Reforms to strengthen Australian Defence Industry

Minister for Defence Materiel Jason Clare today announced reforms to increase opportunities for the Australian industry to compete for Defence work.

Mr Clare announced reforms to broaden and strengthen the Australian Industry Capability Program.

Currently Defence projects valued at more than $50 million require tenderers to submit an Australian Industry Capability Plan.

These plans outline how a company intends to involve Australian industry in the project through things like the use of sub-contractors or involvement in global supply chains.

Mr Clare today announced the following reforms to Australian Industry Capability Plans:

• The threshold for mandatory AICPs will be reduced from $50 million to $20 million. This means around 27 additional projects in the Defence Capability Plan will now require AICPs. It means more opportunities for Australian businesses. It will apply to all tenders from 1 July 2011.

• The ability of a company to arbitrarily reduce the level and type of work included in an AICP will be removed. Any Contract Change Proposal which alters the intent or outcome of a contracted ACIP will need to be approved by the Head of Commercial and Enabling Services DMO. Companies that breach their AICP obligations will be listed in the Defence Annual Report.

• A new clause will be included in the Conditions of Tender allowing a company to be excluded from a tender if they have previously failed to meet their AICP obligations. 

• AICP performance will be included in the Company Scorecard used by Defence to assess a company’s performance. It will be made a category in its own right and will receive an appropriate weighting as a result.

• Project teams will be made more accountable for AICP performance by including them in the DMO Project Manager’s Charter.

“I have met with a lot of small businesses since I got this responsibility. In the past 42 weeks, I’ve visited 48 factories, shipyards and other Defence industry sites,” Mr Clare said.

“Everywhere I go small business talks about this. These reforms are based on their feedback.

“This will create more opportunities for Australian companies.”

Global Supply Chain Program – Update
Mr Clare also provided an update on the Global Supply Chain Program.

Five multi-national Defence companies have signed a Global Supply Chain agreement with the Australian Government – Boeing, Raytheon, Thales, Eurocopter and Lockheed Martin.

Through these agreements, the Government funds multi-national Defence companies to hire a team of people to identify and certify Australian companies as part of their global supply chains.

Global Supply Chain Agreements are designed to outline the way a multinational Defence company engages and facilitates opportunities for Australian industry to compete for work in their supply chains.

The Government has invested more than $11 million in the program over the past three years.

When the program was established everyone agreed that if it could provide a 10-fold return on the Government’s investment it would be a roaring success.

To date it has delivered more than a 30-fold return on investment with more than $356 million in contracts awarded to Australian industry.

Australian SMEs have been the big winners, winning about 90 per cent of the value of these contracts.

The agreement signed with Boeing has led to about more than $200 million worth of contracts to Australian companies.

The agreement signed with Raytheon has led to more than $100 million worth of contracts, and the remainder with Thales.

“In January Lockheed Martin also joined the program and I’m hopeful with the awarding of the new naval combat helicopter contract we will see more work for Australian companies from the Global Supply Chain Program,” Mr Clare said.

“It is obviously already a great success and I’ll have more to say about the future of the Global Supply Chain Program later this year.”

Strategic Reform Plan pilots
In February Mr Clare announced the first four Smart Sustainment pilot projects.

Today he announced two more. These are:

• BAE – BAE and DMO will work together at the Hydrographic SPO in Cairns to trial an Integrated Project Team concept.  This pilot will allow DMO, Navy and BAE staff to apply lessons learned and work seamlessly together to sustain the ADF’s hydrographic capability.
  
• H.I Fraser – H.I. Fraser will set up a pilot project to establish a rotatable pool of spares to reduce lead times and keep business in
  
• Australia .  This pilot will be conducted in Sydney at the Mine Warfare and Clearance Diving SPO with support from the Naval Inventory Procurement Office.

“This is all about testing good ideas. The Defence industry has a lot of good ideas. I want Defence to test them and if they work, roll them out across Defence,” Mr Clare said.

AUS DoD