|Mark Dodd | January 14, 2009
Article from: The Australian
A RUTHLESS independent audit of the defence budget recommends cutting spending by $3billion and slashing the number of civilian staff employed by a department renowned for its lack of accountability and billion-dollar blowouts.
Defence Minister Joel Fitzgibbon is examining the draft independent audit, designed to bring the department into line with the Rudd Government's efficiency demands.
Defence sources, who asked not to be named, said annual spending, now running at $24billion, could be cut by up to $3billion.
The Australian understands the audit is also recommending a big reduction in the number of civilian staff employed by Defence, which has skyrocketed since 2001 to about 20,000.
"Defence are going to go ballistic when they get this," a senior analyst said yesterday. "They'll fight it tooth and nail."
A government official familiar with the draft yesterday denied the size of the proposed cuts.
The sweeping proposals are contained in the Pappas McKinsey defence budget audit, which Mr Fitzgibbon implemented last May amid concerns over the number of troubled defence acquisitions initiated by the Howard government and the need for greater efficiency, especially in project management.
That need was underlined last year when the Rudd Government axed the navy's long-delayed Seasprite helicopter contract, which had cost more than $1billion. But it was not alone.
The list of other delayed or troubled billion-dollar defence contracts is long.
George Pappas, a former senior vice-president of Boston Consulting Group, has been hailed as a good choice for the job of making savings in one of the Government's most demanding areas.
"His independent audit will be a key tool in our efforts to put the dysfunctional defence budget we've inherited back on track," Mr Fitzgibbon told the National Press Club in July.
With total defence spending of $24 billion last year, demands for more efficiency have been spurred by the onset of the global financial crisis. The Rudd Government is also committed to 3per cent real annual growth in Defence's underlying funding base to 2015-16.
Opposition defence spokesman David Johnston said that pledge had been undermined by a demand that Defence find $10billion in savings in the next 10 years. A senior defence analyst familiar with the audit's recommended $3 billion budget cuts said they were feasible.
"In one year, I suspect it is," he said. "If you look at the underspend last year -- about $1billion -- and then the total dearth of (new contract) approvals, what, since the Rudd Government has been in power, has been approved? I do know from a senior Defence guy that Pappas has been really putting the pressure on them and putting them through the hoops.
"(Pappas) knew where to go and look for efficiencies and he was looking deeper than just the balance sheet; he was looking at management structure."
Allan Behm, a former head of the Defence Department's international policy and strategy division, said considerable savings could be achieved in several areas, ranging from excessive air travel to inadequate contract management.
I like the bit about excessive air travel...I know of a number of recent examples of critical personnel not beingable to attend meetings because there was no money available to fly them there.