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 57 on page 97 of the PBS, although that is not very revealing.
Capital Investment Program [PBS p.19]
The Capital Investment Program is detailed in Table 5 page 19 of the PBS, which we have reproduced in part in Table 2.4.1. Unfortunately, the projected result for 2013-14 has not been included in this year’s PBS so we have been forced to use the revised estimate from the 2013-14 PAES. Similarly, because the Defence Annual Report no longer reports on the capital investment program, we’ve had to use the revised estimate from the 2012-13 PAES for that year.
Table 2.4.1: The Capital Investment Program (million $)
06-07
Source: 2012-13 PAES, 2013-14 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:
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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 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 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.
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 2013-14 dollars. Note that the figures for 2012-13 are uncertain because no official figures have been released for the anticipated outcome for that year. The reduction in funding in recent years is a hangover from the attempt to get back to surplus in 2012-13. 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: 2013-14 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 1 2 3 4 5 6 7 8 9 10
billion real 2014-15 $
Other Capital Capital Facilities Major Capital Investment
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Unapproved Major Capital Investment Program [PBS page 117]
The PBS again contains a list of DCP projects planned for first (5) and second pass (12) approval in the forthcoming year. The Future Submarine Program (SEA 1000) is also planned for government consideration during 2014-15 without seeking formal first or second pass.
Approved Major Capital Investment Program [PBS page 146]
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.
Major Capital Facilities Program [PBS pp.119–129]
The PBS lists 55 approved Major Capital Facilities projects (worth $15 million each or more) at various locations with a total value $3.7 billion. In the past, medium projects of between
$25,000 and $15 million were also listed but have been omitted this year. In the 2014-15 Budget the government has foreshadowed 8 new major capital works projects for parliamentary consideration and 6 medium capital works projects. These are listed in Table 75 of the PBS. Expenditure on facilities projects in 2014-15 is planned at $1.19 billion.
Table 75 of the PBS lists the approved major facilities projects. The largest such projects are the Enhanced Land Force Phase 2 facilities at various locations ($1,458 million), Defence Logistics Transformation Program ($753 million), Moorebank Units Relocation ($353 million), MH-60R facilities ($189 million), RAAF Amberley Redevelopment Stage 3 ($332 million), Albatross Redevelopment Stage 3 ($192 million), and the redevelopment of East Sale ($186 million).
Other Capital Purchases
Other capital purchases include Minor Capital Investment, Repairable Items and Other Plant and Equipment. Defence plans to spend $1,355million on other capital purchases in 2014-15.
The year-to-year volatility in this category is difficult to understand.
Retained Capital Receipts [PBS page 20]
The Capital Budget is funded in part through the proceeds from sales of property, plant and equipment and other capital receipts (see Table 7 on page 20 of the PBS). On a year by year basis some or all of this money is returned to the government through a capital withdrawal.
This is taken into account in determining the appropriations to Defence. Table 2.4.2 shows recently planned and achieved assets sales (including both property and other assets.
Capability Sustainment Program [PBS page 20]
Since 2013-14 the PBS has listed the Capability Sustainment Program by group. This year, the figures appear in Table 6. As data accumulates, an interesting time series will become available. Figure 2.4.2 plots the five years of data that is available. Note that sustainment costs are rising in real terms by 5.8% p.a. compounding.
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Table 2.4.2: Proceeds from the sale of assets ($ 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
2004-05 231 143 88 2015-16 79
2005-06 95 108 -13 2016-17 23
2006-07 38 134 -96 2017-18 61
2007-08 99 65 -34
2008-09 285 5 280
2009-10 287 61 226
Source: DAR, 2014-15 PBS and 2013-14 PAES
Figure 2.4.2: The Capability Sustainment Program
Source: 2014-15 PBS and 2013-14 PAES
0 1 2 3 4 5 6 7 8 9
2013-14 2014-15 2015-16 2016-17 2017-18
2014-15 $ billions
Future sustainment from new investment
Defence Support and Reform Group Joint Operations Command Office of the Secretary and CDF Vice Chief of the Defence Force Chief Information Officer Air Force
Army Navy 5.8% real p.a. growth
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