The Australian Defence Force (ADF), which spends more than $12 billion a year on purchasing, today released a policy framework to support its procurement plans for the next decade.
The new 'Defence Industry Policy' supports a sustained increase in defence spending of three per cent per annum in real terms through to the year 2015/16.
Procurement of major capital equipment alone is planned to increase by almost 30 percent over the next decade. Expenditure is expected to reach $50 billion with $20 billion going to new acquisitions and $30 billion for sustainment.
It builds on the 1998 Defence and Industry Strategic Policy Statement and identifies a number of challenges in the cost-effective delivery of equipment to Australia's military.
For example, the policy claims technology is increasing in complexity and cost while the suppliers of IT are consolidating.
Central to the framework is support for local industry and the SMB sector while multi-nationals should have a local presence. Around one-third of defence spending is directed to the SMB sector.
"Companies investing in Australia through a local presence and the transfer of necessary technology and intellectual property will be assessed favourably when competing to provide goods and services necessary for Australia's essential security," the policy states.
"The government's clear expectation is that suppliers will use Australian sub-contractors where it is cost-effective to do so. Prime contractors for large projects will be required to provide a supply chain management plan that sets our how they will engage SMB and other sub-contractors in a sustainable manner."
This will be supported by a Code of Conduct between defence prime contractors and sub-contractors, which will be revised and re-released later this year.
Last year the department spent more than $300 million on research and development to nurture innovation, this will continue and be supported by a closer working relationship with universities and industry.
Moreover, to address a continuing skills shortage for professional and technical workers, ADF will spend $215 million in training and support over the next decade. The department will need 12,000 new employees during this time with 25 percent coming from an engineering background.
A joint defence-industry training taskforce will be formed to pool resources with industry. The taskforce will deliver its recommendations in the second half of 2007.
To work more closely with the private sector an annual program of industry roundtables will be introduced and a joint defence and industry secondment program will be trialled in the second half of 2007. This is in addition to a 'confidential feedback mechanism' to be introduced in the third quarter of 2007.
Industry will have access to end-users through defence-led focus groups so they can receive the feedback necessary to improve the effectiveness of delivering goods and services to the ADF.
To ensure best value for money, the ADF will amend procurement documentation which will be in place by the fourth quarter of 2007 and develop a project risk management capability to be established by mid-2008.
This will include supply chain templates, a new e-portal to be introduced by year's end and the development of a database on local industry capability.