Australian Industry Capability Program

The 2016 Integrated Investment Program and the requirement to achieve value-for-money determine the investment priorities for Defence . In accordance with the 2016 Defence Industry Policy Statement (DIPS), the Australian Industry Capability (AIC) Program aims to: 

  • Provide opportunities for Australian companies to compete on merit for defence work within Australia and overseas.
  • Influence foreign prime contractors and original equipment manufacturers, including Australian subsidiaries, to deliver cost-effective support.
  • Facilitate transfer of technology and access to appropriate intellectual property rights.
  • Encourage investment in Australian industry.

media release in September 2020 announced improvements to the enforceability, measurability and accountability of AIC plans in Defence contracts. 

In particular, an ongoing AIC Independent Audit program would validate performance and strengthen the Australian Industry Capability Program.

Aligned to the requirements of the 2019 Defence Policy for Industry Participation, Defence has introducing:

  • a risk-based AIC assurance framework that includes the AIC Independent Audit program; and,
  • an enhanced AIC contractual framework.

These changes have been made to ensure the AIC Program remains effective in enabling government’s defence industry policy of maximising opportunity for Australian industry involvement in meeting Australia’s defence capability needs. The AIC Independent Audit Program has further made contributions towards AIC assurance for Defence and Australian businesses. 

For more information contact aic.audit@defence.gov.au 

The framework provides a transparent process for detection, referral for assessment, validation, and reporting on non-compliance (or risk of non-compliance) with individual contracted AIC Plans, and allows remediation actions to be monitored on an ongoing basis.

No – many contracts with Defence pre-date the AIC program announced in 2016. Only those contracts with a mandated AIC Plan will be capable of being audited.

It will form part of good business practice but differs in that the audits of contractual performance will be performed by parties independent of Defence and the Contractor.

An underpinning principle of the audits is for detection and validation of compliance issues to lead to enhanced compliance of the audited entities. The existence of the process also aims to act as a deterrent or incentive to entities that are not audited, to support improved compliance. 

In addition, early intervention, analysis of audit outcomes, and identification of systemic issues or trends will allow improvements to be made to AIC Plan content and structure, project management practices, and how policy intent is being achieved. Overall, this framework is intended to contribute to improved opportunities for Australian industry and sovereign capability.

Contracted providers will be selected for audit via one of two mechanisms:

  1. An annual audit program that uses risk criteria for ‘sample-based’ or ‘triggers’ to identify the risk of non-compliance; and
  2. Direct referrals of potential non-compliance to either Defence or the Minister for Defence Industry.

Defence does not plan to name which projects and companies are being selected or subject to AIC Plan audit. Naming companies may result in the perception that the company being audited is not meeting their AIC obligations prior to the audit's completion. Should companies undergoing an AIC Plan audit be named, it will be in consultation with the company and Government. 

First Assistant Secretary Australian Industry Capability is responsible for the framework but will not be conducting audits. The initial focus of the AIC Plan audit program will be materiel contracts >$20m that have a mandated requirement for an AIC Plan.

The new audit framework will work alongside existing processes and will either be informed by them (e.g. referrals in) or feed into them. The framework does not intend to duplicate or replace any existing processes. However, it may influence change to some processes.

The results of individual audits will be reported to Defence, and to the Minister for Defence and Minister for Defence Industry. Results will be analysed over time with trends and systemic issues and reports will be completed annually. Defence plans to release individual audit results publicly without any commercially sensitive information.

AIC Plan audits commenced in December 2020, as part of the annual audit program. Should suppliers wish to refer a project for an AIC Plan audit, please contact aic.audit@defence.gov.au

Defence has developed an enhanced AIC contractual framework and supporting artefacts with specific and measurable AIC commitments that promote greater accountability for achieving the AIC objectives.

Defence has changed the approach for AIC from a ‘one-size-fits-all’ approach across its acquisition and sustainment contracting templates to a more flexible and scalable approach. This enables greater alignment with the unique aspects of each procurement, and is consistent with the view of Defence industry as one of the fundamental inputs to capability.

The changes to be introduced by the new framework are all directed at:

  • better achieving Government’s and Defence’s requirements for maximising opportunities for Australian industry to participate in each procurement, while also recognising the core role of industry in delivering ADF Capability; and
  • strengthening the contractual terms to ensure that these requirements are achieved through introducing revised tendering processes and specific measurable contractual commitments to enhance accountability.

Under the new framework, key enhancements are to elevate AIC as a “core” clause with strengthened AIC obligations that contractors must comply with under contracts, and to complement these obligations with a new AIC remediation regime.

The enhanced contracting framework will not be applied retrospectively. Defence has adopted a phased implementation approach across the ASDEFCON template suite and the ASDEFCON templates are being progressively updated. 

We welcome your feedback on both the AIC Contractual Framework and the Independent AIC Plan Audit Program at any time. Please provide your feedback to aic.pmo@defence.gov.au.

The Minister for Defence Industry issued a media release in June 2017 highlighting the strengthening of the Australian Industry Capability Program.

As the media release notes, the Australian Industry Capability Plan Template has been strengthened in line with government’s defence industry policy of maximising Australian industry involvement in meeting Australia’s defence capability goals.

The changes have been made to explicitly address:

  • the tenderer’s strategy for maximising Australian industry involvement in the project and enduring Australian industry capability benefit beyond the work period
  • maximised inclusion of, and evidence of having positively engaged Australian small to medium enterprises and Indigenous business enterprises
  • proposed investment in innovation, and collaborative research and development efforts in Australia
  • establishing, transitioning or enhancing skills, knowledge, systems, technology and infrastructure within Australian industry, and
  • identification and promotion of Australian defence export opportunities and as a contributor to the global supply chain.

The AIC Program aims to create opportunities for Australian companies to compete on their merits for Defence work on a value for money basis. Consequently, for tendered solutions to represent value for money, tenderers must describe how their proposed approach will enhance defence industry capability and capacity.

Industry requirements define the activities, tasks, or work packages within tender documentation. While industry requirements are specific to individual procurements, in each case they will address the relevant industry capability categories, these being defined as:

Sovereign Industrial Capability Priorities (Priorities) are industrial capabilities considered critical and for which Australia must have access to, or control over the skills, technology, intellectual property, financial resources and infrastructure that underpin the capability. The Sovereign Industrial Capability Priorities identified in the Defence Industrial Capability Plan are industrial capabilities that have been assessed as:

  • operationally critical to the Defence mission
  • priorities within the Integrated Investment Program over the next three to five years, or
  • in need of dedicated monitoring, management, and support due to their industrial complexity, government priority, or requirements across multiple capability programs.

The Sovereign Industrial Capability Priorities have taken the place of the previous Priority Industry Capabilities (PICs); however, Defence will continue to honour existing contracts or other commitments where PICs have been identified and implemented, such as in AIC Plans.

While addressing issues as diverse as AIC Program management arrangements, supply chain management, industry program integration, performance reporting and commercial strategy, AIC plans focus on how industry requirements will be satisfied through implementation of the agreed AIA.

AIC plans are sought for all defence procurements where the value of the tender is expected to exceed $20 million or where the procurement will impact a Sovereign Industrial Capability Priority (SICP). 

AIC plan data-item-descriptions (DIDs) are included with the ASDEFCON suite of tendering and contracting templates.

Government-to-Government procurements, including Foreign Military Sales and Direct Commercial Sales, are not exempt from AIC Program requirements.

Public AIC Plans set out the plans and forecasted opportunities that contracted defence suppliers will provide Australian industry in defence capability and procurement activities.

The level of detail incorporated into each Public AIC Plan is expected to vary in content ranging from brief high-level summaries to more detailed statements depending upon the scope and complexity of the potential Australian industry component of the procurement.

The level of detail published will also depend on the security, commercial restrictions or caveats that apply to the information and the likelihood of any requirement to amend contracts and their associated AIC Plans over their agreed term.

Under the AIC Program, it is a requirement that tailored versions of AIC plans be prepared for public release.

List of published Public AIC Plans