The Defence Department has wasted its time and taxpayers money trying to cut $1 billion from the bill for managing Australia's Defence Force bases, the National Audit Office has found.
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A scathing audit, published on Wednesday, has found the project is on track to deliver no savings and Defence cannot accurately account for vast sums of money, nearly $200 million in 2015-2016, being paid over and above the contracted amounts.
Defence is on track to spend $11 billion managing 119 bases around Australia in the ten years to 2024 the Australian National Audit Office has found.
But that figure is well in excess of the $9.3 billion "expected value" of the 10 Base Services contracts signed by the department in 2014 for cleaning, transport, security, hospitality, catering, and rubbish removal at Army barracks, Air Force and Navy bases around Australia.
The department has defended its performance saying the vast project to renegotiate the contracts has delivered value-for-money, when considered against increased service demands and changing expectations of the ADF.
But a new $120 million IT system, meant to manage the contracts between Defence and private sector companies servicing Defence bases, is $39 million over budget and will not be operational until 2017, five years late.
The stop-gap system being used to manage the contracts is so limited that it cannot accurately track contractor performance leading to a situation where Defence is not able to effectively collect or analyse data on contracts.
The Audit Office has concluded that the giant department could have simply renewed the contracts it had before the massive project began, at broadly the same cost to the taxpayer.
The audit reports the early days of the new contracts were dogged by confusion and service failures with bins not emptied on military installations, accommodation and transport mix-up and even hospital patients at a Northern Territory military hospital not getting their meals.
The auditor found that those teething problems have been smoothed out, but two years into the contract a Defence staff surveys indicated satisfaction with base service remains low or very low and two-thirds of unit commanders did not know what their base management contracts were supposed to deliver.
In the end, the auditors found Defence had failed in its objective to deliver savings on its management contracts.
"Defence is unable to demonstrate that the new Base Services contracts model has achieved the intended value for money objective," the report authors wrote.
"In 2015–2016 Defence spent $1039 million on base services, some $195.5 million, 23 per cent, more than the negotiated amount," the auditors wrote.
"Defence was unable to provide the ANAO with an accurate, consolidated summary accounting for the full $195.5 million difference between the negotiated contract price, $844 million, and actual expenditure in 2015–2016, $1039 million."
The auditors used Defence's own estimates to calculate the department was heading for a 10-year spend of about $11.06 billion on managing its bases.
"If realised, the forecast expenditure would be $989 million, 10 per cent higher than the projected expenditure at the completion of contract negotiation," the auditors wrote.
"Further, the ANAO has estimated that expenditure under the new contracts would be comparable to expenditure under the previous contracts, had the previous contracts continued until 2021–2022."
The Defence Department accepted the ANAO's recommendations for a better performance in the future, but said the massive project had not been a total loss.
"The base services contracts have resulted in a lower cost to Defence for the increased services demand than if this increased services demand than if this increased output had occurred under previous arrangements," the department wrote in its response.
Correction: An earlier version of this article referred to the IT system being $39 billion over budget. The correct figure is $39 million.
