Com

mon

wea

lthau

thor

ities

and

com

pani

es16

--

-93

,000

--

--

--

--

-93

,000

0.00

%3.

65%

FMS

acco

unt w

ith F

RB16

67,15

976

,138

67,15

976

,138

0.00

%0.

00%

Tot

al fi

nanc

ial a

sset

s24

5,77

518

3,22

635

,000

93,0

00-

--

--

-22

0,58

325

5,81

450

1,358

532,

040

Fina

ncia

l lia

bilit

ies

Loan

s fro

m fu

ture

appr

opria

tions

21-

--

--

--

--

--

179,

354

-17

9,35

40.

00%

0.00

%

Fina

nce

lease

21-

-28

611

,480

113

-15

730

5-

--

-55

611

,785

9.92

%10

.09%

Trad

e cr

edito

rs a

ndac

crua

ls24

--

610,

435

514,

869

610,

435

514,

869

0.00

%0.

00%

Tot

al fi

nanc

ial l

iabi

litie

s-

-28

611

,480

113

-15

730

5-

-61

0,43

569

4,22

361

0,99

170

6,00

8

146

Section Two


147


Note 29 - Financial Instruments (continued)

Net fair values of Financial Assets and LiabilitiesThe aggregate net fair values of financial assets and financial liabilities, recognised andunrecognised as at 30 June are as follows:

1999-00 1998-99Note Total

carryingamount

Aggregate net fair

value

Totalcarryingamount

Aggregatenet fairvalue

$'000 $'000 $'000 $'000DepartmentalFinancial assetsCash 15 137,913 137,913 86,857 86,857Receivables - interest 16 1,262 1,262 - -Receivables - goods and services 16 87,459 87,459 24,819 24,819Receivables - property, plant and equipment 16 207,565 207,565 251,226 251,226Receivables - FMS trust account 16 67,159 67,159 76,138 76,138Receivables - loans to ADI Ltd 16 - - 93,000 93,000Total financial assets 501,358 501,358 532,040 532,040

Financial liabilitiesLoans from future appropriations 21 - - 179,354 179,354Finance lease liability 21 556 556 11,785 11,785Trade creditors and accruals 24,25 610,435 610,435 514,869 514,869Total financial liabilities 610,991 610,991 706,008 706,008

1999-00 1998-99Item Note Total

carryingamount


Totalcarryingamount


$'000 $'000 $'000 $'000AdministeredFinancial assetsCash 15 207 207 - -Receivables - goods and services 16 81,277 81,277 - -Accrued revenue 16 3,047 3,047 4,807 4,807Total financial assets 84,531 84,531 4,807 4,807

Financial liabilitiesTrade creditors and accruals 25 2,113 2,113 76 76Total financial liabilities 2,113 2,113 76 76

Section Two

148


Note 29 - Financial Instruments (continued)The following methods and assumptions are used to determine the net fair value of financialassets and liabilities.

Recognised financial instruments

Financial assets

Cash: the carrying amount approximates fair value because of its short term to maturity.

Receivables - goods and services: the carrying amount approximates fair value.

Receivables - property, plant and equipment: the carrying amount approximates fair value.

Receivables - Foreign Military Sales Trust account: the carrying amount approximates fair value.

Receivables - Loans to ADI Ltd: the net fair value of loans to ADI Ltd for 1998-99 was based ondiscounted cash flow analysis using current interest rates. The loans were written off during1999-00 upon disposal of ADI.

Financial liabilities

Finance lease liability: the net fair value of finance leases is based on discounted cash flow analysisbased on current incremental borrowing rates for similar types of borrowing arrangements.Trade creditors and accruals: the carrying amount approximates fair value.

Unrecognised financial instruments

Indemnities: the carrying amount approximates net fair value due to the contingent nature ofmany of these unrecognised liabilities.

Credit risk exposure

The Department's maximum exposure to credit risk at reporting date in relation to each class ofrecognised financial assets is the carrying amount of those assets as indicated in the statement ofassets and liabilities.

In conjunction with the sale of ADI during 1999-00 a decision was made to write offoutstanding loans to ADI. Defence therefore no longer has any credit risk arising from theDefence industry Sector, compared with prior years where Defence had a significantconcentration of credit risk to the Defence industry sector with approximately 21% ofreceivables arising from that sector in 1998-99. There is also a significant proportion of debtors(prepayments are excluded) concentrated in Australia with approximately 41% in 1999-00compared with 42% in 1998-99.


149


Note 30 Auditor's RemunerationAn estimate of the fair value of services provided free of charge by the Auditor-General for auditing the Department of Defence financial statements is as follows:

1999-2000 1998-1999$ $

1,535,000 1,300,000

Note 31 Act of Grace Payments

The number of payments made during the 1999-2000 financial year pursuant toauthorisation given under sub-section 33(1) of the Financial Management andAccountability Act 1997 was 3 (1998-1999 – 2) with the aggregate value being$63,662 (1998-1999 – $65,271).

Note 32 Defective Administration Payments

The number of payments made during the 1999/2000 financial year under theDefective Administration Scheme was 22 (1998-1999 – Nil) with the aggregatevalue being $73,474 (1998-1999 - Nil).

Note 33 Waivers

The number of waivers provided during the 1999-2000 financial year pursuant toauthorisation give under sub-section 34(1) of the Financial Management andAccountability Act 1997 or any other legislation was 1 (1998-1999 – Nil) with theaggregate value being $45.470m (1998-1999 – Nil).

Section Two

150


Note 34 Future Commitments

Defence has a procurement process relating to major projects. Once a project hasbeen approved to proceed, tenders are called, evaluated and contracts awarded.The period between approval for the project to proceed and the award of contractsis the period of 'future commitment'. Once a contract has been awarded, a 'futurecommitment' becomes a 'capital commitment' and is reported in the Schedule ofCommitments. The amounts involved in 'future commitments' are phased overfinancial years in the same way as the ‘Schedule of Commitments'.

1999-2000 1998-1999$’000 $’000

One year or less 1,641,409 1,195,512From one to two years 1,876,202 1,818,220From two to five years 4,913,560 4,109,808Over five years 5,062,181 7,064,740Total future commitments 13,493,352 14,188,280

Note 35 Remote Contingencies

Defence carries an extensive range of guarantees, indemnities and undertakings,normally of a short term nature, relating to business, exercise activities and otherarrangements involving contracts, agreements and other Defence activities.Indemnities issued cover potential losses or damages for which theCommonwealth, without having issued an indemnity, would not otherwise beliable.

Contingencies relating to such guarantees, indemnities and undertakings issued bythe Department are considered to be too remote to be included in the Schedule ofContingencies. Of these, there are 29 instances (5 in 1998-1999) that are eitherunquantifiable or uncapped, and 67 instances (77 in 1998-1999) of quantifiablecontingencies to the value of $4.286b ($3.753b in 1998-1999).

There are many indemnities that are incorporated into major acquisition projects.These uncapped indemnities are potentially large but unquantifiable. TheCommonwealth currently accepts this risk through its policy of non insurance forwork performed.


151


Note 36 Remuneration of Executives

The number of executives (including military and research scientist equivalents)whose total remuneration fell within the following bands follows:

The redundancies’ numbers disclosed below are a subset of the 30 June 2000executive numbers and represent the number of executives within the band thatreceived a redundancy payment. They do not represent the quantum of anyredundancy payments made.

Excluded from this note, in accordance with the Finance Minister’s Orders, are 3civilian and 5 military executive positions permanently established overseas.

Remuneration includes wages and salaries, accrued leave, performance pay, accruedsuperannuation, the cost of motor vehicles, housing, allowances and fringe benefitsincluded in remuneration agreements.

Remuneration Band 1999-2000 1998-1999Redundancies1999-2000

Number ofExecutives

Number ofExecutives

$100,000 to $109,999 - 1 5$110,000 to $119,999 - 27 8$120,000 to $129,999 2 34 53$130,000 to $139,999 - 26 65$140,000 to $149,999 - 20 7$150,000 to $159,999 1 23 37$160,000 to $169,999 - 12 5$170,000 to $179,999 3 16 1$180,000 to $189,999 2 9 7$190,000 to $199,999 3 9 1$200,000 to $209,999 - 4 1$210,000 to $219,999 2 5 1$220,000 to $229,999 1 2 4$230,000 to $239,999 - - 1$240,000 to $249,999 - 1 1$250,000 to $259,999 - - -$260,000 to $269,999 - 1 2$270,000 to $279,999 - 1 1$280,000 to $289,999 - 1 2$290,000 to $299,999 - 1 -$300,000 to $309,999 - - -$310,000 to $319,999 1 1 -$320,000 to $329,999 1 1 -$330,000 to $339,999 - 2 -$340,000 to $349,999 - - -$350,000 to $359,999 1 1 -$360,000 to $369,999 - - -$370,000 to $379,999 - 1 -

Total number of officers 17 199 202

Section Two

152


1999-2000 1998-1999Note 36 Remuneration of Executives (continued)

$ $(to the nearest dollar)

Aggregate remuneration of executives for thefinancial year

31,365,681 29,191,699

Aggregate performance pay paid to executives - -Aggregate separation and redundancy paymentspaid to executives

2,267,196 2,425,287

Some movement between salary bands can be attributed to the inclusion of rentalsubsidies for executives in 1999-2000. Rental subsidy payments were not includedin 1998-1999. Other factors supporting movements between bands are theinclusion of fringe benefits and redundancy payments paid throughout the year.

Note 37 Special Public Money

Defence - Projects for other governments and international bodies

Legal Authority: Financial Management and Accountability Act, 1997; s20Purpose: Payment for all costs in connection with specified activities on

behalf of other governments and international bodies.

Cash balance as at 1 July 44,582,461 35,019,611Plus: Receipts 96,861,273 49,861,343Less: Expenditure 53,616,262 40,298,492

Cash balance as at 30 June 87,827,472 44,582,461

Defence - Services for non-departmental bodies

Legal Authority: Financial Management and Accountability Act, 1997; s20Purpose: Payment for all costs in connection with specified activities on

behalf of non departmental bodies.




153


1999-2000 1998-1999$ $

Note 37 Special Public Money (continued)

Defence – Endowments

Legal Authority: Financial Management and Accountability Act, 1997; s20Purpose: For application in accordance with the conditions of each

endowment.

Balance as at 1 July 239,083 232,838Plus: Receipts 24,516 14,021Less: Expenditure 11,165 7,777

Balance as at 30 June 252,433 239,083

Cash balance as at 1 July 58,363 53,529Plus: Cash inflows 32,516 125,524Less: Cash outflows 32,610 120,689

Cash balance as at 30 June 58,268 58,363

Investment balance as at 1 July 180,719 179,309Plus: Purchase of investments 21,445 112,913Less: Realisation of investments 8,000 111,502

Investment balance as at 30 June 194,165 180,719

Fedorczenko Legacy Fund

Legal Authority: Financial Management and Accountability Act, 1997; s20Purpose: Residue of the estate of the late Petro Fedorczenko which is to

be used for the defence of Australia.

Balance as at 1 July 150,942 156,568Plus: Receipts 8,578 -Less: Expenditure 926 5,626


Cash balance as at 1 July 5,375 11,000Plus: Cash inflows 8,578 -Less: Cash outflows 9,504 5,626


Investment balance as at 1 July 145,567 145,567Plus: Purchase of investments 8,578 -Less: Realisation of investments - -

Investment balance as at 30 June 154,145 145,567

Section Two

154


1999-2000 1998-1999$ $

Note 37 Special Public Money (continued)

Other Trust Money

Legal Authority: Financial Management and Accountability Act, 1997; s20Purpose: For receipt of money temporarily held in trust.



Young Endeavour Youth Scheme Operating Fund

Legal Authority: Financial Management and Accountability Act, 1997; s20Purpose: For the receipt and payment of money in connection with the

operations and activities of the STS Young Endeavour, asspecified by the Young Endeavour Youth Program Board ofManagement or by the Commonwealth.

Balance as at 1 July 473,015 991,352Plus: Receipts 603,319 581,971Less: Expenditure 866,934 1,100,308


Cash balance as at 1 July 473,015 991,352Plus: Cash inflows 603,319 581,971Less: Cash outflows 869,929 1,100,308


Investment balance as at 1 July - -Plus: Purchase of investments 2,996 -Less: Realisation of investments - -

Investment balance as at 30 June 2,996 -


155


$’000 $’000

Note 38 Reporting Against Outcomes

As per Note 1, the Department of Defence has only one outcome The prevention ordefeat of the use of armed force against Australia and its interests.

TotalBudget Actual

Personal benefit payments and subsidies 1,655,936 2,637,876Other administered expenses 2,976 3,498Total net administered expenses 1,658,912 2,641,374Add: Net cost of Defence outputs 10,489,623 10,497,956Net cost to Government before extraordinary items 12,148,535 13,139,330Extraordinary items - -Net cost to Government 12,148,535 13,139,330

Total assets deployed as at 30 June 2000 42,898,549 46,691,366

Net assets deployed as at 30 June 2000 16,339,472 18,938,126

Note: The net cost to Government shown above includes intra-government costs asdetailed below. These will be eliminated at the Whole of Government level incalculating the actual expense to Government.

$'000Related party transactions

Auditor-General 1,535National Archives of Australia 363

Total related party transactions 1,898

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Section Two

SECTION 3

OUTPUTPERFORMANCE

Section Three

158

RESOURCING OF DEFENCE OUTCOME ANDOUTPUTSDefence Outcome

The prevention or defeat of armed force against Australia and its interestsTotal Resourcing of the Defence Outcome $18,364.5m

Total Administered Expenses $2,641.4mTotal Price of Outputs (including East Timor) $15,723.1m

Output $mDefence OperationsOutput 1: Command of Operations 525.7Output 6: Military Geographic Information 205.2Output 20: Effective International Defence Relationships and Contribution

to International Activities236.3

Output 21: Effective Contribution to National Support Tasks 134.7Navy CapabilitiesOutput 3: Capability for Major Surface Combatant Operations 2,462.9Output 4: Capability for Patrol Boat Operations 261.7Output 5: Capability for Submarine Operations 849.0Output 7: Capability for Afloat Support 185.1Output 8: Capability for Mine Countermeasures and Mining 317.5Output 9: Capability for Amphibious Lift 344.8Army CapabilitiesOutput 10: Capability for Special Forces Operations 259.8Output 11: Capability for Land Task Forces Operations 3,621.0Output 12: Capability for Logistic Support of Land Operations 584.9Output 15: Capability Ground-Based Air Defence 111.4Air Force CapabilitiesOutput 13: Capability for Air Strike/Reconnaissance 787.1Output 14: Capability for Tactical Fighter Operations 1,398.1Output 16: Capability for Strategic Surveillance 445.1Output 17: Capability for Maritime Patrol Aircraft Operations 788.4Output 18: Capability for Airlift 892.6Output 19: Capability for Combat Support of Air Operations 240.1Policy AdviceOutput 2: Strategic Intelligence 371.1Output 22: Strategic Policy and Direction 193.0East Timor Operations 507.6

Resourcing of Defence Outcome and Outputs

159

STRUCTURE OF DEFENCE’S OUTPUTS

This section reports the performance in delivering Defence’s 22 outputs in 1999-2000against the performance forecasts set out in the Portfolio Budget Statements 1999-2000.The 22 outputs were consolidated into five outputs in 2000-01. In order to grouprelated outputs and to assist in understanding the transition, the 22 outputs have beengrouped under the five new output headings in this Annual Report. The fold-outstructure chart at the back of this report details this transition.

PRICE OF OUTPUTS

As 1999-2000 was the first full year of accrual budgeting and reporting, the output priceinformation in this section reflects the ongoing refinement of the output attributionrules and the accounting treatment of certain items. As a consequence, many of thevariations in the price of outputs between the budget estimate, the revised estimate andthe actual reflect:

• revision of the set of output attribution rules to more accurately reflect the resourceinput costs identified against each of the outputs; and

• ongoing development and refinement of the accounting treatment of certain assetand liability and revenue and expense accounts.

The explanations for variations for the price of each output provides details for all butminor miscellaneous differences between planned and actual spends. Minor variationsare typically less than $3m or 10% of the total variation.

Variations in Previously Published Additional Estimates Figures

For Suppliers – Inventory Consumption and Suppliers – Other, the additional estimatesfigures in this report will differ slightly from those published in the Portfolio AdditionalEstimates Statements 1999-2000. This is a consequence of the application of improvedattribution rules and refined accounting treatment to the previously published figures.

Explanation of the Difference between Total Inventory ConsumptionFigures in Section Two and Section Three

The Inventory Consumption figure under Suppliers Expenses, at Note 8 of SectionTwo, differs from the total Inventory Consumption figure for all outputs in SectionThree by $35.5m. This is the result of a change in mapping and reporting of theaccount code for Cost of Goods Sold from Suppliers – Other to Suppliers – InventoryConsumption. In Section Two this amount is included in the Goods and Servicesfigure of $419m and not in the Inventory Consumption figure of $618m. In SectionThree it is included in the total Inventory Consumption of $654m. The total SuppliersExpenses are identical in both Sections.

160

DEFENCE OPERATIONS

OUTPUT 1: COMMAND OF OPERATIONS

OUTPUT 6: MILITARY GEOGRAPHICINFORMATION

OUTPUT 20: EFFECTIVE INTERNATIONALDEFENCE RELATIONSHIPS ANDCONTRIBUTION TOINTERNATIONAL ACTIVITIES

OUTPUT 21: EFFECTIVE CONTRIBUTION TONATIONAL SUPPORT TASKS

Output One

161

OUTPUT ONE: COMMAND OF OPERATIONS

OVERVIEW

The performance targets identified against Output One have generally been achieved asforecast. The conduct of overseas operations was a significant undertaking and veryresource intensive at short notice. The ADF was able to provide timely and effectiveresponses to these operations through an embedded command, control,communications and intelligence system. The command infrastructure allowed for thetimely delivery of logistic support and effective communications capability, includingcommand support systems and fixed communications systems.

In regard to the East Timor operations, Headquarters Australian Theatre was able toconduct the planning to facilitate the deployment and support of ADF and coalitionforces in a timely and effective manner.

There is ongoing work monitoring the Operational Preparedness Directive and theProgram of Major Service Activities. Capability enhancement is continuing withdevelopment and refinement assisted by experience gained from current operations.

The Commander Australian Theatre worked closely with the Defence Science andTechnology Organisation in developing a range of situation awareness tools to supportboth the planning and conduct of operations. In particular, action was taken toimprove the ADF’s ability to process key information during warfare.

Commander Australian Theatre’s current and medium term priorities for 1999-2000have been satisfied and enhancements will be incorporated into the 2000-01 priorities.The collocation for Headquarters Australian Theatre component staff remains a long-term priority. The new facilities at RAAF Williamtown to accommodate air defenceoperations, training, maintenance, administration and logistic activities were completedand opened in April 2000.

Section Three

162

PERFORMANCE FOR 1999-2000Performance Indicator 1999-2000

Target1999-2000

PerformanceCombat Capability• Operation Warden (East Timor) As required by

the GovernmentAchieved

Preparedness• Number of preparedness

shortfalls against AustralianTheatre OperationalPreparedness Directive.

0 No major shortfalls.

• Meet exercise preparednessobjectives.

100% 90%(1)

Effectiveness• Achievement of Strategic

Objectives.100% 100%

• Number of Post OperationReports that identifieddeficiencies.

0 A Commander Australian Theatrereview of lessons learnt fromOperation Warden and reports fromthe Theatre Evaluation Team havehighlighted deficiencies in doctrine,some aspects of force preparationand logistic capacity.

• Achievement of individual jointexercise objectives.

100% 100%

Quantity• Tempo of campaigns, operations

and exercises commanded.As required Achieved

Major commitments to operations inEast Timor, Bougainville and theSolomon Islands, northernsurveillance operations, preparationfor the Sydney Olympics and elevenminor operations were conductedconcurrently, in addition to trainingand exercises.

• Extent to which availableresources satisfy operational andexercise activity.

As required AchievedOperational and exercise prioritieswere met.

Note1. Exercise Crocodile 99 was conducted on a reduced scale due to East Timor Operations. Some

objectives were not achieved due to further reduction of the planned scope of Crocodile 99 resultingfrom operational commitments in East Timor.

Output One

163

PRICE OF OUTPUT ONE

Departmental Expenses 1999-2000Budget

Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses

Employees – Military 183.1 170.0 172.6 2.5Employees – Civilian 51.9 54.1 48.6 -5.5

Sub-total Employees 234.9 224.1 221.2 -3.0Suppliers – Other 203.6 91.1 134.2 43.2Suppliers – Inventory Consumption 12.8 7.5 10.3 2.8

Sub-total Suppliers 216.4 98.6 144.6 46.0Depreciation 28.1 25.1 23.4 -1.7Asset Sales/Revenues 0.3 0.7 0.0 -0.7Net Write-Down of Assets 0.0 0.0 18.2 18.2Expensed Assets Under Construction 1.2 14.7 20.6 5.9Other Expenses – including Interest

and Grants 5.3 5.8 1.0 -4.7Total Expenses 486.3 369.0 429.0 60.0

Capital Use Charge 96.1 89.5 96.7 7.3Total Price of Output One 582.4 458.5 525.7 67.3

Note: Figures may not add due to rounding.

EXPLANATION FOR SIGNIFICANT VARIATIONS

Employees – Military (+$2.5m)RealNet effect of:• Real increase in ADF Enterprise Productivity Arrangement.• Changes in personnel distribution including adjustments of rank and profile.• Revision of the methodology for the distribution of allowances.

Employees – Civilian (-$5.5m)Real• Lower than anticipated requirement due to difficulty recruiting civilian information

technology personnel (-$8.1m).Rule/Transfer• Refinement of attribution rule to reflect appropriate distribution of work performed across

all outputs (+$1.9m).

Suppliers – Other (+$43.2m)Real• Reduction in scope of Exercise Crocodile 99 (-$5.2m).• Higher than anticipated requirement to maintain stores and equipment (+$9.5m).• Higher than anticipated requirement for Professional Service Provider information

technology personnel due to difficulty in recruiting civilian personnel (+$10.9m).

Section Three

164

Rule/Transfer• Refinement of output rule to attribute Operating Lease costs for Milsatcom to this output

(+$12.3m).• Refinement of output rule to more appropriately attribute communications to this output

rather than all ship classes (+$12.6m).• Change in category from Other Expenses to Suppliers, including Rockwell payments,

maintenance contracts and other minor variations (+$4.7m).

Suppliers – Inventory Consumption (+$2.8m)Rule/Transfer• Refinement of attribution rules for fuel consumption to reflect actual consumption

(+$2.8m).

Depreciation (-$1.7m)Real• Slippage of Communications Projects and property assets, which had previously been

scheduled for delivery in this financial year (-$6.4m).Accounting Treatment• Identification of assets first found following information technology audit, offset by write-

off of assets below threshold value (+$5.4m).

Net Write-Down of Assets (+$18.2)Real• Transfer of ADI loan to the Department of Finance and Administration (+$14.2m).• Disposal of information technology assets following Year 2000 audit (+$1.1m).Accounting Treatment• Decommissioning communication and other non-financial assets (+$1.7m).

Expensed Assets Under Construction (+$5.9m)Real• Higher than anticipated expensed assets under construction for Milsatcom, minor

communications projects and non-financial assets (+$3.7m).Accounting Treatment• Increase in expensed assets under construction resulted from reclassification of information

technology assets following change in asset threshold value (+$1.8m).

Other Expenses – including Interest and Grants (-$4.7m)Rule/Transfer• Change in category from Other Expenses to Suppliers, including Rockwell payments,

maintenance contracts and other minor variations (-$4.7m).

Capital Use Charge (+$7.3m)Real• Increase resulting from understatement of estimated assets under construction balance,

primarily due to Battlefield Command Support System and HF Modernisation (+$6.7m).Rule/Transfer• Australian Military Air Space Control Communication System was transferred to Output 16

(-$2.4m).Accounting Treatment• Identification of assets first found following information technology audit (+$3.9m).

Output Six

165

OUTPUT SIX: MILITARY GEOGRAPHICINFORMATION

OVERVIEW

This output encompasses the provision of hydrographic, aeronautical, oceanographicand meteorological information. In 1999-2000 there was considerable progress inachieving forecast performance targets, although geospatial information support toEast Timor operations required some reassignment of priorities in a number of areas.Key achievements include:

• Commissioning two new hydrographic ships.

• Re-equipping the Defence Topographic Agency (formerly the ArmyTopographic Support Establishment).

• Satisfying short notice requirements from Interfet for geospatial support.

• Meeting target levels for production in accordance with the topographical andaeronautical plan and hydroscheme (although some tasks were replaced byhigher priority tasks to support operations).

• Gaining AS 9002 quality accreditation at the Defence Topographic Agency.

• Finalising a revised memorandum of understanding on global geospatialinformation and services with the United States.

• Reviewing the ADF military geographic information strategic plan.

• Trial of the Petrel sonar for survey motor launches.

• Revitalising a dormant bilateral data exchange agreement on militaryoceanography and acoustics with the United States, and development of amultilateral agreement covering military meteorology and oceanography betweenAustralia, United States, Canada, New Zealand and the United Kingdom.

In addition, progress has been made on implementing a digital database at theAustralian Hydrographic Office, establishing an improved user requirements processand developing a more efficient and broader military geographic informationacquisition process. Although not completed in 1999-2000, work also continues onestablishing oceanographic data exchange agreements with the Royal Malaysian Navy,finalising memorandums of understanding with Indonesia and the Australian Bureau ofMeteorology, developing a theatre military geographic information support plan andimproving offshore mapping capabilities.

Several targets were not fully achieved due to the late delivery of HMAS Leeuwin andHMAS Melville and the unprogrammed deployment of hydrographic survey assets tosupport the East Timor operations.

Section Three

166


Target1999-2000 Performance

Combat CapabilityOperation Warden (East Timor) As required by

theGovernment

AchievedAll Interfet geospatial requirementswere met.

Acquisition and ProductionProgram• Production targets as detailed

in the topographical andaeronautical plan andhydroscheme.

Fully achieve Partially achievedThe output was impacted by higher thanexpected contingency tasking in supportof East Timor operations, unavailabilityof some source material for overseas aircharts, as well as Project Parare trainingoverheads and other disruptions due toproject implementations. Wherepossible, production effort wasredirected in order to minimise theimpact of these factors and, for someproducts, production targets wereexceeded. The Australian HydrographicOffice partially achieved 1999-2000hydroscheme production-level targets(as some tasks were replaced by higherpriority tasks to support operations).

• Targets for acquisition ofmilitary geographicinformation data and productsto meet short noticerequirements.

Fully achieve AchievedAll short notice requirements were met.Short notice response tasks werecentred on Interfet requirements.

• Directorate of Oceanographyand Meteorology and theAustralian OceanographicData Centre – ability to satisfyuser requirements whentasked.

Fully achieve AchievedThe Directorate of Oceanography andMeteorology has fully satisfied userrequirements throughout the period.Significant achievements have been:• All requirements for deployable

meteorological and oceanographicteams were achieved includingdeployments to East Timor (insupport of the Interfet Commander),the Southern Ocean (in support ofFisheries Patrols) and ExerciseLungfish; and

• All real-time maritime and aviationforecasting requirements have beenachieved.

Output Six

167

Performance Indicator 1999-2000Target

1999-2000 Performance

• 1st Topographical SurveySquadron – ability to satisfy allimmediate user requirementswhen tasked.

Fully achieve AchievedAll geometric support requirements formajor exercises and operationaldeployments were met includingsupport to Interfet. Project Toposs(Topographical Support System), whichis on track for delivery during1999-2000 and through 2000-01, willsignificantly enhance the ability of theunit to satisfy user requirements.

Operational Effectiveness• Ability to satisfy operational

requirements for digital andpaper products:

Fully achieve Partially achievedWhere source data was available,operational requirements were satisfied,particularly support to Interfetoperations. Capability to provide digitalinformation remains limited.

� providing coveragerequired

Fully achieve Partially achievedSome targets were not met due to theunavailability of source material foroffshore air charts. Hydroschemetargets were partially achieved due tolate delivery of HMAS Leeuwin andHMAS Melville, and unprogrammeddeployments of hydrographic surveyassets to support operations in EastTimor and Bougainville.

� to required standard andspecification

Fully achieve AchievedAll products are now compliant withrequired standards and specifications.

� satisfying AS 9002 qualityaccreditation whereappropriate

Fully achieve AchievedThe Defence Topographic Agency isfully AS 9002 accredited.

� in format required Fully achieve AchievedAgencies provide Digital ExchangeStandard (DIGEST) compliantproducts. Non-DIGEST compliantproducts are also produced to meetspecific user requirements.

Section Three

168



Preparedness• Ability of military geographic

information assets to provideeffective response to satisfyshort notice requirements insupport of operations andexercises. Linked to provisionof military geographicinformation data and productsin support of MilitaryResponse Options/Chief ofthe Defence Force’sPreparedness Directiverequirements.

Fully achieve AchievedAll short notice requirements forsupport to operations and exerciseshave been met although this hasrequired some reassignment of prioritieswith respect to programmed activities.While all basic requirements were met,provision of optimum data was limitedby availability of source data and thelimited ability to provide digitalinformation.

Timeliness• Ability of military geographic

information assets to satisfyrequirements within timerequired, in respect of bothforecast production and shortnotice requirements.

Fully achieve Partially achievedAll short notice geospatial informationrequirements were met. While overallproduction levels were met, short noticerequirements have necessitatedrephasing of some routine productiontargets.

Non-Combat Related TasksPeacetime Tasking• Assistance to the Civil

Community(contributes to Output 21)

As required Not required

• National Tasks(contributes to Output 21)� hydrographic services (1) As required Partially achieved

All statutory national tasks wereachieved as far as resourcing allowed.Several targets were not fully achieveddue to the late delivery of HMASLeeuwin and HMAS Melville and theunprogrammed deployment ofhydrographic survey assets to supportthe East Timor operations.

Note1. The RAN Hydrographic Service performs the national hydrographic function to meet Australia’s

obligations to various international conventions and treaties covering safe navigation and safety of lifeat sea, and to support Government objectives with regard to transport, infrastructure and theenvironment.

Output Six

169

PRICE OF OUTPUT SIX


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses

Employees – Military 50.7 57.7 68.3 10.6Employees – Civilian 21.3 23.5 23.9 0.5

Sub-total Employees 72.0 81.2 92.3 11.1Suppliers – Other 45.5 49.7 61.0 11.3Suppliers – Inventory Consumption 10.6 8.0 2.9 -5.1



Capital Use Charge 53.3 34.5 32.1 -2.5Total Price of Output Six 205.0 197.3 205.2 7.9




Suppliers – Other (+$11.3m)Rule/Transfer• Change in category from Other Expenses to Suppliers including lease and hire costs

(+2.4m).Accounting Treatment• Classification of progress payments for Explosive Ordnance purchases during the year

(+$5.0m).• Transfer from Capital Budget (+$4.1m).

Suppliers – Inventory Consumption (-$5.1m)Real• Reduced inventory consumption due to the slippage in delivery of HMA Ships Leeuwin and

Melville (-$3.0m).Rule/Transfer• Refinement of output attribution rule to reflect consumption (-$2.0m).

Section Three

170

Depreciation (-$6.3m)Real• Slippage in delivery of HMA Ships Leeuwin and Melville, the Hydrographic Office and School

Systems (-$3.2m).Accounting Treatment• Revaluation of Laser Airborne Depth Sounder (LADS) (-$3m)

Net Write-Down of Assets (+$1.6m)Real• Transfer of ADI loan to the Department of Finance and Administration (+$0.9m).

Other Expenses – including Interest and Grants (-$2.4m)Rule/Transfer• Change in category from Other Expenses to Suppliers including lease and hire costs

(-$2.4m).

Capital Use Charge (-$2.5m)Real• Slippage in delivery of HMA Ships Leeuwin and Melville, the Hydrographic Office and School

Systems (-$0.4m).• Increased expenditure on acquisition projects, including Land 49 Parare (+$2.2m).Accounting Treatment• Revaluation of Laser Airborne Depth Sounder (LADS) (-$4m)

Output Twenty

171

OUTPUT TWENTY: EFFECTIVEINTERNATIONAL DEFENCE RELATIONSHIPSAND CONTRIBUTION TO INTERNATIONAL

ACTIVITIES

OVERVIEW

Defence has made a significant contribution to international activities through a highlevel of participation in peacekeeping operations. This, as well as the appointment ofMajor General Tim Ford as the military adviser to the UN Secretary-General, hasstrengthened our effective working relationship with the United Nations. Themanagement of our defence relationships in South-East Asia was tested and highlightedduring the Interfet deployment. Our defence relationship with Indonesia contributeddirectly to Interfet’s safe and successful deployment, while our defence relationshipswith Thailand, the Philippines, Singapore and Malaysia gave those countries theconfidence and capability to operate under Australian command.

Defence relations with European countries and those from other regions wereexpanded to include increased dialogue and cooperation on regional issues, especiallyEast Timor. Discussions between senior Australian and Indian defence officialsconcerning the resumption of defence relations took place in early 2000, and thisdialogue continues. The defence relationship with Pakistan remains suspended pendingthe restoration of democracy in that country. Relations with North Asia haveimproved steadily by strategic dialogue, high-level visits and an increase in Service-to-Service contact. Defence relations with the Middle East continued to be constructive,with training and education programs being undertaken with Gulf states.

Defence relations with the United States and New Zealand were pursued through awide range of exercises, training activities and exchanges, which have served tostrengthen existing Defence ties and to provide opportunities to enhance ADFcapabilities. Australia’s network of defence relationships throughout the South-WestPacific region continued to influence the regional strategic environment in which ADFoperations may be required. Defence remains well positioned to support Bougainvilleinitiatives and to provide timely support to the Government on the current situations inFiji and the Solomon Islands.

1999-2000 saw continued growth in our level of engagement with most regionalcountries; in particular Thailand, the Philippines, Vietnam and Brunei. Thedevelopment of the initial Defence International Engagement Plan facilitated a morerobust linkage between our strategic policies and the specific objectives of the DefenceCooperation program.

The performance targets identified against Output Twenty were fully achieved inrespect of quality and timeliness. The quality of leadership during the East Timoroperation enabled Australia successfully to undertake the United Nations peacekeepingoperation in a very compressed timeframe. In addition, the Minister for Defence wasprovided with high quality advice in respect of the fast-moving and politically sensitiveevents in East Timor and Indonesia.

Section Three

172



Combat Capability• Operation Warden

(East Timor)As required

by theGovernment

Fully achievedAll associated international policy issues weresuccessfully managed with the transition toUNTAET.

Quantity• Program of visits by

senior Defence andGovernmentrepresentativessuccessfully conducted.

Fully achieve Fully achievedSuccessful high-level visits took place during1999-2000 such as that of the Secretary toSingapore, Malaysia and the Philippines, the Chiefof the Defence Force to Vietnam and China, andthe Minister to Malaysia and Singapore for theFive Power Defence Arrangements MinistersMeeting.

• Program of workinglevel engagementactivities, meetings, andseminars successfullyconducted.

Fully achieve Fully achievedThe full complement of scheduled bilateralworking level engagement activities (and some adhoc activities) was conducted with South-EastAsian countries. Defence has taken steps torationalise bilateral relationship managementstructures with the aim of improving their output.

• Program of DefenceCooperation activities,including education,training and exchanges,successfully conducted.

Fully achieve Fully achievedDespite a reduction of defence activity withIndonesia, close to a thousand military andcivilian personnel from ASEAN and Pacificnations attended military courses, Australianuniversities, exchange postings and staff colleges.

• Program of overseasADF deployments insupport of DefenceCooperation, includingexercises and combinedoperations, successfullyconducted.

Fully achieve Fully achievedInternational Policy Division worked productivelywith the Services and Headquarters AustralianTheatre to ensure that the desired exercisesoccurred in promotion of Defence Cooperationobjectives for South-East Asia.

• Briefings, speeches,submissions, talkingpoint papers provided asappropriate.

As required As requiredAll requests for written material were met in atimely fashion with a high quality product. Thiswas in the context of a higher-than-usual level ofdemand for such material due to events in EastTimor.

Quality• Leadership – services

provided positionGovernment forsuccessful achievementof Australia’s strategicobjectives.

Fully achieve Fully achievedThe quality of leadership during East Timorhelped Australia to achieve its objectives ofobtaining a workable UN mandate, managing amultinational coalition and making a successfultransition to a UN peacekeeping operation in avery compressed time-frame.

Output Twenty

173



• Foresight – servicesprovided display qualitiesof anticipation andinitiative, enablingeffective shaping ofAustralia’s strategicsecurity environment.

Fully achieve Fully achievedWithin the parameters of Government policy,work has been done to ensure that planning andgroundwork for future productive defencerelationships with Indonesia and East Timor aresound. Opportunities have been actively soughtto further cultivate relationships with emergingleaders on strategic policy in the other South-EastAsian countries, and to position defencerelationships so that maximum return can beobtained as the impact of the East Asian financialcrisis further recedes.

• Whole-of-Defenceperspective: servicesprovided represent unityof effort across Defenceand a commonunderstanding ofAustralia’s strategicobjectives.

Fully achieve Fully achievedDecisions regarding the Interfet operation andAustralia’s contribution to the UNTAETpeacekeeping operation demonstrated ourcapacity to generate quickly a united, whole-of-Defence response to issues affecting Australia’sprimary strategic interests.

• Whole-of-governmentperspective: servicesprovided represent unityof effort acrossGovernment and acommon understandingof Australia’s strategicobjectives.

Fully achieve Fully achievedDefence has established very effective workingrelations with other departments in order topursue the Government’s strategic objectives.Strong evidence of this is in our contribution tothe development of Government responses toevents in East Timor and Indonesia.

Timeliness• Advice is provided in

sufficient time to enablea considered decision tobe made and theappropriate action to betaken.

As required Fully achievedAdvice provided to the Minister regarding South-East Asian issues was timely and of high quality.Again, the fast-moving and politically sensitiveevents in East Timor and Indonesia required apeak effort in this regard.

• Rapid and effectiveresponse to crisissituations.

As required Fully achievedDefence responded rapidly to the UN request toassemble and lead a multinational coalition inEast Timor. The deployment of Interfet troopsoccurred within five days of the UN SecurityCouncil resolution.

Section Three

174

PRICE OF OUTPUT TWENTY


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses


Sub-total Employees 74.5 79.3 99.0 19.7Suppliers – Other 156.3 111.7 105.7 -6.0Suppliers – Inventory Consumption 29.4 46.3 11.4 -34.9

Sub-total Suppliers 185.6 158.0 117.1 -40.9Depreciation 2.7 3.5 4.4 0.9Asset Sales/Revenues 0.0 0.2 0.0 -0.2Net Write-Down of Assets 0.0 0.0 3.6 3.6Expensed Assets Under Construction 0.1 1.9 2.8 0.9Other Expenses – including Interest

and Grants 3.5 2.5 2.4 -0.1Total Expenses 266.6 245.5 229.4 -16.1

Capital Use Charge 8.0 3.9 7.0 3.1Total Price of Output Twenty 274.6 249.4 236.3 -13.0




Employees – Civilian (+$8.9m)Real• Increased involvement in support of international activities, including East Timor and

Bougainville. (+$6.2m).Rule/Transfer• Resources transferred to this output that were associated with existing projects brought

forward to support East Timor (+$3.0).

Suppliers – Other (-$6.0m)Real• General reduction in activities primarily associated with PNG and ASEAN, including the

deferment and cancellation of training activities and projects, following the East Timor crisis(-$5.6m).

• Less than anticipated expenses for research and development and communication andinformation technology usage associated with acquisition projects (-$4.8m).

Output Twenty

175

Rule/Transfer• Net effect of refinement in attribution rule for Woomera Trust Fund in support of this

output (+$16.0m) as well as reduced support to this output (-$1.4m).Accounting Treatment• Lower than anticipated expenses due to transfers to capital expenditure (-$17.2m).Accounting Treatment• Classification of some inventory purchases as operating expenses due to inventory balance

adjustments at year-end (+$8.0m).

Suppliers – Inventory Consumption (-$34.9m)Rule/Transfer• Changes to attribution rules for non-ADF fuel consumption to reflect support for this

output (-$2.4m).Accounting Treatment• Receipt of prior year excise recovery applied against current year inventory consumption

expense (-$8.0m).• Change in accounting treatment of foreign fuel sales excise, resulting in a write-down of sales

revenue and cost of goods sold expense (-$24.5m).

Net Write-Down of Assets (+$3.6m)Real• Transfer of ADI loan to the Department of Finance and Administration (+$3.1m).

Capital Use Charge (+$3.1m)Rule/Transfer• Additional East Timor funding transferred to Output 20 to bring forward many existing

Projects to support East Timor operations (+$2.2m).Accounting Treatment• Identification of assets first found following information technology audit (+$0.8m).

Section Three

176

OUTPUT TWENTY-ONE: EFFECTIVECONTRIBUTION TO NATIONAL SUPPORT

TASKS

OVERVIEW

Throughout 1999-2000, the ADF responded to a range of civil emergencies anddirections including various land and sea rescues and environmental hazards. Allrequests for emergency assistance to the civil community were accepted and completedin accordance with agreed terms and standards.

Support to indigenous groups was continued as part of the Army/Aboriginal andTorres Strait Islander Commission Community Assistance Project. In particular,construction tasks were undertaken on Melville Island to upgrade local housing andimprove the local infrastructure.

Support was also provided to maintain VIP aircraft for Government transportation,aerial surveillance by P-3C aircraft, patrol boat surveillance and other response tasks toassist the civil community.

Specific aerial surveillance and patrol boat resources are dedicated to support civilsurveillance and these were fully utilised during 1999-2000. Civil surveillance tasksresulted in the apprehension of 65 foreign fishing vessels and assistance in theapprehension of 69 vessels suspected of transporting illegal immigrants.

Other national support tasks are accepted where resources are available withoutdetriment to Defence activities. During 1999-2000 these included assistance to theDepartment of Immigration and Multicultural Affairs in provision of temporaryaccommodation facilities at RAAF Curtin and Woomera. A second major task was theprovision of support to Emergency Management Australia during the cyclone season innorthern Australia, where the ADF assisted with fuel deliveries to isolatedcommunities.

A further achievement during the year was the formation and subsequent activity of theAustralian Federation Guard. The Australian Federation Guard was formed in January2000 to provide a standing tri-Service guard to fulfil ceremonial requirements of theGovernment and the ADF.

The Australian Federation Guard performed a range of tasks including its first majorceremonial activity in March 2000 as part of the ‘Welcome Home’ Interfet parade atParliament House in Canberra. Other major ceremonial activities included the RoyalGuard for the Queen in London and the opening of the Australian National KoreanWar Memorial in Canberra. The ADF also sent a ceremonial party to Gallipoli in April2000, and undertook significant preparation in May to June 2000 for Queen’s Guardcommitments in the United Kingdom. Overall, the Australian Federation Guardundertook some 45 ceremonial requirements during the period January to June 2000.

Output Twenty-One

177



Defence Assistance to the CivilCommunity• Percentage of tasks accepted and

completed by the ADF inaccordance with agreed terms andstandards.

100% 100%Examples of assistance includedsupport following the Glenbrooktrain disaster, delivery of fuel andsupplies to affected areas of WA andNT following cyclones, andassistance in the clean up of an oilspill in Sydney Harbour.

• Maintain forces identified in theOperational PreparednessDirective at the levels ofpreparedness specified.

Fully achieve Defence Assistance to the CivilCommunity (DACC) is included aspart of the Operational PreparednessDirective and the Chief of theDefence Force PreparednessDirective. Force elements are heldfor DACC tasks, including allocationof specific resources to civilsurveillance. Specifically, operationalpreparedness objectives 6 and 7 inthe OPD deal with DACC.

• Progress achieved by the Armyagainst the Army/Aboriginal andTorres Strait IslanderCommission CommunityAssistance Project.

Fully achieve Achieved as forecastThe 21st Construction Squadron iscontinuing tasks on Melville Island,refurbishing local housing andimproving drainage and roadconditions.

Defence Force Aid to the CivilPower• Percentage of directed tasks

successfully completed.100% No tasks directed.


Fully achieve Force preparedness maintained.

Defence Assistance to CivilSearch and Rescue• Number of search and rescue

tasks undertaken involving ADFassistance.

Not planned Thirteen tasks were undertakenwhich required a significantcommitment and involvement ofADF equipment and personnel.Assistance was provided to search fora missing person near Tennant Creek,for recovery of personnel from thedismasted yacht Ibis and for a searchfor missing persons in the SnowyMountains.

Section Three

178



• Percentage of authorised taskscompleted.

100% 100%



Defence Support to CivilSurveillance• Number of hours of aerial

surveillance provided by P-3Caircraft.

250 hours 250 hours

• Number of days of surface(Patrol Boat) patrol and responseprovided by patrol boats.

1,800 days 1,796 days

• Number of other significantsurveillance and/or responsetasks conducted.

Not planned Tasks completed as directed, eginterception of illegal fishing vessels.



VIP Operations• Number of VIP aircraft and

crews available for Governmenttransportation.

5 5 aircraft and 9 crews were available.

• Percentage of authorised taskssuccessfully completed.

100% 100%


Fully achieve Force preparedness was maintained.

Emergency Management• Number of tasks undertaken. Not planned Tasks were completed as requested,

eg civil emergencies and naturaldisasters.

Output Twenty-One

179

PRICE OF OUTPUT TWENTY-ONE


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses


Sub-total Employees 31.7 33.0 38.5 5.4Suppliers – Other 33.6 63.0 73.3 10.3Suppliers – Inventory Consumption 10.6 5.9 10.0 4.1

Sub-total Suppliers 44.3 68.9 83.3 14.4Depreciation 6.0 8.7 5.5 -3.3Asset Sales/Revenues 0.0 0.3 0.0 -0.3Net Write-Down of Assets 0.0 0.0 1.0 1.0Expensed Assets Under Construction 0.9 0.9 0.8 -0.1Other Expenses – including Interest


Capital Use Charge 9.9 3.0 5.3 2.2Total Price of Output Twenty-One 100.8 116.6 134.7 18.1




Employees – Civilian (+$1.9m)Rule/Transfer• Refinement of attribution rule to reflect appropriate distribution of work performed across

all outputs (+$1.9m).

Suppliers – Other (+$10.3m)Real• Lower than anticipated expenses associated with Operation Safe Haven (-$3.5m).• Increased inventory stores requirement due to full utilisation of Patrol Boats for civil

surveillance, interception of illegal fishing vessels, immigration response and two search andrescues, as well as increased support to other national support tasks (+$4.9m).

• Increased expenses associated with purchase of equipment, training costs and equipmenthire for Special Purpose Aircraft, Roulettes and RAAF Bands (+$3.0m).

Rule/Transfer• Change in category from Other Expenses to Suppliers including lease and hire costs

(+$1.4m).

Section Three

180

Accounting Treatment• Classification of some inventory purchases as operating expenses due to inventory balance


Suppliers – Inventory Consumption (+$4.1m)Real• Increased consumption due to full utilisation of Patrol Boats for civil surveillance,

interception of illegal fishing vessels, immigration response and two search and rescues(+$8.0m).

Rule/Transfer• Refinement of output attribution rule to reflect consumption (-$4.0m).

Depreciation (-$3.3m)Rule/Transfer• Refinement of attribution rules to better reflect support costs provided to Output 21

(-$3.9m).Accounting Treatment• Identification of assets first found following information technology audit (+$1.1m).


(-$1.4m).

Capital Use Charge (+$2.2m)Rule/Transfer• Project Bloodhound attributed to this output in support of the Sydney Olympics (+$1.7m).Accounting Treatment• Identification of assets first found following information technology audit (+$0.7m).

181

NAVY CAPABILITIES

OUTPUT 3: CAPABILITY FOR MAJORSURFACE COMBATANTOPERATIONS

OUTPUT 4: CAPABILITY FOR PATROLBOAT OPERATIONS

OUTPUT 5: CAPABILITY FOR SUBMARINEOPERATIONS

OUTPUT 7: CAPABILITY FOR AFLOATSUPPORT

OUTPUT 8: CAPABILITY FOR MINECOUNTERMEASURES ANDMINING

OUTPUT 9: CAPABILITY FOR AMPHIBIOUSLIFT

Section Three

182

OUTPUT THREE: CAPABILITY FOR MAJORSURFACE COMBATANT OPERATIONS

In March 2000, as part of the reinvigoration of the Navy and in order to better delivercapability, seven force element groups were formed. The major surface combatantforce element group comprises the guided missile frigates (FFG), Anzac frigates (FFH)and the remaining destroyer (DDG). The naval aviation force element groupcomprises all Navy aircraft and HMAS Albatross. Force element groups also includerelevant support system centres, facilities and infrastructure.

Considerable effort was devoted in the last months of the year to drafting forceelement group master plans for endorsement under the Chief of Navy’s new capabilitymanagement framework.

OVERVIEW

The Surface Combatant Force contributes to the Defence outcome by providing levelsof capability to assert sea control, conduct surveillance, maritime patrol and responseoperations, intelligence collection, counter-insurgency operations, the protection ofshipping, offshore territories and assets and operations other than war in support of theGovernment.

During 1999-2000, the Surface Combatant Force successfully deployed five ships toEast Timor and a guided missile frigate, in support of the Maritime Interception Force,deployed to the Persian Gulf. Surface combatant ships also participated in a range ofexercises with allies and regional partners and other elements of the ADF. Theexercises provided valuable experience, especially in the development of interoperabilityarrangements and opportunities to enhance working relations with other navies.However, some exercises had to be cancelled or curtailed due to the East Timorcommitment.

Major surface combatant capability, while high, is 1960 to 1980 based technology. Thecomparative advantages afforded by superior training and equipment are reducingquickly noting the range of equipment acquisitions and upgrades, and trainingtechnology developments within the region.

HMA Ships Anzac and Arunta have proven to be valuable additions assisting with theRAN’s presence in the region. The Anzac project is progressing as planned with thethird vessel (Warramunga) scheduled to be commissioned in 2001.

HMAS Sydney is scheduled to be the first ship upgraded commencing in July 2002 aspart of the guided missile frigate upgrade program. The above-water warfareimprovement implementation phase (or more correctly the air warfare phase) for theAnzac warfighting improvement program has been cancelled because it was notconsidered value for money given the risk against improved capability. Two destroyersHMA Ships Perth and Hobart decommissioned during the year.

Personnel shortages within the surface combatant force remain a concern and have thepotential to limit the capability for sustained major surface combatant operations.

Output Three

183

The Navy continued to meet preparedness requirements within the surface combatantforce throughout the year. However, aviation performance targets were not fully metlargely as a result of logistic support and personnel limitations. Some $8m in logisticsupport funds was reallocated to other Defence priorities during the year.


Target1999-2000

PerformanceCombat CapabilityPreparedness• Ship Days at MLOC(1)(2)(3)

� 2.3 Destroyers(4) 733 days 599 days(5)

� 6 Guided Missile Frigates 1,576 days 1,587 days� 2 Anzac Frigates 642 days 732 days(6)

• Training� Percentage of single Service, joint and

combined exercise objectives achieved100% 83%(7)

• Flying Hours (8)

� Kiowa 1,030 1,060� Squirrel 2,200 1,976(9)

� Sea King 2,000 1,768(10)

� HS748 1,000 967� Seahawk 4,000 3,636(11)

� Kalkara 39(12) 14(13)

Operations• Quantity, quality and timeliness of response to

warlike and non-warlike unforeseen operationsNot planned Achieved as listed

below• Operation Warden/Tanager (East Timor) As required by the

Government178 days

(5 FFG, 1FFH)• Maritime Interception Force (Gulf Deployment)

– 1 FFG HMAS Melbourne 41 days 41 days

Non-Combat Related Tasks• Assistance to the Civil Community

(contributes to Output 21)• Sydney to

Hobart YachtRace

• Australia Daycelebrations

AchievedTasks included:

• On standby butnot required forRace or AustraliaDay

• 4 search andrescue incidents

• National Tasks (contributes to Output 21) As required Not requiredNotes1. Time at minimum level of capability (MLOC) is the unit of performance measurement for individual

warfare capabilities, ie the capability to conduct anti-surface operations, anti-submarine operations, anti-airoperations and the capability to conduct maritime support operations. As the range and depth of capability

Section Three

184

varies between ship classes due to their design, MLOC results are aggregated to provide performanceinformation at the force element group level. Breakdowns of MLOC performance information below thislevel are classified.

2. The MLOC assessment process for Navy Outputs (Outputs 3-5, 7-9) includes objective assessments ofequipment, equipment condition, personnel and collective training. Ship days at MLOC are an aggregatemeasure, which encompasses numerous lower-level quantity and quality measures. The performance targetis for all ships to be at MLOC when not conducting deep depot-level maintenance or conducting work-upto MLOC. This figure is the maximum possible and may need amendment in light of actual experiencegained with the revised MLOC process.

3. Naval platforms are considered to be in inventory on delivery. The degree to which ships can perform anoperational role after delivery is reflected in the days at MLOC figure.

4. HMAS Perth decommissioned in October 1999. HMAS Hobart was decommissioned in May 2000.5. Reduced activity due to the early decommissioning of HMAS Hobart and maintenance and work-up of

HMAS Brisbane.6. Over-achievement due to the postponement of a planned maintenance period in order to meet operational

imperatives.7. Withdrawal of RAN vessels from Exercises Stardex 99 and Crocodile 99 due to operations in East Timor,

cancellation of Exercise Matakeria by the New Zealand Defence Force and the non-availability ofsubmarine assets for Aswex 99 impacted upon achievement of set objectives.

8. Naval aircraft also contribute to Outputs 6, 7 and 9.9. Reduced flying hours attributed to weather related operating restrictions, aircraft availability restrictions

(logistic support related including inherent process delays, item unavailability, and contractor related issues)and personnel related restrictions (qualified instructor availability).

10. Reduced flying hours attributed to aircraft availability restrictions (logistics support related as above), andpersonnel related restrictions (qualified aircrew availability).

11. Reduced flying hours due to personnel and logistic support deficiencies (as above).12. Projected annual number of flights (presentations) required to meet Navy and Air Force’s surface-to-air and

air-to-air missile firings.13. Due to operations in East Timor the Kalkara system was only required for fourteen taskings for the

Maritime and Air Headquarters. Kalkara remains in project phase.

PRICE OF OUTPUT THREE


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses

Employees – Military 479.0 506.7 502.6 -4.1Employees – Civilian 115.3 131.5 96.6 -34.9

Sub-total Employees 594.3 638.2 599.2 -39.0Suppliers – Other 395.8 395.4 393.0 -2.5Suppliers – Inventory Consumption 137.3 157.5 94.2 -63.3

Sub-total Suppliers 533.1 552.9 487.1 -65.8Depreciation 298.7 322.5 371.3 48.7Asset Sales/Revenues 1.7 2.6 0.0 -2.6Net Write-Down of Assets 0.0 0.0 69.4 69.4Expensed Assets Under Construction 14.1 30.8 29.7 -1.0Other Expenses – including Interest

and Grants 28.5 16.5 2.8 -13.7Total Expenses 1,470.5 1,563.5 1,559.6 -3.9

Capital Use Charge 920.5 855.6 903.2 47.6Total Price of Output Three 2,391.0 2,419.1 2,462.9 43.7


Output Three

185


Employees – Military (-$4.1m)Real• Payments to cater for vacant Service health practitioner positions. (+$7m).• Reduced demand for Married Quarter houses (-$7m).• Reduced compensation claims and associated legal expenses (-$2m).• Real increase in ADF Enterprise Productivity Arrangement (+$4m).• Under-achievement in recruitment and retention (-$6m).

Employees – Civilian (-$34.9m)Real• Shortfall in the Naval Aviation Logistic Management recruitment program (-$1m).Rule/Transfer• Rule variations including improved appreciation of Group contributions to this output

(-$25m).Accounting Treatment• Reassessment of Employees – Civilian long service leave liability (-$9m).

Suppliers – Other (-$2.5m)Real• Slippage of Project Roman and other system updates (-$2m).• Lower logistic support requirements due to non-achievement of aviation performance

targets (-$8m).• Increased payments to suppliers for aviation maintenance not otherwise able to be

undertaken following shortfalls in recruitment program (+$8m).Rule/Transfer• Transfer from Output 7 to reduce logistic shortfall pressures for Anzac and guided missile

frigates (+$11m).• Rule variations including improved appreciation of Group contributions to this output

(+$11m).Accounting Treatment• Reduction in inventory holding following review of closing balance (-$22m).

Suppliers – Inventory Consumption (-$63.3m)Accounting Treatment• Disposals, write-offs and provisions for obsolescence budgeted as inventory consumption,

transferred from this expense item (-$54m).• Revised treatment of fuel excise resulting in reduction of cost of sales expense (-$8m).

Depreciation (+$48.7m)Real• Early pay off of HMAS Hobart (+$5m).• Increased amortisation of intangibles resulting from higher than planned software purchases

(+$1m).Accounting Treatment• Componentisation and revaluation of Anzac class and guided missile frigates (+$34m).• Individual assets with a value less than the asset recognition threshold have been grouped

and recognised as assets for financial statement purposes (+$9m).

Asset Sales/Revenues (-$2.6m)Accounting Treatment• Revenue from disposal program posted to asset sales and budgeted as revenue (-$2m).

Section Three

186

Net Write-Down of Assets (+$69.4m)Real• Transfer of ADI loan to Department of Finance and Administration (+$26m).• Reduced provision for obsolescence, resulting from detailed analysis after additional

estimates (-$19m).• Unbudgeted cost of write-off and demolition of assets. Contributions include demolitions at

HMAS Albatross, Garden Island Dockyard and termination of a lease for oil and fuelfacilities at Wolloomooloo. (+$8m).

Accounting Treatment• Disposals, write-offs and provisions for obsolescence budgeted as inventory consumption,

transferred to this expense item (+$54m).

Expensed Assets Under Construction (-$1.0m)Real• Higher than anticipated expenses from non-cooperative target recognition project (+$2m).Accounting Treatment• Budget allocation for expensed repairable items against Expensed Asset Under Construction

but reported against Suppliers – Other (-$3m).

Other Expenses – including Interest and Grants (-$13.7m)Real• Reduced compensation payments (-$4m).• Slippage in HMAS Albatross redevelopment, Darwin Naval Base infrastructure upgrade and

Garden Island Dockyard Boat Pond Facility (-$2m).Rule/Transfer• Rule variations due to improved appreciation of Group contributions to outputs (-$2m).Accounting Treatment• Transfer from Other Expenses to Suppliers – Other including maintenance contracts and

incidentals (-$6m).

Capital Use Charge (+$47.6m)Real• Increases in capital use charge due to understatement of assets under construction balance at

additional estimates – contributing projects were Anzac Ship Helicopter Acquisition, FFGUpgrade Implementation, Evolved Seasparrow Missile, Active Missile Decoy, PenguinMissile Project (+$44m).

Accounting Treatment• Grouping and capitalisation of assets previously expensed (+$30m).• Componentisation and revaluation of Anzac class and guided missile frigates (-$26m).

Output Four

187

OUTPUT FOUR: CAPABILITY FOR PATROLBOAT OPERATIONS

In March 2000, as part of the reinvigoration of the Navy and in order to better delivercapability, seven force element groups were formed. The patrol boat force elementgroup comprises the 15 Fremantle-class patrol boats and HMAS Coonawarra.

Considerable effort was devoted in the last months of the year to drafting a forceelement group master plan for endorsement under the Chief of Navy’s new capabilitymanagement framework.

OVERVIEW

The Patrol Boat Force contributes to the Defence outcome by providing levels ofcapability to conduct peacetime surveillance, and maritime patrol and responseoperations within coastal waters and operations other than war in support of theGovernment.

The Patrol Boat Force continued to meet preparedness requirements and perform at ahigh rate of effort throughout the year, including the undertaking of nationalsurveillance and response operations as required. The national surveillance task of1,800 days availability was achieved to within four days. The impact of suspect illegalentry vessels operations resulted in a shift in the rate of effort of patrol boat taskingfrom fisheries management to immigration response. Concurrently, patrol boatoperational outcomes re-emphasised the status of the boarding party as the primaryweapon system in the platform. This has attendant equipment and trainingimplications.

The challenges in maintenance and supportability of the Fremantle-class patrol boatscontinue as they approach their end of life. During the period, various cost-effectiveoptions to the life-of-type extension were examined by Defence AcquisitionOrganisation project staff. While awaiting direction on the way ahead, the focus hasbeen on keeping the Fremantle-class patrol boats operational, safe and seaworthy.

Ongoing personnel issues include full manning of vessels with significant pressure nowbeing felt by the inability to fill some junior officer and engineering staff positions.

Section Three

188


Target1999-2000


� 15 Fremantle-Class Patrol Boats 4,531 days 3,626(4)


combined exercise objectives achieved100% 100%

Operations• Operation Warden (East Timor) As required by the

GovernmentNot required

• Quantity, quality and timeliness of response towarlike and non-warlike unforeseen operations

Not planned Not required


(contributes to Output 21)As required Achieved

Tasks included:• Two incidents

where patrolboats used insearch and rescueoperations

• National Tasks (contributes to Output 21)� Civil surveillance and response operations

planned1,800 days(5) 1,796 days(6)

Notes1. Time at minimum level of capability (MLOC) is the unit of performance measurement for individual

warfare capabilities, ie the capability to conduct anti-surface operations, anti-submarine operations, anti-airoperations and the capability to conduct maritime support operations. As the range and depth of capabilityvaries between ship classes due to their design, MLOC results are aggregated to provide performanceinformation at the force element group level. Breakdowns of MLOC performance information below thislevel are classified.



4. Under-achievement due to the requirement for unscheduled maintenance.5. Provide 1,800 patrol boat days available for surveillance of the Australian Fishing Zone and provide at least

33 ship visits for patrol of the Bass Strait oil rigs.6. Previous advice to the Government foreshadowed a shortfall in achievement of 46 days. However, the

anticipated shortfall was reduced by the redeployment of HMA Ships Gawler and Ipswich to the civilsurveillance task following cancellation/postponement of their South-West Pacific deployments in light ofthe instability in the Pacific region. In excess of 33 visits for patrol of the bass strait oil rigs was achieved.

Output Four

189

PRICE OF OUTPUT FOUR


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses





Capital Use Charge 27.5 44.0 45.8 1.9Total Price of Output Four 252.7 309.2 261.7 -47.5



Employees – Military (-$10.4m)Real• Post additional estimate payments to cater for vacant Service health practitioner positions.

(+$1m).• Reduced demand for Married Quarter houses. (-$1m).• Real increase in ADF Enterprise Productivity Arrangement (+$1m).• Under-achievement in recruitment and retention (-$1m).Rule/Transfer• Rule variation including improved methodology for the distribution of allowances and

improved understanding of Group contributions to this output (-$10m).

Employees – Civilian (-$4.6m)Rule/Transfer• Rule variation including improved appreciation of Group contributions to this output

(-$3m).Accounting Treatment• Reassessment of Employees – Civilian long service leave liability (-$1m).

Suppliers – Other (-$34.0m)Rule/Transfer• Rule variations, including moving Landing Craft to Output 9, research and development to

Output 3 and military compensation in line with Employees – Military attribution (-$13m).

Section Three

190

Accounting Treatment• Budget allocation for repairable items against expensed assets under construction but

reported against Suppliers – Other (+$5m).• Reduction in asset holdings following review of closing balance (-$25m).

Suppliers – Inventory Consumption (-$7.3m)Real• Reduced platform availability due to unscheduled maintenance (-$3m).Rule/Transfer• Rule variations including improved appreciation of Group contributions to this output and

revised attribution of non-ADF fuel sales (+$8m).Accounting Treatment• Disposals, write-offs and provision for obsolescence budgeted as inventory consumption,

transferred from this expense item (-$12m).

Depreciation (+$3.7m)Real• Individual assets with a value less than the asset recognition threshold have been grouped

and recognised as assets for financial statement purposes (+$1m).• Accelerated depreciation expense of minor capital delivery to HMAS Ipswich (+$3m).

Net Write-Down of Assets (+$10.3m)Real• Reduced provision for obsolescence, resulting from detailed analysis conducted during

1999-2000 (-$4m).• Property lease termination costs not provided for in additional estimates (+$1m).Accounting Treatment• Disposals, write-offs and provisions for obsolescence budgeted as inventory consumption,


Expensed Assets Under Construction (-$4.2m)Accounting Treatment• Budget allocation for repairable items against expensed assets under construction but

reported against Suppliers – Other (-$5m).

Other Expenses – including Interest and Grants (-$2.2m)Real• Slippage in Naval Base Infrastructure Upgrade and Garden Island Dockyard Boat Pond

Facility projects (-$1m).• Lower than expected compensation payments (-$1m).

Capital Use Charge (+$1.9m)Accounting Treatment• Higher than budgeted inventory and specialist military equipment balances at year-end due

to reduced provision for obsolescence (+$2m).

Output Five

191

OUTPUT FIVE: CAPABILITY FORSUBMARINE OPERATIONS

In March 2000, as part of the reinvigoration of the Navy and in order to better delivercapability, seven force element groups were formed. The submarine force elementgroup comprises the Collins-class and the last of the Oberon-class submarines, relevantsupport system centres, facilities and infrastructure.


OVERVIEW

The Submarine Force contributes to the Defence outcome by providing levels ofcapability to conduct covert surveillance and reconnaissance, offensive operationsagainst warships, submarines and merchant shipping, and mining and support to specialoperations.

The operational capability of the Submarine Force is at a low level due to shortfalls incapability of the Collins-class submarines. HMAS Otama reverted to 90 days notice foroperations in January 2000 and its personnel have transferred to the Collins-classtraining pipeline. The submarine is expected to decommission at the end of 2000. Thecurrent force of three Collins-class submarines, HMAS Collins, Farncomb and Waller,have been delivered and provisionally accepted into naval service. Farncomb and Wallerhave not undergone any significant modifications to rectify the shortfalls but bothsubmarines are capable of meeting the majority of their peacetime roles.

HMAS Collins is the first of the submarines to be fitted with a number of prototypemodifications. The interim minimum operating capability achieved includes:• modifications to the external casing and fin to reduce the noise signature; and• provision of a reliable and functional combat system through some limited

enhancement of the existing system and the addition of stand-alone equipmentsourced from both the RAN and the United States Navy.

The interim minimum operating capability results provide a considerable degree ofconfidence in the modifications themselves although it does not provide sufficientcapability to deploy the submarine outside routine peacetime exercise activities. Thefourth and fifth submarines, Dechaineux and Sheean, are being modified to achieve alimited capability that would allow deployments in a range of low/medium level real-world operations while enduring improvements to the combat system deficiencies arereviewed and implemented. A ‘fast track’ program has been instituted to achieve thiscapability.

Options to bring all submarines to full capability by the end of 2006 will be put beforethe Government in 2000-01.

The Collins-class submarines met preparedness requirements for all but four months ofthe year when minor defects to submarine hulls were repaired. Although shortfalls inthe Collins class preclude the force from achieving full capability, the submarines

Section Three

192

successfully performed in all programmed peacetime operational requirements.However, some forecast exercises were cancelled as a result of the non-availability ofsubmarines while hull repairs were carried out.

Submarine personnel numbers remain critical but are currently sufficient to maintainfour operational submarines plus a trials crew. Particularly critical shortages are beingexperienced in junior seaman officers and junior marine technicians due principally tothe shortages of personnel in other areas of the Navy. The full effect of the completionincentives offered to submariners for retention is yet to be felt, however this isexpected to provide a considerable boost to submarine numbers in the next 12 months.

The introduction in July 1999 of a certified Collins-class submarine docking cradle atthe Western Australian shiplift facility owned by Tenix has been tested and allowsintermediate-level maintenance (ie planned and emergency dockings) to take place onthe west coast. The East Coast Submarine Facility at Garden Island in Sydney verysuccessfully demonstrated its capability to remotely support submarines duringdeployment.


Target1999-2000


� 3 Collins class submarines 366 days 541 days(4)


combined exercise objectives achieved 100% 40%(5)


warlike and non-warlike unforeseen operations Not planned Not requiredNon-Combat Related Tasks• Assistance to the Civil Community

(contributes to Output 21)As required Not required





4. Rescheduling of maintenance periods resulted in increased achievement. HMAS Otama was not at MLOCduring the period.

5. The cancellation of Aswex 99, Tamex series and Exercise Stardex 99 was partially offset by achievement ofadditional objectives during USN CV B ASWEX.

Output Five

193

PRICE OF OUTPUT FIVE


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses



Sub-total Suppliers 105.9 124.5 67.9 -56.6Depreciation 121.2 162.9 137.3 -25.7Asset Sales/Revenues 0.5 0.7 0.0 -0.7Net Write-Down of Assets 0.0 0.0 20.1 20.1Expensed Assets Under Construction 31.5 20.0 5.2 -14.7Other Expenses – including Interest


Capital Use Charge 515.3 574.0 509.7 -64.3Total Price of Output Five 904.7 1,011.4 849.0 -162.3



Employees – Military (-$11.4m)Real• Reduced demand for Married Quarter houses (-$1m)• Post additional estimate payments to cater for vacant Service health practitioner positions

(+$1m).Rule/Transfer• Rule variation due to improved appreciation of Group contributions to this output (-$11m).

Employees – Civilian (-$4.0m)Rule/Transfer• Rule variations due to improved appreciation of attribution of the Defence Service Centre

and other costs of this output (-$1m).Accounting Treatment• Reassessment of Employees – Civilian long service leave liability (-$2m).

Suppliers – Other (-$47.5m)Real• Lower than expected maintenance of stores and equipment costs (-$2m).• Lower than expected communications and information technology usage (-$1m).Rule/Transfer• Rule variations due to improved appreciation of Group contributions to this output (-$24m).Accounting Treatment• Transfer from Other Expenses to Suppliers – Other including maintenance contracts and

incidentals (+$3m).

Section Three

194

• Reduction in asset holdings following review of closing balance (-$40m).• Budget allocation for expensed repairable items against Expensed Asset Under Construction

but reported against Suppliers – Other (+$17m).

Suppliers – Inventory Consumption (-$9.1m)Real• Increased inventory consumption due to higher levels of availability (+$9m).Accounting Treatment• Disposals, write-offs and provision for obsolescence budgeted as inventory consumption,


Depreciation (-$25.7m)Real• Delivery of Towed Array (Kariwarra) not included in additional estimate (+$3m).Accounting Treatment• Componentisation and revaluation of Collins class (-$28m).

Net Write-Down of Assets (+$20.1m)Real• Reduced provision for obsolescence, resulting from detailed analysis conducted during 1999-

2000 (-$4m).• Transfer of ADI loan to the Department of Finance and Administration (+$5m).Accounting Treatment• Disposals, write-offs and provision for obsolescence budgeted as inventory consumption,


Expensed Assets Under Construction (-$14.7m)Rule/Transfer• Rule variations due to improved appreciation of projects contributing to this output (+$2m).Accounting Treatment• Budget allocation for expensed repairable items against Expensed Asset Under Construction

but reported against Suppliers – Other (-$17m).

Other Expenses – including Interest and Grants (-$5.0m)Real• Less than planned expenditure arising from Naval Base Infrastructure Upgrade and Garden

Island Dockyard Boat Pond Facility projects (-$1m).• Lower than expected compensation payments (-$1m).Accounting Treatment• Transfer from Other Expenses to Suppliers – Other including maintenance contracts and

incidentals (-$3m).

Capital Use Charge (-$64.3m)Real• The decrease was due to an overestimate of assets under construction for new submarine

project at additional estimates (-$56m).• Slippage in Harpoon Missiles project (-$3m).• Collins class intermediate level of capability was budgeted for delivery in June 2000 but is

scheduled for December 2000 (-$3m).Rule/Transfer• Maritime Ranges Electromagnetic Measurement project attribution was refined and spread

across relevant Outputs with Submarines retaining a lower proportion (-$2m).

Output Seven

195

OUTPUT SEVEN: CAPABILITY FOR AFLOATSUPPORT

In March 2000, as part of the reinvigoration of Navy and in order to better delivercapability, seven force element groups were formed. The amphibious and afloatsupport force element group comprises the amphibious transports, landing ship heavy,landing craft heavy, fast catamaran, auxiliary oiler replenishment and auxiliary oiler.The force element group also includes relevant support system centres, facilities andinfrastructure.


OVERVIEW

The Afloat Support Force contributes to the Defence outcome by providing levels ofcapability required to provide under way replenishment of fuel, water, stores andammunition, and strategic bulk fuel transport.

Despite the unavailability of HMAS Westralia while repairs to main engines were carriedout, the Afloat Support Force met preparedness requirements for all but 46 days of theyear. HMAS Success successfully supported operations in East Timor from Septemberuntil November 1999, supporting both sea and land operations. HMAS Westralia isnow undergoing sea trials after refit.

The significant deviation from the 1999-2000 performance indicators was the failure ofHMAS Westralia to meet its 125 days target capability delivery. The problems that ledto this capability output failure have been addressed and should not continue to reflectin the 2000-01 capability output statements.

Planning has started on a replacement for HMAS Westralia (Project Sea 1654). Theship is due to be withdrawn from service by 2009 to maintain compliance with 1978maritime pollution convention regulations.

Section Three

196


Target1999-2000


� 1 Auxiliary Oiler Replenishment 366 days 320 days(4)

� 1 Auxiliary Oiler 125 days 0 days(5)





below• Operation Warden (East Timor) As required by the

Government41 days

(HMAS Success)







4. Unscheduled maintenance due to a defect in the port main engine.5. Return to operational service delayed by ongoing engine defects following extensive refit.6. Cancellation of Exercise Matakeria by the New Zealand Defence Force impacted upon achievement of

planned objectives.

Output Seven

197

PRICE OF OUTPUT SEVEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses

Employees – Military 65.1 66.9 66.9 -0.1Employees – Civilian 13.5 16.1 19.3 3.2

Sub-total Employees 78.7 83.0 86.1 3.1Suppliers – Other 52.0 81.8 -26.5 -108.2Suppliers – Inventory Consumption 13.4 10.8 5.6 -5.2

Sub-total Suppliers 65.4 92.6 -20.8 -113.4Depreciation 32.5 30.0 31.2 1.2Asset Sales/Revenues 0.3 0.4 0.0 -0.4Net Write-Down of Assets 0.0 0.0 23.3 23.3Expensed Assets Under Construction 0.5 1.3 1.4 0.1Other Expenses – including Interest


Capital Use Charge 47.1 61.8 63.5 1.7Total Price of Output Seven 227.9 270.9 185.1 -85.8



Employees – Civilian (+$3.2m)Rule/Transfer• Rule variations due to improved appreciation of Group contributions to this output (+$4m).Accounting Treatment• Reassessment of Employees – Civilian long service leave liability (-$1m).

Suppliers – Other (-$108.2m)Rule/Transfer• Funds have been transferred from this output to reduce logistic shortfall pressures in Output

3. Tasking of vessels in support of operations reduced their availability for maintenanceactivities in the budget year (-$11m).

• Rule variations due to improved appreciation of Group contributions to this output (-$11m).Accounting Treatment• Reduction in asset holdings following review of closing balance (-$85m).

Suppliers – Inventory Consumption (-$5.2m)Real• Reduced requirements due to delayed delivery into service of HMAS Westralia and

unavailability of HMAS Success for repairs (-$2m).Accounting Treatment• Disposals, write-offs and provision for obsolescence budgeted as inventory consumption,


Section Three

198

Depreciation (+$1.2m)Accounting Treatment• Individual assets with a value less than the asset recognition threshold have been grouped

and recognised as assets for financial statement purposes (+1m).


1999-2000 (-$11m).Rule/Transfer• Rule variations due to improved appreciation of Group contributions to this output (+$4m).Accounting Treatment• Disposals/write-offs and provision for obsolescence budgeted as inventory consumption,


Other Expenses – including Interest and Grants (-$1.3m)Real• Lower than expected compensation payments (-$1m).

Capital Use Charge (+$1.7m)Real• Grouping and capitalisation of assets previously expensed (+$1m).

Output Eight

199

OUTPUT EIGHT: CAPABILITY FOR MINECOUNTERMEASURES AND MINING

In March 2000, as part of the reinvigoration of the Navy and in order to better delivercapability, seven force element groups were formed. The mine warfare and clearancediving force element group comprises the minehunter coastal, minehunter inshore,minesweeper auxiliaries, HMAS Waterhen, clearance diving teams and drone boat unit.The force element group also includes relevant support system centres, facilities andinfrastructure.


OVERVIEW

The Mine Countermeasures Force contributes to the Defence outcome by providingthe capability to conduct mine clearance from beaches, shallow and deep water, routesurvey and lead through operations, and provision of the ADF capability for mining.

Acceptance of six new Huon-class minehunter coastal vessels remained the focus of themine warfare and clearance diving force element group. The first two vessels weredelivered in 1999 and the third vessel of the class was delivered in July 2000.

A high-speed craft was acquired to support clearance-diving operations during theSydney Olympics and to improve clearance-diving support to amphibious operations.

While preparedness requirements were not fully achieved during the year, the minecountermeasures force successfully completed all operational tasks in the period andmet all exercise commitments as revised. The clearance diving teams achievedpreparedness requirements, notably in mine clearing operations in East Timoresewaters from September 1999 until February 2000.

Minesweeping and mine hunting effectiveness suffered as a result of materieldeficiencies in the existing force. This will be overcome with the introduction of thenew minehunters and development of new generation minesweeping platforms.

Section Three

200


Target1999-2000


� 1 Minehunter Coastal 28 days 18 days(4)

� 2 Minehunter Inshore 581 days 329 days(5)

� 5 Minesweeper Auxiliaries As required 769 days• Training

� Percentage of single Service, joint andcombined exercise objectives achieved

100% 100%



below• Operation Warden (East Timor) As required by the

Government• Nil ship days• Clearance Diving

Teams – 158 days• Operation Bel Isi continuation – 3 Minesweeper

Auxiliaries (Bougainville)Not planned 105 days(6)



Tasks included:• Clearance Diving

Team used tosearch for divermissing in GreatBarrier Reef.

• National Tasks (contributes Output 21) As required Not requiredNotes1. Time at minimum level of capability (MLOC) is the unit of performance measurement for individual




4. HMAS Huon did not reach MLOC until June; HMAS Hawkesbury did not reach MLOC during the perioddue to delays in acceptable material fitout.

5. MHI failed to reach planned MLOC because of material defects throughout the reporting period. Somedefects remain unresolved.

6. As required by the Government.

Output Eight

201

PRICE OF OUTPUT EIGHT


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses





Capital Use Charge 150.4 173.0 157.7 -15.3Total Price of Output Eight 294.9 330.0 317.5 -12.5



Employees – Military (+$17.2m)Real• Under-achievement in recruitment and retention (-$1m).Rule/Transfer• Rule variations due to improved methodology for attribution of allowances to this output

(+$18m).

Suppliers – Other (-$27.3m)Rule/Transfer• Rule variations due to improved appreciation of research and development contributions to

this output (-$2m)Accounting Treatment• Reduction in asset holdings following review of closing balance (-$29m).• Budget allocation for repairable items against Expensed Asset Under Construction but

reported against Suppliers – Other (+$4m).

Suppliers – Inventory Consumption (-$8.2m)Real• Reduced requirements due to removal from service of HMA Ships Koraaga and Bermagui and

extended state of readiness for HMA Ships Rushcutter and Shoalwater (-$2m).Rule/Transfer• Rule variation due to refinement of non-ADF fuel sales (+$9m).

Section Three

202

Accounting Treatment• Disposals, write-offs and provision for obsolescence budgeted as inventory consumption,


Depreciation (+$9.7m)Real• Slippage in delivery of the Mine Warfare Command Support System (-$2m).Accounting Treatment• Revaluation and componentisation of the minehunter coastal vessels(+$12m).


1999-2000 (-$5m).• Transfer of ADI loan to the Department of Finance and Administration (+$3m).Accounting Treatment• Disposals, write-offs and provision for obsolescence budgeted as inventory consumption,


Expensed Assets Under Construction (-$1.7m)Real• The increase was due to the expensing of assets under construction for undersea warfare

project not identified at additional estimates (+$1m).Accounting Treatment• Budget allocation for repairable items against expensed assets under construction but

reported against Suppliers – Other (-$4m).

Other Expenses – including Interest and Grants (-$1.6m)Real• Net foreign exchange losses not identified at additional estimates (-$1m).

Capital Use Charge (-$15.3m)Real• Slippage in maritime mining, minehunter coastal and mine warfare command support system

projects (-$5m).Accounting Treatment• Revaluation and componentisation of the minehunter coastal vessels (-$10m).

Output Nine

203

OUTPUT NINE: CAPABILITY FORAMPHIBIOUS LIFT

In March 2000, as part of the reinvigoration of the Navy and in order to better delivercapability, seven force element groups were formed. The amphibious and afloatsupport force element group comprises the amphibious transports, landing ship heavy,landing craft heavy, fast catamaran, auxiliary oiler replenishment, and auxiliary oiler.The force element group also includes relevant support system centres, facilities andinfrastructure.


OVERVIEW

The Amphibious Lift Force contributes to the Defence outcome by providing levels ofcapability to conduct amphibious operations, and to support land operations from sea,provide strategic, operational, tactical and administrative sea transport, and providesupport to beach intelligence gathering.

All amphibious platforms were heavily committed to operational tasks in East Timorand the Solomon Islands. The continued heavy tasking and operational success of thelanding craft heavy resulted in the decision to recommission HMAS Wewak, bringingthe total number of commissioned landing craft heavy to six. The Navy’s amphibiouslift capability achieved the Government’s preparedness requirements throughout theyear. All platforms exceeded their output targets with an overall output of 2,357 days atminimum level of capability spread between just 10 ships.

HMAS Manoora was delivered from the contractor in December 1999 and successfullycompleted initial sea trials and mariner skills evaluation in March 2000. HMAS Manoorawas then successfully deployed to provide sea transport in support of operations inEast Timor and the Solomon Islands. HMAS Kanimbla is now scheduled for contractordelivery during the fourth quarter of 2000.

Section Three

204


Target1999-2000


� 1 Landing Ship Heavy 194 days 293 days(4)

� 2 Amphibious Transports 105 days 112 days� 5 Landing Craft Heavy, increased to six in

April 2000 1,426 days 1,586 days(5)

� 1 Fast Catamaran 366 days 342 days• Training


100% 90%(6)



below• Operation Warden/Tanager (East Timor) As required by the

Government957 days

(1 LSH, 4 LCH)• Operation Bel Isi continuation (Bougainville) In continuation

and as required byGovernment

40 days(1 LSH, 2 LCH)

• Operation Plumbob 1 LSH, 1 LPA (SolomonIslands) Not planned 29 days







4. Increased requirement due to Operation Warden demand.5. Addition of extra LCH and greater demand in relation to Operation Warden increased the achievement.6. Some objectives were not achieved due to further reduction of the planned scope of Exercise Crocodile 99

resulting from operational commitments in East Timor.

Output Nine

205

PRICE OF OUTPUT NINE


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses


Sub-total Employees 98.2 107.1 124.9 17.8Suppliers – Other 56.1 121.2 79.1 -42.0Suppliers – Inventory Consumption 14.9 14.1 16.6 2.4

Sub-total Suppliers 71.0 135.3 95.7 -39.6Depreciation 23.0 28.9 30.3 1.5Asset Sales/Revenues 0.3 0.6 0.0 -0.6Net Write-Down of Assets 0.0 0.0 18.3 18.3Expensed Assets Under Construction 1.5 2.2 2.7 0.5Other Expenses – including Interest


Capital Use Charge 59.0 76.3 72.3 -4.1Total Price of Output Nine 256.9 353.0 344.8 -8.2



Employees – Military (+$18.3m)Real• Real increase in ADF Enterprise Productivity Arrangement (+$1m).• Under-achievement in recruitment and retention (-$1m).• Post additional estimate payments to cater for vacant Service health practitioner positions

(+$1m).• Higher than expected costs for conditions of service travel (+$1m).Rule/Transfer• Rule variations due to improved methodology for the allocation of allowances to this output

(+$11m).• Contribution of Aeronautical Research Development Unit to this output not reflected at

additional estimates (+$4m).

Suppliers – Other (-$42.0m)Real• Increased management fee for Landing Platforms Amphibious due to high levels of

maintenance activities in previous years (+$7m).Rule/Transfer• Rule variation due to transfer of Milsatcom costs and communications to Output 1, Landing

Craft to Output 4 and improved appreciation of Group contributions to this output (+$5m).Accounting Treatment• Reduction in asset holdings following review of closing balance (-$54m).

Section Three

206

Suppliers – Inventory Consumption (+$2.4m)Real• Increased inventory consumption arising from delivery of HMAS Jervis Bay (+$8m).Rule/Transfer• Rule variations due to refinement of attribution of non-ADF fuel to this output and

improved appreciation of Group contributions to this output (+$16m).Accounting Treatment• Disposals, write-offs and provisions for obsolescence budgeted as inventory consumption,


Depreciation (+$1.5m)Real• Individual assets with a value less than the asset recognition threshold have been grouped

and recognised as assets for financial statement purposes (+$1m).


1999-2000 (-$8m).• Write-down and write-off of commercial vehicles and other assets not included in the

additional estimate (+$2m).Accounting Treatment• Disposals, write-offs and provisions for obsolescence budgeted as inventory consumption,


Other Expenses – including Interest and Grants (-$2.0m)Miscellaneous• Transfer from Other Expenses to Suppliers – Other including maintenance contracts and

incidentals (-$1m).

Capital Use Charge (-$4.1m)Real• Slippage of HMAS Kanimbla delivery (-$3m).

207

ARMY CAPABILITIES

OUTPUT 10: CAPABILITY FOR SPECIALFORCES OPERATIONS

OUTPUT 11: CAPABILITY FOR LAND TASKFORCES OPERATIONS

OUTPUT 12: CAPABILITY FOR LOGISTICSUPPORT OF LANDOPERATIONS

OUTPUT 15: CAPABILITY FOR GROUND-BASED AIR DEFENCE

Section Three

208

OUTPUT TEN: CAPABILITY FOR SPECIALFORCES OPERATIONS

OVERVIEW

The Special Forces Group is capable of contributing a range of rapidly deployable forceelements tailored to support strategic tasks. The Special Forces Group contribution tothe ADF was significant for the 1999-2000 period. Of note was the initial and ongoingsupport to the operations in East Timor, which has contributed to the high regard inwhich the ADF is held by the community, both nationally and internationally. 4 RAR(Cdo) battalion will provide an additional force for rotation in East Timor. The unitwill deploy to East Timor in 2000-01. The continued development of the ADFcounter-terrorist capability and the continued expansion of the commando capabilitywill further enhance the output.

Projects such as Bluefin – providing equipment for counter-terrorist operations, andLand 132, aimed at raising the full-time commando capability, provide short-termcapability enhancements.

The Special Forces Group successfully completed a range of exercises during thereporting period. However, some training limitations were experienced due to someequipment being utilised for other priority activities.

A number of initiatives have been developed to address manpower requirementsassociated with surge capacity within some units, especially part-time components, intimes of high operational tempo. These include a recruiting campaign which addressesthe regular component deficiencies, the general Reserve roles and tasks study, andproposed changes to Reserve Force legislation which address the part-time componentissues. The Government has also introduced initiatives such as general Reserveemployment for unemployment benefit recipients.

The Special Forces Group is now embarking upon a year of consolidation. The yearwill incorporate the continued development of the capability, the expansion of thecommando capability, the preparation of force elements for operations in East Timor,and operations in support of the Olympics.

Output Ten

209


Target1999-2000

PerformanceCombat CapabilityPreparedness• MLOC Fully achieve Partially achieved(1)




GovernmentAchieved

• Capable of completing operational tasking 100% 100%



Tasks included:• Support to the

Royal EasterShow

• Roping Displays• Climbing training

for VictorianPolice

• National Tasks (contributes to Output 21) As required Not requiredNotes1. The manning of the part-time component is an ongoing issue.2. The unavailability of some training assets, eg Black Hawks (due to East Timor deployment), and minor

equipment deficiencies or technical problems resulted in minor reductions in training.

Section Three

210

PRICE OF OUTPUT TEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses



Sub-total Suppliers 54.7 72.8 59.1 -13.7Depreciation 14.6 15.8 16.0 0.2Asset Sales/Revenues 0.0 0.0 0.0 0.0Net Write-Down of Assets 0.0 0.0 2.7 2.7Expensed Assets Under Construction 1.4 0.8 1.8 1.1Other Expenses – including Interest


Capital Use Charge 34.3 50.2 52.8 2.5Total Price of Output Ten 206.8 253.9 259.8 5.9



Employees – Military (+$9.0m)Real• Real increase in ADF Enterprise Productivity Arrangement (+$0.4m).• Net variation in personnel attributions including changes in rank/profile and allowances

(+$9.8m).• Variations in leave entitlements, superannuation and fringe benefits tax payments associated

with revised workforce attributions (-$2.9m).• Net variations in conditions of service related expenses including, housing, living out

allowance, health services, workers compensation and conditions of service related travel(+$0.5m).

• Lower than planned General Reserve salaries (-$0.7).Accounting Treatment• Revised methodology relating to conditions of service expenses (+$1.9m).

Employees – Civilian (+$5.3m)Rule/Transfer• Inter group transfers and refinement of attribution rules relating to increased contribution

from enabling Groups (+$5.0m).

Suppliers – Other (-$8.8m)Real• Lower than anticipated expenditure relating primarily to legal services, training, office

requisites and communication usage (-$1.9m).

Output Ten

211

• Non-utilisation of Defence Reform Program contract and transition costs due to delays inthe implementation of contracts and non-utilisation of legal and compensation funds(-$6.2m).

Suppliers – Inventory Consumption (-$5.0m)Real• Lower inventory consumption as a result of the postponement of exercises planned for

1999-2000 and the prioritisation of Army activities towards the support of operations in EastTimor (-$5.3m).

Rule/Transfer• Changes to attribution rules for non-ADF fuel sales (+$0.4m).

Net Write-Down of Assets (+$2.7m)Accounting Treatment• Treatment of actuals for disposals and write-offs of inventory as net write-downs whilst

budget was held in inventory consumption (+$2.1m).

Expensed Assets Under Construction (+$1.1m)Real• Disposal of specialist military equipment and write-back of certain inventory items from the

provision for obsolescence (+$0.8m).• Expensed assets under construction brought to account from previous financial years

(+$0.4m).

Other Expenses – including Interest and Grants (-$1.2m)Real• Lower non-capitalised costs arising from capital facilities projects including APIN Stage 2,

Townsville, Lavarack Barracks redevelopment and Bradshaw infrastructure development.(-$0.3m).

• Lower miscellaneous expenses contributing to Output 10 (-$0.9m).

Capital Use Charge (+$2.5m)Accounting Treatment• Higher inventory and specialist military equipment balances at year-end due to write-back of

certain inventory items from the provision for obsolescence, lower than budgeted inventorytransfers, and lower specialist military equipment transfers (+$3.2m).

• Net effect of lower Estate asset base held at year-end caused by the recognition of assetsfirst found, asset roll outs, revaluations less disposal/demolitions/write-offs anddepreciation during the year (-$1.2m).

Section Three

212

OUTPUT ELEVEN: CAPABILITY FOR LANDTASK FORCES OPERATIONS

OVERVIEW

The capability for Land Task Force Operations achieved a high tempo of operationalactivity in the 1999-2000 period. Effective land operations were conducted to meetADF preparedness tasks. This included significant contributions to operationsundertaken in East Timor and Bougainville. Land Forces have also continued toparticipate successfully in other UN missions such as Operations Osier (Bosnia),Paladin (Sinai), Mazurka (Israel), and Coracle (Mozambique).

Land Task Force capability and flexibility was enhanced during the reporting period,with the change in readiness of the 1st Brigade to 28 days readiness notice. The changein readiness of the 1st Brigade was a result of strategic guidance which required theADF to be capable of providing maximum flexibility to respond to contingencies atshort notice. Elements of the 1st Brigade, notably 5/7 RAR and 2 Cavalry Regiment,were subsequently deployed to East Timor under both Interfet and UNTAET duringthe reporting period.

The redistribution of personnel and equipment was necessary to meet operationalrequirements, particularly operations in support of East Timor. This action requiredsupplementation to achieve both operational tasks and to meet the enduring costs ofreconstitution and remediation. Equipment requirements were met through theredistribution of equipment from low-readiness units, loan pools, and attrition stocks,to higher readiness units, and through procurement action. Remediation action toreconstitute low readiness units is continuing.

To sustain rotations in East Timor and to meet other ADF commitments it wasnecessary to round out two battalion groups; 6 RAR and 4 RAR(Cdo) (see Output 10).This was the second significant redistribution of resources, the first being the expansionof the Ready Deployment Force with the change in readiness of the 1st Brigade.

The tempo of operations affected the planned exercise program with a number ofexercises being downgraded, postponed or cancelled. Nevertheless the Land Forcesconducted a range of training activities and exchanges with other armies to enhanceindividual and collective skills.

Training postponed because of East Timor commitments was conducted at the earliestopportunity upon return to Australia. The Parachute Company Group, 3 RAR forexample recently completed Exercise Arnhem in Singleton. This exercise provided theArmy’s airborne units with the parachute training that could not be completed whiledeployed in East Timor.

2000-01 will continue to be a year of high operational tempo for the Land Forces withcontinued support to operations in East Timor, operations in support of the 2000Olympic Games, and support to the Centenary of Federation activities.

Output Eleven

213


Target1999-2000

PerformanceCombat CapabilityPreparedness• 2 brigades at higher readiness levels, capable of

conducting light infantry operations (ReadyDeployment Force) and mechanised operations(1st Brigade)

Available at 28days notice

Achieved

• 7 brigades at lower readiness levels, capable ofconducting motorised infantry operations (7thTask Force), and protective operations indefence of Australia (4th, 5th, 8th, 9th, 11th, and13th Brigades)

Fully achieve Partially achieved(1)

• MLOC Fully achieve Partially achieved(2)



• Flying Hours(4)

� Black Hawk 12,828 8,179� Iroquois 7,724 6,349� Kiowa 11,934 8,379� Squirrel 8,011 5,297� Chinook 1,000 875� King Air 3,016 2,581� Twin Otter 1,200 1,164


GovernmentAchieved

• Capable of completing operational tasking 100% 100%



Tasks included:• Food relocation

to flood boundcommunities inSouth Australia

• The provision ofemergencyaccommodationfor the Daly Rivercommunity

• National Tasks (contributes to Output 21) As required Not required

Section Three

214

Notes1. Reserve legislation has restricted the employment of part-time personnel on operations, except on a

volunteer basis. This has a significant influence on the Army’s ability to generate and sustain requiredforce levels. Changes in Reserve Force legislation will enable the Reserve Force to provide sustainmentand strategic depth for the ADF. Shortfalls in Army Reserve numbers constrain the output’s ability toprovide reinforcements, rotations, and round-out personnel for high-readiness operations.

2. Manning levels are generally greater than 70% achievement against full-time established positions. Part-time numbers continue to be an issue.

3. 41% achieved as forecast. 18% partially achieved, primarily due to East Timor commitments. 41% notachieved as forecast due to a combination of East Timor commitments, postponement of activities andunavailability of supporting force elements.

4. Under contingency planning for East Timor, the Black Hawk, Iroquois, Kiowa, and King Air aircraftwere allocated additional flying hours in the additional estimates. The anticipated increase in the rate ofeffort did not eventuate as training requirements were able to be achieved concurrent with East Timoroperational duties. The Chinook allocation was reduced from 1,000 hours in late 1999 due to theimpact of several component manufacturer requirements maintenance issues. The reduction in flyinghours for the Squirrel is a reflection of the progressive changeover to the Kiowa as the primary trainingaircraft for Army flying training.

PRICE OF OUTPUT ELEVEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses

Employees – Military 1,201.5 1,290.8 1,288.9 -1.9Employees – Civilian 215.9 237.6 176.8 -60.8

Sub-total Employees 1,417.4 1,528.4 1,465.7 -62.7Suppliers – Other 732.6 790.3 745.4 -44.9Suppliers – Inventory Consumption 268.4 269.2 176.2 -93.0

Sub-total Suppliers 1,001.0 1,059.5 921.6 -137.9Depreciation 404.3 368.8 349.0 -19.8Asset Sales/Revenues 5.1 6.6 0.0 -6.6Net Write-Down of Assets 0.0 0.0 48.4 48.4Expensed Assets Under Construction 46.0 46.8 50.7 3.9Other Expenses – including Interest

and Grants 24.2 34.9 10.4 -24.5Total Expenses 2,898.0 3,044.9 2,845.8 -199.2

Capital Use Charge 883.1 826.6 775.3 -51.3Total Price of Output Eleven 3,781.1 3,871.5 3,621.0 -250.5


Output Eleven

215


Employees – Military (-$1.9m)Real• Real increase in ADF Enterprise Productivity Arrangement (+$2.3m).• Net variation in personnel attributions including changes in rank/profile and allowances

(-$38.6m).• Variations in leave entitlements, superannuation and fringe benefits tax payments associated

with revised workforce attributions (+$33.3m).• Net variations in conditions of service related expenses including, housing, living out

allowance, health services, workers compensation and conditions of service related travel(-$10.2m).


Employees – Civilian (-$60.8m)Real• Net variation in civilian staffing numbers and associated costs across all Groups including

discretionary savings (-$4.9m).Rule/Transfer• Inter group transfers and the refinement of attribution rules relating to the contribution

from enabling Groups to reflect appropriate support to Output 11 (-$44.1m).Accounting Treatment• Accounting changes associated with employer entitlements including superannuation,

recreation leave and long service leave across all Groups contributing to Output 11(-$12.5m).

Suppliers – Other (-$44.9m)Real• Increase in suppliers expense for facilities operations, leasing and disposal costs relating

primarily to establishments at Lavarack Barracks, Enoggera Barracks, Oakey, KakodaBarracks, Singleton, Holsworthy (+$18.0m).

• Reduced corporate systems project payments due to slippage in deliverables (-$3.3m).• Net variation primarily relating to personnel management expenses together with the

reprogramming of costs relating to the Defence Service Centre, HealthKEYS and otherpersonnel programs (-$12.5m).

• Lower than anticipated expenditure including maintenance, logistics, legal services, training,office requisites and communication usage and other miscellaneous items (-$35.6m).

• The non-utilisation of Defence Reform Program contract and transition costs due to delaysin the implementation of contracts and non-utilisation of legal and compensation funds(-$30.9m).

Accounting Treatment• Net effect of increased munitions payments and the reclassification of explosive ordnance

progress payments to Suppliers Expenses (+$14.5m).• Net effect of reclassification/transfers between capital (inventory) and suppliers expense

(inventory) (+$5.8m).

Section Three

216

Suppliers – Inventory Consumption (-$93.0m)Real• Under-achievement in inventory consumption is the result of the postponement of exercises

planned for 1999-2000 and the prioritisation of Army activities towards the support ofoperations in East Timor (-$80.8m).

Accounting Treatment• Recording of actuals for inventory disposals/write-offs and provision for obsolescence as

net write-downs while the budget was held in inventory consumption (-$11.9m).

Depreciation (-$19.8m)Real• Net effect of information technology and telecommunication assets first recognised and

amortisation for software purchases (+$7.1m).• Decrease in depreciation for estate assets is the net result of delays from the asset roll outs

from the capital facilities program, delays in the disposal of properties, changes arising fromasset revaluation program and adjustment to the depreciation expense schedule during thefinancial year to reflect actual costs (-$18.0m).

• Lower than anticipated asset base including specialist military equipment and inventory atyear-end (-$7.6m).

Asset Sales/Revenues (-$6.6m)Accounting Treatment• Reclassification to correct cost of disposal from property disposal program posted to

Suppliers Expense not Revenue (-$8.4m)

Net Write-Down of Assets (+$48.4m)Real• Write-off as a result of the reclassification of some items previously reported as specialist

military equipment to inventory (+$18.0m).• Write-off/demolition of assets including associated lease termination costs and the removal

of disposed properties from the assets register. Properties that contributed to this outcomeincluded the demolitions and/or write-off at Australian Defence College Weston, RobertsonBarracks, Victoria Barracks and the Pilbara Regiment (+$12.0m).

• Transfer of ADI loan to the Department of Finance and Administration (+$5.6m).• Write-down in value of commercial vehicles and of certain inventory items from the

provision for obsolescence (-$12.6m).Accounting Treatment• Treatment of actuals for disposals and write-offs as net write-down of assets while budget

was held in Inventory Consumption at additional estimates (+$25.9).

Expensed Assets Under Construction (+$3.9m)Real• Net effect of expensed assets under construction brought to account from previous financial

years and less than anticipated expensed assets under construction from capital projects(+$12.9m).

• Rollouts from various projects that were expensed as a result of being below the capitalthreshold (+$3.4m).

• Reduction in expensed assets under construction due to fewer purchases under thecapitalisation threshold (-$12.0m).

Output Eleven

217

Rule/Transfer• Transfer of expensed assets under construction related to project AUSTACCS post

additional estimates (-$5.5m).Accounting Treatment• An increase in write-offs of information technology and telecommunication assets (+4.9m).

Other Expenses – including Interest and Grants (-$24.5m)Real• Lower non-capitalised costs arising out of the capital facilities program. Capital projects that

contributed to this output include include APIN Stage 2, Townsville, Lavarack Barracksredevelopment and Bradshaw infrastructure development (-$8.2m).

Rule/Transfer• Category change from Other Expenses to Suppliers post additional estimates across Groups

contributing to Output 11 including project payments, maintenance contracts, incidentalsand other miscellaneous expenses (-$15.1m).

Capital Use Charge (-$51.3m)Rule/Transfer• Refinement to attribution rules (+$2.4m).Accounting Treatment• Information technology and telecommunication assets first recognised and brought to

account (+$6.9m).• Net effect of variations and adjustments to various capital projects (-$7.0m).• Net effect of lower than anticipated assets base at year-end including specialist military

equipment, inventory and estate (-$53.9m).

Section Three

218

OUTPUT TWELVE: CAPABILITY FORLOGISTICS SUPPORT OF LAND OPERATIONS

OVERVIEW

The Logistic Support Force, despite some capability and capacity deficiencies, providedforce-level support for all forecast and some unforecast land operations and exercisesduring 1999-2000. Deficiencies provide commanders with real limitations to theconduct of operations. Logistic Support Force deficiencies include a lack of personnelin key trades, such as petroleum and terminal operators, and ‘specific-to-task’equipment. Considerable risk management of some specialist capabilities was requiredin order to meet operational objectives and maintain directed preparedness levels.

Throughout 1999-2000, the Logistic Support Force experienced difficulties in ensuringcapabilities were sufficiently manned, equipped and trained in order to rotate the force-in-being. This necessitated drawing extensively upon Reserve personnel, forceelements and individuals for suitably-qualified reinforcements.

Many logistic support capabilities were constrained by the inability of the LogisticSupport Force to sustain personnel and equipment for an extended duration on eitherexercises or operations. The Logistic Support Force would have been incapable ofsupporting escalated conflict in East Timor or for any additional operations.

Nevertheless, the past year saw several successes and achievements by the LogisticSupport Force. The force was able to provide effective force-level logistics support todeployed forces in East Timor covering all aspects of combat service support lesssupport engineering. A force logistics squadron continues to provide support to UNunits and personnel in East Timor.

The Logistic Support Force maintains the capability to provide force-level combatservice support to one deployed formation within manpower, training and equipmentconstraints, while also providing the capabilities required in preparedness directives.Increased levels of support, including support to two deployed formations onconcurrent operations within Australia or overseas, or prolonged operations requiringunit rotation, are not sustainable by the Logistic Support Force with its currentmanning and equipment. The logistics support of land operations is an importantcapability. Meeting the requirement of rectifying current deficiencies and concurrentactivities will require additional resources.

Output Twelve

219


Target1999-2000



combined exercise objectives achieved100% 41% - Achieved(2)

18% - Partiallyachieved


GovernmentAchieved

• Capable of completing operational tasking 100% 100%(3)



Tasks included:• Transport

support toTasmanianGraziersAssociation

• Support to AnzacDay ceremonies

• National Tasks (contributes to Output 21) As required • Regionalsurveillance innorthern Australia

Notes1. 24% deficiency in the combat support elements, 11% full-time/61% part-time deficiency in the logistic

support force capability.2. 18% partially achieved, primarily due to East Timor commitments. 41% not achieved as forecast due

to a combination of East Timor commitments, postponement of activities and unavailability ofsupporting force elements.

3. Capable of completing operational tasking within constraints.

Section Three

220

PRICE OF OUTPUT TWELVE


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses





Capital Use Charge 80.0 89.5 90.4 0.9Total Price of Output Twelve 401.1 485.3 584.9 99.6



Employees – Military (+$29.0m)Real• Real increase in ADF Enterprise Productivity Arrangement (+$0.8m).• Net variation in personnel attributions including changes in rank/profile and allowances


with revised workforce attributions (-$4.0m).• Net variations in conditions of service related expenses including, housing, living out



Employees – Civilian (+$23.1m)Real• Net variation in civilian costs across all Groups including transfers of functions between

Groups (-$4.9m).Rule/Transfer• Revision of attribution rules applicable to this Output has erroneously attributed an increase

not reflective of actual costs. This is offset against Output 11 (+$17.5m).• Refinement of attribution rules relating to increased contribution from enabling Groups

(+$10.5m).

Output Twelve

221

Suppliers – Other (+36.7m)Real• Increase in suppliers expense relating to facilities operations, leasing and disposal costs

primarily relating to establishments at Lavarack Barracks, Enoggera Barracks, Oakey,Kakoda Barracks, Singleton and Holsworthy (+$2.5m).

Accounting Treatment• Net effect of classification of some inventory purchases and asset purchases as operating

expenditure during the year-end reconciliation process (+$27.1m).• Reclassification of explosive ordnance progress payments to Suppliers Expenses (+$4.7m).

Suppliers – Inventory Consumption (-$6.1m)Real• Under-achievement in inventory consumption as a result of the postponement of exercises


Depreciation (-$1.5m)Real• Information technology and telecommunication assets first recognised and brought to

account (+$1.5m).• Lower depreciation expense for estate assets as a result of delays from the roll out of assets

from the capital facilities program, delays in the disposal of properties, changes arising fromasset revaluation program and adjustment to the depreciation expense schedule during theyear to reflect actual costs (-$2.7m).

Asset Sales/Revenue (-$1.2m)Accounting Treatment• Reclassification to correct cost of disposal from property disposal program posted to

Suppliers Expense not Revenue (-$1.2m).

Net Write-Down of Assets (+$9.7m)Real• Transfer of ADI loan to the Department of Finance and Administration (+$6.6m).• Write-off of the disposal of estate assets including associated lease termination costs and the

removal of disposed properties from the assets register. Properties that contributed to thisincluded demolitions and/or write-off at Australian Defence College Weston, RobertsonBarracks, Victoria Barracks and the Pilbara Regiment (+$1.8m).

Expensed Assets Under Construction (+$12.2m)Real• Net effect of expensed assets under construction not previously identified and brought to

account (+$4.5m).• Net effect of disposal and write-off of specialist military equipment, write-back of inventory

items from the provision for obsolescence and other minor adjustments (+$2.1m).Rule/Transfer• Refinement in the attribution rules relating to Output 12 (+$5.5m).

Other Expenses – including Interest and Grants (-$3.1m)Real• Lower non-capitalised costs arising from the capital facilities projects including APIN

Stage 2, Townsville, Lavarack Barracks redevelopment and Bradshaw infrastructuredevelopment (-$1.2m).

Section Three

222

OUTPUT FIFTEEN: CAPABILITY FORGROUND-BASED AIR DEFENCE

OVERVIEW

Significant manning and equipment shortfalls resulted in the requirement for 16 AirDefence Regiment to conduct carefully-balanced risk management strategies in order toperform land operations and exercises during 1999-2000. While able to provideground-based air defence support to combined and joint exercises, including within theFive Power Defence Arrangements and Headquarters Integrated Air Defence Systemenvironments, the Air Defence Regiment has been unable to meet forecast operationaltasking levels due to critical shortages in manning levels and equipment availability.These difficulties have been exacerbated by the delay of introduction into service ofequipment that enhances the training and manpower efficiency of the regiment.


Target1999-2000




Operations• Capable of completing operational tasking 100% Partially achieved(3)



Tasks included:• Flood relief in

South Australia• National Tasks (contributes to Output 21) As required Not required

Notes1. 41% personnel deficiency.2. The Crocodile series objectives for this output were not achieved due to resources being deployed to

East Timor.3. 16 Air Defence Regiment was unable to achieve full operational tasking due to manning and

equipment shortfalls.

Output Fifteen

223

PRICE OF OUTPUT FIFTEEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses





Capital Use Charge 13.7 32.5 37.3 4.7Total Price of Output Fifteen 75.0 92.6 111.4 18.7



Employees – Military (+$8.5m)Real• Net variation in personnel attributions including changes in rank/profile and allowances


with revised workforce attributions (+$0.4m).Accounting Treatment• Revised methodology relating to conditions of service expenses (+$0.4m).

Suppliers – Other (+$7.1m)Rule/Transfer• Refinement of attribution rules to more accurately reflect support to Output 15 (+$1.4m).Accounting Treatment• Classification of asset purchases and inventory purchases as operating expenditure during

the year-end reconciliation process (+$5.7m).

Suppliers – Inventory Consumption (-$2.1m)Real• Under-achievement in inventory consumption as a result of the postponement of exercises


Section Three

224

Net Write-Down of Assets (+$1.2m)Real• Transfer of ADI loan to the Department of Finance and Administration (+$0.5m).• Minor adjustments by Groups contributing to Output 15 (+$0.3m).

Capital Use Charge (+$4.7m)Accounting Treatment• Higher inventory and specialist military equipment balances at year-end due to write-back of

inventory items from the provision for obsolescence, lower than budgeted inventorytransfers, and lower specialist military equipment transfers (+$3.2m).

• Understatement of assets under construction at additional estimates (+$1.3m).

225

AIR FORCECAPABILITIES

OUTPUT 13: CAPABILITY FOR AIRSTRIKE/RECONNAISSANCE

OUTPUT 14: CAPABILITY FOR TACTICALFIGHTER OPERATIONS

OUTPUT 16: CAPABILITY FOR STRATEGICSURVEILLANCE

OUTPUT 17: CAPABILITY FOR MARITIMEPATROL AIRCRAFTOPERATIONS

OUTPUT 18: CAPABILITY FOR AIRLIFT

OUTPUT 19: CAPABILITY FOR COMBATSUPPORT OF AIR OPERATIONS

Section Three

226

OUTPUT THIRTEEN: CAPABILITY FOR AIRSTRIKE/RECONNAISSANCE

OVERVIEW

The Air Strike/Reconnaissance Group met all individual military strategic capabilityoption requirements of the Chief of the Defence Force’s Preparedness Directive,despite a lower than planned rate of effort. However, insufficient assets were availableto meet some concurrent requirements. The combined achieved flying rate of effortwas 80% of that planned compared with 95% achieved in 1998-99. The ageing airstrike/reconnaissance fleet, coupled with the need to release aircraft for modificationand 501 Wing market testing, impacted on aircraft availability and resulted in areduction in the rate of effort.

Although participation in some exercises was cancelled due to operational priorities, thebulk of the flying hours lost were in relation to support activities for the other Services,which did not occur because of East Timor commitments. To minimise potentialadverse impact on preparedness resulting from this, training activity was increased.

A lack of qualified fast-jet aircrew continues to influence the planned rate of effort andmay affect operational capability in the short to medium term. Remedial action iscontinuing to overcome aircraft availability problems and to increase fast-jet aircrewnumbers.

In summary, Air Strike/Reconnaissance Group key shortfalls and issues which aresubject to remedial action include:

• shortages in fast-jet aircrew;

• shortages in engineering and technical personnel;

• significant workforce pressures associated with the delays in 501 Wing markettesting and the transition to contractor support;

• reduced aircraft availability due to compounding ageing aircraft issues, projectmodifications and market testing backlog; and

• reduced sustainment and ability to conduct concurrent operations.

Output Thirteen

227


Target1999-2000

PerformanceCombat CapabilityPreparedness• Output 13 elements are able to meet endorsed

Operational Viability Periods without external re-supply at MLOC

Fully achieve Fully achieved

• Output 13 elements are able to meet endorsedSustainability Periods with external re-supplysupport at MLOC


• Output 13 elements are able to meet endorsedDeployment Lead Times at MLOC Fully achieve Fully achieved

• Sufficient aircrew to maintain competencies inroles required by preparedness directives. Fully achieve Fully achieved

• Flying Hours 100% 80%(see table below)

• Safety� Aircraft Accidents 0 0� Base/Unit Flying Safety Committee

meetings /surveys conducted 14 16• Training


100% 94%

Operations• Operation Warden (East Timor) As required by

GovernmentFully achieved

• Mission Generation� Sortie Launch Rate 100% 90%(1)

• Quantity, quality and timeliness of response towarlike and non-warlike unforeseen operations Not planned Achieved



• National Tasks (contributes to Output 21) As required Not requiredNote1. Sortie launch rates of 90% or more are considered to be acceptable.

Section Three

228

Strike/Reconnaissance Group Flying Hours – 1999-2000

Flying Activities PlannedF-111 Flying Hours

1999-2000F-111 Flying Hours

Training 2,570 2,683 Fleet Support 160 113 Defence Category 1 (National Commitments) 144 273 Defence Categories 3 and 4 (Single ServiceActivities)

51

16

Army Categories 3 and 4 (Single ServiceActivities)

146

31

Squadron Support 276 164 Program of Major Service Activities 600 102 Avionic Update Project Support 221 0 Projects 232 145 Total Flying Hours 4,400 3,527

PRICE OF OUTPUT THIRTEEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses


Sub-total Employees 152.0 197.8 178.5 -19.4Suppliers – Other 121.5 122.9 205.0 82.1Suppliers – Inventory Consumption 38.6 41.7 30.4 -11.3

Sub-total Suppliers 160.1 164.6 235.4 70.8Depreciation 92.1 103.4 108.3 4.9Asset Sales/Revenues 0.5 0.9 0.0 -0.9Net Write-Down of Assets 0.0 0.0 3.0 3.0Expensed Assets Under Construction 14.5 13.7 5.6 -8.1Other Expenses – including Interest


Capital Use Charge 234.6 236.1 254.7 18.6Total Price of Output Thirteen 660.3 723.1 787.1 64.0


Output Thirteen

229


Employees – Military (-$23.5m)Real• Reduction in average workforce numbers due to slippage of market testing programs and the

requirement to meet East Timor commitments (-$20.4m).• Variation in allowance payments (+$4.0m).• Variations in leave entitlements, superannuation and fringe benefits tax payments associated

with reduced workforce (-$0.8m).• Net variations in conditions of service related expenses including housing, living out

allowance, health services, workers compensation and other conditions of service relatedcosts including travel (-$6.3m).

Employees – Civilian (+$4.1m)Real• Variation in Defence Science and Technology Organisation’s contributions to Strike

Reconnaissance Group, including superannuation payments (+$4.5m).• Increase in temporary staff costs for Support Command Australia to alleviate permanent

workforce vacancy problem (+$2.0m).• Net variation in civilian staffing numbers and associated costs across all Groups including

discretionary savings achieved by Defence Acquisition Organisation (-$2.4m).

Suppliers – Other (+$82.1m)Real• Unbudgeted additional cost on F-111 external maintenance (+$7.4m).• Higher than budgeted munitions production payments (+$0.7m).Rule/Transfer• Defence Corporate Support attribution rule variation to better reflect that Group’s support

of Output 13 (-$4.4m).Accounting Treatment• Reclassification of F-111 maintenance costs from Capital (inventory) to Suppliers Expenses

(repair and maintenance) (+$28.8m).• Asset purchases reclassified as Suppliers Expenses during the end of financial year

reconciliation process (+$4.8m).• Reclassification of some General Stores and Fuel inventory purchases to Suppliers Expenses

as part of inventory balance adjustments at end of financial year (+$34.4m).• Reclassification of explosive ordnance progress payments to Suppliers Expenses (+$11.3m).

Suppliers – Inventory Consumption (-$11.3m)Real• Net variation due to over-estimate of inventory consumption including misclassification of

write-off budget and under-fly in F-111 hours (-$13.5m).Rule/Transfer• Refinement of attribution rules by Support Command Australia for non-ADF fuel sales

(+$2.2m).

Depreciation (+$4.9m)Real• Depreciation expenses associated with F-111 revaluation (+$5.2m).• Depreciation expenses associated with assets first found in Defence Information Systems

Group (+$1.5m) and Air Force test and evaluation equipment (+$2.3m).

Section Three

230

• Delay in capital facilities assets rollout program, disposal of properties and changes to estateasset valuations (-$2.9m).

Miscellaneous• Other miscellaneous depreciation expenses across all Strike Reconnaissance Group assets

(-$1.2m).

Net Write-Down of Assets (+$3.0m)Real• Net effect of asset write-downs by Support Command Australia (-$4.2m).• Transfer of ADI loan to the Department of Finance and Administration (+$2.4m).• Write-off/demolition of Defence Estate assets and termination of lease costs (+$2.0m).• Net effect of asset write-downs by other Groups, Defence Information Systems Group

(+$0.5m), Air Force (+$2.0m) and Defence Corporate Support (+$0.3m).

Expensed Assets Under Construction (-$8.1m)Real• Defence Acquisition Organisation’s increased expense for Project Air 5225, F-111 Avionics

Upgrade Program (+$1.7m).Accounting Treatment• Variation to Defence Estate Organisation expenses from previous financial years that should

have been expensed rather than capitalised (+$1.8m).• Reclassification of assets under construction expenses brought to account by Support

Command Australia rather than in Air Force (-$13.5m).

Other Expenses – including Interest and Grants (-$4.9m)Rule/Transfer• Recategorisation of Defence Acquisition Organisation Other Expenses to Suppliers

Expenses (-$1.8m).• Changes in attributions by Defence Estate (-$1.3m), Personnel Executive (-$1.3m) and other

Groups (-$0.4m) to better reflect distribution of expenses across Outputs.

Capital Use Charge (+$18.6m)Real• Impact of slippage on the major capital equipment program asset rollout schedule including

the F-111 Simulator Project, the F-111G Attrition Aircraft Buy Project and the N&Q/B96Harpoon Missile, resulting in higher than budgeted Asset Under Construction by DefenceAcquisition Organisation (+$15.3m).

• Impact of assets first found in Defence Information Systems Group (+$1.2m) and Air Forcetest and evaluation equipment (+$2.8m).

• Impact of the re-valuation of the F-111, write-off of assets double-counted in relation toF-111 Avionics Update Program and other changes in the Strike Recognisance asset base(+$3.8m).

• Net effect of higher than budgeted inventory balances and slippage on the minor capitalequipment asset rollout (+$2.7m).

Rule/Transfer• Interim F-111 Electronic Warfare Self Protection attribution was refined and transferred

from Output 14 (+$4.6m).• Ph1 Lead-in Fighter attribution was refined and transferred to Output 14 (-$7.7m).• Reapportionment of capital use charge to better reflect Defence Estate assets (-$5.5m).

Output Fourteen

231

OUTPUT FOURTEEN: CAPABILITY FORTACTICAL FIGHTER OPERATIONS

OVERVIEW

The Tactical Fighter Group met all individual military strategic capability optionrequirements of the Chief of the Defence Force’s Preparedness Directive. Thecombined achieved flying rate of effort was 94% of that planned, compared to 96%achieved in 1998-99. All planned training objectives were met, with the shortfall onlyaffecting support activities. The lack of qualified fast-jet pilots continues to be theprimary factor impacting on the potential tactical fighter operational capability in theshort to medium term and has been specifically targeted for remediation action. Thewithdrawal of the Macchi training aircraft to meet stipulated life-of-type expiry dates,combined with delays in delivery of the replacement Hawk lead-in fighter, has alsoaffected pilot training. The Macchi flying rate of effort achieved in 1999-2000 was92%. The Macchi shortfall did not impact on pilot training programs but did result in areduction of support activities.

In summary, Tactical Fighter Group key shortfalls and issues which are subject toremedial action include:

• shortages in fast-jet pilots;

• shortages in engineering and technical personnel; and

• the training impact of delays in the introduction of the Hawk lead-in fighter.

Section Three

232


Target1999-2000







• Sufficient aircrew maintain competencies in rolesrequired by preparedness directives Fully achieve Fully achieved

• Flying Hours 100% 94%(see tables below)


meetings/surveys conducted 23 25• Training


100% 94%







• National Tasks (contributes to Output 21) As required Not required

Note1. Sortie launch rates of 90% or more are considered to be acceptable.

Output Fourteen

233

Tactical Fighter Group Flying Hours – 1999-2000

Flying Activities PlannedF/A-18 HornetFlying Hours

1999-2000F/A-18 HornetFlying Hours

PlannedMacchi

Flying Hours

1999-2000Macchi

Flying Hours Defence Category 1(National Commitments)

270

432

-

-

Defence Categories 3 and4 (Single Service Activities)

93

-

45

-

RAAF Categories 3 and 4(Single Service Activities)

-

71

-

42

Program of Major ServiceActivities

1,150

717

80

-

Projects 140 83 - - Training 10,082 9,846 6,155 6,259 Pilots Course - - - - Fleet Support 600 223 400 138 Army Categories 3 and 4(Single Service Activities)

180

164

220

21

Roulettes - - - - RAAF Support 270 204 350 206 Squadron Support 215 - 200 - Aircraft Research andDevelopment UnitAllocation

270

-

100

- Total Flying Hours 13,270 11,740 7,550 6,666

PC9 Flying Hours – 1999-2000

Flying Activities PlannedPC9 – HQACFlying Hours

1999-2000PC9 – HQACFlying Hours

PlannedPC9 – HQTCFlying Hours

1999-2000PC9 – HQTCFlying Hours

Defence Categories 3 and4 (Single Service Activities)

8

-

-

400

RAAF Categories 3 and 4(Single Service Activities)

120

73

160

-


70

-

-

-

Training 1,192 1,279 6,570 5,446 Pilots Course - - 11,600 11,435 Army Categories 3 and 4(Single Service Activities)

200

-

-

-

Roulettes - - 1,500 1,990 RAAF Support 300 - - 250 Squadron Support 60 87 380 - Total Flying Hours 1,950 1,439 20,210 19,521

Section Three

234

PRICE OF OUTPUT FOURTEEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses



Sub-total Suppliers 224.7 242.4 277.5 35.2Depreciation 220.5 248.6 250.0 1.4Asset Sales/Revenues 0.4 1.0 0.0 -1.0Net Write-Down of Assets 0.0 0.0 12.3 12.3Expensed Assets Under Construction 38.5 37.4 5.0 -32.4Other Expenses – including Interest


Capital Use Charge 453.7 504.8 610.9 106.1Total Price of Output Fourteen 1,186.3 1,289.7 1,398.1 108.3



Employees – Military (-$8.4m)Real• Reduction in average workforce numbers due to slippage of market testing programs and




Suppliers – Other (+$62.6m)Real• Higher than expected munitions production payments (+$1.4m).• Net variation in expenses relating to removals, advertising and other personnel management

expenses together with reprogramming of costs relating to the Defence Service Centre,HealthKEYS and other Defence Personnel Executive programs (-$2.8m).

• Real variations including additional repair and maintenance activities at establishments thatcontribute to the output (+$3.6m).

• Non-requirement of Portfolio provisions for end of financial year management purposes(-$2.6m).

• Reduction in project management related expenses by Defence Acquisition Organisationincluding legal expenses, training, research and development and administration (-$5.4m).

Output Fourteen

235

• Increased expenses by Air Force associated with purchase of equipment, training costs andequipment hire (+$1.8m).

Rule/Transfer• Net effect of transfers (such as the Personnel Executive Service Centre to Defence

Corporate Support) and a better understanding by Defence Corporate Support of what costsit incurs to support Output 14 (+$13.6m).

• Refinement of attribution rules splitting costs formerly attributed to Output 22 (StrategicPolicy and Direction) across all outputs (+$8.7m).

Accounting Treatment• Asset purchases reclassified as supplier expenses during the end of financial year

reconciliation process (-$4.3m).• Reclassification of some inventory purchases (General and Fuel) as supplier expenses as part

of inventory balance adjustments at end of financial year (+$44.9m).• Reclassification of explosive ordnance progress payments to Suppliers Expenses (+$8.7m).

Suppliers – Inventory Consumption (-$27.5m)Real• Net variation due to over-estimate of inventory consumption budget including misclassified

budget write-off and under-fly in F/A-18 hours (-$28.7m).Rule/Transfer• Refinement of attribution rules by Support Command Australia for non-ADF fuel sales

(+$1.2m).

Depreciation (+$1.4m)Real• Depreciation expenses associated with assets first found in Defence Information Systems

Group (+$1.6m) and Air Force test and evaluation equipment (+$6.7m).• Variations resulting from delays in asset rollout from capital investment program, delay in

disposal of properties, changes arising from asset revaluation program and adjustment to thedepreciation expense schedule during 1999-2000 to reflect actual cost (-$3.9m).

• Impact of revaluation of Tactical Fighter Group assets (+$6.0m).• Unbudgeted depreciation expense in relation to specialist military equipment held by

Support Command Australia, not yet transferred to Air Force (+$2.9m).Rule/Transfer• Revision of attribution rules to better reflect Depreciation against Air Force Outputs

(-$10.8m).

Asset Sales/Revenues (-$1.0m)Accounting Treatment• Reclassification to correct cost of disposal from property disposal program posted to

Suppliers Expense not Revenue (-$1.8m).

Net Write-Down of Assets (+$12.3m)Real• Write-off/demolition of assets as well as lease termination costs and the removal of

properties from the assets register previously disposed of (+$2.6m).• Transfer of ADI loan to the Department of Finance and Administration (+$9.3m).• Write-down in value and write-off of commercial vehicles (+$0.8m).• Disposal and/or write-off of specialist military equipment by Support Command Australia

(+$4.5m).• Write-back of inventory items from the provision for obsolescence (-$41.6m).• Provision for new inventory obsolescence in 1999-2000 (+$13.4m).

Section Three

236

Rule/Transfer• Revision of attribution rules to better reflect write-down of asset expense against Air Force

outputs (+$5.8m).Accounting Treatment• Reclassification of disposals/write-offs budgeted against Inventory Consumption (+$16.8m).

Expensed Assets Under Construction (-$32.4m)Accounting Treatment• Misclassification: budgeted expense for Repairable Items under $25,000 held in this account.

Actual expense appears against Suppliers (-$37.0m).• Reclassification of expenses incurred in previous financial year by Defence Estate

Organisation, relating to capital facilities program (+$2.4m).

Other Expenses – including Interest and Grants (-$5.3m)Real• Variations in other expenses relating to capital facilities program, including the Amberley

Base Redevelopment, Williamtown Eastern Region Operations Centre and the Darwin BaseRedevelopment (-$1.8m).

• Net foreign exchange losses and reclassification of other expenses by Defence AcquisitionOrganisation (-$2.1m).

Capital Use Charge (+$106.1m)Real• Impact of slippage on the major capital equipment program asset rollout schedule, resulting

in higher than budgeted capital use charge expenses by the Defence AcquisitionOrganisation as follows:- Hawk Lead-In Fighter Project (+$58.6m).- F/A-18 Hornet Integrated Avionics Support Facility Project (+$5.8m).

• Higher than budgeted expenditure in relation to:- Air-to-Air Weapons Follow-On Buy Project not identified at additional estimates

(+$3.2m).- F/A-18 Hornet Upgrade Project not identified at additional estimates (+$3.6m).

• Understatement of Capital Usage Charge at budget for:- F/A-18 Upgrade Project (+$5.6m).- Air-to-Air Weapons Capability Project (+$1.7m).

• Increase due to revaluation of Tactical Fighter Group assets and other changes in theOutput 14 asset base (+$14.2m).

• Impact of assets first found in Defence Information Systems Group (+$1.3m) and Air Forcetest and evaluation equipment (+$8.2m).

• Net variation in inventory balances and Minor Capital Equipment assets rollout programmanaged by Support Command Australia (+$2.7m).

Rule/Transfer• Reapportionment of Capital Usage Charge to better reflect Defence Estate assets (-$7.0m).• Interim F-111 Electronic Warfare Self Protection attribution transferred to Output 13

(-$2.1m).• ADF Air Ranges – Air Combat Training System attribution transferred from Output 19

(+$1.1m).• Lead-In Fighter attribution was refined and transferred from Output 13 (+$7.7m).

Output Sixteen

237

OUTPUT SIXTEEN: CAPABILITY FORSTRATEGIC SURVEILLANCE

OVERVIEW

Surveillance and Control Group was able to meet the majority of the individual militarystrategic capability option requirements of the Chief of the Defence Force’sPreparedness Directive. The group supported ADF operations in East Timor, as wellas other planned and short notice tasking. The tasks that could not be met were thoserelating to sustained operations and to provision of a mobile tactical air defencecapability. The difficulties in supporting ageing equipment, particularly radars, resultedin reduced system availability and sustainment capability.

The current air defence ground environment only represents a limited operationalcapability. The realisation of a full operational capability will be dependent on thetimely delivery of projects aimed at addressing equipment obsolescence. However,these projects have already been significantly delayed.

No.114 Mobile Control and Reporting Unit has been undergoing a life-of-typeextension program, which has reduced air control and battlespace management supportto deployed operations.

Workforce shortfalls in technical personnel have also impinged on Surveillance andControl Group’s ability to meet some preparedness requirements and are subject toremediation action. There are a number of approved projects under way to address theknown obsolescence and performance problems associated with the existing systemsthat contribute to a strategic surveillance capability, including the replacement of theexisting radars, which is scheduled for late 2001.

In summary, Surveillance and Control Group key shortfalls and issues which are notsubject to remedial action include:

• equipment obsolescence and reduced serviceability combined with project delays;

• limited operational and deployable capability; and

• additional resources required to provide 24-hour surveillance operations.

Section Three

238


Target1999-2000


Deployment Lead Times at MLOCFully achieve Partially achieved(1)

• Safety� Number of air traffic control Air Safety

Audits hosted5 5



OperationsOperation Warden (East Timor) As required by


• Mission Generation� System availability rate 100% 88.4%(1)




• National Tasks (contributes to Output 21) As required Achieved(2)

Notes1. The reduced system availability is due to difficulties in supporting ageing systems, which resulted in

reduced serviceability and availability.2. Surveillance and Control Group assets provide surveillance inputs to the National Surveillance Centre.

Output Sixteen

239

PRICE OF OUTPUT SIXTEEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses



Sub-total Suppliers 63.7 103.4 88.2 -15.2Depreciation 18.9 22.4 20.0 -2.4Asset Sales/Revenues 0.2 0.6 0.0 -0.6Net Write-Down of Assets 0.0 0.0 7.4 7.4Expensed Assets Under Construction 0.8 1.0 5.8 4.8Other Expenses – including Interest


Capital Use Charge 141.7 197.3 186.7 -10.7Total Price of Output Sixteen 361.8 465.9 445.1 -20.8



Employees – Military (+$2.6m)Real• Reductions in average workforce numbers due to slippage of market testing programs and

requirements to meet East Timor commitments (-$2.3m).• Variation in allowance payments (+$1.4m).• Variations in leave entitlements, superannuation and fringe benefits tax payments associated



Rule/Transfer• Variations in Support Command Australia's attributions to better reflect Output 16 costs

(+$6.6m).

Employees – Civilian (-$2.8m)Real• Variation in the Defence Science and Technology Organisation's contribution to Output 16,

including superannuation payments (-$1.2m).• Reduction of Defence Corporate Support civilian labour costs including refinement of

attribution rules (-$1.4m).

Section Three

240

Suppliers – Other (-$9.1m)Real• Non-requirement for Portfolio provision against Output 16 for end of financial year

management purposes (-$4.7m).• Under-achievement associated with Defence Reform Program savings, the energy efficiency

project and the non-utilisation of legal and compensation funding (-$4.2m).

Suppliers – Inventory Consumption (-$6.1m)Rule/Transfer• Refinement of attribution rules to better reflect aviation fuel costs (-$0.6m), consumable

stores (-$5.7m) and explosive ordnance (-$0.1m) not forming part of Output 16.

Depreciation (-$2.4m)Real• Variation to the schedule of asset rollouts from the capital facilities program including

Darwin air traffic control tower (-$1.2m).• Depreciation expenses associated with assets first found in Defence Information Systems

Group ($0.9m) and Air Force test and evaluation equipment ($0.4m).Rule/Transfer• Refinement of attribution rules to better reflect the depreciation of plant and equipment for

Defence Science and Technology Organisation (-$1.1m).• Net variations in depreciation expenses against all other Output 16 assets (-$1.4m).

Net Write-Down of Assets (+$7.4m)Real• Transfer of ADI loan to the Department of Finance and Administration (+$5.9m).• Net effect of asset write-downs by other Groups (+$1.5m).

Expensed Assets Under Construction (+$4.8m)Real• Assets under construction expensed by Defence Acquisition Organisation not budgeted for

at additional estimates as follows:- Australia Military Airspace Communications and Control System (+$2.3m)- Airborne Early Warning and Control (+$1.7m)

• Net variations in assets under construction expenses across all other Groups (+$0.8m).

Other Expenses – including Interest and Grants (-$4.0m)Real• Net foreign exchange losses by Defence Acquisition Organisation and reclassification of

other expenses to Suppliers (-$2.5m).Rule/Transfer• Changes in attributions by Defence Estate to better reflect distribution of expenses across

Outputs (-$1.6m).

Capital Use Charge (-$10.7m)Real• Impact of Government's decision not to proceed with the acquisition of the Airborne Early

Warning and Control capability at this stage (-$12.1m).• Global Hawk project previous years expenses (+$1.2m).• Understatement of budget for Tactical Air Defence Radars project (+$2.6m).• Higher than anticipated project expenditure, prior to the Government’s decision not to

proceed with the project, for Airborne Early Warning and Control Initial Design Activity(+$1.9m).

Output Sixteen

241

• Impact of assets first found in Defence Information Systems Group ($0.8m) and Air Forcetest and evaluation equipment ($0.3m).

• Net increase in inventory balance in Support Command Australia due to write-back of itemsagainst provision for obsolescence and lower consumption (+$2.7m).

Rule/Transfer• Refinement of attributions associated with Airborne Surveillance for Land Operations

project from Output 11 to Output 16 (+$1.1m).• Refinement of attributions associated with Australian Military Airspace Communications and

Control System project from Output 1 to Output 16 (+$1.4m).• Refinement of attributions associated with Australia Defence Air Traffic System project and

transfer from Output 16 to Output 15 (-$9.4m).• Reapportionment of capital usage charge to better reflect Defence Estate assets ($-3.0m).

Section Three

242

OUTPUT SEVENTEEN: CAPABILITY FORMARITIME PATROL AIRCRAFT OPERATIONS

OVERVIEW

The Maritime Patrol Group met all individual military strategic option requirements ofthe Chief of the Defence Force’s Preparedness Directive for the provision of capability.Participation in some planned exercises was cancelled due to East Timor operationalcommitments. The embargo on training with Indonesia and a lack of naval assets alsocurtailed exercise activities. The resultant lack of training opportunities was mostlyoffset by experience gained in operational surveillance activities. However, anti-submarine warfare training was adversely affected by the lack of submarines with whichto exercise. If this trend continues, operational proficiency in this capability will suffer.

The combined achieved flying rate of effort was 104% of that planned as projectedaircraft availability was better than expected. Maritime patrol fleet aircraft availabilitylate in the year was more difficult to achieve, due to the need to release aircraft formodification activities.

In summary, Maritime Patrol Group key shortfalls and issues which are subject toremedial action include:

• shortages in experienced maritime pilots;


• reduced training opportunities and capability to prosecute submarines; and

• the operational impact of delays to the AP-3C project.

Output Seventeen

243


Target1999-2000







• Sufficient aircrew maintain competencies in rolesrequired by preparedness directives Fully achieve Fully achieved

• Flying Hours 100% 104%(see table below)


meetings/ surveys conducted 19 19• Training


100% 84%







Tasks included:• 3 search and

rescue incidents• National Tasks (contributes to Output 21)

� Civil surveillance and response operationsplanned

250 hours of P-3COrion aerialsurveillance

Achieved

Note1. Sortie launch rates of 90% or more are considered to be acceptable.2. Due to the heavy commitment of assets to East Timor operations, training opportunities and activities

were significantly curtailed.

Section Three

244

Maritime Patrol Group Flying Hours – 1999-2000

Flying Activities PlannedP-3C Flying Hours

1999-2000P-3C Flying Hours

Training 3,756 3,663 Squadron Support 230 407 National Support 100 40 Defence Category 1 (NationalCommitments)(1) (Scheduled)

1,545

2,160

Projects 585 182 Program of Major Service Activities 1,200 1,079 RAAF Categories 3 and 4 (Single ServiceActivities)

300

751

Defence Categories 3 and 4 (Single ServiceActivities)

284

5

Fleet Support 700 755 Total Flying Hours 8,700 9,042

Note1. Includes 250 hours of aerial surveillance which contributes to Output 21.

PRICE OF OUTPUT SEVENTEEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses





Capital Use Charge 290.9 328.3 323.7 -4.6Total Price of Output Seventeen 721.8 829.5 788.4 -41.1


Output Seventeen

245


Employees – Military (-$9.7m)Real• Reductions in average workforce numbers due to slippage of market testing programs and

requirements to meet East Timor commitments (-$6.4m).• Variation in allowance payments (+$8.1m).• Variations in leave entitlements, superannuation and fringe benefits tax payments associated

with a reduced workforce (-$5.7m).• Net variations in conditions of service related expenses including housing, living out


Employees – Civilian (-$1.3m)Real• Variation in Science and Technology’s contribution to the Output 17, including

superannuation payments (+$0.9m).• Non-requirement for Portfolio provision against Output 17 for end of year financial

management purposes (-$1.7m).

Suppliers – Other (-$4.8m)Real• Increased expenses by Air Force associated with purchase of equipment, training costs and

equipment hire (+$3.9m).• Additional facilities repair and maintenance costs, including Edinburgh (+$1.8m).• Net variation in expenses relating to removals, advertising and other personnel management

expenses together with reprogramming of costs relating to the Defence Service Centre,HealthKEYS and other Defence Personnel Executive programs (-$2.4m).

• Reduction in project management related expenses by Defence Acquisition Organisationincluding legal expenses, training, research and development expenses and administrationand computer support (-$5.2m).

• Non-utilisation of Defence Reform Program contract and transition cost allocations, legaland compensation funds, together with better understanding by Corporate Support of costsincurred to support Output 17 (-$16.1m).

Accounting Treatment• Reclassification of some General Stores and Fuel inventory purchases to Suppliers Expenses

as part of inventory balance adjustments at the end of the financial year (+$19.5m).• Reclassification of explosive ordnance progress payments to Suppliers Expenses (+$1.0m).• Asset purchases by Support Command Australia reclassified as Suppliers Expenses during

the end of financial year reconciliation process (-$5.5m).

Suppliers – Inventory Consumption (-$18.1m)Real• Net variation due to over estimate of inventory consumption budget including misclassified

write-off budget (-$18.6m).

Depreciation (+$5.0m)Real• Depreciation expenses associated with assets first found in Defence Information Systems

Group (+$1.5m) and Air Force test and evaluation equipment (+$2.0m).• Delays in asset rollout from the capital facilities program (-$2.1m).

Section Three

246

Rule/Transfer• Refinement of Air Force attribution to better reflect the Maritime Patrol Group asset base

(+$2.7m).• Net variation in inventory balances and impact of the roll out of Minor Capital Equipment

projects by Support Command Australia (+$2.0m).

Net Write-Down of Assets (+$2.5m)Real• Provision for write-off of additional obsolete items by Support Command Australia not

budgeted for in this category (+$8.9m).• Disposal, write-down and write-off of equipment by Support Command Australia

(+$14.9m).• Net effect of asset write-downs by Air Force (+$2.7m).• Transfer of ADI loan to the Department of Finance and Administration (+$1.8m).• Write-off/demolition of Defence Estate assets and termination of lease costs (+$1.4m).• Write-back of assets from the provision of obsolete stores by Support Command Australia

(-$27.8m).

Expensed Assets Under Construction (-$7.7m)Real• Variation to Defence Estate Organisation expenses from previous financial years that were

to be capitalised rather than expensed (+$1.2m).• Expenses incurred by Support Command Australia relating to management of Air Force’s

Minor Capital Equipment program (+$1.2m).Accounting Treatment• Reclassification of assets under construction expenses brought to account by Support

Command Australia rather than in Air Force (-$11.2m).

Other Expenses – including Interest and Grants (-$2.0m)Real• Variation in budgeted non-capital costs associated with the capital facilities program,

including Edinburgh (-$0.9m).• Net foreign exchange losses by Defence Acquisition Organisation and reclassification of

other expenses to Suppliers (-$1.0m).

Capital Use Charge (-$4.6m)Real• Impact of assets first found in Defence Information Systems Group (+$1.1m) and Air Force

test and evaluation equipment (+$3.9m).• Net increase in inventory balances and impact of rollout of Minor Capital Equipment assets

scheduled by Support Command Australia (+$2.7m).• Over-estimate for the P-3C Electronic Support Measures project together with variations

associated with the P-3C Update project (-$15.7m).Rule/Transfer• Reapportionment of capital use charge to better reflect the value of the Maritime Patrol

Group asset base (+$6.8m).• Reapportionment of capital use charge to better reflect the value of the Defence Estate

assets (-$3.7m).

Output Eighteen

247

OUTPUT EIGHTEEN: CAPABILITY FORAIRLIFT

OVERVIEW

During 1999-2000, there were short periods when Air Lift Group could not meet allindividual military strategic option requirements of the Chief of the Defence Force’sPreparedness Directive for the provision of airlift, and also periods when insufficientassets were available to meet some concurrent requirements. The main causes of thedeficiencies were aircrew availability and currency across the C-130 and Caribou fleets,due to lack of training opportunities. Delays to the introduction of the C-130J and thewithdrawal of the C-130E have also impacted on Air Lift Group’s capacity to supportADF operations. These delays, combined with delays to the introduction of the C-130Jsimulator, have reduced the ability to generate C-130J qualified aircrew.

The maintenance burden associated with the ageing aircraft fleets, in particular theCaribou and B-707, coupled with the need to release aircraft for modification activities,also contributed to the shortfalls in meeting preparedness levels, rates of effort andsortie launch rates. The low sortie launch rate of 85% for Air Lift Group as a wholewas due to the Caribou aircraft only achieving a sortie launch rate of 55%. The primarycauses were engine unserviceabilities, lack of serviceable spare parts, and aircraftavailability arising from the inability to achieve planned maintenance because of a highrate of effort in East Timor and Papua New Guinea. The B-707 fleet also sufferedfrom reduced aircraft availability, which will have an impact on fighter trainingopportunities in the short term.

The combined achieved flying rate of effort for all aircraft was 82% of that planned.There was a marked reduction in training opportunities due to aircraft support to EastTimor operations. Furthermore, involvement in two key combined exercises, Bullseyeand Rajawali, was cancelled due mainly to operational commitments. However,participation in operations, especially in East Timor, made up for some of the trainingshortfall experienced by C-130 and Caribou crews.

In summary, Air Lift Group key shortfalls and issues which are subject to remedialaction include:

• low aircrew experience levels and shortages in C-130J pilots;


• significant workforce pressures associated with the 503 Wing market testing andthe transition to contractor support;

• delays in the introduction into service of C-130J; and

• ageing aircraft issues, in particular the Caribou and B-707.

Section Three

248


Target1999-2000






• Output 18 elements are able to meet endorsedDeployment Lead Times at MLOC


• Sufficient aircrew maintain competencies in rolesrequired by preparedness directives


• Flying Hours 100% 82%(see tables below)


meetings/surveys conducted 33 34• Training


100% 85%(2)







Tasks included:• aid to PNG• 2 search and

rescue incidents• flood relief in WA

• National Tasks (contributes to Output 21) As required Not requiredNotes1. Preparedness directive levels of readiness were unrealistic with current number of C-130, Caribou

and B-707 aircraft. Requirements have subsequently been changed to reflect the force in being.2. Due to the heavy commitment of assets to East Timor operations, training opportunities and

activities were significantly curtailed.3. The overall figure for the Air Lift Group is due to the low serviceability rate for the Caribou of 55%.

Output Eighteen

249

Air Lift Group Flying Hours, 86 Wing –1999-2000 Flying Activities Planned

C-130Flying Hours

1999-2000C-130

Flying Hours

PlannedCaribou

Flying Hours

1999-2000Caribou

Flying Hours Training 4,845 4,226 2,454 1,327 Squadron Support 600 553 380 594 National Tasks 250 262 10 117 Defence Support 2,056 4,736 50 1,377 Project 635 146 - - Program of Major ServiceActivities

4,210

1,194

475

152

Army Categories 3 and 4(Single Service Activities)

1,750

662

1,325

664

Defence Categories 3 and 4(Single Service Activities)

450

37

-

11

Scheduled Services – O/S 336 153 - - Scheduled Services – Dom 750 210 - - Northern Command - - 120 4 Fleet Support 230 95 - 10 RAAF Support 650 870 266 100 Total Flying Hours 16,762 13,144 5,080 4,356

Air Lift Group Flying Hours, 84 Wing – 1999-2000 Flying Activities Planned

B-707FlyingHours

1999-2000B-707FlyingHours

PlannedHS748FlyingHours

1999-2000HS748FlyingHours

PlannedF900

FlyingHours

1999-2000F900

FlyingHours

National Tasks 10 - - - - - Defence Category 1(National Commitments)

240

465

-

-

-

89

Defence Categories 3 and 4(Single Service Activities)

27

70

-

-

-

-


450

202

-

-

-

-

Navy Support 45 17 - - - - Army Categories 3 and 4(Single Service Activities)

125

35

-

-

-

-

O/S Training/Scheduled Services

260

403

-

-

-

-

Domestic ScheduledServices

164

58

-

-

-

-

VIP (1) 40 65 - - 2,846 2,437 Training 414 207 610 766 1,019 935 RAAF Support 75 112 - - - 12 Squadron Support 30 23 140 143 110 74 TankerTraining/Operations

500

338

-

-

-

-

Navigation Course - - 2,200(2) 1,602 - - Total Flying Hours 2,380 1,995 2,950 2,511 3,975 3,547

Section Three

250

Notes1. VIP transport is attributed to Output 21, National Support Tasks. This activity is shown here as Air

Lift Group exercises command and control of this squadron.2. B200 aircraft flying is under contract as opposed to hours allocation. Rate of effort is approximately

2,000 hours.

PRICE OF OUTPUT EIGHTEEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses



Sub-total Suppliers 244.3 274.0 304.7 30.7Depreciation 85.0 93.5 97.8 4.3Asset Sales/Revenues 0.5 -18.4 0.0 18.4Net Write-Down of Assets 0.0 0.0 4.6 4.6Expensed Assets Under Construction 16.5 15.2 7.0 -8.2Other Expenses – including Interest

and Grants 15.2 -3.7 2.3 5.9Total Expenses 573.9 607.7 639.2 31.6

Capital Use Charge 330.3 233.7 253.4 19.7Total Price of Output Eighteen 904.2 841.3 892.6 51.3



Employees – Military (-$24.3m)Real• Reduction in average workforce numbers due to slippage of market testing programs and the




• Non-requirement for Portfolio provision held for end of year management purposes(-$1.8m).

Rule/Transfer• Refinement of the Defence Corporate Support attribution rules to better reflect support

costs provided to Output 18 (-$5.4m).

Output Eighteen

251

Suppliers – Other (+$53.0m)Real• Additional repair and maintenance activities by Defence Estate Organisation at a number of

Air Force bases (+$3.6m).• Net variation by Air Force relating to purchase of equipment and stores and personnel

training costs by Air Lift Group (+$1.2m).• Net variation in expenses relating to removals and other personnel management expenses

together with reprogramming of costs relating to the Defence Service Centre, HealthKEYSand other Defence Personnel Executive programs (-$4.0m).

• Non-requirement for Portfolio provision for end of year financial management purposes(-$3.8m).

Rule/Transfer• Re-categorisation by Defence Acquisition Organisation of some supplier expenses originally

budgeted for as Other Expenses (-$7.5m).• Refinement of attribution rules splitting costs formerly attributed to Output 22 across other

Outputs (+$7.5m).• Defence Corporate Support attribution rule variation to better reflect that Group's support

to Output 18 during the East Timor commitment period (+$10.9m).Accounting Treatment• Reclassification by Support Command Australia of asset purchases as Suppliers Expenses

during the end of financial year reconciliation process (-$6.2m).• Reclassification by Support Command Australia of some inventory purchases (General

Stores and Fuel) as Suppliers Expenses as part of the inventory balance adjustments processat the end of the financial year (+$55.0m).

• Reclassification by Support Command of explosives ordnance progress payments (-$0.9m).

Suppliers – Inventory Consumption (-$22.4m)Real• Net variation due to over-estimate of inventory consumption and under-fly in Air Lift

Group flying hours, particularly for C-130 aircraft (-$23.7m).Rule/Transfer• Refinement of attribution rules by Support Command Australia for non-ADF fuel sales

(+$1.3m).Depreciation (+$4.3m)Real• Delay in capital facilities assets rollout program, disposal of properties and changes to

facilities asset valuations (-$3.9m).• Depreciation expenses associated with assets first found in Defence Information Systems

Group (+$0.4m) and Air Force test and evaluation equipment (+$1.6m).• Net increase in inventory balances and rollout of Air Force Minor Capital Equipment

projects (+$2.9m).• Additional depreciation expenses associated with Air Lift Group aircraft revaluation

(+$2.6m).• Reduced depreciation expenses associated with write-off of one HS748 (previously disposed

of) and two C-130E aircraft (-$1.0m).

Asset Sales/Revenues (+$18.4m)Real• Revenue from trade-in of C-130E aircraft slipped to 2000-01 due to East Timor

commitments (+$19.5m).• Variation to property disposal program (-$1.9m).

Section Three

252

Net Write-Down of Assets (+$4.6m)Real• Write-back of assets from the provision of obsolete stores by Support Command Australia

(-$28.3m).• Transfer of ADI loan to the Department of Finance and Administration (+$5.6m).• Disposal and write-off of specialist military equipment by Support Command Australia

(+$4.7m).• Defence Estate Organisation’s write-off/demolition of estate assets, particularly at

Learmonth and Darwin, and lease termination costs (+$3.3m).• Write-down in value and write-off of commercial vehicles by Support Command Australia

(+$0.7m).Accounting Treatment• Provision for write-off of additional obsolete items incorrectly budgeted for in this category

(+$16.8m).

Expensed Assets Under Construction (-$8.2m)Real• Assets under construction expensed by Defence Acquisition Organisation for Strategic

Airlift Capability project, not budgeted for (+$2.3m).• Expenses by Support Command Australia relating to the management of Air Force’s Minor

Capital Equipment program (+$1.1m).Accounting Treatment• Correction of accounting errors in relation to Defence Estate assets for previous fiscal years

for which no budget provision was made (+$2.4m).• Reclassification of assets under construction brought to account by Support Command

Australia rather than by Air Force (-$14.9m).

Other Expenses – including Interest and Grants (+$5.9m)Real• Other expenses by Support Command Australia relating to East Timor commitment

(+$11.9m).• Variation in budgeted non-capital costs by Defence Estate associated with the capital

facilities program (-$1.8m)Rule/Transfer• Defence Acquisition Organisation’s reclassification of Other Expenses (-$2.5m).

Capital Use Charge (+$19.7m)Real• Slippage of Strategic Airlift Capability project (+$7.9m) and other variations to the assets

rollout schedule (+$5.2m) managed by Defence Acquisition Organisation.• Effect of assets first found in Defence Information Systems Group (+$1.5m) and test and

evaluation (+$2.8m).• Revaluation of Air Lift Group assets and variations to asset base (+$4.9m).• Rollout of Minor Capital Equipment by Support Command Australia (+$2.3m).Rule/Transfer• Defence Acquisition Organisation refined attributions from Output 11 for C-130H

replacement project (+$2.7m).Accounting Treatment• Reapportionment of capital use charge across Defence Estate assets (-$7.5m).

Output Nineteen

253

OUTPUT NINETEEN: CAPABILITY FORCOMBAT SUPPORT OF AIR OPERATIONS

OVERVIEW

The Combat Support Group met all individual military strategic option requirements ofthe Chief of the Defence Force’s Preparedness Directive for the provision of capabilitydespite being under strength in both combat support and protection elements. CombatSupport Group’s readiness levels, sustainment and the ability to support and protectconcurrent operations were unfavourably affected.

The group is under strength in both combat support and protection elements, whichhas impacted on readiness levels, sustainment and the ability to support and protectconcurrent operations. Currently, the Combat Support Group is 56% staffed due todelays in commercialisation programs which have prevented the redistribution ofworkforce across the Air Force.

Valuable support was provided to air operations in East Timor, despite personnelshortages. However, these operations could not have been sustained for any significantlength of time within current resources. The experience in East Timor highlightedshortfalls in both equipment and staffing levels, which are now being addressedthrough a remediation program.

Sustainability of extant air operations was also impacted by reduced manning of rearbase support areas due to personnel being deployed to East Timor. The AirTransportable Hospital is currently deployed in East Timor, which impacts on theability to meet endorsed lead times for the required level of medical support forconcurrent operations.

Some preparedness training and exercise objectives were not met due to thecancellation of exercises due to significant commitment to East Timor operations. Thisreduction in training opportunities was partially offset by experience gained duringoperational deployments.

The Combat Support Group continues to develop under the direction of its newlyformed headquarters at RAAF Amberley and is undergoing major restructuring due toorganisational and functional changes resulting from the Defence Reform Program.

In summary, Combat Support Group key shortfalls and issues which are subject toremedial action include:

• high workloads associated with the recent high tempo of ADF operations;

• shortages in both combat support personnel and disposition;

• shortages in combat support equipment; and

• a reduced ability to mount and sustain concurrent operations.

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254


Target1999-2000






• Output 19 elements are able to meet endorsedDeployment Lead Times at MLOC Fully achieve Partially achieved(1)








• National Tasks (contributes to Output 21) As required Not requiredNote1. Combat support and protection elements were under strength impacting on readiness and

sustainment achievement.

Output Nineteen

255

PRICE OF OUTPUT NINETEEN


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses



Sub-total Suppliers 51.7 83.2 65.0 -18.2Depreciation 9.7 17.5 30.5 13.0Asset Sales/Revenues -0.1 0.7 0.0 -0.7Net Write-Down of Assets 0.0 0.0 1.8 1.8Expensed Assets Under Construction 2.1 0.2 1.3 1.1Other Expenses – including Interest


Capital Use Charge 22.5 40.5 41.6 1.0Total Price of Output Nineteen 149.4 216.1 240.1 24.0



Employees – Military (+$31.0m)Real• Provision for additional personnel to meet East Timor Force expansion requirement (part

year effect of +555 average funded strength augmentation) (+$16.9m).• Progressive reinvestment in workforce as a result of market testing and other Defence

reform initiatives, including Reserve forces (+$3.7m).• Variations in allowance payments (+$9.2m).• Variations in leave entitlements, superannuation and fringe benefits tax payments associated

with increased workforce (+$3.2m).• Net variations in conditions of service related expenses including housing, living out


Employees – Civilian (-$3.0m)Real• Variations to reflect reduced contribution by Defence Science and Technology to Output 19

(-$3.0m).• Net variation to civilian staffing numbers and associated costs across all Groups including

discretionary savings achieved by Defence Acquisition Organisation (-$2.3m).Rule/Transfer• Refinement of attribution rules by Defence Corporate Support to better reflect support to

Output 19 (+$3.4m).

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256

Suppliers – Other (-$10.6m)Real• Increases by Corporate Support reflecting enhanced support to the Combat Support

Group’s East Timor commitments (+$10.0m).• Non-requirement for Portfolio provision for end of financial year management purposes

(-$1.5m).• Reduced requirement by Defence Acquisition Organisation associated with management of

Air Force projects (-$1.7m).Rule/Transfer• Attribution rule change by Air Force in the main distributing Search and Rescue contract

lease payments across all Air Force outputs (-$20.6m).Accounting Treatment• Reclassification of some inventory purchases (General Stores and Fuel) by Support

Command Australia as Supplier Expenses as part of inventory balance adjustments at end offinancial year (+$3.4m).

Suppliers – Inventory Consumption (-$7.6m)Real• Net variation due to over-estimate of inventory consumption in Budget (-$7.7m).

Depreciation (+$13.0m)Real• Delay in capital facilities asset rollout program, disposal of properties and changes to asset

valuations (-$1.3m).Rule/Transfer• Changes to attribution rules by Air Force to cater for depreciation of Output 19 assets, not

provided for in the budget (+$13.4m).• Depreciation expenses for Defence Information Systems Group for assets first found

(+$1.0m).

Net Write-Down of Assets (+$1.8m)Real• Write-off/demolition of assets as well as lease termination costs and the removal of

properties from the asset register where disposal was not properly recognised (+$0.9m).

Expensed Assets Under Construction (+$1.1m)Accounting Treatment• Recognition of expenses from previous financial year by Defence Estate Organisation,

relating to the capital facilities program (+$0.8m).

Other Expenses – including Interest and Grants (-$2.1m)Real• Net foreign exchange losses and reclassification of other expenses by Defence Acquisition

Organisation (-$1.0m).• Non-capitalised expenses incurred in managing the capital facilities program including

Townsville Base Redevelopment and Bradshaw infrastructure development projects(-$0.6m).

Capital Use Charge (+$1.0m)Real• Higher than budgeted inventory balances at end year due to write-back of certain inventory

items from the provision for obsolescence (+$1.3m).• Net impact of capital facilities rollout program and reduced level of facilities assets due to

rationalisation/disposals (-$1.3m).

257

POLICY ADVICE

OUTPUT 2: STRATEGIC INTELLIGENCE

OUTPUT 22: STRATEGIC POLICY ANDDIRECTION

Section Three

258

OUTPUT TWO: STRATEGIC INTELLIGENCE

OVERVIEW

This output provides intelligence, primarily on strategic and military issues, to Defenceand other parts of government and to the ADF for the conduct of military operations.It also develops and maintains a defence intelligence capability for use in times of crisisand conflict. A major challenge for defence intelligence during the period was the needto provide appropriate support to military operations in East Timor.

Intelligence products, processes and practices were improved, and people managementand development initiatives were introduced for better performance against corporateobjectives. In concert with the Science and Technology group, collaborative researchand development programs were developed to assess the capability of future imagerysystems to support surveillance and intelligence.

Intelligence reporting was rated highly by most customers against criteria such asaccuracy, relevance and timeliness. The Defence intelligence capability providedappropriately developed people, infrastructure, systems and processes to meet customerrequirements. However, the attraction and retention of appropriately qualifiedtechnical staff is becoming increasingly challenging.

Intelligence support for East Timor operations was successful and well received, andthe experience provides the basis for further improving intelligence support for ADFoperations.

A major challenge has been to overcome the effects upon intelligence capability of twocases of alleged espionage and a number of leaks of Defence intelligence material. Theleaks have been stopped and implementation of the recommendations flowing from theInspector-General of Intelligence and Security’s investigation into security issues hasresulted in improved security practices.


Target1999-2000

PerformanceIntelligence Assessment and Reporting• Intelligence information will be accurate,

relevant, timely, responsive, insightful and useful,and will be delivered cost effectively andefficiently.

Fully Achieve Achieved

Intelligence Capability• The Defence intelligence capability will have

appropriately developed people, infrastructure,systems, and processes to meet customerrequirements, and be able to meet ADF andGovernment needs in times of crisis or conflict.

Fully achievable Achieved


GovernmentAchieved

Output Two

259

PRICE OF OUTPUT TWO


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses





Capital Use Charge 78.4 72.1 61.6 -10.5Total Price of Output Two 331.1 349.6 371.1 21.5



The increase of $21.5m is a result of a variation in deliveries of assets under constructiontogether with increased attribution of Suppliers Expenses by enabling areas. These increaseswere offset by shortfalls in ADF personnel, a refinement in Civilian Employees attributions, andthe effect of an overestimate in Depreciation.

Section Three

260

OUTPUT TWENTY-TWO: STRATEGICPOLICY AND DIRECTION

OVERVIEW

The public discussion paper, Defence Review 2000 – Our Future Defence Force, wasapproved by Government in May and released in June 2000. Strategic Assessment2000 reviewed the strategic environment since Australian Strategic Policy (ASP) 97 andwas forwarded for senior Defence and Ministerial consideration. The QuarterlyStrategic Review was further refined to enable the Chiefs of Staff Committee toconsider circumstances in which the ADF might be employed over the short term.Other policy papers completed during the year included several futures studies, after-action reports of the East Timor crisis, Chiefs of Staff Committee agendum papers onChemical and Biological Warfare defence, and submissions to parliamentarycommittees on UN peacekeeping and Coastwatch.

A methodology was developed for addressing the link between strategic objectives andspecific guidance on the range and balance of capabilities to be acquired for the ADF.In addition, a range of indicative force options was prepared, including scenariosdrawing on the departmentally-agreed set of military strategic objectives and militaryresponse options. During the year, this methodology was tested by examining theutility of the force options in each scenario, drawing on the professional knowledge ofsubject matter experts in Defence. The detailed results of these deliberations werecaptured in a series of computer-based tools developed by the Defence Science andTechnology Organisation and Australian industry.

Future Warfare Concepts were developed to guide capability and investment decisions.The capstone strategic doctrine, the Australian Defence Force Approach to Warfare, isin preparation prior to approval for release. In addition, work was carried out on the‘revolution in military affairs’.

Direct support was provided to the Minister for Defence via a series of briefs ofindicative future scenarios (based on the Australian Military Strategy) concerning theuse of the ADF over the medium term. The proposal for an Australian Strategic PolicyInstitute was developed, with subsequent consideration by Government. Theperformance targets for Output Twenty-Two were generally achieved as forecast. Inparticular, the various strategic assessments were provided in a timely manner andsupported better-quality decision-making.

Output Twenty-Two

261



Combat Capability• Operation Warden (East Timor) As required by

the GovernmentAchieved

Quantity• Publish strategic assessments and

reviews and produce Ministerialand Cabinet submissions.

As required AchievedThe strategic assessments andreviews, and submissions to Cabinetand Minister were provided asrequested.

• Production of an annual strategicassessment, and both classifiedand unclassified unapprovedmajor capital equipment projectslist.

Fully Achieve Partially AchievedProduction of the annual strategicassessment (SA2000) and capitalequipment project list is ongoing.The classified version of the newmajor investment program wascompleted. The completion andrelease of the unclassified version hasbeen deferred until after the WhitePaper.

Quality• the advice is coherent,

comprehensive and relevantFully achieve Achieved

A concerted effort has been made toimprove the quality of informationprovided to our clients.

• the advice is formulated andcommunicated using the mostcost-effective combination andquantity of resources

Fully achieve AchievedThe most cost-efficient and effectiveresources were always sought whenpossible.

• the recipient adopts andadvocates the advice provided,and advice can be seen to havebeen important to decisions made

Fully achieve AchievedInformation was provided asrequested to assist in the higher leveldecision making process.

Timeliness• advice is provided in sufficient

time to enable a considereddecision to be made and theappropriate action to be taken

As required AchievedAdvice was always provided asrequired in a timely manner to ensureappropriate action was taken.

Section Three

262

PRICE OF OUTPUT TWENTY-TWO


Estimate$m


$m

1999-2000Actual

$m

Variation

$mExpenses



Sub-total Suppliers 131.7 46.0 53.5 7.5Depreciation 44.0 8.3 9.0 0.7Asset Sales/Revenues 0.1 0.4 0.0 -0.4Net Write-Down of Assets 0.0 0.0 1.1 1.1Expensed Assets Under Construction 0.1 0.0 1.2 1.2Other Expenses – including Interest


Capital Use Charge 13.0 8.6 9.3 0.7Total Price of Output Twenty-Two 318.3 194.5 193.0 -1.5




Employees – Civilian (-$14.6m)Real• Non-requirement for Portfolio provisions associated with end of financial year management

(-$1.5m).Rule/Transfer• Refinement of attribution rules to reflect support to this output (-$7.4m).• Allocation of centrally held provision for Civilian pay increase (-$2.7m).Accounting Treatment• Reassessment of long service leave expense (-$1.9m).

Suppliers – Other (+$7.5m)Rule/Transfer• Change in category from Other Expenses to Suppliers including lease and hire costs

(+$5.0m).• Refinement of attributions rules to reflect reduced support to this output (-$3.1m).

Output Twenty-Two

263

Accounting Treatment• Reclassification of some inventory purchases as operating expenses due to inventory balance


Expensed Assets Under Construction (+$1.2m)Real• Higher expensed assets under construction than anticipated for non-financial assets

(+$0.4m).Accounting Treatment• Increase in expensed assets under construction resulting from reclassification of information

technology assets following change in asset threshold value (+$0.7m).


(-$5.0m).

Section Three

264

APPENDIX A: AUSTRALIAN DEFENCEFORCE OPERATIONS

Table 3.1: Peacekeeping and Humanitarian Assistance(1)

Operation PerformanceBLAZER1991 – Dormant

ForcesADF

Outcome: During the year Australia continued to providepersonnel to assist in the identification, inspection anddestruction of Iraq’s weapons of mass destruction.Australia withdrew its last ADF personnel from UnitedNations Special Commission in UN New York on 30 April2000. The operation is now dormant.

DAMASK1991 – Continuing

ForcesNavy

Outcome: HMAS Melbourne was deployed to the Gulf fora six month period during 1999 to participate in theMultinational Maritime Interception Force in support ofUnited Nations Security Council sanctions against Iraq.

MAZURKA1992 – Continuing

ForcesArmy

Outcome: The ADF provided personnel to theMultinational Force Observers to monitor the securityarrangements in the Sinai.

BANNER1993 – October 1999

ForcesArmy

Outcome: Australian Army Engineers were attached tothe Cambodian Mine Action Centre to provide trainingadvisory assistance.

CORACLE1994 – Continuing

ForcesArmy

Outcome: Engineering personnel provided training to de-mining staff as part of the United Nations force inMozambique.

PALADIN1995 –Continuing

ForcesArmy

Outcome: Army personnel operate as part of the UnitedNations Truce Supervisory Organisation. This force ofunarmed military observers supervise, observe and reporton the various cease-fire arrangements, truces and peacetreaties that have been negotiated since 1948 betweenIsrael and Arab nations.

OSIERMarch 1997 – Continuing

ForcesArmy

Outcome: Army personnel deployed as part of theStabilisation Force in Bosnia-Herzegovina and Croatia andKosovo Force in Kosovo. In both cases personnel serveas individuals attached to UK forces.

BELISI IINovember 1997 – Continuing

ForcesADF

Outcome: Australia led the regional Peace MonitoringGroup to monitor and report on the maintenance of thecease-fire on Bougainville. Contributions include tri-Service specialist medical, logistic, communications andtransport capabilities necessary for the deployment and . ofthe Peace Monitoring Group.

Appendix A

265

Operation PerformancePOLLARD1998 – Continuing

ForcesArmy

Outcome: ADF forces were prepared and deployed forthe United States led coalition in the Gulf region during1998. This force has returned to Australia and the ADFmaintains a liaison officer in Kuwait attached to thecoalition combined joint task force headquarters.

CONCORDJune 1999 – Continuing

ForcesAir Force

Outcome: This operation contributed personnel andlogistic support to the United Nations force in East Timor.

SAFE HAVENJuly 1999 – May 2000

ForcesADF

Outcome: This operation contributed personnel andlogistic support to Kosovar refugees.

PLUMBOB2000 – Continuing

ForcesADF

Outcome: This operation is the ADF contribution toevacuation operations in the Solomon Islands. It includesRAN and RAAF transport assets and Defenceaugmentation to the Australian mission in Honiara.

Note1. ADF operations in East Timor are reported in Section One.

Table 3.2: Expenditure on Peacekeeping and Humanitarian AssistanceDeployment 1999-2000

Estimate$’000

1999-2000Actual$’000

Gross Cost 64 100Recoveries 0 0Supplementation 0 0

BLAZER

Net Cost 64 100Gross Cost 5,514 160Recoveries 0 0Supplementation 0 0

DAMASK

Net Cost 5,514 160Gross Cost 2,011 888Recoveries 498 725Supplementation 0 0

MAZURKA

Net Cost 1,513 163Gross Cost 112 59Recoveries 0 0Supplementation 0 0

BANNER

Net Cost 112 59Gross Cost 167 238Recoveries 0 108Supplementation 0 0

CORACLE

Net Cost 167 130

Section Three

266

Deployment 1999-2000Estimate

$’000

1999-2000Actual$’000

Gross Cost 2,205 1,442Recoveries 0 0Supplementation 0 0

PALADIN

Net Cost 2,205 1,442Gross Cost 405 490Recoveries 0 0Supplementation 0 0

OSIER

Net Cost 405 490Gross Cost 18,324 24,393Recoveries 414 470Supplementation 0 17,205

BELISI II

Net Cost 17,910 6,718Gross Cost 0 649Recoveries 0 0Supplementation 0 0

POLLARD

Net Cost 0 649Gross Cost 0 30Recoveries 0 0Supplementation 0 0

CONCORD

Net Cost 0 30Gross Cost 0 39,060Recoveries 0 0Supplementation 0 43,930

SAFE HAVEN

Net Cost 0 -4,870(1)

Gross Cost 0 5Recoveries 0 0Supplementation 0 0

PLUMBOB

Net Cost 0 5Gross Cost 28,802 67,514Recoveries 912 1,303Supplementation 0 61,135

TOTAL

Net Cost 27,890 5,076Note1. Surplus is due to earlier than planned closure of safe havens for Kosovars and East Timorese. Some

of this residual will be used to cover outstanding amounts in 2000-01.

Appendix B

267

APPENDIX B: AUSTRALIAN DEFENCEFORCE EXERCISE PROGRAM

Several exercises scheduled for 1999-2000 were cancelled, postponed until 2000-01 orreduced in scope due to the unavailability of force elements or resources assigned toEast Timor operations. Although this resulted in a reduced ADF exercise program, itdoes not reflect a training deficit, as the force elements deployed to East Timor gainedconsiderable training benefits from the operational experience.

Table 3.3: Combined Exercises Involving the ADF and the Defence Forcesof Other Countries

Exercise PerformanceObjective: To improve interoperability by conducting anannual maritime surveillance exercise with the PNG DefenceForce (PNGDF) and RAN patrol boat elements.

PARADISE 99June – July 1999

AustraliaNavy, Air ForceOther CountriesPapua New Guinea

Outcome: The benefit gained by the RAN and RAAF duringthis particular activity was limited due to PNGDF preparednesslimitations, however, the Paradise series of exercises remains aworthwhile longer-term international engagement activity fordevelopment of the PNGDF (Maritime Element) maritimepatrol capability.Objective: To practise combined operations requiringinteroperability at a tactical level with elements of the ThaiArmy.

CHAPEL GOLDJuly 1999

AustraliaArmyOther CountriesThailand

Outcome: Achieved as forecast. This was an effective exercisein that a basic working relationship between participants wasachieved and hence the overall relationship between the twoforces was tested and enhanced. The persuit of interoperabilitywith the Royal Thai Army is easily achievable.Objective: To develop and evaluate RAN/United States Navy(USN)/Republic of Singapore Navy (RSN) interoperability inMine Warfare, Diving and Explosive Ordnance Disposaloperations.

MCM TRI-LATERAL EX 99July 1999

AustraliaNavyOther CountriesUnited States, Singapore

Outcome: This exercise was conducted for the first time in1999 and subsumed Exercises Hunter 99, Mercury and Axolotl99 to maximise resources. A worthwhile exercise that providedopportunities for Australian Clearance Diving Teams tointegrate into minehunter coastal ships’ companies. ClearanceDiving personnel successfully conducted both surface andunderwater Improvised Explosive Device Disposal andExplosive Ordnance Disposal, harbour defence, mineidentification and recovery from both sea and land forwardoperating bases. Additionally, real time post mission analysisutilising the Australian Mine Warfare Evaluation AnalysisSystem created much interest from overseas participants.

Section Three

268

Exercise PerformanceObjective: Biennual fleet concentration period to improveinteroperability with regional defence forces in a concentratedtraining environment.

FCP KAKADU IVJuly – August 1999

AustraliaNavy, Air ForceOther CountriesIndonesia, Malaysia,New Zealand, Philippines,Singapore, Thailand,Papua New Guinea

Outcome: Assessed as successful through achievement of allaims and objectives, providing essential combined and jointtraining in the maritime environment. Specifically the followingwere considered as significant outcomes:• The C3 and Command Air Operations Centre procedures

were successfully exercised at the operational level;• Excellent participation of the minor war vessel task group

and Collins Class submarines;• Provision of advanced surface gunnery target, the Radio

Controlled Surface Target and good firing results;• F/A-18 pilots were provided with the opportunity to meet

categorisation requirements for maritime strike and airdefence roles.

• Air Defence Ground Environment units proved the Link 11connectivity capabilities between Air Force and Navyelements;

• The high profile and availability to fleet units when anExplosive Ordnance Disposal/Improvised Explosive DeviceDisposal team was embarked, and

• The availability of RAN Guided MissileFrigates/Replenishment ship organic rotary wing aircraft forthe insertion of teams onto a range of platforms.

Objective: To conduct realistic anti-submarine and anti-surfacewarfare training with a USN Carrier Battle Group.

PAC JTFEX 99-1July 1999PAC JTFEX 00-1November 1999

AustraliaAir ForceOther CountriesUnited States

Outcome: JTFEX series continues to provide valuableopportunities for the RAAF to develop and maintaininteroperability with USN. The series also provides anti-submarine warfare and anti-surface warfare opportunities notalways available with RAN elements. Continued participation isessential to further the ADF maritime combined operationscapability.Objective: To conduct anti-submarine warfare training andincrease interoperability for RAAF and USN P-3C crews.Timings for these exercises vary depending on aircraft andsubmarine availability.

EXTENDEX SERIESJuly 1999 – June 2000


Outcome: Extendex Series exercises were conducted on anopportunity basis from the Australian mainland. Less than fiveoccurred, however they provided opportunities that have beenabsent in the ADF due to limited RAN submarine availability.Objective: For participating units to exercise interoperability inairborne insertion, EOD and ship attacks with Naval SpecialWarfare Unit One.

CDT NSWEX 99August 1999


Outcome: A successful and beneficial exercises providingvaluable training opportunities for Australian Clearance DivingTeam One.

Appendix B

269

Exercise PerformanceObjective: To conduct dissimilar air combat tactics.THAI BOOMERANG 99

August 1999

AustraliaAir ForceOther CountriesThailand

Outcome: Thai Boomerang 99 built on the professionalrelationship between the RAAF and the Thai Air Force. 81Wing validated air-to-air tactics in an unfamiliar air environmentagainst dissimilar aircraft, F16, which enhanced pilot’smanoeuvring proficiency. The exercise tested 3 Squadron’sability to support sustained operations at a deployed locationwith minimum logistic support. Access to the Air CombatManoeuvring Range at Korat was unavailable due to upgradework, but access will be available for future exercises. Overallvaluable air combat training was gained that is difficult toachieve in Australia.Objective: Conduct effective combined maritime airsurveillance exercise with the Indonesian Air Force (TNI-AU) inTimor Gap zone of cooperation to develop closer working tiesbetween the RAAF and Indonesian forces.

ALBATROS AUSINDO 99-6August 1999

AustraliaAir ForceOther CountriesIndonesia

Outcome: Collocation of RAAF and TNI-AU units atHasanuddin Air Force Base proved to be of great value infacilitating the exercise and the development of the operatingrelationship. The success of the exercise was underpinned bythe visit of the Chief of Staff TNI-AU and the discussions heldwith him and other senior TNI-AU personnel. TNI-AUproposed there is clear opportunity to expand the scope of theexercise to include surveillance passage exercises and thepossibility of combined operations from Mando withsurveillance of the Celebes Sea.Objective: To practise and develop operational procedures andtactics with the Five Power Defence Arrangements units in ajoint/combined maritime exercise.

STARDEX 99August – September 1999

AustraliaNavy, Army, Air ForceOther CountriesSingapore, Malaysia, NewZealand, United Kingdom

Outcome: All the required outcomes were achieved as revised.The working relationship between the Australian and Malaysianunits proved to be very effective. This was also the first time aGround Based Air Defence Liaison Officer was provided toHeadquarters Integrated Air Defence System and was verysuccessful in the coordination of ground based air defencesupport across all participating nations. It was recommendedthat this position be incorporated into future iterations of thisexercise. Some potential benefits of the exercise were reducedbecause of the withdrawal of major RAN units to supportoperations in East Timor.Objective: French Pacific Naval forces concentration period.Contribute to the development of interoperability with FrenchNaval units.

STAGE RECO 99August – September 1999

AustraliaNavyOther CountriesFrance

Outcome: A beneficial activity, which provided a challengingoperational environment for RAN Patrol Boats not availableelsewhere in the region. While the main focus of the exercise isthe work up of FANC units, the inclusion of RAN units addedan extra dimension to the period and provided a valuable periodto develop a moderate level of interoperability.

Section Three

270

Exercise PerformanceObjective: To exercise ADF elements in planning andconducting quadrennial combined and joint operations in thedefence of Australia – formerly the Kangaroo series.

CROCODILE 99 September – November 1999

AustraliaNavy, Army, Air ForceOther CountriesUnited States

Outcome: Partially achieved as forecast. Due to operations inEast Timor, and the subsequent withdrawal of forces from theexercise, the level of activity was significantly reduced.However, training objectives gained from the combinedplanning of the exercise and the successful interaction ofAustralian and US forces were achieved.Objective: To improve relationships and developinteroperability between the RAAF and Indonesian Air Force byairman-to-airman discussions and air defence command postexercise with TNI-AU forces in a bilateral air training activity.

ELANG AUSINDOSeptember 1999

AustraliaAir ForceOther CountrieIndonesia

Outcome: The exercise provided an excellent opportunity tobetter understand the Indonesian Air Defence capabilities and toimprove the mutual understanding of air defence proceduresand operational concepts. An agreed format between the RAAFand TNI-AU for future bilateral air defence exercises wasproduced.Objective: To exercise the armies of the Five-Power DefenceArrangements in combined operations by conducting a brigadeto unit-level Command Post exercise.

SUMAN WARRIOROctober 1999

AustraliaArmyOther CountriesUnited Kingdom, NewZealand, Malaysia, Singapore

Outcome: The exercise objective was achieved as forecast.The exercise proved to be the most appropriate forum todevelop interoperability amongst armies of the Five PowerDefence Arrangements. Interoperability during this exercise wasenhanced through the development of Five Power DefenceArrangements standard operating procedures.Objective: To test and evaluate RAN/USN interoperability indiving and Explosive Ordnance Disposal operations. Toenhance interoperability between Australian and US personnelthrough a Mine Countermeasures vessel training exercise.

SHORTSCOPE/DUGONG 99November 1999

AustraliaNavy, Air ForceOther CountriesUnited States

Outcome: Despite the late arrival of the USN ExplosiveOrdnance Disposal Maritime Unit personnel all exerciseobjectives were met. Utilisation of the HMAS WaterhenOperations room as Local Mine Counter Measure Headquartersproved an excellent concept. Computer support with the MineWarfare Tactical System was a good force multiplier. ExercisingBase security teams was extremely valuable.Objective: To practise anti-submarine warfare, with joint andindependent maritime patrol aircraft cooperation and to practiseand develop combined RAN/USN submarine operations.

LUNGFISH 99December 1999


Outcome: Highly successful with all objectives met.Participants drew great benefit from practising coordinatedundersea warfare operations in a testing environment usingadvanced communication infrastructure.

Appendix B

271

Exercise PerformanceObjective: To practise combined operations at the tactical levelbetween part-time elements of the Australian and New ZealandArmies.

TASMAN RESERVEJanuary-February 2000

AustraliaArmyOther CountriesNew Zealand

Outcome: The exercise objective was achieved as forecast.The activity was highly successful with many new lessons learntand a good rapport established between the Australian and NewZealand units involved. Participants were able to gain a goodworking knowledge of the host’s unit-level equipment,operations, logistics and administrative procedures therebysignificantly enhancing unit-level interoperability.Objective: To conduct anti-submarine and anti-surface warfaretraining with major USN units. The exercise will be conductedin the San Diego operating areas.

FLEET EXJanuary – February 2000


Outcome: The exercise provided Maritime Patrol Group anopportunity to operate with and against submarines which hasbeen difficult to achieve in Australia in the past two years. Theexercise also provided experience with operating with USNcarrier borne anti-submarine warfare aircraft and helicopters incoordinated operations. Interoperable tactics and procedureswere exercised improving the experience levels of P-3C crews,which will minimise any integration problems in combinedoperations and exercises.Objective: To conduct combined Australian and New Zealandair-to-air and air-to-ground fighter operations and improveinteroperability with the RNZAF

WILLOH 00-1February – March 2000

AustraliaAir ForceOther CountriesNew Zealand

Outcome: The planning and execution for deployed operationswas successful. Although EX WILLOH continued to provide81 Wing pilots with valuable Dissimilar Air Combat Training,the New Zealand decision not to replace the A4 Skyhawk willreduce the value of the exercise to the RAAF in the future.Objective: To practice deployment and develop interoperabilityat a tactical level with elements of the Malaysian Special Forces.

NIGHT TIGERMarch 2000

AustraliaArmyOther CountriesMalaysia

Outcome: Achieved as Forecast. The exercise was conductedby the Rifle Company Butterworth contingent. It wasconducted due to the deployment of 1 Commando Regiment toButterworth, which provided the opportunity for the Regimentto conduct the exercise instead of making a separatedeployment. Participants drew great benefit from practicingdeployment at a tactical level.Objective: To develop and evaluate RAN/RSN interoperabilityin diving and Explosive Ordnance Disposal operations

AXOLOTL 00March – April 2000

AustraliaNavyOther CountriesSingapore

Outcome: The exercise proved to be both a valuable mediumfor exchange of information and enhancing basic divinginteroperability with the RSN.

Section Three

272

Exercise PerformanceObjective: To practice Regional Naval Control of Shippingprocedures in a multi-national environment to exercise the RANNaval Control of Shipping Organisation’s response to a threat toAustralia’s maritime trade. (This exercise was not reported inthe Portfolio Budget Statements 1999-2000 as it was originallyscheduled for July 2000 but was brought forward to April 2000.)

BELL BUOY 00April 2000

AustraliaNavyOther CountriesCanada, United States,United Kingdom, Chile,South Korea

Outcome: The exercise was considered to have been successfulin integrating personnel from Allied navies into the RAN NavalControl of Shipping Organisation and in identifying a number ofsignificant areas for improvement from a national perspective.Objective: To enhance interoperability and practice theintegration of Five Power Defence Arrangement air defence andmaritime forces in the coordinated air defence of peninsularMalaysia and Singapore.

IADS/ADEX SERIESApril – May 2000

AustraliaNavy, Air ForceOther CountriesSingapore, Malaysia

Outcome: Exercise objectives were achieved. A challengingand rewarding exercise in which a high degree of forceintegration was achieved in the air defence of peninsularMalaysia and Singapore.Objective: To test and evaluate RAN/USN/RSNinteroperability in Diving and Tactical Explosive OrdnanceDisposal operations.

TRICRAB 00May 2000

AustraliaNavyOther CountriesUnited States

Outcome: A successful exercise achieving a high level ofinteroperability with USN and RSN Explosive OrdnanceDisposal forces. Australian Clearance Diving Teamsaccomplished all helicopter rope suspension techniques.However participation in parachute load follow missions waslimited due to lack of suitably qualified personnel.Objective: To develop and evaluate RAN/RSN interoperabilityin Mine Warfare operations.

HUNTER 00May 2000

AustraliaNavyOther CountriesSingapore

Outcome: Exercise Hunter 00 proved the effectiveness ofcontrol and coordination of operations from HMAS Waterhen.The logistics and maintenance organisation was also fully tested.The Command Decision Aids (MINTACS) have provedeffective in the planning and assessment of minecountermeasures operations.Objective: To conduct integrated undersea warfare coordinatedoperations with a USN Carrier Battle Group. (This exercise wasnot reported in the Portfolio Budget Statements 1999-2000; it was anadditional exercise undertaken on an opportunity basis.)

USN CVBG ASWEXMay 2000


Outcome: A very successful exercise that for the first timeincluded the full integration of a RAN submarine into theCVBG. Valuable lessons and experience were gained throughestablishing and using advanced communications networks in acomplex environment. The RAN submarine’s participationproved the viability for similar future combined underseawarfare exercises.

Appendix B

273

Exercise PerformanceObjective: To conduct training to develop Thailand’s CounterOperations Command counter-hijack capability.

DAY PANTHERMay – June 2000


Outcome: All objectives were achieved as forecast. Theexercise provided valuable training in counter- hijack methodsfor the exercise participants.

Objective: To practice deployment and develop interoperabilityat a tactical level with elements of the Thai Special Forces.

NIGHT PANTHERMay – June 2000


Outcome: Achieved as forecast. The exercise enhancedinteroperability at a tactical level while achieving the objectivesof the exercise.

Objective: Enhance interoperability and proficiency ofmaritime and air forces to operate in coalition arrangementscentred on realistic short warning littoral operations.

RIMPAC 00May – July 2000

AustraliaNavy, Air ForceOther CountriesUnited States, Canada, Japan,Chile, South Korea

Outcome: Sufficient data is not yet available for full evaluationat time of promulgation. However, initial reports indicate a verysuccessful exercise which met objectives and provided excellenttraining value for all participants.

Objective: To practise combined operations requiringinteroperability at a tactical level with elements of the US MarineCorps.

GOLD EAGLEJune-July 2000

AustraliaArmyOther CountriesUnited States

Outcome: This exercise did not conclude until July 2000 andwill be reported in the 2000-01 Defence Annual Report.

Objective: To practise combined operations requiringinteroperability at a tactical level with elements of the US Army.

PACIFIC BONDJune-July 2000

AustraliaArmyOther CountriesUnited States

Outcome: This exercise did not conclude until July 2000 andwill be reported in the 2000-01 Defence Annual Report.

Notes• The following exercises were postponed to 2000-01: Flying Fish 00, New Horizon, Penguin 00,

JMSDF Passex.

• The following exercises were subsumed into other exercises: Swift Eagle 99 into Crocodile 99

• The following exercises were cancelled due to operations in East Timor: Tasmanex 2000, Cassowary.

• The following exercises were cancelled due to unavailability of force elements, resource considerationsor the suspension of training activities with Indonesia: Bullseye 00, Maple Flag 2000, Day Tiger, FCP00-1, Gunrunner 2000, Trisetia, Fincastle 99, Rajawali Ausindo 99-6, Tamex Series, Matakirea 2000.

• The following exercises were mistakenly reported as cancelled in the Portfolio Additional EstimatesStatements 1999-2000, but subsequently took place: Night Tiger, Day Panther.

Section Three

274

Table 3.4: Joint Exercises involving at least two of the Navy, Army andAir Force

Exercise PerformanceObjective: To test the readiness of a selected Land Commandunit to defeat attacks on Australia.

SAMICHON EAGLEJuly 1999

ForcesArmy, Air Force

Outcome: The exercise objective was achieved as forecast.

Objective: To exercise the oncoming Special RecoverySquadron at the completion of hand-over training.

DUSK SERIESNovember 1999

ForcesNavy, Army, Air Force Outcome: Completed successfully. Air Force provided airlift

support only.

Objective: To practise special recovery techniques involvingships at anchor.

DAY ANCHORJanuary 2000

ForcesNavy, Army

Outcome: Completed successfully

Objective: To maintain Special Forces insertion techniquesutilising the parachute capability.

PEGASUS MOON/DAYPEGASUSFebruary-March 2000

ForcesArmy, Air Force

Outcome: The exercise objectives were achieved under theexercise Day Pegasus. Special Forces elements successfullypracticed insertion techniques in a training environment.

Notes• The following exercises were cancelled due to operations in East Timor: Arnhem 00-01, Sea Snake.

• The following exercises were cancelled due to unavailability of force elements or resourceconsiderations: Day Bubble 00, Initial Landing 00, Prowler 00, Platypus Moon, Aswex 99, MaritimeGuard 99.

Appendix C

275

APPENDIX C: DEFENCE COOPERATION

OVERVIEW

Expenditure for Defence Cooperation in 1999-2000 was $55.1m. During the financialyear a number of departmental initiatives affected expenditure. These included:reduction as part of the departmental savings initiative; transfer to DefenceEngagement in support of East Timor; retrospective price/exchange adjustment;reduction in activities within Indonesia; group savings initiative; and a military salaryadjustment.

As a result of changes to guidance a number of planned exercises and activities with theregional armed forces planned to occur during 1999-2000 were either reprioritised orcancelled. The East Timor crisis also had a serious impact on the Defence Cooperationrelationship with Indonesia. A number of training programs and combined exerciseswere cancelled and subsequently funding was reduced to reflect this downturn.Activities that were planned with Papua New Guinea were delayed due to the inabilityof PNG to provide adequately trained personnel. There were some delays caused bythe half-life refit of the patrol boats and the crisis in Fiji and Solomon Islands whichaffected the achievement of planned activities.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000

Variation(Actual less

Revised)$’000

Papua New Guinea 10,284 8,537 7,986 -551South Pacific Region 25,894 21,495 21,109 -386South-East Asia andOther Indochina 26,858 22,296 23,739 1,443Other Regional Activities 2,900 2,900 2,252 -648Facilities for Training inAustralia 103 103 15 -88Total 66,039 55,331 55,101 -230

Section Three

276

PAPUA NEW GUINEA

The 1999-2000 actual reduction for Papua New Guinea was due to a number of factorsincluding the closure of 12 Chief Engineer Works at Mendi, variations in billing andpayments schedules, and disruptions to planned training schedule. An actual reductionin administration and personnel costs was also recorded due to delays in filling trainingadviser positions and the reduction in training activity.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 6,123 5,083 1,557 -3,526Projects 600 498 2,893 2,395Training and Study Visits 3,561 2,956 3,536 580Total 10,284 8,537 7,986 -551

SOUTH PACIFIC REGION

The key activity supported by the Defence Cooperation Program in the elevencountries of the South-West Pacific is the Maritime Surveillance Program with thePacific Patrol Boat Project as a mainstay activity. The Maritime Surveillance Programprovides Australia with the opportunity to understand regional attitudes and intentionsand to maintain strategic dialogue on security issues. The Pacific Patrol Boat Projecthelps recipient countries to develop national security capabilities with associatedincreases in interoperability with the ADF.

This year saw an increase in ethnic tensions in the region leading to two coups resultingin the inability to complete some projects.

Vanuatu

Due to commitments by the Vanuatu Police Force to other activities, planned projectswere unable to proceed. In addition, some ADF billets were vacant for part of the year,leading to lowered administration and salary costs.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 1,413 1,173 1,124 -49Projects 668 555 200 -355Training and Study Visits 460 382 293 -89Total 2,541 2,109 1,617 -492

Appendix C

277

Solomon Islands

The Solomon Islands overspend is largely a response to costs associated with theincreased numbers of Multinational Police Advisory Group personnel and the requiredincrease in Defence funding to support these numbers. Defence also provided fundingfor logistics associated with the peace process in this country.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 1,517 1,259 1,441 182Projects 532 442 465 23Training and Study Visits 300 249 570 321Total 2,349 1,950 2,476 526

Tonga

Tonga was unable to take advantage of Australia’s offer to fund a strategic review of itsdefence service. There was some underspend in projects due to the difficulty inforecasting accurate project costing at the time of submission.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 688 571 799 228Projects 1,172 973 793 -180Training and Study Visits 609 506 694 188Total 2,469 2,050 2,286 236

Western Samoa

The Patrol Boat was unavailable for its usual surveillance work as it was used as a jailfor part of the year.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 343 285 344 59Projects 120 100 0 -100Training and Study Visits 30 25 29 4Total 493 409 373 -36

Section Three

278

Cook Islands

Several minor projects were deferred.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 205 170 194 24Projects 210 174 99 -75Training and Study Visits 39 32 26 -6Total 454 377 319 -58

Fiji

There was significant underspend in Fiji due to delays in the completion of severalplanned projects caused by inclement weather and the 19 May 2000 coup. Projectdesigns were also delayed due to the heavy tasking of the Republic of Fiji MilitaryForces’ engineering elements. All Defence Cooperation projects, and planned trainingactivities, were suspended following the coup.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 1,037 861 1,275 414Projects 1,190 988 154 -834Training and Study Visits 1,756 1,458 1,180 -278Total 3,983 3,306 2,609 -697

Marshall Islands

The Marshall Islands’ overspend is due to revised estimates savings in personnel costsnot being realised.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 717 595 707 112Projects 50 42 0 -42Training and Study Visits 36 30 25 -5Total 803 667 732 65

Appendix C

279

Federated States of Micronesia

The Federated States of Micronesia had a slight overspend. This is largely due tounforeseen increases in the costs of personnel.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 622 516 809 293Projects 63 52 0 -52Training and Study Visits 87 72 41 -31Total 772 641 850 209

Tuvalu

Part of the shortfall in expenditure in Tuvalu can be attributed to savings onadministrative costs and reduced Defence Cooperation Adviser travel costs. A numberof minor projects in each country were deferred.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 452 375 304 -71Projects 170 141 7 -134Training and Study Visits 38 32 22 -10Total 660 548 333 -215

Kiribati

Following representations from the Kiribati Government, the scheduled half-life refitfor Pacific Patrol Boat RKS TEANOAI was brought forward to early in 2000. ThePacific Patrol Boat did not take part in the planned patrolling and training activities thatwere scheduled for this period, resulting in an underspend in predicted ongoing fueland administrative costs.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 504 418 466 48Projects 190 158 0 -158Training and Study Visits 48 40 40 0Total 742 616 506 -110

Section Three

280

Palau

The Palau personnel costs overspend is the result of two effects. Firstly, the PalauDefence Cooperation team were unable to realise the expected 17% decrease inexpenditure from the original budget estimate. Secondly, certain projects relating to theadvisers compound were recorded as personnel expenses, but had been budgeted as aproject expense.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 641 532 678 146Projects 150 125 21 -104Training and Study Visits 47 39 47 8Total 838 696 746 50

Multilateral General Assistance

Multilateral General Assistance comprises administration, training programs, contractsfor half-life refits and other support activities for the 22 Pacific Patrol Boats. Theunder expenditure was due to lower follow-on support costs due to internal economies,savings generated through redirection of an assets management program and actuallower than originally forecasted training costs due to variations in student numbers.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 334 277 454 177Projects 6,200 5,147 4,877 -270Training and Study Visits 3,256 2,703 2,931 228Total 9,790 8,127 8,262 135

SOUTH-EAST ASIA AND OTHER INDOCHINA

Singapore

The 1999-2000 decrease in spending for Singapore was a result of Singapore’seconomic stabilisation and consequent fee-paying status.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 0 0 4 4Projects 0 0 0 0Training and Study Visits 747 620 242 -378Total 747 620 246 -374

Appendix C

281

Philippines

The 1999-2000 actual reduction for the Philippines was due to an inability to meet theexpected training levels for the Armed Forces of the Philippines. A major contributingfactor to this outcome was the need for both the Philippines and Australian militariesto commit substantial resources and command focus to the Interfet and UNTAEToperations.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 182 151 957 806Projects 0 0 0 0Training and Study Visits 5,654 4,694 3,838 -856Total 5,836 4,845 4,795 -49

Thailand

Additional expenditure above original budget estimates was principally due to the startup of the joint maritime surveillance Exercise Taa Nok Insii, expansion in othertraining activities, and a higher than anticipated number of visits. The suspension ofcost sharing for training activities undertaken in Australia continues and will be subjectto review in 2000-01.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 350 291 915 625Projects 80 66 125 59Training and Study Visits 4,170 3,462 4,423 961Total 4,600 3,819 5,463 1,645

Malaysia

The 1999-2000 underspend in training was due to an inability to meet expected traininglevels for the Malaysian Armed Forces. A number of courses and projects werecancelled due to ADF commitments in East Timor and to the Olympics.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 1,579 1,311 3,180 1,870Projects 460 382 80 -302Training and Study Visits 4,357 3,617 2,940 -677Total 6,396 5,310 6,200 891

Section Three

282

IndonesiaAustralian personnel and logistics support was provided to the Indonesian Navy forNomad aircraft maintenance. Australian personnel were also attached to theIndonesian Armed Force Central Language Training School, the Navy Officer TrainingAcademy and the Air Force Staff College. Indonesian officers were attached to theRAAF Staff College, RAN Staff College and Air Power Studies Centre, and theDefence International Training Centre.

Projects included activities in defence cooperation in Science and Technology andLogistics.

Australia conducted several combined exercises with Indonesia prior to events in EastTimor.

Training in Australia was provided to Indonesian Armed Force personnel by the singleService Staff Colleges, postgraduate tertiary institutions and military training institutionsfor vocational and professional development. Many also attended the DefenceInternational Training Centre for English language training. Much of the training wasprovided prior to Australian deployment to East Timor. Areas of training included:defence and strategic studies, navigation, medicine, communications, engineering,management, training systems, logistics, peacekeeping, and maritime air surveillance.

Indonesian personnel also attended a conference on the ‘revolution in military affairs’.

The variation in the budget reflects the suspension of many bilateral activities arisingfrom tensions in the relationship after Australia’s involvement in the UN-supportedInterfet deployment to East Timor.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 1,830 1,519 1,531 12Projects 472 392 275 -117Training and Study Visits 5,587 4,638 3,428 -1,210Total 7,889 6,549 5,234 -1,315

Other IndochinaTraining for Cambodia and Laos consists largely of English language training, medicalassistance and strategic level reform seminars. The 1999-2000 actual increase inspending was due to a slight increase in activity costs.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 195 162 633 471Projects 160 133 0 -133Training and Study Visits 124 103 488 385Total 479 398 1,121 724

Appendix C

283

VietnamIn our modest defence relationship with Vietnam, training in Australia primarily takesthe form of Tertiary Scholarships, English language training and the Australian Defenceand Staff Colleges. Defence has a collaborative activity in the form of an army-to-armymalaria project. The 1999-2000 actual reduction for Vietnam was due to an inability tofind candidates with a suitable level of English. This difficulty has resulted in theappointment of an English Language Adviser in Hanoi and an increase in languagetraining.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 0 0 0 0Projects 360 299 239 -60Training and Study Visits 551 457 439 -18Total 911 756 678 -78

OTHER REGIONAL ACTIVITIES

Several planned activities, of varying sizes, with other countries did not go ahead asexpected, or went ahead on a reduced activities budget. Costs on several otheractivities came in under budget.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Defence RegionalCooperation 1,237 1,237 909 -328Training and Study Visits 1,663 1,663 1,343 -320Total 2,900 2,900 2,252 -648

FACILITIES FOR TRAINING

The 1999-2000 actual decrease for Facilities for Training in Australia resulted fromlower than expected purchase of training support items for ADF schools andestablishments.

1999-2000Budget

Estimate$’000


$’000

1999-2000Actual

$’000


Revised)$’000

Personnel 0 0 0 0Projects 0 0 0 0Training and Study Visits 103 103 15 -88Total 103 103 15 -88

SECTION 4

SUPPLEMENTARYINFORMATION

Section Four

286

FINANCIAL STATISTICS

Table 4.1: Defence Function Outlays/Departmental Appropriations (netof capital use charge) as a Percentage of Gross Domestic Product 1982-83to 1999-2000(1)

Year Expenditure$m

Less Receipts$m

Outlays$m

% of GDP%

1981-82(2) 4,019 129 3,886 2.5

1982-83(2) 4,663 160 4,501 2.6

1983-84(2) 5,215 158 5,056 2.6

1984-85(2) 5,863 206 5,657 2.6

1985-86(2) 6,551 217 6,333 2.6

1986-87(2) 7,095 273 6,823 2.6

1987-88(2) 7,196 230 6,967 2.3

1988-89(2) 7,576 282 7,295 2.1

1989-90(2) 8,234 320 7,913 2.1

1990-91(2) 8,809 328 8,480 2.2

1991-92(2) 9,080 348 8,731 2.3

1992-93(2) 10,088 930 9,158 2.4

1993-94 10,314 568 9,746 2.31994-95 10,338 607 9,731 2.11995-96 10,605 594 10,011 2.01996-97 10,611 612 9,999 1.91997-98 10,910 495 10,415 1.91998-99 11,686 503 11,183 1.91999-2000(3) n/a n/a 11,954 1.9

Notes1. This table may not add due to rounding.2. Figures from 1981-82 to 1992-93 have been adjusted to remove superannuation contributions/refunds

to make them consistent with 1993-94 Defence Function outlay.3. Figures for 1999-2000 represent departmental appropriations net of capital use charge which equates

broadly to Defence outlays under the previous funding model.

Table 4.2: Foreign Currency Expenditure$m

Currency Expenditure Overseas 1,981.8

Financial Statistics

287

Table 4.3: Defence Expenditure as a Percentage of Gross DomesticProduct

Year ending30 June

Aust US UK Thai Sing Indon Malay NZ Can Japan

1990 2.1 5.1 3.9 2.5 5.1 1.5 2.6 1.8 1.01991 2.2 5.0 4.0 2.4 4.9 1.5 3.3 1.6 1.9 1.01992 2.3 4.6 3.8 2.5 5.1 1.4 3.0 1.4 1.8 1.01993 2.4 4.6 3.6 2.5 4.6 1.3 3.0 1.2 1.7 1.01994 2.3 3.8 3.4 2.4 4.3 1.3 2.8 1.1 1.6 1.01995 2.1 3.7 3.1 2.2 4.6 1.3 2.7 1.2 1.4 1.01996 2.0 3.5 3.0 2.2 4.3 1.3 2.6 1.1 1.3 1.01997 1.9 3.3 2.9 2.5 4.5 1.4 2.3 1.1 1.2 1.01998 1.9 3.1 2.8 1.6 4.9 1.0 1.6 1.0 1.1 1.01999 1.9 2.9 2.7 1.5 5.1 1.1 2.2 1.0 1.1 1.02000 1.9 3.2 2.5 1.5(1) 4.5 1.1 2.0 1.0(1) 1.1(1) 1.0(1)

Note1. Where 2000 figures were unavailable, 1999 figures have been provided (as indicated).

Section Four

288

PERSONNEL STATISTICS

Table 4.4: Distribution of Australian Defence Force, Reserve and CivilianPersonnel by Location of Employment(1)

NSW Vic Qld SA WA Tas NT ACT(2) O/S(3) TotalPermanent Forces(4) (5)

Navy(6) 6,055 1,502 677 61 2313 12 501 1,352 54 12,527Army 4,994 3,179 9,155 553 886 105 3,033 2,223 36 24,164Air Force 4,892 1,576 2,612 1,595 416 9 1128 1,702 134 14,064Sub Total 15,941 6,257 12,444 2,209 3,615 126 4,662 5,277 224 50,755CiviliansSub Total 3,260 3,611 1,212 1,819 425 124 285 5,474 85 16,295Total 19,201 9,868 13,656 4,028 4,040 250 4,947 10,751 309 67,050Reserves(7)

Navy 432 95 102 44 155 53 16 324 1 1,222Army 4,979 3,253 4,625 1,533 1,754 783 596 338 42 17,903Air Force 483 326 618 245 156 0 86 307 0 2,221Sub Total 5,894 3,674 5,345 1,822 2,065 836 698 969 43 21,346Grand Total 25,095 13,542 19,001 5,850 6,105 1,086 5,645 11,720 352 88,396

Notes1. Figures in this table show actual staff numbers as at 30 June 2000 and are not the average funded

strengths.2. ACT includes personnel located at Jervis Bay, HMAS Harman, RAAF Fairbairn and other Defence

units within the legally defined boundaries of the Australian Capital Territory.3. Permanent Forces and Reserves overseas figures represent personnel posted for long-term duty.

Personnel on short-term duty overseas are included against the state or territory in which they arenormally employed.

4. Permanent Forces figures include all paid and unpaid members.5. Personnel are shown in the location they are administered from.6. Personnel serving in ships are included against the state or territory in which the ship is home-ported.7. Figures are Reserves with training obligations.

Personnel Statistics

289

Table 4.5: Distribution of Civilian Personnel by Classification Group andLocation of Employment, as at 30 June 2000(1)

OccupationalGroup(2)

NSW Vic Qld SA WA Tas NT ACT O/S(3) Total

Secretary 0 0 0 0 0 0 0 1 0 1SES, COD 0 6 0 9 0 0 0 87 4 106SO and SITO 114 130 17 43 7 1 4 1,097 28 1,441ASO, ITO andEquivalents 1,579 1,822 641 472 221 47 183 3,246 4 8,215Trade/Physical 682 305 380 69 108 64 68 61 0 1,737Professional 285 719 54 869 33 11 15 579 46 2,611Technical 596 625 118 357 56 1 15 350 3 2,121Miscellaneous 4 4 2 0 0 0 0 53 0 63Total 3,260 3,611 1,212 1,819 425 124 285 5,473 85 16,295

Notes1. Figures in this table show actual staff numbers as at 30 June 2000, not average funded strengths.2. Senior Executive Service (SES); Chief of Division (COD); Senior Officer (SO); Senior Information

Technology Officer (SITO); Administrative Service Officer (ASO); Information Technology Officer(ITO).

3. Overseas figures represent personnel posted for long-term and short-term duty.

Table 4.6: Australian Defence Force – Enlistments 1998-99 and1999-2000(1)(2)(3)

Navy Army Air Force ADFMen Women Men Women Men Women Men Women

1998-1999Trained ForceOfficers 39 7 34 12 (4) (4) 73 19Other Ranks 70 9 361 43 (4) (4) 431 52Training ForceOfficers 96 32 236 64 161 24 493 120Other Ranks 628 149 1,133 116 399 92 2,160 357Total 833 197 1,764 235 560 116 3,157 5481999-2000Trained ForceOfficers 40 1 53 21 (4) (4) 93 22Other Ranks 80 11 641 95 (4) (4) 721 106Training ForceOfficers 72 25 174 49 135 28 381 102Other Ranks 564 163 1,780 137 708 170 3,052 470Total 756 200 2,648 302 843 198 4,247 700

Notes1. Figures in this table show actual staff.2. Enlistments exclude Reserves commencing periods of full-time duty.3. Figures include inter and intra-Service transfers processed by the Service Offices and, therefore, do not

correlate with the recruiting activity shown in Table 4.7.4. All Air Force recruits are enlisted into the Training Force.

Section Four

290

Table 4.7: Australian Defence Force – Permanent Recruiting Activity1998-99 and 1999-2000

Navy Army Air Force ADF1998-1999Total Inquiries 16,314 27,502 23,973 67,789Formal Applications 4,058 6,951 5,183 16,192Applicants Enlisted 863 1,573 651 3,0871999-2000Total Inquiries 19,116 45,754 35,031 108,126(1)

Formal Applications 3,987 9,145 7,204 20,336Applicants Enlisted 846 2,189 1,008 4,043

Note1. This figure includes 8,225 tri-Service inquiries that relate to inquirers who were undecided upon which

Service they wished to pursue full-time.

Table 4.8: Australian Defence Force – General Reserve/Air Force ActiveReserve Enlistments 1998-99 and 1999-2000

Navy Army Air Force ADF1998-1999 30 2,162 82 2,2741999-2000 29 1,566 104 1,699

Table 4.9: Australian Defence Force – Separations 1998-99 and1999-2000(1)(2)

Voluntary Involuntary(3) AgeRetirement

Cadets andTrainees

Total

1998-1999Navy Officers 250 8 2 81 341

Other Ranks 1,128 143 1 110 1,382Army Officers 411 10 23 95 539

Other Ranks 1,880 543 7 157 2,587Air Force Officers 316 10 13 47 386

Other Ranks 1,253 94 29 34 1,410ADF Officers 977 28 38 223 1,266

Other Ranks 4,261 780 37 301 5,3791999-2000Navy Officers 199 13 1 61 274

Other Ranks 1,113 211 0 112 1,436Army Officers 416 28 25 108 577

Other Ranks 1,783 547 35 192 2,557Air Force Officers 299 16 19 57 391

Other Ranks 1,073 63 26 70 1,232ADF Officers 914 57 45 226 1,242

Other Ranks 3,969 821 61 374 5,225Notes1. Figures in this table show actual staff.2. Non-effective personnel (ie personnel on maternity leave and leave without pay) and Reserves

completing periods of full-time duty are not included.3. Involuntary primarily comprises personnel medically unfit or unsuitable for further training.

Personnel Statistics

291

Table 4.10: Civilian Personnel as at 30 June 2000(1)(2)

Category Full-Time Part-Time Casual TotalPermanent Male 10,539 36 5 10,580

Female 4,681 207 15 4,903Temporary Male 436 8 23 467

Female 301 19 25 345Total Male 10,975 44 28 11,047

Female 4,982 226 40 5,248Total Civilian Personnel 15,957 270 68 16,295

Notes1. Figures in this table show actual staff numbers.2. Figures exclude locally-engaged civilians overseas.

Table 4.11: Senior Executive Staff as at 30 June 2000(1)(2)(3)

Total SES 1999-2000 Gains 1999-2000 LossesMen Women Total Men Women Total Men Women Total

Senior Executive Band 1 55 9 64 6 1 7 2 0 2Senior Executive Band 2 20 2 22 2 1 3 1 1 2Senior Executive Band 3 5 0 5 1 0 1 2 0 2Chief of Division Grade 2 12 0 12 3 0 3 3 0 3Chief of Division Grade 3 3 0 3 0 0 0 0 0 0Total 95 11 106 12 2 14 8 1 9

Notes1. Figures in this table show actual staff numbers.2. Numbers reflect officers at their substantive level and officers on higher duties pending permanent

filling action.3. Gains and losses do not reflect movements of officers between levels in each of the Senior Executive

Service and Chief of Division streams.

Section Four

292

Table 4.12: Permanent Service and Civilian Personnel by EmploymentCategory and Gender(1)

As at 30 June 1999 As at 30 June 2000Men % Women % Men % Women %

NavyTrained ForceOfficers 1,935 14.4 333 2.5 1,853 14.8 326 2.6Other Ranks 8,247 61.5 1,334 10.0 7,891 63.0 1,216 9.7Training ForceOfficers 473 3.5 180 1.3 384 3.0 153 1.2Other Ranks 770 5.7 127 0.9 567 4.6 137 1.1Total 11,425 85.3 1,974 14.7 10,695 85.4 1,832 14.6ArmyTrained ForceOfficers 3,841 16.1 543 2.3 3,838 15.9 566 2.3Other Ranks 15,976 66.8 1,826 7.6 15,874 65.7 1,741 7.2Training ForceOfficers 560 2.3 175 0.7 521 2.1 137 0.6Other Ranks 893 3.7 92 0.4 1,377 5.7 110 0.5Total 21,270 89.0 2,636 11.0 21,610 89.4 2,554 10.6Air ForceTrained ForceOfficers 3,068 20.9 506 3.4 2,936 20.9 485 3.4Other Ranks 8,618 58.6 1,656 11.3 7,999 56.9 1,510 10.7Training ForceOfficer 469 3.2 72 0.5 397 2.8 63 0.5Other Ranks 284 1.9 41 0.3 611 4.3 63 0.5Total 12,439 84.5 2,275 15.5 11,943 84.9 2,121 15.1Total ADFTrained ForceOfficers 8,844 17.0 1,382 2.7 8,627 17.0 1,377 2.7Other Ranks 32,841 63.1 4,816 9.3 31,764 62.6 4,467 8.8Training ForceOfficers 1,502 2.9 427 0.8 1,302 2.6 353 0.7Other Ranks 1,947 3.7 260 0.5 2,555 5.0 310 0.6Total 45,134 86.8 6,885 13.2 44,248 87.2 6,507 12.8Civilians(2)

Secretary 1 0 1 0SES 82 0.5 10 0.1 95 0.6 11 0.1Other Staff 11,414 66.4 5,684 33.0 10,951 67.2 5,237 32.1Total 11,497 66.9 5,694 33.1 11,047 67.8 5,248 32.2Reserves(3)

Navy 1,018 4.1 199 0.8 1,014 4.8 208 1.0Army 18,187 73.2 3,772 15.2 14,774 69.2 3,129 14.6Air Force 1,359 5.5 313 1.2 1,822 8.5 399 1.9Total 20,564 82.8 4,284 17.2 17,610 82.5 3,736 17.5

Notes1. Figures in this table are actual staff numbers at 30 June 1999 and 2000.2. Figures exclude locally-engaged civilians overseas.3. Figures are Reserves with training obligations.

Occupational Health and Safety

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OCCUPATIONAL HEALTH AND SAFETY

POLICY STATEMENT

The Secretary and the Chief of the Defence Force co-signed Defence’s occupationalhealth and safety policy statement in May 2000. The policy statement is the keydocument that establishes the foundation upon which the structures and systems forsafety can be built in the organisation.

The policy statement recognises that risk is an inherent part of Defence activities whichmust be appropriately controlled, and that the systems and procedures developed andimplemented in peacetime should assist to maximise capability in an operationalenvironment.

The Defence Safety Management Agency is identified in the policy statement as havingthe primary responsibility for safety policy and the provision of services and expertadvice for the organisation.

DEFENCE SAFETY MANAGEMENT AGENCY

The Secretary launched the agency in July 1999, identifying its role in leading andcoordinating Defence’s efforts to prevent or reduce the incidence and severity ofoccupational injury and disease. The Defence Safety Management Agency recognisesthat safety is about people, Defence’s greatest strength.

Since its launch, the agency has developed and provided the following services for thebenefit of Defence:

• Advice and policy on the Occupational Health and Safety (Commonwealth Employment)Act 1991 and regulations under the Act.

• A deployable safety capability.

• A 24-hour telephone help-line for expert advice, which has received over 1,400calls since its inception in August 1999.

• A comprehensive suite of on-line safety services and tools available through theDefence intranet and part of the Defcare computer system.

• Development, coordination and provision of specialist radiation safety training.

• Promulgation of information and promotion of awareness of safety issues.

• Provision of expert, on-site consultancy services, assisting in the conduct ofinvestigations and audits and other safety-related matters.

• Management and development of a motor vehicle accident database and itsintegration into the Defcare computer system.

• Management of the asbestos exposure evaluation scheme.

• Management of the Defence highway rest stop program.

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Operational Safety Team in East Timor

At the invitation of the Commander Interfet, then Major General Cosgrove, theDefence Safety Management Agency deployed an operational safety team to EastTimor in November 1999. This was the first time a team of professional safety advisershad deployed with an Australian force. From a wide range of safety-related issuesencountered, road safety and exposure to asbestos had the greatest potential toadversely affect the safety and capability of the deployed force.

The operational safety team identified and catalogued the extent of asbestoscontamination of the buildings occupied by Interfet and instituted risk minimisationstrategies. Generally, the overall level of risk to personnel was low, because theexposures were not heavy or of a lengthy duration.

On return to Australia in March 2000, the team developed a brochure, Asbestos in EastTimor, and arranged distribution to all Australian units likely to have been affected. Thebrochure gave information about the risks, exposure levels, health effects, healthcounselling and reporting of possible asbestos exposures.

In response to the potential road safety hazards, the team produced a further brochure,Driving in East Timor, for distribution to Australian drivers in East Timor and troops atpre-deployment. Accompanying this brochure was a waterproof and rip-proof accidentcard, detailing steps to be taken in the event of an accident and providing relevantEnglish/Tetum phrases.

Web Services and Tools

The Defence Safety Management Agency web services component of the Defcarecomputer system was released for use through the Defence intranet in July 1999. Theagency visited numerous Defence locations from July to September 1999 promotingawareness of the web site, but planned training of its web tools and services waspostponed as a consequence of the East Timor deployment. Comprehensive trainingcommenced in June 2000.

The DSMA web services was nominated for and won two external awards:

• the Systems Award at the 1999 ACT Occupational Health and Safety CouncilPrevention Awards; and

• a Gold Award at the Government Technology Productivity Awards in March 2000.The system is available through the Defence intranet with features including:• an electronic risk score calculator and database which assesses and calculates the

risk outcomes and cost justification for activities;

• a statistical reporting system which allows users to generate reports on a wide rangeof scenarios down to unit level;

• a comprehensive workplace safety management module containing workplaceinspection checklists, a hazard management system and a systems audit tool;

• a health and safety reference library containing on-line legislation, codes of practice,Defence safety manuals and policies;

• electronic links to various related safety organisations and information sources;

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• Chemwatch – a chemical management system which provides rapid access tomaterial safety data sheets, unit manifests and emergency information;

• an on-line discussion facility which provides Defence employees with the ability toraise questions and share views and experiences on safety issues;

• a bulletin board which provides advice on new safety issues. Eleven safety bulletinswere published during 1999-2000; and

• a hazard alert system which is used to post safety hazards in a timely manner.Seven hazard alerts were published in 1999-2000.

Australian Radiation Protection and Nuclear Safety Agency

Defence submitted licence applications to the Australian Radiation Protection andNuclear Safety Agency in respect of Defence radiation holdings and facilities regulatedby the Australian Radiation Protection and Nuclear Safety Act 1998. The Defence SafetyManagement Agency coordinates Defence’s compliance with the Australian RadiationProtection and Nuclear Safety Agency legislation and has worked with Groups todevelop an inventory of radiation holdings and assess the need for facilities licences.Defence paid the Australian Radiation Protection and Nuclear Safety Agency a licencefee of $600,000 in 1999-2000.

Australian Services Cadet Scheme

In November 1999, the Minister of Employment, Workplace Relations and SmallBusiness declared that members of the Air Training Corps, the Australian Cadet Corpsand the Naval Reserve Cadets were employees of the Commonwealth for the purposesof the Occupational Health and Safety (Commonwealth Employment) Act 1991. The Minister’sdeclaration, gazetted on 15 December 1999, imposed a clear ‘duty of care’ obligation onthe Department of Defence for all members of the Australian Services Cadet Scheme.

In response, the Defence Safety Management Agency has worked with the Services todevelop a cadet safety program for members of the scheme. The program incorporatesa review of the safety and risk management elements of cadet scheme training, theestablishment of safety committees, clarification of notification and reporting systems,safety audits of cadet facilities and a safety awareness program.

Asbestos Exposure Evaluation Scheme

The Defence Safety Management Agency, in conjunction with Health ServicesAustralia, conducts a free service for the assessment, counselling and testing ofemployees and former employees of Defence and former members of the ADF whomay have been exposed to asbestos at any time during their employment with Defence.During 1999-2000, 228 services were provided by Health Services Australia to personswho accessed the scheme, at a cost of $70,082.

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Notification and Reporting of Incidents

In accordance with the Occupational Health and Safety (Commonwealth Employment) Act1991, Defence is required to notify Comcare, within specified times, of specificaccidents and incidents. In 1999-2000, the Defence Safety Management Agencyreceived 8,729 incident reports and was required to report to Comcare 237 dangerousoccurrences, 453 incidents resulting in incapacity and 1,665 incidents resulting inserious personal injury.

Considerable work has been undertaken to improve the incident reporting system witha new report form and associated policy developed for release in 2000-01.

Investigation conducted during reporting period by ComcareDuring 1999-2000, Comcare conducted 20 planned investigations of the safety systemswithin Defence units or establishments. Among these was a ‘whole of agency’ reviewof the Navy which involved an audit of ten sites and a comprehensive report.Additionally, Comcare conducted 53 reactive investigations following reportedincidents.

Notices Issued by Comcare InvestigatorsIn 1999-2000, six provisional improvement notices were issued by health and safetyrepresentatives. There were two prohibition notices issued by Comcare investigatorswith direction to ‘remove an immediate threat’ to Defence employees. All issues raisedby the notices were resolved.

Environmental Performance

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ECOLOGICALLY SUSTAINABLEDEVELOPMENT AND ENVIRONMENTAL

PERFORMANCEThe following report is submitted in accordance with the principles outlined in section516(a) of the Environment Protection and Biodiversity Conservation Act 1999. Defence hasadopted the principles of ecologically sustainable development provided for in the Act.The initiatives detailed below indicate how Defence implemented the principles withinthe organisation during 1999-2000.

Providing an overall framework for environmental performance

Implementation of the Defence environmental management system, which aligns withISO 14001 series standards, continued. Work in 1999-2000 included furtherdevelopment of the comprehensive information management system, the formulationof the Defence environment and heritage strategic plan, production of the Defenceenvironmental management system guidance manual, the formulation of a draftenvironmental incident reporting plan and regular meetings of the Defenceenvironment and energy forum and the Defence environment and energy workinggroup.

Linking the principles of ecologically sustainable development with corebusiness

Examples in 1999-2000 included linkages with construction and disposals projects andthe management of training areas (whether leased, owned or occupied by Defence).Defence considered ecological sustainability to be a key element when planningExercise Crocodile 99.

Taking appropriate action to maintain and improve the quality of theenvironmental setting

Actions in this area included the implementation of an accelerated environmentalmanagement program for Defence sites, investment in research projects, such asresearch on the effects of underwater demolition training activities on dugongs, andcommitment to consultative arrangements with key stakeholders.

Complying with all applicable legislation

During the year, applicable Defence activities were assessed under the EnvironmentProtection (Impact of Proposals) Act 1974, and the Australian Heritage Commission Act 1975,and property disposal activities were proceeded with having regard to relevant statelaws.

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FREEDOM OF INFORMATIONSection 8 of the Freedom of Information Act 1982 (the FOI Act) requires eachCommonwealth agency to publish information about the way it is organised, itsfunctions, the decision-making and other powers it has that affect the public,arrangements for public participation in the work of the agency, and the categories ofdocuments that are held by the agency and how these can be accessed by the public.

Information about the structure of the Defence organisation can be found in theCorporate Governance segment in Section One of this report. The remainder of theinformation required to be published in the annual report is set out below.

In addition to the procedures of the FOI Act, other less formal avenues exist foraccessing information from Defence. Examples of information available are underCategories of Documents Maintained later in this section, while access details withinDefence are at the end of the section. Contact points for inquiries are located in allstates and territories.

FREEDOM OF INFORMATION PROCEDURES AND CONTACT POINTS

A request for access to documents under the FOI Act must be made in writing andprovide such information concerning the documents as is reasonably necessary toenable a responsible officer of the Department of Defence to identify them. Therequest must be accompanied by a $30 application fee (unless the fee is not required orit has been remitted by the department) and should include a telephone number and areturn address by which the applicant can be contacted. Requests may be sent by postor delivered to an officer of the department at the address of the central office (inCanberra – see below) or any regional office of the department specified in a currenttelephone directory. The following address is preferable:

Freedom of Information DirectorateDefence Legal Office – Canberra(R8-1-013)Department of DefenceCANBERRA ACT 2600

Advice about making a request under the FOI Act may be obtained by telephoning theFOI Directorate on (02) 6265 3683 or (02) 6265 1305 or by facsimile on (02) 62651270. Applicants seeking access to documents may be liable to pay charges at ratesprescribed by the Freedom of Information (Fees and Charges) Regulations.

AUTHORISED FREEDOM OF INFORMATION DECISION MAKERS

The authority to disclose documents or to refuse requests for access to documents isheld widely throughout the Department and the ADF at director level (Executive Level2 and Colonel or equivalent rank) and above.

Authority to make decisions of other kinds under the freedom of informationlegislation, eg the power to impose charges on applicants, has also been granted toappropriate officers. Details can be obtained from the FOI Directorate (see above).

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DECISION-MAKING AND OTHER POWERS AFFECTING MEMBERS OF THEPUBLIC

Reference may be made to the fold-out organisation chart found at the end of thisreport when reading this section. It should be noted that many powers invested in thespecific positions described in this section many be delegated formally to subordinateofficers.

Chief of Navy

May declare, by notice in the Commonwealth of Australia Gazette, an area in or adjacent toAustralia to be a firing area; may make orders and give instructions in relation tocanteens and clubs for members of the Navy; and may grant to a person a licence totrade in a naval establishment.

Maritime Commander Australia

May make decisions relating to public access to naval ships and military (Navy) areas;may provide assistance to civilian authorities in disaster relief or rescue situations; maymake public comment in relation to visiting naval forces or ships; convenes courtsmartial which may involve the summoning of civilian witnesses; and provides Defenceassistance to the civil community when not managed by the commanding officer of thearea.

Commander Australian Navy Systems Command

May make decisions relating to public access to naval establishments and military(Navy) areas; may provide assistance to civilian authorities in disaster relief or rescuesituations; may make public comment in relation to visiting naval forces or ships;convenes courts martial which may involve the summoning of civilian witnesses; andprovides Defence assistance to the civil community when not managed by thecommanding officer of the area.

Director General Navy Personnel and Training may authorise the release of serving andformer members’ military history.

Chief of Army

May prescribe conditions for entry to the Army; place the names of officers and formerofficers on the Retired List, grant them military title and authorise the wearing ofuniforms and insignia by such persons; determine who shall be employed, reside or stayin any military establishment; approve the possession, sale, supply and consumption ofintoxicating liquor at a gathering of members of the Army and their guests; and orderthe sale or destruction of unclaimed property held in ADF establishments or stores.

Land Commander Australia

May make decisions relating to public access to military (Army) areas; selects private,state or Commonwealth property for training exercises; provides Defence assistance tothe civil community as directed by the Commander Australian Theatre or DefenceHeadquarters; may release Army personnel information; may approve local hire or leaseof Army property; and may impose constraints on Army personnel which impinge onpublic enterprise.

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Commander Training Command

May authorise the provision of Defence assistance to the civil community by any of theschools, colleges or training establishments and release information from the records ofany member and ex-member who has undergone training by the Command.

Chief of Air Force

Has the power to determine the conditions for the appointment of officers and airmento the Royal Australian Air Force.

Air Commander Australia

Provides Defence assistance to the civil community and may summon civilian witnessesto attend Air Force courts martial.

Defence Personnel Executive

Defence Personnel Executive develops ADF and civilian personnel policies andpractices and provides personnel support services, including accountability for agreedobjectives and enabling services. Defence Personnel Executive also conducts ADFrecruiting and provides ADF health services.

The Executive provides support to the Head, Defence Personnel Executive and policyanalysis and advice relating to military superannuation and compensation, occupationalhealth and safety and complaints resolution services..

The personnel policy area develops personnel management policies and industrialrelations policies for all Defence personnel. It also recruits members for the Services(both Regular and Reserve) while providing a framework for the management anddevelopment of personnel to meet current and future requirements and staffing inaccordance with Defence priorities and requirements of the Secretary and the ServiceChiefs. Powers that may affect members of the public include delegations held by theDirectorate of Psychology to allow the release of information from individualpsychological records.

The personnel management area provides the framework for the administration ofpersonnel, including pay and personnel systems, Service career management includingpostings and promotions, and family support services. The Director General CareerManagement (Army) and Director General Career Management (Air Force) mayauthorise the release of serving and former members’ military history. Delegations areheld by supervising staff in pay areas for write-off of irrecoverable revenue, debts andoverpayments or amounts uneconomical to recover; and may allow an amount payableto the Commonwealth to be paid in instalments.

The Defence Health Service formulates policy and strategies and provides an integratedhealth service for the ADF. The Director-General Defence Health Service mayauthorise the release of serving and former members’ medical and dental records.

Under Secretary Defence Materiel

Has the authority to determine method of procurement and approve contracts formajor capital equipment.

Heads of Maritime, Land, Aerospace and Electronic Systems

Have the authority to issue invitations to register interest and requests for tender, toevaluate tenders and to recommend source selection for major capital equipment. In


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specific cases, have the authority to determine the method of procurement and approvemajor capital equipment contracts.

Head Industry and Infrastructure

Has the authority to issue approvals to export certain defence equipment and goodswith dual civil and military applications; to accept tenders and quotationrecommendations for the purchase of supplies and services; and, on behalf of Defence,to accredit suppliers’ quality systems.

Commander Joint Logistics

Has authority to issue invitations to register interest and requests for tender, to evaluatetenders and recommend source selection for minor capital equipment; authority toapprove Defence assistance to the civil community; and may summon civilian witnessesto attend disciplinary tribunals.

Head Defence Estate

Has the authority to determine the method of procurement, issue invitations to registerinterest and requests for tender, evaluate tenders, recommend source selection andapprove contracts for capital facilities, property transactions, facilities operations andthe purchase of services.

Head Defence Corporate Support

Has the authority to provide Defence assistance to the civil community; control publicaccess to military areas; approve the loan, hire or purchase of Defence stores andequipment and, in defined cases, determine the method of procurement; issueinvitations to register interest and requests for tender; evaluate tenders and recommendor approve sourcing; issue period contracts; and grant remission of fees and imposecharges payable under the freedom of information legislation.

In accordance with an arrangement made between the Department of Defence and theNational Archives of Australia pursuant to section 35 of the Archives Act 1983, theDirector Classified Archival Records Review provides advice to the Director-GeneralNational Archives of Australia specifying which matter, if any, contained in classifiedDefence archival records is considered to be exempt under sections 33(a) and (b) of theAct. Such advice is generated in the course of the Department's continuing program ofclearing classified archival records for public release or in response to requests frommembers of the public for access to such records (pursuant to section 35 or 40,respectively, of the Act).

First Assistant Secretary Resources and Financial Programs

Determines the rates of charge for the use of departmental stores and services;determines, in association with the Department of Finance and Administration, thecosts to be recovered in respect of Defence assistance to the civil community; acceptsthe insurable risk in respect of ADF activities and stores on loan to the Department ofDefence; may write-off irrecoverable revenue, debts and overpayments or amountsuneconomical to recover; and may allow an amount payable to the Commonwealth tobe paid in instalments.

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ARRANGEMENTS FOR OUTSIDE PARTICIPATION

Australian Defence Medical Ethics Committee

This committee’s mission is to promote and encourage health research in the militarycontext, with responsibility for the review and monitoring of all human research inDefence. The committee is structured in accordance with the National Health MedicalResearch Council national statement on ethical conduct in research involving humansand comprises the following:

• A chairperson.

• At least one member who is a lay man and one member who is a lay woman, whohave no affiliation with Defence, are not currently involved in medical scientific orlegal work and who are preferably from the community in which the organisation islocated.

• At least one member with knowledge of, and current experience in, the areas ofresearch that are regularly considered by the committee.

• At least one member with knowledge of, and current experience in, theprofessional care, counselling or treatment of people.

• At least one member who is a minister of religion, or a person who performs asimilar role in a community such as an Aboriginal elder.

• At least one member who is a lawyer.

Citizens in Support of Reserve Forces (Trust) Fund

The group was established through a trust deed approved by the Minister. In recenttimes, the work of the trust has been almost exclusively to provide financial support forthe Prince of Wales Award. There are four external trustees.

Defence Health Consultative Group

The role of the group is to establish, at senior level, formal liaison between Defenceand appropriate civilian authorities and to provide advice on major professional healthmatters having relevance to Defence. The group comprises the Surgeon General ADF,Director General Defence Health Service and representatives from other departmentsand professional bodies, including the Australian medical and dental associations andthe Royal College of Nursing Australia.

Defence Reserves Support Council

The committee aims to promote the benefits of reserve service to the community. Aswell as spreading the word informally about reserve service, the committee sponsors anumber of specific activities to encourage business support.

Joint Consultative Committee

The committee was established under the Department of Defence (Commonwealth ofAustralia) West Malaysia Employees Agreement 1970 to negotiate and discuss mattersrelating to rates of pay and conditions of employment for locally-engaged civiliansworking at RAAF Support Unit, Butterworth. Involves representatives of departmentalemployees who may be union representatives.


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National Consultative Group of Service Families

The group was established in 1987 with the purpose of improving the quality of life forService families by providing them with a forum for expressing their views, forreporting and making recommendations to the Chief of the Defence Force and forinfluencing policy that affects them.

National Workplace Relations Committee

The committee was established under the Defence Employees Certified Agreement 2000-01 todeal with a wide range of employment matters affecting Defence civilian employees.Involves representatives of departmental employees who may be union representatives.

Shoalwater Bay Training Area Environmental Advisory Committee

The committee provides advice on environmental matters relating to the ShoalwaterBay Training Area and includes representatives from the Department of Defence andlocal community and business organisations.

Woomera Consultative Committee

The committee advises the Department of Defence on matters relating to themanagement of Woomera and includes representatives from the department, theUnited States Air Force and the Woomera Board, which comprises appointed andelected residents of Woomera.

CATEGORIES OF DOCUMENTS MAINTAINED

Documents Available as Part of a Public Register and Subject to a Fee or Other Charge

• Oceanographic data (copies of original survey documents, and hydrographic andoceanographic data held by the Navy on computer file).

Documents Available for Purchase by the Public

• Aeronautical information (annual flying safety calendar); aeronautical maps andcharts; supplements and planning documents; aerial photographs.

• Defence cataloguing handbooks and information.

• Defence annual report, the Defence portfolio budget and additional estimatesstatements (on sale through the Australian Government Information Shops).

• Draft and final environmental impact statements (held by Defence Estate).

• Commercial Support Program Manual.

• Journals and magazines published by Service colleges and schools.

• Procurement manuals and guidelines produced by the Defence MaterielOrganisation (available for purchase in hard copy or free through the DefenceMateriel Organisation website: http://www.dao.defence.gov.au.

• Service newspapers (both the Navy and Air Force newspapers may be boughtindividually or by annual subscription and the Army newspaper by annualsubscription).

• Tide tables (Australian national tide tables and navigational charts and publicationsare available for purchase either through appointed chart agents or direct from theHydrographic Office in Wollongong by mail order).

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Documents Free of Charge to the Public upon Request

Defence holds a wide range of such material including, for instance, information on orin the nature of:

• academic calendars and prospectuses (for the Service colleges);

• the Defence Force Journal;

• information about the Defence Force Retirement and Death Benefits Scheme andthe Military Superannuation and Benefits Scheme;

• Defence Science and Technology Organisation information and activitiesbrochures and booklets, research news and industry brief newsletters, selectedtechnical reports, technical and research press releases, videos on projects andlectures given to professional and public institutions;

• flying and ground safety (the Air Force makes magazines on these subjects availableto some professional organisations);

• a range of pamphlets and booklets, produced by Emergency Management Australiafor distribution through state and territory emergency services, on natural and man-made disasters and civil defence as well as training manuals, films and cassettes.Both Emergency Management Australia's headquarters and the AustralianEmergency Management Institute maintain film and cassette libraries for use byschools and colleges. Particulars of courses, notes for trainers, course handoutsand proceedings of seminars are also available from the institute;

• notices to mariners (the Navy issues such notices, which contain hydrographicadvice to correct navigational charts and documents and detailed information ofexercises and firings);

• a range of booklets and brochures from the Defence Community Organisation;

• recruitment pamphlets, brochures and video media, the ‘career explorer’ computersoftware program on ADF career options, and an internet home page on ADFcareer options;

• organisational material (functional statements, organisation charts and dutystatements);

• procurement policy and procedural guides, contract templates and Defenceindustry statements;

• public relations material;

• transcripts of public seminars conducted by the department;

• speeches by the Ministers and the Parliamentary Secretary;

• technical material (including technical details of obsolete and selected currentequipment; unclassified technical reports and Defence (Australia) Standards).

• personnel documentation and records including medical and psychological records;and

• pamphlets and brochures on graduate programs in Defence for civilians and thecivilian graduate careers page on the internet.


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Other Documents

The department maintains records in various forms and locations relating to thefunctions of the Defence organisation. Records are retained for varying periods,depending on their administrative and historical value and are disposed of inaccordance with standards and practices approved by the National Archives ofAustralia. Some particular categories of documents held are:

• arrangements with other Commonwealth agencies and with state and territorygovernments and agencies;

• accounting records;

• Cabinet documents (including submissions and promulgation of decisions);

• committee records;

• conditions of service (including documents relating to compensation other than forpersonal injury and financial conditions relating to overseas service);

• contractual documents, requests for tender documents and industry study reports;

• departmental instructions, circulars and reference books;

• industrial matters (including agenda and minutes of meetings of various industrialcommittees and councils, occupational health and safety committees and policy onindustrial practices within the Department of Defence);

• guidelines held in electronic form by the Directorate of Classified Archival RecordsReview that are used in determining which matter, if any, contained in classifiedDefence archival records is exempt under sections 33(1)(a) and (b) of theArchives Act 1983 from public access. New guidelines are created, or existing onesrevised or abolished, progressively as the need arises;

• intelligence reports;

• international agreements and arrangements held in a register of agreements;

• personal documentation (for example, recruitment and enlistment, selection forpromotion documents and those of a medical and psychological nature);

• personnel documentation and records, including medical records;

• press cuttings;

• documents concerning quality assurance;

• technical publications (relating to maintenance of ADF materiel, and drawings,specifications and standards relating to ships, aircraft and other equipment in use);and

• working papers (internal working papers are maintained throughout theorganisation on a wide range of policy, technical and administrative subjects).

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FACILITIES FOR ACCESSING DOCUMENTS

The following areas within Defence maintain access points at which information abouttheir activities is available:

Australian Emergency Management InstituteThe DirectorAustralian Emergency Management InstituteMACEDON VIC 3440Tel: (Information Officer) (03) 5421 5234Emergency Management AustraliaManager, International Decade for Natural Disaster ReductionEmergency Management AustraliaPO Box 1020DICKSON ACT 2602Tel: (02) 6266 5408Defence Science and Technology OrganisationManager, Defence Science CommunicationsDefence Science and Technology OrganisationDepartment of DefenceCANBERRA ACT 2600Tel: (02) 6265 7914Public Affairs and Corporate Communications DivisionDirector General Communication and Public AffairsDepartment of DefenceCANBERRA ACT 2600Tel: (02) 6265 2999Defence PublishingDirector, Defence Publishing ServiceDepartment of DefenceCANBERRA ACT 2600Tel: (02) 6266 2056

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ADVERTISING AND MARKET RESEARCH

TOTAL ADVERTISING AND MARKET EXPENDITURE

Table 4.13: Total Advertising and Market Research Expenditure byGroup – 1999-2000Groups Expenditure in 1999-2000

$Defence Headquarters 22,917Navy 49,874Army 48,836Air Force 22,695Intelligence 315,294Support Command 242,843Defence Personnel Executive 32,784,744Acquisition 259,881Science and Technology 530,393Defence Estate 80,220Defence Information Systems 59,175Defence Corporate Support 312,564Total 34,729,436

BREAKDOWN OF ADVERTISING AND MARKET EXPENDITURE

The following table provides detail on advertising services utilised by Defence Groupsduring 1999-2000 that were in excess of $1,500. Individual amounts for like purposeshave been aggregated and where total payments to specific agencies exceed $1,500,these amounts are also shown below.

Table 4.14: Breakdown of Advertising and Market Research Expenditureby Group – 1999-2000

Payee Amount PurposeDefence HeadquartersMedia Advertising OrganisationsAIS Media $17,393 Recruitment – CivilianArmy News $1,750 Recruitment – CivilianNavy News $2,200 Recruitment – CivilianNavyMedia Advertising OrganisationsAIS Elliott Matthews $1,913 Recruitment – NavyAIS Media $42,782 Recruitment – NavyGreater Cairns Radio $2,600 Public relationsArmyMedia Advertising OrganisationsAIS Media $5,464 Chief of Army conferenceAIS Media $4,061 Army History Grant SchemeArmy News $3,498 Advertisement – Training Command Army

Promotion Advertisement

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Payee Amount PurposeArmy News $1,500 Commando Basic Training Course

AdvertisementMessenger Press $1,752 Recruitment – ArmyOutdoor Plus $12,620 Recruitment – ArmyShop-A-Docket $1,734 Recruitment – ArmyTMP Worldwide $2,962 Trooping the Colours Queens Birthday

ParadeTMP Worldwide $6,608 Beating the RetreatAirforceMedia Advertising Organisations3AW Southern Cross Radio $15,850 RAAF MuseumK-Rock $4,000 Air PageantPrintgraphics $2,745 General advertising for RAAF BandIntelligenceMedia Advertising OrganisationsAdvertising Investment Services $42,283 Recruitment – CivilianAIS Media $262,299 Recruitment – CivilianInterim HR Solutions $2,750 Recruitment – CivilianDirect Mail OrganisationsUniversity of Adelaide $2,132 Defence Signals Directorate attendance at

University FairSupport CommandMedia Advertising OrganisationsADCORP Aust Ltd $14,808 Recruitment – CivilianAIS Media $13,215 Request for TendersAIS Media $159,033 Recruitment – CivilianAIS Media $4,484 ConferenceAIS Media $6,181 Expression of InterestAIS Media $2,771 Invitation to RegisterAIS Media $8,181 Standing Offer – foodETMP Pty Ltd $27,915 Recruitment – CivilianAIS Media $1,550 Request for Tenders – Collins class docking

systemDefence Personnel ExecutiveMarket Research OrganisationsAdvertising Development Solutions $183,450 Research for RecruitingNew Focus Pty Ltd $95,431 Research for RecruitingSweeney Research Pty Ltd $30,000 Research for RecruitingMedia Advertising OrganisationsAdvertising Investment Services $53,104 Recruitment – CivilianAIS Media $2,683 Request for Tenders – Training Course for

Cadets and StaffAIS Media $27,055 Services of the Family Information

Network for Defence (FIND)AIS Media $55,287 Recruitment – Health PractitionerAIS Media $130,572 Recruitment – CivilianBOAC $25,818 Recruitment – TAFEBOAC $643,266 Recruitment – Tri-ServiceBOAC $2,299,842 Recruitment – Royal Military CollegeBOAC $2,897,261 Recruitment – Army ReserveBOAC $3,442,847 Recruitment – RAAFBOAC $4,059,058 Recruitment – Navy


309

Payee Amount PurposeBOAC $5,034,835 Recruitment – General EntryBOAC $9,731,391 Recruitment – ADFAFederal Capital Press $1,765 Recruitment – Health PractitionerJohn Fairfax Group $2,663 Recruitment – Health PractitionerMorgan & Banks $17,050 Recruitment – CivilianAdvertising AgenciesAIS Media $228,068 Recruitment – ADFAAIS Media $13,712 Recruitment – NavyAIS Media $179,114 Recruitment – RAAFAIS Media $63,389 Recruitment – Tri-ServiceGrey Advertising $426,145 Recruitment – ADFAGrey Advertising $49,515 Recruitment – Army ReserveGrey Advertising $118,965 Recruitment – General EntryGrey Advertising $111,933 Recruitment – NavyGrey Advertising $1,136,581 Recruitment – RAAFGrey Advertising $98,847 Recruitment – Royal Military CollegeGrey Advertising $27,798 Recruitment – TAFEGrey Advertising $1,558,424 Recruitment – Tri-ServiceSet Form Limited $4,484 Wall calendarTrotman O'Brien $6,750 Recruitment – CivilianUniversity of Wollongong $3,000 Participation in Careers FairsAcquisitionMedia Advertising OrganisationsAIS Media $193,593 Recruitment advertisingAIS Media $39,712 Advertising of ITRs and Defence TendersAIS Media $4,899 Procurement Conference 1999Australian Defence Business $7,350 Defence + Industry 2000 promotionExecutive Media $2,500 Exports and International Programs Branch

to increase profileJaymac Australia $3,880 Promotional items for Regional Briefing

ProgramSupport Command Australia $3,985 Procurement Conference 2000 promotionWatcham Penrose Association $2,350 Recruitment – CivilianScience and TechnologyMedia Advertising OrganisationsAIS Media $448,070 Recruitment – CivilianAPS Gazette $24,603 Recruitment – CivilianAustralian Defence Business $7,400 Colour advertisement in Aust Defence

Business magazineAustralian Industry Group $3,800 Colour advertisement in Oct/Nov 1999

edition of industryExecutive Media Pty Ltd $2,895 Colour advertisement in Australian Defence

Force Reserves YearbookInterim HR Solutions Pty Ltd $314 Recruitment – CivilianITC Publishing $2,950 DSTO as in September and October 1999

issue A4 full colourMirror Australian Telegraph $5,761 Advertisement in the Defence supplementNew Hobsons Press $7,390 Recruitment – CivilianPT. Industri Pesawat Terbang(Indonesia)

$6,241 Advertisements in IPTN Magazine

TMP Worldwide Pty Ltd $5,577 Recruitment – Civilian

Section Four

310

Payee Amount PurposeWPA Career Media $4,400 Colour display advertisement in Focus on

Engineering & Focus on Information 1999WPA

Yaffa Publishing Group $9,240 Advertisement in Aust Defence MagazineDefence EstateMedia Advertising OrganisationsAdvertising Investments $1,502 Notification of burn-off at EnoggeraAdvertising Investments $2,165 Invitation to Register Interest –

Comprehensive maintenance contract,northern region

Advertising Investments $3,532 ITR – Puckapunyal water pump line androad construction at Monegeeta

Advertising Investments $2,640 ITR – Refurbishment of 4 Brigade at SurryHills

Advertising Investments $4,454 Recruitment – CivilianAdvertising Investments $2,087 Request for Tenders – High voltage project

at OakeyAdvertising Investments $2,584 Request for Tenders – Refurbishment of

Hawthorn Training DepotAdvertising Investments $1,786 Request for Tenders – Smoke detection

upgrade for living in accommodationAIS Media $3,267 Expressions of Interest – Development of a

security construction manualAIS Media $1,764 ITR – Comprehensive maintenance

contract, Shoalhaven regionAIS Media $3,225 ITR – Living-in accommodationAIS Media $2,673 ITR – Revaluation of the Defence estateAIS Media $1,825 ITR – for Defence Environmental PanelAIS Media $3,013 ITRs – Comprehensive maintenance

contractsAIS Media $27,696 Recruitment – CivilianAIS Media $1,620 Request for Tenders – Pavement overlay

and airfield lighting works at RAAF Pearceand RAAF Gingin

Mirror Australian Telegraph $3,342 ITR – High range training area drainageworks

Defence Information SystemsMedia Advertising OrganisationsAIS Media $42,696 Recruitment – CivilianAIS Media $4,161 Request for Tenders – Replacement of the

Defence Preferred Systems Integrator Panelarrangements

Employment National $10,500 Recruitment – CivilianWest Australian Newspaper $1,818 Recruitment – CivilianDefence Corporate SupportMedia Advertising OrganisationsAdvertising Investment Services $1,825 Recruitment – CivilianAIS Elliott Mathews $23,418 Public notices for Navy live firing activities.CPM PSMPC $2,979 Gazette NoticesExaminer Newspaper, The $3,756 Public notices – range activityMcIvor Times, The $3,314 Public notices – range activityNorth Queensland Newspapers $4,000 Public notices – range activity


311

Payee Amount PurposeNorthern Services Courier $8,061 Advertising family assistance and welfare

information related to East Timoroperations

Northern Services Courier $3,000 Public notices – range activityPort Stephens Examiner $5,372 Public notices – range activity and night

flying warningsPublic Service and Merit ProtectionCommission

$243,633 Recruitment – Civilian

Telegraph Seymour $1,762 Public notices – range activityALIA net-Incite Newsmagazine $3,300 Recruitment – Civilian

Section Four

312

ANNUAL REPORT ON THE ADMINISTRATIONAND OPERATION OF THE DEFENCE FORCE (HOME

LOANS ASSISTANCE) ACT 1990

Legislation

The Defence Home Owner Scheme is covered by the Defence Force (Home LoansAssistance) Act 1990. Section 39 of the Act requires that an annual report be preparedfor the Minister on the administration and operation of the Act. The annual report isset out below.

Objectives

The objectives of the Defence Home Owner Scheme are:• to attract and retain ADF personnel;• to encourage home ownership during service as a cost effective alternative to rental

assistance; and• to assist in the reintegration of ADF personnel into the community on return to

civilian employment.

Description

Defence Home Owner is a Commonwealth scheme which provides a subsidy on theinterest payable on a home loan for members of the ADF. The scheme is open topermanent force members who enlisted on or after 15 May 1985 and to thosepermanent force members who elected to revoke their entitlement under the DefenceService Homes Scheme in favour of a Defence Home Owner entitlement. Reserve andEmergency Force personnel who provide part-time efficient service are also eligible forassistance.

The Defence Housing Authority administers the scheme for the Department ofDefence. The benefits are provided under an agreement between the NationalAustralia Bank and the Commonwealth. Under the scheme, the Commonwealthassesses eligibility and entitlement and pays monthly interest subsidies on loansprovided by the National Australia Bank. Interest subsidy is paid on loans between$10,000 and $80,000. Spouses who are both members of the ADF can apply for acombined subsidised loan of up to $160,000. The subsidy amount is calculated at 40%of the average monthly interest to be paid over the life of a notional 25-year loan.

Providing a person has a period of entitlement, the subsidised loans can be transferredfrom one home to another during service as often as is required and once within twoyears of the date of separation from the ADF.

Subsidy Entitlement

Generally, the subsidy entitlement period is calculated on the number of completedyears of effective full-time service after completion of a five-year qualifying period. Thequalifying period for Active Reservists is eight continuous years of efficient service.

For members who qualify by length of service, the maximum period for which thesubsidy can be paid is 20 years. For members with operational or warlike service, the

Defence Force (Home Loans Assistance) Act 1990

313

five-year qualifying period is waived and the period for which the subsidy can be paidmay be extended from 20 to a maximum of 25 years.

There are special considerations for rejoining members, widows/widowers of deceasedeligible persons and members discharged as a result of a compensatable disability.

Evaluation Against Objectives

The objectives of the Defence Home Owner Scheme are achieved through:• the provision of a subsidised home loan for a period which is directly related to the

member's length of service with the permanent or reserve forces;• bringing home ownership within the reach of more members; and• the provision of a subsidised loan once within two years of separation from the

ADF.After two years of decline, there has been a surge of activity in the last financial yearwith the number of entitlement certificate applications up 35% on 1998-99. Thesefigures are similar to the levels of 1996-97, when the amount available under thescheme doubled from $40,000 to $80,000.

Attract and Retain Defence Force Personnel: The scheme is one of a number of initiativesdesigned to influence the attraction and retention rate of ADF personnel. However,against a background of personnel reductions as a result of the Force Structure Reviewand the Defence Reform Program, the objective would need to be measured in termsof attraction/retention of the right categories of personnel. This is not quantifiable atthis time.

Encourage First Home Ownership as a Cost Effective Alternative to Rental Assistance: Thisscheme is part of a package of schemes which includes the recently introduced homepurchase assistance scheme and the home sale and purchase allowance. Thecombination of these schemes, together with other Government initiatives, provideADF members with a wider range of choices in meeting their housing requirementsand also bring home ownership within the reach of more members. Of the subsidyapplications received, 75% have been from serving members who must live in thehome to commence the subsidy, thus reducing the need for the Defence organisationto provide rental assistance.

Assist in the Reintegration of ADF Personnel into the Community on Return to CivilianEmployment: Of new subsidy applications, 25% have been from members takingdischarge from the ADF. This significant percentage demonstrates that the scheme ismeeting this objective for those personnel who satisfy the loan criteria.

Operational/Warlike Service Applicants: The surge in activity for this financial year isattributable to the significant number of personnel who have been involved inoperational or warlike deployments, particularly in East Timor. These members havetheir basic qualifying period (five years) waived and are thus able to access the schemeearlier. Of the subsidy applications received, 27% were from members with this type ofservice, the great bulk of those from East Timor.

Processing Activity

During 1999-2000, 3,344 applications for entitlement certificates and loan subsidieswere processed bringing the total number of approved loans to 3,970 as at 30 June2000.

Section Four

314

Performance Evaluation of the Administration of the Scheme

Defence continues to be satisfied with the administration of the scheme by the DefenceHousing Authority. During the reporting period, there were no appeals lodged with theAdministrative Appeals Tribunal against decisions made by the delegate.

The National Australia Bank has met its obligations to the Commonwealth under theAct and has generally provided support to the scheme. The bank and the DefenceHousing Authority have made considerable and continuing efforts to streamline theprocess for obtaining the subsidy.

Table 4.15: Applications for Entitlement Certificates by Type ofAssistance(1)

Activity 1995-96 1996-97 1997-98 1998-99 1999-2000Buy a home 542 1,094 1,157 1,011 709Re-finance a loan 181 800 492 333 322Enlarge a home 2 16 12 12 11Build a home 106 223 250 193 150Renovate a home 16 25 28 26 30

Note1. Prior to 1999-2000, the above figures were taken from the entitlement certificate applications. From

1999-2000, the figures are taken from the subsidy application.

Table 4.16: Comparison of Activities(1)

Activity 1995-96 1996-97 1997-98 1998-99 1999-2000Applications for EntitlementCertificate received 847 2,158 1,938 1,575 2,122Entitlement Certificate issued 765 1,928 1,809 1,474 2,006Applications for EntitlementCertificate declined/withdrawn 93 177 155 106 116Applications for Payment ofSubsidy received 424 1,328 1,415 941 1,222Applications for Payment ofSubsidy approved 417 1,274 1,390 938 1,194Applications for Payment ofSubsidy declined 7 26 17 13 3Amount of Commonwealthsubsidy paid $1,820,066 $2,062,627 $2,970,289 $3,692,631 $4,405,248Number of Subsidy payees as at30 June 1,828 2,280 3,132 3,519 3,970

Note1. Entitlement Certificates are valid for one year.

Operational Costs – 1999-2000

An annual management fee of $395,850.50 was paid to the Defence Housing Authorityby the Department of Defence. The authority was also paid a fee in respect of eachapplication for entitlement certificate lodged. These fees totalled $127,097.90.

The total cost of the scheme is $4,928,196.85.

INDEX

Index

316

GLOSSARY

Appropriation: is an authorisation by Parliament to spend moneys from theConsolidated Revenue Fund.

Accrual Accounting: recognises the change in value of assets, liabilities, income andexpenditure at the time that transactions and/or events occur, not at the time cash ispaid or received, as is the case in cash accounting.

Administered Items: are resources administered on behalf of the Commonwealthincluding grants, subsidies and benefits. Such resources may be used by third partyorganisations.

Assets: are future economic benefits controlled by Defence as a result of pasttransactions or other past events. Assets are initially recognised at the cost ofacquisition. They are periodically revalued on the basis of their written-down currentreplacement cost.Capability Assessment Reporting: preparedness is reported as part of the CapabilityAssessment Reporting (CAR) process, which requires all Executive managers to reportthe salient aspects of their Executive’s capabilities in terms of force structure,preparedness, resources and vision.Capital Use Charge: represents the opportunity cost of capital tied up in assets. Theobjective of this charge is to better reflect the true costs of outputs and to encouragegood asset management practices. The Capital Use Charge is imposed by multiplyingthe closing net assets (ie total assets minus total liabilities) of Defence by theDepartment of Finance and Administration-specified rate of 12%, based on the long-term bond rate (currently around 6%) plus a margin for risk (6%).

Combined Exercise: an exercise/activity involving one or more Services of the ADFwith the forces of other countries.

Defence Assistance to the Civil Community: is a program which provides Defenceresources, in exceptional circumstances, for the performance of emergency or non-emergency tasks which are primarily the responsibility of the civil community. While ahigh priority is given to civil emergencies and natural disasters where lives or propertyare at risk, other tasks include flyovers and displays at significant public events andvarious support tasks for local authorities and charitable organisations around Australia.

Defence International Engagement Plan: is the primary guidance document forDefence’s international relationships, and is produced annually by International PolicyDivision. It aims to ensure that our international engagement activities are conductedin accordance with strategic guidance. As such, the DIEP interprets strategic guidanceand identifies priority areas for the development of individual internationalrelationships.

Departmental Items: are resources directly controlled by Defence including salaries,allowances, military equipment and costs associated with the Defence organisation.Such resources, including outsourced activities funded and controlled by Defence, areused to produce outputs for government.

Equity Injection: represents the additional contribution to Defence by theCommonwealth as owner. It is determined on the basis of the amount additional to theDepartmental outcome appropriation required to fund Defence up to the government-

Glossary

317

agreed level of global funding. Within Defence’s global flexibilities, the injection can beused for any purpose that increases the net assets of Defence. It is planned to use thesefunds for investment in new or replacement capital equipment or facilities. Theinjection is not tied to any specific capital projects.Expenses: are consumptions or losses of future economic benefits, in the form ofreductions in assets or increases in liabilities of Defence, other than those relating todistributions to the Commonwealth, that result in a decrease in equity during thereporting period.

Force Element: a component of a unit, a unit or an association of units havingcommon prime objectives and activities.

Force Element Group: a grouping of force elements with an appropriate commandand control structure for a specified role or roles.

Force Structure: see Preparedness Concepts and Planning.Group: was a term used prior to 1 July 2000 as the basis upon which Defence wasstructured and resources were allocated.

Interoperability: the ability of systems, units or forces to provide the services to andaccept services from other systems, units or forces and to use the services so exchangedto enable them to operate effectively together.

Joint Exercise: an exercise/activity involving two or more Services of the ADF.

Liabilities: are sacrifices of future economic benefits that Defence is presently obligedto make to other entities as a result of past transactions or other past events.Military Capability: see Preparedness Concepts and Planning.

Outcomes are the results, impacts or consequences of actions by the Commonwealthfor the Australian community.

Outputs are the products or services produced by Defence.Preparedness Concepts and Planning: To achieve its outcome, Defence developsmilitary capabilities that enable the Government to apply military power when required.Military capability is achieved by developing a force structure appropriately prepared foroperations. Preparedness is a measure of how ready (readiness) and how sustainable(sustainability) the ADF is to undertake military operations. Preparedness is therefore offundamental importance to Defence, which must be able to manage it effectively andcommunicate its status to the Government.

Military Capability - The two levels of military capability specified for forces within theADF are derived from the concept of maintaining forces at an appropriate minimumlevel of capability (or MLOC) in peacetime and ensuring that those forces are ready towork up to an appropriate higher level of task-specific capability (or operational level ofcapability - OLOC), within a given time, in order to conduct operations effectively.

However, the maintenance of a force at a higher level of preparedness or at anoperational level of capability for a prolonged period is resource intensive. A clearunderstanding of the implications is required before a force is raised to that level ofcapability in peacetime. During a time of economic constraint, Defence balances themix of capabilities, or outputs, from within its budget to meet Government taskingpriorities.

Index

318

Readiness – The readiness of forces to be committed to operations within a specifiedtime is dependant on the availability and proficiency of personnel, equipment, facilitiesand consumables.

Sustainability – Sustainability is measured in terms of the ability to provide personnel,equipment, facilities and consumables to enable a force to complete the needed periodof operations.

Force Structure - Force structure relates to the type of force required - personnel,equipment, facilities and military doctrine - to achieve the operational level of capabilitynecessary to conduct operations effectively. In the medium to long term, militarycapability will vary due to changes in force structure generated by the capabilitydevelopment process. In the short term, force structure is the more constantcomponent of military capability and the level of capability available for operations isdetermined by Defence’s management of preparedness of the current force.

Changes to force structure usually impact on the preparedness of the associated forces.For example, the introduction of a new capability, retirement of an old capability orcapability enhancement will have a direct impact on the resource, training and facilityrequirements of the forces involved.

Preparedness - Preparedness is a measurement of how ready (readiness) and howsustainable (sustainability) the whole or part of the ADF is to undertake militaryoperations. The readiness of forces to be committed to operations within a specifiedtime is dependent on the availability and proficiency of personnel, equipment, facilitiesand consumables. Sustainability is measured in terms of the ability to providepersonnel, equipment, facilities and consumables to enable a force to complete itsperiod of operations.

Preparedness Planning - The preparedness planning process begins with a strategicappreciation involving an analysis of the national security objectives which are specifiedin Government guidance. These objectives are considered against current strategiccircumstances and defence policy. In the light of this appreciation, military strategiesare developed or refined to achieve the objectives. Military strategic objectives andmilitary response options are then derived from the military strategies and are used toprovide preparedness planning guidance.

The Chief of the Defence Force’s Preparedness Directive - This principal strategic-level directivecontains strategic planning guidance, lists military response options and setspreparedness requirements. It informs all subordinate preparedness directives at theoperational level which set specified levels of preparedness and contain the capabilitystandards against which force units measure and report.

The implementation of preparedness involves the allocation of resources to the currentforce to ensure that preparedness objectives can be met and managed properly. Theevaluation and reporting of preparedness ensure that there is regular feedback in theprocess and that objectives and resource allocations are refined as necessary.

Readiness: see Preparedness Concepts and Planning.

Revenues: are inflows or other enhancements, or savings in outflows, of futureeconomic benefits, in the form of increases in assets or reductions in liabilities ofDefence, other than those relating to contributions by the Commonwealth, that resultin an increase in equity during the reporting period.

Glossary

319

Risk Management: at the highest level, strategic risk management involves theidentification and mitigation of those risks that have the potential to adversely affectthe achievement of agreed output performance at the agreed output price.

Running Costs: are the full recurrent and minor capital costs consumed by an agency.Included are salaries and related employment costs, superannuation, administrativeitems, minor capital items, property operating expenses and consultancy services.

Sustainability: see Preparedness Concepts and Planning.Theatre: is the area in which military operations/activities take place.

Index

320

LIST OF ACRONYMS

AAS Australian Accounting StandardACT Australian Capital TerritoryADF Australian Defence ForceADFA Australian Defence Force AcademyADI Australian Defence Industries LtdAE Additional EstimateAEW&C Airborne Early Warning and ControlAFS Average Funded StrengthALG Air Lift GroupANAO Australian National Audit OfficeAPIN Army Presence in the NorthAPS Australian Public ServiceARDU Aircraft Research and Development UnitASEAN Association of South East Asian NationsASO Administrative Service OfficerATSIC Aboriginal and Torres Strait Islander CommissionAUC Assets Under ConstructionAUSMIN Australia/United States Ministerial Talks

C3I Command, Control, Communications and IntelligenceCDF Chief of the Defence ForceCOD Chief of Division, Science and TechnologyCOMAST Commander Australian TheatreCRU Control and Reporting UnitCSP Commercial Support ProgramCUC Capital Use Charge

DACC Defence Assistance to the Civil CommunityDAO Defence Acquisition OrganisationDCS Defence Corporate SupportDDG DestroyerDEFMIS Defence Financial Management and Information SystemDFRB Defence Force Retirement BenefitsDFRDB Defence Force Retirement and Death BenefitsDoFA Department of Finance and Administration

Acronyms

321

DPE Defence Personnel ExecutiveDRP Defence Reform ProgramDSTO Defence Science and Technology Organisation

EOD Explosive Ordnance Disposal

FANC French Armed Forces New CaledoniaFFG FrigateFFH Anzac FrigatesFMA Financial Management and AccountabilityFMS Foreign Military SalesFOI Freedom of Information

HealthKEYS Health Key Solution information management systemHF High FrequencyHMAS Her Majesty’s Australian Ship

IADS Integrated Air Defence System (Malaysia)Interfet International Intervention Force East TimorISO International Organization for StandardizationITO Information Technology OfficerITR Invitation to Register Interest

JORN Jindalee Operational Radar Network

LADS Laser Airborne Depth SounderLCH Landing Craft HeavyLPA Amphibious TransportLSH Landing Ship Heavy

MGI Military Geographic InformationMHI Inshore MinehunterMINTACS Command Decision AidsMLOC Minimum Level of CapabilityMSBS Military Superannuation and Benefits Scheme

NSW New South Wales

Index

322

NT Northern TerritoryNUSHIP Ship yet to be commissionedNZDF New Zealand Defence Force

OPD Operational Preparedness Directive

PAC JTFEX Pacific Joint Task Force ExercisesPMKeyS Personnel Management Key SolutionPNG Papua New GuineaPNGDF Papua New Guinea Defence Force

RAR Royal Australian RegimentR&D Research and DevelopmentRNZAF Royal New Zealand Air ForceROMAN Resource and Output Management and Accounting

NetworkRSN Republic of Singapore Navy

SES Senior Executive ServiceSITO Senior Information Technology OfficerSMEs Small to Medium EnterprisesSO Senior OfficerSTS Sail Training Ship

TAFE Technical and Further EducationTNI Indonesian Army

UN United NationsUNAMET United Nations Assistance Mission in East TimorUNTAET United Nations Transitional Administration in East TimorUSN United States NavyUSS United States Ship

WA Western Australia

Y2K Year 2000

Compliance Index

323

COMPLIANCE INDEXRequirements PageLetter of Transmittal ................................................................................................................................... iiiTable of Contents ................................................................................................................................... v-viiAlphabetical Index............................................................................................................................324-327Compliance Index.....................................................................................................................................323Glossary .............................................................................................................................................316-319Contact Officer ............................................................................................................................................. iiInternet Home Page Address and Internet Address for Report .............................................. ii, vii, ixUser Guide............................................................................................................................................. viii-ixReview by Secretary and CDF................................................................................................................ 3-7Summary of Significant Issues and Developments – Year in Review........................................... 8-18Role and Functions...................................................................................................................... 8, 158-283Organisational Structure......................................................................................................................58-59Map from Former Programme Structure to the newOutcome/Output Structure .................................................................................... 158, Fold Out ChartOutput Performance Reporting .....................................................................................................158-283Purchaser/Provider Arrangements........................................................................................................ NilAnalysis of Performance ....................................................................................................................... 3-91Customer Service and Complaints.....................................................................................................77-78Social Justice and Equity .....................................................................................................................81-83Financial Performance .........................................................................................................................19-54Financial Statements (including Auditor-General’s Report) ...........................................72-73, 95-156Resourcing of Defence Outcome and Outputs ..................................................................................158Corporate Governance ........................................................................................................................56-58Internal and External Scrutiny..................................................................................................... 68-71, 74Staffing Overview.....................................................................................................................54-55, 79-81Workplace Relations.............................................................................................................................79-80Occupational Health and Safety.....................................................................................................293-296Defence Service Charter......................................................................................................................75-78Legislation/Regulations Impacting on Business ................................................................................. NilPurchasing..............................................................................................................................................84-85Assets Management..............................................................................................................................86-87External Consultants..................................................................................................................................88Competitive Tendering and Contracting..........................................................................................89-91Freedom of Information .........................................................................................................................298Advertising and Market Research..................................................................................................307-311Environmental Performance ..................................................................................................................297Administration and Operation of the Defence Force(Home Loans Assistance) Act 1990 ..............................................................................................312-314Discretionary Grants................................................................................................................................129

Index

324

ALPHABETICAL INDEXAAccountability 3,4,6-7,56-74, 84,145,152-156,Acquisition reform 6,14,16,56,58,72,84-85ADF Enterprise Productivity Arrangement 4,15,217,224,230ADF operations see also individual OutputPerformance Reports Section 3

3,8,9,17-19,73,76,

Advertising and market research 307-311Air Force capabilities 158,226-256Alliances and International Relationships 13,172,Amphibious landing ships (LPAs) 4,11,52-53,204-206Appropriations 19-21,31,97,101,108-111,114-117,121,125-126, 138,

142-143,146-147,156Army Capabilities 158,208-224Asset management 17,22-24,86,98Assistance to the Civil Community and otherCommonwealth Departments and Agencies

8-9,78,128,169,176-180,188-189,200,209,213,219,222,225,243,248,254

Auditor-General’s Reports 68,72-73Australian National Audit Office see alsoAuditor-General’s Reports

5,28,74,116

BBalance sheet see also Financial statements,and Financial performance

24-25,30,97-99,108,123-124

Bosnia see also ADF operations 3,9,212,264Bougainville see also ADF operations andPapua New Guinea

3,8,9,14,70,162,167,171,174,200,204,212,264

CCambodia see also ADF operations 9,264Capability (New/Enhanced Capabilities) seeMajor capital equipmentCapital use charge see also Price of OutputTables Section 3 pp163-271

18,21-26,95-102,106,108,110,124,126,130,140,142,

Commercial Support Program 80,89-91,118Compensation see also Price of Output TablesSection 3 pp163-271

74,98,113,118,124,127,130,138

Collins class submarines see also Submarines 4,10-11,34,52,68,87,191-194,276,308Consultants 88,128DDefence Committees (Senior) 60-64Defence Cooperation 14,48-49,171-173,275-283Defence Employees Certified Agreement 4,15,79,303Defence Force Ombudsman 74Defence Force Remuneration Tribunal 15,80Defence Force Home Loans Assistance 312-314Defence Force Retirement and DeathBenefits Scheme (and MilitarySuperannuation and Benefits Scheme) see alsoSuperannuation

28,124,127-128,139,143,304

Defence Housing Authority 127,131,312,314Defence Materiel Organisation (AcquisitionOrganisation) see also Price of Output TablesSection 3 pp163-271

6,44,56,

Defence mission see Defence Outcome

Alphabetical Index

325

Defence outcome 8,158,182,187,191,195,199,203,205Defence Plan 4,6,7,46Defence Review 2000 Public Discussion Paper 293-296Defence Safety Management Agency 302-305Defence structure 6,16,58-59Defence Reform Program 5,6,16,46-53,79-80Defence Service Centre 14,53,217,238,250,257Defence Service Charter 75-78Discrimination (inc sexual harassment) 82EEast Timor see also ADF operations, andindividual Output Performance reporting –Section 3

3,4-6,8-10,16,17-23,26,28,32,35,38,45,54,71,78-79,97-98,126-127,131,143,294,311,313

Environmental performance 297Emergency management 9,73,176,178,304,316Equipment see also individual OutputPerformance reporting – Section 3

4,6,9-11,13,16,23-25,30-49,72,84-87,99-100,108-112,119-123,129 132-137 140,142,144,146-148,300

Ethics and Fraud 63,66,73,84Evaluations 63-64,66-67Evolved SeaSparrow Missile 11,33,35,186Exercises 5,13,22,98,162,167-168,171-172,182,184,192,

211-212,216,218,221,222,226,242,247,253,253,267-274

FFacilities see also Major facilities projects andOutput Performance Section 3

9,13,35,38,40-45,47-51 ,69, 72, 84, 86, 98, 128, 161,176, 182, 186, 191, 197,275,283,291

Family support, ADF 129Family Support Funding grants 129Fiji see also South-West Pacific 14,171,275,278Financial management see also Financialperformance and Financial statements

5,46,62-64,77-78,95,115

Financial statistics 286-287Financial performance 5,19-53Financial statements

Administered assets and liabilities 109Administered Cash flow 111Administered revenues and expenses 107Auditor General’s ReportBalance Sheet 108Cash flows 110,Notes to financial statements 114-156Operating statement 106Schedule of commitments 112Schedule of contingencies 113

Five Power Defence Arrangements 172,222,267-273Freedom of Information 298-306GGovernance 4,56-67Groups see also Price of Output TablesSection 3 pp163-271

56,80

Gulf deployment 3,9,182-183,264-265HHydrographic ships 4,10,52,166,168-169

Index

326

IIndonesia see also South-East Asia 3,13,165,171-173,242,268-270,275,282Industry see also National support 5-6,12-14,16,23,48-51,66,77,84-89, 176-180,313-319Information systems (includes DefenceInformation Systems Group) see also Managementinformation systems

16-17,24,88,95,98,159, ,316,320

JJindalee Operational Radar Network 13,33,37LLeadership see Leadership and ManagementLeadership and Management 5-11,13-17,46,48,50-52,56-64,67,72-74,79-82,

171-172,182Lead-In Fighter see Air Force capabilities andMajor capital equipment projectsLogistics 5,16,39,47-53,87,89,91,218-221,277,282MMajor capital equipment projects 32-39Major facilities projects 40-45Malaysia see also South-East Asia 13,165,171-172,268-272,281,302Management information systems see alsoInformation systems

16,95

Management Audit 63-64,73Market testing see also Defence ReformProgram ,

4-5,14,50-53,89-91,247

Middle East see also Sinai and Persian Gulf 3,8-9,70,171Military satellite communications 33,38Minehunter coastal (also Minehunter) 4,11,33-34,199-202,267NNational Support 9,14,66,91,158,176-180,244,250Navy Capabilities see also Major capitalequipment projects

158,181-206

Native Title 42,44,69New Zealand see also Alliances andInternational Relationships

13,34,67,84,165,171,267-274

OOccupational Health and Safety 83,293-296Office of the Revolution in Military Affairs 13,260,282Operation Safe Haven see also ADFoperations

6,265

Outcome see Defence outcomeOutput(s) see Output Performance Section 3PP3C see also Air Force capabilities 33,36,176-179,243-244,268,271Pacific Patrol Boat 276,279-280Papua New Guinea see also Bougainville 9,247,275-276,267-268Parliamentary committees 68-71Peacekeeping see ADF operationsPerformance information see also Section 3 5-7,19-53,95Performance Management 15,80Persian Gulf see Middle East and GulfdeploymentPersonnel 3-5,8-11,14-18,47-56,65-67,72,78-84,87-88,98,

Alphabetical Index

327

118-119,121, 183-188,192,212 218,229, 231,242,247,253,260,288-292

Personnel Management Key Solution(PMKeyS)

16,80

Philippines see also South-East Asia 13-14,171-172,268,281Portfolio Evaluation Strategy 66-67Preparedness see also Section 3 Outputperformance tables

8,10,16,161

Project Roman 16,95RRecruiting see also Personnel 15-16,18,52,78-79,90,208,288-292Ready Deployment Force 212-214Reinvestment see Defence Reform Program 48-53Reserves 8,11,14-15,54-56,79,208,218,288-292,302‘Results through people’ see also Personnel 4,6Retention see also Personnel 3,8,10,15,47,52,54,72,128,192,258,313Russell Offices redevelopment 44,72SSearch and rescue 9,177,183,188,243,248Senior Executives Remuneration 57,151-152Sinai see also Middle East 3,212,264Singapore see also South-East Asia 13,171-172,266-273,280Social justice 81Solomon Islands see also South-West Pacific 3,11,14,16,162,171,203-205,275,277South-East Asia 13,171-173,275,280South-West Pacific 3,14,171,276Strategic airlift capability 4,12,33,36,247-252Style conventions ixSubmarines 4,12,33-35,52,68,158,191-194,242,268,271Submarine Fast Track Program 4,12,34-35,191Superannuation see also Price of OutputTables Section 3 pp163-271

28,31,48,98,111,118,124,127,130-131,138-139,151,300,304

TTactical air-defence radar systems 33,38,237,240Training see also Exercises, DefenceCooperation, and Section 3 Outputperformance tables

11,13,15,23,35,48,50-56,67,69,78,80-84,98,128

UUnited Nations also ADF operations 3,9,17-18,28,70,127,131,171,264-265United States see also Alliances andInternational Relationships, and Operationsand Exercise Tables in Section 3

4,12,13,34,38,77,165,171,191

VVietnam 9,14,171-172,191WWhole-of-life-costing 6-7,11,85Women 79,83,289-292

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