The objective of the audit was to examine the effectiveness of the management of maintenance of the Defence estate, taking particular account of planning and delivery aspects.

The audit examined: Defence’s policies, procedures, processes and supporting tools related to the planning and delivery of the maintenance of the estate; and services provided to Defence by private sector firms in relation to maintenance activities. The audit did not focus on contract management matters, nor on the systems used by Defence to maintain information related to estate maintenance.



1. The Defence estate is the largest land holding in Australia and consists of some 394 Commonwealth-owned properties (including 72 major bases) and another 355 domestic leases and 220 overseas leases, with land, buildings and infrastructure being valued at $20.2 billion.[1] The estate includes the bases, training areas and ranges, research facilities and office accommodation to support Australian Defence Force (ADF) capability. Recent Defence investments in the estate have consolidated some of its operations into larger, more economic bases that are also close to existing industry and social support. In particular, Amberley in Queensland and Edinburgh in South Australia are being upgraded to hold major Air Force and Army assets and personnel.

2. The need for further change to the estate was highlighted in the Defence Budget Audit (Pappas Report).[2] Estimates undertaken for Defence by the Australian Valuation Office and consultants indicate that the remaining useful life of Defence facilities, a broad indication of health of the estate, has fallen from 22 years in 2001 to 17 years in 2009. Defence informed the ANAO that this decrease has resulted from long-term underfunding of estate maintenance, and the size and composition of the estate.

3. The Government did not accept a number of key recommendations of the Defence Budget Audit Report related to the future Defence estate and asked Defence to undertake further work on base consolidation.[3] The Base Consolidation Review is to develop options for changes to the estate over a 25 to 30 year period and is expected to be completed in mid 2011. Options for consolidating bases are being developed within the wider context of implementing the Defence White Paper 2009 and the subsequent Strategic Reform Program (SRP).

4. The White Paper noted that there was pressure on bases, training areas and ranges from urban encroachment, and set out strategic basing principles to meet the future needs of Defence. It also noted the importance of environmental management as an aspect of sustainability of the Defence estate. In particular, the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) requires Defence to identify, conserve and protect its heritage assets. The impact of this requirement is felt at most of Defence’s major bases and it adds complexity to the planning and management of Defence’s estate.[4]

5. The Strategic Reform Program (SRP), announced in 2009 with the objective of reforming Defence while delivering $20 billion in savings for Defence over the 10 years to 2019, designated the Defence estate as one of the non-savings streams. An additional $190 million was allocated to be spent over four years to redress the deterioration of Defence facilities. However, estate maintenance is classified as an element of non-equipment procurement, a savings stream under the SRP, from which savings of $500 million are to be achieved over the ten-year period, effectively reducing the annual estate maintenance budget by $50 million.

Planning and delivery of estate maintenance

6. Defence Support Group (DSG), the area within Defence responsible for estate maintenance, delivers a wide range of support services to Defence establishments, bases and training areas. Strategic planning for the Defence estate into the future, while requiring input from the Groups and Services, is also managed by DSG.

7. Defence first fully outsourced estate maintenance in 2000 with the introduction of the Comprehensive Maintenance Contracts (CMC). Since 2000, these contracts have been replaced by the newer comprehensive Maintenance Services (CMS) contracts. Defence is now beginning to introduce a new type of contract—the Base Services contract—to cover the services of both the CMS contracts and the Garrison Support Services (GSS)[5] contracts. Base Services Contracts were introduced in North Queensland and Tasmania in 2008, covering services previously provided under both CMS and GSS contracts. As part of the North Queensland Base Services contract, a pilot was introduced for RAAF Townsville under which the prime contractor can utilise ‘in-house’ or contracted labour directly for low value works. The services are delivered under a fixed fee arrangement and remove the need for individual invoicing for each item of low value work. In 2010 this was one of a number of new initiatives included in the tender arrangements for the Central Northern New South Wales (CNNSW) sub-region.

8. The main components of work undertaken through the CMS contracts involve reactive maintenance (unplanned maintenance), Risk Managed Works which include planned maintenance and minor new works, and regular scheduled maintenance for fixed plant and equipment. The estate maintenance contracts, managed by DSG, are based around DSG’s previous 12 region structure,[6] with separate contracts for each former region. The payments made by Defence to the CMS contractors for estate maintenance totalled $461.5 million for 2009–10 across all regions in Australia.[7]

Audit approach

9. The objective of the audit was to examine the effectiveness of the management of maintenance of the Defence estate, taking particular account of planning and delivery aspects.

10. The audit examined: Defence’s policies, procedures, processes and supporting tools related to the planning and delivery of the maintenance of the estate; and services provided to Defence by private sector firms in relation to maintenance activities. The audit did not focus on contract management matters, nor on the systems used by Defence to maintain information related to estate maintenance.

Overall conclusion

11. Maintaining the $20.2 billion Defence estate, containing 72 major bases and numerous training areas and minor establishments, is a major undertaking, involving expenditure in the order of $482 million in 2009–10. In considering the ongoing management of the estate, the Defence Budget Audit (Pappas Report) stated that the estate was an ageing, complex and costly historical legacy, in which investment for maintenance had been decreasing since the 1980s.[8] Providing sufficient funding for estate maintenance is an ongoing challenge in Defence’s environment due to the need to accommodate competing demands for funds; Defence must satisfy the ADF’s current needs, while concurrently developing capability to meet the ADF’s future needs. In the case of the estate, Defence must also achieve this while subject to external pressures such as urban encroachment and emerging environmental and heritage issues.

12. When considered as a discrete function, the ANAO concluded that the management of estate maintenance has not been fully effective. Estate maintenance planning processes would benefit from Defence having in place authoritative, longer-term plans for the estate itself, and from condition assessments of estate facilities and infrastructure—both elements being key to sound infrastructure maintenance approaches. Further, based on Defence’s existing planning for its maintenance program, the funding currently applied to estate maintenance is insufficient to preserve existing assets which, in many cases, Defence will require for long-term use. In terms of the delivery of estate maintenance services to bases and other Defence establishments, performance is mixed, although Defence has advised of initiatives being pursued to improve delivery performance in the longer-term.


13. The prerequisites for the effective allocation of resources to estate maintenance are a long term plan for the composition of the estate, and maintenance plans that are informed by reliable assessments of the condition of the assets that comprise the estate. While Defence is currently developing plans for the future of its estate, it is yet to establish its inaugural estate management plan. In addition, maintenance planning would benefit from having better information on the expected future usage of specific buildings and facilities, thus providing a more authoritative context in which to plan the annual estate maintenance program.

14. Elements of Defence’s annual planning and resource allocation for estate maintenance are relatively straightforward, with the estimated resources required being determined from contractual arrangements (programmed fixed plant and equipment maintenance, certain prime contractor services) or from past experience (reactive maintenance needs). However, a key area of potential improvement is in Defence’s priority setting and management of its planned general estate works, which are called Risk Managed Works. Defence sets priorities on the basis of Infrastructure Appraisals, under which buildings and structures are categorised based on their contribution to Defence capability (five rankings apply) and particular works are prioritised (also with five rankings), with occupational health and safety works being ranked highest and asset preservation receiving third priority. These assessments are largely done by DSG regional staff. The assessment and prioritisation process would be improved by having condition assessments undertaken by technically qualified staff and by presenting that material to decision makers, along with information related to usage, contribution to Defence capability, and legislative requirements. In addition, estate maintenance plans would be improved by being consistently informed by condition assessments of engineering services (such as electrical, plumbing and piping systems) at bases.

15. Based on the data provided by Defence from its most recent Infrastructure Appraisal process, there is a shortfall over the next three years (2011–14) of approximately $500 million in the funding available to effectively maintain the existing estate. While acknowledging that maintenance will at times need to make way for other priority requirements, this level of shortfall will result in increasing maintenance backlogs in the future, and reductions in the lives of existing assets, with added pressure to bring forward upgrades and renewals.


16. Performance of the delivery of estate maintenance services to Defence under existing CMS arrangements has been mixed. Of the four sub-regions examined, two were performing acceptably, while the other two were not, particularly in the delivery of the Risk Managed Works program.

17. Under the existing arrangements, a prime contractor has been responsible for delivering services using a call centre, its own staff for fixed plant and equipment maintenance and sub-contractors for other general estate works. Defence has started to make changes to its contract arrangements, introducing arrangements for prime contractors to undertake more work using their own staff rather than sub-contractors, where that provides better value for money. Building on the initiatives that Defence has underway, and with current CMS contracts expiring from the end of 2011, it is timely for Defence to re-examine the design of the arrangements under which estate maintenance services are delivered. This examination should include a focus on the outputs that Defence requires and identifying improvements in maintenance delivery arrangements to provide better value for money. Given the number and complexity of existing contracts and the number of Defence stakeholders, Defence should adopt a formal change management approach to facilitate the effective introduction of revised delivery and contractual arrangements.

Key findings

Framework for management and administration of estate maintenance

18. Defence has in place some of the key elements of the framework required to support the management and administration of estate maintenance. There exist roles and responsibilities for staff at both national, regional and base levels, with improved arrangements being introduced to assist with the relationship between DSG and its customers. Defence also has in place policy and process guidance, as well as training, which supports the planning and delivery of estate maintenance services.

19. Staff involved in the planning and delivery of estate maintenance receive guidance through DSG’s Infrastructure Management (IM) intranet site—DSG’s central source for policy, processes and procedures. This is generally considered to provide comprehensive guidance, although comments from a number of DSG regional staff suggested that they were unfamiliar with the IM’s features for tracking updates to policies and procedures, and that the IM was difficult to use and navigate for inexperienced users. Due to the importance of the IM as a source for policy, processes and procedures for DSG regional staff, there would be merit in introducing training to assist regional IM users.

20. The Defence Estate Management System (DEMS) is used in the planning and delivery of estate maintenance under the CMS contracts, and also for services provided under the Garrison Support Services (GSS) contracts. This system provides much of the data used in the management of estate maintenance. There are concerns regarding the quality and integrity of data stored on DEMS and Defence has plans approved for the system’s replacement with an enhanced system, the Garrison and Estate Management System (GEMS).

Estate maintenance planning

21. Defence is currently developing a National Defence Estate Strategy 2030 which is seen as Defence’s strategic document for estate planning. Defence has completed a strategic plan for its training areas and ranges and is currently undertaking a Base Consolidation Review. Together, the results of this work will provide a longer term plan for Defence base and training area requirements. Current estate maintenance plans do not have the benefit of such strategic or operational plans for the estate. Current estate maintenance plans are developed using risk-based prioritisation and align with a broader 20 year investment program which includes capital works and leasing options.

22. Heritage issues add complexity to Defence’s longer term approach to estate maintenance. The precise number of buildings affected by heritage legislation is not known by Defence, although Defence is developing Heritage Management Plans for 62 sites across Australia (required under the EPBC Act). As at November 2010, 44 Heritage Management Plans had been completed. The end result of this process will be a large number of facilities within the Defence estate becoming classified as heritage sites. As soon as practicable following completion of Heritage Management Plans, there would be merit in Defence compiling an omnibus submission for the Minister for Defence to provide to the Minister for Sustainability, Environment, Water, Population and Communities with options for the future management of heritage buildings on Defence’s major bases.[9] This needs to be done in a coordinated and comprehensive manner (rather than on a piecemeal basis) so that the scale of the issue confronting Defence can be fully represented and properly understood. Having a longer term plan for the estate and an approved way ahead for heritage sites, would assist in determining the level of funding for estate maintenance consistent with its approved future use.

23. As part of annual planning processes, resources for fixed plant and equipment maintenance and certain prime contractor services are determined based on contractual arrangements, and reactive maintenance resources are determined in the light of past experience. The maintenance category under which Defence exercises most discretion is entitled Risk Managed Works. To guide its allocation of resources to particular areas under Risk Managed Works, Defence categorises structures to reflect their contribution to Defence capability. Each item of proposed work is also prioritised (with rankings from P1 to P5) according to the type of work that is proposed to be undertaken. For instance, P1 works are those which if not completed in the year shown will result in a breach of the Occupational Health and Safety Act 1991 (OH&S Act). P3 works relate to asset preservation that, if not completed in the year shown, will result in unacceptable deterioration of the asset.

24. The current annual priority setting approach for Risk Managed Works has a heavy focus on maintaining significant Defence operational capabilities. This approach, and the limited level of funding being made available for estate maintenance, has meant that many Defence facilities have not received maintenance work sufficient for their ongoing preservation. If this situation continues, maintenance backlogs will grow further and the lives of existing assets will be reduced, with added pressure to bring forward upgrades and renewals. Using Defence’s current assessment of the maintenance requirement to preserve existing assets, the maintenance funding deficit will be approximately $500 million in the next three year period (2011–14).

25. In contrast to the approach used by other large public sector agencies considered during this audit, Defence’s current approach in most locations does not involve technically skilled personnel to undertake condition assessments and identify necessary maintenance projects. Adequate information relating to condition, use, required maintenance, contribution to Defence capability and satisfaction of OH&S requirements is required by decision makers when considering the level and distribution of resources for estate maintenance.

26. Many of Defence’s bases have infrastructure similar to that of a small town or substantial industry. This can include water and power reticulation, roads, drainage, wharves, airfields and fuel lines. The DSG staff undertaking the infrastructure appraisal process are generally not qualified to undertake assessments of the more technical aspects of these services. Nor is there a routine process of obtaining specialist advice to provide condition assessments of engineering services. Without routine arrangements to assess the condition of engineering services at its bases, Defence’s operation of engineering services may give rise to unknown risks with potential operational, economic and environmental impacts. Defence informed the ANAO that it has recently commenced undertaking assessments of the condition of engineering services at its bases.

Delivery of estate maintenance

27. Delivery of estate maintenance services is largely undertaken through the Comprehensive Maintenance Services (CMS) contracts which Defence has in place throughout its regions across Australia.[10] Services are currently provided under 12 contracts across Australia. The contract provides an initial service delivery period of five years, with provisions for extensions of further periods of four single years, up to a maximum contract period of nine years. The key services provided by CMS contractors are management of services (including management of Risk Managed Works and low value general estate works), operation of a property service call centre, and maintenance of fixed plant and equipment.

28. The ANAO examined the performance of estate maintenance services delivered under contract to Defence in four of the 12 sub-regions and found that the performance of individual sub-regions has been mixed. Two sub-regions had performed acceptably, while for the other two sub-regions there was unsatisfactory performance for some elements of the contractor’s responsibilities. The key weakness in the performance of these two sub-regions has been the contractors’ inability to deliver the full Risk Managed Works program. This is reflected in the performance management assessments made under the CMS contracts, as well as the strategic reviews.

29. Defence is currently introducing a number of initiatives to improve value for money as the opportunity arises. For example, a pilot program was introduced at one base in North Queensland whereby the contractor employed its own trade personnel (for example, plumber, carpenter, electrician) to undertake routine low value maintenance on a fixed fee basis. The Request for Tender (RFT) that Defence issued for CMS in the Central Northern New South Wales (CNNSW) sub-region in 2010 has extended this approach to the whole of the CNNSW contract. In addition, the RFT for CNNSW provides for the successful contractor to undertake the Infrastructure Appraisal process, a key element of maintenance planning, for Defence.[11] This approach is considered by DSG staff to have been successful in the case of the current Sydney Central contract.

30. Given that current CMS contracts expire from the end of 2011, it would be timely for Defence to review the experience with the existing contract model and put in place improved arrangements for the future.

Summary of agency response

31. Defence acknowledges the findings contained in the audit report on maintenance of the Defence estate, and agrees to the two recommendations made by the ANAO.

32. Defence is currently undertaking significant activity across all functional areas, including estate maintenance, as part of our Strategic Reform Program. Over the past 18 months, Defence has created the Estate and Facilities Program Office, established the Defence Estate Performance and Investment Committee, and implemented the Base Accountabilities Model.

33. Defence has also commenced work on a number of other initiatives during this period including the development of a future contracting model, the introduction of baseline assessments of engineering services, and more flexible options for the delivery of medium capital and maintenance works.

34. Defence is committed to continuous improvement in the management of its estate, including addressing the issues raised in the report.


[1] Department of Defence, Defence Annual Report 2009-10 Volume 1, Canberra, pp. 227-228. Buildings and infrastructure are valued at $15.7  billion.

[2] The 2008 Defence Budget Audit made a number of recommendations regarding the future of the estate, including the consolidation of the Defence estate into ‘super-bases’ to achieve financial savings. Department of Defence, 2008 Audit of the Defence Budget, Canberra.

[3] The Report recommended Defence move to the smallest number of ‘super-bases’ that is consistent with strategic requirements and the ‘raise, train, sustain’ mission of the three Services over the next 20 to 30 years. It also recommended the establishment of a Defence Estate Review Committee, to among other things prepare a ‘super-base’ master plan, which would finalise a recommended base footprint and develop a fully costed strategic business case. The Government did not accept these recommendations. (Department of Defence, Response to the Defence Budget Audit, Canberra, 2009, p. 4.)

[4] Defence is in the process of completing Heritage Management Plans for 62 sites. Defence currently has 72 major bases.

[5] Services provided under the GSS contracts include: grounds maintenance, access control, accommodation management, hospitality and catering, cafeteria services, cleaning and waste management.

[6] DSG now has five regions across Australia, namely Central and Western Australia, Queensland, Northern New South Wales, Southern New South Wales, and Victoria-Tasmania. Within this report, the former regions (of which there were 12) are now referred to as sub-regions given the current five region structure.

[7] On top of this $461.5 million, $20.1 million was spent in 2009–10 on airfield maintenance, which is managed centrally by DSG and is not performed by CMS contractors.

[8] Department of Defence, 2008 Audit of the Defence Budget, Canberra, pp. 240-241.

[9] Future management of heritage buildings could include options such as ongoing preservation or disposal.

[10] These contracts correspond to the 12 regions that, until July 2009, were the basis of DSG’s regional structure. The former 12 regions are referred to as sub-regions in this report, given that DSG now has only five larger regions.

[11] The Infrastructure Appraisal process has usually been undertaken by DSG regional staff.