Audit shows $50m blowout in Defence supply project

Attempts by the Department of Defence to computerize its Defence supply network has led to a cost blowout of $50 million.

The project originally cost $16 million and despite the massive blowout the system is still not working, according to a report released yesterday by the Australian National Audit Office (ANAO).

In the report the ANAO states that the Standard Defence Supply System (SDSS) upgrade did not deliver value for money.

"Cumulative cost escalations ... have required a further allocation of $34 million to what had been approved as a $15.87 million project," it said.

"By November 2003 the project had already exceeded its initial approved budget by more than 200 percent."

"This excludes further funds being earmarked for the SDSS Get Well Program."

The audit office said Defence estimated the remediation would be in place by December next year.

It said the project was launched in July 2000 to modernise the defence supply chain information system, which covers 1.6 million different items in 1162 warehouses at 135 separate business units.

Identifying the cause of the blowout the ANAO report blames poor project management pointing out that the upgrade was treated as minor capital equipment acquisition activity despite a defence cost estimate of $27 million.

Any costs over $20 million require Cabinet approval to ensure it is managed as a major capital equipment activity.

As a minor activity it was outside major project guidelines which are far more stringent.

The ANAO said a Defence internal audit found SDSS was never capable of delivering the required scope within the allocated budget and schedule.

"Nevertheless the reporting system recorded a green status for consecutive reporting periods on more than one occasion," it said.

The result now is that the system doesn't come near delivering what was promised and did not even meet 40 percent of the required guidelines. As a minor activity the ANAO said Defence did not realise it was failing to meet defence operational requirements.

Opposition Defence procurement spokesman Chris Evans said the report also made note of the fact that the Defence Minister Robert Hill approved an additional $23 million be spent on the project.

"When the Minister approved the spending of millions of taxpayers dollars on the failed project it was already running over 12 months behind schedule and was failing to deliver many of the features promised," he said in a statement.

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