Last month, DMO Head Industry Division, Mr Peter Croser presented the keynote address at the Defence Skilling Summit 2005 held in Adelaide . In that address he spoke about the magnitude of the Australian Defence Industry and the range of supporting mechanisms available to develop and sustain the industrial capabilities needed to support the ADF in the future. The following is an extract from that address.
DMO Head Industry Division, Peter Croser
The scale of Defence’s expenditure on new equipment and maintaining existing equipment for the ADF needs to be realized to appreciate the size of the industry involved. This year the DMO has a budget in excess of $7.2 billion. That’s 0.8 percent of Australia ’s GDP or over 3 percent of Government outlays. It will all be spent on military equipment and services and represents about 40 percent of Defence’s total budget. In addition, over the next ten years the value of projects in the Defence Capability Plan is over $52 billion, covering both acquisition and sustainment. The fact that the quality and superior technology of this equipment may mean the difference between the loss of lives and ultimately the winning or losing of wars, demonstrates how important Defence industry, particularly the Australian Defence Industry, is to the ADF.
Of this spend, more than half is spent right here in Australia , with companies based here, providing jobs for Australians. About $650 million is spent on highly specialized engineering and project management. In addition, Defence work is spread right across the nation – in every capital city and in regional centres.
The size and complexity of major capital equipment and through-life-support projects means that Prime Contractors are generally best placed to enter into contract and manage these projects. However, SMEs are also a vital element of the supply chains for the acquisition and support of ADF capability, and represent a significant portion of the in-country industry capabilities in the defence sector. They are also the birthplace of many of the innovative technologies that contribute to the ADF’s capability edge. SMEs usually provide highly specialized, high quality elements of the overall packages of work. Significant opportunities exist for SMEs to access Defence work as subcontractors to the large Prime Contractors. For example, 1300 companies were involved in the ANZAC frigate project alone.
The required adjustment to the size, shape and skill set of our workforce is just one of the major obstacles to overcome. Defence will in future require primes to prepare a workforce development and training plan as part of future tenders. In addition, Defence has a range of mechanisms such as defence export initiatives and the SADI program to assist industry to develop and sustain local industry capabilities.
Defence exports offer significant benefits to the ADF in that they reduce industry’s sole reliance on Australian Defence expenditure, they amortise development costs over a diversified customer base and they improve the overall viability and robustness of Australian defence industry. We have introduced initiatives such as the establishment of a dedicated military officer of star-rank to help promote Australian defence industry exports and provide the linkage to operational experience. Major General Jim Molan has been appointed to this new position. See related story on DMO's Defence Materiel Advocate.
The Skilling Australia’s Defence Industry (SADI) program, managed from within the Industry Division of DMO, is a government initiative to increase the skills available in Australia ’s Defence Industry. It reflects the Government’s recognition of the importance of Australia ’s Defence Industry in delivering ADF capabilities. Commencing in the 05/06 financial year the government is investing up to 0.5% ($215 million over ten years or over $20 million each year on average) of the money spent on major capital equipment projects. This commitment is to provide assistance in generating additional skilled positions, upskilling existing employees and improving the quality and quantity of skills training in defence industry. See related story on implementing the SADI Program.
It is hoped that these and other initiatives and support will generate a profitable defence industry sector. In return, the Government expects an efficient and effective commitment from industry that is able to deliver value-for-money capability to the ADF on time, on budget and to the required quality, safety and capability. |
