casg cost principles

The 2012 Coles Report identified five root causes of problems with the sustainment of Collins Class Submarines, and made 25 recommendations.196 Based on the ANAOs analysis, the recommendations with potentially broader application across Defence sustainment are listed below. 2.16Two recent reviews of the operations of Systems Program Offices have identified major challenges for the future management of sustainment. Ten such products are listed in the report for the subsequent quarter (July September2016). For example, the category listed in the PBS Helicopters, Tactical Unmanned Aerial Systems and Guided Weapons no longer appears and the items are distributed among other categories. Military units also undertake some operational-level sustainment activities. The minute did not inform the minister that the SPMS had been under development for over two years at that point. Other reforms flowing from the First Principles Review remain underway: 30. It pointed out that a similar contract with a counterpart organisation in another jurisdiction included a performance element where Bechtels fee was based on outcomes achieved. [12] Gumley had headed an executive team of around 20 senior managers. through read-across of data). 5.57A briefing to DMO Division Heads in September2011 summarised the shortcomings of Defences approach to sustainment in the absence of an asset management approach: 5.58In 2011, DMO set about developing a Sustainment Business Model drawing on generically applicable asset management principles.179 There is then little evidence of substantial progress of the project for some years. The Coles Review (2012) used benchmarking against international comparator navies to review the sustainment of Defences Collins Class submarines.a The Coles team used data from an international benchmarking report compiled by Defence to compare the performance of the Collins Class boats against submarine fleets of international navies. 200.408 Limitation on allowance of costs. 100Defence, First Principles Review, p. 14. The effectiveness of the reforms implemented following the 2003 Defence Procurement Review (the Kinnaird Review) were evaluated in 2008 by the Defence Procurement and Sustainment Review (the Mortimer Review).198 Mortimer made specific recommendations to improve sustainment, including that Defence create an independent Sustainment Efficiency Office to measure, benchmark, and find ways to improve the efficient delivery of sustainment. 197The 2012 Coles Review characterised the recommendations from 2012 report as Strategic, Management or Operational recommendations. (LIFO) Definition: The Inventory Cost Method Explained. In the Quarterly Performance Report, Defence does not identify the Tiger as an under-performing acquisition or sustainment project, even though the other sources suggest just that. This form of measure is applicable to Aviation related products only measured as a percentage achieved against planned reflects the reliability of the Mission System and the Support System. Systemic issues identified by Defence from the reviews of Systems Program Offices to date are set out in Box 3. 183Defence, minute Effective implementation of asset management in Defence, 17 September 2015. 5.38Major industry organisations have continued to urge Defence to progress performance-based contracting as a means of improving capability while reducing sustainment costs. 51Defence, CA12Armed Reconnaissance Helicopter (ARH) Weapon System, Sustainment Performance Gate Review, 8 July 2016. PDF Cost Principles: Allowable Costs Uniform Guidance 2 CFR 200 Top Cash Management Strategies to Manage Cash Effectively Other reforms flowing from the First Principles Review remain underway: Defence has also been developing its approach to asset management over many years, having obtained substantial advice from internal and external sources to adopt a Defence-wide asset management strategy to underpin a sustainment business mode for specialist military equipment. 5.42A design guide for the establishment of the Centres of Expertise has been produced and initial establishment of these centres is scheduled for April2017, with the establishment of a balanced matrix expected to be over a two-year period.158. Defence does not yet have a completed register of its acquisition and sustainment contracts though, since January2016, it has had a facility in place and had commenced populating it. 200.410 Collection of unallowable costs. This historic cost of an asset is used to provide reliable and consistent records. 16. Defences second corporate plan prepared under the Public Governance, Performance and Accountability Act 2013 (PGPA Act) identifies sustainment more clearly than in the first corporate plan. 3.50To assess Defences public reporting for the sustainment of specialist military equipment, the ANAO considered: 3.51The Public Governance, Performance and Accountability Act 2013 (PGPA Act) aims to improve the line of sight between what was intended and what is delivered. Accountability and Transparency in procurement Defence should give sustainment much higher attention and priority during the initial phases of the assets life cycle (Needs, Requirements, and Acquisition). Following the First Principles Review, Defence first engaged Bechtel from October2015 to April2016 (extended to June2016) to provide initial implementation help.128. Maintenance Completion (tasks) to Plan is an output measure, which directly reflects achievement against the Materiel Confidence outcome. Typically, sustainment entails repair and maintenance, engineering, supply support and disposal of equipment and supporting inventory.4 Effective sustainment of naval, military and air assets is essential to the preparedness of the ADF and to enable Defence to conduct operations in accordance with the Governments requirements.5, 1.2Defence has commented that sustainment management is not a technical discipline: it is an over-arching business-oriented management function focused on meeting the outcomes required of Capability Acquisition and Sustainment Group customers.6. 28The same issue continues to arise. 209Defence, Defence and Industry Policy Statement 2007, p. 28: Defences in-house S&T organisation, DSTO, enables the ADF to be a smart buyer, user and adaptor of military technology. The cost principles The government-wide principles, issued by OMB (or, in the case of commercial organizations, the Federal Acquisition Regulation [48 CFR 21], or, in the case of hospitals, 45 CFR 75, Appendix IX, "Principles For Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals"), on allowability and unallowability of costs under federally sponsored agreements. [4][3]. In its 201415 Annual Report, Defence claimed to have achieved $2billion of savings from the initiative in its first five years. Rate of Effort / Aircraft Availability Achievement. Therefore it did not take into account any reductions (or increases) in staff costs in assessing that programs outcome. 3.53Commonwealth entities must reportin an annual performance statementtheir actual results against the planned performance criteria outlined in their corporate plan and Portfolio Budget Statements. Measures the number of occurrences where Cannibalisation was approved by the Capability Manager Representative. This Key Health Indicator measures the cost growth associated with individual External Maintenance Period. This was the case with the earlier Smart Sustainment reforms. 5.51In its implementation of the smart buyer concept, Capability Acquisition and Sustainment Group does not clearly articulate the competencies required to specify outsourcing requirements. 5.21The report found that the lack of Systems Program Office commonality added complexity, blurred accountability and confounded the ability to build enterprise solutions for common services. However, the departments approach to monitoring savings does not provide sufficient information to determine whether that occurred, and how the reported savings were achieved. 198Defence, Going to the Next Level, the report of the Defence Procurement and Sustainment Review [Mortimer Review], 2008, p. 46. Examples include B Vehicles (Land Rovers, G-Wagons), Direct Fire Support Weapons, Aeronautical Life Support Equipment and Command and Support SystemsMaritime. This has been achieved while managing risks to national security.2. This includes the capacity to adequately direct, supervise, and monitor contracts. Box 7: The current Defence definition of smart buyer. Unclear lines of responsibilityMany key sustainment roles and responsibilities were not clearly defined or understood, from both an individual and organisational perspective. During 2012 DMO endeavoured to capture and model the expected cost of ownership for the 47 MRH90 aircraft over the planned life of the aircraft. According to generally accepted accounting principles (GAAP), manufacturing overhead must be included in the cost of Work in Process Inventory and Finished Goods Inventory on a manufacturer's balance sheet, as well as in the Cost of Goods Sold on its income statement. 5.17As set out above (paragraph 5.8), the activities most likely to affect the management of sustainment are: 5.18When Defence established Systems Program Offices in 2000 as the focus of the newly created DMO, Systems Program Offices were to have the following characteristics: 5.19Defence has more recently (April2016) defined Systems Program Offices as: a business unit that works directly with Capability Managers and Suppliers as necessary to deliver agreed capability across the [Capability Life Cycle], coordinating the [Fundamental Inputs to Capability] elements required to achieve this objective.133. General Provisions for Selected Items of Cost: 200.420 - 200.476 200.420: It terminated upon the delisting of DMO. Defence has had no central facility to maintain a register of contracts for sustainment (or, indeed, acquisition) until January2016. In July 2005, DMO became a Prescribed Agency under Australian Financial Management and Accountability legislation, meaning that although it remains a part of the Department of Defence, it was separately accountable to the Minister of Defence for its budget and performance. 136Defence advised the ANAO in March 2017 that examples of fully outsourced models in the Air Domain include AEW&C, C-17, the Lead-in-Fighter and the Heron Unmanned Aerial System. 43 199798, Lifecycle Costing in the Department of Defence, examined Defences 1992 policy on lifecycle costing, finding that while Defences policy and procedures advocate the use of whole-of-life costings in acquisition decisions, in practice, Defences use of whole-of-life costing was uneven. To form a conclusion against the audit objective, the ANAO adopted the following high-level criteria: 5. An output measure, which directly reflects achievement against the Materiel Availability outcome. Please direct enquiries relating to reports through our contact page. Primary impact will be on achievement of Materiel Ready Days (Materiel Availability outcome) with secondary impact upon Sustainment Efficiency outcome as alternate supply chain or cannibalisation will be required. Defence has not implemented measures of efficiency and productivity for all sustainment products. A Smart Buyer collaborates with Industry and engages early and throughout the Capability Life Cycle. 2.11A simplified representation of the essential relationship among elements responsible for the sustainment of specialist military equipment is in Figure2.1 below. Develop an Asset Management Strategy for sustainment.

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