Who will benefit from Australia's big new defence spend?

You can tell the Turnbull government is serious about defence industry innovation, because we're going to have both a hub and a portal.
Written by Stilgherrian , Contributor

Media coverage of Australia's 2016 Defence White Paper, launched by the prime minister on Thursday, has concentrated on big-ticket items like the new submarines, and on the AU$5 billion spend on cyber and IT. But there's a lot more going on here, folks.

I'll leave discussion of all that military equipment to the armchair admirals and the rest of the instant experts on modern warfare. I figure, say, that the Royal Australian Navy knows a bit more about modern submarine warfare than you or me, and can be left to choose the right kit.

What interests me are some of the supporting documents on the white paper's website. There's the Defence Industry Policy Statement, plus a description of the Integrated Investment Program. Together they explain where a full 2 percent of Australia's GDP will be going in the coming years -- and I'm not talking about the hardware choices here, but the processes and governance.

It's an election year in Australia, though, so first you'll have to wade through pages of Turnbull's Nimbledon waffle.

The industry policy is less than 80 pages long, but it's agile (mentioned eight times), and innovative (21 times). It will "embrace risk and incentivise early stage investment in startups", and it will reset and refocus (3 times in total) what our defence sector does to foster innovation (186 times).

"Defence will transform the way it approaches innovation, streamlining its engagement with industry and academia, simplifying access to Defence research funding, and creating a seamless link between capability needs, smart ideas and innovation in Australian industry," we're told.

See what I mean?

But if you make it through that, you'll find that one of the key reforms is a new Centre for Defence Industry Capability (CDIC), which I assume will be pronounced "see-dick" and spawn a thousand lame jokes. Including that one.

"The purpose of the CDIC is to provide strategic leadership for the sector, and to help build the capability and capacity of Australian industry to support the ADF," says the policy statement, and it'll be funded at AU$23 million a year.

"In consultation with government, the CDIC will drive the strategic vision for the defence industry, building on the capability needs identified in the Integrated Investment Program.

"The CDIC will focus on delivering initiatives within three core activities -- industry development, facilitating innovation, and business competitiveness and exports."

Fans of late-20th century innovation buzzwords will also find some treats.

There's a portal. For stakeholder engagement.

"A new Defence Innovation Portal (the Portal) will be the primary conduit to introduce Australian defence industry to Defence innovation activities ... Small to medium enterprises with innovative ideas will be able to present them to Defence through the Portal and will be able to work with the CDIC to realise investment opportunities," says the statement.

There's a hub, too. For whatever hubs are for.

"[The government will spend] around AU$640 million (over the decade to FY 2025-26) for a new Defence Innovation Hub to undertake collaborative innovation activities from initial concept, through prototyping and testing to introduction into service."

Quaint terminology and nimble buzzwords aside, the CDIC is a huge change. Its advisory board will have two co-chairs, one from Defence and one from the defence industry, and there'll be representatives from the primes -- the big defence contractors like Raytheon, Thales, Lockheed Martin, BAE Systems, and all the rest -- as well as SMEs and industry groups.

Now a better process for getting innovative military technology is a good thing. So are exports. Indeed, I've previously suggested that military exports could replace coal. And the emphasis on developing SMEs and startups is good too.

But there's so much visual emphasis on SMEs in the document -- including a map showing how "around 3,000 small to medium enterprises (SME) and local businesses support Defence across the country" -- that I'm wondering whether the Turnbull doth protest too much.

Dig around a bit, and you'll find some coded language which suggests that the SMEs might be pawns in a larger game.

"The large defence companies (the primes) will be vital in providing critical linkages to small to medium enterprises, including potential global supply chain opportunities. Defence and the Centre for Defence Industry Capability will also work with the prime companies to help ensure appropriate levels of skilling and technology transfer, and to develop effective processes for exchanging information between Defence and local and international defence industries," reads one section.

"The initiatives in this Defence Industry Policy Statement, together with the Integrated Investment Program, are designed to provide industry with confidence to invest in the required skills, infrastructure and technologies," reads another. Providing industry with confidence usually means that the government is taking on the risk.

If the Defence Industry Policy Statement is really about developing our defence industry, then it might be an expensive route to future prosperity. As Crikey reported on Friday, the AU$5.6 billion Anzac frigate program did generate jobs, but at a cost of AU$100,000 per worker -- far more than the AU$18,000 per worker that Australia spent propping up the domestic auto industry.

Crikey also noted that, based on their 2012 calculations, when it comes to Australia's major defence procurement, nearly a third of the money goes offshore.

Back in 2014, there was a huge fuss in the UK when two American companies scored management contacts for the Bristol-based agency Defence Equipment and Support (DE&S). As The Independent reported, San Francisco-based Bechtel and Denver-based CH2M Hill were now in charge of buying everything from forklift trucks to Astute-class nuclear submarines.

I note with interest, therefore, that Bechtel scored the biggest consultancy contract to help restructure Australia's defence procurement, worth a tidy AU$8.5 million.

Am I joining too many dots here? Or is the Defence Industry Policy Statement a blueprint for a Goldman Sachs-style money funnel? Let's watch and see who's appointed to the CDIC advisory board, shall we?

Editorial standards