The road map development process
On 1 October 2020, the Australian Government announced $1.5 billion to be invested over the next 4 years in the Modern Manufacturing Strategy (MMS) to help Australian manufacturers become more competitive, resilient and build scale in the global market.
The centrepiece of the MMS is the $1.3 billion Modern Manufacturing Initiative (MMI) which will allow Government to invest in projects within 6 National Manufacturing Priority areas. The 6 National Manufacturing Priority areas are:
- Resources Technology & Critical Minerals Processing
- Food & Beverage
- Medical Products
- Recycling & Clean Energy
Road maps have been developed with industry to set out plans for both industry and Government to strengthen Australia’s manufacturing capability. The road maps have been led by 6 industry taskforces to identify and set a future vision for the priority areas with clear goals, opportunities and actions over the next 2, 5 and 10 years.
Members of the industry taskforces were selected based on their expertise across the priority areas, and were supported by technical experts from the CSIRO, the Department of Defence, the Department of Industry, Science, Energy and Resources (the department) and Industry Innovation and Science Australia.
Taskforce deliberations focused on current and future issues, challenges and opportunities to identify actions businesses and governments can undertake to support scale, competitiveness and resilience in defence manufacturing in the next 10 years.
Government has also been working with industry beyond the taskforce to understand the manufacturing needs of the defence sector. A public consultation process was held between 23 October 2020 and 9 November 2020 which received 340 responses, including 38 focused on defence manufacturing.
Inputs on the key strengths, opportunities and solutions to grow manufacturing have been used to inform the road map. The road map was also informed by bilateral meetings with key stakeholders as well as research conducted by the department.
Defence industry policy settings
The foundational Australian Defence policies that shape the domestic industry are listed below.
The 2020 Defence Strategic Update sets out the challenges in Australia’s strategic environment and their implications for Defence planning. It reaffirms the Government’s commitment to developing a strong, sustainable and secure Australian Defence industry and supporting leading edge national innovation.
The 2020 Force Structure Plan outlines the planned investment in Defence’s capability requirements, including in relation to the following emerging technologies:
- adopting remotely piloted or autonomous systems for a range of missions, such as air combat, strike,
- air-to-air refuelling, surveillance, undersea warfare, and land operations
- capabilities to counter emerging space threats and ensure space access
- high-speed missile systems to provide more deterrence options
- directed energy weapons for close-range defence of naval vessels, and for the land forces to defeat armoured vehicles.
The 2018 Defence Industrial Capability Plan sets out Government’s comprehensive plan for Australia’s defence industry. The plan includes the Sovereign Industrial Capability Assessment Framework and introduces Defence’s initial Sovereign Industrial Capability Priorities (SICPs), comprising:
- Collins Class submarine maintenance and technology upgrade
- Continuous shipbuilding program, including rolling submarine acquisition
- Land combat and protected vehicles and technology upgrade
- Enhanced active phased array and passive radar capability
- Combat clothing survivability and signature reduction technologies
- Advanced signal processing
- Surveillance and intelligence
- Test, evaluation, certification and systems assurance
- Munitions and small arms research, design, development and manufacture
- Aerospace platform deeper maintenance and structural integrity.
The 2016 Defence Industry Policy Statement strengthens the partnership between Defence and industry through a focus on stronger, more strategic partnerships and closer alignment between industry investment and Defence capability needs. The Statement also seeks to enhance collaboration between Defence and industry in establishing the Centre for Defence Industry Capability, Defence Innovation Hub and Next Generation Technologies Fund.
The Defence Industry Skilling and STEM Strategy outlines a plan for building a technology-enabled Australian Defence Force and defence industry workforce. The Government has committed $32 million between 2019 and 2022 to ensure the Strategy is responsive to industry needs.
The Defence Export Strategy sets out programs and initiatives aimed at delivering greater export success to build a stronger, more sustainable and more globally competitive Australian defence industry. It provides $20 million in funding to support Australia’s defence exports and established the Australian Defence Export Office to provide a focal point for defence exports and drive implementation through to 2028.
Building on other policies and strategies
Recognising the valuable work already completed in this area, development of the road map also drew upon relevant strategies and existing Government initiatives including but not limited to:
- Small Business Innovation Research for Defence: The program is managed through the Next Generation Technologies Fund and seeks to encourage a new generation of innovators in developing breakthrough technologies for the ADF.
- COVID-19 Recovery Investment Package: $1 billion investment package to boost Australia’s defence industry. The investment package is linked to defence manufacturing as it includes a focus on sustainment of ADF platforms and capabilities, funding for defence innovation as well as targeting key manufacturing sectors within defence.
- Australia’s Cyber Security Strategy: The Australian Cyber Security Strategy 2020 will invest $1.67 billion over 10 years to create a more secure online world for Australians and Australian businesses.
- Skilling Australia’s Defence Industry Grants (SADI) Program: SADI provide businesses servicing the defence sector with upskilling and training opportunities to meet current or future Defence needs.
- 2019-2030 Moving Towards a High-Tech Future for Defence, Workforce Strategic Vision underpinned by STEM: The STEM Strategy outlines the vision for Defence to build a technology enabled Australian Defence Force and Defence industry workforce.
- Australian Industry Capability Program: The Australian Industry Capability Program requires that prime companies competing for Defence contracts demonstrate how they will maximise opportunities for Australian industry involvement. The Government is committed to maximising opportunities for Australian industry to participate in Defence projects, including in regional areas. This program will contribute to the development and sustainment of the enduring industrial capability required to meet Defence’s strategic needs.
- The Defence Global Competitiveness Grants Program: Grants to help Australian businesses invest in projects that build their defence export capability.
- More, together. Defence Science and Technology Strategy 2030: The strategy focuses on 3 strategic pillars:
- One Defence science and technology capability
- Brilliant people, collaborative culture
- Outstanding research infrastructure powering innovations.
Barriers to scale
This road map seeks to support the Defence National Manufacturing Priority area to achieve its full potential by overcoming barriers to scale. The defence manufacturing taskforce sees the Government’s work to get the economic conditions right for all manufacturers as an important opportunity to improve competitiveness, particularly in:
- Skills and workforce: the sector is knowledge driven, so relies on having access to the STEM and vocational skills needed to commercialise emerging technologies, and advanced manufacturing capabilities. Industry stakeholders noted that some of the skills critical to Defence are in short supply within the broader economy and businesses can find it difficult to attract candidates and fill vacancies.
- Regulation and standards: the defence industry is a heavily regulated environment. Regulations and standards include the workforce and facilities being used having the appropriate security clearance, export controls and in some cases international accreditations. Improving the ability of businesses to navigate regulation effectively and efficiently is a key enabler of competitiveness for new businesses and products to enter the market.
- Energy: affordable energy and energy technology is critical for manufacturers, particularly when they play an important role in supporting critical Defence capabilities.
The key barriers to scale and competitiveness in the defence manufacturing sector identified during the road map development process include:
Bridging the gap between early stage technology and commercialisation can be challenging. Further, the sector is predominantly small firms that may not have the necessary resources to invest in commercialising their ideas. Current R&D initiatives are predominantly received in lag support, meaning businesses receive the funding after they have already invested in R&D. Commercialising specialised defence products and technologies is also resource intensive and a lengthy process with limited guarantee of procurement at the end.
Business continuity has been a challenge for the Defence industry. Defence procurement can be cyclical, as the demands set out by the ADF may not be enough to sustain business for long term. To overcome this challenge, defence manufacturers must either diversify their products to adjacent industries or exports.
Breaking into exports is a challenge for Australian businesses, especially for those who have not provided services or products to the ADF before—overseas buyers often only want to acquire products that have been tested. Many countries support their own industries via offset requirements, hindering access and complicating exports. Exports of sensitive technology are subject to a greater level of scrutiny by Defence Export Controls due to an increasingly complex strategic environment and the need to protect the ADF’s capability edge and sensitive technologies from exploitation and misuse.
Standards and Compliance
The products for Defence need to be extremely high quality (no fail), and often require adherence to specific international standards which are hard, especially for small businesses, to implement. Due to this, Defence procurements tends to be more geared towards well-established contractors, most often Defence primes. This approach presents a barrier for new participants to get access to defence supply chains.
There is an increasing requirement for Australian businesses to not only be accredited to Australian standards, but they must also hold international accreditations (seemingly dependent on the country of origin of the defence prime. High security requirements for Defence projects can include physical security of people, information and assets. Businesses need to identify their security risks and the right security strategies to manage these risks if they are seeking to partner with Defence or primes.
Manufacturers often do not have the resources and experience to adopt digital or Industry 4.0 technologies that will enable them to scale their operations or otherwise better meet the demands for defence products. Cyber security is a priority issue for businesses in the defence supply chain, with an increased risk of cyber attacks due to the sensitivity of their projects. Similarly to Industry 4.0, many businesses do not have the resources to understand cyber risk or develop and implement appropriate security measures.