Leading the development of a sovereign industrial defence capability

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The Hon Melissa Price MP

Minister for Defence Industry

Minister for Science and Technology

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24 September 2020

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Welcome all to the Defence Teaming Centre’s Defence Industry Virtual Summit.

I would like to thank Audra and her team at DTC for hosting this event to discuss our sovereign industry capability.

It’s a great pleasure to be here.

As many of you would have seen over the past couple of weeks, we have made some exciting announcements with respect to our industry capability.

The Minister for Defence and I have revealed details of the CDIC Review and its recommendations.

We have also announced significant changes to AIC in Defence and the overhaul of ASDEFCON.

Developing a sovereign defence industry and ensuring small business remains a key part of this is no small feat.

Especially when you consider the substantial cultural and systemic shift we are embarking on within Defence, and the changes we have implemented over the past six months.

We continue to develop a true sovereign defence industry – one that builds up our manufacturing base, creates thousands of Australian jobs and ensures Australian small and medium businesses play a fundametal role in our major programs.

We not only want to do this – we need to do this, to ensure Australian businesses are stronger and more competitive – both at home and abroad.

We also need to make sure the men and women of the Australian Defence Force have the best capability possible to keep Australians safe.

But we must also recongise the vital role Australian industry will play in delivering our ambitious and unprecedented $270 billion investment in defence capability.

Because the opportunities that arise as a result of that investment will be significant.

Backing small businesses and ensuring they are given full, fair and reasonable consideration when Defence makes decisions is essential especially if we are to build our manufacturing base and develop new skills and capabilities in the Australian defence industry.

And from what we have completed over the past 12 months, we remain on track to achieve this.

I announced earlier this year that our Government would deliver a new and enhanced AIC contractual framework and an Independent AIC Audit Program.

And as I announced in recent weeks, we have now delivered on both of these commitments, and will be implementing AIC changes in the contractual framework for future contracts from January 1 2021.

The Independent AIC Plan Audit Program is now in place, as promised.

This program will work to hold major contractors to account for their AIC commitments.

It is a targeted program that will look at specific contracts over time.

It has taken considerable time to develop because it so important – we need to get this right.

It will be the tool we use to ensure AIC compliance across the board.

When an audit is established, it will be targeted.

And it will be forensic.

Independent auditors will be able to go on-site, look at the books and thoroughly investigate if a company is compliant with AIC.

This extends to auditing their commitments of IP transfer to Australia, partnerships with Australian businesses, developing capability in Australia and their investment in the Australian economy.

And if a company is found to be non-compliant, it will be less likely to win Defence contracts.

That’s because a company’s performance on AIC will be a consideration in future tender evaluations.

I would like to commend Martin Halloran, Fran Rush and their teams in Defence CASG for their enormous work in formulating the changes to allow us to deliver on these two commitments.

As many in industry will know, I initiated a review of the Centre for Defence Industry Capability late last year.

The CDIC must be fit-for-purpose and must deliver targeted support for Australian businesses already in – and looking to get into – our defence industry.

It has been a good initiative by our Government so far, but I want to make stronger in how it supports industry.

The CDIC review was a long and thorough process.

And as you would have all have heard from our announcement a couple of weeks ago, the recommendations are quite extensive, and all bar one of them have been accepted.

Returning the CDIC to Defence will allow better coordination with the priorities of the ADF and Government.

The changes will help to strengthen our support for defence businesses.

The changes to the governance, structure and delivery of support to industry from the reformed CDIC are substantial, and they will have a lasting impact in developing our sovereign defence industry capability.

My expectation is that the CDIC recommendations will be implemented by the end of quarter one next year.

Last month I also announced details of an update of the guidance to the Commonwealth Procurement Rules, which directly effects Defence procurement.

This change is quite significant for Defence.

For procurements above $4 million, the guidelines now define AIC and sovereign capability as an economic benefit to be assessed as part of the value for money consideration in the CPRs.

Defence has now rolled out more effective guidance to its tender evaluators with respect to AIC.

It will also amend its procurement templates to strengthen the application of our Government’s AIC policy and will develop AIC-specific training for Defence tender evaluators.

This is a big step in achieving a sovereign defence industry.

Further to this, I also recently revealed that our Government will overhaul the way Defence does business with industry.

Changes to the Australian Standard for Defence Contracting, also known as ASDEFCON, are on the table.

And I give this commitment to all of our defence industry:

We will significantly cut the overly burdensome red tape that you have to deal with

We will also reduce the costs that come with tendering for Defence contracts.

This is an enormous change to how Defence will contract in the future.

The Terms of Reference and process for consultation will be announced shortly.

I will also oversee this review and have asked that Fran Rush and Andrew Staines lead this task in Defence, and have it finalised by the end of March.

While here – I want to remind businesses of recent funding opportunities we have announced – including SADI grants – to support skills training in our sector.

I want to thank members of defence industry, for their support and encouragement with this program.  And I am thrilled we were able to expand it to provide even more opportunities to help industry boost their skill set.

We have achieved a significant amount over the past twelve months and the path ahead is clear.

I truly believe the changes we have made and the changes we are making will pave the way for the development of a sovereign defence industry.

Thank you.


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