Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

In accordance with the provisions of the Auditor-General Act 1997, I present the following report of the Auditor-General: Audit report No. 10 of 2005-06: Performance audit: Management of the standard defence supply system remediation programme: Department of Defence and Defence Materiel Organisation.

John Faulkner (NSW, Australian Labor Party) Share this | Link to this | Hansard source

by leave—I move:

That the Senate take note of the report.

Last Tuesday, the Audit Office tabled Report No. 10 of 2005-06: Performance audit: Management of the standard defence supply system remediation program: Department of Defence-Defence Materiel Organisation on the standard defence supply system focusing on efforts towards remediation of this troubled system. This report follows on from a previous report, Report No. 5 of 2004-05: Performance audit: Management of the standard defence supply system upgrade: Department of Defence, in which the Audit Office concluded that value for money was not achieved. Little has changed since that time. The Audit Office is to be commended for recognising the dual role of systems such as SDSS in both financial management and operational management. In each of these ANAO reports, there has been an acknowledgement of the vital role that logistics systems should be performing for the ADF. The overall audit conclusions of report No. 10 of 2005-06, particularly as they relate to the operational dimension, include:

14. SDSS is a key contributor to the ability of Defence to provide the necessary logistics support for operational capabilities. ... There are both technical, and personnel dimensions that affect the performance of SDSS, which pose ongoing challenges to the delivery of effective service by the system to the ADF.

15. At a technical level, SDSS is now some two decades old, and although it has been expanded and upgraded, it remains dated. ...

16. Notwithstanding increased operational deployments and subsequent increased equipment use rates, the ANAO’s audit testing identified material deficiencies in the ability of the Defence supply chain to provide consumable and replacement parts to end users in Navy, as required to support specified ADF operational Demand Satisfaction Rates.

Those are very damning statements. I know that those aspects and others in relation to this audit report have been highlighted by my colleague Senator Mark Bishop, the shadow minister for defence industry, procurement and personnel. I certainly support the concerns that he has made public.

This report actually points to issues concerning the present and long-term ability of SDSS to address the operational needs of the ADF. And it provides two specific recommendations that, if implemented, would certainly improve operations. The ANAO recommends that Defence and the DMO assign responsibility for, and take appropriate steps to ensure, that items returned as defective to Defence warehouses under warranty are reviewed and, where appropriate, repaired by the supplier at no cost to Defence and the DMO. The ANAO also recommends that Defence develops a plan to review items that have been listed as in transit for a period in excess of 90 days and reports on them on a regular basis to the Joint Logistics Command. Clearly, items that are tied up in a quarantine process or that are in transit for long periods are not available to be used to fix a platform and are not available to provide support to a deployed force. This is a very serious problem. Indeed, we know now that 63 per cent of items in quarantine are there because:

... the required documentation relating to test information had not been provided at the time of required use.

The Auditor-General also noted:

SDSS does not flag when an item could be remediated under warranty ...

Of course, this leads to financial as well as operational impacts on non-availability. We also know now that:

Stores listed as being In-Transit constitute a value within the SDSS system of some $61.13 million. The ANAO reviewed the management of those items, and noted that the average time this equipment spends In-Transit was 104 days, with some elements remaining In-Transit for periods of up to nine years. Many of these items—

according to the ANAO—

constitute valuable, and attractive items ...

So how did the government respond to this Auditor-General’s report? The minister acknowledged in his press release that there was a ‘very critical report’ on SDSS in August 2004. And the minister and his department accepted the two recommendations which amount to asking the department to do its job properly and more thoroughly in the future. But—and, of course, how many times do we say ‘but’ when it comes to the Howard government; how many times do we use that word—the minister blames the Defence supply chain, not SDSS, for the low demand satisfaction rates for some items of inventory that were identified by the ANAO.

The minister clearly fails to understand that the role of a logistics information system is not only to keep a count of stock but to aid planning of stock levels and tracking of usage. Whether it is a failure of SDSS, a failure of the process around SDSS or a failure of some other element of the Defence supply chain, SDSS is or should be the key information provider on the status of the supply chain. The minister of course does acknowledge some improvement in the financial controls environment, but he fails to acknowledge that little or nothing has been done to improve support for personnel or the service ability of our platforms.

The minister is placing all confidence in future systems, advising that further upgrades will provide a greater level of operational support. I say, as this high-quality audit report suggests, that it is worthwhile to consider whether the financial issues of SDSS will ever be solved by this government so they can move on to improving its performance as an operational support system and whether this technologically dated piece of software provides the government with the building block—or whether they will just continue to build in hope. We need a great deal more than hope with SDSS. We need action from the government to fix these problems now. What this report shows is that we cannot afford to wait any longer. I seek leave to continue my remarks later.

Leave granted; debate adjourned.