Australian defence procurement reform, part 2

In ‘one of the most significant reforms to defence that we have seen,’ the Australian Department of Defence will establish an all-new Defence Delivery Agency combining the functions and budgets of its principal procurement agencies, the Capability and Sustainment Group (CASG), its Guided Weapons and Explosive Ordnance Enterprise (GWEO) and its Naval Shipbuilding and Sustainment Group (NSSG).

There has been considerable criticism of Defence’s inability to deliver major projects on time or on budget; Richard Marles, Australia’s Deputy Prime Minister and Minister for Defence, declined to comment on this criticism, but said, “relative to what we inherited from the former government, we have increased defence spending by $70 billion over the decade.

“What comes with that very significant increase in defence spending — the largest increase in Australia’s peacetime history – is an obligation to ensure that this money is spent well. The establishment of the Defence Delivery Agency will see a much bigger bang for buck for the defence spend,” he stated.

Defence procurement currently accounts for about 35% of total Defence spending and at $18.8 billion is the biggest single expenditure item in Australian government procurement as a whole; sustainment accounts for $18.7 billion. The current Australian defence budget is about $57.4 billion.

The new Agency, to be headed by a new National Armaments Director, will exist outside the traditional Defence structure, reporting directly to the Minister and, for the first time, by-passing the Secretary of the Department. Its budget will, however, remain part of the overall Defence budget. The National Armaments Director will be responsible for delivering defence projects on time and on budget.

“What we will see is that there will be decisions made as to the capabilities that the Australian Defence Force needs, which are embodied in the Integrated Investment Plan,” said Marles. “That process will also now be consolidated under the Vice Chief of the Defence Force. And having then determined that a particular capability is required, that project will be given to the Defence Delivery Agency with a budget to make sure that that project is delivered on time and on budget.

“This is one of the most significant reforms to defence that we have seen,” Marles added.

The exact design of the new body will be recommended by a Task Force to be set up this calendar year and reporting back early in 2026. Details of the Task Force will be released ‘shortly’, it’s understood. A search will also commence shortly for the National Armaments Director, who is expected to be in post well before the 1^st of July next year.

It’s understood that the preference is for an Australian to hold this role and Defence is agnostic whether the favoured candidate comes from the Defence community or from a large commercial organisation with significant experience in building infrastructure and delivering it on cost and on time.

The new Agency will be formed first as a Group on 1^st of July 2026 and then as a separate agency, or Non-Corporate Commonwealth Entity, on 1^st of July 2027, said Marles.

“It will work clearly in partnership with the Department of Defence and the Australian Defence Force,” Marles told reporters in Canberra on 1 December. “But it will be autonomous in the way in which it does its work and the way in which it reports to Government through the Minister for Defence and the Minister for Defence Industry.”

Regardless of its final form, EX² understands the new agency will be fully independent with the National Armaments Director able to hire and fire and set salaries with more freedom than exists with most public service organisations. This is a significant difference from both the former Defence Material Organisation (DMO – abolished in 2015) and the Defence Science and Technology Group (DSTG) where the Department of Defence and ADF argued successfully for them to remain within the department.

However, Marles told reporters in Canberra that the creation of the Defence Delivery Agency would not involve job cuts. This appears to be a political rather than operational decision which may bite him in time.

Capability Development will become the responsibility of the Vice Chief of Defence Force (VCDF) Group, which already has carriage of the Defence Integrated Investment Program (IIP), which will be updated in mid-2026. The VCDF Group includes the Heads of Force Design and Force Integration and already has Defence Advanced Strategic Capabilities Accelerator (ASCA) in its portfolio, charged with identifying advanced technologies that give the ADF an asymmetric advantage and that can be fielded quickly.