Government unveils Department of Defence overhaul amid delays and cost blowouts

The federal government has unveiled a sweeping overhaul of the Department of Defence as it struggles to fight cost blowouts and major project delays while ramping up spending on the military.

Defence Minister Richard Marles has announced a dedicated independent agency will be established to prioritise delivering projects on time and within budget.

It is the biggest reform to the Australian Defence Force organisation in 50 years.

The ABC has confirmed that three groups within Defence — the Capability Acquisition and Sustainment Group, the Naval Shipbuilding and Sustainment Group and the Guided Weapons and Explosive Ordnance Group — are set to be rolled into one entity, the Defence Delivery Agency (DDA).

Mr Marles said it was about "more bang for buck" and "improving the quality of the defence spend".

"It will make sure that as we spend more money in the defence budget, we are doing so in a way which sees programs delivered on time and on budget."

The three groups are currently responsible for nearly 40 per cent of defence spending.

Mr Marles said the DDA would begin as the Defence Delivery Group on July 1, 2026, before transitioning to the independent Defence Delivery Agency on the same date a year later.

The agency would report to the Minister for Defence and the Minister for Defence Industry and be headed by a new position — the National Armaments Director.

Mr Marles said the agency would be "autonomous in the way in which it does its work and the way in which it reports to government" but would be held accountable for its performance.

The government said there would be no job cuts from the amalgamation, but that it wanted to bolster the department's ability to manage complex projects as Australia pressed on with the hugely ambitious AUKUS nuclear submarine plan.

"It is the same group of people who are working in these three groups that will form part of the defence delivery group from July next year," Mr Marles said.

Defence Industry Minister Pat Conroy said Labor had already pruned back the use of consultants in Defence while ensuring it built up the skills needed to oversee increasingly sophisticated and complicated contracts.

"We've added 500 highly skilled public servants in these three groups and got rid of a serious number of contractors and consultants," he said.

Defence industry figures have long complained that the department is too top-heavy, sclerotic and risk-averse.

The government has long flagged the restructure, with Mr Marles criticising the department's performance in June, declaring "everything was on the table" when it came to reform.

Mr Marles said the reforms were not about job cuts, and the same amount of people that make up the three groups — around 6,500 people — will be moved to the DDA.

But the government has repeatedly made it clear that it wants more "accountability" from top Defence officials when it comes to delivering sophisticated military capabilities and platforms, with Defence Industry Minister Pat Conroy flagging last week the government would make new announcements "shortly".

In June, Mr Marles bemoaned that there were "28 different projects running a combined 97 years over time" when Labor first came to office.

"Now that did represent a failure of leadership on the part of the former Coalition in government, but it also says something about the challenge which is in front of us now to ensure that the defence establishment is fit for purpose to achieve this delivery outcome," he said.

Defence currently has a budget of almost $60 billion a year but that figure is set to rise to about $100 billion annually by 2034, as China continues to rapidly build up its military and the Trump administration presses allies such as Australia to ramp up defence spending.

But the Greens have heaped scorn on the announcement, and Senator David Shoebridge said it would do little to fix massive cost blowouts and delays.

"Of course there must be independent oversight of defence procurement. However, reporting to the Minister of Defence is hardly independent," he said.

"The same group of people who have overseen defence's procurement mess are the same people who will head this new agency. That is not fixing an issue, it's just moving it along and popping a different name tag on it."