BUILDING INDIGENOUS BUSINESS TO ENHANCE SOVEREIGN CAPABILITY

By Adam Goodes,

CEO, Indigenous Defence & Infrastructure Consortium

Much like the rest of the world, Australia faces uncertain times as we continue to be impacted by the COVID-19 pandemic, with fractured supply chains, international political uncertainty and strained trade relations. Despite all of this, a number of positives and opportunities have come out of the last 18 months in Australia. Many individuals are now spending more time with family and close loved ones, taking the opportunity to spend more time enjoying and exploring our beautiful country. From a business and political perspective though, lessening our reliance on international solutions and supply chains – building sovereign capability - is back on the agenda.

DISRUPTION & OPPORTUNITY

Over the last 12 months there has been a number of announcements and policy initiatives that directly encourage Defence prime contractors to look locally and reach out to support Australian business develop capability within our shores. It demonstrates the Australian Government is keenly aware of the need for a defence force underpinned and supported by Australian sovereign capability. As we look to better cultivate the skills, build the capability and capacity in the Australian defence industry locally, I ask: what could be more sovereign than building the capability of Australia’s network of Indigenous businesses?

Disruption will lead to opportunity. As our industry focuses on the future of defence, I see the opportunity and importance of Indigenous businesses playing a bigger role. But it will take partnership across the defence industry ecosystem. Without trusted relationships and real commitment at all levels of the supply chain, the Indigenous business sector will hover at a transactional service provider level, and not make the valuable inroads required to provide to a more meaningful contribution.

We already understand the benefit of Australian industry capability. From a security perspective, Australian capability is critical to building a self-reliant defence industry that isn’t dependant on overseas supply chains. As the recession starts to bite, investing in defence capability is not only a way to boost small business growth, but to keep Australian Government funding onshore. ACTION, NOT TALK

Engaging and helping build capability of Indigenous businesses is a winwin for the broader defence industry too. Most large companies have a Corporate Social Responsibility (CSR) policy, diversity and inclusion teams or even Reconciliation Action Plans. These are all steps in the right direction, but the biggest way companies can make a difference to the Indigenous community isn’t talk – it’s action.

Typically, Defence contracts are a long-running proposition. Acquisition and sustainment programs can run for 20-30 years. For small businesses, this is life changing. For Indigenous businesses, it can reshape generational wealth. Of the 100 Indigenous-owned and controlled businesses we work with at the Indigenous Defence & Infrastructure Consortium (iDiC), we estimate 63% of their staff are Indigenous too. Further, a

iDiC core team and directors. © iDiC. cost benefit analysis by Supply Nation The Sleeping Giant report found that for every dollar that was invested in an Indigenous business, an average of $4.41 was returned in economic and social value. You won’t find a better return on investment anywhere. The iDiC has now been trading in the defence sector since 2016 and in that short time we have, via our direct supply chain, contributed over $110m in economic and social value to Indigenous businesses, people and communities. We are not about charity or a handout. In business, you’re only as good as your last project. With our Indigenous Consortium partners, we offer over 500

different services spanning professional services, engineering, logistics, construction, ICT goods and services, cyber security services, facility services, training and development, education and creative services – our businesses hold their own in very competitive fields. Investing in these businesses not only provides better Australian capability, but it opens defence contractors up to the vast talent in these networks.

Better partnership based on relationships not transactional is required to achieve this and help Indigenous businesses get a foot in the door. If you’ve never worked on a defence project or aren’t on a particular procurement panel, often you are automatically ruled out whether your capabilities match or not. Without a pre-existing relationship with a prime contractor, an Indigenous business won’t get a look in. That is why at iDiC we only work with organisations that share our values, and it starts at the top. We only have 12 strategic clients and as CEO I sign a strategic agreement which clearly outlines intent, commitments and objectives with the CEO of each company before we start working together.

As we look to better cultivate the skills, build the capability and capacity in the Australian defence industry locally, I ask: what could be more sovereign than building the capability of Australia’s network of Indigenous businesses?

TRUST & UNDERSTANDING

A good example of this is Boeing Australia. We have been working with Boeing Defence Australia (BDA) since 2016 and last month signed a Relational Agreement - a world-first for an Indigenous business - which will see both companies operate as one. The agreement is based upon a shared vision of delivering ‘Black Excellence’, relational objectives, guiding principles and intended behaviours. This will ensure the engagement of Indigenous-owned businesses is elevated from a transactional procurement driven relationship to that of a true strategic partnership. The groundbreaking, five-year relational head agreement will make it easier for all of Boeing’s Australian subsidiaries to engage Indigenous small and medium enterprises.

Our new agreement with Boeing has already started to reap benefits for Indigenous businesses we have already commenced delivering a longterm Integrated Facilities and Asset

Management contract with our partners at Zancott Knight with over 70% of the services now being delivered by

Indigenous businesses like Fields Group

Security. We are not only working on

Indirect services, but have been engaged by BDA on campaigns like JP9102

SATCOMS where we are delivering design and planning services with our partners at PSG Holdings as a managing contractor, and cyber security services on BDA programs with our partners at

Willyama Services.

Relational agreements are designed to focus on the relationship between the businesses – defining the principles for ethical interactions which are advantageous to both parties. The primary challenge to engaging Indigenous businesses is fear of the unknown. Many large defence contractors haven’t worked with Indigenous businesses before. In a world where the environment is volatile and trust is in short supply, additional uncertainty can be a step too far.

This is why relationships are important. The benefits of working with an Indigenous business aren’t something that can be quantified by procurement departments. Nor is it CSR. It’s about doing good business - smart business. It’s about building networks that endure and further Australia’s capability.

Scott Carpendale Vice President Boeing Defence Australia and Adam Goodes CEO & Director iDiC signing 5 year Relational Head Contract. © iDiC.

A VIBRANT SECTOR

At iDiC we predict, with the uncertainty in the world today, that trusted brands and relationships will outweigh ‘price and cost’ policy determinations. A reliable network of the right local skillsets will be key to moving forward.

Good policy is important. It means Australia is fair dinkum about sovereign capability. However, giving Indigenous businesses the opportunity to add value requires more than regulation and policy – we need the right partnership with industry, and for this to be recognised and incentivised by government. Sovereign capability means looking at the skills and talents we already have and nurturing them for the future. Our vibrant, brilliant Indigenous business sector would be a fitting place to start.

The iDiC is working with a number of defence prime contractors as a supply chain aggregator and account manager, focussing on identifying business opportunities for our 100 plus Indigenous businesses, presenting turnkey solutions which provide a de-risked integrated offering to our clients. The iDiC is able to navigate the supply chain requirements of large companies, which are somewhat daunting for small to medium enterprises, and prequalify as an approved supplier. By taking this approach Indigenous businesses are getting access to contracts which they normally would not have been able to as stand-alone business. We are reinvesting in our people via targeted development programs, getting our people ‘defence ready’ as we build sovereign capability.

By the Hon Brendan O’Connor MP,

Shadow Minister for Defence, Australian Labor Party

THE PRESSING NEED FOR A DEFENCE FORCE POSTURE REVIEW

Western Australia has a long and proud history of supporting our national security and defence, which not only secures our nation, it promotes industry, jobs and growth. WA is home to significant defence manufacturing - including the billion-dollar shipbuilding industry - and holds the minerals and resources sector critical to sovereign supply chains.

LABOR’S PLEDGE

The west coast’s growing significance will be a focus of our review of Australia’s defence posture - a commitment by Labor should we win government. With its strategic position on the Indian Ocean - which to date has not been truly maximised - we could see an increased focus on WA for our defence.

Approximately one-third of Australia’s maritime jurisdiction is in the Indian Ocean. There is therefore greater scope for increased ADF presence in the North West of Australia. We know the current levels of Defence infrastructure and presence in WA could be improved, considering the area’s economic importance. This would be addressed by Labor should we win the next election, as an Albanese Labor government will conduct the first Defence force posture review since 2012.

Australia has only conducted two fully-fledged Defence posture reviews in recent times - both under Labor. Defence force posture is more than ‘places and bases’, it is how we participate in regional exercises and mobilise our troops in times of conflict. This review would ensure the Australian Government is considering both long-term strategic posture and whether Australian Defence units, assets and facilities are equipped and prepared for the military to respond to any threats.

The Indo-Pacific would be a key focus of this review and with WA holding the ‘Indo’ side of the Indo-Pacific, it would form a significant part of this work. This independent review will investigate the future security and strategic environment, the importance of domestic and demographic issues and their impact on Defence facilities, as well as the strategic location of ADF bases. This will also assist us in preparing for humanitarian and disaster responses, including those related to climate change.

The relationship between energy security, national defence and the economy must be a focus of the government, and under Labor you will see increased focus on energy security. The review would also examine implications of the emergence of cyber security as a central strategic concern for Australia’s posture. In any response to the review’s findings, Labor is committed to local industry involvement in the building and sustaining of defence capability in Western Australia.

WA’s growing significance will be a focus of our review of Australia’s Defence posture - a commitment by Labor should we win government.

STRATEGIC IMPERATIVES

After six Defence Ministers in eight years, the government has been neglecting planning on posture, despite deteriorating strategic circumstances.

This is in stark contrast to our allies.

US President Joe Biden is conducting a global force posture review with a strong focus on the Indo-Pacific. Australia’s 2020 Defence Strategic Update warned of the rapidly changing circumstances in our region and stressed that a 10 year strategic warning time for a major conventional attack against Australia is

Earlier this year, Brendan O’Connor was provided a guided tour of Austal’s repair and maintenance facility in Cairns. © Office Of Brendan O’Connor. no longer an appropriate basis for Defence planning. Reduced warning times mean Defence plans can no longer assume Australia will have time to gradually adjust military capability and preparedness in response to emerging challenges. This is particularly concerning when we know our major Defence asset contracts are over budget and face years of delay, and do not always represent value for money. We need to do better to deliver what our ADF and our country needs. We need to ensure our negotiations deliver assets on time, on budget and with appropriate local industry content. The Morrison government has regularly spoken of - and taken credit for - posture related activities, such as upgrades to Defence assets in northern Australia and the presence of US Marines, yet they have largely ignored posture. Under Labor you will see a genuine, independent Defence force posture review to establish the best places for our assets and to protect our interests today and into the future.

By Matt Keogh MP,

Shadow Minister for Defence Industry, Australian Labor Party

DEVELOPING OUR OWN CAPABILITY: THE FEDERAL OPPOSITION PLAN

After eight years and six Defence Ministers this federal Liberal government still doesn’t get the importance of the Australian defence industry - certainly not the importance of the Western Australian sector and our geostrategic positioning. As the ‘drums of war’ rhetoric grows in volume and our geo-strategic situation continues to deteriorate, our major shipbuilding projects are seeing more and more delays.

INTEGRATING LOCAL SMES INTO SUPPLY CHAIN

To get this back on track Defence needs to engage local Australian industry as an integral partner. Indeed, local defence industry should not just be seen as a critical enabler of defence capability, but also as its own domain of capability, able to work with all the other domains, yet necessary to ensuring the breadth and depth of Defence’s operational success.

Therefore, it is vital that the prime contractors engaged by Defence on these significant projects properly integrate Australian small and medium enterprises into their supply chains locally. This requires leadership from the top. That’s why the Australian Labor Party has committed to having enforceable Australian industry capability requirements in contracts with the primes, not just requiring ‘best endeavours’, but ensuring that those requirements are both audited and enforced.

The COVID-19 pandemic has demonstrated just how vulnerable we are to supply chain and skill shocks, potentially worsened in the event of actual armed conflict. We need to ensure our Australian industry, particularly in WA, is engaged and available to support our defence forces.

NEED FOR PROPER MANAGEMENT

This government is allowing the primes to overlook our Australian industry when they should be holding them to account. They should be managing these billion-dollar contracts (as well as smaller ones) properly. After all, it is Australian businesses, workers, sovereign capability, the ADF and all Australian taxpayers that ultimately lose out when contracts go offshore.

It is not acceptable that this government lets primes get away with claims that capability is not present in Australian industry when we know it is, or could be with just a little support and encouragement. Australia needs to get the biggest bang for its $270bn of Defence procurement spending over the next decade. This means government working to understand where the true gaps in local industry capability are to ensure these are plugged by supporting new businesses or expanding existing businesses to fill capability gaps. This is essential to expanding our sovereign capability.

There’s no doubt the Government’s decision that Australia have a nuclearpowered submarine fleet will improve our defence capability in an increasingly challenging environment. This decision, made possible because of a change of policy by our closest allies, is supported by Labor. We must ensure that the Liberal government’s record of completely and utterly mishandling our future submarine program to date does not continue with this critical new nuclear-powered project. It is vital the acquisition of this new defence capability is done on time, on budget and, as much as possible, using our Australian defence industry and developing our sovereign capabilities as much as possible. LABOR’S PLANS

Expanding this capability will be supported by Labor’s announced national reconstruction fund, which will provide up to $15bn of capital to invest in jobcreating projects through loans, equity and guarantees. This will support and grow Australia’s sovereign capability as well as research and development for the future.

Labor’s plans are not just about ensuring that a proportion of money spent is classified as ‘Australian’, regardless of the capability actually grown and delivered. Rather, it is about ensuring that the use of Australian industry actually results in Australia growing sovereign capabilities across planning, research, development, design, and engineering, as well as manufacture and integration. That means backing organisations that are Australian-owned and controlled, generating local IP and doing the work here. Australia has the ability, capability and know-how, but it’s up to federal government to ensure that this is developed in our national interest. INCREASING WA’S PROMINENCE

Western Australia has always been pivotal to our nation’s naval defence, and the proposed Defence force posture review by an incoming Labor Government could increase the state’s prominence in other domains too.

From our strategic position on the western frontline of Australia’s defence – the ‘Indo’ side of the Indo-Pacific – to WA’s billion dollar shipbuilding industry, to our resources sector that keeps our economy moving, and the minerals critical to sovereign supply chains, WA’s strategic and geographic value will be of great importance to the review of Australia’s Defence posture. It is incumbent on decision-makers to support our WA defence industry specifically, and the national industry more broadly. Only Labor has a plan to make that a reality.