Greg Combet, Minister for Defence Materiel and Science, today said that the Government’s new Defence Industry Policy had established new and clear investment priorities for the Australian Defence Industry.
“The Government’s new Defence Industry Policy Statement – Building Defence Capability – A Policy For a Smarter and More Agile Defence Industry Base - gives new and unprecedented investment guidance to local firms who wish to succeed in the defence industry,” said Mr Combet.
“The industry has made clear to me that one of their primary concerns is to obtain information from Government that will lead to greater investment certainty.
“For this reason the Government has outlined in great detail the Priority and Strategic Industry Capabilities and also explains the Government’s approach to these capabilities.
“The first principle of the Government’s defence industry policy is that defence strategy and the capability needs of the ADF will determine Defence’s investment priorities.
“The Public Defence Capability Plan is the principal means through which the Australian Government signals to industry its defence capability needs and intentions for future major capital equipment acquisitions.
“However, the Government has also outlined a series of Priority Industry Capabilities (PICs) that are strategically important to the ADF.”
“PICs are those industry capabilities which would confer an essential strategic advantage by being resident within Australia, and which, if not available, would significantly undermine defence self-reliance and ADF operational capability.”
There are currently 12 PICs which are outlined in the Building Defence Capability.
“In order to provide greater investment certainty for the industry the Government has also outlined principles the Government may consider in acquisition and sourcing decisions related to PICs,” said Mr. Combet
“When making procurement and sourcing decisions related to PICs, the Government will always emphasise the need to obtain value for money for the Australian taxpayer through competition. This calculation will take into account factors such as Australian industry impacts, the national interest, broader strategic factors, and other whole-of-government considerations.
“Defence is currently assessing whether there is adequate investment in the PICs, based on known acquisition and sustainment demand, to maintain them at an appropriate level of capability to meet the ADF’s needs.
“It is important that local defence industry understands that the listing of a capability as a PIC will not in itself lead to Government financial assistance.”
Actions to sustain a PIC may include:
-- demand management: managing the timing of new projects through the Public DCP to maintain regular work where possible;
-- access to export promotion, skills development and company activities through programs such as Skilling Australia’s Defence Industry (SADI) and the Defence Industry Innovation Centre (DIC);
-- developing longer term contracting arrangements;
-- accessing the PIC Innovation Program; and
-- in some cases, ensuring that requests for tender seek separate costings for work that must be undertaken in Australia.
“Due to their potential to become PICs, the Government also monitors a broader range of capabilities, known as the Strategic Industry Capabilities (SICs),” said Mr. Combet.
“The SICs are capabilities which provide Australia with enhanced defence self-reliance, ADF operational capability, or longer term procurement certainty. They are outlined in detail in Building Defence Capability.
“The SICs are important, but will merit less oversight than PICs. For example, if the Government believes sufficient domestic demand can sustain that capability – for example ship maintenance, or that the industry capability is closely linked to demand in the wider economy and hence is more sustainable.
“To gauge the overall condition of the SICs, Defence will consider factors such as the proposed level of utilisation of these industries offered through tender responses, the performance of these industries under contract, Company ScoreCard information, and information obtained through engagement with industry associations and the network of Business Access Offices.
“Where they occur, both types of industry capabilities will be identified in projects appearing in the Public Defence Capability Plan. If a PIC element is listed this will require industry to specify a costed locally based option for that part of the tender. However, this requirement will always be subject to value for money considerations and other whole of Government considerations.”
