Minister for Defence Materiel – Release of Priority Industry Capability Health Checks

The Minister for Defence Materiel Dr Mike Kelly today released the remaining Priority Industry Capability (PIC) Health Checks.

“Australian industry plays a vital role in supporting our men and women serving in the ADF,” Dr Kelly said.

PICs identify elements of broader industry capabilities that confer an essential strategic advantage by being resident in Australia and which, if not available, would undermine defence self-reliance and Australian Defence Force (ADF) operational capability.

In 2011, the former Minister for Defence Materiel, Jason Clare, announced that the Defence Materiel Organisation would conduct health checks on each of the PICs.

Eight PIC factsheets have been released to date and are available on the Defence Materiel Organisation website.

They are defined in terms of industrial capabilities rather than specific companies. Ideally, healthy PICs should function without any special form of Government subsidy or intervention in the market.

“The health checks are an important tool for assessing the capacity of Industry, the forecast demands of the ADF and any Defence or Government intervention that might be necessary,” Dr Kelly said.

“The findings of these health checks will feed into the development of the 2013 Defence White Paper.”

The health checks were undertaken following consultation with an extensive range of industry and Defence stakeholders.

Steps are already underway within Defence to more closely integrate PICs with Defence’s range of grants programs for industry in the areas of skilling, innovation and market development.

Dr Kelly today released the following three health checks in full, and the remaining elements of health checks for a further two PICs:

Selected Ballistic Munitions and Explosives

This PIC has important implications for Australia’s capacity to produce a range of munitions at Benalla in Victoria, propellants and explosives at Mulwala in New South Wales and airborne flare decoys at Lara in Victoria.

The health check notes that under the proposed Domestic Munitions Manufacturing Arrangement (DMMA) with industry, scheduled to be introduced from 2015, Defence is seeking to improve value-for-money outcomes through longer term changes to the ownership, management, operating environment and customer base of some existing manufacturing facilities.

“The health check has found that the health of the PIC, now and in the foreseeable future is satisfactory. There is a high probability that the enduring capacity of Australian industry will be sufficient to meet the evolving needs of the ADF,” Dr Kelly said.

‘High end’ Systems and ‘System of Systems’ Integration

This PIC focuses on the ability of Australian-based companies and Defence to manage and deliver the integration of complex components onto a range of sophisticated military platforms and to facilitate the integration of these platforms with the ADF’s joint force structure.

“The health check found that the way high-end systems integration services are delivered to Defence can be improved, specifically by strengthening the planning of projects and the development of industry’s project management capabilities,” Dr Kelly said.

To address this, Defence is improving its management of system integration at all stages of capability lifecycle and is also considering opportunities for improved professionalisation, education, industry inclusion and workforce agility across Defence and industry.

Combat Clothing and Personal Equipment (Personal Equipment element)

This PIC focuses on enhancements to personal survivability against ballistic, blast and flash threats, and specifically includes soft and ballistic armour inserts, helmets and ballistic goggles for the combat elements of the ADF.

“These are the capabilities that we cannot do without in Australia, and clearly the supply of combat clothing and personal protective equipment for our troops is vitally important,” Dr Kelly said.

The health check found that with the domestic design and development of personal equipment focussing on ADF requirements and being adequately resourced, the health of the PIC is satisfactory.

Australian-based companies already have a proven track record in innovative work to produce body armour for our soldiers that is both lighter and stronger.

“In these areas, technology is advancing so rapidly that the acquisition strategy that will deliver the best capability and protection for the ADF is to buy smaller quantities of equipment, more often.

“Local industry will benefit from a steadier stream of work expected from Defence projects such as Land 125 Phase 3B,” Dr Kelly said.

High Frequency and Phased Array Radar

This PIC focuses on the domestic skills and expertise required to support the Jindalee Operational Radar Network (JORN), and the Phased Array Radars (PARs) fitted to ANZAC frigates.

“For JORN, the health check has found the health of the PIC to be unsatisfactory in the short term. This is due to the impact on industry of an expected five-year gap between the completion of work under Project JP 2025 Phase 5 and the approval of further work under Phase 6, scheduled for between 2015–18,” Dr Kelly said.

“To address this issue, the Government has invested nearly $70 million in order to retain skill sets and fill this gap between completion of Phase 5 and start up of Phase 6. This represents a clear and substantial policy decision by Government to intervene in the market where a compelling case arises to support a PIC and implement an appropriate intervention strategy.”

Dr Kelly said that while the PAR element of the PIC is satisfactory in the short term, Defence will monitor potential influence that two major projects – SEA 1449 Phase 4B to replace the air search radar on ANZAC frigates and SEA 5000 Phase 1A for the technological requirements of radars on the Future Surface Combatant – will have on the ongoing health of the PIC.

“Defence is progressing these projects to both de-risk radar solutions for future naval acquisition projects and build on the already substantial investment made by Government in domestic radar-related industrial research and development,” he said.

Infantry Weapons and Remote Weapon Stations (Remote Weapon Stations element)

This PIC focuses on the Australian-based industry capacity to maintain, repair and upgrade Remote Weapon Stations (RWS) to ensure their ongoing availability and reliability on operations. RWS are fitted to a number of the ADF’s military platforms, and provide their operators the ability to engage the enemy in a way that minimise their own exposure to attack.

“While the health check has found the health of the PIC to be satisfactory in the short term, some uncertainty exists around Defence’s future requirements for individual platforms, particularly in relation to the transition of Australia’s mission in the Middle East Area of Operations,” Mr Kelly said.

“To address this issue, I have instructed Defence to conduct a Capability Requirements Definition study to determine its future level of demand for RWS.”

Noting the potential for several current Defence projects to use RWS, Australian-based companies will be provided with preferential access to Defence’s range of industry assistance programs.

Factsheets that provide a summary of the findings of the health checks are available at http://www.defence.gov.au/dmo/id/pic/.

Media contacts:

Dr Kelly’s Office: Robbie Rynehart (02) 6277 4840 or 0459 810 654
Defence Media Operations (02) 6127 1999


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