The $1.1 billion 10-year Strategic Domestic Munitions Manufacturing (SDMM) contract with Thales Australia for the continued management and operation of Australia’s munition factories in Benalla (Victoria) and Mulwala (NSW) announced this week has some surprises.
Thales has invested more than $20 million in research and development and $25 million in capital infrastructure over the last 10 years at the Benalla and Mulwala facilities and will invest further to develop new and world leading products for the ADF, according to the company.
They employ approximately 650 highly skilled staff between its two Australian Government owned facilities in Benalla and Mulwala. It exports products to 17 countries globally.
In 2019, Thales spent $113 million with its Australian suppliers for munitions and small arms, supporting 414 direct jobs in the supply chain. This contract will enable Thales to secure more than $450 million in export and non-ADF orders over the coming 10 years.
“Mulwala and its sister facility in Benalla are the home of munitions manufacturing in Australia, generating vital job opportunities in regional NSW and Victoria,” Minister for Defence Senator Linda Reynolds said.
“This new agreement not only reinforces the 20-year strong partnership between Defence and Thales Australia, but also provides job certainty for more than 650 highly-skilled workers at these factories. The Government’s effort to ensure job security, especially in regional areas, is vital for the recovery of the Australian economy.”
Alongside this announcement was the news that Thales would be getting a neighbour at the Benalla facility with NIOA Munitions signing a 10-year tenancy contract at the facility as well.
“NIOA is already pursuing export opportunities from the new tenancy at Benalla and is well placed to manufacture munitions for use by the ADF in the future,” Minister Reynolds said.
“This contract will establish NIOA as a tenant alongside Thales Australia, where together they will provide opportunities for domestic manufacturing while enhancing supplies of key munitions for Defence.”
NIOA’s new footprint at the Commonwealth Government-owned facility in north-eastern Victoria will commence from July 1, with the focus being on the production of medium and large calibre munitions for the ADF while bringing another 100 jobs to the region.
Revitalisation of the Benalla facility and adjacent landholdings is part of a $130 million capital investment in domestic munitions and explosives manufacturing by NIOA over the next five years. NIOA’s investment includes a $60 million artillery shell forging plant in Maryborough, Queensland with joint-venture partner Rheinmetall Waffe Munitions.
‘’This is also central to strengthening the nation’s self-sufficiency in defence manufacturing to deliver the requirements of the ADF warfighter while maximising the use of the government factory at Benalla well into the future,” Rob Nioa, NIOA founder and MD said.
“Sovereignty is not just about defence industry work in Australia. Sovereignty is about that work and the control of that work resting within our country. Australia’s national interests are always best served when such important projects for our national security are done in a way in which the programs are controlled within this country.
“The ownership, the intellectual property, the company’s headquarters, the jobs, the investments, the taxes, the profits and the control remain within Australia.”
While the initial focus at Benalla is to upgrade the infrastructure capability, NIOA has plans, subject to, government approval to produce 155mm Assegai Projectiles, 30mm ammunition for the Boxer vehicle, hand grenades, aircraft bombs and artillery fuses.
The deal, directly between the Commonwealth and NIOA, will see NIOA take over almost half of the Benalla facility. As previously reported by ADM, NIOA has purchased a 300 acre site right door to Benalla for further possible opportunities.
NIOA also confirmed to ADM that they will source their energetics from Mulwala and expects that there will be an exchange of goods and services between the two companies.
ADM Comment: There have a been a few failed efforts over the years to compete the facilities at Mulwala and Benalla. This latest series of agreements relies on a sole source arrangement for Mulwala for another decade essentially but sees Benalla truly opened up in a competitive sense with the addition of NIOA.
For the better part of two decades, Thales has made investments at both the government owned contractor operated (GOCO) sites that it acquired when the government sold off ADI. But there have still been questions about the value for money equation that have not balanced with Australian Industry Capability or Defence Sovereign Industry Capability Priorities. It depends on your viewpoint.
The recent report from Thales about their AIC impact last month does make for impressive reading. As Thales Australia MD Chris Jenkins pointed out in his ADM Congress speech in February this year looking at ADM’s own Top 40 data, Thales’ turnover has increased while their workforce has remained relatively steady over a decade. This was due to the company working with so many SMEs in their supply chain, he explained.
Both Thales and NIOA will bring a competitive tension to the sites going forward. This can only be a good thing as the ADF focuses on what it truly means to focus on a sovereign supply chain that also demonstrates value for money to taxpayers.