RESPONSE TO 2016 DEFENCE WHITE PAPER APRIL 2016 HunterNet Co-Operative Limited T: 02 4908 7380 1 P a g e
RESPONSE TO 2016 DEFENCE WHITE PAPER APRIL 2016 Project Manager Marq Saunders, HunterNet Defence Final Version Review Tony Cade, Chief Executive Officer HunterNet Co-Operative Limited E: tony.cade@hunternet.com.au W: www.hunternet.com.au A: 755 Hunter St Newcastle West NSW 2300 P: PO Box 437, Newcastle NSW 2300 HunterNet Co-Operative Limited 2
Table of Contents Executive Summary... 4 The Defence Industry Policy Statement... 5 Defence and Industry Partnership... 5 Delivering Defence Capability... 7 A New approach to Defence Innovation... 8 Driving Competitiveness and Export Potential... 9 Doing Business with Defence: Cutting Red Tape... 10 HunterNet Co-Operative Limited 3
Executive Summary The 2016 Defence Industry Policy Statement is an encouraging insight into the direction that Government is taking Defence and the guidance that has been provided on future interaction with the Australian Defence Industries. Given that this reform coincides with the release of the current Defence Whitepaper which has outlined a period of unprecedented expenditure on defence acquisition and capability sustainment and enhancement, it is now more important than ever that Defence industry primes and small to medium business enterprises understand how to capitalise on new initiatives and work within the new processes and structure which have been designed around fostering strong collaborative relationships between the organisations in order to meet the needs of Defence. As was made mention to by Commodore Steve Tiffen from the Capability Acquisition and Sustainment Group (CASG) at our last Defence Forum the significant changes highlighted in this summary will be conducted over the next six months. Recently CASG have announced they will be conducting a Defence and Industry conference Defence + Industry Fundamental Inputs to Capability on 15 June at the National Convention Centre in Canberra. CASG Deputy Secretary Mr Kim Gillis has stated, The 2016 D+I Conference provides a critical platform for Government-to-Business and Business-to-Business interactions. Registration for the event is through their website and attendance by HunterNet defence members is highly recommended. Finally HunterNet Defence will be hosting their own Conference in the latter half of this year. The theme for this years event will aim to leverage off the discussion and briefings conducted by CASG in Canberra and its timing will enable an insightful update to the ongoing changes and processes discussed at the Canberra June conference. HunterNet Co-Operative Limited 4
Based on the direction provided in the 2016 Defence White Paper, Defence must deliver a significant capability modernisation program to build our future Australian defence Force (ADF). Government has stated that the Australian defence industry is essential to the operations of the ADF and to the capability we need to protect Australia and our national interests. The following document is a summary of the recently released 2016 Defence Industry Policy Statement by HunterNet Defence for the benefit of their members. The Defence Industry Policy Statement Defence and Industry Partnership The 2016 Defence Industry Policy Statement has been developed following an extensive consultation process during the development of the Defence White Paper. This process identified the need to reset and refocus the Defence and industry partnership. The Governments objective for Defence industry policy is to deliver the defence capability necessary to achieve the strategy set out in the Defence White Paper, supported by an internationally competitive and innovative Australian defence industrial base. In order to achieve their objective, Government through the Defence Industry policy statement have defined the following specific measures; A streamlining of the numerous Defence industry and innovation programs under two broad initiatives funded at $1.6 billion over the decade to FY2025-26. o Funded to around $230 million will be the establishment of the new Centre for Defence Industry Capability, led by an advisory board comprised of private sector and Defence representatives to drive the strategic partnership with Defence, involve industry in governance of the industry programs and provide a range of business and skilling services. o A new approach to innovation by fostering a collaborative approach between defence, industry and research organisations to jointly develop innovation and commercial opportunities trough two streams of funding. The Next Generation Technologies Fund, approximately $730 million. Establishment of a new Defence Innovation Hub, around $640 million to take innovative ideas from initial concept, through prototyping and testing into production and service. The commitment to provide to industry an earlier and greater influence across the capability life cycle. Implementation of the First Principles Review recommendations, which will enable a more agile capability development and procurement process. Publish the 2016 Integrated Investment Plan to provide certainty to the Governments investment plan. Evolving the existing Priority and Strategic Industry Capability policy into a Sovereign Industrial Capability Assessment framework with the goal of ensuring that strategically critical capabilities remain within Australian exclusive control, improving the system that identifies and manages these capabilities. HunterNet Co-Operative Limited 5
The policy statement identifies that large defence companies (Primes) will play a vital role in providing the connection to small to medium enterprises, including potential global supply chain opportunities. The intent is for Defence and the Centre for Defence Industry Capability to work with the Prime companies to ensure that there are the appropriate levels of skilling and technology transfer as well develop an effective process for the exchange of information between Defence, Local and International defence industries. HunterNet Co-Operative Limited 6
Delivering Defence Capability The Centre for Defence industry Capability (CDIC) which is to commence operations in the second half of 2016, is the vehicle for the Governments plan to renew the way in which Defence and Defence Industry interact through a single governance framework. It will be co-led by private sector industry and defence through an advisory board. Its primary purpose is twofold, firstly to provide strategic leadership for the sector and then secondly to help build the capability and capacity of Australian industry to support the ADF. The CDIC will be centred on three core streams of activity; 1. Industry Development 2. Facilitate Innovation 3. Business Competiveness and Exports Industry development will identify and support sector-wide initiatives and incorporate activities from existing programs by: Delivering an Australian industry Capability facilitation function Develop and manage the future delivery model of skilling programs Developing and proposing the future delivery model for the Defence Engineering Internship Program Develop and propose the future delivery model for the School Pathways Program and F1 in Schools/Subs in Schools Develop the Defence Industrial Capability plan. In order to help Facilitate Innovation a Defence innovation Portal will be created to provide vital connections between small to medium enterprises and Defence, their aim will be to help companies understand defence capability needs and supporting their ability to contribute to Defence innovation requirements by; Assisting Australian industry to access Defence innovation funding Develop industry awareness Provide information about defence innovation requirements The Business Competitiveness and Exports stream will provide specific advice and development support to small to medium enterprises on how they can improve their productivity and global competitiveness in areas specific to Defence. The stream will absorb the functions currently performed by the Defence Industry Innovation Centre by the second half of 2016. This stream will also take responsibility for; Support delivery and development of the current Global Supply Chain Program and the future delivery model, and Assume responsibility for the delivery and development of Team Defence Australia trade events. HunterNet Co-Operative Limited 7
A New approach to Defence Innovation Government recognises that Australia benefits from a industrial base comprising a large number of agile small to medium enterprises strengthened by a vital collection of global companies who have access to global knowledge networks, supply chain networks and export markets. This combined with the fact that together our small, medium and large enterprises combined with Australian research institutes and academics have a track record of producing some of the worlds most innovative defence technologies means that the Government has committed to implementing a new approach to Defence innovation. The new approach for Defence to innovation will comprise four key initiatives; 1. Next Generation Technologies Fund $730 million to invest in strategic next generation technologies introduced from 1 July 2016. The Defence Science and Technology Group (DST Group) will head the fund by identifying, conducting and integrating research into next generation technologies relevant to Australia s national interests. DST will work collaboratively with academia, research agencies, Australian industries, defence and government along with our allies and has already identified the following technology areas of interest; o Integrated intelligence, surveillance and reconnaissance o Space capabilities o Enhanced human performance o Medical countermeasure products o Multidisciplinary material sciences o Quantum technologies o Cyber o Advanced sensor, hypersonics and directed energy capabilities 2. Defence Innovation Hub $640 million investment in a new virtual Defence innovation hub enabling a collaborate approach between industry and Defence to undertake innovation activities from initial concept through to introduction in service. The fund will manage a portfolio of funded investments in Defence innovation. By the second half of 2016 the funding and functions of a number of existing innovation programs (and their future models) will come under the strategic guidance of the Hub including; o Capability Technology Demonstrator (CTD) o Rapid Prototyping Development and Evaluation (RPDE) o Defence innovation Realisation Fund (DIRF) o Priority Industry Capability Fund (PICDF) o Chief Information Officer Group Innovation Program The Defence Materials Technology Centre will be funded to continue to provide a resource to support the Defence Innovation Hub 3. Defence Innovation Portal As part of the CDIC and outlined earlier in this document. HunterNet Co-Operative Limited 8
4. Changed Culture and processes Develop a change in culture and business processes to systematically remove barriers to innovation. This will start with the development of a new contracting and intellectual property policies that encourage investment in Australian ideas, keep profits in country and provide incentives for larger countries to back Australian innovation. Driving Competitiveness and Export Potential The Government is committed to promoting internationally competitive Australian businesses. The CDIC will work with Australian companies to achieve economies of scale and develop a more robust and diverse industrial base. Government tasking of the CDIC will include a guiding / mentoring role for business to improve their international competitiveness through export programs by; Acting a s a trusted broker of relationships between defence companies, Defence and other Government agencies like AusTrade Offering advisory services to assist enterprises to become export ready and globally competitive Offering market advice to guide potential export opportunities Facilitating Defence trade missions Facilitating interaction with Defence Export Controls Branch Providing a Supplier Continuous Improvement Program aimed at systematically embedding corporate, operational and continuous improvement capability as required by global defence businesses. HunterNet Co-Operative Limited 9
Doing Business with Defence: Cutting Red Tape The creation of the CDIC and the defence Innovation Hub has provided Defence a means to adopt more efficient administrative processes and a greater collaboration opportunity with the States and Territories on industry programs. The Government has also aimed to reduce tendering and contract costs by accepting the recommendations of the First Principles Review, which established a strong case for organisational change and how Defence interacts with Industry. The review was critical of Defence in their current practice of a one size fits all approach to procurement strategy and has promoted the establishment of a single end to end development function in order to remove complex and unnecessary procurement processes by; Adopting a leaner smarter approach that better manages risk, leverages industry, is simpler, more commercially orientated and delivers value for money by removing complex components to tendering and contracting processes in Defence, and Revising the two-pass process by establishing an entry gate and creating a clear pathway to tailor and fast track projects. The strategy will include a robust contestability process and is aimed at reducing the potential for project schedule delays. Defence has also made a commitment to the Governments regulatory reform agenda as a means of lowering costs for business. Key initiatives to date that have been identified include; Improving the selection of templates for the Australian Standard of Defence contracting Simplifying the Australian standard for Defence Support template for major platform sustainment Standardising the approach to performance based contracting in the sustainment of Defence material Introducing e-tendering Amendment of the Defence Trade Controls Act 2012 to reduce export regulation for industry, university and research stakeholders Streamlining intellectual property management Introducing open days for small to medium business enterprise engagement The Government has also identified that streamlining of defence industry and innovation programs into the CDIC and Defence Innovation Hub will allow Defence and industry to; Ensure development and skilling needs are accurately identified and targeted Align development activities to the integrated investment plan Simplify entry into the industry development and innovation programs Conduct regular reviews ensuring effectiveness and return on investment of industry development activities and outcomes. Defence has furthered its commitment to driving innovation and providing individuals and businesses simpler access to Australian Government services through the Governments Digital Transformation Agenda. The CDIC will draw on AusIndustry s whole of Government service delivery solutions, which are consistent with the Digital Transformation Agenda. HunterNet Co-Operative Limited 10