The impact of the Defence Strategic Review (DSR) on Australian defence industry has been a constant presence over the past year, with primes and SMEs alike expressing frustration about the lack of movement in Defence acquisition.
One of the hot topics of conversation at every major defence event this year, the anecdotal evidence of the declining opportunities for companies in the defence sector has been pervasive, and can now be visualised through the results of ADM’s Top 40 survey and the number of Defence tenders being released.
When collating data for the Top 40/Top 20 Defence Contractors 2023 survey, ADM was told that delayed projects on both sides of the DSR release have hit defence industry revenue hard.
After almost continuous growth in recent years, 2023 recorded a 10.5 percent drop in total industry earnings, with an increased number of defence businesses declining to participate in the survey.
Some companies described the number of defence projects in their portfolio dropping by factors up to nine; revenue losses were often greater than 50 per cent, and in some cases running into the hundreds of millions of dollars.
This decline is particularly visible in the number of Defence tenders being released.
Through tracking the moving six-month average of Defence tenders released on AusTender, a cyclic pattern can be seen for the last few years before the announcement of the DSR. There is an uptick around July, aligning with the beginning of the financial year, which peaks in November and then slowly returns to the average before repeating.
The DSR was initially announced in early August 2022, with the effects seen immediately in the six-month moving average. Where the previous three years had increased the average tenders around this time of year, there was instead a year-long period of decline, a steady drop that only stabilised towards the end of 2023.
Prior to the commissioning of the DSR, end of year peaks were nearing 70 tenders per month, with 62 in November 2019, 58 in November 2020, and 67 in November of 2021. This compared to only 28 Defence tenders released in November 2022, and 34 in November 2023, halving the rate of previous years.
To put this in perspective, there are close to 3000 companies in Australia with defence-related capability. Many hands in an increasingly small pot does not bode well for domestic opportunities.
It will be interesting to see whether the released tenders stabilise at this reduced trend or creep back up to the pre-DSR average cycle through the 2024 period and beyond.
Note: The ADM Premium Subscription Tender Bulletin has collected the Defence tenders over the indicated time period in the graph. It is as accurate as we can make it with this information, but cannot be 100% guaranteed.