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DEFENCE MATERIEL HANDBOOK
(ACQUISITION)
DMH (ACQ) 2/2006 V3.0
DMO
ACQUISITION STRATEGY
DEVELOPMENT
HANDBOOK
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CONTENTS
INTRODUCTION ................................................................................................................... 3
AIM........................................................................................................................................ 3
ROLE OF THE ACQUISITION STRATEGY .......................................................................... 4
Role of the development process ....................................................................................... 4
Role of the Acquisition Strategy Document ........................................................................ 5
SCOPE OF AN ACQUISITION STRATEGY .......................................................................... 5
ACQUISITION STRATEGY LIFE CYCLE .............................................................................. 6
First Pass Approval Stage .................................................................................................. 7
Second Pass Approval Stage ............................................................................................. 8
Acquisition Phase............................................................................................................... 9
RESPONSIBILITIES AND ACCOUNTABILITIES .................................................................. 9
Approvals and Endorsements ............................................................................................ 9
Integrated Project Team – Defence Materiel Organisation Lead .......................................10
Acquisition Strategy Developer .........................................................................................10
DMO Delegate ..................................................................................................................10
Capability Development Executive's Integrated Project Team Leader ...............................10
KEY SOURCES OF INFORMATION AND RELATIONSHIPS ..............................................10
Key Inputs .........................................................................................................................10
KEY EVALUATION CRITERIA .............................................................................................11
THE MAKE-UP OF AN ACQUISITION STRATEGY .............................................................11
Business Element .............................................................................................................12
System Solution Element ..................................................................................................12
Procurement Element .......................................................................................................12
Contracting Element..........................................................................................................12
Industry Element ...............................................................................................................12
Management Element .......................................................................................................13
Delegations .......................................................................................................................13
Overarching Acquisition Strategy ......................................................................................13
STEPS TO DEVELOPING THE ACQUISITION STRATEGY................................................13
Step 1: Conduct Research and Identify Decision Drivers and Key Evaluation Criteria .......13
Step 2: Conduct Strategy Element Analysis for each Capability Option .............................16
Step 3: Assemble Overarching Acquisition Strategy for each Capability Option and
Evaluate against Key Evaluation Criteria. ..........................................................................17
Step 4: Refine acquisition strategy for approved Capability Option(s). ..............................17
Annexes:
A.
Policy and Regulatory Framework Overview
B.
Issues and Options
C.
Acquisition Strategy Template (link only)
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References:
A.
Defence Capability Development Manual (DCDM) 2006
B.
Defence Procurement Policy Manual (DPPM)
INTRODUCTION
1.
Acquisition strategies are fundamental in the acquisition of capital equipment within Defence.
The strategies have broad reaching affects on a capability throughout the requirements, acquisition,
in-service support and disposal life cycle phases, including the transition between new and extant
capabilities. A formal acquisition strategy must be developed and documented for all Capital
Equipment projects.
2.
Acquisition strategies are high level (strategic) documents in an acquisition project, and are
included in the Capability Proposal First Pass (CPFP) and the Capability Proposal Second Pass
(CPSP) packages which are progressed through the various defence committees and government to
obtain project approval.
3.
As a separate document, the acquisition strategy informs both Government and Defence
delegates and builds their confidence that the basis for the acquisition of each capability option is well
founded and, at the highest level, how the acquisition is intended to be achieved. Acquisition
strategies must outline the total approach, including all Fundamental Inputs to Capability (FIC), for
acquiring and implementing the materiel components of the required capability option, taking into
account the strategic objectives, capability needs, potential costs, required timeframes, and potential
risks.
4.
The intent of the acquisition strategy is to ensure that there is a common understanding of
why a specific strategy is selected from the range of possibilities available. Therefore, it needs to
show how the proposed acquisition strategy delivers value for money and that sound management
and review will be applied to the acquisition in accordance with the legal and policy framework for
Defence and Government procurement. This understanding and assurance will lead to greater
confidence in the decisions taken and ultimately improve outcomes in support of the Defence
Capability Plan
AIM
5.
The aim of this handbook is to provide Defence Materiel Organisation personnel,
especially those charged with the development of the acquisition strategy, with guidance and advice
on:
a. the role of acquisition strategies,
b. the acquisition strategy life cycle and development process, and
c.
detailed guidance and methodology on how to develop an acquisition strategy.
6.
In following this guide, acquisition strategy developers and project management staff will be
able to:
a. provide a clear understanding of the requirements in relation to the development,
maintenance and implementation of an acquisition strategy.
b. ensure acquisition strategies provide Defence and the Government value for money;
c.
ensure that sound management and review is applied to all acquisition strategies in
accordance with the legal and policy framework for Defence;
d. highlight the responsibilities of relevant managers and delegates; and
e. ensure that delegates will be able to see that the most effective approach for
delivering the materiel components of the required capability has been chosen and
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that the cost, schedule and capability requirements will be met within acceptable
levels of risk.
7.
The methodology provided in this guide, when systematically applied and documented, will
demonstrate that the strategy is well considered, supports the objectives of the capability
development, and has been developed using a sound decision framework. That said, project staff
tasked with the development of acquisition strategies must apply the guide to the unique issues facing
individual acquisition projects. The role of the acquisition strategy is to describe a planned course of
actions designed to achieve an outcome that will give effect to the business case put to Government
at First and Second Pass.
ROLE OF THE ACQUISITION STRATEGY
8.
The process of developing the acquisition strategy and the resulting document perform
important roles in the planning and management of capital equipment acquisition projects. It is
important for acquisition strategy developers and project management staff (whether they be CDE or
DMO IPT leads) to understand these roles, and how the acquisition strategy development process
integrates with the other project planning and management process and the overall capability life cycle
and approval process. Figure 1 depicts how the acquisition strategy fits within the systems approach
of Concept – Strategy – Plan.
V&V
OPERATIONAL
CONCEPT
DOCUMENT
V&V
ACQUISITION
STRATEGY
PROJECT
MANAGEMENT
PLANS
SUBORDINATE
PLANS
INTEGRATED PLANNING PROCESSES
Figure 1 – Concept – Strategy – Plan
Role of the development process
9.
The process of developing acquisition strategies is an integral part of the overall project
development and planning process. The systematic approach to developing acquisition strategies
both influences and is influenced by other processes and activities.
10.
From the outset, the development of the acquisition strategy will be influenced by:
a. The capability needs, as detailed in the Capability Definition Statement (CDS) that
was developed during the needs phase of the Capability Life Cycle (refer to the
Defence Capability Development Manual), including the initial project resource
estimates (schedule and cost);
b. The preliminary Capability Definition Documents developed during the First Pass
Approval Stage;
c.
Initial strategic level risk assessments (the acquisition strategy is also a risk
mitigation tool);
d. Industry and market assessments and analysis; and
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e. Defence and Government procurement and financial policy, regulations and
requirements.
11.
During the development process, the acquisition strategy will inform / influence:
a. Initial capability option identification, assessment and selection;
b. The development of the Initial and Acquisition Business Cases (IBC and ABC);
c.
Planning for the second pass approval stage and the resultant project management
plans,
d. Planning for the solicitation activities for the project,
e. Planning for the acquisition phase and associated Acceptance into Service issues
and the associated acquisition project management plans and transition plans.
12.
Throughout the acquisition phase, the acquisition strategy remains a key document to which
decisions regarding changes to capability requirements or the acquisition approach may be referred.
Role of the Acquisition Strategy Document
13.
As a document, the acquisition strategy records assumptions and assessments, and
provides evidence that support acquisition decisions. It details and justifies the acquisition strategy
that will be followed for a particular capability option. The acquisition strategy:
a. Informs the Defence committees and Government on the acquisition and
sustainment strategy that will be followed;
b. Defines and details the method of procurement (including the method for procuring
the sustainment solution);
c.
Records compliance with Government and Departmental policy and regulations;
d. Forms the basis under which Procurement Approval is granted by the DMO delegate
in accordance with the FMA Act regulatory framework; and
e. Provides the basis for developing the solicitation and contractual documentation for
acquisition and support.
SCOPE OF AN ACQUISITION STRATEGY
14.
From its initial development early in the Requirements Phase, the acquisition strategy
provides the foundation for how the capability will be acquired, introduced into service, integrated with
other extant and developing or proposed capabilities and supported through-life. The scope of an
acquisition strategy is based on this principle.
15.
Although the primary focus of the acquisition strategy is the mission and support systems
that will comprise the capability, due consideration must be given to all Fundamental Inputs to
Capability (FIC) and how they will be influenced by the acquisition strategy.
16.
Strategies need to show how the acquisition and implementation of the materiel components
of a capability option would leverage from, or be affected by:
a. Existing Mission System elements;
b. Materiel System (Mission System and Support System) elements that may be
currently under development via other projects;
c.
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Existing and developing facilities; and
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d. Existing support arrangements, including for supply, maintenance, engineering,
training and operational support.
17.
While much of this information is available in the Capability Definition Documents, it is the
role of the acquisition strategy to detail how the above elements to be acquired under this project will
be integrated with any new elements being developed under other projects or with any elements
already in existence to satisfy the total capability requirements.
Note: It is likely that DSG will develop an acquisition strategy for related facilities requirements.
However, this strategy would be subordinate to and thus influenced by the Mission and Support
System Acquisition Strategy. This also applies to acquisition strategies that relate to the other
Fundamental Inputs to Capability (FIC).
ACQUISITION STRATEGY LIFE CYCLE
ACQUISITION
PHASE
REQUIREMENTS PHASE
FIRST PASS APPROVAL STAGE
SECOND PASS APPROVAL STAGE
Second Pass
Approval
First Pass
Approval
SOLICITATION SUB STAGE
Contract
Signature
Identify
Decision
Drivers and
Risks
Conduct Strategy
Element Analysis and
develop Acquisition
Strategies for each
Capability Option
Refine Acquisition
Strategies for
approved capability
option(s) into Final
Acquisition Strategy
Update Final
Acquisition Strategy (if
required) for inclusion
in Capability Proposal
Second Pass
ACQUISITION
STRATEGIES FOR
EACH OPTION FOR
CPFP
FINAL ACQUISITION
STRATEGY
UPDATED
ACQUISITION
STRATEGY
Figure 2 – Acquisition Strategy Life Cycle
18.
The Defence Capability Development Manual (DCDM) clearly articulates the Capability Life
Cycle, and in particular the Requirements Phase and the First and Second Pass approval processes.
The development and approval of the acquisition strategy is inherent within this life cycle and the
associated government approval processes. The acquisition strategy is developed initially for the First
Pass Approval stage. Usually, the acquisition strategy will be refined and expanded after First Pass,
as more detailed planning is done, for example, about the types of contracting templates that will be
used. That said, the strategy itself will influence the other phases of the life cycle, especially the
acquisition phase itself. Figure 2 depicts the development and approval life cycle for the acquisition
strategy.
19.
A well-developed strategy minimizes the time and cost required to satisfy approved
capability needs, and maximizes affordability throughout the program life-cycle. When developing the
acquisition strategy, the program manager and supporting team members should keep in mind their
total systems responsibility.
20.
In reality, all projects are different, and the role or objective of the acquisition strategy and
the associated development and approval process will vary (albeit slightly) accordingly. It is the
responsibility of the acquisition strategy developer to tailor the role of the acquisition strategy (in
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consultation with appropriate project authorities and stakeholders) and align the development and
approval process for the strategy with that role.
First Pass Approval Stage
21.
Development of the acquisition strategy happens during the First Pass Approval Stage of the
Requirement Phase, where the Preliminary Capability Definition Documents are developed to a point
where fundamental capability issues can be identified and the identification of capability options can
begin. At this point, the decision drivers for the acquisition strategy can be identified and agreed, as
can the key evaluation criteria against which the acquisition strategy will be evaluated. Figure 3
depicts the acquisition strategy development process during the First Pass Approval Stage.
Derive High
Level Capability
Project Plan from
CDS
Schedule, Cost,
Risks
Identify Initial
Capability Option
Set
Key Capability
Requirements
Capability
Options
Conduct
Capability Option
Definition and
Supportability
Analysis
Activities
PCDD
Issues and
Options
Approved
Acqusition
Strategies for each
Option
Analyse Strategy
Elements for
each Option
Assemble, Assess and
Approve Overarching
Acquisition Strategies
for each Option
Decision Drivers
Industry/Market
Factors
Identify Decision
Drivers and Key
Acquisition Risk
Issues
Integrated Analysis
Figure 3 – Acquisition Strategy Development During First Pass Approval Stage
22.
Approval (by the Options Review Committee – ‘The Troika’) of the broad options to be
investigated marks the point at which the detailed development of the acquisition strategy
commences. An acquisition strategy is required for each broad option that has been approved for
investigation. The document(s) itself will form part of the Capability Proposal First Pass package that
is progressed through the Defence committees and Government to obtain first pass approval.
Although Capability Development Executive (CDE) is responsible for the management of the First
Pass Approval Stage, DMO is responsible for the development and approval of the acquisition
strategy for inclusion in the CPFP Package.
23.
The role of the Acquisition Strategy is to provide key information to Defence committees and
Government to assist in deciding which capability options will be subject to further investigation and
development during the Second Pass Approval Stage. In particular, the Acquisition Strategy will
provide:
a.
Details of the activities required to further define and evaluate each of the capability options,
such as project definition studies, market research, prototyping, concept technology
demonstrators, industry solicitation - funded Request for Proposal (RFP) or Request for Tender
(RFT). It is important to identify industry solicitation activities proposed before second pass
approval due to the expensive nature of such activities and prospects of process contracts and
the need to manage industry expectations particularly when the project has not yet been
approved; and
b.
An outline approach to the solicitation activities that would be required or are proposed for each
capability option.
24.
Options approved by Government at First Pass are considered ‘realistic options’ even
though the Government is not committed to acquiring the capability option, only to the conduct of
detailed studies, such as industry capability studies and analysis.
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25.
Where extensive definition development activities are to be undertaken during the second
pass approval stage, it is likely that the acquisition strategy will require refinement and updating before
it is suitable for forming the basis of procurement approval by the DMO Delegate. Where such
development work is forecast or envisaged, the plan for managing such changes must be included in
the Acquisition Strategy.
26.
Incremental Development. Development of the acquisition strategy during the First Pass
Approval Stage follows an incremental approach, where DMO Delegate, stakeholder input and
endorsement are provided in steps, culminating in the Acquisition Strategy that is included in the
Capability Proposal First Pass Package. The incremental approach includes the development and
endorsement / approval of:
a.
Decision Drivers and Key Evaluation Criteria.
b.
Possible acquisition approaches for each capability option, including the associated risks,
schedule and cost issues.
c.
The Acquisition Strategy (for First Pass Approval).
Second Pass Approval Stage
27.
The Acquisition Strategy that formed part of the CPFP, is updated as required during this
stage. If significant changes to the acquisition strategy result from the first to second pass activities, it
may require higher (i. e. Government or Minister) approval prior to commencement of solicitation.
Figure 4 depicts the acquisition strategy development process during the second pass approval stage.
28.
At this stage, the acquisition strategy should identify:
a.
The applicable acquisition and support template(s).
b.
The major tailoring of the templates.
c.
Any linkages between the different procurements and the mechanisms for managing those
linkages.
Note: Work on the non-preferred options may provide a valuable resource for future strategy
developments and should be retained for reference.
Develop Final
CDDs for
approved
Options
Key Capability
Requirements
Conduct Detailed
Option Definition
and
Supportability
Analysis
Activities
Issues and
Options
Approved
Option(s) from
Government
Refine Acquisition
Strategy for
selected Option(s)
and gain Delegate
approval
Acqusition
Strategies for each
Approved Option(s)
Integrated Analysis
Conduct
Solicitation
Activities
Acquisition
Strategy Issues
Updated Acquisition
Strategy for CPSP
Update
Acquisition
Strategy for
CPSP
Figure 4 – Acquisition Strategy Updates During Second Pass Approval Stage
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29.
Solicitation Pre-Second Pass Approval. Where the solicitation activities are to be
undertaken prior to second pass approval, the acquisition strategy is to be finalised and approved by
the DMO Delegate prior to the commencement of such activities. Note that the approval may be
subject to higher level endorsement (eg Minister or Government), achieved through Ministerial or
Cabinet Submission processes. The Defence Capability Development Manual (2006) notes that it will
generally be necessary to solicit formal quotations and estimates from Industry prior to second pass
approval (Section 5.10).
30.
Solicitation Post-Second Pass Approval. Where the solicitation activities are planned to
be undertaken following second pass approval from Government, the updated acquisition strategy is
approved by the DMO delegate and then included in the Capability Proposal Second Pass (CPSP)
package that is presented to the Defence Committees and Government.
31.
The IPT DMO Lead (or Project Manager) is responsible for ensuring that the key documents
(CDDs, Acquisition Business Case, Acquisition Project Management (and supporting) Plans etc) are
aligned with the acquisition strategy and baselined.
Acquisition Phase
32.
Project directors must ensure that the acquisition strategy is continually updated as the
project progresses. This will ensure that the acquisition strategy continues to provide Defence and the
Government with the best value for money in accordance with Defence procurement policy. Major
updates/changes to the acquisition strategy are to be forwarded to the delegate who approved the
acquisition strategy. The delegate is to make a decision as to whether the major updates/changes to
the acquisition strategy need to be forwarded to higher Defence Committees and / or to Government
for reconsideration.
RESPONSIBILITIES AND ACCOUNTABILITIES
Approvals and Endorsements
33.
Although the acquisition strategy is included in the CPFP and CPSP packages, and may
also be subject to Ministerial and Government scrutiny, Acquisition Strategies are approved by the
DMO Delegate for the project, which is normally the Chief Executive Officer or Division Head.
34.
Given the far reaching influence of the acquisition strategy, approval by the DMO delegate is
subject to endorsement by key stakeholders in the project, which may include:
a.
Appropriate DMO (Aerospace, Helicopter, Land, Maritime, Electronic Weapons) Division and /
or Branch Heads;
b.
Other DMO Division Heads or their delegates (e.g. Industry, COO);
c.
Appropriate CDE representatives (e.g. DGs, HCS, CCDE); and
d.
Capability Manager(s).
Note: Additionally other Defence Groups (eg Command HQ, DSG, CIO etc) may need to be consulted
or at least be informed of the Acquisition Strategy if it will effect their domains.
35.
The importance of stakeholder engagement and management cannot be underestimated.
The acquisition strategy developer must identify and classify all appropriate stakeholders, solicit
requirements and expectations and then manage those requirements and expectations accordingly.
This is best achieved through a stakeholder mapping, and is normally included in the Communications
and Stakeholder Management Plan in accordance with PMMv2 Section 7.8.2. It is vitally important to
understand and satisfy the expectations of the approval authority (DMO Delegate) and stakeholders.
This is best achieved through an incremental development and approval approach, where feedback
and direction is provided regularly throughout the development process.
36.
Once stakeholders are engaged, the acquisition strategy can then be progressed through
the DMO Line Management and submitted to the DMO Delegate for approval. DMO Delegate
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approval is required before the acquisition strategy is included in the CPFP and CPSP package and
prior to commencement of the solicitation activities.
37.
Acquisition strategy developers, Project Managers and Directors and DMO Delegates must
have a detailed understanding of the policy and regulatory frameworks within which acquisition will
take place. Further guidance and details of these frameworks is provided at Annex A.
Integrated Project Team – Defence Materiel Organisation Lead
38.
Where CDE establishes an Integrated Project Team (IPT) prior to First Pass Approval, the
relevant DMO Division head will appoint a DMO lead for that IPT. It is the responsibility of the IPT
DMO Lead to either assume the role of acquisition strategy developer, or delegate that responsibility
to a competent DMO staff member. The IPT DMO Lead is responsible for overseeing the
development and ensuring that the development process includes appropriate DMO Delegate and
stakeholder engagement.
Note: If a formal IPT is not established prior to First Pass Approval, the DMO Environmental Emerging
Project Team (EPT) Lead is responsible for appointing an acquisition strategy developer and ensuring
the appropriate amount of DMO Delegate and Stakeholder Engagement.
Acquisition Strategy Developer
39.
The acquisition strategy developer, as appointed by the IPT DMO Lead, is responsible for
the actual development of the acquisition strategy. This includes working with the Integrated Project
Team members and engaging the appropriate stakeholders.
40.
Typically, the development of the acquisition strategy demands a multi-disciplinary approach
and a variety of skill sets. Accordingly, the IPT DMO Lead should appoint an appropriately
experienced staff member as the acquisition strategy developer and foster an environment and
processes to obtain multi-disciplinary inputs to support this development. The development of the
acquisition strategy must be integrated with the processes used to determine capability requirements
and to determine and evaluate capability options and the associated project planning processes. To
that end, it is recommended that the acquisition strategy developer be included in the IPT.
DMO Delegate
41.
The DMO Delegate is responsible for approving the Acquisition Strategy prior to inclusion
the Capability Proposal First Pass Package and any significant amendments during the first – second
pass stage. Noting any significant changes may have to go to Government before the second pass
approval.
Capability Development Executive's Integrated Project Team Leader
42.
The Capability Development Executive’s Integrated Project Team (IPT) Leader is
responsible for coordinating the development of the acquisition strategy with the other capability
development and approval processes, and integrating the strategy with the Initial and Acquisition
Business Cases.
KEY SOURCES OF INFORMATION AND RELATIONSHIPS
Key Inputs
43.
There are number of key inputs and sources of information that drive the development of the
acquisition strategy from the outset. These sources continue to drive and influence the strategy as the
capability requirements and options mature. Acquisition strategy developers must be aware of these
sources and how they influence the formation of the acquisition strategy, especially their role in
identifying the decision drivers.
44.
Capability Definition Statement. The Capability Definition Statement (CDS) and
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documentation that was used to support entry of the capability requirement into the Defence Capability
Plan (DCP) provides key information regarding the overall capability project such as schedule
milestones, capability and other project relationships and initial cost estimates.
45.
Capability Definition Documents (CDDs). The CDDs throughout their development will
influence the acquisition strategy up to the point where they are baselined prior to the commencement
of the solicitation activities. Strategy developers should note that the ability to develop an acquisition
strategy is directly dependent upon the maturity of the Capability Definition Documents and the clarity
in defining the Materiel System solution. Elements of the Capability Definition Documents may also be
defined by the acquisition strategy (e. g. the system boundary may be defined by the acquisition
strategy).
46.
Market and Industry Issues. The acquisition strategy will be influenced significantly by
industry capabilities and market forces, and industry development requirements and objectives. Such
issues need to be determined very early in the development of acquisition strategies as they will have
a significant bearing on the success of the acquisition project.
47.
Financial and Procurement Policy and Regulations. As discussed previously, the
financial and procurement policy and regulatory frameworks will also have a significant impact on the
development of acquisition strategies, and all development must be cognisant of these frameworks.
48.
Operational Concept Document (OCD). The OCD will provide the basis for system
support concepts and strategies (for example, Through Life Support Concept). These concepts both
influence the strategy element analysis activities. Support concepts and strategies may have to be
changed if assessed as non viable or inadequate due to acquisition issues.
49.
Acquisition Project Management Plan. The acquisition strategy will be the main driver in
the development of the Acquisition Project Management Plan.
50.
Risk Management. The risk management process shares an important relationship with the
acquisition strategy development process. The acquisition strategy is an important risk mitigation tool.
Risks peculiar to the acquisition strategy should be identified, documented and a mitigation strategy
identified and integrated with the strategy. Project authorities and delegates must ensure that the
‘residual’ risk levels are acceptable and appropriately managed. This should be undertaken as part of
the overall risk management processes within the projects.
KEY EVALUATION CRITERIA
51.
The process of determining the overarching acquisition strategy includes the evaluation of
the strategy against a set of key evaluation criteria.
52.
The sources of key evaluation criteria against which the overarching acquisition strategy will
be evaluated are:
a.
Achievement of value for money (refer to Defence Procurement Policy Manual (DPPM) for
Value for Money checklist);
b.
Compliance with the applicable statutory, legislative and policy requirements;
c.
Satisfaction of the cost, schedule, capability and Government direction or strategic objectives;
and
d.
Acceptability of the residual risk exposure.
THE MAKE-UP OF AN ACQUISITION STRATEGY
53.
An acquisition strategy consists of a number of elements that are developed through the
identification and consideration of issues affecting the project outcome. These elements are:
a.
Business Element,
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b.
System Solution Element,
c.
Procurement Element,
d.
Contracting Element,
e.
Industry Element,
f.
Management Element, and
g.
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54.
Each strategy element may have one or more possible options to meet the particular
objectives required. This will depend on the individual capability option, the issues confronted, and the
synergies required between other elements of the strategy. The strategy should address each
element in as much depth as considered appropriate for the size, complexity and criticality of the
project and the specific capability option being addressed.
Business Element
55.
The Business element provides a robust business strategy or strategies for acquiring and
implementing the materiel components of a capability option. Options for the Business element must
consider issues affecting competition, affordability and synergies with other projects or existing
capabilities. This element should also highlight how the Defence Materiel Organisation will achieve
value for money. A list of issues and possible Business Options is provided at Annex B to assist with
the development of this element of the acquisition strategy.
System Solution Element
56.
The System Solution element outlines the system solution strategy for acquiring and
implementing the materiel components of a capability option. In determining the System Solution
Options, issues such as the volatility of the requirements, history of product and/or technology,
availability, and new design versus Commercial off the Shelf and/or Military off the Shelf should be
considered. A list of these and other issues, and possible System Solution Options, is provided at
Annex B to assist with the development of this element of the acquisition strategy.
Procurement Element
57.
The Procurement element details the procurement strategy for the acquisition and
implementation of the materiel components of the capability option and should always promote the
achievement of value for money. As procurement aligns closely with the contracting requirements,
many of the issues relevant to contracting will apply here also. Ensuring effective and efficient
competition does not necessarily mean full open competition. Broad procurement options may be
open competition, restricted competition or direct sourcing. A list of issues and possible Procurement
Options is provided at Annex B to assist with the development of this element of the acquisition
strategy.
Contracting Element
58.
The Contracting element outlines the strategy for major contracts. The contracting
methodology and procurement strategy must be consistent. Issues such as allocation of risk between
the supplier and Defence, time frames, variations and contingencies should be considered. A list of
issues and possible Contracting Options is provided at Annex B to assist with the development of this
element of the acquisition strategy.
Industry Element
59.
The Industry element must support Defence’s industry policy framework, which is aimed at
developing and sustaining critical in-country industrial capabilities, and facilitating greater alignment
and partnership with industry. The trade-off between building/ enhancing local industry capability and
buying overseas is one of the key issues. However, in developing Industry Options, developers
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should also consider how to balance industry support with achieving the required capability on time
and within budget. A list of issues and possible Industry Options is provided at Annex B to assist with
the development of this element of the acquisition strategy.
Management Element
60.
The Management element outlines the strategy for the high-level management of the
Requirements, Acquisition and In-Service Phases. It should also outline funding responsibilities for
acquisition and support as well as for whole-of-life. It considers issues such as skill availability,
training, break-up of project phases, governance and internal controls. A list of issues and possible
Management Options is provided at Annex B to assist with the development of this element of the
acquisition strategy.
Delegations
61.
The acquisition strategy will be used to delegate authority related to the acquisition and
procurement activities. This includes identifying individuals, who will exercise approvals and
delegations, and the organisational agencies that will review, and individuals who will approve the
steps in the acquisition processes for significant procurements within the project and who will approve
significant changes. Individuals must be identified to exercise delegations and approvals by name,
rather than by position, in accordance with Defence Materiel Organisation Finance Instructions.
Overarching Acquisition Strategy
62.
Each acquisition strategy combines the decision drivers, business, industry, procurement,
contracting, system solution, and management elements into a coherent balanced overarching
strategy for acquiring and implementing the materiel components of a capability option.
STEPS TO DEVELOPING THE ACQUISITION STRATEGY
63.
The following section outlines the systematic approach to acquisition strategy development,
as an integral process of the requirements phase. Essentially, there are 4 key steps in the
development process:
First Pass Approval Stage
a.
Step 1. Conduct Research and Identify Decision Drivers and Key Evaluation Criteria.
b.
Step 2. Conduct Strategy Element Analysis for each Capability Option.
c.
Step 3. Assemble Overarching Acquisition Strategy for each Capability Option and Evaluate
against Key Evaluation Criteria.
Acquisition Strategy Produced
Second Pass Approval Stage
d.
Step 4. Update acquisition strategy if required for approved Capability Option(s). This will be
required for most major projects, as more detailed planning is undertaken after First Pass.
Acquisition Strategy Updated
64.
These development steps are illustrated in Figure 5, and are aligned with the acquisition
strategy life cycle as detailed earlier in this handbook.
Step 1: Conduct Research and Identify Decision Drivers and Key Evaluation Criteria
65.
Strategy developers should conduct research and analysis to collect and sort relevant
information to support the development of the acquisition strategy, and identify the Decision Drivers
and Key Evaluation Criteria. The objective must be to build a clear understanding of the business
and domain environment and also the operational and support concepts and requirements, which are
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defined in the preliminary (and later final) Capability Definition Documents.
66.
It is important to identify the decision drivers that might lie at the centre of a multidimensional acquisition strategy. The decision drivers essentially dictate, drive or influence the
acquisition strategy in a direction and as well as dictate the choices in the remaining elements. The
decision drivers will lock in a certain degree of the project, direction and close off issues and options in
the Business, System Solution, Procurement, Contracting, Industry and Management elements.
Therefore, they should be considered carefully. Some examples of decision drivers that could drive
the acquisition strategy in a particular direction could be schedule, range, interoperability, proven
operational history, access to foreign technology, industry capability, security and spectrum1
constraints.
67.
The research and analysis should include identification of the key evaluation criteria. Each
element of the strategy will be measured against the associated key evaluation criteria to provide a
measure of the effectiveness of the strategy. These issues are formulated into the decision drivers for
the acquisition strategy. Annex B provides typical issues to be considered for Business, System
Solution, Procurement, Contracting, Industry and Management elements. However, the range of
issues will vary depending on the capability being considered. The primary inputs were discussed
earlier in this guide under the section titled Key Sources of Information and Relationships.
68.
Market research is essential for developing the acquisition strategy. The Capability
Manager/Sponsor as part of the Project Definition Studies conducts much of the initial market
research and analysis. However, Defence Materiel Organisation staff need to be involved in this initial
market research to ensure that the specific acquisition strategy issues are identified early and can be
addressed in time for the First and Second Pass approval processes. Additionally, industry input
should also be actively sought as early as possible because industry is likely to be able to provide
valuable input into the costs and risks associated with particular capability options.
69.
Part of the research and analysis should also include seeking advice from experienced
Defence Materiel Organisation practitioners and domain experts and advisers. Lessons learnt and
practical initial guidance can be the difference between success or failure in developing an acquisition
strategy or at the very least, the advice could reduce the possible rework involved.
70.
Acquisition strategy developers should note that the decision drivers and key evaluation
criteria should be continually checked and validated as the capability requirements (CDDs) as options
mature.
1
RF Spectrum may, at first glance, appear to be a technical constraint and too tactical to appear in a strategic
document such as the Acquisition Strategy. However, overarching considerations such as NCW or
interoperability with other projects and with allies can have far reaching consequences when allocation of
Spectrum can require very long lead times.
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CDS
INPUTS
STEP 1
Conduct Research
and Identify Decision
Drivers and Key
Evaluation Criteria
CDDs
OUTPUTS
DECISION
DRIVERS
INPUTS
DECISION
DRIVERS
STEP 2
Conduct Strategy
Element Analysis for
each Capability
Option
DMG (ACQ) 2/2006
Market /
Industry
Research
Risks
Regulations
KEY
EVALUATION
CRITERIA
Acquisition
Models
Business
Element
System
Solution
Element
Contracting
Element
Procurement
Element
Industry
Element
Management
Element
OUTPUTS
STEP 3
Assemble
Overarching
Acquisition Strategy
for each Capability
Option and Evaluate
against Key
Evaluation Criteria
Delegations
ACQUISITION
STRATEGY
ELEMENTS
INPUTS
NT
ME
SS
E
S
AS
KEY
EVALUATION
CRITERIA
Overarching
Acquisition Strategy
OUTPUTS
ACQUISITION STRATEGY
(for each Capability Option)
INPUTS
STEP 4
Refine acquisition
strategy for approved
Capability Option(s).
OUTPUTS
Updated
CDDs
Updated
Project
Plans
(including
Risks)
ACQUISITION
STRATEGY
(for slected
Capability Option)
Refined Acquisition
Strategy for Approved
Capability Option(s)
Detailed
Requirement
and Option
Analysis
Activities
M
SS
SE
AS
KEY
EVALUATION
CRITERIA
T
EN
UPDATED ACQUISITION
STRATEGY (for approved
capability option(s))
Figure 5 – Acquisition Strategy Development Steps
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Step 2: Conduct Strategy Element Analysis for each Capability Option
71.
Developers must consider and fully document the full range of issues affecting each of the
fundamental strategy elements and develop options to address these issues. This analysis should be
integrated with the Capability Requirements and Options analysis activities and processes being
undertaken in the project.
72.
Acquisition Models. Acquisition models are an important input into this step of the
development process, and must be fully considered in the analysis activities. The various acquisition
models include:
a.
Traditional Once-Through Acquisition Model;
b.
Evolutionary Acquisition Model (either Spiral or Incremental);
c.
Mixed Acquisition Model;
d.
Private Financing Model (including leasing);
e.
Staged Procurement Model;
f.
Project Alliancing Model; and
g.
Foreign Miliary Sales Model.
Refer to the Defence Procurement Policy Manual (Section 4) for more details.
73.
A key feature of the acquisition strategy development process is to ensure issues and
options for strategy elements are weighed-up against each other rather than in isolation.
Consideration of these elements in isolation may introduce the risk that the underpinning strategy
elements for the acquisition strategy are inadequate. This will lead to cost, schedule and quality
issues as the project matures. The need to thoroughly document all the issues and options for
strategy elements is essential for building the acquisition strategy, both in terms of providing
justification for selected courses of action leading to logical/reasoned conclusions and to provide an
audit trail.
74.
The issues and options provided in Annex B are a starting point only. There will likely be
additional issues and options that can be drawn from source documents such as CDDs, industry
sector plans, market surveys, logistic support analysis and feasibility study reports.
75.
Analysis of the strategy elements is undertaken in concert with activities and processes that
are used to refine the capability requirements and options. This includes Systems Engineering and
Supportability Analysis activities such as Logistics Supportability Analysis and Life Cycle Costing
Analysis. The acquisition strategy elements both influence and are influenced by these processes.
76.
Risk Assessment and Management. Each element of the acquisition strategy is, in
essence, a stand-alone plan of action to support a particular area of business associated with the
acquisition. As such, each element must be subject to a risk-management process before being
accepted or rejected for integration into the overarching acquisition strategy.
77.
The process of risk assessment for each element of the acquisition strategy will provide
evidence that the element will achieve its desired purpose or, conversely, will highlight additional work
that is, or will be, required. For example, in the Business element, the issue of managerial and
technical capability within the Defence organisation to support the proposed acquisition may be
considered a risk which, if identified early, can be treated with supplementary staff, skills development,
mentoring etc.
78.
Consideration and documentation of risks, both within and across the elements, will show
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that the acquisition strategy for the materiel components for each capability option is well considered
and achievable.
Step 3: Assemble Overarching Acquisition Strategy for each Capability Option and Evaluate
against Key Evaluation Criteria.
79.
At the conclusion of the first pass approval stage capability requirements and options
analysis activities and in preparation for first pass approval, the acquisition strategy developer is
required to formulate and document the Acquisition Strategy for each capability option being
presented at First Pass Approval. This involves ‘assembling’ the strategy elements to form the
overarching acquisition strategy. Depending on the specifics of the Project, a separate document may
be developed for each option, or the details for each option may be included in the one document.
80.
Evaluation. Once the seven strategy elements are integrated into an overarching
acquisition strategy, developers should check the overarching acquisition strategy against the key
evaluation criteria and conduct a final risk analysis. This will identify any weaknesses that need to be
addressed, as well as exposing residual risks for input into the Project Management and subordinate
plans. The primary assessment questions are:
a.
Does this strategy achieve or support value for money?
b.
Does it comply with applicable statutory, legislative and policy requirements?
c.
Will it meet the cost, schedule, capability and strategic objectives?
d.
Are there any risks for which the residual capability/cost/schedule risk exposure is
unacceptable?
Note: Records (or evidence) of the assessment are captured in the Acquisition Strategy document.
81.
The assembly of the overarching acquisition strategy and associated assessment completes
the development of the Acquisition Strategy (for each option). These Acquisition Strategies are to be
approved by the DMO Delegate prior to incorporation in the Capability Proposal First Pass Package.
The strategies for the options selected by government for further investigation (at First Pass Approval)
will be carried over to the second pass approval stage for further refinement as required.
Step 4: Refine acquisition strategy for approved Capability Option(s).
82.
Following First Pass Approval, a preferred option (or in some cases options) will have been
selected by government for further investigation and development during the second pass approval
stage. It is the role of the acquisition strategy developer to continue the refinement of the acquisition
strategy (as required) during this stage of the project. As during the development of the strategies
during the First Pass Approval stage, this continued development is conducted in concert with the
detailed capability requirements and options development processes.
83.
Each section of the acquisition strategy should be checked, validated and updated as
required. The level of detail in these sections is likely to increase as the capability requirements and
options mature. This refinement process includes updating and reassessing the overarching
acquisition strategy. Once these activities have been completed (following baselining of the capability
requirements and options documents), the Acquisition Strategy update has been completed.
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ANNEX A
POLICY AND REGULATORY FRAMEWORK OVERVIEW
Financial Management and Accountability Act
The acquisition strategy must be consistent with the Defence Materiel Organisation governance
requirements and statutory obligations imposed by the Financial Management and Accountability Act
1997 (FMA Act) and accompanying regulations and Orders (Financial Management and Accountability
Regulations and Orders). The Commonwealth Procurement Guidelines and Best Practice Guidance
flow down from the Financial Management and Accountability Act and the Financial Management and
Accountability Regulations.
The acquisition strategy must clearly demonstrate to the delegate how the proposed acquisition
activity complies with the policy and guidance contained in the Australian Government
(Commonwealth) Procurement Guidelines and Best Practice Guidelines – February 2005.
In this regard, the Chief Executive of the agency and his/her delegate must ‘manage the affairs of the
agency in a way that promotes the proper use of the Government resources for which the Chief
Executive is responsible’. In this context, the ‘proper use’ means efficient, effective and ethical use.
Similarly, Reg 9 of the Financial Management and Accountability Regulations says that any proposal
to spend public money must not be approved unless the approver (the delegate) is satisfied, after
making such inquiries as are reasonable, that the proposed expenditure is amongst other things:

in accordance with the policies of the Government; and

will make efficient and effective use of public money.
Value for Money
Value for money is a significant purchasing principle governing Commonwealth procurement and is
underpinned by four supporting principles:

efficiency and effectiveness

accountability

ethics

industry development
Achieving ‘value for money ’ requires Defence personnel involved in acquiring goods or services to
ensure that the best possible outcome is achieved, taking into account all relevant costs and benefits
over the whole-of-life of the goods or services being acquired. Accepting the lowest price is not an
indicator of best value for money.
The Defence Materiel Organisation Integrated Project Team (IPT) Lead Member must select an
acquisition strategy on its merits weighing up all relevant requirements and market conditions to
ensure that the business, contracting, system solution, procurement, industry and management
elements will make efficient and effective use of public money.
To ensure accountability and transparency, the acquisition strategy should clearly document, and
provide well-founded reasons for, selection of the recommended business, contracting, system
solution, procurement, industry and management approaches. Procurement and contracting elements
should ensure that prospective suppliers are alerted to the public accountability requirements of the
Commonwealth, including disclosure to Parliament and its Committees.
Pursuit of value for money must always be underpinned by good ethical practice. Establishing good
relations with potential suppliers is to be encouraged; however, project personnel are required to be
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careful to avoid any perception of bias or other activity that may compromise probity. Any conflict of
interest, by tenderers or project personnel, must be declared. Developers of acquisition strategies
should consult with probity advisers and auditors as well as seek advice from other contracting
specialists to ensure that strategies developed comply with value for money principles.
An acquisition strategy, in particular the industry element, is to articulate how it will meet industry
development requirements such as ensuring competitive business with enhanced capacity to grow,
invest, innovate and export.
Acquisition strategy developers should refer to Defence Procurement Policy Manual (DPPM) Chapter1. 2 for further guidance on value for money.
Government Policy and Legislation
There is a wide range of government policy and legislation that may affect the development of an
acquisition strategy. Developers and delegates should ensure that due consideration is given to all
relevant policy and/or legislation, which may include:

likely limitations and provisions imposed by the United States or other governments on
the export to Australia of potential solutions;

hazardous substances;

trade and foreign policy – including international sanctions;

Government-State coordination and cooperation;
At the very least, developers of acquisition strategies should attempt to address each of the above
areas during their analysis of potential issues of concern when developing options for strategy
elements.
For further information on the requirements associated with this and other legislation, refer to the
Defence Procurement Policy Manual (DPPM), Section 3, Chapters 3.10 and 3.14.
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ANNEX B
ISSUES AND OPTIONS
An acquisition strategy consists of seven elements that are developed through the identification and
consideration of issues affecting the project outcome. These elements are Business, System
Solution, Procurement, Contracting, Industry, Management and Delegations. Delegations are
predominantly fixed and highly specific to a project and therefore, issues and options are not
applicable to this element. The information provided in this Annex is intended as a guide for strategy
developers. The issues checklists and possible options listed are based on historical data and may
not be applicable to all projects. They are not exhaustive and should be supplemented from wider
information sources, including research, knowledge of Integrated Project Team (IPT)/project office
members and other documentation relating to the proposed capability option and other projects.
Section B1: Business Issues and Options
Section B2: System Solution Issues and Options
Section B3: Procurement Issues and Options
Section B4: Contracting Issues and Options
Section B5: Industry Issues and Options
Section B6: Management Issues and Options
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SECTION B1: BUSINESS ISSUES AND OPTIONS
In developing a robust business strategy or strategies for acquiring and implementing the materiel
components of a capability option, the Business element should reflect consideration of issues such
as those listed below.
Business Issues:

What circumstances will affect the potential for competition (e. g. urgency) and how is value for
money achieved in such circumstances?

What resources will be required, i. e. funding, staffing levels, life cycle costs – what can be
attributed to acquisition/support over what period?

What is the whole-of-life affordability2 (including cost/feasibility constraints on disposal and/or the
best value return when disposing proposed asset)?

What are the commercial support costs compared to the in-house support costs for those elements
of support where either option could be selected?

What are the potential costs (both direct and opportunity costs) to the Government and industry in
pursuing lengthy procurement approaches?

What is the managerial and technical capability within the Defence organisation to support the
proposed acquisition?

What are the type, quantity, mix, volume and scale of the materiel components of the capability
required (including likely follow-on orders)?

What is the potential for risk sharing (e. g. what risks should be transferred to other parties and
what should Defence manage)?

What are the potential sources and industry capability (financial and technical capability to design,
develop and support) - including potential requirement for teaming arrangements?

What insurance, financial and performance guarantees will be needed?

What export/import restrictions and regulations need to be considered?

Are there any known best practice processes and methodologies that would assist in the
acquisition?
Business options:

Consider going to industry with a range of capped budgets and schedules - requesting industry to
come forward with capability options for each capped budget and schedule. The Government can
pick a capability option that meets the intended capability gap and proceed with the acquisition.

Consider opportunities for sharing the capability provided by the Materiel System solution with the
commercial sector.

Consider ‘piggybacking’ on existing concurrent overseas 3. programs
2
The
acquisition
strategy is
not
the
primary source
of
Life
information. It should draw on such information to argue whole-of-life affordability.
3
Cycle
Cost
Economy of scale price reductions can be often achieved through piggybacking on foreign
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
Consider tapping into the global supply chain.

Consider lease or buy.

Consider joint ventures and international collaborations (including funds sharing arrangements).

Consider increased synergies with related projects.

Consider using existing state, regional, national and international capabilities and facilities that
could support the capability.

Consider commercial support or in-house support or combination of commercial and in-house
support.

Consider the implementation of the Support System (see below).
Note: Implementation of the Support System
If the Mission System(s) are being delivered incrementally (e.g. individually or in lots), there is no
requirement to have all of the Support Resources (e.g. Spares) delivered from day one. A better
approach might be to package the Support Resources and have them delivered incrementally to
match the deliveries of the Mission System(s).
With respect to the support contract, there may also be no requirement to have the full force of the
support contract in place from day one. A better approach might be to have the support contract ramp
up4 to align with the deliveries of the Mission System(s). Note that, for this approach to be adopted,
the performance measures also need to be scalable. Availability-based performance measures may
be scaleable with the incremental delivery of Mission Systems, if the deliveries of the Support
Resources are also scaled in the same fashion (i.e. only those resources required to support each
additional Mission System are delivered at the same time as the Mission System).
Strategy developers should note that some elements of the support contract could phase in 5 and ramp
up differently from other elements. For example, maintenance services might phase in by the
operative date6 and ramp up with the deliveries of the Mission Systems; however, engineering and
supply services might phase in and ramp up differently. For example, engineering services might
phase in after the operative date to coincide with the requirement for engineering services after ‘x’
Mission Systems have been accepted under the contract. The only overall objective is that the full
scope of support services must be in place by the time all of the Mission Systems have been
delivered.
government programs, requirements and orders.
“Ramp up” relates to the increased support effort required as greater numbers of Mission Systems
are delivered that require support. Essentially, ramp up is only relevant when a support contract is
implemented in conjunction with an acquisition contract.
4
“Phase in” is where the support contractor develops and implements systems and processes and
obtains the necessary resources to provide the required support to the Mission System.
5
6
“Operative date” defines the circumstances when the support contract comes into operation.
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SECTION B2: SYSTEM SOLUTION ISSUES AND OPTIONS
The System Solution element of the acquisition strategy should propose a system solution strategy for
procuring a capability option based on issues such as those listed below.
System Solution Issues:

How volatile are the system solution requirements?

Is there a proven history of product and/or technology?

What is the project maturity score?

What is the availability of product and/or technology?

What percentage of new design/innovation7 is anticipated?

Does the system solution include the design and construction of new facilities?

Is the installation of new systems anticipated within existing or modified Materiel Systems?

What access is available to foreign technology?

What is the treatment of classified technical information?

What level of technology transfers will be required and can export licences be approved

What level of Research and Development (R&D) 8 is involved?

What technology trends (including maturity and evolution of the software technology) are
anticipated?

What level of standardisation is available?

Is it an open systems design?

Are there any foreign government policies, which may affect the interoperability of the equipment?

What compatibility with existing Materiel System will be required for any in service equipment?

What are the radio frequency spectrum coordination needs?

Is software development9 expected?

What integration is required - physical, functional and human?

What is the support concept?

Are there technology demonstrations, prototypes and engineering development models in
7
How much developmental activity is needed for hardware and software? What are the opportunities
for injecting technological advances progressively?
8
It should be noted that risk increases exponentially with the degree of R&D required.
9
Address key aspects, including risks, of the proposed software development approach. It should
state how the chosen software development approach supports the system-level acquisition strategy.
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existence?

What are the mission and safety critical requirements?

What are the expected implementation and transition 10 issues?

What operating and maintenance standards will apply?

What Materiel System and facility integration will be required?

What compatibility with national and international standards is expected?

What is the plan for managing obsolescence?

How will the system and equipment be disposed of?

Will a modular design to facilitate supportability of fielded system be required?
System Solution Options:
Acquisition strategy developers should note that options for the System Solution element would
typically include:

The development of new technologies.

Incremental development of the system solution.

Evolutionary development of the system solution

Novel integration of existing technologies.

Reuse of existing Materiel System or Materiel System elements without any modification (including
re-use of existing software without any modification).

Modification of existing Materiel System elements (including use of existing software with
modification).

Commercial/military off the shelf (without any modifications) – System Solution element must
include at least one off-the-shelf option. This can be used as a benchmark against other potential
system solution options.

Commercial/military off the shelf with modification to suit unique requirements.

Combinations of the above combined with complex system integration (this would be the case in
most strategic/complex acquisitions).
Notes:
Acquisition strategy developers need to understand the differences between the development strategy
(which, generally, is the contractor’s decision) and the acquisition strategy (which is the Australian
Defence Organisation’s decision). For example, incremental development is something determined by
a contractor, whereas incremental delivery is something determined by the strategy developer in
consultation with the capability sponsor.
If the System Solution strategy is to modify existing Materiel System elements, existing support
arrangements for the Mission System need to be considered, to decide whether the new support
arrangements should be either independent or integrated with the existing support arrangements.
10
To satisfy requirements related to transition from the current capability to the new capability so ongoing operations are not disrupted.
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SECTION B3: PROCUREMENT ISSUES AND OPTIONS
The Procurement element should propose a strategy for acquiring the capability option. Procurement
options should always promote the achievement of ‘value for money’ as described in the Roles and
Responsibilities section of this guide.
It should closely align with the Contracting element, as many of the issues outlined for contracting will
also apply to procurement.
Procurement Issues:

What are the procurement process costs (e. g. costs of tendering) incurred by both Defence and
industry?

What is the estimated time for evaluation of tenders?

What amount of information and documentation is required from potential tenderers?

What knowledge of the market is available?

Is there any limitation on the number of suppliers who are capable of meeting the requirements,
including Support System elements?

Is there a genuine urgency, including operational urgency?

Is there a requirement for use of pre-qualified or short-listed potential suppliers from a previous
procurement?

Is there a limitation to suppliers who can meet Defence security requirements?

Will there be a re-qualification of suppliers for security reasons?

Is there any compatibility with existing services and equipment?

What is the anticipated use of supplies and services from a particular supplier due to existing
obligations under warranty or other contractual arrangements?

Is there a known requirement gap or an undefined requirement – capable of multiple solutions?

What is the ‘buyers’ and ‘suppliers’ knowledge of the requirement?

Is there a developmental aspect of the requirement to meet a particular need – including the
degree to which the method of developing the capability is known?

Is there a need for a project definition/pilot study?

Will there be a qualification of supplies or services to defined standards?

To what degree is the initiative likely to be based on changing commercial technology?

Is there a need for exceptional results in terms of schedule achievement, cost reduction, technical
innovation and/or complex integration?

Are there additional costs in new contracting methodologies for Defence?

Will there be equal opportunity to all suppliers who want to tender for Defence business?

What are the requirements for Australian and New Zealand Industry?
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
What use will be made of endorsed supplier(s) and standing offers?

What relationships exist to other projects?

What is the potential for competition and how value for money will be achieved?

What are the details of proposed source of supply – e. g. local or overseas?

What specific items should/must be obtained from commercial sources?

Which suppliers can meet operating and maintenance standards?

Can you get product support/spares, servicing, maintenance and repair from commercial support?

What is the feasibility of industry providing support near to (or in) an operational area?

Are you operating in a remote or regional location or overseas? Can commercial suppliers provide
support (in accordance with support concept) in these locations?

What are the implications of industry providing support near to (or in) an operational area?

Is it a fixed asset or a deployable asset?

Which suppliers can meet your support concept within the required time frames?

What are your requirements for repair/service turnaround times?

What are the requirements for Independent Verification and Validation (IV&V)?

Who has the know-how, technical data, and resources for the system being supported?

How will each of the Support System Constituent Capabilities be implemented, including operating
support, engineering support, maintenance support and training support for a capability option
(both hardware and software)?
Procurement Options:

Consider direct sourcing (within CPG guidelines).

Consider open competition.

Consider restricted competition.

Consider reuse of existing resources particularly facilities, personnel, general-purpose equipment
(typically formalised through Departmental documentation including Memorandum of
Understanding, establishment variations etc. ).

Consider purchasing from standing offers, strategic common use arrangements, endorsed supplier
arrangements or state government arrangements.

Consider purchasing under the Foreign Military Sales (FMS) system or other Government to
Government collaborative arrangements such as the Armaments Cooperative Program.

Consider staged procurements using a process of progressive elimination (e. g. request for
information – invitation to register interest – request for proposal – request for tender). Note: This
type of staged procurement should eliminate uncertainties and project complexities by increasing
the opportunities for structured pre-offer and post-offer contact between Defence and potential
suppliers.
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Consider outright purchase.

Consider Contractor support and/or In-house support.

Consider acquisition of commercial items on a commercial basis.

Consider Private Financing.
DMG (ACQ) 2/2006
If choosing between open competition, restricted competition or direct sourcing, evaluate the benefits
to be gained by each of these processes.
Open competition
Some specific questions to answer in deciding option(s) for open competition include:

Are there any security implications11 which will limit the number of suppliers able to tender?

Do you have short or long delivery lead-time?

What will be the administrative cost of tendering for both the Government and tenderers?

Which potential suppliers can meet your requirements?

Will savings generated by wider competition outweigh those costs?

Does the whole market cater to your specialised requirements?

Will your requirement need to be specially developed?

How wide is the market supplying your requirement?
Restricted competition
Restricted competition may be a preferred option under the following circumstances:

Existence of only a few known suppliers who can meet the requirements.

Granting of foreign government export licenses for key equipment e. g. weapons systems.

Genuine urgency, including operational urgency.

Potential suppliers have been pre-qualified, or short-listed, from a previous exercise.

The existence of only a few suppliers meeting Defence security requirements.

Where value for money in the procurement process cannot be achieved by pursuing open
competition due to the expenses involved.
Direct sourcing
Direct sourcing may be a preferred option under the following circumstances:

Government strategic considerations.

Government policy.
11
It should be noted that suppliers should not be excluded from tendering for a requirement simply on
the basis that they do not currently have the required security clearance.
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
There may be only one supplier capable of meeting the requirements.

A genuine urgency in requirement.

The need for compatibility with existing services and equipment.

The existence of obligations under warranty, intellectual property or other contractual
arrangements which requires the use of supplies and services from a particular supplier.
Options for support system
Options for implementing the required support arrangements may require a mix of in-house and
commercial support. For example, maintenance support may be commercial with training support
being in-house; operator/deployable-unit maintenance support, depending on the maintenance
concept, can be in-house and rest of the maintenance support can be commercial.

Consider commercial support.

Consider in-house support.

Consider an in-house/commercial mix.

Consider using existing Support System elements.

Consider using wider national infrastructure.
There are significant synergies in issuing a combined Request For Tender (RFT) for both acquisition
and support, particularly with respect to cost (including Life Cycle Cost) and accountability. This
approach should be used wherever possible. It should be noted that current preferred practice is to
have separate contracts for the acquisition and support requirements. The Australian Defence
Contracting (ASDEFCON) suite has separate acquisition and support templates.
Further information
For further information acquisition strategy developers should consult the following:

selection of the method of procurement – the Defence Procurement Policy Manual (DPPM),
Section 5, Chapter 5. 3; and

selection of the appropriate tendering and contracting template – the Defence Procurement Policy
Manual (DPPM), Section 2, Chapter 2. 3.
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SECTION B4: CONTRACTING ISSUES AND OPTIONS
The contracting element should propose a contracting strategy for the major contracts proposed.
Contracting and Procurement elements are clearly related and must be consistent.
Contracting Issues:

Allocation of risks between the supplier and the Government.

Exchange rate variations and handling of foreign currency.

Contract period for acquisition and support.

Cost variations of labour and material.

Cost reimbursement.

Incentives.

Contingencies.

Broad characteristics of the requirements.

Complexity of the requirement (including percentage of design and development, and software
development involved).

Assessed level of risk of the initiative.

Liability regime and insurance requirements.

Asset/service mix of the requirement.

Level of knowledge of the requirement, already contained within Defence.

Certainty of the requirement.

Developmental state of the required technology.

Payment regime.

Government furnished material.

Securities for performance.

Intellectual property provisions.

Potential Australian and New Zealand Industry development opportunities.

Special terms and conditions required for protecting the Government.

Degree of negotiations anticipated.

Requirements for Independent Verification and Validation (IV&V).

Relationship between acquisition and support contracts.

Previous performances of contractors on similar procurements.
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Note:
Relationships between acquisition and support contracts are very important and, therefore, a proper
analysis of the relationships between the contracts needs to be undertaken to ensure that all of the
linkages are addressed. Additionally, the two contracts need to be developed together to ensure that
they operate as an integrated package.
It is recommended that the support considerations be addressed from the perspective of the
respective contracts, as follows:

What support is required to be provided by the acquisition contractor under the acquisition
contract?

What are the phase in and ramp-up arrangements under the support contract?

What are the linkages between the two contracts?
The above approach also facilitates consideration of the linkages and trade-offs between the two
contracts.
Contracting Options:
The acquisition strategy is required to outline the proposed contracting options. The Defence
Procurement Policy Manual is the best source of information about contracting options. Specifically:

Selection of the contracting methodology – Section 5, Chapter 5. 3 and Section 4);

Selection of the price basis – Section 2, Chapter 2. 2, and

Selection of the appropriate tendering and contracting template – Section 2, Chapter 2. 3.
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SECTION B5: INDUSTRY ISSUES AND OPTIONS
The Industry element should support Defence’s industry policy framework aimed at sustaining critical
in-country industry capabilities and facilitating greater alignment and partnership with industry. The
trade-off between building local industry and buying overseas is one of the key considerations.
Industry Issues

What are the industry sector considerations?

What are the opportunities for industry to be part of global supply chain?

What are the opportunities for strategic partnerships with Industry?

What are the in-country industry requirements for acquiring and implementing the materiel
components of a capability option?

What are the opportunities for international industry in acquiring and implementing the materiel
components of a capability option?

What is the distribution and location of potential suppliers?

Is there international competition?

What are the industrial capabilities and capability gaps (including industry preparedness to support
and react to urgent operational needs)?

What is the potential suppliers' current and future work load (potential suppliers' workforce levels)?

Is any proposed in-country industry capability likely to be sustainable, given the predicted
workload?

What is the past performance and reliability of potential suppliers?

To what extent is participation of Small and Medium Enterprises a factor?

What special skills and capabilities are required of industry?

What are the key industry technology risks / drivers and how these will be managed?

What is the industry assessment of proposal costs, risks and schedule delivery?

What are the industry impacts on the capability proposal (e. g. timing)?

What are the cross-project and cross-sector synergies?

What are the demand management proposals / options (e. g. packaging of work, restricted
tendering, direct sourcing)?

What are the industry investment opportunities / activities?

How compatible are the project schedule and industry’s ability to meet the schedule?

What is the state of any current contract likely to be applied to the acquisition?

Are restricted or direct sourcing tenders confined to offshore suppliers (including acquisitions
through Foreign Military Sales)?
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
What intellectual property issues including ownership and management arise?

What are the export license and technical assistance agreement requirements?
DMG (ACQ) 2/2006
Industry Options

International prime and Australian Subcontractors;

International prime and international subcontractors;

Australian prime and subcontractors;

Australian prime and international subcontractors;

International prime for acquisition and Australian prime for support;

International prime for design and Australian subcontractors for development and subsequent
support; and.

Combinations of the above.
Note:
Acquisition strategy developers should refer to the Industry Division in Defence Materiel Organisation
for further advice.
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SECTION B6: MANAGEMENT ISSUES AND OPTIONS
The management component should propose high-level management options for the Requirement,
Acquisition and In-Service Phases of the Materiel Life Cycle. This will include options for line
management and whole-of-life governance (for acquisition and sustainment). It should also include
options for configuration, engineering, integrated logistic support, financial, risk and performance
management.
Management Issues

What are the responsibilities for management and whole-of-life funding:

Who is acquiring what and when?

Who is paying for what?

Who is responsible for funding offer definition if any?

Who is responsible for funding support?

What skills, competencies and training will be required for acquiring and supporting a capability
option?

What is the break-up of project phases? (Any proposals by Capability Systems on phasing of the
project need to be examined critically.)

What governance and internal controls (including authorities responsible for approving key
documents – delegation charter) will be applied?

What are the requirements for probity advisers for offer definition and/or for tender evaluation?

What transition of staff from acquisition to support will be required?

What tailoring and streamlining of processes and documentation is required – what are the review
and documentation realities?

What are the security issues that need to be managed/coordinated?

What Government/Defence organisational structure issues need to be addressed?

What doctrinal and policy implications need to be highlighted?

What mechanisms need to be put in place to coordinate issues across Federal/State/Territory
agencies and regulatory bodies?

What is specifically excluded from the acquisition strategy being developed and who is responsible
for developing/acquiring these excluded items?

What are the transition arrangements between the Requirements and Acquisition, and Acquisition
and In-service Support Phases?
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Management Options

Joint project management between internal and/or external business units.

Partnering - where the parties agree to focus on cooperation from the outset in order to avoid
adversarial means of settling problems. A partnering relationship is based upon teamwork and
aims to lessen contract delivery delays, cost blowouts and litigation.

Integrated Project Teams.

Joint project management between foreign governments.

In-house project management with Professional Service Provider support.

Main and resident project management teams.
Note:
An analysis of the expected organisational arrangements for each of the Support System Constituent
Capabilities can be a useful method for helping to define the Support Arrangements. These
arrangements are also an essential prerequisite for defining the contractual requirements for both
acquisition and support contracts.
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DOCUMENT ADMINISTRATION SHEET
KEY INFORMATION
Document Category
Defence Materiel Handbook (DMH)
Functional Domain
Acquisition (ACQ)
Reference Number
4/2005
Version No
Nomenclature
Title
Business Process
Owner (BPO)
Business Process
Approval Authority
(BPAA)
Domain Expert
Amendment Details
Filing Details
V3.0
DMH(ACQ) 2/2006 V3.0
DMO Acquisition Strategy Development Handbook
Deputy Chief Executive Officer
Executive Director, DMO Project Office (DCEO)
Director, Business Process Improvement (COO)
Supersedes and cancels Acquisition Strategy Development
Guide, October 2004
2004/1003223/3 (17)
Approval Date
19 May 07
Review Period
24 Months
Consultation
CCP Required
Director, DCEO Strategic Support Office (DCEO)
Director, Project Management Framework (DCEO)
Director Emerging Projects - Fixed Wing (ASD)
Yes, to modify links into appropriate PRPs within C. 2. 1
APPROVALS
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