Improving the effectiveness of defence logistics contracts

Abstract

Technically complex platforms operated by the Australian Defence Force (ADF) require similarly complex logistics support arrangements to ensure that, whenever the ADF is called upon to act as a public good provider, whether in a wartime scenario, to deter hostile intentions or to provide humanitarian assistance or disaster relief, it will be ready and able to do so, and furthermore, will be able to sustain that operation for as long as required. There is an expectation that this public good provision will be undertaken efficiently and effectively as the media are very stringent in holding the Department of Defence to account if they become aware of any shortfall in capability or develop a perception that value for money has not been attained. The Australian Defence Organisation outsources many of these logistics support requirements using contracts which are typically high value and long term, and cover a diverse range of goods and services. The purpose of this study is to identify the key success factors for logistics contracts supporting capabilities of a provider of public goods such as Defence focusing, in particular, on its aerospace capabilities. The research adopts the grounded theory approach to data collection and analysis, with the key data source drawn from a series of interviews with defence managers responsible for logistics support contracts in the in-service phase of a product s life cycle. The interviews demonstrated that, despite the complexity and diversity of these contracts, it is possible to identify the necessary and sufficient conditions that must be met for that contract to provide the best possible outcome for Defence and, thus the tax payer. This study represents the first known attempt to use the grounded theory approach in this environment and provides valuable insights into defence contracting and decision-making processes. The study s findings support previous research that has identified that relational and contractual governance are strongly complementary. It challenges the view that such relational mechanisms cannot be effective in the public sector environment due to concerns about probity and accountability, demonstrating that they are of significant importance and practical applicability.