Editorial: What dreams may come | ADM July 2012

The White Paper is to be moved up by a year and an update of the Defence Capability Plan (DCP) to work into that schedule, it seems that once again a holding pattern has emerged. Given the likely timetable for a federal election during that same period, there is a sense of waiting and wondering what the department will do next.

The adjustments made to numerous projects announced in the May budget will appear in the revised DCP, which I’m hoping will be out by the time this edition is in your hands (fingers crossed). But there is still a sense that, at the political level, there is little engagement with the fate of the defence industry and the larger strategic picture that the Defence organisation faces. I have spoken before about the need for change champions in the defence community and they are sorely needed now. With this in mind, should industry policy as it relates to Defence be considered differently at the government level?

Defence is not in the business of supporting defence industry, far from it. Its job is to use industry as a supply base and a supportive tool as required. There are no mechanisms in place to encourage or reward defence contracting officials for favouring Australian industry. That is left up to industry under Australian Industry Capability (AIC) plans that are applied to contracts worth $20 million or more. According to the DMO “Each AIC plan will be assessed and form part of the overall tender evaluation. Contracted AIC Plans will be monitored and evaluated.”

The shape of these evaluations are as follows, according to a statement from the DMO: “Companies AIC proposals, where applicable, will be a condition of tender and thus evaluated under standard ASDEFCON criteria.

“AIC Plans are contractually enforceable being the primary and most effective mechanism for implementing Contractor AIC obligations. Under such arrangements a prime contractor is bound to perform and is required to flow relevant requirements on to sub contractors. There will also be procurements where it maybe appropriate for AIC arrangements to be captured in a deed.

“AIC Program performance management is assured in a number of ways. Each AIC Plan requires reports to be submitted on at least an annual basis confirming progress achieved against contracted AIC Plan requirements. This enables contractor performance to be monitored against agreed AIC Plan requirements. “Additionally, contractor performance has also been included as an assessment category in Defence's Company ScoreCard system. Where contractors do not address identified shortfalls in performance may then be reported in the Defence Annual Report.

“Finally, DMO has in place a program designed to audit AIC Program implementation. Outcomes from the performance monitoring and auditing of the AIC program will feed into future tender evaluations which could give grounds for exclusion based on previous poor performance.”

At Defence & Industry Conference 2009, the Government launched the GSC Program as an enhancement to the AIC Program. The GSC Program is designed to assist entry by Australian defence industry into global supply chains of multi-national primes. The GSC Program establishes agreements with multinational primes, called GSC Deeds, which will actively facilitate opportunities for Australian industry to compete in the primes’ global supply chains and that of their major suppliers.

Presently there are GSC Deeds active with virtually every prime now.

Each of the primes has pointed to the millions of dollars of business that the GSC programs have generated within the SME community. The synergy that the AIC and GSC programs provide is excellent but still bedding down in many respects.

The role of the Department of Innovation, Industry, Science and Research in defence industry is also underrated. The Enterprise Connect program in particular provides valuable support in helping businesses, particularly SMEs, in accessing government services, programs and navigating the system. Their support in the Team Australia concept for companies interested in working with the Joint Fighter Program has also been a key success. There is no reason why the Team Australia approach could not be replicated for future use on large international programs that Australia is part of.

With all of this said, the issue that strikes a chord with me is how good Australia is getting at filling out the paperwork for the Foreign Military Sales program. While there is much to be said in support of the FMS framework, the lack of openings it provides for local industry is easy to see. Large overseas companies involved in such cases always speak of sustainment opportunities. This completely sidesteps the point that Australian industry is capable of much more than just sustainment.

Local industry produced highly technical, developmental award winning work on the ASMD program, the Bushmaster and JORN to name but a few. Yes, there can be bumps along the way but the final capability is world class. This requires some bravery on the part of those making decisions to take the risk.

In terms of what dreams may come for defence industry policy, I would like to put on my less cynical hat and believe that we’re heading in the right direction, albeit slowly.