Defence underspend budget to get procurement processes right

The Australian Defence will underspend its budget for new equipment this year by an estimated $600 million, after finding it tougher to get projects through government. 

As a result of the global financial crisis, government has become slow to approve new projects and the industry slow in delivering existing ones.

Mark Thomson of the Australian Strategic Policy Institute has said that things in this area of changed since the days of the Howard government.

“Previously, Defence would go to the government with a proposal and the government would say, ‘don’t worry about that, we trust you, go off and buy one’. Now after reviews of procurement processes, Defence has to go to government twice to get projects through,” Thomson said.

“Asking Defence to be thorough on how they spend millions of taxpayers’ dollars is appropriate for the government.  It’s better to take their time and get it right than rush through with half-baked projects,” he said.

Approvals of defence projects in the past three years were much lower than in the previous three years: $7.8bn compared with $26.5bn for 2005-06 to 2007-08.

"The Howard government was fiscally spoilt. It wasn't just Defence. There was money being spent in a range of portfolios that in more stringent fiscal circumstances wouldn't have been dreamed of," Thomson said.

The amount allocated for defence projects in the 2010-11 budget was $5.407 billion, but in the additional estimate statements for Defence released last week, anticipated spending has been revised down to $4.305bn.

The total left unspent in the top 30 projects, for a range of reasons, was $1.102bn, about half of which was anticipated by Defence as part of its routine "overprogramming" designed to cover slippage.

The Defence Department's Red Book, the incoming government brief prepared before last year's election, warned that the 2009 white paper had set an ambitious timetable. It said Defence had struggled to get the major capital projects ready for approval by the government.

Thomson said the timetable had resulted in "a visible failure against the white paper's timetable". "Why did they plan to do something which, on the historical basis, they couldn't do," he said.

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