Stepping up to the plate this year in the wake of the May 2019 federal election as Minister for Defence Industry Melissa Price of WA was an unknown for many in the Defence community. Since taking the job in May, she has travelled the length and breadth of the country to get across the brief literally and figuratively. She spoke with ADM Managing Editor Katherine Ziesing about what her focus points for the year that was and the year ahead.
ADM: Australian Industry Capability (AIC) has become increasingly important in Defence’s mega programs. What does this mean specifically for the Land 400, Hunter and Attack class programs? What assurances can you give the SME community that they will share in the value of these programs?
Price: AIC is a journey that I’ve been on long before I became the Minister for Defence Industry and I’ve had - over the years, since being elected in 2013 – discussions with former Defence Ministers/Defence Industry Ministers David Johnson, Christopher Pyne, Linda Reynolds and Steve Ciobo about the number of regional small companies that I believed had capability but I believed we weren’t giving them a go. Before I became the Defence Industry Minister I was very engaged, particularly around regional companies and how do we actually get more of them through the supply chain and not waiting for them to come and knock on the door.
I’m critical of CDIC; we’re having a review at the moment. I’m critical because I think we’re waiting for people to walk through the door. I want us to drag them through the door because I believe there are numerous opportunities for small to medium Australian businesses that have got transferable skillsets; they don’t even know they’re capable.
This is something that I’ve been beating the drum for some time. You won’t be surprised, as the Minister for Defence Industry, that it is my number one priority. Because if we support these small Australian companies, we then increase the number of jobs in defence industry, we can then dedicate ourselves to increasing the skillset. But if we don’t give them the opportunities then we are losing really great Australian companies who could get the opportunities to win important work.
That being said, I’ve been overwhelmed by the number of companies who are already in the supply chain. Every day I’m hearing about some new fabulous small to medium Australian business that has got involved; they’ve either got an innovation contract or grant from Defence, they’ve got future prospects with Defence, or they’ve already got a contract with us.
Only three or four weeks ago we were talking about the latest round of Rheinmetall contracts; there’s around 11 new contracts that were announced from one end of Australia to the other. Some contracts are small as $50,000, some were $200,000. So there are opportunities there but I think our biggest challenge is making sure companies know that they’re capable.
What people say to me is it’s not easy doing business with Defence. I accept that but we are the client, it’s not easy but we need to help them and that’s why we’re doing a review of CDIC to make sure that those who are capable, that we’re helping them to get over that hurdle to be Defence ready.
If I look at the Hunter Class frigate and the Attack Class submarine, already we’ve engaged over 2,000 local companies across the whole of Australia – who are already involved in those supply chains or they’ve already been identified as having a capability.
In terms of Land 400 Phase 2, we’re on track to achieving 65 per cent AIC. I don’t think it’s a matter of ‘what’s the target?’ I believe that it’s imperative (and I believe Rheinmetall understand) it’s not a matter of ‘well what does it say in the contract?’ They actually need Australian companies and it’s not just to build whatever their contract is with the Australian government, it’s also about their own aspirations for other export opportunities. $200 billion is buying us much more than submarines and widgets, it’s bringing in overseas companies who are setting up, like Lürssen, like Rheinmetall and they have export aspirations from their Australian base.
ADM: What are the checks and balances to make sure that those bigger international companies are leveraging supply chains here and not the ones in their home market?
Price: We haven’t finalised it yet but there will be an assurance/audit process, which is something that I’m driving, to make sure that if you said you’re going to have a certain amount of AIC, I’m going to hold you to account.
It’s no secret that I’ve ensured that all of the primes, those major defence contractors, they know that I’m watching very carefully, to the point where I’ve had one or two of them say to me, “Oh Melissa, I know you don’t care so much about us, you really care about AIC” and I say, “Oh no, I care about you a lot, I just want to make sure that you do the right thing by Australian small businesses”, and I’m feeling very confident that we’re on track.
ADM: Do budgets/schedules exist for the different phases of Sea 1000 i.e. figures set by the Commonwealth against which it can determine whether anticipated spending or AIC decisions by Naval Group are or are not acceptable?
Price: At the moment we’re in the design phase, which is a two-year period and a contract of $605 million. Once the design phase is finished or when it’s nearing finalisation, we’ll then have a better idea of how we’re going to spend the money and where. So at the moment that perhaps detailed budget that you’re asking about, that doesn’t exist yet.
There’s still a lot that I can be getting on with in the meantime. In particular I had a very, very good trip to France; went out to Cherbourg, spent half a day with all these fabulous, most of them young, Australian engineers who are over there learning, the basis of that technology transfer. Most of them are from Adelaide; they all intend to go back to Adelaide.
You often hear about these are the initiatives of the primes. Until you see it, until you touch it you don’t realise how powerful it is or how valuable it’s going to be and I think those 50 or 60 Australians that are over there, that they are critically important to the success of this project.
That’s what I can do right now and in addition to that, it’s the skillset. You know, talk about shipbuilding; we’ve got 4,000 people approximately working in shipbuilding in our country. We’re going to build 57 vessels. We need 15,000 Australians working in shipbuilding and these are the things we can focus on right now and that’s what I’m doing.
ADM: On that front, you’ve been quoted as saying you don’t like the term STEM. What could we use instead to help spread the word around the workforce challenges in the Defence community? And not just the shipbuilding side of the workforce equation.
Price: That’s right and I think the use of the term STEM, frankly you’re preaching to the converted. I don’t have a substitute for it. I think we should just call it for what it is, that we’re looking for people who have got an aptitude for maths and science. But it’s not just people with an aptitude for maths and science, we’re going to need very, very good quality tradespeople who may not necessarily have that on their resume but they could have great attention to detail, a great work ethic, and are interested in being an Australian shipbuilder.
In November we had the inaugural two-day Skills Summit in Perth. It wasn’t one of those conferences where everyone just sits on their backside for two days, it was very interactive. It was a combination of industry, education departments, obviously Defence Department and other training organisations and training departments from around the country. I can tell you, most of them did not have great understanding of what we are going to achieve with that $200 billion program of work. So that in itself was a great education for them.
When I was explaining to them I wanted to dispense with talking about STEM, because we don’t need everybody going to university, we also want people going to TAFEs and getting a whole range of skills. There was a lot of nodding in the room and I think we’re at that point where we need to be more exact with our language about what is it that we’re actually looking for, whether it’s project managers or schedulers or engineers or naval architects. There’s a whole suite of skillsets and professions that we need to be able to build those 57 vessels.
One good example for me, if I think about my electorate, I look at the City of Geraldton, if you talk about STEM, and I’ve done this with parents to try and understand well what is the knowledge, what’s the education of parents. When I talk about STEM a lot of the time, number one, they don’t know what you’re talking about. If the parents haven’t been to university, the chances are that when you talk about STEM they don’t really get it. They may have heard it in the news but they don’t really understand it. In fact, when I was in Karratha, people that are very engaged in the business community and I would say one of them was involved in a STEM industry, they didn’t know what I was talking about.
So I think we need to be very careful that we’re not talking to ourselves. We need to be talking to people who we would like to be involved in this fabulous defence industry and I believe that we haven’t been spreading the message far and wide.
ADM: It has been almost four years since the release of the 2016 Defence White and its associated partner documents. Is it time for an update? Will a publicly available version of the Integrated Investment Program (IIP) be released? It’s updated every six months internally but it hasn’t been released externally for defence industry to know what’s going on.
So there’s a lot of rumour and innuendo and guessing about what you’re doing and how you’re doing it in terms of the timelines, and it’s really hard to make investments in terms of capital and people when you don’t know what the timeframe is.
Price: At Sea Power in Sydney last year, Minister Reynolds spoke about Defence reviewing its force structure plan. I know this is a regular activity and process to critically look at the changing strategic environment. To take stock of what’s happening around the world and its possible impact on the ADF and forthcoming investment priorities and decisions. Australia’s defence industry is an essential part of delivering our ADF capability – as your readers know, a fundamental input; a partnership. That’s why any future investment outcomes of this review will be released to the public and industry.
It’s worth noting CASG makes a significant effort to keep industry informed as projects evolve, through things like working groups and industry engagement activities and information in the Portfolio Budget Statements. We know how important it is to bring industry along with us on this journey; it’s the only way we’ll achieve our shared goals.
ADM: What role do you see state-based defence advocates or agencies playing in the Defence debate and decision-making process?
Price: I think they are playing a really important role in connecting industry to Defence opportunities and it’s one thing to identify a small business in a state but it’s another to identify perhaps infrastructure that you might need. I think that’s also important, that the state’s got visibility of what could be the infrastructure requirements or what is it that they are offering to whatever program might be on the cards.
What I would like to do or what I would like the state based defence agencies to do, is to do a bit more of this forward leaning which I talked about at the outset; identifying those companies that perhaps have got some capability rather than waiting for them to come knock on their door, and I think I’ve met every state since I’ve been in this role and a number of those advocates and bodies. Obviously there is a matter of resources but I think they could do a lot more in making those connections. I think they’ve been really important as part of the journey in identifying who’s capable of doing what but I think that it’s time for them all to step up now.
ADM: Does Australia have the capability to become a global player in the Defence export/trade space?
Price: So one of my priorities, and there’s a number of them, is really to identify where are those roadblocks, to help those Australian companies who want to export, that we help them as much as we can. So rather than focusing on where we are in some league table, I’m very focused on individual companies, what’s their problem, how can we help them overcome whatever the roadblock is in their way, and there’s currently a review of those processes at the moment. So that’s at an Australian shopfront level.
ADM: To confirm, Defence Export Controls (DEC) is being reviewed at the moment to make sure it’s fit for purpose?
Price: Yes. This was actually something that the Minister of Defence has required but also we’ve got an additional list of issues that we would also like to explore. This is all about human behaviour as well, so we need to make sure that if a potential export application is not going to proceed, that we say no quickly, rather than keep people hanging on the line.
So that’s at home. But what are we doing overseas and what are we able to do as a government to support the growth of export opportunities to overseas? And to that end we had a very good trip to the UK with the DSEI trade show in London. I’ve had some feedback from the 60-odd delegates (that’s the most delegates we’ve had) that went to London and they said it was really encouraging, the number of people that came up and talked to them about their product or their service and in their words – people are now serious when they’re coming to talk to them about their product.
Everyone was very interested in the Australian delegation; in who we were talking to, where were we going. Australia is very clearly in a strong position and are looking for partnership opportunities on many fronts.
Again, our $200 billion is buying us much more than just widgets and submarines. People know that’s the commitment of the federal government and almost by association or osmosis or the fact we’ve got a lot of attention on our federal government, if you’re an Australian company and you’re credible, you’re seen to be reliable, the chances are people are very interested in talking to you about what you’re capable of doing.
We are now getting a reputation as being innovative but also producing a high-quality reliable product from a five eyes partner. Also the exchange rate is very helpful for us at the moment.
ADM: What role do you see a national space agency playing in the Defence realm, given now that 90 per cent of all Defence assets rely on space generated data in some way, shape or form?
Price: The Australian National Space Agency was established in 2018 and Defence has had a longstanding involvement in the space arena. There’s is no doubt that space technology will be applicable to our defence capability, like satellites. When we’re reviewing our capability needs, there’s no doubt that we will look to space technology to see how it will fit.
Now we don’t have all the answers yet but, of course, that is just if you’re talking about solutions, of course space technology will form part of that. Small and micro businesses make up a large part of the space industry – businesses like Inovor in South Australia are a good example of how these small businesses in the space industry can partner with defence. We’ve just announced a $2.5 million contract for Inovor to develop a nano satellite to help with Defence’s Buccaneer Space Mission.
But as the Minister for Defence Industry, what I’m interested in is that complementary skillset. With Australia developing its space capability, and it’s complementary to my portfolio responsibilities, there will be a lot of transferable skillsets. So when we have a conversation around defence industry capability, inevitably people also talk about well what else could I be doing in terms of supporting our space ambitions.
ADM: In three years time, what does success look like for you in this role? What do you want to have achieved?
Price: Well the Prime Minister has told me it’s my job to deliver that $200 billion worth of defence industry capability. Success will mean we’ve got a significant number – and I can’t put a number on it yet but in the next six months I think I will have figured it out – we will have increased the number of Australian SMEs in our supply chain.
We will be well and truly on our way to ensuring we’ve got that 15,000 people who are skilled to enable them to work in our Australian shipbuilding industry. There will be a greater number of Australian SMEs from regional Australia who are involved in our defence industries. And a greater number of export opportunities through improvements to the way that we handle export applications to existing partners like the US and new partners too.
We’ve spent a bit of time in the US this year talking about the barriers in the US and the opportunities for Australian companies to be able to export into the US.
ADM: We’re now part of their industrial base on paper.
Price: We are but I think -- but it’s one thing to be on paper, I want it to be in practice. We’ve had some very, very valuable meetings about what it is that we expect and, again, the Americans are very interested in Australian companies because we are reliable, we’re a trusted five eyes partner, we have a high-quality product and we have a very good exchange rate.
This article first appeared in the December - January edition of ADM.