1.70 Defence capital equipment acquisition contracts are generally written on a variable price basis reflecting their long-term nature and risk allocation. Such contracts include a base date, being the date agreed as the basis of the fixed contract price (usually a date specified in the tender documents to ensure comparability of responses), and agreed conditions under which this price can be varied (usually conditions concerning contract price adjustment for foreign exchange variation and indices to calculate contract price adjustment for movement in the cost to the contractor of labour and materials).
1.71 In this, the third MPR, the Auditor-General has again qualified the DMO as certain 'base date' figures for expenditure and contract price have not been disclosed in the PDSS. This qualification relates solely to the non- disclosure of 'base date' information and does not indicate or infer any deficiencies in the adequacy of the DMO's management of project expenditure or non-compliance with Australian accounting requirements.
1.72 The Defence Materiel Accounting Policy Manual provides a reference for the accounting policies applicable to financial transactions in the DMO. These accounting policies recognise the requirements of Australian Accounting Standards, Australian Government legislation, and the Finance Minister's Orders for Financial Reporting (FMOs), issued by the Minister for Finance and Deregulation. DMO compliance with accounting policies is confirmed by the ANAO providing an unqualified audit report for the DMO's 2009-10 financial statements.
1.73 As indicated in previous MPRs, the standard project management and performance reporting requirements for DMO projects do not require management and/or reporting in base date dollars. Hence, projects report performance to our stakeholders in current-day dollars. The conversion of financial data, particularly contract expenditure, into base date dollars for a number of MPR projects has proven a time consuming and costly exercise, offering limited value for project management outcomes.
1.74 Notwithstanding the difficulties in providing base date dollar information, the DMO has expended considerable effort to report, where practicable, base date dollar amounts within the MPR. It is pleasing that the DMO has been able to produce this data for those projects that reported base date dollar information in the 2008-09 MPR.