Farewell, Dr Gumley.

Dr Stephen Gumley AO joined the Defence Materiel Organisation as its inaugural CEO in February 2004 and retired abruptly on July 7, turning the almost monthly rumours of his departure into reality. Before joining DMO he had a distinguished career in industry including with Boeing and then as the Managing Director of Government-owned ASC, the imaginatively rebranded Australian Submarine Corporation.

26th Jul 2011


 

Farewell, Dr Gumley.


Dr Stephen Gumley AO joined the Defence Materiel Organisation as its inaugural CEO in February 2004 and retired abruptly on July 7, turning the almost monthly rumours of his departure into reality. Before joining DMO he had a distinguished career in industry including with Boeing and then as the Managing Director of Government-owned ASC, the imaginatively rebranded Australian Submarine Corporation.

No one has ever doubted Dr Gumley’s enthusiasm for a very difficult job, nor his intellect, nor his ability to persuade Ministers of his case. In this latter task he was assisted by such a regular turnover of political masters that none of them had the opportunity to form a long-term view of how defence procurement was being managed. He was quite media shy – to his detriment because if more of us understood what he was trying to achieve some of the criticism of him and his organization would have abated, but not disappeared.

Dr Gumley’s departure may coincide with the end of DMO itself, making him its one and only permanent CEO. What is behind this is believed to be the Government’s acceptance of a masterplan prepared by Departmental Secretary Dr Ian Watt to end DMO’s status as a prescribed organization and to bring its people and functions back within the structure of the Department.

If the DMO experiment is to come to an end this might be a good thing for taxpayers, depending on what will replace it. In these pages we have previously pointed out that the functions currently performed by DMO were once managed by a single Deputy Secretary and three First Assistant Secretaries. There is now a Secretary equivalent, five Deputy Secretaries and a vast Christmas tree spread of senior managers. If it is true that the DMO will not be reduced in scale but will have the specially created position of Assistant Secretary placed between whoever leads it and the Secretary then that will be a backward move.

We have long argued that the DMO has been misconceived in scale and orientation. Rather than being a project management organization it should have been a contract administrator. Project management is the role of the prime contractor and it is a waste of taxpayer’s money for Defence to create a mirror image for each and every project.

There are many useful examples to consider. One of them is the DIDS contract – the outsourcing of many routine transport and warehousing tasks – has seen the private sector employ around 1,000 people to manage and undertake this performance-based task. Performance based contracting is perfect for this type of activity because it financially rewards the company for on-time delivery and punishes it for failure. However, Defence employs a similar number of its own people to closely monitor what the company is doing. It’s like buying a dog but continuing to bark yourself.

It is also a shame that the projects Dr Gumley himself nominates as the ones of which he is most proud – C-17s and Super Hornets – are relatively uncomplicated military off the shelf purchases, awarded on a sole-source basis. It is hard to see how these projects are good examples of either project management or complex procurement – they would appear to be a routine task of buying an item – albeit a very complex one – coming off an existing production line. In such cases even pricing is taken care of under the FMS system, where the original US price is known and the foreign buyer is given the escalation-corrected version of that. In these circumstances it is important to avoid making requests for changes to the product otherwise costs can escalate dramatically – so in a sense good project management means doing as little as possible. For the C-17s through life support again appears to be a fairly simple matter of plugging in to the existing Boeing global support network.


It must also be said that problems in procurement are not the responsibility of DMO alone. Indeed the Capability Development Group is a far greater source of difficulties and is in urgent need of reform. Observers of the Defence Department have long felt the need for the recreation of the Force Development and Analysis division, which until its abolition in an internal restructure almost twenty years ago used to rigorously test and challenge military requirements. While many uniformed people resented having to explain themselves in detail about what they wanted to purchase, in hindsight the process worked well. It is not known precisely what is in the mind of Dr Watt, but it is believed that he is planning to reconstitute FDA under a different name. While he is at it, he should reduce the number of review committees and – especially – cut back the number of people on each one.

We would like to wish Dr Gumley well in his future endeavours, free from the need to attend committee meetings. He has been a conscientious and hard working executive and has always been focused on his primary task – making sure that the ADF has the best possible equipment available in the knowledge that this is not just a matter of money but sometimes an issue of life and death.

 


 

APDR at a glance