Effective collaboration between organisations must start at the top. As part of our research into collaboration in the defence sector we talked with senior leaders to gain their views on the challenges and opportunities that closer cooperation will bring. In this interview, Bernard Lauinger and Ben Olesen, spoke with Steve Grzeskowiak, Deputy Secretary, Defence Estate and Infrastructure Group, Department of Defence.
Could you tell us a little about your role and that of DE&I Group?
I describe myself as the landlord of the Defence organisation. We manage the Defence estate, 2.7 million hectares, and provide the facilities on defence bases and training ranges. A large part of our business is construction and the other part is a complex service-delivery organisation providing services such as access control, catering, grounds and equipment maintenance. To give a sense of the scale this year we spent $2 billion on CAPEX and about $2.5 billion on services: in total a $4.5 billion dollar business.
And how large is industry’s presence?
The reality is that most of the services are provided by industry—we probably have about 7500 industry service providers on a defence base every day delivering services of some sort. On top of that about 5000 people are working on various construction projects that we have underway. Also, I’ve got about 1800 people in Defence working for me. Of that about 200 are military personnel.
How has the way you interact with industry changed over the years?
If you were here 25 or 30 years ago, a lot of the services were provided by either Australian Public Servants or military personnel: for example access control, catering, grounds maintenance, facility maintenance and repair. We’ve always used the construction industry to build things but we used to do a lot of maintenance and service provision ourselves.
Since then, we’ve been through three waves of out-sourcing. The first one in the mid-90s for a whole range of contracts delivering services in an uncoordinated way—we had 12 separate regions in Australia doing their own thing. In the mid-2000s we restructured all those contracts into five regions to get more consistency. Then three years ago, we went to industry and this time we said—look, is there a better way of packaging what we do that would enable you to give us better value?
If you do an apples and apples comparison we’re now delivering the same sort of services for lower cost because, in some cases, we’ve removed those costs that were getting passed through and, in other cases, industry has more flexibility to do things the way that they normally do them, rather than us telling them how we think it should be done.
And what has this change meant for the way services are delivered?
Well, it’s required more cooperation between contractors to deliver services. With the estate maintenance and operational services contract, for example, generally only one of three contractors would have those: Broadspectrum, Brookfield Global Infrastructure Solutions, and Spotless as the Estate, Maintenance and Support (EMOS) contractor, the dominant player on the base, with smaller contractors doing bespoke services.
This shift to a single lead contractor has meant that all the suppliers had to talk to each other much more, work together and take direction from the EMOS contractor. So we signed this deed of cooperation, saying that we are all going to work together to deliver high-quality services to the customer, the Australian Defence Force, and we’re going to be open and transparent and deal ethically with each other.
By and large it’s working quite well. We are finding that they are helping each other out on things like rolling out the new ICT system for estate management. Spotless, the company that came onto that system first, is offering to help the other companies that are trying to get their systems to work with our new system—and that helps everybody.
Of course nothing’s perfect. I’m delivering services to customers who don’t have to pay for it directly so managing demand can take some ingenuity.
So tell us more about how this change in the relationship with industry has been felt by Defence people?
We deliberately made the EMOS contractor responsible for coordinating all contractors’ activities on the base. That’s something that my base teams used to do and, when people have been in their roles for quite a long time, it can be hard to let go.
So, we are working on re-skilling people for an assurance role rather than a management or delivery role. That hasn’t suited everybody. We did quite a lot of change management but we are still working through that—how you bring people into different roles or give them the skills to do the job that we now want them to do.
How do you see this more collaborative relationship fostering innovation?
We have innovation clauses in these contracts so if one of the companies brings in an innovation that reduces the cost of delivery, they get to retain a share of the savings.
We also have an awards program that we run every year where we aim to encourage innovation. We like to call out these improvements and thank people for not just delivering the contract but also finding ways to improve.
I like simple innovations. One of my contractors changed all the grass on the sporting ovals in Queensland. The new grass is cheaper to own because you don’t have to water it so much and you don’t have to mow it so often. It’s a better playing surface. It stays greener for longer, such a simple thing, but why didn’t we do it years ago?
We’ve got another contractor that is trialling unmanned underwater vehicles to inspect some of our underwater structures. I’m not paying them to do this but they’re trying it out and the bottom line is that if they can provide the required inspections at reduced cost, then we all benefit. We’ve got high-tech initiatives going on and really straight-forward ones going on.
Does the competitive nature of the relationship between companies get in the way of collaboration?
Every nine months I meet with all of the CEOs or the managing directors to talk about how it is all going. It always impresses me how openly they are prepared to talk about things. We never talk about individual contracts or individual cases but they are willing to talk about what we need to do to make things better.
So I see a willingness to collaborate even among players who ultimately will compete with each other. We’re all just trying to improve service delivery.
It’s been an evolution. We’ve been working with some of the companies for quite a few years but in this suite of contracts we’ve got a couple of companies who we’ve never worked with before and they bring in fresh ideas as well as that readiness to openly discuss the outcomes we need.
Do you see collaboration as simply a more effective way of getting the outcomes you need?
We buy quite complicated equipment and services, so we can’t just go out to the market and pick the cheapest thing we can get that does the job. Often, there’s fundamental uncertainty about requirements which you can’t get rid of without having open, detailed discussions with industry up front, before launching into a contract.
To give us that breathing room, I’d like to see contracts that allow us to work with industry on a flexible costs basis before we lock down prices. I have this firm view that we lock down prices far too early and I believe because of that we sometimes pay too much. I’d like to see flexible costs for a certain part of the journey until we really understand it, then nail it down for the delivery phase.
“There’s always going to be risk. The earlier you try to nail that down I reckon the more risk premium you pay … or the higher risk you’ve got of not getting the deliverable.”
Trust must be an important part of these relationships if people are stay with the journey?
I’ve got 72 defence bases and they all work on the same governance arrangements and, broadly, with the same contractors, and yet some work better than others. When you look into it you find that the answer is the relationship between the EMOS contractor, the base manager, and the senior Australian Defence Force Officer on site. If the relationship between those three people goes well, then things work really well. If it doesn’t, it doesn’t.
“If I could get away with it I wouldn’t have contracts. But, I’m never going to get there.”
I’m doing a lot of work with the Indigenous business sector at the moment. We’re placing contracts with Indigenous-owned construction companies and what we see is a relationship-based way of forming consortia. Less black letter contracting and more trust: ‘we’ve worked with you before, we know you gave us a good price … we know you.’
Harley Davidson had a very similar ethos years ago. At the time they didn’t have contracts with many of its suppliers. They’d say, ‘Oh we’ll give you a ring every week and we’ll tell you how many systems we need.’ And because they’d worked for years, decades, with those suppliers there’s that trust. So, moving more into that space, I think, would be interesting.
I’ve formed the view that, while you need a contract, that’s not really how you get things done well — it’s all about building trusting, open relationships and giving people a bit of room to make sensible decisions. When you get to the point where it’s all about the contract, then you’ve lost it really.