Skilling & Training: We're from the government... | ADM Sep 2010

…And we’re here to help.

Suddenly there’s an alignment occurring between defence industry policy and a portfolio of Federal government programs designed to help local firms grow and become more competitive.

Gregor Ferguson | Sydney

It’s probably more coincidence than a cunning plan, but the 2010 Defence Industry Policy Statement, with its explicit focus on small to medium enterprise (SME) competitiveness, is supported by a number of Federal government programs designed to help Australian industry become more capable and competitive.

A few of these have an explicit focus on the defence sector; what’s interesting is that although they are funded by the Department of Defence, the Department of Innovation, Industry, Science and Research (DIISR) is responsible for actually delivering much of this support for the defence industry’s innovation and development activities.

Two key programs for Australia’s defence industry include the Defence Industry Innovation Centre (DIIC) and the Defence Materials Technology Centre (DMTC), both of which are funded by Defence through the Defence Materiel Organisation (DMO), but administered by DIISR.

The reason for this, according to DIIC Director Tony Quick, is two-fold: first of all, DIISR already had industry support and funding mechanisms (and, importantly, governance mechanisms) which have been proven to work effectively, so there was little point in the DMO trying to re-invent them.

Secondly, using this arm’s length funding mechanism neatly avoids any potential for a conflict of interest: the DMO is a procurement organisation which seeks value for tax-payers’ money, and this would sit uncomfortably alongside any kind of interventionist approach to industry development.

Using DIISR to deliver this support is an effective method of pursuing many of the goals of the Defence Industry Policy Statement without compromising the DMO’s necessarily disinterested pursuit of value for money.

A third, purely DIISR-driven, support mechanism is the new Commercialisation Australia (CA) program, established earlier this year to combat the gaps in skills, knowledge and capital in the market - the ‘Valley of Death’ - along the path from experimental development to commercialisation, which mean that many new concepts fail, either technically and/or financially, before achieving commercial viability.

On 22 July Commercialisation Australia (CA) announced its second $2.2 million basket of innovation and research support grants.

Three of these, worth over $430,000, went to projects with a direct defence or security application: Kord Defence’s Rifle Input Control (RIC) device; Navisens’s location system for humans in buildings and the open environment; and Virtual Observer’s video data search tool enabling users to search by time and location to access video data captured by cameras on a network.

In addition to Commonwealth funding to develop their innovations, CA will also provide a dedicated case manager to steer these companies through the commercialisation process.

The case managers will also provide valuable connections to a newly established network of volunteer business mentors who have direct experience of bringing new ideas to market and can apply their specialist knowledge.

One of the newly appointed CA case managers for Sydney is former EASAMS and BAE Systems executive Nigel Hennessy.

Also under the DIISR umbrella is Enterprise Connect, whose focus is somewhat broader than CA. It doesn’t concentrate on specific projects but instead looks right across a business and its operating environment to help firms become more efficient and competitive.

The DIIC is part of DIISR’s Enterprise Connect initiative and sits alongside similar programs directed at manufacturing, clean energy, resources, the creative industries, remote enterprise and regional development.

It provides exactly the same portfolio of services and grants to defence firms turning over less than $100 million a year – almost by definition, that includes all Australian-owned private defence companies, along with a few small subsidiaries of larger overseas primes.

That methodology aims to pair companies with a Defence Business Adviser who conducts a review of the company and can then tailor a package of services to help the business improve its competitiveness.

These services, many of which are free to the company, include funding researchers to help with product and technology development, funding consultants to implement specific business improvement programs identified in the original review, helping companies link with sources of technology and specialist expertise (including specialised manufacturing capabilities), and funds to help companies attend appropriately targeted workshops and seminars or to organise workshops and training seminars for industry groups.

Many of these grants are dollar-matching arrangements (ie DIIC matches every dollar spent by the company) while some are whole-of-cost grants (up to a certain limit).

Twelve months into the program, DIIC is meeting or exceeding all of its targets in terms of companies both undertaking a business review and then taking advantage of the follow-up services and grants.

The DIIC has established a network of Defence Business Advisers across Australia; the final piece of this jigsaw will be in NSW where it expects to announce an appointment this month.

They also work closely with industry associations (particularly AIDN) and the various state governments: the approach is collaborative, rather than to duplicate proven and trusted industry development activities and mechanisms which already exist.

The DIIC’s Tony Quick is well-known within the defence industry.

A former general manager of GKN Aerospace in Melbourne, he was previously with Westland and Plessey Electronics in the UK and was appointed to set up the DIIC at DIISR’s office in Dandenong, Victoria, in mid-2009.

He is also a director of the DMTC.

His international background was very useful, he told ADM, in identifying and assessing business development models which would help prepare local SMEs to compete in the Global Supply Chains of the northern hemisphere prime contractors.

Most of the major primes, in particular the US ones, have their own supplier development programs which provide business, technical and supply chain mentoring and education for suppliers and sub-contractors.

European links

But the very different scale of the European and British defence and aerospace markets means that a different approach is required to SME development: they can’t afford to concentrate on a single large customer, and often haven’t the time and resources to go through successive qualification and accreditation processes with multiple primes.

For this reason the former Society of British Aerospace Companies (SBAC – now known as Aerospace Defence Security or ADS) introduced the Supply Chains for the 21st Century (SC21) program for British SMEs.

This is the only non-company specific defence industry supply chain development program in the world and meets the majority of requirements laid down by the major US, UK and European primes.

Quick has licensed the SC21 program for Australian companies, to be delivered through the DIIC.

All of the foreign primes with a significant footprint in Australia have approved the program, which will see companies listed on Defence’s DMO e-Portal as they ascend the Bronze, Silver and Gold Award capability ladders.

Importantly, Australian companies graduating from the SC21 program have an automatic advantage over firms in other countries when trying to sell into UK supply chains.

As noted, one of DIIC’s functions is skills-related: it helps companies attend essential workshops or seminars and facilitates and pays for some of these events itself.

One such as the program of Lean Design workshops for design and production engineers and managers run in Melbourne, Adelaide, Sydney and Perth in early-August by Lean Design Australia and US design process specialist Munro & Associates.

This was heavily subsidised by DIIC and organised jointly with AIDN, who helped publicise the event nationally and at state level.

This highlights another feature of DIIC, says Quick: the success of its outreach to the defence industry depends to a considerable degree on a close working relationship with all of the industry associations and the relevant state government departments.

They have shared goals, so the collaborative approach they have adopted is simple common sense.

Sandy Munro, who developed the concept in Detroit, has previously delivered Lean Design training for automotive companies in Australia; this was the first dedicated defence sector program.

However, he has also worked extensively for both US defence contractors, including Boeing, Lockheed Martin, Raytheon and the Pentagon.

Lean Design is a structured, disciplined process designed to eliminate waste and streamline production; it requires more up-front investment but reaps significant benefits down-stream.

As well as enhancing system and product design it has spawned a metric which was very influential in shaping the US Weapon Systems Acquisition Reform Act of May, 2009: the Manufacturing Readiness Level (MRL).

The MRL provides a systematic and robust measure of a system or product’s design maturity and therefore of the risk associated with it.

It mirrors the recommendations of the Kinnaird report in requiring up-front investment to realise major project savings down-stream; this new Pentagon approach explicitly transfers risk to the contractors, and is having a cascading effect from the prime contractors down through their supply chain, and reaching as far as Australia.

DMTC

The Defence Materials Technology Centre (DMTC) also has an education focus, but most of its work is directed at business outcomes.

It is funded by the DMO, but administered through DIISR along very similar lines to a Cooperative Research Centre (CRC).

Again, this provides the necessary arm’s length relationship between the DMO and industry, but importantly it also builds on the proven CRC model for both governance and the delivery of measurable results.

The CRCs aim to deliver business outcomes through their industry partners: the bottom line is a stronger industry sector contributing to a stronger economy.

On top of this, the DMTC also aims to deliver direct benefits to Defence and to the ADF war fighter, says its CEO, Dr Mark Hodge.

These benefits include better capability (crucially, including survivability); lower equipment costs; and lower cost of ownership.

Broader benefits include a more robust and sustainable defence industry which is able to maintain critical industry capabilities to support Defence’s goal of self-reliance.

In that sense, the DMTC, SC21 and DIIC provide a package of interlocking, mutually supportive programs which go directly to the goals set out in this year’s Defence Industry Policy Statement.

A particular focus of DMTC and its industry partners is titanium machining.

Titanium is a very difficult material to machine; increasing amounts of it are being used in modern aircraft, especially the F-35A Joint Strike Fighter, and companies which can design and produce machined titanium components at the right level of quality and a competitive price enjoy a crucial advantage.

The DMTC, along with the CAST CRC, RMIT, CSIRO and a large group of other industry and university research partners has been developing machining and manufacturing techniques to reduce significantly the cost of producing titanium components.

At stake is potentially multiple billion dollars-worth of work on programs such as the JSF, and the long-term growth trajectory of Australia’s aerostructures industry.

In June this year DMTC ran a series of Advanced Manufacturing Workshops in Adelaide, Brisbane, Melbourne and Wollongong, co-funded by CSIRO and the DIIC, to disseminate to local companies and researchers the titanium machining and welding knowledge it has helped create.

The workshops attracted 118 attendees in all, 75 of them from industry representing 43 companies, and were targeted at design, process and production engineers and managers, maintenance supervisors and precision parts specialists.

The industry speakers included BAE Systems, SECO Tools, Sutton Tools and Millatec, while the research community was represented by RMIT University, DMTC itself, CSIRO, University of Wollongong, CAST CRC and Swinburne University of Technology.

Importantly, they enabled all of DMTC’s key partners in this sector to deliver an aggregated package of experience, expertise and specialist knowledge.

At a different level, the DMTC’s Education and Training Program funded 16 conference registrations for DMTC participants to attend and present papers at Australian JSF Advance Technology and Innovation Conference held in Melbourne in May.

Their attendance enabled DMTC participants to showcase their research (DMTC participants presented fifteen papers) and also put them and the DMTC firmly on the Australian R&D map as a leading technology developer able to support long-term involvement in future JSF development activities.

DSTO and DMTC

This highlights an essential difference between the DMTC and DSTO: the latter is still the ADF’s scientific and technical authority and conducts the Technical Risk Assessments (TRA) on major capital equipment programs.

It therefore faces some of the same potential conflicts as the DMO; in any case commercialisation and technology transfer aren’t its primary focus.

The DMTC, however, is an independent applied research organisation for whom commercialisation and technology transfer are its very purpose.

Once again, an arms-length relationship allows DSTO to work closely with the DMTC and disseminate knowledge and expertise to industry without compromising a core function.

The DMTC provides a path for DSTO’s expertise and Intellectual Property, via industry, to the warfighter.

In this sense, it represents a win-win for all parties, albeit in the relatively narrow sector of materials technology.

More broadly, the relationship between Defence and DIISR seems to fill an industry need: a sector composed largely of SMEs needs support to raise skill levels and overall competitiveness.

While DMO initiatives such as Skilling Australia’s Defence Industry (SADI) have been successful and widely welcomed, this has been an exercise in enlightened self-interest.

Funding DIISR to do what it does best on behalf of Defence has resulted in a welcome convergence of interests.