Australia Unveils Defence Delivery Agency in Biggest Defence Department Overhaul in 50 Years

Canberra — 1 December 2025

Australia’s federal government has announced the largest shake‑up of the Defence Department in half a century, creating a powerful new Defence Delivery Agency (DDA) to take charge of billions of dollars in military projects after years of cost blowouts, schedule overruns and escalating strategic risk. ^[1]

The changes, unveiled in Canberra by Acting Prime Minister and Defence Minister Richard Marles alongside Defence Industry Minister Pat Conroy, will consolidate three major procurement and sustainment groups into a single organisation with its own budget, leadership and direct reporting line to ministers. ^[2]

What is changing inside Defence?

At the heart of the reform is the creation of the Defence Delivery Agency, which will emerge in two stages:

1 July 2026: The Capability Acquisition and Sustainment Group, the Naval Shipbuilding and Sustainment Group, and the Guided Weapons and Explosive Ordnance Group will be merged into an internal Defence Delivery Group within the Defence Department. ^[3]
1 July 2027: That group will be spun out as an independent Defence Delivery Agency, with operational autonomy but a clear mandate to report directly to the Defence and Defence Industry ministers. ^[4]

The new agency will be led by a National Armaments Director, a role yet to be appointed, who will act as the government’s central authority on defence acquisition strategies and project delivery once cabinet has approved major programs. ^[5]

Collectively, the three groups being merged currently manage close to 40 per cent of Defence spending, meaning the DDA will immediately become one of the most powerful arms of Australia’s national security bureaucracy. ^[6]

Marles said the overhaul is designed to put “delivery” at the centre of Defence’s work and ensure a “much bigger bang for buck for the defence spend”, while Conroy has framed it as the biggest reform to the defence organisation in 50 years. ^[7]

Why now? Cost blowouts, delays and rising strategic pressure

The restructure follows years of damning assessments of Defence’s project management record.

When Labor came to office, 28 major projects were running a combined 97 years late, according to Marles and Conroy. ^[8]
The share of “complex” projects has roughly doubled in 15 years, from about 27 per cent to almost 60 per cent, increasing technical and commercial risk. ^[9]
Past reforms — notably the abolition of the Defence Materiel Organisation (DMO) after the 2014 Commission of Audit and First Principles Review — shifted Defence towards being a contract manager rather than a project manager, while reducing in‑house expertise. The government now says that mix of fewer staff and more complex projects was a “recipe for trouble”. ^[10]

All this is playing out as Australia commits to its largest peacetime defence spending increase in modern history.

Defence’s annual budget is currently just under $60 billion, and is forecast to climb to around $100 billion by 2034, driven by the AUKUS nuclear‑powered submarine program, new long‑range strike capabilities and an increasingly contested Indo‑Pacific. ^[11]

Strategic anxiety is intensifying too. On the same day as the overhaul announcement, Marles confirmed that Australia is tracking a Chinese People’s Liberation Army Navy flotilla in the Philippine Sea, a task group that could technically reach Australian waters before the end of the year, though its destination is unknown. ^[12]

Officials and analysts argue that a defence system dealing with this level of spending and risk can no longer afford “business as usual” procurement. The DDA is pitched as the structural answer.

How the Defence Delivery Agency will work

Under the new model, Defence’s capability planning and its project delivery will be more clearly separated: ^[13]

Capability design and prioritisation
- The Vice Chief of the Defence Force (VCDF) will oversee a centralised capability development function.
- New projects will flow through the National Defence Strategy and the Integrated Investment Plan, which identify what the Australian Defence Force (ADF) needs and in what order.
Government approval
- The National Security Committee of Cabinet will approve major acquisitions based on advice from Defence and the new agency. ^[14]
Project delivery and budget control
- Once a project is approved, it will be handed to the DDA with an agreed budget and schedule.
- The agency will then act as the central project manager, responsible for contracting, oversight and sustainment, and for warning ministers early when timelines or costs are at risk. ^[15]

The government says the agency will:

Have direct control of funding for major acquisitions after approval. ^[16]
Combine existing public‑service expertise with “strong industrial and commercial skills” drawn from the private sector. ^[17]
Improve contestability, cost estimates and accountability across the life of each project. ^[18]

In design, the DDA echoes earlier recommendations from the Kinnaird (2003) and Mortimer (2008) reviews, as well as the 2023 Defence Strategic Review, which all called for clearer authority over acquisition and stronger project management capacity. ^[19]

Jobs, workforce and culture: reform without redundancies?

The government has stressed that the DDA is not a cost‑cutting exercise and insists there will be no job losses from the amalgamation of the three groups. Roughly 6,500 staff will move into the Defence Delivery Group in 2026 and then into the independent agency in 2027. ^[20]

Marles and Conroy also emphasise that over the past two years Defence has added about 500 highly skilled public servants to these areas while cutting “a serious number” of external contractors and consultants, reversing earlier downsizing. ^[21]

However, some reporting around the original Sydney Morning Herald scoop suggests industry sources fear up to around 270 positions could eventually go, particularly in senior or duplicated roles, even if official headcount remains similar. ^[22]

Beyond raw numbers, critics and supporters alike agree that the culture of Defence’s acquisition system will determine whether the DDA works:

Ministers say the aim is “greater discipline” over project changes, which they argue are a key driver of schedule slippage and budget blowouts. ^[23]
Officials highlight that the DDA’s National Armaments Director will be held personally accountable to ministers for delivering projects on time and on budget. ^[24]

Whether this translates into real consequences for poor performance — long seen as a weak point in the system — remains an open question.

Industry reaction: welcomed, but “implementation is everything”

Defence industry groups have broadly welcomed the overhaul, while warning that its success will hinge on execution.

The national employer association Australian Industry Group (Ai Group) said establishing the DDA to streamline acquisition and sustainment is “welcomed by industry”, arguing that bringing three separate capability functions into a single agency with direct ministerial reporting and budget control should improve coordination and speed up decisions. ^[25]

Ai Group chief executive Innes Willox noted that, with an extra $70 billion in defence spending expected over the next decade, getting the structure right is critical and that the priority now must be ensuring the changes actually deliver faster contracts and clearer engagement pathways for companies. ^[26]

The Australian Industry & Defence Network (AIDN), representing small and medium‑sized defence suppliers, also “welcomes the Albanese Government’s effort” to focus on delivery through the DDA. It argues that merging the three groups should reduce centralised administration costs and could be a first step towards a more coherent Australian armaments policy. ^[27]

Both Ai Group and AIDN used the moment to renew calls for defence spending to rise towards 3 per cent of GDP, citing deteriorating geostrategic conditions and growing capability ambitions such as AUKUS. ^[28]

Political and expert criticism: “same people, new name?”

Not everyone is convinced the shake‑up will fix systemic problems.

The Australian Greens have attacked the reforms as more cosmetic than structural. Greens defence spokesperson David Shoebridge argues that an agency that still reports to the Defence Minister cannot truly be considered independent, and that the reforms largely keep “the same group of people” in charge of a system that has already presided over major procurement failures. ^[29]

Independent commentators are also sceptical. In a sharply critical analysis, Crikey politics editor Bernard Keane describes the DDA as another iteration of long‑running attempts to reorganise Defence procurement without tackling what he sees as deeper issues of transparency, accountability and bureaucratic culture. ^[30]

Past experience looms large in these critiques. Australia has previously cycled through different models — from the standalone Defence Materiel Organisation to its later absorption into the department — without ending the pattern of overruns on large ships, armoured vehicles and complex ICT systems.

For these critics, the key test will be whether the DDA publishes clearer performance data, accepts independent scrutiny from bodies like the Auditor‑General, and is willing to cancel or radically restructure failing projects early, rather than simply rebadging them.

Strategic backdrop: China, AUKUS and US pressure

The timing and tone of the announcement underline the strategic environment in which the DDA will operate.

Marles confirmed that Defence is closely monitoring a Chinese navy task group currently in the Philippine Sea, after a previous flotilla circumnavigated Australia earlier this year and conducted live‑fire drills that disrupted civilian air routes. ^[31]
The government has also created a dedicated AUKUS group inside the Department of Prime Minister and Cabinet, tasked with overseeing the trilateral nuclear‑powered submarine project and related advanced‑capability work. ^[32]
US officials linked to the Trump administration have publicly pressed allies like Australia to lift defence spending from just above 2 per cent of GDP to as high as 3.5 per cent, adding political pressure to demonstrate that new money will be well spent. ^[33]

Domestically, the government is also looking at ways to recycle Defence’s vast property holdings. Recent reporting points to plans to sell assets such as Brisbane’s Victoria Barracks and Spectacle Island in Sydney Harbour, with proceeds to be reinvested in new capabilities — and potentially used to ease housing pressures in major cities. ^[34]

What happens next?

While the announcement is sweeping, much of the DDA’s practical impact will depend on decisions made over the next 18 months. Key steps include: ^[35]

Design and consultation: Defence will now design the detailed structure of the Defence Delivery Group and the independent agency, with formal consultation promised with industry and other stakeholders.
Legislation and governance: The government is expected to introduce legislation or administrative orders to give the DDA clear authority, governance and reporting requirements.
Appointing the National Armaments Director: Recruiting a leader with both commercial acumen and deep defence experience is widely seen as critical. Industry groups emphasise that “the right person” must be selected to set the tone for the new body. ^[36]
Transition of major projects: Existing shipbuilding, missile, and acquisition programs — including key AUKUS‑linked efforts — will need to be migrated into the new structure without causing further delay. ^[37]
Related reviews: Marles has signalled that the long‑awaited Defence estate audit will be released in coming months, while the 2026 National Defence Strategy and updated Integrated Investment Plan will further shape the DDA’s workload. ^[38]

For now, the Defence Delivery Agency is a promise: a leaner, tougher machinery of government that will finally bring discipline to some of the country’s most expensive and complex projects.

Whether this reform becomes a turning point for Australian defence procurement, or just another entry in a long list of reorganisations, will only become clear once the agency is up and running — and the next generation of ships, missiles and systems either arrive on time and on budget, or don’t.