P O R T F O L IO B U D G E T S T A T E M E N T S 2 0 … › Budget › 11-12 › 2011-2012...P o rtfo lio O v e rv ie w T h e p o rtfo lio o v e rv ie w o u tlin e s th e re s p o

PORTFOLIO BUDGET STATEMENTS 2011-12BUDGET RELATED PAPER NO. 1.5A

DEFENCE PORTFOLIO

ISBN 9780-642-29739-6

With the exception of the Commonwealth Coat of Arms and where otherwise noted all material presented in this document is provided under a Creative Commons Attribution 3.0 Australia (http://creativecommons.org/licenses/by/3.0/au/) licence.

The details of the relevant licence conditions are available on the Creative Commons website (accessible using the links provided) as is the full legal code for the CC BY 3.0 AU licence (http://creativecommons.org/licenses/by/3.0/au/legalcode).

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MINISTER FOR DEFENCE

PARLIAMENT HOUSE

CANBERRA 2600

President of the SenateAustralian SenateParliament HouseCANBERRA ACT 2600

SpeakerHouse of RepresentativesParliament HouseCANBERRA ACT 2600

Dear Mr PresidentDear Mr Speaker

I hereby submit Portfolio Budget Statements in support of the 2011-12 Budget for the Department of Defence, the Defence Materiel Organisation and Defence Housing Australia.

These statements have been developed, and are submitted to the Parliament, as a statement on the outcomes for the portfolio.

I present these statements to provide accountability to the Parliament and, through it, the public.

Yours sincerely

Stephen Smith MPMinister for Defence

Defence Portfolio Budget Statements 2011-12

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ABBREVIATIONS AND CONVENTIONS

(a) The following notation may be used:

NEC/nec not elsewhere classified– nil.. not zero, but rounded to zerona not applicable (unless otherwise specified)nfp not for publication$m $ million$b $ billion

(b) Figures in tables and in the text may be rounded. Figures in text are generally rounded to one decimal place, whereas figures in tables are generally rounded to the nearest thousand. Discrepancies in tables between totals and sums of components are due to rounding.

ENQUIRIES

Should you have any inquiries regarding this publication please contact:

DirectorMinisterial and Parliamentary ReportingR1-5-A036Department of DefenceCANBERRA ACT 2600

Telephone: (02) 6265 6277Email: [email protected]

A copy of this document can be located on the Australian Government Budget website at.

REFERENCES

Previous years’ Defence Portfolio Budget Statements, Portfolio Additional Estimates Statements and Annual Reports can be found at .

USER GUIDETO THE

PORTFOLIO BUDGET STATEMENTS


vi

USER GUIDEThe purpose of the 2011-12 Portfolio Budget Statements (PBS) is to inform Senators and Members of Parliament of the proposed allocation of resources to Government outcomes by agencies within the portfolio. Agencies receive resources from the annual appropriations acts, special appropriations (including standing appropriations and special accounts), and revenue from other sources.

A key role of the PBS is to facilitate the understanding of proposed annual appropriations in Appropriation Bills No. 1 and No. 2 2011-12 (or Appropriation Bill [Parliamentary Departments] No. 1 2011-12 for the parliamentary departments). In this sense the PBS are Budget related papers and are declared by the Appropriation Acts to be ‘relevant documents’ to the interpretation of the Acts according to section 15AB of the Acts Interpretation Act 1901.

The PBS provide information, explanation and justification to enable Parliament to understand the purpose of each outcome proposed in the Bills.

As required under section 12 of the Charter of Budget Honesty Act 1998, non general government sector entities are not consolidated into the Commonwealth general government sector fiscal estimates and accordingly, these entities are not reported in the PBS.

User Guide

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STRUCTURE OF THE PORTFOLIO BUDGET STATEMENTS The Defence Portfolio Budget Statements are divided into three parts: Defence, the Defence Materiel Organisation (DMO) and Defence Housing Australia (DHA). The sections of each part are outlined in the following table.

Portfolio OverviewThe portfolio overview outlines the responsibilities of the portfolio, list the relevant agencies and Ministers and the resources available.

Department of DefenceSection 1: Defence Overview and Resources

Section 1 provides the strategic direction for Defence, the functions and responsibilities of Defence, its organisational structure, as well as information about its contribution towards its outcomes for the budget year and the resources available. This section also provides information about Defence management reforms, its capital budget and workforce, including the DMO.

Section 2: Outcomes and Planned Performance

Section 2 provides a brief overview of Defence's outcomes and programs for 2011-12. Each outcome has an outcome resource statement which provides resourcing information by program. The deliverables and performance indicator information for each program follow the outcome resource statement.

Section 3: Explanatory tables and financial statements

This section includes explanatory tables and budgeted financial statements. The explanatory tables include:

• an explanation of any differences between the information included in the Budget Papers and the PBS arising from the use of the Govern-ment Financial Statistics and Australian Accounting Standards accounting methodologies

• supplementary information on the reconciliation between total available appropriation and outcome attribution, the re-phasing and use of appropriations, special account flows and Australian Government Indigenous Expenditure.

Defence Materiel OrganisationSection 1: DMO Overview and resources

Section 1 provides an overview of the DMO's functions and responsibilities, including the strategic priorities for 2011-12 and organisational structure, as well as information about its contribution towards its outcomes for the budget year and the resources available. This section also provides summaries of the DMO's reform initiatives and governance activities.

Section 2: DMO Outcomes and Planned Performance

Section 2 provides an overview of the DMO's outcome and programs, including the Top 30 Projects, the Top 20 Sustainment Products and the Top 10 Minor Projects. This section also provides summaries of the DMO's reform initiatives and governance activities

Section 3: DMO Explanatory tables and financial statements

This section includes explanatory tables and budgeted financial statements. The explanatory tables include:

• an explanation of any differences between the information included in the Budget Papers and the PBS arising from the use of the Government Financial Statistics and Australian Accounting Standards accounting methodologies

• supplementary information on the reconciliation between total available appropriation and outcome attribution, the re-phasing and use of appropriations, special account flows and Australian Government Indigenous Expenditure.

Defence Housing AustraliaThis part provides an overview of Defence Housing Australia (DHA), including performance forecasts for 2011-12, DHA’s outcome and output, and its 2011-12 budgeted financial statements.

Appendices A glossary and list of acronyms and abbreviations.


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TABLE OF CONTENTSUser Guide ............................................................................................................................................................viStructure of the Portfolio Budget Statements .............................................................................................. vii

PORTFOLIO OVERVIEW .................................................................................................................................. 3Ministers and their Portfolio Responsibilities ............................................................................................... 4Changes Affecting the Portfolio .......................................................................................................................... 4Portfolio Structure and Outcomes..................................................................................................................... 7Portfolio Resource Statement............................................................................................................................. 10Portfolio Workforce............................................................................................................................................. 12

DEPARTMENT OF DEFENCESection 1: Defence Overview and Resources ................................................................................................ 171.1 Strategic Direction Statement....................................................................................................................... 171.2 Portfolio Resource Statement....................................................................................................................... 211.3 Funding from Government .......................................................................................................................... 271.4 Capital Investment Program........................................................................................................................ 341.5 People .............................................................................................................................................................. 36Section 2: Outcomes and Planned Performance ........................................................................................... 422.1 Outcomes and Performance Information................................................................................................... 42Section 3: Explanatory Tables and Budgeted Financial Statements....................................................... 1083.1 Departmental Explanatory Tables ............................................................................................................ 1083.2 Budgeted Financial Statements ................................................................................................................. 111

DEFENCE MATERIEL ORGANISATIONSection 1: Agency Overview and Resources ............................................................................................... 1471.1 Strategic Direction Statement..................................................................................................................... 1471.2 DMO Resourcing ......................................................................................................................................... 150Section 2: Outcomes and Planned Performance ......................................................................................... 1532.1 DMO Outcomes and Performance Information...................................................................................... 154Section 3: Explanatory Tables and Budgeted Financial Statements....................................................... 2003.1 Explanatory tables ....................................................................................................................................... 200

DEFENCE HOUSING AUSTRALIASection 1: DHA Overview and Resources ................................................................................................... 2111.1 Strategic Direction ....................................................................................................................................... 2111.2 DHA Resource Statement........................................................................................................................... 2131.3 Budget Measures ......................................................................................................................................... 213Section 2: Outcomes and Planned Performance ......................................................................................... 2142.1 Outcomes and Performance Information................................................................................................. 214Section 3: Explanatory Tables and Budgeted Financial Statements....................................................... 2163.1 Explanatory Tables ...................................................................................................................................... 2163.2 Budgeted financial statements................................................................................................................... 216

AppendicesGlossary............................................................................................................................................................... 224Acronyms and Abbreviations.......................................................................................................................... 229


x

Department of Defence

1

PORTFOLIO OVERVIEW


2


3

PORTFOLIO OVERVIEWThe Defence portfolio consists of a number of component organisations that together are responsible for supporting the defence of Australia and its national interests. The three most significant bodies are:

• the Department of Defence—a department of state, headed by the Secretary of the Department of Defence

• the Australian Defence Force (ADF)—which consists of the three Services, Navy, Army and the Air Force (including Reserves) commanded by the Chief of the Defence Force (CDF). Each Service Chief also administers their respective Cadet service, although the Cadet service is not a component of the parent Service

• the Defence Materiel Organisation (DMO)—a prescribed agency within the Department of Defence, headed by its Chief Executive Officer (CEO) DMO.

In practice, these bodies have to work together closely and are broadly regarded as one organisation known simply as Defence (or the Australian Defence Organisation).

The portfolio also contains some smaller entities, including a number of statutory offices created by the Defence Force Discipline Act, 1982 which are independent but reside administratively within Defence and various trusts and companies such as Defence Housing Australia (DHA) and the Australian Strategic Policy Institute.

DHA's main function is to provide adequate and suitable housing for members of the ADF. DHA is an enterprise within the Defence portfolio and has two shareholder Ministers: the Minister for Defence, the Hon Stephen Smith MP; and the Minister for Finance and Deregulation, Senator the Hon Penny Wong.

DHA is required by legislation to perform its functions in accordance with the policies of the Australian Government and in accordance with sound commercial practice. This means that DHA has a targeted rate of return and a requirement to make annual dividends and income tax payments.

The Minister for Defence's portfolio also contains the Department of Veterans' Affairs and associated bodies, as it is designated as part of the Defence portfolio in the Administrative Arrangements Order. The Department of Veterans' Affairs is administered separately to Defence.


4

MINISTERS AND THEIR PORTFOLIO RESPONSIBILITIES

Changes Affecting the Portfolio

Since publication of the Defence Portfolio Additional Estimates Statements 2010-11, Defence ministerial responsibilities have not changed. The Ministers and their portfolio responsibilities are as follows:

THE HON STEPHEN SMITH MP – MINISTER FOR DEFENCE

• General

- oversight of all aspects of the Defence portfolio

- lead on all Cabinet submissions

• Strategic Policy

• Operations and Intelligence

• International Policy

• Force Structure

• Strategic Reform Program

• Budget and Finance

• Defence estate policy and major projects

• Military Justice System

• Defence Export Controls

Strategic aspects of:

• Defence estate policy and major projects

• Project SEA 1000

• New Air Combat Capability

Capability Responsibilities:

• Development of the Defence Capability Plan (DCP)

• DCP programming and budgeting

• Processing of unapproved projects up to and including Second-Pass stage


5

THE HON WARREN SNOWDON MP – MINISTER FOR DEFENCE SCIENCE AND PERSONNEL

Specific responsibilities allocated to Mr Snowdon are:

• Science and technology policy including:

- strategic direction

- external engagement

- support to operations

- support to the force-in-being

- enabling research

• Personnel policy including:

- workforce planning

- recruitment and retention

- pay and superannuation

- equity and diversity

- personnel support

- Defence families and community organisations

- housing policy

- health (including Occupational Health and Safety)

THE HON JASON CLARE MP – MINISTER FOR DEFENCE MATERIEL

Specific responsibilities allocated to Mr Clare are:

• Defence materiel acquisition

• Sustainment issues

• Tendering and contracting for materiel acquisition

• Industry capacity, structure, policy and engagement

• Skills policy

• Equipment disposal

• Science and technology matters as they relate to capability development materiel acquisition and sustainment

Capability Responsibilities:

• Acquisition strategy throughout the capability approval process

Assist the Minister for Defence on:

• Development of the DCP

• DCP programming and budgeting

• Processing of unapproved projects up to and including Second-Pass stage


6

SENATOR DAVID FEENEY – PARLIAMENTARY SECRETARY FOR DEFENCE

Specific responsibilities allocated to Senator Feeney are:

• Garrison services and administration of Defence estate policy

• Facilities, infrastructure and property

• Reserves policy

• Cadets

• Asia-Pacific Civil Military Centre of Excellence (APCM-COE)

• Asia-Pacific Centre for Military Law

• Honours and Awards

• Nature of Service Review

• ADF Parliamentary exchange program

• Aircraft noise and abatement

• Assist the Minister for Defence on information communications technology matters

• Education and training [1]

1. The Parliamentary Secretary for Defence has prime carriage of education and training, but he will consult the Minister for Defence Science and Personnel on matters in rela ion to overall personnel policy.


7

PORTFOLIO STRUCTURE AND OUTCOMESFigure 1: Defence portfolio structure and outcomes

Minister for Defence The Hon Stephen Smith MP

Minister for Defence Science and Personnel The Hon Warren Snowdon MP

Minister for Defence Materiel The Hon Jason Clare MP

Parliamentary Secretary for Defence Senator David Feeney

Australian Defence Force

Navy Army Air Force

Navy Reserves

ArmyReserves

Air Force Reserves

Navy Cadets

ArmyCadets

Air Force Cadets


including

Defence Materiel Organisation

Various small trusts and companies

Defence Housing Australia

Disciplinary appointments

(DFDA)

Department of Defence Secretary: Dr Ian Watt AO

Chief of the Defence Force: ACM Angus Houston AC AFC

Outcome 1: The protection and advancement of Australia’s national interests through the provision of military capabilities and the promotion of security and stability.

Outcome 2: The advancement of Australia’s strategic interests through the conduct of military operations and other tasks directed by the Government.

Outcome 3: Support for the Australian community and civilian authorities as requested by Government.

Defence Materiel Organisation (Prescribed Agency) within the DepartmentChief Executive Officer: Dr Stephen Gumley AO

Outcome: Contributing to the preparedness of the Australian Defence Organisation through the acquisition and through-life support of military equipment and supplies.

Defence Housing AustraliaManaging Director: Mr Michael Del Gigante

Mission: To deliver efficiently housing and related services that meet Defence operational and personel needs.


8

DEFENCE PORTFOLIO BODIES

None of the portfolio bodies described below receives direct appropriations from the Commonwealth.

Army and Air Force Canteen Service

Chairman: Mr Edward (Ted) Moore

The Army and Air Force Canteen Service (trading as Frontline Defence Services) is a Commonwealth authority, established under the Army and Air Force Canteen Service Regulations 1959 and supplies goods, facilities and services to, or for the entertainment and recreation of, members of the Army and the Air Force including persons employed in, or in connection with, Army or Air Force installations and dependants of those members or persons, visitors to such installations and members of the Australian Army or Air Force Cadets.

Their role is to enhance the living conditions and social environment of the Australian Defence Force by providing canteen services, comprising food beverages and convenience items; wholesale supply of alcohol and other requirements to messes and clubs; vending; dry-cleaning services; postal services; fuel and mechanical workshops; and Army Shop - the online supplier of Brand Army merchandise and Military and adventure-wear stores.

Australian Military Forces Relief Trust Fund

Chairman: Brigadier Gerard Fogarty AM

The Australian Military Forces Relief Trust Fund is a Commonwealth authority established under the Services Trust Funds Act 1947 and provides benefits to members of the Australian Defence Force who have served in, or in association with, the Army and to the dependants of such members.

Royal Australian Air Force Veterans' Residences Trust Fund

Chairman: Vacant as at 1 April 2011

The Royal Australian Air Force Veterans' Residences Trust Fund is a Commonwealth authority which provides a residence or residences in which eligible former members, including dependants, of the Royal Australian Air Force, Royal Australian Air Force Nursing Service and Women's Auxiliary Australian Air Force who are in necessitous circumstances and, if the Trust so approves, the dependants of such eligible persons, may be accommodated or supported.

Royal Australian Air Force Welfare Trust Fund

Chairman: Chaplain (Air Commodore) Murray Earl

The Royal Australian Air Force Welfare Trust Fund is a Commonwealth authority established under the Services Trust Funds Act 1947 and provides benefits for members of the Defence Force who have served in, or in association with, the Royal Australian Air Force and to the dependants of such members.

Royal Australian Navy Central Canteens Board

Chairman: Rear Admiral Peter Marshall

The Royal Australian Navy Central Canteens Board is a Commonwealth authority established under the Navy (Canteens) Regulations 1954 and administers the Royal Australian Navy Central Canteens Fund (RANCCF) which provides grants and loans to canteens, clubs, cinemas or other institutions or facilities for the welfare or entertainment of the members of the Navy and to make grants to the Royal Australian Navy Relief Trust Fund.


9

The RANCCF also operates holiday parks, accommodation and amenities which provide discounted holiday accommodation to Naval and Defence members; a theatre and entertainment ticketing agency which provides discounted theatre tickets to Naval and Defence members; a retail e-Commerce facility called SALT which sells Navy memorabilia; a raffle for Navy members; a retail operation at the Fleet Air Arm Museum in Nowra; mobile coffee services and wholesale supply services to canteens, messes and clubs.

Royal Australian Navy Relief Trust Fund

Chairman: Commodore Paul Kinghorne

The Royal Australian Navy Relief Trust Fund is a Commonwealth authority established under the Services Trust Funds Act 1947 and provides benefits for members of the Defence Force who have served in, or in association with, the Navy and to the dependants of such members.

AAF Company

President: Brigadier Gerard Fogarty AM

The AAF Company is a Commonwealth company that undertakes the management and trusteeship of the unincorporated funds known as the 'Army Amenities Fund' and the 'Messes Trust Fund'. The AAF Company promotes and supports the objects of the Army Amenities Fund which provides amenities for members of the Australian Army.

Australian Strategic Policy Institute Limited

Chairman: Mr Stephen Loosley

The Australian Strategic Policy Institute Limited is a Commonwealth company that provides policy-relevant research and analysis to inform Government decisions and public understanding of strategic and defence issues.

Royal Australian Air Force Welfare Recreational Company

Chairman: Air Commodore Robert Rodgers CSM

The Royal Australian Air Force Welfare Recreational Company is a Commonwealth company that provides access to discounted recreational accommodation and manages and promotes the Royal Australian Air Force Central Welfare Trust Fund-owned recreational facilities for the Royal Australian Air Force members, their families and other eligible persons. It also provides financial support to, and assists in the provision of, recreational facilities and services to the Royal Australian Air Force members.

Defence Portfolio Budget Statem

ents 2011-12

10 Portfolio Resource Statement

Table 1: Portfolio Resources[1]

Notes1. Note that Defence Departmental Appropriation includes planned payments to DMO of $10,099.5m and to DHA of $513 5m.2. Note that DMO and DHA includes planned revenue from Defence.3. The special appropriation of $3,928 9m represents gross administered expenses, special appropriation net of Revenue is $3,802.6m. 4. Value of interest administered by Defence for Defence Housing Authority loans taken out prior to the 30th June 2008.5. The Total Appropriation ($29,071.0m) in this table is different to Table 2 - Total Cash Available ($27,242.7m). This is due to the Administered Special Appropriation ($3,928 9m) being reported on accural basis in this table,

while Table 1 reports the amount on a cash basis ($2,100.6m), giving a difference of $1,828.3m ($29,071.0m - $1,828.3m = $27,242.7m).

Departmental Bill No. 1

$m

Appropriation Bill No. 2

$m

Return to the OPA

$m

Special Appropriation[3]

$m

Total Appropriation

$m

Non-Appropriation

Receipts

$m

Other Non-Appropriated

Items[4]

$m

Total Resources

Available

$m

Department of DefenceAdministered appropriations - - -1,292.1 3,928 9 2,636.8 1,264.0 28.1 3,928.9Departmental appropriations[1] 22,648.8 2,909.3 -51.6 - 25,506.5 1,053.3 - 26,559.8

Total Department of Defence 22,648.8 2,909.3 -1,343.7 3,928.9 28,143.3 2,317.3 28.1 30,488.7


$m


$m

Return to the OPA

$m

Special Appropriation

$m

Total Appropriation

$m

Non-Appropriation

Receipts

$m


Items

$m

Total Resources

Available

$m

Defence Materiel OrganisationAdministered appropriations - - -1.5 - -1.5 1.5 - -Departmental appropriations[2] 929.2 - - - 929.2 10,155.5 - 11,084.7

Total Defence Materiel Organisation 929.2 - -1.5 - 927.7 10,157.0 - 11,084.7


$m


$m

Return to the OPA

$m

Special Appropriation

$m

Total Appropriation

$m

Non-Appropriation

Receipts

$m


Items

$m

Total Resources

Available

$m

Defence Housing AustraliaAdministered appropriations - - - - - - - -Departmental appropriations[2] - - - - - 833.1 - 833.1

Total Defence Housing Australia - - - - - 833.1 - 833.1Total Portfolio[5] 23,578.0 2,909.3 -1,345.2 3,928.9 29,071.0


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Table 2: Total Departmental and Administered consolidation cash budget for the Department of Defence (including DMO)[1]

Note1. Figures shown eliminate interagency transactions and transactions flowing between Departmental and Administered funding.2. Includes $8.0m of Prior Year Appropriation for 2010-11 relating to Operations3. Cross reference with Table 79 Consolidated Administered Statement of Cash Flows for the Department of Defence (including DMO)

2011-12Estimate

$mAPPROPRIATIONS AND CAPITALAppropriation (Bill 1)[2] 23,578.0Appropriation - contributed equity (Bill 2) 2,909.3Appropriations for military superannuation[3] 2,100.6less Returns to the OPA -1,345.2Total Cash Available 27,242.7OPERATING ACTIVITIESCash received

Goods and services 405.7Interest and licence fees 16.6Oher cash received including GST 1,462.6

Total cash received 1,884.9

Cash usedEmployees 8,939.4Suppliers 8,796.9Subsidies and grants 190.8Administered military benefits 1,987.1Oher cash used including GST 1,270.3

Total cash used 21,184.4Net cash from or (used by) operating activities -19,299.5INVESTING ACTIVITIESCash received

Proceeds from sales of land and buildings, infrastructure, plant and equipment 117.8Dividends 47.6

Total cash received 165.4

Cash usedPurchase of land and buildings, infrastructure, plant and equipment 1,443.6Purchase of specialist military equipment 5,193.7Purchase of inventory 1,253.5Purchase of intangibles 31.4Loans -Oher 101.4

Total cash used 8,023.7Net cash from or (used by) investing activities -7,858.3FINANCING ACTIVITIESCash received

Cash usedRepayment of debt 76.9

Total cash used 76.9Net cash from or (used by) financing activities -76.9Net increase or (decrease) in cash and cash equivalents held 8.0

Cash and cash equivalents at beginning of the reporting period 136.7Effect of exchange rate movements on cash and cash equivalents -

Cash and cash equivalents at end of the reporting period 144.7


12

Portfolio WorkforceThe Australian Defence Force (ADF) workforce will continue to exceed its planned growth path in 2011-12 and 2012-13. This is largely a result of the lowest separation rates for military personnel in the last twenty years, caused in turn by the combined effects of successful recruitment and retention initiatives undertaken by Defence since 2006 and the impact of the Global Financial Crisis. Defence will mitigate the effects of this overachievement through a range of measures designed to return the military workforce to guidance by the end of 2012-13.

The Australian Public Service (APS) workforce will increase from an estimated 20,656 in 2010-11 to 21,648 in 2011-12. The major drivers of growth in the APS workforce include investment associated with Force 2030 capability development initiatives, and Strategic Reform Program (SRP) Workforce and Shared Services Reform-related civilianisation of non-combat related military positions and conversions from contractors to less costly APS positions. In parallel with these growth factors, reductions to the net APS workforce will result from measures such as the introduction of a first phase of Shared Services reform in Defence, and improvements in sustainment and logistics.

A further reduction of 1,000 to the forecast growth in the Defence APS workforce will be implemented over the next three years. This will be achieved through a broader implementation of Shared Services across Defence, bringing forward existing SRP initiatives where possible, and seeking further efficiencies throughout the Defence Organisation. Care will be taken in these reforms not to reduce standards of service in support of operations or capability development.

Table 3: Defence and DMO Consolidated Workforce Table

Notes1. Numbers for ADF Permanent Force include ADF members in the DMO, and Reservists on Continuous Full Time Service.2. Numbers for Reserves include Active and High Readiness Reserve members.3. Contractors are individuals under contract performing agency roles. Contractors are not APS Employees.

2010-11Projected

Result

2011-12Budget

Estimate

2012-13ForwardEstimate



ADF

ADF Permanent Force[1] 59,023 59,053 58,928 58,872 59,546

Reserves[2] 21,850 22,350 22,850 23,290 23,290

1 Total ADF Workforce 80,873 81,403 81,778 82,162 82,836APSDefence APS 15,146 16,001 16,114 15,972 15,611

DMO APS 5,510 5,647 5,744 5,874 6,096

2 Total APS 20,656 21,648 21,858 21,846 21,707

Contractor[3]

Defence Contractor 651 593 488 450 447

DMO Contractor 24 51 48 48 48

3 Total Contractor 675 644 536 498 495Total Workforce Strength (1+2+3) 102,204 103,695 104,172 104,506 105,038


13

AGENCY RESOURCES ANDPLANNED PERFORMANCE


Defence Materiel Organisation

Defence Housing Authority


14


15

DEPARTMENT OF DEFENCE

AGENCY RESOURCES AND PLANNED PERFORMANCE

Section 1: Overview and Resources

1.1 Strategic Direction Statement1.2 Defence Resource Statement1.3 Budget Measures1.4 Capital Investment Program1.5 Workforce

Section 2: Outcomes and Planned Performance

2.1 Outcomes and Performance Information

Section 3: Explanatory Tables and Budgeted Financial Statements

3.1 Explanatory Tables3.2 Budgeted Financial Statements


16


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DEPARTMENT OF DEFENCE

Section 1: Defence Overview and Resources

1.1 Strategic Direction Statement

Defence's primary focus continues to be to protect and advance Australia's strategic interests by providing military forces and supporting those forces in the defence of Australia and its strategic interests. To achieve this, Defence prepares for and conducts military operations and other tasks as directed by the Government.

Apart from the conduct of current operations, the Government's key initiative in 2011-12 will be implementing the Strategic Reform Program (SRP).

STRATEGIC REFORM PROGRAM

The SRP comprises a comprehensive set of reforms that will fundamentally overhaul the entire organisation, driving efficiency and creating around $20.6b in cost reductions over the decade from 2009-10 that are necessary to deliver Force 2030. This will deliver Australia a genuine strategic national advantage by significantly enhancing capability while constraining the call on national resources.

The program will:

• provide a vehicle for deep and enduring reform within Defence

• enhance management performance within Defence

• ensure that productivity within Defence is increased and able to be sustained, so that the maximum possible level of resources are directed to the front end of capability

• improve the way Defence does business, both in terms of efficiency and effectiveness

• help ensure that the goals set out in the White Paper are delivered.

Defence has successfully delivered the scheduled cost reductions and reforms without any adverse impact on capability or safety. In 2011-12, Defence will continue to focus on putting in place the necessary tools and mechanisms to track the progress of reforms and cost reductions while also monitoring any impacts on capability or safety. Capability and safety will not be compromised to deliver cost reductions. Furthermore, there will be an increased focus on ensuring that reforms are genuine and sustainable.

The delivery of Force 2030 and the deep reforms of Defence are considered national priorities for the Government. The Government continues to closely monitor the progress of the SRP, taking advice from the externally chaired Defence Strategic Reform Advisory Board and the Defence Audit and Risk Committee.

DEFENCE ACCOUNTABILITY AND PROJECT MANAGEMENT REFORM

Defence will implement initiatives aimed at improving Defence accountability. These will include implementation of the Government’s response to the Review of the Defence Accountability Framework undertaken by Dr Rufus Black. Initial priority will be directed to reforms in Defence project management to ensure that projects are monitored and controlled more effectively through their life-cycle, and that potential problems are identified and remediated early.


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CULTURAL REVIEWS

Continuing the work of making the Defence workplace safe and equitable for all is a key priority for 2011-12. A series of reviews have commenced into various aspects of the culture of the ADF and the Department of Defence, including the treatment of women.

DEFENCE MATERIEL ORGANISATION

The Defence Materiel Organisation (DMO) equips and sustains the Australian Defence Force (ADF) through the acquisition and sustainment of equipment. The DMO is currently managing more than 190 major acquisition projects and programs and more than 100 minor acquisition projects. It also provides sustainment for over 100 military fleets and commodities.

In 2011-12, the key priorities for the DMO will be:

• continuing support to ADF operations

• achieving the SRP’s targets for the DMO by continuing to:

- work with key customers (Navy, Army and Air Force) to reduce the cost of ownership of major Defence military fleets and commodities

- consult and engage with industry to jointly deliver savings and efficiencies

- reform internal functions to deliver savings and efficiencies

• improving performance on procurement and sustainment

• delivering the approved materiel elements of Defence Capability Plan (DCP) projects on time and on budget

• continuing implementation of the reforms resulting from the Defence Procurement and Sustainment Review (the Mortimer Review) and measuring outcomes.

The DMO has a major role in delivering on the SRP commitments through the Smart Sustainment Stream. Further information concerning the Smart Sustainment Stream is detailed separately under DMO’s Section 2 Outcomes and Planned Performance.


19

ORGANISATIONAL STRUCTURE

The following changes have taken place since the Portfolio Additional Estimates Statements 2010-11.

Senior Executive changes• With effect 14 January 2011, Mr Simeon Gilding ceased acting in the temporary position of Deputy

Secretary Strategy (Operations).

• On 16 May 2011, Mr Simeon Gilding transfers from his position as Principal Adviser (Afghanistan-Pakistan) to take up the position of Deputy Director Intelligence in the Defence Signals Directorate.

• On 16 May 2011, Mr Neil Orme transfers from his position as First Assistant Secretary Ministerial and Executive Coordination and Communication (MECC) to take up the position of Principal Adviser Afghanistan-Pakistan.

• On 2 May 2011, Ms Rebecca Skinner transferred from her position as First Assistant Secretary Strategic Policy to take up the position of First Assistant Secretary Ministerial and Executive Coordination and Communication.

• On 23 May 2011, Mr Michael Shoebridge will transfer from his position as First Assistant Secretary Defence, Intelligence and Research Coordination Division at the Department of the Prime Minister and Cabinet (PM&C) to take up the position of First Assistant Secretary Strategic Policy.

Organisational structure• With effect 17 January 2011, Mr Simeon Gilding reverted to an SES Band 2 position of Principal

Adviser (Afghanistan-Pakistan), providing high level policy advice on Afghanistan and Pakistan issues.

• With effect 17 January 2011, Mr Ben Burdon ceased acting as First Assistant Secretary International Policy Division and resumed his role as Assistant Secretary Major Powers and Global Interests Branch. Mr Andrew Nikolić assumed the position of First Assistant Secretary International Policy Division from 17 January 2011.

• With effect from 4 May 2011, MECC Division transferred from the Strategy Executive to the Strategic Reform and Governance Executive (SRGE) in the Office of the Secretary and CDF Group. The move of the MECC division to SRGE will help consolidate governance-related functions around the leadership of Mr Brendan Sargeant, Deputy Secretary SRGE .

DMO Senior Executive changes

There has been one change to the DMO senior leadership group since the Portfolio Additional Estimates Statements 2010-11:

• In January 2011, Ms Michelle Kelly commenced acting in the position of Head Commercial Enabling Services.


ents 2011-12

20 Figure 2: Defence organisational chart

(1) Statutory appointment.(2) Reports directly to the Minister for Defence in accordance with Section 196A of the Defence Force Discipline Act 1982.(3) The Inspector-General ADF is directly responsible to the Chief of the Defence Force (CDF).(4) Chief Audit Executive reports directly to the Secretary and CDF.(5) The Inspector-General Defence reports directly to the Secretary and CDF, and CEO DMO on investigative matters.

(6) Section 9(3) of the Defence Act 1903 requires the Service Chiefs to advise the Minister on matters relating to their command.(7) Deputy Secretary Strategic Reform and Governance is appointed as the Group Head for Office of the Secretary and Chief of the Defence Force Group to perform all the duties and exercise all the relevant delegations of that role. (8) Under the agreed business model for DMO as a prescribed agency, the CEO DMO Ministerial Directive identifies that the CEO DMO is directly accountable to the Minister for DMO’s performance but remains accountable to the Secretary and CDF.

Stars (*) refer to ADF Star rank or SES Band levels

Office of the Secretary & Chief of the Defence Force Group

Judge Advocate GeneralMAJGEN the Hon Justice

Richard Tracey** (1) (2)

Chief Judge AdvocateBRIG Ian Westwood

*(1) (2)

Director Military ProsecutionsBRIG Lyn McDade

*(1) (2)

Inspector-General DefenceMr Ray Bromwich

*(5)

Chief Audit ExecutiveMr Geoff Brown

**(4)

Inspector-General ADFMr Geoff Earley

**(1) (3)

Deputy Secretary Intelligenceand Security

Mr Stephen Merchant***

Chief Executive OfficerDefence Materiel Organisation

Dr Stephen Gumley(8)

Chief Defence ScientistProfessor Robert G. Clark

***

Deputy Secretary PeopleStrategies and Policy

Mr Phil Minns***

Deputy Secretary DefenceSupport

Mr Simon Lewis***

Chief Information OfficerMr Greg Farr

***

Chief Finance OfficerMr Phillip Prior

***

Chief Capability DevelopmentAIRMSHL John Harvey

***

(7)

Deputy Secretary StrategicReform and Governance

Mr Brendan Sargeant***

Deputy Secretary StrategyMr Peter Jennings

***

Chief of Joint OperationsLTGEN Mark Evans

***

Vice Chief of the Defence ForceLTGEN David Hurley

***(1)

Chief of NavyVADM Russ Crane

***(1) (6)

Chief of ArmyLTGEN Ken Gillespie

***(1) (6)

Chief of Air ForceAIRMSHL Mark Binskin

***(1) (6)

SecretaryDr Ian J Watt

****(1)

Chief of the Defence ForceACM Angus Houston

****(1)

Minister for DefenceThe Hon Stephen Smith MP

Minister forDefence Materiel

The Hon Jason Clare MP

Minister for Veterans’ Affairs andDefence Science and PersonnelThe Hon Warren Snowdon MP

Parliamentary Secretaryfor Defence

Senator David Feeney


21

1.2 Portfolio Resource Statement

Departmental funding is presented in serial 13 of Table 4. The total level of departmental funding in 2011-12 has increased by $744.5m to $26,559.8m compared with $25,815.3m in the Portfolio Additional Estimates 2010-11. Defence funding is comprised of:

• an appropriation for departmental outputs ($22,640.8m)

• an equity injection ($2,909.3m)

• prior year appropriation relating to Operations no-win no-loss 2010-11 activity ($8.0m)

• drawdown of appropriations carried forward from previous years ($6.4m)

• return of equity to government (-$58.0m)

• net capital receipts ($117.9m)

• own source revenue ($935.5m)

There are several measures and adjustments which have increased Defence's funding by $740.7m. These measures are reflected in Table 10: 2011-12 Budget Measures and Other Budget Adjustments and are summarised below:

• an increase of $1,100.2m for Operations

• a decrease of -$174.5m for savings measures

• a decrease of -$185.0m for other budget adjustments


ents 2011-12

22 Table 4: Total Defence Resourcing

Notes1. Previous year's outputs totalling to $2.1m (appropriation receivable) rolled up into Ordinary Annual Services.2. Prior Year Appropriation in 2011-12 is related to Operation no-win no-loss expenditure drawn in 2010-11 and appropriated in 2011-12 which will be returned to Government.3. The value of interest administered by Defence for Defence Housing Australia loans taking out prior to 30 June 2008.

Seria

l No. 2010-11

EstimatedActual

$'000

2011-12Previous Estimate

$'000

2011-12Budget

Estimate$'000

Variation$'000

Variation

%


$'000


$'000


$'000Defence resourcing

1 21,341,915 Appropriation for departmental outcomes 21,656,501 22,640,794 984,293 4.5 21,908,495 23,117,261 23,865,203 2 2,755,907 Equity injection appropriation 3,188,466 2,909,317 -279,149 -8.8 1,949,867 2,438,876 2,492,102 3 2,100 Prior year appropriation[1][2] - 8,000 8,000 - - - - 4 24,099,922 Current year's appropriation (1+2+3) 24,844,967 25,558,111 713,144 2.9 23,858,362 25,556,137 26,357,305 5 65,000 Draw dow n of appropriations carried forw ard 6,389 6,389 - - - - - 6 -2,100 Other appropriation receivable movements - - - - - - - 7 -93,269 Return to OPA -85,679 -58,026 27,653 -32.3 -112,951 -22,416 -22,783 8 -30,369 Funding from/to the OPA (5+6+7) -79,290 -51,637 27,653 -34.9 -112,951 -22,416 -22,783 9 24,069,553 Funding from Government (4+8) 24,765,677 25,506,474 740,797 3.0 23,745,411 25,533,721 26,334,522

10 154,749 Capital receipts 160,858 117,827 -43,031 -26.8 155,423 86,146 93,781 11 1,025,884 Ow n source revenue 888,791 935,515 46,724 5.3 925,354 967,089 1,008,364 12 1,180,633 Funding from Other Sources (10+11) 1,049,649 1,053,342 3,693 0.4 1,080,777 1,053,235 1,102,145 13 25,250,186 Total Defence funding (9 + 12) 25,815,326 26,559,816 744,490 2.9 24,826,188 26,586,956 27,436,667

Administered14 3,755,962 Administered special appropria ions 3,940,954 3,928,923 -12,031 -0.3 4,106,050 4,295,344 4,493,346 15 -1,226,966 Returns to the OPA -1,253,714 -1,292,077 -38,363 3.1 -1,361,415 -1,437,203 -1,515,091 16 1,200,271 Ow n source revenue 1,226,110 1,264,020 37,910 3.1 1,333,358 1,409,146 1,487,034 17 26,695 Interest earned for DHA loans[3] 27,604 28,057 453 1.6 28,057 28,057 28,057 18 44,100 Administered payments to CAC Act bodies - - - - - - - 19 3,800,062 Total Administered Funding (14+15+16+17+18) 3,940,954 3,928,923 -12,031 -0.3 4,106,050 4,295,344 4,493,346 20 29,050,248 Total Defence Resourcing (13 + 19) 29,756,280 30,488,739 732,459 2.5 28,932,238 30,882,300 31,930,013

Appropriation carried forward21

34,846 Appropriation receivable including previous year's outputs 20,457 20,457 - - 20,457 20,457 20,457

22 44,226 Cash in bank 52,226 52,226 - - 52,226 52,226 52,226 23 79,072 Total appropriations carried forward (21+22) 72,683 72,683 - - 72,683 72,683 72,683 24 29,129,320 Total Defence Resourcing (20+23) 29,828,963 30,561,422 732,459 2.5 29,004,921 30,954,983 32,002,696


23

Table 5: Defence Resource Statement—Budget Estimates for 2011-12 as at Budget May 2011

Notes1. Previous year's outputs totalling to $2.1m (appropriation receivable) rolled up into Ordinary Annual Services.2. Prior Year Appropriation in 2011-12 is related to Operation no-win no-loss expenditure drawn in 2010-11 and appropriated in 2011-12 which will

be returned to Government.

Seria

l No.

Estimate of prior

year amounts available

in 2011-12

$'000

+

Proposed at Budget

2011-12$'000

=

Total estimate

2011-12$'000

Actualavailable

appropriation

2010-11$'000

ORDINARY ANNUAL SERVICES[1]

Outcome 1 - 21,052,011 21,052,011 19,771,495Outcome 2 - 1,578,954 1,578,954 1,565,268Outcome 3 - 9,829 9,829 15,252

1 Total Departmental outputs - 22,640,794 22,640,794 21,352,0152 Total ordinary annual services - 22,640,794 22,640,794 21,352,015

OTHER SERVICES[1]

Departmental non-operatingEquity injections - 2,909,317 2,909,317 2,755,907Previous years' programs - - - -

3 Total Departmental non-operating - 2,909,317 2,909,317 2,755,907Administered non-operatingPayments to CAC Act bodies - - - 44,100

4 Total Administered non-operating - - - 44,1005 Total other services (3+4) - 2,909,317 2,909,317 2,800,0076 Total Available Annual Appropriation (2+5) - 25,550,111 25,550,111 24,152,022

SPECIAL APPROPRIATIONSSpecial appropriations limited by criteria/entitlement

Defence Forces Retirement Benefits Act, 1948 Part 1 s.15D and VIC , s.82ZJ - 30,000 30,000 35,000Defence Force Retirement and Death Benefits Act, 1973 Part XII, s.125 - 1,591,000 1,591,000 1,655,000Military Superannuation and Benefits Act, 1991 Part V, s.17 - 2,194,443 2,194,443 1,958,223Defence Force (Home Loan Assistance) Act, 1990 Part IV, s.38 - 3,547 3,547 3,789Defence Home Ownership Assistance Scheme Act 2008 Part VI, s.84 - 109,933 109,933 103,950

7 Total Special Appropriations - 3,928,923 3,928,923 3,755,9628 Total Appropriations (6+7) - 29,479,034 29,479,034 27,907,984

Funding from other sources - 2,297,826 2,297,826 2,354,922Returns to the OPA - -1,343,714 -1,343,714 -1,257,335Previous years' outputs (Appropriation Receivable) 34,846 -14,389 20,457 34,846Cash available[2] 44,226 8,000 52,226 44,226Dividends - 47,593 47,593 52,677

9 Total Other Available Resources 79,072 995,316 1,074,388 1,229,33610 Total Resourcing (8+9) 79,072 30,474,350 30,553,422 29,137,320

Special AccountsOpening balance - 78,306 78,306 120,305Appropriation receipts - - - -Appropriation receipts - other agencies - - - -Non-appropria ion receipts to Special Accounts - 62,355 62,355 30,099

11 Total Special Accounts - 140,661 140,661 150,404


24

Table 6: Third party payments to and from other agencies

DRAWDOWN OF APPROPRIATIONS CARRIED FORWARD

Table 7: Appropriations Receivable

Notes1. As published in Table 9 of the Portfolio Additional Estimates Statements 2010-11.2. Prior Year Appropriation in 2011-12 is related to Operation no-win no-loss expenditure drawn in 2010-11 and appropriated in 2011-12 which will

be returned to Government.

FUNDING FROM OTHER SOURCES

Own Source Revenue

Table 8: Variations in Own Source Revenue

Note1. As published in Table 10 of the Portfolio Additional Estimates Statements 2010-11.

2010-11$'000

2011-12$'000

Revenue received from Defence Housing Australia for the provision of goods and services (Departmental) 26,981 35,905Revenue received from Defence Housing Australia for interest on loans, dividends and competitive neutrality payments (Administered) 112,572 116,621Payments made to Defence Housing Australia for the provision of services (Departmental) 525,361 513,456Payments made to Defence Housing Australia for loans and equity injections (Administered) 44,100 -Payments made to Comsuper for the provision of services (Departmental) 29,325 28,860Payments made to the Australian Federal Police for the provision of services (Departmental) 47,808 43,514

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000

2012-13Forward Estimate

$'000


$'000


$'00026,846 Previous Estimate[1] 20,457 20,457 20,457 20,4578,000 Prior year appropriation transfer to 2011-12[2] 8,000 - - -

- Return to government -8,00034,846 Closing balance appropriation receivable 20,457 20,457 20,457 20,457

2010-11Estimated

Actual$'000

2011-12Budget

Estimate$'000


$'000


$'000


$'0001,025,394 Previous estimate[1] 888,791 924,639 966,219 1,007,336

490 Variation in ow n source revenue 46,724 715 870 1,0281,025,884 Own source revenue 935,515 925,354 967,089 1,008,364


25

Table 9: Variation in Estimates of Net Capital Receipts

Note1. As published in Table 11 of the Portfolio Additional Estimates Statements 2010-11.

2010-11Estimated

Actual$m

2011-12Budget

Estimate$m


$m


$m


$m62.1 Previous estimate[1] 76.1 70.7 44.4 36.3

-Movement in capital w ithdraw al associated w ith capital disposals program 27.7 -91.2 148.8 -

-Movement in proceeds associated w i h the capital disposals program -43.0 64.0 -128.5 35.6

- Variation in net capital receipts -15.4 -27.3 20.3 35.662.1 Total net capital receipts 60.7 43.4 64.7 71.9


26

PURCHASER-PROVIDER ARRANGEMENTS

Total Planned Payments to the DMO

Table 10: Total Planned Payments to the DMO

Seria

l No. 2011-12

Budget Estimate

$m

2012-13 Forward Estimate

$m


$m


$m

Total

$mPlanned Defence Capability Plan (DCP) approvals 647.1 1,174.0 2,658.0 3,443.4 7,922.4Approved Major Capital Investment Projects (AMCIP) delivered by he DMO 4,329.1 2,894.6 2,381.9 2,575.4 12,181 0

1 Total Major Capital Investment Projects 4,976.1 4,068.6 5,039.9 6,018.8 20,103.4Approved Navy minor projects 5.4 5.2 1.3 0.9 12 9Approved Army minor projects 48 5 35.2 8.3 3.1 95.1Approved Air Force minor projects 15 5 4.1 3.6 - 23 3Approved Joint Logistics Command minor projects - 0.2 - - 0 2Approved Chief Information Officer minor projects 4.1 1.3 - - 5 5Approved Office of the Secretary and CDF minor projects 0 2 - - - 0 2

2Sub-total approved minor program delivered by the DMO 73.9 46.1 13.1 4.0 137.1Unapproved Navy minor projects 22 2 24.1 27.4 28.1 101.7Unapproved Army minor projects 14 9 31.9 68.1 68.5 183.4Unapproved Joint Logistics Command minor projects 2.4 3.6 4.4 4.4 14 8

3Sub-total unapproved minor program planned for transfer to the DMO 39.5 59.6 99.9 101.0 299.9

4Total minor program (2+3) to be delivered by the DMO 113.4 105.7 113.0 105.0 437.0

5 Total acquisition (DMO Program 1.1) (1+4) 5,089.5 4,174.3 5,152.9 6,123.8 20,540.4Navy sustainment 1,435.7 1,483.1 1,385.7 1,389.6 5,694.1Army sustainment 1,614 0 1,250.1 1,234.0 1,274.2 5,372 2Air Force sustainment 1,657.7 1,555.8 1,567.1 1,615.5 6,396.1Chief Information Officer sustainment 43.6 54.0 70.3 71.2 239.1Vice Chief of he Defence Force sustainment 81.4 85.2 90.2 96.3 353.1Office of he Secretary and CDF sustainment 22.7 21.3 18.3 20.3 82.7Joint Operations Command sustainment 5 2 5.4 5.7 5.9 22 2Defence Support Group sustainment 27 0 27.0 27.0 27.0 108 0Future sustainment costs associated w ith AMCIP 122.7 238.0 605.9 839.9 1,806.6

6 Total sustainment (DMO Program 1.2) 5,010.0 4,719.9 5,004.2 5,340.0 20,074.17 Total planned payments to the DMO (5+6) 10,099.5 8,894.1 10,157.1 11,463.8 40,614.5


27

PAYMENTS TO DEFENCE HOUSING AUSTRALIA

Overview

Defence Housing Australia (DHA) provides housing and relocation services for ADF members. DHA has a formal agreement with Defence titled the Services Agreement for Housing and Related Requirements (the Services Agreement). The Services Agreement was amended in 2009 to incorporate the responsibility for the allocation and tenancy management of Service residences on behalf of Defence. Under the Service Agreement, DHA is to provide suitable housing for Defence members to meet the operational needs of Defence. Defence requires DHA to provide appropriate numbers of houses in suitable locations in accordance with Defence policy.

Control Arrangements

DHA is a statutory authority responsible, through its board, to the Minister for Defence and the Minister for Finance and Deregulation. It was established in 1987, commenced operations on 1 January 1988, and provides a range of housing and housing-related services to Defence and other Financial Management and Accountability Act 1997 agencies.

The Defence Housing Authority Amendment Act 2006 took effect on 23 November 2006. This act enables DHA to expand the scope of its operations to provide services that are ancillary to housing and housing-related services to both Defence and other Australian Government agencies as defined in the Financial Management and Accountability Act 1997. These changes created a smaller, streamlined and more commercially focused board.

Information on the DHA Board and Advisory Committee is available in the DHA section on page 212.

Resourcing

The 2011-12 estimate for the purchase of services from DHA is $513m as reported in Table 6 Third Party Payment .

1.3 Funding from Government

2011-12 BUDGET MEASURES AND OTHER BUDGET ADJUSTMENTS

Budget measures relating to Defence are detailed in Budget Paper No. 2 and are summarised in Table 11.

s to and from other agencies


ents 2011-12

28 Table 11: Defence 2011-12 Budget Measures and Other Budget Adjustments

Notes 1. Includes $8.0m of Prior Year Appropriation in 2011-12 relating to Operations2. Defence is absorbing $2.1m in 2011-12 and $1 9m in 2011-12. 3. Defence is absorbing $9.8m in 2011-12. 4. Defence is absorbing the cost.

Program2011-12

$m2012-13

$m2013-14

$m2014-15

$mTotal FE

$m2015-16

$m2016-17

$m2017-18

$m2018-19

$m2019-20

$m2020-21

$mTOTAL

$m

Budget MeasuresExpenditure MeasuresMiddle East Area of Operations - continuation of Australia's military contribution[1] 2 2 926.1 115.4 93.9 - 1,135.4 - - - - - - 1,135.4

to maintain security and stability 2.1 133.4 2 2 0.6 - 136.2 - - - - - - 136.2Solomon Islands - continued Australian Defence Force assistance to the Regional Assistance Misson to Solomon Islands 2.1 41 8 1 2 0.1 - 43.1 - - - - - - 43.1

[2] 2 2 -1.1 -1 9 -0.0 - -3.1 - - - - - - -3.1Coastal Surveillance - Operation Resolute[3] 3.1 - - - - - - - - - - - - Royal Australian Air Force Base Williamtown - Improving

[4] various - - - - - - - - - - - - Total Budget Measures 1,100.2 116.9 94.5 - 1,311.6 - - - - - - 1,311.6

Savings MeasuresIncreased efficiencies various -226.6 -320.7 -318.7 -319.1 -1,185.0 -268 2 -270 0 -286.5 -305.5 -309.0 -323.4 -2,947.7Efficiency dividend - temporary increase in he rate various -15 3 -30.4 -39.6 -49.6 -134.9 -45.6 -50.1 -47.3 -43.1 -42.5 -42.6 -406.2C-130J Hercules - cancellation of two additional aircraft various -2.4 -3 8 -16.9 -88.1 -111.3 -158.7 -144.1 -76.3 -24.7 -4.5 -0.5 -520.1Capital investment reprogramming various 69 8 -158 9 -323.8 -868.0 -1,280.8 841 0 1,001 0 411.0 136.0 - - 1,108.1Total Savings Measures -174.5 -513.7 -699.0 -1,324.8 -2,712.0 368.5 536.7 0.9 -237.4 -356.0 -366.5 -2,765.8Other Budget AdjustmentsUnited States Studies Centre - contribu ion various -0 3 -0 3 -0.3 - -1.0 - - - - - - -1.0

various -0.1 - - - -0.1 - - - - - - -0.1Overseas Property Office various -2 0 -2 0 -2.0 -2.0 -8.0 -2.0 -2 0 -2.0 -2.0 -2.0 -2.0 -19.9Foreign Exchange various -210 3 -194 2 -177.9 -168.6 -751.0 -242.7 -276 0 -286.5 -274.2 -283.6 -289 0 -2,403.0Property Disposals various 27.7 -91 2 148.8 - 85.2 - - - - - - 85.2

Total Other Budget Adjustments -185.0 -287.8 -31.5 -170.6 -674.9 -244.7 -278.0 -288.5 -276.2 -285.6 -291.0 -2,338.9Variation to Defence Funding 740.7 -684.7 -636.0 -1,495.4 -2,075.3 123.7 258.7 -287.6 -513.5 -641.6 -657.5 -3,793.1

Timor-Leste - continua ion of Australia's commitment to helping

Na ional Security - Baghdad Embassy - civilian security arrangements - final transi ion

National Disaster Recovery and Rebuilding - Commission of

Inquiry into Queensland Floods

aircraft noise management


29

Table 12: Budget Measures agreed since the 2010-11 Portfolio Additional Estimates[1]

Note 1. Budget Measures absorbed by the Department of Defence.

Measures agreed since Portfolio Additional Estimates Statements 2010-11

C-17 Globemaster III Fleet – acquisition of additional aircraft

The Government approved the purchased an additional C-17A Globemaster III aircraft from the 2011 United States Air Force production line. This additional C-17A aircraft will significantly enhance the Royal Australian Air Force's long range heavy airlift capacity and its ability to provide the Government with a wide range of options to support ADF operational tasks and in providing disaster relief and humanitarian assistance.

Recent events in Queensland and previous natural disasters in Australia's region have shown the C-17s to be an essential part of the Australian Government's capacity to respond to domestic and regional disasters. Additionally the C-17s continue to support Australian and Coalition forces in Afghanistan and the Middle East, meeting their primary purpose in providing military long-range heavy airlift.

Royal Fleet Auxiliary Largs Bay – acquisition

The Government agreed to the purchase of the Bay class amphibious ship Largs Bay which had become surplus to the United Kingdom (UK) requirements. Largs Bay represents a necessary boost to amphibious lift capability and will be able to respond to a range of regional short-notice contingencies, particularly natural disasters. This interim amphibious capability will replace the decommissioned HMAS Manoora and will be used until the introduction in to service of two Canberra class Landing Helicopter Docks (LHDs).

2011-12 Budget Expenditure Measures

Middle East Area of Operations - continuation of Australia's military contribution

Operation Slipper is the ADF's contribution to the international coalition against terrorism. The Government has provided $1,135.4m over the forward estimates for the net additional cost of extending the operation to 30 June 2012. The Government has continued its use of Reservists on this operation.

Timor Leste - continuation of Australia's commitment to helping to maintain security and stability

Operation Astute is the ADF contribution to assist the Government of Timor Leste in the restoration of stability, security and confidence to the country. The Government has provided $136.2m over the forward estimates for the net additional cost of extending the operation. The Government has continued its use of Reservists on this operation.

Solomon Islands - continued Australian Defence Force assistance to the Regional Assistance Mission to Solomon Islands

Operation Anode is the ADF's contribution to the Regional Assistance Mission to Solomon Islands. The Government will provide $43.1m over the forward estimates for the net additional cost of extending the operation until 30 June 2012. The Government has continued its use of Reservists on this operation.

Program

2010-11Revised

Estimate$m

2011-12Budget

Estimate$m

C-17 Globemaster III Fleet - acquisi ion of additional aircraft 1.4 - -Royal Fleet Auxiliary Largs Bay - acquisition 1.2 - -Total Budget Measures agreed since the 2010-11 Portfolio Additional Estimates Statements - -


30

Operation Kruger is the ADF's contribution to security for Australian Embassy personnel in Iraq. The ADF's security role will transition to a fully contracted security arrangement administered by the Department of Foreign Affairs and Trade. Defence will absorb the net additional cost of the operation and return to Government previous funding of $3.1m provided for Operation Kruger.

Coastal Surveillance - Operation Resolute

Operation Resolute is the ADF's ongoing contribution to Australian whole of government efforts to protect Australia's offshore maritime areas. It includes unauthorised arrivals, illegal fishing and smuggling. Defence will absorb the net additional cost of $9.8m extending the operation until 30 June 2012.

Royal Australian Air Force Base Williamtown - Improving aircraft noise management

This initiative is the development of options to address noise issues in the vicinity of RAAF Base Williamtown including the development and release of a new Australian Noise Exposure Forecast for the area surrounding RAAF Base Williamtown in 2025. Defence will absorb the cost associated with this budget measure.

Savings Measures

Increased efficiencies

The Government will realise additional efficiencies in corporate and support functions in the Defence portfolio, including through greater reductions in duplication and increased use of shared services.

This measure will result in savings of $1,185.0m over the forward estimates. Savings from this measure will be redirected to support other Government priorities and delivers on the Government's commitment to responsible economic management.

Efficiency dividend - temporary increase in the rate

The Government extended the application of the efficiency dividend for Defence portfolio, with an increase to the efficiency dividend from 1 per cent to 1.5 per cent in 2011-12 and 2012-13 and 1.25 per cent in 2013-14 and 2014-15.

This measure will result in savings of $134.9m over the forward estimates. Savings from this measure will be redirected to support other Government priorities and delivers on the Government’s commitment to responsible economic management.

C-130J Hercules - cancellation of two additional aircraft

The Government agreed to cancel the acquisition of two additional C-130J Hercules aircraft. This measure will save $111.3m over the forward estimates.

The latest Defence Capability Plan anticipated a final decision on acquisition of additional C-130J Hercules aircraft in the period 2013-2015. However, the opportunity to purchase an additional C-17 Globemaster aircraft from the 2011 United States Air Force production line has obviated the need for the acquisition of the Hercules aircraft. The C-17 will deliver increased lift capability earlier than planned.

Capital investment reprogramming

The Government will reprogram funding for the Defence capital investment program to better align it with Defence's strategic requirements. The reprogramming will result in savings of $1,280.8m over the forward estimates, to be reprogrammed beyond the forward estimates.

The reprogramming will support the Department of Defence in delivering the military capabilities set out under Force 2030, the Defence White Paper 2009.

National Security - Baghdad Embassy civilian security arrangements - final transition


31

Other Budget Adjustments

United States Studies Centre - contribution

Transfer to Prime Minister and Cabinet for Defence's contribution to the establishment of an USA Studies Centre. This will transfer $1.0m over the forward estimates.

Inquiry into Queensland Floods

Transfer to Attorney General’s Department for Defence's contribution to the Commission of Inquiry into the Queensland Floods. This will transfer $0.1m over the forward estimates.

Overseas Property Office

Following a review of the Overseas Property Office, the amortisation funding previously allocated to Defence will be discontinued and returned to the Department of Finance and Deregulation. This will return $8.0m over the forward estimates.

Foreign Exchange Movements

Under the 'no-win no-loss' arrangements, Defence is required to return to the Government any surplus foreign exchange supplementation for an appreciation of the Australian dollar relative to other currencies. Conversely, where the Australian dollar depreciated relative to other currencies, Defence is supplemented under these arrangements. Over the forward estimates a total of $751.0m will be returned to the Government under these arrangements.

Property Disposals

Adjustments have been made to the Property Disposal Program since the 2009-10 Budget that have resulted in Defence retaining $85.2 million over the forward estimates.

Natural Disaster Recovery and Rebuilding - Commission of


ents 2011-12

32 Table 13: Net Additional Cost of Operations from 1999-00 to 2014-15

Notes1. The 2010-11 Revised Estimate includes $6.0m for Up-Armoured Commercial Vehicles funded by Defence.2. The 2010-11 Revised Estimate includes $0.4m for Service Fee which has been directly appropriated by DMO.3. The Revised Estimate and Forward Estimates include foreign exchange adjustments.4. For 2011-12 Defence will absorb the cost of Operation Resolute.5. For 2011-12 and 2012-13 Defence will absorb the cost of Operation Kruger.6. An amount of $126.4m has been re-programmed from 2010-11 to 2011-12 to align sustainment funding with revised acquisition schedules.7. An amount of $6.9m is no longer required in 2010-11 as the acquisition was completed in 2009-10.8. An amount of $19.8m is no longer required as the acquisition was less than expected.9. An amount of $1.8m is being managed from 2009-10 due to acquisition schedule changes.

1999-00 to 2006-07 Actual Result

$m

2007-08 Actual Result

$m


$m


$m

2010-11 Revised

Estimate$m [3]

2011-12Budget

Estimate$m [3]


$m [3]


$m [3]


$m [3]Total

$mOperation Astute 3,405.5 205.6 164.7 144.9 170.5 160.2 10.7 0.9 - 4,263.0Operation Bel Isi 47.7 - - - - - - - - 47.7Operation Slipper[1][2] 805.3 394.9 701.9 1,125.3 1,251.1 1,221 8 299.6 139.2 - 5,939.2Operation Resolute[4] 96.9 7.0 10.0 10.3 15.3 9 8 - - - 149.3Operation Catalyst 1,560.7 501.5 290.9 11.4 - - - - - 2,364.5Operation Anode 148.2 23.7 25.1 27.9 42.6 43 5 1.4 0.2 - 312.5Operation Sumatra Assist 44.5 - - - - - - - - 44.5Operation Acolyte 10.5 - - - - - - - - 10.5Operation Deluge 2.7 4.0 - - - - - - - 6.7Operation Pakistan Assist 9.8 - - - - - - - - 9.8Operation Outreach - 12.3 2.3 - - - - - - 14.6Operation Kruger[5] - - - 29.8 13.2 2.1 1.9 - - 46.9Enhanced Force Protection in Afghanistan[6][7][8][9] - - - 80.3 355.6 482.4 190.6 - - 1,108.9Total Net Additional Costs 6,131.8 1,149.1 1,194.9 1,429.8 1,848.2 1,919.8 504.2 140.3 - 14,318.1Sources of Funding for Operations:Government Supplementation 6,122.0 1,127.5 112.5 1,386.7 1,576.7 1,551 9 311.7 140.3 - 12,329.4Department of Foreign Affairs and Trade 9.1 - - - - - - - - 9.1Department of Defence (Absorbed) 0.7 21.6 1,082.4 43.1 271.5 367 9 192.5 - - 1,979.7Total Cost 6,131.8 1,149.1 1,194.9 1,429.8 1,848.2 1,919.8 504.2 140.3 - 14,318.1


33

Operations Summary

The ADF is involved in a number of deployments around the world, including United Nations Peacekeeping, regional assistance missions, border protection and domestic security operations. The Government has provided $1,100.2m in 2011-12 for net additional cost of Operations. Defence plans to spend $1,437.4m in 2011-12 on Operations and $482.4m for enhance force protection capabilities in Afghanistan.

Middle East Area of Operations - continuation of Australia's military contribution

Operation Slipper is the ADF's contribution to the international coalition against terrorism. The Government has provided $1,221.8m in 2011-12 for the net additional cost of extending the operation to 30 June 2012. The Government has continued its use of Reservists on this operation.

East Timor - continuation of Australia's commitment to helping to maintain security and stability

Operation Astute is the ADF contribution to assist the Government of Timor Leste in the restoration of stability, security and confidence to the country. The Government has provided $160.2m in 2011-12 for the net additional cost of extending the operation until 30 June 2012. The Government has continued its use of Reservists on this operation.

Solomon Islands - continued Australian Defence Force assistance to the Regional Assistance

Operation Anode is the ADF's contribution to the Regional Assistance Mission to Solomon Islands. The Government will provide $43.5m in 2011-12 for the net additional cost of extending the operation until 30 June 2012. The Government has continued its use of Reservists on this operation.

Baghdad Embassy - transition towards civilian security arrangements

Operation Kruger is the ADF's contribution to security for Australian Embassy personnel in Iraq. The ADF's security role will transition to a fully contracted security arrangement administered by the Department of Foreign Affairs and Trade. Defence plans to spend $2.1m in 2011-12 for the net additional cost of the operation.

Coastal Surveillance

Operation Resolute is the ADF's ongoing contribution to Australian whole of government efforts to protect Australia's offshore maritime areas. It includes unauthorised arrivals, illegal fishing and smuggling. Defence plans to spend $9.8m in 2011-12 for the net additional cost of extending the operation until 30 June 2012.

Force Protection

The Australian Government is continuing its investment in enhanced force protection capabilities for our troops in Afghanistan. A comprehensive package of air combat, land forces, maritime forces and networked information capabilities will be delivered to ensure the Australian Defence Force of the 21st Century will have the capabilities required to meet future strategic challenges. Defence plans to spend $482.4 million in 2011-12 on enhanced force protection capabilities.


34

1.4 Capital Investment Program

The Capital Investment Program comprises the Defence Capability Plan (DCP), the Approved Major Capital Investment Program (AMCIP), the Capital Facilities Program, Other Capital purchases, and Retained Capital Receipts.

Table 14: Total Capital Investment Program

Notes1. Cross references with Table 10.2. Includes projects delivered by the DMO and Defence Groups and Services.3. Includes both Major and Minor Capital Facilities Program.4. This includes plant and equipment, Minor Capital Investment projects, infrastructure costs, non-capital facilities building projects, intangibles

and purchase of repairable items.5. The Capital Investment Program funding includes $60.7m (Budget Estimate) and $179.9m (Forward Estimates) in retained capital receipts.

Cross reference with Table 15.

MAJOR CAPITAL INVESTMENT PROGRAM

The Unapproved Major Capital Investment Program (also known as the DCP) is a costed, detailed development plan for Australia's military capabilities over a ten-year period. The plan is reviewed regularly to take account of changing strategic circumstances, new technologies and changed priorities, in the context of the overall Defence budget.

Further details in relation to the DCP can be found in Program 1.11 Capability Development.

The AMCIP consists of projects, usually costing more than $20m, which are funded from the DCP and which, following approval, are generally transferred to the DMO for the acquisition phase.

As an enabling organisation to the Department of Defence, the DMO contributes to the Department’s outputs. The DMO budget is detailed separately in Section 2: DMO Outcomes and Planned Performance, including an overview of the Top 30 Projects.

Seria

l No. 2011-12

Budget Estimate

$m


$m


$m


$mTotal

$mDefence Capability Plan

Planned payment to DMO for projects aw aiting Government approval[1] 647.1 1,174.0 2,658.0 3,443.4 7,922.4Other Defence groups 71.9 130.4 295.3 382.6 880 3

1 Total Defence Capability Plan 718.9 1,304.4 2,953.3 3,825.9 8,802.72 Approved Major Capital Investment Program[2] 4,409.6 2,939.9 2,406.7 2,585.3 12,341 53 Major Capital Investment Program (1+2) 5,128.6 4,244.3 5,360.0 6,411.3 21,144.1

Capital facilitiesApproved Capital Facilities Projects[3] 819.1 459.5 314.8 169.1 1,762 5Unapproved Capital Facilities Projects 361.2 704.8 570.6 434.2 2,070.8

4 Total Capital Facilities Program 1,180.3 1,164.3 885.4 603.3 3,833.45 Other investment[4] 739.8 787.9 924.4 378.4 2,830.56 Total Capital Investment Program (3+4+5)[5] 7,048.6 6,196.6 7,169.8 7,392.9 27,808.0

Capital component 6,665 9 5,749.4 6,474.1 6,545.5 25,434.9Operating component 382 8 447.1 695.7 847.5 2,373.0


35

CAPITAL FACILITIES PROGRAM

The Capital Facilities Program comprises approved and unapproved projects. This program gives priority to projects that support the AMCIP, sustain current capability requirements, support other Government initiatives, meet legislative obligations and assist initiatives that support Defence personnel. A significant proportion of the program funding is directed towards the provision of basic engineering and infrastructure services either in support of new projects or upgrades to existing facilities.

Further details in relation to Capital Facilities can be found in Program 1.6 Defence Support.

OTHER INVESTMENT

Other Investment consists of Plant and Equipment, including Information and Communication Technology equipment, Minor Capital Investment projects, infrastructure costs, non-capital facilities building projects, intangibles and purchase of repairable items. Minor capital projects cover new equipment, modifications to existing equipment or enhancements to new equipment. After approval, funding for minor projects is generally transferred to the DMO for the acquisition phase. Defence plans to spend $739.8m on other investment in 2011-12 as part of the $2,830.5m in spending over the Budget and forward estimates period.

RETAINED CAPITAL RECEIPTS

Table 15: Retained Capital Receipts

Seria

l No. 2011-12

BudgetEstimate

$m


$m


$m


$mTotal

$mProperty Sales

Proceeds from the sale of land and buildings 68.8 105.9 28.7 35.6 238 9Proceeds from the sale of housing 20.3 20.8 21.3 21.8 84 3Less capital return to Government -57.1 -112.0 -21.5 -21.9 -212.6

1 Proceeds retained by Defence 32.0 14.6 28.5 35.5 110.62 Proceeds from the sale of specialist

military equipment - - - - -3 Proceeds from the sale of infrastructure,

plant and equipment 28.7 28.7 36.2 36.4 130.04 Retained Capital Receipts (1+2+3) 60.7 43.4 64.7 71.9 240.6


36

1.5 People

WORKFORCE OVERVIEW

People in Defence - Generating the Capability for the Future Force provides Defence’s our first response to the Government's requirement to develop a strategic-level approach to People matters. It offers a vision for attracting and retaining People and provides guidance on Defence’s key People objective, namely to deliver sustainable People capability to Defence. It also provides guidance on efficiency savings to be achieved through the Human Resources Workforce and Shared Services stream of the Strategic Reform Program.

The Annual People Plan, which was first published in 2010-11, is the detailed implementation plan that supports our People vision. It describes the People related projects and initiatives being led by People Strategies and Policy Group (PSP) and undertaken across Defence to deliver a compelling and attractive employment offer, develop a work environment that delivers our commitments to our People and build an efficient and effective People system comprising policies, structures, processes, systems, behaviours and partnerships that enable us to more consistently deliver our commitments.

Against this, the challenge for Defence is to meet workforce requirements within the context of continuing relatively high operational tempo, skills shortages in a range of occupations and under the backdrop of an uncertain and challenging economic environment and outlook. While recruitment and retention initiatives have proven to be particularly successful in the past 12 months, there is no guarantee that this will continue into the future. However, through the implementation of Annual People Plan projects and initiatives, Defence will continue to work towards meeting its recruitment targets and maintaining low separation rates. In particular, Defence will seek to redress shortages within its critical categories and target women, indigenous Australians and those from non English speaking backgrounds to consider Defence careers.

Continuing the work to make the Defence workplace inclusive and diverse is a priority for 2011-12. A number of reviews will be conducted and will target issues relating to the treatment of women in the ADF, Leadership pathways for women in the ADF and APS, the use of alcohol in the ADF, the impact of social media on Defence, and personal conduct issues in the ADF.

ADF Workforce

To support the introduction of new capability over the coming decade, the full-time ADF workforce will approximately maintain the strength it has achieved through recent growth, of around 59,000 members, with some marginal adjustments year by year. Key projects contributing to recent increases in the size of the military workforce include the Hardened and Networked Army and stages 1 and 2 of Enhanced Land Force, as well as a range of initiatives arising from the 2009 White Paper. Against the growth are reductions in budgeted staffing due to civilianisation of military positions, Economy and Efficiency measures and the withdrawal from service of the F-111.

While the number of permanent ADF staff will decrease from 2010-11 to 2011-12, it is still projected to be 801 over the budgeted ADF workforce for 2011-12. This assumes budget coverage for Army of 704 Reservists on Operational Continuous Full Time Service, noting that this is a planning figure yet to be confirmed by Government. The overachievement is due to the unprecedented low separation rates experienced as a result of the successful Retention and Recruitment initiatives combined with the effects of the global economic downturn. A management plan is in place to return the ADF workforce to the budgeted size by the end of 2012-13.


37

Australian Public Service Workforce

The 2009 White Paper and 2010 Strategic Reform Program (SRP) Workforce and Shared Services Reform diagnostic program resulted in net increases to Defence's Australian Public Service (APS) workforce in the years to 2013-14. There are two main drivers for the increases: the need to invest in specific Force 2030 capability development initiatives, and the need to support SRP related reforms to the Defence workforce mix, creating significant organisational cost savings. The workforce reforms comprise:

• the civilianisation of more expensive non-combat-related ADF roles

• conversions within the civilian workforce from contractors to less costly APS positions.

Additional growth also results from underachievement against the budgeted workforce in 2010-11 leading to a deficit to be made up in 2011-12, and a minor increase in the APS workforce for Defence programs associated with Government 2010 election commitments.

In parallel with these growth factors, reductions to the net APS workforce will result from

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