A slice of Defence spend?

The Australian Government is investing $200 billion over this decade and beyond into modernising the nation's defence capability. That's a significant market to consider playing in.

Of course, as you would expect, there are larger companies already in this market, known to Defence as "primes" or prime contractors. These primes have an obligation to use Australian business in their supply chain where possible. This represents a significant opportunity for Australian business to consider. 

I recently attended a Defence Market Information Session facilitated by the Centre for Defence Industry Capability. In addition to our host, other organisations presenting included:

• AusIndustry
• Defence Industries Queensland
• Australian Industry and Defence Network
• Steyr Motors Australia
• Spotless
• Lockheed Martin

Each organisation gave a presentation with of course including a bit of self promotion, however there were some great summary points that I got out of the day and I'd love to share them with you. 

Positives to ponder:

• $200 billion over 10 years or so is a huge market to consider playing in.
• It's not just for the big players. The larger primes need to demonstrate they are using Australian business where possible, I believe this is what's most attractive.
• Approximately $4.3 billion was awarded in Queensland contracts to suppliers in 2016/2017. 
• Working for the Department of Defence, one of their primes or as a sub-contractor to one of their sub-contractors can add credibility to your brand. 
• A broad range of work packages are on offer. Yes, there are contracts to build submarines, however, there are also contracts for maintenance services such as mowing, painting and fixing broken windows.
• Sub-contractors in the Defence supply chain need a broad spectrum of products and services to run their business, for example photocopiers, paper for the photo copiers, vehicles, fuel, recruitment services and accounting.
• Grants are available to assist organisations become ready for working in the Defence supply chain.  

Challenges to contemplate:

• Defence wants the best of the best. This means their primes need to demonstrate they are using the best of the best. Demonstration may come in the form of quality insurance system to implement, audit trails to maintain etc. The increased cost of business needs to be considered carefully.
• Security checks are a must. This is another cost of business to consider. Compliance generally takes time and money.
• Payment terms. Each prime or sub-contractor will have different terms. Consider the effects on cashflow.
• Often there are long dating periods. It is common that you will be dating your new client for quite a while before the relationship goes to the next level and you are invoicing for work. Tenders are very common, which only come around every few years.

I have worked with a few clients over the years who have worked for one of the primes. To ensure they have put their best foot forward when tendering, I have assisted with capability statements, website content and case study preparation. One of the companies has walked away from the work citing the additional paperwork costs were too high. The other two are still doing work and have used this to diversify their revenue streams.

In closing, I would like to point out that if you do see taking part in the Defence supply chain as a viable market to pursue, there is plenty of help available. The Australian Industry and Defence Network and AusIndustry are both great places to start your research. 

Let me know how you go.