Information on the Capital Budget is spread across several areas of the PBS. The Capital Budget represents Defence’s plans for capital investment in new equipment, upgrades, facilities and other non-military capital items. It’s formally described in accounting terms in the Capital Budget Statement in Table 58 on page 108 of the PBS, although that is not very revealing.
Capital Investment Program [PBS p.20]
The Capital Investment Program is detailed in Table 5 page 20 of the PBS, which we have reproduced in part in Table 2.4.1. Unfortunately, the projected result for 2014-15 has not been included in this year’s PBS so we have been forced to use the revised estimate from the 2014-15 PAES. Similarly, because the Defence Annual Report no longer reports on the capital investment program, we’ve had to use the revised estimates from the 2012-13 and 2013-14 PAES for those years.
Table 2.4.1: The Capital Investment Program (million $)
Unapproved Major Capital Investment (DCP) Approved Major Capital Investment Subtotal Minors Program ICT Investment Plan Other Capital Capital Facilities Programme Total
a b a+b c d e f a+b+c+d+e
+f
2006-07 4,019 4,019 925 653 5,598
2007-08 4,030 4,030 829 570 5,429
2008-09 3,943 3,943 742 963 5,648
2009-10 5,150 5,150 626 1,504 7,280
2010-11 4,838 4,838 883 1,211 6,932
2011-12 4,208 4,208 739 997 5,944
2012-13 30 3,327 3,357 276 1,019 4,652
2013-14 14 3,544 3,558 1,482 1,222 6,262
2014-15 328 5,753 6,081 101 400 754 1,303 8,638
2015-16 885 6,158 7,043 164 415 894 1,279 9,795
2016-17 1,897 4,586 6,483 170 250 1,103 1,577 9,583
2017-18 3,078 4,894 7,972 160 20 1,166 2,152 11,471
2018-19 6,376 4,559 10,935 175 9 1,313 2,197 14,628
Source: 2012-13 & 2013-14 PAES, 2014-15 PAES and 2015-16 PBS and various DAR. The AMCIP figure for 2011-12 does not take into account the additional $825 million booked in 2010-11 by DMO and paid for by Defence in 2011-12. Where possible, large shifts due to accumulation and drawdown of the DMO special account have been accounted for.
There are four components to the Capital Investment Program:
Unapproved Major Capital Investment Program or Defence Capability Plan (DCP): This represents Major Capital Investment projects that have not yet received second-pass approval from government. Major Capital Investment projects are generally of more than
$20 million value and predominantly involve the purchase of military equipment, (previously
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called ‘Pink Book’ projects). The preparation of these projects for approval is the
responsibility of the Chief of the Capability Development Group. Once approved, projects generally pass to the DMO for delivery.
Approved Major Capital Investment Program: Projects already approved by government and under way, previously called the ‘White Book’. Once approved, projects generally pass to the DMO for delivery.
Capital Facilities: Approved and Unapproved Capital Facilities Projects, including everything from new barracks to upgrades of existing facilities. These projects are the responsibility of the Infrastructure Division in the Defence Support and Reform Group.
Other Capital: including Minor Capital Investment (projects costing less than $20 million), repairable items, non-capital facilities, plant and equipment, and software and intangibles.
In recent years, minor capital and ICT investment has been listed separately.
What are the trends in the Capital Investment Program?
Recent actual and projected real spending in the Capital Investment Program is shown in Figure 2.4.1 in terms of 2015-16 dollars. Note that the figures for 2012-13 and 2013-14 are uncertain because no official figures have been released for the anticipated outcome for those years. Minors and ICT investment have been group in with ‘Other Capital’. The gap in funding around 2012-13 is a hangover from the attempt to get back to surplus that year.
Further discussion of the capital investment program appears in Chapter 3.
Figure 2.4.1: Recent and planned trends in the Capital Investment Program
Source: 2012-13 & 2013-14 PAES, 2014-15 PAES and 2015-16 PBS and various DAR. The AMCIP figure for 2011-12 does not take account of an additional $825 million booked in 2010-11 by DMO and paid for by Defence in 2011-12.
0 2 4 6 8 10 12 14
billion real 2015-16 $
Other Capital Capital Facilities
Major Capital Investment
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Unapproved Major Capital Investment Program [PBS page 129]
Because of the impending White Paper the PBS only lists a ‘sample’ of DCP projects planned for first- (2) and second-pass (8) approval in the forthcoming year. The PBS says that
additional projects to be considered in 2015-16 will be announced in the 2015 Defence White Paper.
Approved Major Capital Investment Program [PBS page 156]
The approved Capital Investment Program is mainly, but not exclusively, the responsibility of DMO. As a result, most of the information on approved projects can be found in the DMO section of the PBS, including details of the top 30 projects. We examine the Capital Investment Program more closely in Chapter 2.7 of this Brief.
Capital Facilities Program [PBS page 130]
The PBS lists 63 approved Capital Facilities projects at various locations with a total value
$6.2 billion. In the 2015-16 Budget the government has foreshadowed 33 new major and medium capital works projects for parliamentary consideration. These are listed in Table 79 of the PBS. Expenditure on facilities projects in 2015-16 is planned at $905 million.
Table 78 of the PBS lists the approved facilities projects. The largest such projects are the Facilities in support of the New Air combat Capability at Williamtown and Tindal
($1,477 million), Enhanced Land Force Phase 2 facilities at various locations ($1,458 million), Defence Logistics Transformation Program ($753 million), Maritime Patrol Aircraft facilities ($708 million) at Edinburgh, Moorebank Units Relocation ($353 million), Albatross
Redevelopment Stage 3 ($192 million), MH-60R facilities ($189 million), and the redevelopment of East Sale ($186 million).
Other Capital Purchases
Other capital purchases include Repairable Items and Other Plant and Equipment. Defence plans to spend $894 million on other capital purchases in 2015-16. The year-to-year volatility in this category is difficult to understand.
Retained Capital Receipts [PBS page 21]
The Capital Budget is funded in part through the proceeds from sales of property, plant and equipment and other capital receipts (see Table 7 on page 21 of the PBS). On a year-by-year basis some or all of this money is returned to the government through a capital withdrawal.
This is taken into account in determining the appropriations to Defence. Table 2.4.2 shows recently planned and achieved assets sales (including both property and other assets).
Capability Sustainment Program [PBS page 21]
Since 2013-14 the PBS has listed the Capability Sustainment Program by group. This year, the figures appear in Table 6. As data accumulates, an interesting time series will become available. Figure 2.4.2 plots the six years of data that is available. Note that sustainment costs are rising in real terms by 5.2% p.a. compounding (or 2.4% p.a. across the forward estimates).
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Table 2.4.2: Proceeds from the sale of assets ($ million)
Budgeted Achieved Shortfall Budgeted Achieved Shortfall
pre 2000 – 77 – 2010-11 156 138 18
2000–01 820 87 733 2011-12 118 134 -16
2001–02 1023 199 824 2012-13 127 undisclosed
2002–03 700 632 68 2013-14 102 undisclosed
2003–04 306 184 122 2014-15 73 undisclosed
2004-05 231 143 88 2015-16 201
2005-06 95 108 -13 2016-17 -44
2006-07 38 134 -96 2017-18 -34
2007-08 99 65 -34 2018-19 42
2008-09 285 5 280
2009-10 287 61 226
Source: DAR and PBS
Figure 2.4.2: The Capability Sustainment Program
Source: 2015-16 PBS and 2014-15 PAES
0 1 2 3 4 5 6 7 8 9
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
2015-16 $ billions
Future sustainment from new investment
Defence Support and Reform Group
Joint Operations Command Strategy Sustainment
Vice Chief of the Defence Force Chief Information Officer Air Force
Army Navy 5.2% real p.a. growth
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