The audit examined the relationship between the strategic guidance and capabilities provided by Army, through analysis of the Army capability management and reporting framework. The objectives of the audit were to: Assess Army capability management and reporting processes; determine whether these processes efficiently and effectively manage resources to provide Army capability; and accurately indicate the capability provided by Army.



In mid 2004, Army had a force of 42 337 comprising 25 455 personnel employed on a permanent basis in the Regular Army and 16 882 Reserve personnel. The 2004–05 Defence Portfolio Budget Statements (PBS) estimate that the total cost of Defence departmental outcomes would be $15.6 billion. The Army Capability outcome represents one-third of the Defence budget at $5.29 billion. This figure comprises the budget for those commands directly under the control of the Chief of Army, as well as resources consumed by other groups to produce Army Capability.1

The ‘Fundamentals of Land Warfare' outlines the Army Model which comprises four components: the Enabling Component; national and international support base; the Combat Force Reserve; and the Deployable Force.2 The Enabling Component provides the support required to expand and sustain the Army, as well as a means to generate new capabilities. The Combat Force Reserve provides a mobilisation and sustainability base for the Army and is intended to provide strategic depth by allowing the Deployable Force to adapt to changed circumstances. The Deployable Force comprises high readiness units to provide the initial deployed force and lower readiness units to augment the deployed force and allow for rotation if required. The size and composition of the components of the Army Model are aligned to the current strategic guidance on warning times for possible contingencies.

Changes in Australia's strategic environment, combined with lessons learnt from various operations, are influencing Army's view of the capabilities required of land forces through the Hardening and Networking the Army (HNA) Review. Initially presented to the Chief of Army's Senior Advisors Committee (CASAC) in December 2003, the Review, which is to be implemented by 2012, addresses a range of existing Army capability issues and Force Structure changes associated with a range of new or updated capabilities scheduled to enter service over the next 10 years.

The Audit

This audit examined the relationship between the strategic guidance and capabilities provided by Army, through analysis of the Army capability management and reporting framework.

The objectives of the audit were to: assess Army capability management and reporting processes; determine whether these processes efficiently and effectively manage resources to provide Army capability; and accurately indicate the capability provided by Army.

Overall audit conclusions

High-level Defence and Army directives are based on guidance provided to Defence by the Government through the White Paper 20003 and the Strategic Update 20034 . The ANAO identified that a number of risks and limitations have considerable implications for Army's capacity to achieve levels of capability commensurate with those indicated as required by government guidance.

The ANAO noted that a series of factors adversely impacting on Army capability have emerged over a prolonged period and will require remediation over a number of years. The ANAO found that improving the ability for Army to achieve desired outcomes will require attention to: identifying personnel numbers and skill requirements; improving the availability and serviceability of existing equipment; addressing issues delaying the introduction into service of new and updated equipment; and refining processes that allocate personnel and equipment across Army units.

Army's capacity to assess and address capability issues in a structured manner has been inhibited by shortcomings in internal reporting arrangements. The ANAO found that these shortcomings contributed to an overstatement in performance measures provided against Army capability outputs in the 2002–03 Defence Annual Report.

In the period since the White Paper 2000, Army has commenced developing responses to many of these challenges and has implemented a range of strategies to: improve the allocation of resources across Army; address issues associated with the introduction into service of equipment; and enhance internal reporting arrangements. The ANAO considers that further refinement of these strategies, combined with enhanced linkages to overarching Army and Defence capability priorities, need to occur to ensure that remediation measures are progressively implemented effectively within available funding.

Key findings

Capability management framework (Chapter 2)

The ANAO found that a clear link was evident between directives provided by the Chief of the Defence Force and Joint Operations Command to Army and the overarching capability directive for Army. This link is achieved through the allocation of force elements, within Army, to a series of possible contingencies indicated in high level Defence directives. In some circumstances, the same force elements are assigned to multiple tasks, introducing difficult management issues, should more than one contingency require the same force element simultaneously.

Army capability directives are developed using the Military Appreciation Process which is a decision-making tool used within Defence. This incorporates risk assessment and identification processes, and is repeated at various levels of command within Army as the overarching capability directive for Army cascades through the layers of command into specific unit level directives. The ANAO identified that, at the unit level, procedures surrounding the application of the Military Appreciation Process could be improved, particularly in the area of documentation of key decisions and associated risks.

ANAO analysis of key Army capability reports noted that the assessment of the key objectives of readiness and sustainability are based on numerical and empirical analysis and interpretation of business rules. The ANAO found that this did not provide a consistent basis for internal analysis and reporting. In mid 2004, Defence and Army changed reporting processes, which to some extent improved the transparency in reporting. However, further refinement would have the potential to reduce unnecessary subjectivity and improve overall reporting reliability and the resulting confidence of stakeholders.

The ANAO compared Army's reporting of capability performance information in the 2002–03 Defence Annual Report with related internal Defence documentation. This comparison was unable to reconcile statements of achievement made against certain performance indicators for Output 3.2, Mechanised Operations; Output 3.3, Light Infantry Operations; Output 3.4, Army Aviation Operations; Output 3.5, Ground Based Air Defence; and Output 3.8, Logistics Support.

Managing current capability (Chapter 3)

Under the White Paper 2000, Army is required to maintain six infantry battalion groups at less than 90 days readiness notice. Army revised this to five infantry battalion groups and a commando regiment in the 2004–05 Defence PBS.

The ANAO compared the identified personnel requirements with actual personnel numbers for a range of Army units and noted that varying degrees of personnel number and key trade deficiencies apply across units. The ANAO also noted that other issues impact on the availability of personnel for operations including: deployment and reconstitution following deployment; compliance with Army Individual Readiness Notice requirements; personnel about to discharge, be promoted or posted to other units; and disciplinary matters.

The White Paper 2000 indicated that the Logistics Support Force would be enhanced by increasing the preparedness of individual units to provide improved support to deployed forces and enhanced ability to rotate forces. The ANAO identified that significant challenges remain for Army in maintaining required logistics capabilities, particularly in regard to personnel requirements and critical trade deficiencies.

In 2000, Army undertook a Reserve Roles and Task Study to align Reserve capabilities by December 2003 to the requirements set down in the White Paper 2000. While Reserve personnel have participated in deployments over the past several years, and the roles of specific elements of the Reserves have been defined in terms of the prevailing strategic guidance, the ANAO considers that the roles and tasks for the bulk of the Reserves lack clear definition. In late 2003, Army commenced a further Roles and Task Study to be implemented as part of HNA by 2012. Army advised that this Study has been completed following two submissions to CASAC, the last of which was in November 2004.

Army has also experienced an ongoing decline in Reserve personnel numbers and low parading for duty statistics. The ANAO found that, between 1999–2000 and 2002–03, an average of just over 20 per cent of Reserve personnel did not parade for duty at all in a given year.

In mid 2003, Army identified the need to redistribute equipment from lower readiness units to higher readiness units in order to meet capability requirements. A similar process was undertaken in 1999 in preparation for the deployment to East Timor. In order to better understand and control the distribution of equipment, Army is developing an Army Equipment Establishment Plan (AEEP). Maintaining the serviceability of equipment presents difficulties for Army. Factors impacting on equipment serviceability include: ageing fleets and associated difficulties in obtaining parts; increasing technical complexity; and the limited availability of qualified personnel to perform maintenance and repairs. The ANAO found that, while there are processes in place to upgrade and replace elements of the ageing fleet, as well as evidence of attempts to improve overall maintenance outcomes, the impact of these issues will require the development and progressive implementation of suitable strategies to achieve long-term resolution.

The ANAO found that the limited availability of ammunition for training has impacted on Army's capacity to maintain required preparedness levels over several years. Army and Defence have undertaken a range of studies to identify operating and reserve explosive ordinance requirements. Army has also implemented a range of simulator systems to reduce demand for ammunition in training.

Training capability (Chapter 4)

In late 1999, Army commenced developing the Army Capability Management System (ACMS) for full implementation in early 2006. In its final form, ACMS is intended to automate a range of capability management and reporting processes. At the time of audit fieldwork, limited functionality had been implemented for the management of unit training proposals for 2003–04. The ANAO found that interfaces between ACMS and key Defence corporate systems relating to personnel, inventory and accounting, required improvement; as well, associated business processes need to be reviewed and refined to minimise resource intensive processes and assure the integrity of data captured.

The ANAO found that a clear relationship could not be established between preparedness requirements set down in the overarching Army capability directive and training courses provided by Training Command. A system implemented by Army in 1999 to manage the training program did not provide the functionality required by Training Command. The ANAO review of attendance at Training Command courses indicated that this was less than satisfactory at 66 per cent for 2003–04. Weaknesses in training course management processes and supporting systems contribute to a significant discrepancy between the identified annual Army training requirement and the number of personnel actually attending and passing courses. The ANAO noted that, in 2003–04, the number of trainees passing courses represented 43 per cent of the identified training requirement for Army.

The ANAO found that, other than for a limited range of activities, assessment of collective training is based on subjective military judgement applied by officers within the chain of command. To a limited extent, training activities, conducted by the Combat Training Centre (CTC), provide a degree of quality assurance for collective training and capability assessment. The ANAO considers that Army would benefit from the development of more rigorous objective setting and assessment processes for all collective training activities.

Developing future capability (Chapter 5)

Through the HNA Review, Army is developing a model to provide a long-term focus for capability development and to address a range of existing Army capability issues. Army modelling indicates that, based on projected funding, there will be insufficient personnel to meet the requirements of the model. Aligned to the development of the HNA Model has been the development of a Reserve Roles and Tasks Study to meet HNA rotation requirements. This Study has identified that, without changes to existing Reserve arrangements, the Reserve will be unable to fulfil HNA requirements.

An option being considered by Army, as part of HNA, is the raising of a second mechanised battalion to improve protected mobility. Under this option, Army would equip both mechanised battalions with fleets comprising the upgraded M113 Armoured Personnel Carrier and the Bushmaster Infantry Mobility Vehicle. Neither of these vehicles had been introduced to service at the time of audit fieldwork.

In 2001, the Government released the Defence Capability Plan (DCP), which was updated in 2004. Initially, Army planning processes for the introduction into service of projects outlined in the DCPs were inadequate and lacked required coordination. During 2002 and 2003, Army reviewed and implemented changes to improve introduction into service arrangements. However, further work is required to address a backlog of issues in key areas, such as formal introduction into service processes. The ANAO found that changes to force structure necessary to implement DCP projects are having a significant influence on the HNA Review.

The ANAO also found that, in April 2004, 38 per cent of Army related major capital procurement projects were at risk of schedule slippage and 44 per cent were under-resourced in terms of staff. The DMO has identified that schedule slippage is a key cause of cost escalation in major projects. Similar issues are impacting on the delivery of minor capital procurement projects which also deliver significant capability to Army. Minor projects have consistently failed to achieve budgeted expenditure forecast since the Defence Reform Program commenced in 1997 98.


The ANAO made eight recommendations aimed at improving Army capability management processes.

Agency response

The Department provided the following response to this audit:

Defence agrees with all of the eight recommendations, and is pleased to see the acknowledgment in the overall audit conclusion: “In the period since the White Paper 2000, Army has commenced developing responses to many of these challenges and has implemented a range of strategies to: improve the allocation of resources across the Army; address issues associated with the introduction into service of equipment; and enhance internal reporting arrangements.”


1 For 2004–05, Army represents 43.4 per cent of the Army Capability Outcome Budget. The enabling groups of Corporate Services and Infrastructure Group and the Defence Materiel Organisation (DMO) represent 21.2 per cent and 16.0 per cent of the Army Capability Outcome Budget respectively.

2 Land Warfare Doctrine 1: The Fundamentals of Land Warfare (2002), pp. 91–93 (Army has indicated that this document is under review.)

3 Defence 2000: Our Future Defence Force.

4 Australia's National Security: A Defence Update 2003.