It is an often-repeated adage that innovation comes from small to medium enterprises (SMEs) and this has certainly been true in the simulation space in the past.

By their very nature SMEs are agile, flexible and often created with the aim of solving a certain problem or filling a requirement. But are they now being stifled by the primes, in the defence industry space in particular, which would rather adapt or re-use an in-house product to ‘best-fit’ a requirement rather than sourcing a perhaps more suitable solution from outside, especially when the innovation does not provide a clear differentiation against the criteria of a large and complex delivery program.

The Defence acquisition process is all too often ponderous and the rapid technological advancement in simulation can make it frustrating for some smaller businesses to remain engaged throughout the process.

At one simulation conference in Australia some years ago, the writer overhead representatives from two (unknown) companies asking themselves why they should bother doing business with Defence and wait perhaps 10 years for a contract, when they could achieve similar success in the mining industry within 10 months.

From Defence’s perspective too, is it perceived as a safer option to deal with a prime they know, rather than risk perhaps the unknown by selecting an SME to develop a product, service or capability? Particularly so as acquisition programs are becoming ever larger and more expensive, does it mean that SMEs are finding it increasingly harder to find a sympathetic ear within the Defence Organisation?

Is a relationship with a prime essential for doing business in the defence simulation space and how is this relationship formed – do the primes routinely look to SMEs for a desired capability, or do the smaller organisations have to do all the running to place themselves in the spotlight?

And what about the much-trumpeted Australian Industry Capability (AIC)? Is it real? Is it really scrutinised by the government? Does it really mean that local industry, local innovation and local capabilities are represented – or are they merely ‘shopfronts’? Does AIC really amount to much if it’s not actively policed and consequences for non-compliance aren't made real?

These are questions applicable to every Defence acquisition project, but to hopefully learn more about what it’s like to be an SME in the Defence simulation space, ADM spoke with a selection of companies who have enjoyed considerable success across a range of simulation products and services in the sector to date.

Air Affairs Australia
Air Affairs Australia (AAA) is an aviation operations and engineering company, which was established in 1995 and is 100 per cent Australian-owned and operated.

The company owns and operates a fleet of special mission Learjet and King Air aircraft, providing specialised air training support services to the ADF, including Aerial Target Towing and Tactical Flight Missions in support of the Australian Navy, Army and Air Force.

The company’s Learjets are used for simulating fighter tactics and the simulation of maritime attack profiles.

AAA also manufactures and provides full operational services for the Phoenix Unmanned Aerial Target Drone. The Phoenix, developed by AAA, is currently in operational service and, according to the company, it provides an extremely cost-effective unmanned target drone solution for the ADF. The company also developed the unique towing mounts for the Phoenix system, attached to the hard points of the jets, which have been exported globally.

CEO Chris Sievers says that AAA typically works directly with Defence, rather than via an industry prime.

“We have been working with defence for over 25 years providing live threat simulation services using both manned and unmanned aircraft,” he explained to ADM.

Regarding the opportunities to deal directly with Defence in the current context, Sievers says that it is becoming harder for an Australian SME to do so.

“There is a merging trend for defence to work through a Prime Systems Integrator (PSI),” he said. “Looking towards the future, I am optimistic about opportunities to continue working closely with the ADF, either directly or through a PSI.

“Air Affairs is pleased to continue its support to the ADF’s training programs and we look forward to providing more services during a period of very high operational demand on our Forces,” he said. “We have been providing these services for over 25 years and have significantly increased the capability and level of services and training value to defence while saving millions of dollars each year.”

Bohemia Interactive Simulations
Bohemia Interactive Simulations (BISim) is a global software company that was founded in Australia in 2001, beginning with the licensed development of a computer game from Bohemia Interactive Studio in the Czech Republic.

The product, named Operation Flashpoint, was developed into a desk top simulation tool and training environment, known as Virtual Battlespace 1 and initially used as a mission rehearsal tool for ADF troops deploying to Iraq. It is now in its third iteration, known as VBS3.

Today BISim has 250 employees across seven sites around the world. Its products are in service in 59 countries and hundreds of thousands of soldiers are been trained using the products each year.

Ryan Stephenson, BISim managing director for Australia and NZ says the company’s experience as an SME in the Defence simulation space is both as a prime and a subcontractor.

“As we become more mature and our technology has become more accepted in the Defence space, we’re working increasingly with primes. We sell directly to militaries, which procure our products for training mainly in that desk top paradigm, but also for use in other training systems and simulators,” Stephenson explained to ADM.

“Increasingly we are also working directly with primes on different projects which want to use our simulation technology – either because they are able to access it as Government Furnished Equipment from their government military customer, or because they want to offer it into whatever training system they are supplying to Defence. So, we work with primes such as BAE Systems, Elbit and Rheinmetall around the world, including Land 400 Phase 2 here in Australia.”

While opportunities to work directly with Defence are arguably becoming increasingly more limited, Stephenson says the government’s AIC policy is having an effect.

“There has been increased focus on building a skilled Australian defence industry workforce, one that is permanent and not transient and, while that is not massively changing our business, I think the effect is being felt,” he said.

“The primes are getting the message from Government that Australian content, building Australian jobs and skills in the defence space and ensuring a viable local defence industry, is something they need to address when they are dealing with Government and I think that message is being heard.”

Looking forward, Stephenson thinks SMEs in the Defence simulation space should be cautiously optimistic about the future.

“Simulation is very broad, multi-faceted, and can be low cost. It can provide value for money, so I think the trend towards seeking out simulation solutions where they can add that value is increasing,” he said.

From a BSim perspective, Stephenson says the company is in a strong position with the capability, maturity and acceptance of the technology it has developed, and it is investing in R&D and expanding its range of products.

“We’re bringing computer game technology into new simulators and also refreshing legacy simulators,” he said. “We are optimistic, we have a strong position with our current product offering, which we don’t take for granted, and we have a lot of new technology, so we definitely see growth for our business.”

Calytrix Technologies
Established in Perth in 2001, Calytrix Technologies today employees more than 60 staff in Australia and the US and is both a software development company and a services provider.

Its largest customer in the Defence simulation sphere is the Australian Defence Simulation and Training Centre (ADSTC) and in recent times, the company has partnered with TitanIM, another local SME, on the Vanguard 3D simulation system, which is used for a range of applications across the ADF, including Army’s Land Simulation Core (LS Core) synthetic environment, the RealFires joint fires and effects simulator for training Joint Terminal Attack Controllers (JTACs) being installed by Collins Aerospace and CAE’s Enhanced Landing Safety Officer Part Task Trainer (ELSOPTT) trainer at Nowra.

Calytrix Technologies’ CEO Shawn Parr says that simulation was still quite a new concept back when the company we first started and, because it was very dynamic, it was relatively easy to win contracts through the then Australian Defence Simulation Office (ADSO), DST Group and the single services.

Because it was a cutting-edge technology Parr says only the more agile companies were working in the space, but he doesn’t think that’s true in the current climate.

“I think simulation is now very much seen as a mainstream capability, which sits within the larger primes, and we’re only seeing the projects get bigger and bigger,” he said to ADM.

“Where we used to see innovative projects of $50,000 to $200,000, which didn’t interest anyone other than an SME, we’re now seeing simulation projects becoming much larger in scope and ambition and they are now in the realms of the primes. So, as an SME, we are almost always competing directly or partnering with them.”

Parr says that working with the primes is now an essential part of securing Defence business, so Calytrix is no longer always viewed as a prime in the simulation space, but rather as key support to larger companies.

“Invariably it’s up to us. We need to approach the primes and make them more aware of our capabilities, technologies and advantages – they’re often not seeking out innovation, so if they don’t know you within their business development divisions, you are going to miss out,” he added.

“We’re always looking for opportunities, like Army’s LS Core 2.0 for example, or the manufacturers of simulators themselves and whether there’s a place for radio communications or 3D virtual simulators like CNR and Titan Vanguard. Can we go in as a subcontractor and actually integrate those systems into their final solutions?

But in some ways, it’s quite complicated, because most large primes now have their own legacy simulation systems and unless there’s a mandate or a desire to change, they are more likely to use the software they already own, rather than invest in something local and new, despite AIC and other initiatives.”

Cirrus is a developer, supplier and support agency for simulation capability in the Defence sector, beginning in the early 2000s with the development and supply of a Mine Hunting Simulation System for the Navy’s Mine Hunter Coastal (MHC) fleet of ships.

In more recent times the company has provided Navy with the Generic COMCEN Simulator (GCS) system to train communications systems operators and a Tactical Electronic Warfare (TACEW) system, which simulates the EW systems of Navy’s major fleet units.

In the Air domain, Cirrus has developed and supplied its Air Combat Officer Training System (ACOTS) to the RAAF Air Mission Training School (previously School of Air Warfare) at East Sale, which simulates navigation systems and sensors, including multi-mode radar, tactical data links, electro-optic and Infra-red (EO/IR) sensors and other equipment.

It has also enjoyed export success with the supply of the Helicopter Training Officer System (HCOTS), a variant of ACOTS, to a regional navy in partnership with Prism Defence.

Peter Freed, Cirrus’ managing director says that that under the contracts Cirrus has had with Defence, it has delivered some very high-end technology that simulates highly complex systems and it is genuinely helping move the ADF’s training capability forward.
Freed is optimistic about the future and notes that the most important environmental factor affecting SMEs is the scale of expenditure in the Defence sector.

“The substantive capabilities being introduced into the ADF brings an increased demand for warfighter training, and with Cirrus’ record of delivery and reputation as a local, responsive supplier, we are pleased to make a significant contribution,” he said to ADM.

Winning Defence business can be a challenge and he noted a degree of reticence within Defence to work with smaller organisations

“There can be a presumption of risk regarding working with SMEs. While that outlook may not reflect the risks as they actually are, it can be the case that we’ll just go the extra mile to prove our credentials,” he said.

While most of Cirrus’ work to date has been directly with Defence, Freed says there are cases where the Defence Organisation prefers to have more managed by the primes, which may then subcontract the work to other companies, including SMEs.

“We do some work on a subcontract basis now and some of it as the prime. It just comes down to what works best for the case at hand for the end customer,” Freed explained.

From an AIC perspective, Freed says that the government’s strong push for local capability is a very positive and beneficial strategy, but he cautions that the actual delivery of promised content needs to be monitored closely.

“AIC policy is the mature outcome of industry policy development over quite some time. Moving forwards, rather than further policy updates, effective compliance management of the existing policy will be key to ensuring that the prime/SME interaction operates as intended. While there is room for real progress here, factors such as this are very much secondary when compared to the overwhelmingly positive environment for our industry,” he said. 

This article first appeared in the August 2019 edition of ADM.

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