The 2nd Annual Defence Support Services Summit

Partnering with Industry

Mark Jenkin – Head Defence Support Operations

Outline

Effectively working with industry to achieve “value

for money” in Defence Support

• Defence Support Operations

» Where, who, what and why

» Contracted services

• How - priorities

» New Operating Model

» Base Services Retender

Who

DSO STRUCTURE

Mark Jenkin

Head

Defence Support Operations

Sue Parr

Garrison, Estate &

Business Support

CDRE Jaimie Hatcher

Base and Customer

Support Services

Regions:

Central West – Ron Hunter

Nthn NSW – Larry Robbins

Sthn NSW – James Simpson

Qld – Gerald Griffin

Vic/Tas – Steve Georgiou

What we do

• Three key roles DSO performs for Defence are:

– Whole-of-base support functions, through management support

and a governance framework on behalf of Defence Groups and

Services to assist effective command, control and administration

of base-wide issues and base support functions.

– Contribution to stewardship of the Defence estate, through

estate upkeep, estate appraisal and estate program services

and projects, and facilitating the management of estate risk and

compliance.

– Delivering DSO’s share of products and services to Defence as

a shared services provider in support of Defence’s living,

working and training environment, either through external or

internal delivery.

DSO delivers outcomes to support Defence capability supported by:

• A single integrated service delivery organisation with a national footprint

• Value for money through working with industry and leveraging volume

• Connection to both customers and national control

• Geographic coverage where Defence works, trains and lives across Australia

• Large customer population base (100,000):

– 58,000 ADF

– 21,000 APS

– 21,000 Reserves

• Dispersed sites in metropolitan, regional and remote locations

Why

Current Contracted Services

• Relocations Administration Services and Removal Services (Toll) – five

years from 1 July 2010 plus extensions. ~ 22,000 relocations and

20,000 removals each year.

• Provision of Housing and related services (DHA)– 12 years plus 3 x

five year extensions. There is a major review every five years.

17,500 Service residences provided to meet the ADF operational

needs of a mobile workforce.

– Strong governance arrangements

– KPIs – business improvement, reduce Defence costs, sustain

and improve relationships and influence service provider

behaviours to ensure quality services are delivered to Defence

personnel.

– DHA housing model established by government to maximise

involvement of the construction industry (800 – 1000 new

houses per year)

Defence Contracted Services – Relocations and Housing

• HQ Joint Operations Command – joint operational command

facility at Bungendore.

• LEAP 1 – 1,395 Level 5 Live In Accommodation (LIA) units located

at Holsworthy Barracks, Enoggera Barracks and RAAF Amberley.

• LEAP 2 – 3,015 Level 5 LIA units delivered and under construction

at 14 Defence bases Australia-wide.

Considerable financial incentives under PPPs for good performance

– Defence pays the capital costs of the PPP facilities over a 30 year

period, rather than on completion of construction, and abatements are

also applicable if performance does not meet requirements.

At the end of the 30 year agreement, ownership of the PPP facilities reverts to

Defence.

Defence Contracted Services – Public Private Partnerships (PPP)

• Current contracted Garrison Support Services include:

– Management of the Services

– Cleaning

– Grounds maintenance

– Pest and vermin

– Training Area and Range Management

– Laundry and dry cleaning

– Sports and recreation

– Accommodation Management

– Hospitality & Catering

– Canteen/Cafeteria

– Access control

– Waste management

– Airfield support

– Fire Fighting and rescue

– Petrol, oils and lubricants

– Stores management

– Transport

– Workshop

• Current contracted Comprehensive Maintenance Services include:– Management of the Services

– Call Centre

– Fixed Plant & Equipment Maintenance

– Engineering Operations

– General Estate Works

– Special Training Facilities

21 contracts over original 12 DSO regions

Defence Support Operations Current Base Services

Other contracted services managed by DSO include:

– Utilities

– Fresh Rations

– Safe Hand Mail

– Base Security Infrastructure

– Library Services

Defence Contracted Services - other

A new DSO Operating Model

• DSO’s responsibilities will be carried out at the national, regional

and local (base) levels based on the following accountabilities:

– Activities carried out with national scope, and geographically

located in Canberra

– Activities carried out with national scope, and geographically

located in one of our five regions

• DS regions will play dual roles:

– regional and base support roles focused on their geographic

area of responsibility similar to those currently performed; and

– designated national roles supporting activities across Australia

Proposed changes to DSO roles and responsibilities:

• DSRG is under increased pressure to demonstrate value for

money, and to improve effectiveness in delivering products and

services

• Defence is also seeking to deliver efficiencies

• Investment in the DSO future Operating Model, new base services

contracts and new IT systems will allow DSO to improve the way it

does business

Rationale for a new operating model:

New Operating Model

• Current reforms also compel change:

– Changes to Defence priorities and shared services model affect how we operate and deliver outcomes

– Base Services Retendering (BSR) significantly changes future service delivery arrangements and the contracting model

• DSO’s response is to enhance our ways of working:

– From ‘customer’ to ‘partner’

– From ‘regional’ to ‘national’

– From ‘ambiguous’ to ‘accountable’

– From ‘reactive’ to ‘proactive’

Rationale for a new operating model (continued):

New Operating Model

• Identifies and articulates key business functions and processes of

DSO to deliver its outcomes to support Defence capability

• Documents key roles, responsibilities, functions, and processes

required to define DSO activities

• Delivers on DSO business outcomes through:

– Increased consistency and reduced duplication

– Improved planning processes

– Improved capacity to manage risk

– Increased internal product and service management capacity

– Key governance processes

– Changed contract management arrangements

What is the DSO Operating Model?

New Operating Model

Base Services Retender

Elements of the BSR

The BSR comprises a number of

streams.

SOW

Transition

Planning

Procurement

Strategy

Supporting

DataBSR

Information

Systems

Contracting

Model

Performance

Mgt Framework

Affordability

& Reform

Background

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The overall value of these Base Service contracts is approximately $1.1 billion per annum, including estate maintenance projects (risk management works).

Current Base Services comprise 24 individual products and service lines (e.g. estate maintenance, catering, access control). Contracts were tendered based on the former Defence Support 12 regional model.

There are 21 current contracts comprising of:

-9 Garrison Support Services contracts;

-9 Comprehensive Maintenance contracts;

-3 x Base Services contracts (combined).

The dates of these contracts have been aligned to allow Defence to go to market at a single point of time.

In 2012, a formal re-tendering process to replace these contracts commenced that will replace the existing contracts in 2014.

CURRENT

CONTRACTS

Background

2009

Future Acquisition Strategy - Industry was engaged to conduct market research and analyse and assess current contracting arrangements against industry better practice.

Alternative ‘bundling’ options were proposed

Three ‘supply market’ strategies to optimise value for money:

Leveraging volume, increasing standardisation and improvingdemand management.

Reform – Implementation of working group to progress ‘agreed’ initiatives.

Funding - Budget allocations revised to reflect SRP harvest

The Journey 2010

Strategic Reform Program – Establishment of SRP and savings targets.

-GSS - $654m and CMS - $505m.

-Reform - Commencement in developing reform initiatives

Background

The Journey

Industry Consultation – as part of developing the future acquisition strategy for Base Services.

Defence + Industry Conference - Three ‘bundling’ options were presented at the Defence + Industry Conference 2011 for feedback.

Internal consultation also occurred.

Reform and Affordability - Continuation of work on reform initiatives.

2011

Background

The Journey

2012 Request for Information – A formal RFI was issued in February 2012, seeking industry feedback on proposed bundling and market approach.

Statement of Work – Using the agreed guiding principles. Supporting data was sourced from a number of systems, spreadsheets, contractors and regions.

Reform and Affordability - Continuation of reform initiatives in hospitality and catering, access control, sports and recreation.

Invitation to Register – Open approach to the market through AUSTENDER.

Request for Tender – Released through AUSTENDER. Limited to those companies that successfully pre-qualified as a result of the ITR.

Background

2013

The Journey

2014

Request for Tender – Closed on 28 February 2013.

Evaluations – Evaluation team established

Transition Preparation – Transition preparations underway including alignment with the implementation of DSO Operating Model and transition to the new corporate system GEMS.

Negotiations – Subject to successful negotiations contracts will be

signed.

Transition In – Progressive transition of the eight service packages.

Transition Out – Progressive transition out of the existing 21 contracts.

Current Challenges

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Funding available for Base Services contracts has been reduced as a result of SRP targets ($1.1bn over 10 years).

Increased compliance and legislative requirements as well as increased scope of services.

Different arrangements, processes, procedures and experience depending on where you are.

Ability to access innovation or industry expertise.

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CHALLENGES

Inconsistent product support and service delivery arrangements.

Inefficient models exist and Defence is paying to have capacity on hand.

The quality of the supporting data and estate information.

BSR Objectives

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OBJECTIVES

Sustain Defence Capability

Optimise Value for Money

Defence has identified two major objectives in delivering the

provision of Base Services in unison not opposition.

Reframe Statement of Work

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Sustainability

Total Asset Management

Leverage Volume

Competitive Advantage

Innovation

Standardisation

Outcome Based Contracts

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PRINCIPLES

The primary objectives are supported by seven guiding principles

agreed by the Star NEP Committee in December 2011

Strategies

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By implementing contract options that leverage volume, standardise requirements, reduce excess capacity and decrease demand management, there is opportunity to restructure and redesign service delivery.

This will optimise value for money whilst sustaining ADF capability and meeting increased legislative compliance activities.

Maximise the opportunity provided by BSR to optimise value for money for Defence by:

~ Allowing modernisation of the providers’ service delivery models,

~ Better leveraging volume (national tender) and standardisation (consistency of activities across Australia), and

~ Outcome focused statements of work.

~ Enhanced consistency through national product management

~ Improve accountability for both Defence and Contractors – a strong relationship of mutual respect and trust between those involved.

~ Improve Planning

~ Enhance the role of Contractors and leverage industry expertise

~ Separate estate planning/ programming from program execution

~ Manage the whole of estate

Mapping from Current to New

Bundling of

Services

Estate Maintenance & Operations Services

(EMOS) Bundle

Management, Integration & Co-ordination

(MIC) Including Estate Appraisal

Base Services Call Centre

Cleaning & Housekeeping

Commercial Operations (Central West only)

Estate Upkeep

Land Management

Laundry & Dry Cleaning

Reprographics

Pest & Vermin

Sports & Recreation

Training Area and Range Management

Transport and Airfield Support Operations

GSS

Mgt of Services

Accommodation Mgt

Airfield Support

Cleaning

Commercial Ops

Grounds Maint

Laundry & Dry

Pest & Vermin

Reprographics

Sport & Recreation

Range & Training

Transport

CMS

Mgt of Services

Property Services

Centre

Infrastructure Appraisal

Engineering Operations

Routine & Reactive Works

Fixed Plant & Equip

Special Forces

Training Facilities

Estate Maintenance & Operations Bundle

Mapping from Current to New

Bundling of

Services

GSS

Access Control

Hospitality and

Catering

Aircraft Refuelling

Fire fighting Services

Stores Mgt Services

POL

Waste

CMS

Regional Program

Dev & Mgt

Risk Managed

Works

National Program

Services

Retail Stores & POL

Aircraft Refuelling and

Rescue & Fire Fighting Bundle

Access Control

Hospitality and Catering

Waste

Project Delivery Services

Miscellaneous Service Packages