Leveraging growth opportunities through partnerships between Government and industry, the defence manufacturing sector will be able to scale‑up their operations and be more competitive. To achieve the overarching vision for the sector, actions include building up the ability of defence manufacturers to supply the ADF, specific support for manufacturers to expand into export markets and assistance to diversify into markets outside of defence. The road map also outlines broader policy actions and key enablers of advanced manufacturing that may be required for participation in some defence projects.
Implementation of these actions is expected to help defence manufacturers overcome some of the fundamental barriers to scaling, namely:
- the difficulties in breaking into defence supply chains (directly or via primes)
- creating and converting innovations into successful commercial products
- diversifying their customer or market base to counter the cyclical nature of defence procurement
- accessing or complying with the specialised infrastructure or standards required to operate in the defence industry.
The co-investments referred to in this road map will be enabled primarily by the Government’s funding available through the MMI and are supported by the existing Defence and Industry portfolio initiatives, ranging from advice and facilitation services to innovation grants. This road map also outlines future policy work for all levels of governments to further help Australian businesses to join the growing defence industry.
Actions to capture the Defence opportunity
Defence has established capability priorities that provide unique market opportunities for Australian manufacturers and can drive productivity, skills and innovation. Targeting investments and activities towards these priorities is likely to help manufacturers grow their own capability and capacity.
Co-investment by Government and industry in production or deployment of prototypes, in undertaking late stage R&D or in commercialisation activities.
These activities should link to or develop capabilities aligned to the current or emerging Defence priority capabilities.
The activities can be undertaken by an individual business, a group of businesses, or a consortium.
- Current priority capabilities include those listed in the Sovereign Industrial Capability Priorities (SICPs) and the 2020 Force Structure Plan. Priorities are reviewed periodically.
Investment should focus on:
- Supporting activities that would not otherwise happen without co-investment by governments and industry.
- Bringing consortia of businesses together to deliver large and significant benefits to Defence.
- Bringing parts of supply chains back to Australia (‘onshoring’) where domestic manufacturers have the capability to meet ADF requirements or serve civilian sectors, where this is economically viable.
- Increasing the proportion of Australian industry ownership of the associated IP which can enable more exports or sustainment activities. Co-investors (governments and industry) need to outline an appropriate strategy for how the IP would be managed.
- Ensuring knowledge sharing and transfer between primes and small and medium Australian defence manufacturers without breaching commercial and IP arrangements.
Co-investment by Government and industry in facilities that help participants share resources to develop the necessary technologies, processes and practices to compete for contracts and contribute to current Defence priority capabilities.
- Facilities could include secure operation facilities, testing facilities or joint equipment.
- They also can be facilities that provide access to business networks or encourage collaboration in other ways—particularly activities that can help small businesses to connect with primes.
- They could also include investment in shared high performance computing capabilities and associated data sets required for deep learning applications.
- Collaboration could also aim to produce or develop related IP and build up defence manufacturers’ abilities.
In addition, all levels of governments can assist small businesses, in particular, to build the required capabilities for entering Defence markets and navigating the defence industrial operational environment through:
- Creating a database of capabilities within Australian manufacturing that are relevant to Defence priorities, and identify gaps where there are future business opportunities which investment could target (co-led by the Industry Portfolio and industry).
- Assistance to implement quality management systems.
- Assistance to attain and retain certifications and accreditations.
- Assistance to have Australian certifications and accreditations recognised as equal to the international standard where appropriate.
- Building on existing linkage initiatives such as prime roadshows and networking events, identify other mechanisms to increase engagement between businesses and primes.
- Building on existing initiatives, identify mechanisms to increase the business community’s awareness of Defence procurement opportunities.
- Enhancing awareness of Government initiatives or opportunities that can improve defence manufacturers’ business management abilities, support business growth (for example Manufacturing Modernisation Fund and the MMI, and Defence related procurement), and support to overcome the hurdles for entering defence supply chains.
- Providing greater awareness of, and accessible information on Defence opportunities to SMEs, and identifying opportunities along the defence supply chain to promote their development.
- Leveraging the ongoing work within the Defence portfolio, work towards improving the identification and classification of defence industry, including manufacturing, and estimating its economic contribution to enable effective impact evaluation of the road map.
Actions to capture the International opportunity
International collaborations and exports by Australian defence manufacturers can provide a source of continuous work and funding for product development or commercialisation. Participation in international markets could generate contacts with possible business partners and product end users that could lead to new market and export opportunities.
The Defence Export Strategy has identified that the majority of Australian defence exports are already relatively high value: technologies, components and specialised products produced by SMEs. This highlights an opportunity for Australian primes to use their position to target more systems-level export opportunities in the future, thus increasing export volume.
Co-investment by Government and industry to demonstrate or commercialise products that have a potential for export, in foreign defence forces and/or broader national security sector (acquisition or sustainment), or civilian markets.
Co-investment by Government and industry to undertake late stage research collaborations or commercialisation with international partners. The projects should relate to validation or viability of later stage commercialisation.
Investments should focus on:
- Collaborating to develop new technologies and capabilities relevant to Australian (or overseas) defence priority capabilities.
- Creating greater linkages between foreign businesses, including primes and Australian industry, particularly SMEs.
- Increasing the proportion of Australian ownership of the associated IP in the exports when this aligns with the Export Controls and other regulations.
Actions to capture the Cross-sector opportunity
The defence sector is playing a pivotal role in facilitating the development and commercialisation of advanced technologies with cross-sector applications. The defence sector also benefits from capabilities such as the critical minerals sectors processing of oxides, metal alloys, precursor chemicals and battery components into production inputs.
There is significant scope for defence manufacturing to ‘spin-in’, or ‘spin-off’ to adjacent sectors and activities.
Co-investment by Government and industry to demonstrate or commercialise products or services that have a potential for:
- Adapting non-defence technologies to contribute to defence priority capabilities
- Adapting defence innovations to applications in civilian sectors such as space, healthcare or mining.
The investments should support prototype demonstrations in an operational environment. Projects can be led by a single business, a group of businesses, or a consortium.
To continue to build industry’s ability to diversify their business offerings and exports, the taskforce identified additional opportunities that can further assist Australian manufacturers:
- Building on the work of Austrade, identifying further mechanisms to make it easier to find information on exporting and examples of successful defence exporters.
- Increasing the awareness of initiatives that educate and train business owners to successfully promote their products and services to overseas markets.
- Identifying opportunities for cross-sector collaboration that allow manufacturers to improve their commercialisation and procurement prospects, for example between defence and space.
Actions to unlock Enablers for growth
Embracing the digital transformation of manufacturing, referred to as Industry 4.0, is becoming crucial for scaling-up and competing internationally for all manufacturers. The Government can assist with the digital transformation by co-investments with industry in technologies, as capital costs can be a barrier for many businesses.
Co-investment by Government and industry to support defence manufacturers acquire and adopt new technologies and/or purchase IP.
- The co-investments need to directly assist the business commercialise a product that either contributes to a priority Defence capability or where there is a potential cross-sector or export market.
- The co-investment should be accompanied by a clear strategy for adopting new technologies into business operations.
The taskforce identified the following policy actions to support businesses to build the required digital capabilities to operate in Defence supply chains:
- Strengthen cyber security awareness and capabilities in the defence manufacturing ecosystem. The Government has numerous initiatives that can be leveraged in order to improve cyber security, such as:
- The broader Government vision for advancing and protecting our national interests online, outlined in Australia’s Cyber Security Strategy 2020. This will include applying the recommendations and actioning priorities identified in the AustCyber Sector Competitiveness Plan.
- The Cyber Security Partnership Innovation Fund, which provides industry with funding to deliver innovative projects that meet local requirements to quickly improve the quality or availability of cyber security professionals in Australia.
- Assistance for businesses to access Defence security training through the Defence Industry Security Program membership.
Benchmarks of success
The road map focuses on creating transformative change in the defence manufacturing sector to growth in higher value‑add activities. It is expected that participants in the MMS will grow jobs, exports and profits and expand Australia’s defence manufacturing capabilities.
To measure our progress against the vision set out in the road map, the following may be monitored over 2, 5 and 10 year periods, dependent on data availability:
- number of new jobs
- increase in profitability
- growth in defence manufacturing exports
- increase in the number of new products brought to market
- growth of medium-sized businesses in defence manufacturing
- investment in the defence manufacturing sector.
This road map aims to take Australia into new and different defence manufacturing activities to deliver economy-wide benefits. Importantly, the Government is working to establish a data-informed baseline for the size and economic contribution of the defence industry sector, including manufacturing. New and innovative approaches to capture pre and post production activities are under development and may be used to identify and capture this activity in future.
29 Examples of such platform and system level capabilities that are exported include: Thales Australian military vehicles and Australia’s defence vessels. Department of Defence, Defence Export Strategy, 2018, p.36. ↵
30 Advanced Manufacturing Growth Centre, Industry 4.0: An opportunity for every Australian Manufacturer, March 2018. ↵