Summary

Australian National Audit Office assessed the effectiveness of the Department of Defence's arrangements for the operation and maintenance* of the Mulwala and Benalla manufacturing facilities of military propellants, high explosives and munitions. The auditors also analyzed the effectiveness of the sole source procurement process. Defence’s conduct of the sole source procurement, planning, operation and maintenance of the facilities were partially effective. Defence’s management of probity was not effective and there was evidence of unethical conduct. SAI made eight recommendations to Defence aimed at improving: procurement planning; advice to decision-makers; management of probity risks and issues; compliance with record keeping requirements; and traceability of negotiation directions and outcomes. _________________________________ * In 2020, the Department of Defence signed a new 10-year agreement valued at AUD 1.2 billion (about USD 0.8 billion) with Thales Australia, the plant operator, for the continued management and operation of the facilities. The agreement was intended to provide surety of supply of key munitions and components for the Australian Defence Force and maintain a domestic munitions manufacturing capability.