Defence Department reforms set to usher in new era with creation of Defence Delivery Agency

A new agency dedicated to delivering complex multi-billion-dollar military projects “on time and on budget” will be established by the Albanese government but won’t be operating fully independent from Defence for another 18 months.

On the same day Defence Minister Richard Marles announced sweeping changes to his department, he also confirmed the military was tracking a Chinese naval task group in the Philippine Sea which could be headed for Australia.

Under the biggest changes to the defence bureaucracy since the 1970s, three underperforming acquisition agencies in the department will soon be absorbed into a new “delivery” body that will eventually report directly to government.

The Capability and Sustainment Group (CASG), the Guided Weapons and Explosive Ordnance Group (GWEO) and the Naval Shipbuilding and Sustainment Group (NSSG) will be integrated into a new independent Defence Delivery Agency by July 2027.

Initially the three agencies will be merged in July next year into a Defence Delivery Group inside the department, to be run by a British-style National Armaments Director, before becoming a stand-alone organisation the following year.

“The establishment of the defence delivery agency will see a much bigger bang for buck for the defence spend, and that is at the heart of the decision that we have made,” Mr Marles declared.

“It will make sure that as we spend more money in the defence budget, we are doing so in a way which sees programs delivered on time and on budget”.

Defence Industry Minister Pat Conroy described the impending organisational shakeup, which will begin in six months, as the “biggest reform to the defence organisation in 50 years”.

“These reforms, historic in nature … will deliver with speed the capability to the men and women of the ADF, making sure that the record increase in the defence budget will be spent wisely,” he said.

A deteriorating security environment in the Indo-Pacific, and a string of past troubled defence projects including the Hunter class frigates, Offshore Patrol Vessels and Army’s battle management system have underscored the urgency to revamp procurement.

Asked by The Nightly whether the new changes amounted to shifting military acquisition further away from Australia’s war fighters, the defence minister denied that was the case.

“I think that this is actually ensuring that we have an agency which gets capability into the hands of the war fighter much more quickly. And what it’s about is making sure that project delivery is moved much closer to Government”.

Immediate job losses have been ruled out, but The Nightly has been told that numerous senior figures responsible for capability delivery are expected to be moved on when the new Defence Delivery body begins operating next year.

Earlier this year it was reported that military service chiefs had been directed to cut 1-star and above positions by 30 percent, with a similar reduction considered for defence public service staff, which would equate to roughly 270 people shown the door.

A recent review of the Australian Submarine Agency which sits outside the Defence Department is understood to have made strong criticisms of the agency which oversees the AUKUS endeavour to acquire nuclear-powered submarines.

Sources familiar with former Defence official Defence Richardson’s findings, say he has made numerous recommendations on how to improve the direction of the agency which sits outside the Defence Department.

Shadow Defence Minister Angus Taylor claimed Monday’s announcement by the government did nothing to help Australia’s military which he described as “chronically underfunded”.

“The focus has to be on getting equipment and capability into the hands of our brave men and women who are prepared to fight for our country. And there is nothing in this announcement that gives us any confidence that we will be any closer to where we need to be on that.”

Members of Australia’s military community have given mixed reactions to the long-anticipated shakeup, with some pointing out that the Defence Department was largely returning to changes made by the former Coalition government a decade ago.

“It’s the same merry go round. The thing that’s not changing is that it’s the same people running the organisation and the projects,” says former defence official Dr Marcus Hellyer.

“We are back to where we were over a decade ago when the former Defence Material Organisation was a separate agency, and it was hived off as a statutory agency then brought back in again and renamed CASG,” he tells The Nightly.

“Then we had Naval Shipbuilding and Sustainment Group and GWEO split off, and now they are being rolled back in again and CASG is being separated off again – all into a new super statutory agency”.

Greens Senator David Shoebridge was also scathing of Labor’s shake-up describing it as being akin to “moving the deck chairs on the Titanic”.

“Of course, there must be independent oversight of defence procurement. However, reporting to the Minister of Defence is hardly independent, the Minister is already in charge of the procurement mess.

“The same group of people who have overseen Defence’s procurement mess are the same people who will head this new agency. That is not fixing an issue, it’s just moving it along and popping a different name tag on it.

Other defence insiders are more accepting of the changes to defence procurement, arguing current approaches were no longer working, and peacetime settings for acquisition needed to be adjusted to meet a more difficult strategic environment.

“Success will be measured in two ways; firstly, whether ministers can unlock greater funds from Treasury and Finance - thus convincing their colleagues that there will be greater rigour and efficacy in Government spending”, says one industry figure. “Then secondly, and in the longer term, they’ll need to ensure the ongoing issues of poor financial and program management are resolved by the new changes,” the industry representative added.

Monday’s announcement of sweeping changes to military procurement came as Mr Marles also confirmed a recent report that another Chinese naval task group was being monitored in the Philippine Sea in case it was headed to Australia.

“We maintain constant maritime domain awareness in our geographic areas of interest,” Mr Marles said, referencing the Australian Financial Review’s report last Thursday about warships from the People’s Liberation Army-Navy (PLA-N).

“We will routinely monitor the movements of PLA vessels when there are movements such as this. We will monitor them particularly until we know they are not coming in the vicinity of Australia.”