15. The data reviewed in the PDSSs centre on three major dimensions of project performance: budgeted cost, schedule, and progress towards delivering the planned capability.
16. The ANAO's analysis indicates that maintaining Major Projects on schedule remains the major challenge for the DMO and industry contractors, affecting when the capability is made available for operational release and deployment. DMO data indicates that at 30 June 2010, the total time for the 22 Major Projects to achieve their final operational capability (FOC) date is expected to be almost one third longer than was originally planned.7
17. The management of projects' budgeted cost is, to a significant degree, assisted by routine supplementation to deal with both price changes (via price indexation) and foreign exchange movement (via a whole-of-government 'no win, no loss' policy); and the coverage of certain operating costs, such as staffing, from outside projects' budgeted cost. In this context, while projects' budgeted cost requires careful management by the DMO, this dimension of project performance has not been a major issue.8 None of the Major Projects in this report have exceeded their approved budgeted cost.
18. The DMO believes it is likely to deliver almost all the key capabilities associated with the Major Projects in this report.9 This assessment by the DMO was outside the scope of the ANAO's review as explained in paragraph 9.
19. Table 3 provides aggregate DMO data on the approved budgeted cost, schedule performance and progress toward delivering capabilities for the Major Projects covered in this year's report.
Table 3
2007-08, 2008-09 and 2009-10 MPR Headline Data: Approved Budgeted Cost, Schedule Performance and Progress Towards Delivering Capabilities
| 2007-08 Major Projects Report | 2008-09 Major | 2009-10 Major Projects Report |
Number of Major Projects | 9 | 15 | 22 |
Total Approved Budgeted Cost | $ 13.5 billion | $37.8 billon | $40.8 billion |
Approved Budgeted Cost Increase/Decrease (In-Year) | $1.1 billion | $4.8 billion | -$3.3 billion |
Schedule Performance ▪ Total Slippage | 308 months | 378 months | 688 months |
▪ Average Slippage per Major Project | 39 months | 25 moths | 34 months |
▪ In-year Schedule Slippage | - | 119 months | 39 months |
Progress toward Delivering Key Capabilities ▪ High level of confidence that will be delivered (Green) | 80 per cent | 86 per cent | 89 per cent |
▪ Under threat but still considered manageable (Amber) | 13 per cent | 13 per cent | 10 per cent |
▪ At this stage unlikely to be met (Red) | 7 per cent | 1 per cent | 1 per cent |
Sources 2007-08 MPR Parts 2 and 3; 2008-09 MRP Parts 2 and 3; 2009-10 MPR, Parts 2 and 3.
Note 1: | As the data for the 22 Major Projects in the 2009-10 MPR compares results with a subset of projects in the 2008-09 MPR (15 of the current 22 Major Projects) and a further subset of projects in the 2007-08 MPR (nine of the current 22 Major Projects), a comparison of the data across years should be interpreted in this context. |
Note 2: | ^This figure relates to the 15 Major Projects in the 2008-09 MPR and the schedule variation of 39 months that occurred with these Major Projects in 2009-10. |
Note 3: | The grey section of the table covers data that is not within the scope of the ANAO's assurance review. |
_____________________________________________________________________
7 FOC is the point in time at which the final subset of a capability system that can be operationally employed is realised. FOC is a capability state endorsed by the government at Second Pass Approval and reported as having been reached by Defence's capability manager (usually the Service Chief). Major capital equipment can be in Defence service use before formally achieving FOC, such as in the case of Bushmaster vehicles which are in active use by the ADF but have not achieved FOC.
8 In the 2009-10 MPR, the DMO is reporting less than one per cent negative variation in the total budgeted cost of the 22 Major Projects. Net variation involves budgeted cost movements between Second Pass Approval to 30 June 2010 that are not due to price indexation, foreign exchange, government approved scope changes and transfers to other areas of Defence. See 2009-10 MPR, DMO Executive Summary, Table 1.
9 The one key capability the DMO reports will not be met is the performance level required for the phased array radar on the Wedgetail project, at final delivery.