Strengthening how Defence does business with Australian industry

Joint media release:

  • Minister for Defence Industry, the Hon Melissa Price MP

The Morrison Government is strengthening Australian Industry Capability (AIC) and refining the way Defence does business with industry.

Minister for Defence, Senator the Hon Linda Reynolds CSC, and Minister for Defence Industry, Melissa Price, today announced the Government will implement significant improvements to the AIC Program so that opportunities for Australian industry are front and centre of Defence decision-making.

The Australian Standard for Defence Contracting (ASDEFCON) will also undergo a major revamp to cut process times and costs for Australian businesses.

Minister Reynolds said a genuine partnership with Defence and industry was critical to ensuring our industrial base effectively supports Australia’s national security, as reinforced in the 2020 Defence Strategic Update.

“Defence will strengthen the requirements for AIC in Defence contracts through additional contractual and non-contractual measures and will consult with industry on these changes over the coming months,” Minister Reynolds said.

The delivery of new AIC provisions in future contracts, creation of an Independent AIC Plan Audit Program, recent changes to Commonwealth Procurement Rules guidelines and an overhaul of the CDIC will significantly improve opportunities, protections and support for Australian businesses seeking to enter the Defence sector or looking to expand their footprint with Defence.

“The Morrison Government is committed to maximising opportunities for Australian business to be involved in Defence procurement and to building a competitive Australian industry to equip and sustain the Australian Defence Force,” Minister Reynolds said.

“Large companies will know that the Government expects them to honour their AIC commitments, and small businesses know the Government has their backs.

“Additional AIC provisions in future contracts will require companies to make specific and measurable commitments.

“Independent audit firms will then ensure large Defence companies are meeting their contracted Australian industry commitments.

“This will provide an additional level of confidence for Australian businesses.”

Defence will consult with industry over several months on the changes to AIC contractual requirements before the new contractual provisions begin to be implemented from 1 January 2021.

Minister Price said the latest changes represented the culmination of a major new ‘five-pillars’ approach to supporting defence industry in Australia.

“The pillars of the AIC contractual framework and ASDEFCON review build on the work of our CDIC reforms, the Independent AIC Plan Audit Program and more support for defence industry in the guidelines to the Commonwealth Procurement Rules,” Minister Price said.

“Small businesses are the backbone of the Australian economy and need to be treated accordingly during Defence’s decision-making process.

“Backing small business has been my number one priority and we have delivered on the promised changes to enhance the AIC Program in Defence.

“The delivery of an Independent AIC Plan Audit Program and improving how we contract for AIC in our major programs are the next big steps needed to create more opportunities for Australian businesses in Defence programs.”

The review of ASDEFCON, to be overseen by Minister Price, will aim to simplify and streamline contracting and subcontracting templates and remove unnecessary complexities that create additional burden on Australian businesses.

Minister Price said the Terms of Reference to remove the barriers in ASDEFCON and the consultation process will be finalised and released in November 2020.

“Ultimately, the renewed ASDEFCON template suite and processes are aimed at reducing avoidable cost, time and process complexity,” Minister Price said.

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