The Australian Government recognises that Australia's defence
industry has an important role in delivering and sustaining the ADF's
capability. The White Paper makes clear that procurement, sustainment and
industry support are 'critical to defence capability and operational
effectiveness'. It stated:
The ADF requires a deep, diverse and secure supply chain to
acquire and maintain the capabilities it needs, and Defence's procurement and
sustainment systems must continue to be flexible and responsive as possible.*
In the following chapters, the committee considers the
partnership between Defence and defence industries. It looks at industry's
skill base, its access to information on Defence planning and scheduling for
major projects, the workflows generated by defence projects, and the
relationship between Defence and industry including industry's early
*Department of Defence, Defending Australia in the Pacific Century: Force 2030, Defence White Paper 2009, Commonwealth of Australia, 2009, paragraph 16.1.
Sustaining and building Australia's defence industry
Released in July 2010, the Defence Industry Policy Statement noted that
a strong, successful and skilled Australian defence industry would be needed
for Defence to deliver the future capability needed for the ADF.
The ambitious acquisition program set out in the White Paper will require
Australia's defence industry to increase both its capacity—the size of its
workforce—and also its technical expertise, particularly for projects such as
the Future Submarine Project. This places increasing importance on how
Defence's procurement decisions affect Australia's defence industry and
Defence's role in helping industry to grow the capability and capacity to
deliver Force 2030.
Australia's defence industry comprises a small number of Australian
subsidiaries of global prime contractors, such as BAE Systems, Thales and
Raytheon; ASC, a Government Business Enterprise;
and Australian SMEs. In this chapter, the committee considers the relationship
between Defence and defence industries and the ways in which Defence assists
industry in Australia to contribute to ADF capability.
Assisting Australian defence industry
In its submission, Defence noted that industrial capacity 'needs to be
planned, built, managed and continually re-shaped—and industry must plan to
ensure it can play its part'.
As the sole purchaser of major defence capital equipment in Australia, Defence
exerts considerable influence on the performance and viability of the domestic
defence industry. Consequently, Defence cannot be a disinterested bystander of
the national defence industry and should have 'a strong and enduring interest
in the industry's success'. In the following section, the committee considers
the ways in which Defence supports industry with an emphasis on industry's
skills base, industry's access to information and workflows.
Skills in industry
According to Defence, Australia's defence industry currently employs
approximately 29,000 people and supplies over $5 billion worth of materiel and
services to Defence each year.
Defence has estimated that the defence industry workforce will need to grow to
about 34,000 workers to meet the requirements of the White Paper, with most of
the growth required from 2020.
Growing Australia's defence industry workforce, particularly its engineers,
presents significant difficulties in light of the demands for engineers in the
resource sector and the availability of skilled engineers within Australia.
For example, a recent survey of Australian defence industry capability
suggested that, given the projected staffing levels planned for five years'
time, an impending problem loomed with the expected size and skill profile of
the systems integrations and systems engineering workforce.
The Future Submarine Project in particular will require significant increases
in the defence industry workforce in both engineers and draftsmen over the next
The committee is aware of some of the difficulties faced by Australia's
defence industry in attracting and retaining skilled engineers in the face of
competing demands for those engineers from higher-paying resource companies.
Additionally, as Mr Brent Jackson of Engineers Australia pointed out, the
defence industry is also subject to further constraints with regard to their
ability to attract engineers from overseas:
Where other companies, resource companies for example, can
draw from migrant engineers quite freely, Defence is constrained somewhat by
citizenship requirements and, of course, security clearances and such, which
means that they largely have to rely on domestic growth to fuel their demand,
which is of course a lot slower than just getting somebody in from overseas who
is suitably qualified.
Industry made the point forcefully that a skilled workforce takes time
to build: that you cannot simply flick a switch and skilled workers can be
Australia's naval shipbuilding industry demonstrates the difficulty for
industry to acquire and maintain its skilled workforce.
Currently, the Air Warfare Destroyer (AWD) Program illustrates the
challenges that industry faces in having the necessary capacity and skilled
workforce ready to deliver complex projects on schedule.
In this case, the BAE Systems shipyard in Melbourne could not cope with the
construction work on the AWDs and building steel blocks for the Landing
Helicopter Dock (LHD) ships. The first of the two Canberra-class LHD ships is
expected to arrive in Melbourne in 2012 for further construction and internal
fitout, with the second ship expected to arrive in 2013.
One of the challenges for the contractor was starting production for the
AWDs from a cold start and with a reduced workforce. Following difficulties in
engineering and construction of some the first hull blocks, the Minister for
Defence announced that the AWD Alliance had reallocated the construction of
some blocks to other shipyards in Adelaide, Melbourne, Newcastle and Ferrol,
The Future Submarine Project will also test industry's capacity to
deliver. The Project aims to replace the Collins Class submarines with 12 new
submarines capable of travelling further, longer, more frequently and providing
more capabilities than the Collins Class. The process of acquiring these
submarines will be Australia's most complex defence procurement in history.
According to the RAND Corporation, Australia will need a workforce of
approximately 1,000 skilled draftsmen and engineers across industry and
government for the Future Submarine Project.
The study suggested that while Australia has the requisite number of skilled
engineers and draftsmen, many of them are currently employed on other
commercial or naval programs, and few have experience in submarine design.
The RAND study found that while it would be possible for Australia to
grow its submarine-building workforce to levels required for the Future
Submarine Project, the duration and cost of the program would be significantly
increased if Australia did not bring in some submarine-experienced personnel
When factoring the demands from other programs, the data in the RAND study
shows significant shortfalls in several key skill categories including naval
architecture and combat systems.
Defence Materiel Organisation and
DMO has established several programs to increase the availability of
skilled workers to the defence industry. These include training programs, such
as the Skilling Australia's Defence Industry (SADI) program, the Defence and
Industry Study Course, the Industry Skilling Program Enhancement Package, the
Priority Industry Capability Innovation Program, and internships and other
programs targeted at students.
The SADI program was established in 2005 and is designed to assist the
defence industry to address the shortage of skilled workers. It seeks to
up-skill existing employees, to improve the quality and quantity of skills
training in defence industry; and to generate additional skilled positions.
The program provides funding for training to industry where training is linked
to a defence capability need, and since its inception over 24,000 training
places have been funded.
The Minister for Defence Materiel announced in September 2011 that the government
would provide $14 million to 109 companies for over 4,000 training places in
A number of submissions cited the SADI program as an important measure to
help tackle the problem of securing skilled workers for the defence industry.
The Australian Industry Group Defence Council suggested that funding for the
SADI program be increased, as currently many companies that apply for assistance
under the scheme miss out.
Defence's fluctuating demand for work affects industry's ability to
contemplate future investment. In its submission, Sonartech Atlas argued that
despite significant government initiatives in the form of programs such as the
SADI program, 'extended and delayed procurement timelines can still have a
negative impact on suppliers beyond recovering or offsetting cost'.
It also noted that programs such as SADI need to be complemented by actual work
experience that allows newly trained staff to consolidate and practise their
In addition to the various DMO initiatives, in September 2011, the
Minister for Defence Materiel announced the Defence Industry Workforce Strategy,
which involves Skills Australia working with the DMO to prepare a comprehensive
workforce strategy for the defence materiel supply industries by June 2012.
The strategy is intended to include an assessment of the preparedness of
Australia's defence industry to compete for major defence projects. It is also to
include recommendations on building and supporting the skills required in the
defence industry with an aim to assist:
...better positioning Australia’s Defence materiel supply industries
to fully participate in emerging opportunities for Australian Government
Defence procurements through ensuring the availability of a more skilled
Skills Australia's January 2012 discussion paper makes several important
points, some of which have also been raised in submissions or witness
testimony. These include:
- the need for better data to assess fully current capacity; and
future needs in the defence industry;
- the likelihood that skill shortages for upcoming major defence
projects are likely to occur as the defence industry competes for skilled
workers with the resource and infrastructure sectors.
Consistent with evidence before the committee, the paper raises
questions on how Defence and industry can best address skill shortages in the
The committee understands that the defence industry workforce is
suffering from skill shortages, a shortfall in capacity, and limited experience
in some areas such as submarines. It especially recognises the difficulties
faced by industry in attracting and maintaining the skilled personnel—particularly
engineers—required for defence procurement. For industry to deliver the major
capital projects set out in the White Paper, the industry workforce will have
to grow by approximately 5,000 workers over the next two decades while
competing against the resource sector for the limited numbers of skilled
workers available. Even if this growth is achieved, the lack of experience of the
Australian workforce in some critical areas may still impose significant delays
on some projects—such as the Future Submarine Project—unless additional
industry expertise and capacity is obtained from overseas.
Access to information
Due to Defence's dominance in the domestic defence market, Australian
firms are largely dependent on Defence's decisions for business. Clearly, public
information is essential for industry planning particularly around resourcing
By providing clear and timely information to industry, Defence can assist these
firms to undertake more informed planning, investment and innovation, and as a
result, offer better value for money and greater capacity to Defence.
The main public information tools that the government uses to convey its
priorities to industry are the Defence White Paper and the DCP. The 2009 White
Paper set out the long-term capability goals that the government intended to
achieve. According to Air Marshal Harvey, the White Paper and the DCP generally
provide a very high level description of the required outcome but not necessarily
the materiel solution.
Descriptions of outcomes required (for example, a submarine capability),
however, can provide industry with valuable information about future
The White Paper also announced the government's undertaking to ensure
that certain strategically important industry capabilities would continue to be
available from within Australia. In July 2009, following the publication of the
White Paper, the government released a fact sheet outlining 12 Priority
Industry Capabilities (PICs).
The PICs are defined as:
...those capabilities that confer an essential strategic
advantage by being available from within Australia and which, if not available,
would significantly undermine defence self reliance and Australian Defence
Force (ADF) operational capability.
The DCP, which provides the defence industry with insight into defence
procurement, is a practical document and one of the fundamental sources of
inputs to the strategic planning processes. The 2011 DCP contained an account
of major capital initiatives that were currently planned for government
consideration in the period to 2021.
An ASPI paper, described the DCP as a key document:
Without doubt, the DCP is the single most important source of
defence capability planning information available to industry, the media,
academe and the public at large––not to mention the Parliament of Australia and
the men and women of our defence force.
The public version of the DCP 2009 was updated twice in 2010, further
revised in 2011 and the latest version published in July 2012.
The current DCP contains 111 priority projects, or phases of projects, worth
approximately $153 billion and planned for either first or second pass approval
over the four year Forward Estimates period.
Defence also releases defence industry policy statements. The 2010
statement set out the government's vision for how Defence and industry would
work together to achieve a combination of outcomes—the ADF receives the
equipment that it needs, Australian taxpayers receive value for money, and
local businesses obtain opportunities to win business domestically and
It cited four key principles underpinning the policy:
- setting clear investment priorities;
- establishing a stronger Defence-industry relationship;
- seeking opportunities for growth; and
- building skills, innovation and productivity.
The policy statement cited the PICs as an aspect of the first principle,
noting that 'Government may take into account factors such as Australian
industry impacts, the national interest, broader strategic factors, and other
whole-of-government considerations' when making decisions based on
value-for-money in PIC-related procurements.
Defence has also created the Defence+Industry ePortal, a website that provides
links to key planning documents, media releases and tender announcements.
According to Defence, 'the ePortal is designed to provide industry with a tool
to access a wide and comprehensive range of Defence information including
opportunities for companies, including SMEs, to participate in Defence
acquisition and sustainment programs'.
Additionally, the Defence+Industry conference is an annual conference bringing
together defence personnel and industry representatives.
Industry values the conference highly as an opportunity to meet defence
officials and show products.
A number of analysts and witnesses were critical of the quality and
reliability of information available and drew particular attention to the
Defence Capability Plan (DCP).
The Australian Business Defence Industry Unit and Sonartech Atlas urged the
government to provide industry with clear messages to increase the industry's
confidence in Defence.
According to Sonartech Atlas (STA), the DCP funding brackets in their current
form are interpreted by STA as a less than perfect predictive tool to glean the
intent of the Commonwealth in relation to a particular project. It argued that
a 'greater level of detail regarding the Commonwealth's expectations on the
outcomes or deliveries would help to minimise ambiguity with potential benefits
for both defence and industry'.
In its view, there was scope for the DCP to be of greater benefit to industry
by providing more detail of the Commonwealth’s expectations on delivery, better
fidelity in project timelines and allocation of priorities for listed projects.
As it stands, it is not possible for a business to determine
the priority order of the projects within the DCP, ie the risk a project could
be progressed or slipped dependent on other higher priority projects. This can
be a significant issue if the project a potential supplier is pursuing and
investing for is a lower priority project with less likelihood of advancement.
Dr Thomson described the DCP as 'unhelpful'. He stated that 'while
specific years used to be provided for the planned approval of projects, there
are now only multiyear brackets that obscure what's going on with individual
projects'. The Submarine Institute of Australia Inc informed the committee that
in recent years the former clarity of the DCP had been undermined. In its opinion,
this tendency 'runs counter to the increasing demands for accuracy and detail
in plans and schedules from industry'.
One industry representative questioned the reliability of both the White Paper
and DCP with regard to projects being on time and on track.
The reality...is that there is a delay process in that front
end on these things. Obviously the strategic requirements can change. We all
acknowledge that, but when it comes to the defence capability planning cycle...these
things become quite critical to companies' investments in facilities, training,
staffing, retention of staff and so on. So there is almost a loss of
credibility around the significance of a white paper, the significance of a DCP
and the underlying actions that will achieve the dates of those plans.
The Defence Council noted that in December 2010 when the updated public
DCP was released, Ministers Smith and Clare 'announced the cancellation or
postponement of 21 major projects or phases of projects' without explaining adequately
these changes to the DCP.
It should be noted that both experts and commentators as well as
representatives of defence industry have been critical of the information made
available through the DCP for many years. For example one of the loudest
messages coming out of the committee's 2006 inquiry into naval shipbuilding was
that industry 'wants clearer guidance from government on its long term plan and
objectives for the industry'. The report also found that the plan 'currently
seems to bring industry into the discussion about capability development too
late'. It concluded that:
...the DCP should provide the opportunity for Australian
industry, and indeed, the wider community, to engage with Defence in the
earlier stages of analysing and identifying Australia's strategic priorities
and the capabilities needed to meet them.
With regard to the information available on priority industries, some
industry representatives welcomed the government's commitment to sustain PICs
and Strategic Industry Capabilities (SICs) within Australia. The 2012 DCP
listed the following as PICs:
- Acoustic Technologies and Systems
- Anti-Tampering Capabilities
- Combat Uniform and Personal Equipment
- Electronic Warfare
- 'High-end' System and 'system of systems' integration
- High Frequency and Phased Array Radars
- Infantry Weapons and Remote Weapons Stations
- In-Service Support of Collins Class Submarine Combat Systems
- Selected Ballistic Munitions and Explosives
- Ship Dry Docking Facilities and Common User Facilities
- Signature Management, and
Through-life and Real-Time Support of Mission Critical and Safety
While industry representatives welcomed the publication of PICs, they
regarded them as 'too narrow, not well defined or limited to one stage of the
lifecycle'. According to the Australian Industry Group Defence Council, the
information provided by government and Defence has not been sufficient for some
businesses and industry groups to make informed longer-term investment
Additionally, BAE Systems also argued that at present the PIC and SIC do not
provide 'sufficient information for industry to make longer-term investment
Other industry representatives also noted that Defence should provide clearer
guidance to industry.
Similarly, a 2009 ASPI's report found that industry considered the list of PICs
too limited and focused only on 'high profile' capabilities, and lacking the
required level of detail.
A survey of defence industry capability supported this view and suggested
further that PICs are 'not yet accompanied by a clear implementation strategy
or evidence of action resulting from their publication'.
Defence's approach to its dealings with industry—planning, acquisition
and sustainment for defence projects—is essential for the successful delivery
of Force 2030. Industry's ability to plan for, and invest in, people and
facilities to deliver future defence projects is significantly dependent on the
information Defence provides about its intentions. The DCP and Defence White
Papers are the main public information tools and key planning documents for
industry. Clearly, from industry's perspective, they fall short in providing
the level of certainty and confidence that industry requires to be an effective
partner in capability development. Furthermore, the committee believes that the
involvement of industry at the earliest stage of capability planning is
inadequate, including Defence White Paper preparation (see paragraphs 3.20,
In the previous chapter, the committee noted the consequences for skills
development in Defence caused by purchasing OTS. The very strong collective
view of respondents to a survey of defence industry capability was that the
continuing Defence preference for the inclusion of off-the-shelf solutions was
'reducing the amount of engineering design work at the sub-system level and
below'. The respondents regarded government's emphasis on MOTS/COTS as
'somewhat misguided' because they believed that to be competent in systems
integration, engineers required a deep understanding in a domain (i.e.
software, hardware, electronics, etc) and then broader experience in systems
engineering. According to the results of the survey:
This consequently means that there will be fewer engineers in
the future that have had the benefit of having been involved in the detailed
design and interfacing of hardware and software. The concern from industry was
that 'People that study SI [systems engineering] only, without practical
technology experience, are often the ones who make mistakes on complex SI
[System integration] projects as they are only 'book smart' system with little
real subsystem and equipment experience.
Industry's concerns about the need to provide opportunities for those in
defence industries to gain practical technology experience in detailed design
and hardware and software interfacing is another consideration that should be
factored into decisions about, and arrangements for, purchasing OTS.
As noted earlier, Defence is the sole customer for Australia's domestic
defence industry and its procurement decisions directly affect the industry,
including the viability of some companies. In particular, uneven demands on defence
industry can reduce its ability to support Australia's capability needs. Australian
SMEs that rely on work generated from major Defence capital equipment projects
are particularly vulnerable to Defence's procurement decisions and are
dependent on Defence to provide them with an even flow of work.
In this regard, a dominant theme among industry submissions to this
inquiry has been the need for Defence to commit to more regular flow of new
projects and sustainment work to encourage investment in the defence industry.
Industry representatives, both primes and SMEs, supported each other in their
call for Defence to smooth out fluctuations in the workload.
Defence's cyclical demands—for example, periods of heavy shipbuilding
followed by a drop-off in demand—can create difficulties for industry in
maintaining a workforce through periods of low demand. Prolonged gaps between
projects can force the prime contractors to lay off workers and SMEs to leave
the defence sector altogether. The Royal Institution of Naval Architects
referred to the provision of a steady stream of work at whatever level Defence
feels is an appropriate level as very important to defence industry:
Peaks and troughs should be avoided wherever possible, and as
much notice given to industry when these are unavoidable, to help companies to
The Australian Business Defence Industry Unit argued that to deliver new
platforms and systems beyond the next decade, industry will 'need to build and
grow skills in capability development, design engineering, project management,
assembly and systems integration'. Workforces with these skills, however, 'can
only be maintained and grown through regular tranches of new defence projects
BAE Systems Australia similarly noted that a robust indigenous industry
requires a smooth and consistent demand to maintain capability. It argued that
fluctuations in demand would 'invariably lead to degradation in industry
capability.' It cited the four year gap from 2014 to 2018 in ship building
requirements of the present DCP, which will result in deterioration in workforce
skills and expertise in the maritime sector.
Mr Innes Willox of the Australian Industry Group Defence Council described
...what bedevils all the companies we represent here is that
projects start and stop and then there are gaps; then they start and stop and
then there are gaps; and then there are ramp-ups and ramp-downs all through
this. So the pipeline does not flow; it either gushes or dribbles. It is that
feast or famine scenario which bedevils the entire industry, because you do lose
that skills base. They go off...and then they do not come back...So we lose all the
great technological and technical expertise that we developed through the
Collins class submarines and the Anzac frigates, or it disappears or we cannot
find it again. We cannot rummage around in the bottom drawer and just pick it
up and start again.
According to Mr Tonkin, Australian Industry and Defence Network, the
government's policy has failed to maintain a sustainable workload in the
defence shipbuilding space to enable industry to maintain its skills. He
referred to the importance of spreading acquisitions over time and concluded
that 'If you were to deliver ships in a succession, as they do in some other
countries, you would find that we would have the capability to adequately
undertake that task'.
Along the same lines, BAE noted:
Consistent and sustained demand is necessary for industry to
develop and maintain both capability and capacity. This requires
longer term contracts for sustainment that provide incentives for industry for
investment, particularly in skilled people. In addition to the issue of
industry capability, there is the equally important factor of capacity that
requires a baseline level of work to maintain or alternatively sufficient
notice and certainty for industry to ramp-up to the required level.
Dr Davies explained the problem in terms of naval shipbuilding where there
is a surge while one class of ship is being built, followed by a hiatus, and 'then
a lot of those skills need to be relearned'. As noted earlier, the AWD stands
out an example of where peaks and troughs created problems for the industry. He
We have just seen that play out in the air warfare destroyer project.
The BAE shipyards did a fine job building the Anzac frigates. Fast forward 10
years and all sorts of problems emerge when they start to construct the first
modules for the air warfare destroyers.
Looking forward, the Victorian Government registered concerns about
another significant gap in demand before the next tranche of shipbuilding
commences following the completion of the AWDs and LHDs.
Slowdown in approvals
On a related matter, a number of companies cited the rate of project
approvals as a worrying trend. In chapter 3, the committee referred to the
slippage in the approval rate in the context of the need for sound planning for
future capability development based on early and robust analysis. The following
consideration of the slow rate of approvals is concerned with the effect of delays
In recent years, project approvals have slowed which, in industry's
experience, is having a negative impact on companies, particularly on prime
contractors, SMEs and professional service providers.
A number of submissions cited the Defence Incoming Government Brief 'Red Book'
released by the government on 28 October 2010, which revealed that the two-pass
process had stalled. According to Dr Davies and Dr Thomson, it was clear that
things were slipping behind schedule as early as May 2010. Since then, the
situation has deteriorated further. In their view, 'given the mounting delays,
it looks increasingly unlikely that the program of modernisation can be
achieved on schedule'. More recently in ASPI's 2011 Defence Budget Brief, Dr
They can change the goalposts all they want, but the fact
remains that implementation of Force 2030 has fallen steadily behind schedule
over the past two years...over the past 24 months, a mere ten projects have been
given the nod, whereas more than three times that number was planned. And it is
set to get worse.
He suggested that 'the unambiguous lesson of the past decade was that
while planning for new capability is easy, delivering it can be very difficult'.
To his mind, it 'is already clear that the new capabilities envisaged in the
White Paper will not enter service as planned'.
According to BAE Systems, the NSC would need to approve approximately 50
projects per year to meet the present DCP timeline.
The present average, however, is less than ten per year. In his most recent
Defence Budget Brief, Dr Thomson stated that the lead indicator of future work,
first-pass approvals, was still 'badly behind schedule'.
One consequence of this delay is increased cost to industry as project
teams are formed and disbanded. BAE Systems stated that the time the NSC takes
to consider and approve projects affects the flow of work to industry. A
slowdown in the rate of project approvals can create a lower and less
predictable workload for industry,
and as a result, can also impose significant costs on industry. In its view, the
slow rate of approval aggravates the already severe problem of uneven workload.
The Australian Industry Group Defence Council similarly observed that the delay
in approvals undermines 'industry's investment in infrastructure and skilling,
including causing cash-flow and staffing problems for SME companies'.
The Australian Industry Defence Network supported the contention that the
slowdown in the approval rates had adversely affected the defence industry. In
its view, this interruption had the potential to delay capability needed by the
ADF and, through the delay, increase the cost of providing that capability.
Numerous other witnesses cited the detrimental effect that Defence's general
slow-down in decision-making was having 'on the ability of defence industry
companies to make the necessary business and investment decisions to ensure the
ongoing viability of the sector'.
Industry representatives noted that current delays in decisions were
causing particular problems for the smaller companies and stressed the need for
Defence to maintain a consistent flow of work to keep the industry going.
In December 2011, Jane's Defence Weekly reported that at least ten
defence-related SMEs 'operating in niche capability areas' had ceased trading
or withdrawn from the defence industry. Delayed program approvals were cited as
a decisive factor forcing companies to withdraw from the defence sector.
A recent survey of defence industry capability also indicated that 'many
significant job losses had occurred in some companies over 2009–10 and more
were 'expected as many projects were delayed by the White Paper preparation in
2009 and had not gone to contract'.
While a slowdown in approvals of new projects may result in an increase
in sustainment spending, as existing systems must be maintained for longer, the
Northern Territory (NT) Government argued that this had not occurred in recent
The slowdown in the volume of work going to both prime contractors and SMEs has
had significant impacts in the NT, with SMEs in particular suffering from the
reduced workload and being forced to sustain operations in other industry
sectors instead of defence. The NT Government warned that industry capability
in NT would soon be lost if current delays were not resolved.
Defence acknowledged that it faced challenges in delivering the number
of project approvals for government consideration.
In October 2011, in response to a question about the rate of project approvals
by the NSC, Air Marshal Harvey, then CCDG, stated that first and second pass
approval rates were increasing.
As noted earlier, however, Dr Thomson indicated that first pass approvals were
'badly behind schedule'
He observed further:
It is worrying, that the usual surge in approvals following a
White Paper simply did not occur in 2009. Moreover, the election in 2013 (which
historically reduces the number of approvals) and a White Paper in the same
year (which on past experience will be preceded by a substantial hiatus in
approvals), will probably see a reduced throughput of approvals over the next
Time lapse to contract signature
Industry also raised concerns about the time lapse from the bidding
phase for a project to contract award and contract commencement. The Australian
Association for Maritime Affairs stated that current processes 'take so long,
delay the expenditure of money; and diffuse personal responsibility for the eventual
According to the Australian Industry Defence Network, the delays around
decision-making to contract result in higher costs, due to the effects of
inflation, the increased cost of later technology and of government and defence
industry resources 'treading water' while waiting for a decision.
The Defence Teaming Centre believed that this process 'requires reform and
tighter timelines, especially for contract award'. It argued that 'the delayed
time frame, sometimes years, eventually creates an unrealistic timeline in
which industry must then deliver'.
In addition, according to the centre, 'the company may lose vital intellectual
capability within their staff if not utilised within the original time frame
The Australian Industry Group Defence Council urged Defence to 'embrace
speedier tendering and contracting processes and outcomes which incorporate
proven cost-effective commercial practices and processes'.
DMO's tendering and contract practices are considered in the following chapter.
Many witnesses voiced their concerns about delays in the procurement
processes and the lack of attention given to ensuring that the work generated
by defence procurement was steady. As Australia has only a finite amount of
industry capacity in terms of engineers, shipyards and other resources, Defence
needs to consider carefully how it could better manage its flow of work in
order to assist industry to remain productive.
This does not mean that government resources should be used to give industry work
to do in between projects to keep the workforce stood up and the skills base
intact. As industry emphasised a more consistent workflow is needed to enable
industry to invest and increase its capability and capacity to the levels that
will be needed in the coming decades.
As a relatively small force, it can be difficult for Defence to moderate
its acquisition projects so that demand for work from industry is even and
constant. Even so, it is clear that Defence must do its utmost to develop a DCP
that provides an even flow of work that would encourage industry 'to invest
wisely in infrastructure, skills and staffing'.
The committee recommends that Defence make their DCP a document that
provides industry with greater certainty about its plans and intentions for
future capability development to enable industry to invest with confidence in
capability development. In particular, the committee recommends that the next
- a schedule that provides anticipated timelines for the
construction and delivery of all DCP items, with continuity the key feature;
- a detailed explanation on this acquisition schedule indicating
the reasoning and analysis behind it and how Defence has taken into account
demand flows; and
- reliable cost estimates.
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