Industry reacts to Defence Strategic Review

Industry groups and government officials around Australia are reacting to the Defence Strategic Review released on Monday by the Australian government. Below are some of the reactions.

Strong partnership touted by government
Today, the Albanese Government begins implementing key recommendations of the Defence Strategic Review. As the Review makes clear, a genuine partnership between the Government, industry and unions will be critical to growing Australia’s defence industry and speeding up the acquisition of vital defence capabilities. The Review recommends significant reforms to the way Defence is structured, postured and operates, to respond to our current strategic circumstances – including reprioritisation of the Defence Integrated Investment Program (IIP).

That is why the Government has agreed to the Review’s recommendation that the Defence IIP be rebuilt to align with the priorities outlined in the Review. This is a significant endeavour – and one which requires a considered, deliberate, and timely response. We understand the substantial implications of these changes for both Defence and industry, which is why we will be working closely with industry over the coming weeks and months ahead. The Review is clear that too much time has been lost on key defence acquisitions and capabilities. Our strategic circumstances demand these issues be addressed urgently.

That is why the Albanese Government will deliver a series of reforms in response to the Review. The Government has directed Defence to immediately begin work to:

• Remove unnecessary barriers to acquisitions.

• Streamline strategically important projects and low-complexity procurements.

• Make faster decisions in the delivery of Defence projects.

• Develop practical solutions in close consultation with defence industry.

These reforms will cut red tape and see Defence become a better partner with industry, which will help to deliver the capability the Australian Defence Force needs, when they need it. The Albanese Government has already announced, and is implementing, significant reforms to defence procurement to deal with complex projects and projects that are experiencing challenges. Later this year, and in order to build the defence industry needed to support the ADF, the Albanese Government will release a Defence Industry Development Strategy that will set out:

• The strategic rationale for a sovereign defence industrial base.

• More targeted and detailed Sovereign Industrial Capability Priorities.

• A plan to grow industry’s workforce to deliver a viable industrial base and increase Australia’s defence exports.

• Reforms to defence procurement to support the development of Australian defence industry and respond to the Review.

• Mechanisms to improve security within defence businesses.

• A detailed implementation plan.

This will be critical step in delivering the reforms and capabilities identified in the Defence Strategic Review.

Deputy Prime Minister and Minister for Defence, Richard Marles said: “The Defence Strategic Review is a clarion call for action in light of our strategic circumstances. The Review is clear that we cannot waste any more time when it comes to acquiring critical defence capabilities. The Albanese Government is determined to reform Defence and its capability acquisition processes to ensure our defence forces have the capabilities they need and sooner.”

Minister for Defence Industry, Pat Conroy said: “The Albanese Government is fixing the mess left by the former Government, which talked a big game but failed to deliver. We are determined to provide the clarity and guidance that industry needs to make informed business decisions based on Australia’s priorities. There’s no time to lose, but it’s also essential that Government works closely with industry and unions to get this right, and to build the industrial base we need for our future national security.”

DSR announcement results in more uncertainty for Defence Industry
The release of the Defence Strategic Review (DSR) comes as a welcome relief to the Defence industry which has been waiting to find out which Defence Projects will continue, which will be cancelled, and what new opportunities will be available.

The Defence Teaming Centre (DTC) was pleased to see a number of their recommendations have been agreed upon by the Albanese Government, which will reduce the risk to businesses operating in Australia’s Defence industry.

Despite this, the cancellation or reduction of major projects and the very real possibility that lower-priority projects and programs could still be cancelled, may cost the industry millions of dollars in lost investment. This has the DTC predicting a decline in the number of businesses working in the Defence sector due to the continued lack of commitment and certainty from government, at a time when we need to maximise resources available to meet Defence’s requirements.

Tim Dore, Acting Chief Executive Officer at the DTC, said the DTC supports the urgency to equip the Australian warfighter with the capability necessary to keep Australia safe. However, more commitment is needed to establish Australia’s sovereign industrial capability for long-term security to the sector that sits behind Defence.

“We understand why the significant overhaul was needed. We are in a considerably different geopolitical environment than in 2020, and the DTC appreciates the Albanese government requesting the review early on in their tenure,” Mr Dore said. “However, there are numerous businesses who have lost out on work and who have lost hundreds of thousands of dollars in investments they had made to upskill their workforce and equipment based on Defence’s previous requirements, only to see the Government’s direction once again change. Neither the taxpayer nor the warfighter benefits from this indecision.

“We will be monitoring the release of the National Defence Strategy next year, the recommended review for the structure and composition of Australia’s surface combat fleet later this year and any new opportunities that become available. The DTC will work with our members to see how they can pivot their business to meet the new needs of Australia’s Defence Force. Our sector is agile, responsive and has proven to the Government that with the right support and investment, they can deliver the capability. However, speaking with our members, we know that the DSR announcement may result in many established and mature small to medium enterprises choosing to either reduce their involvement or exit the Defence sector entirely, because it is no longer financially viable and less attractive to other buoyant sectors.

“Another issue we hear from our members is that they have heavily invested in projects only to have their hard work amount to nothing. Changes and uncertainty affect industries’ confidence of investing in Australia’s sovereign capability. With the huge demand for skilled employees in all sectors, members are worried that it may be difficult for them to afford to keep Australian skilled staff when there are few manufacturing and testing opportunities on the near horizon for Australia’s Defence industry.

“What the DTC would like to see is a bipartisan approach to how the Australian Government wants to defend our shores. Australia’s Defence industry has the speed, agility and capability required to deliver to Defence; however, Australia’s Defence industry is not being given the opportunity to begin building this important design expertise due to changing Defence priorities.

“Based on what has been published in the review about the implementation of a biennial National Defence Strategy, the DSR could support a bipartisan approach. A biennial strategy should also remove the uneasiness of delivering to Defence as requirements are consistently being reviewed instead of at sporadic intervals. This, in theory, should minimise the need to cancel projects and restore confidence in the sector.”

Australian Industry and Defence Network responds toDefence Strategic Review
The Australian Industry and Defence Network (AIDN) welcomes the release of the Defence Strategic Review (DSR). AIDN acknowledges the hard work of Dr Stephen Smith and Sir Angus Houston and their team in producing this review.  AIDN will spend some time reviewing the report and intends to engage in a constructive manner with the Albanese Government, Defence and industry stakeholders, to ensure that the role for the Australian Defence Industry is fully understood and that Australian Industry is front and centre for all decision making opportunities going froward in the defence integrated investment program.

AIDN’s strong membership of Australian SMEs supports any Australian Government initiative that affords the Australian Defence Industry the opportunity to secure high end work in all Defence programs.  AIDN has supported, the Minister for Defence Industry, the Hon Pat Conroy MP, drive towards ensuring that enhanced capability for the Australian Defence Industry is the measure the Albanese Government would be seeking, rather than a simplistic measure of percentage, however the DSR does not reflect this sentiment.

In principle, as an industry that contributes $10.6 billion to the Australian economy annually, AIDN supports this initiative.  A highly capable Australian Defence Industry supports the Albanese Government’s ambition of a more self-reliant and a sovereign industrial base.  AIDN is calling for the Albanese Government and the Department of Defence (DoD) to work closely with the 61,000+ workers employed by the Australian Defence Industry, to ensure that a comprehensive policy and procurement framework are put in place to achieve this intent.

However, the DSR does not affirm this position. The references to Defence Industry appear cursory at best. Of concern is the statement that Australian industry content and domestic production should be balanced against timely capability acquisition.

The Albanese Government needs to clearly articulate what the Government believes ‘timely’ acquisition is, further to this it needs to articulate what the industrial plan for Australian Industry is to be.

AIDN can accept that the requirement for a capability may mean that Defence proceeds offshore to purchase that capability. However, there must be a plan to ensure that the ability to produce that capability locally is developed at the same time and it must be mandatory. Without the proper guidance from Government, Defence will be able to use the argument of speed to capability to avoid the use of Australian Industry. The future of the Australian Defence Industry depends on a framework where their role in delivering capability requirements is clear, and the procurement process is efficient and accessible to local industry and importantly, SMEs.

Allowing Internationally owned large Defence contractors the ability to provide advice to Defence on ‘speed to capability’ without due regard or requirement for work to be transferred to Australian Industry, means that the these overseas companies will simply use the ‘speed to capability’ mantra to employ their existing overseas supply chain. And there will be no development, enhancement or creation of an Australian Indigenous sovereign industrial capability, a capability our national requires in order to achieve national strategic resilience.

The recent pandemic demonstrated how vulnerable Australia is to the nuisances of overseas supply chains. Without Government clearly articulating the requirement to create an Australian supply chain then this simple will not happen and Australia will be at the behest of supply from foreign Governments, with their own needs being prioritised ahead of Australia, we will simply be in the queue to be supplied.

The creation of Australia capability allows us as a nation to be independent, sovereign and resilient. It also could and should provide a secondary manufacturing and supply capability for our strategic partners.

If Australia is to achieve a truly sovereign industrial base, then the Australian Defence Industry must be designed into every aspect of these programs.  If the intent is simply to acquire capability form foreign owned overseas industries, then our nation will have fallen short of what we need to create with our Industry.

Australian Industry is simply too important to be left to the whims of foreign owned multinational companies, AIDN would argue that now is the time for our Government to mandate requirements into all of these programs so that foreign entities understand what they must do in order to secure these opportunities.

This is not an isolated requirement, most nations have exacting requirements for the inclusion of local defence industry into their programs.

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