3.3 Gate Reviews, undertaken at specified points in a project's life cycle, were being implemented in 2008 (during the time of the Mortimer Review) for selected high value and highly complex projects.87 Their purpose is to provide a mechanism whereby, particularly in respect of critical 'gates', the Chief Executive Officer (CEO) of the DMO is provided with assurance that all the identified risks for a project (cost, schedule, technical/capability) are manageable, and that the project is ready to proceed to the next stage.88
3.4 Following the initial limited implementation of the Mortimer recommendation, where Gate Reviews were largely ad hoc, the decision was made to strengthen the process and expand it to all Major Projects managed by the DMO at least once a year. This expansion followed a directive from the Government in July 2011 through the establishment of an Independent Project Performance Office (IPPO)89, whose responsibilities also included overseeing the remediation of all Projects of Concern and implementing the new Early Indicator and Warning system designed to help identify and correct potential problems with projects.90
3.5 Gate Reviews are undertaken by DMO-appointed Gate Review Boards which normally comprise senior line management, relevant people with key skill sets from other parts of the DMO, and at least two external independent members with extensive Defence or commercial experience. For Acquisition Category (ACAT) I and II projects and selected ACAT III and IV projects, the IPPO will appoint a Senior Project Analyst to conduct an independent analysis of preparedness and identify key issues to bring to the Board's attention.91
3.6 Accountability for the conduct and findings of a Gate Review rests with the Chair who, on completion of the review and on advice from the Board, will make a formal recommendation to the relevant DMO executive as to the fitness of the project to proceed to the next stage in the project life cycle. Gate Review Board clearance may be conditional on the completion of a number of actions noted during the Board meeting.
3.7 Gate reviews are mandatory for Major Projects at six specified gates and optional at other gates, depending on the outcomes of the project risk assessment. A project is not permitted to proceed to the next stage of its life cycle until it is cleared by the Gate Review Board. Mandatory gates are: Defence Capability Plan entry; Options Review Committee consideration; First Pass Approval; Second Pass Approval; Contract Solicitation; and Contract Negotiation. To date, some fifty projects have been subjected to Gate Reviews, including ten in the 2010-11 MPR.92
3.8 The ANAO assessed the material considered in the Gate Reviews and the outcomes of each review conducted to gain assurance that the information presented was consistent, in all material respects, with the information in the 2010-11 MPR. Part of the assessment revealed the developmental nature of the MRH90 helicopter system, and therefore the misclassification of the type of purchase as Australianised MOTS (AMOTS). The review conducted in April 2011 was directed to address delays to the project due to a series of key issues. A further review was conducted in September 2011 to examine the effectiveness of the action taken and whether further action was necessary to remediate the project.93
3.9 In 2011-12 the ANAO will further assess the Gate Review process for potential efficiencies in our review procedures. Additionally, a performance audit to examine and report on the development and effectiveness of DMO's implementation of the enhanced Gate Review processes and the associated administrative arrangements is currently underway.
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87 Defence Procurement and Sustainment Review 2008, p. 35.
88 A gate is a key project decision point or milestone.
89 Minister for Defence, the Hon. Stephen Smith MP, and the Minister for Defence Materiel, the Hon. Jason Clare MP, Independent Project Performance Office to oversee major Defence projects established, June 2011.
90 Minister for Defence, the Hon. Stephen Smith MP, and the Minister for Defence Materiel, the Hon. Jason Clare MP, Strategic Reform Program, 6 May 2011.
91 The DMO categorises its acquisition projects into one of four Acquisition Categories (ACATs) to differentiate between the complexity of business undertakings, focus management attention, provide a basis for professionalising its workforce and facilitate strategic workforce planning.
92 AWD Ships, MRH90 Helicopters, LHD Ships, Joint Strike Fighter, Hornet Upgrade, High Frequency (HF) Modernisation, ANZAC Anti-Ship Missile Defence (ASMD) Phases 2A and 2B, Stand Off Weapon and 155mm Howitzer.
93 Minister for Defence Materiel, the Hon. Jason Clare MP, Diagnostic Review of MRH-90 Multi Role Helicopter Program, 16 September 2011.