{"id":32324,"date":"2017-06-08T11:45:42","date_gmt":"2017-06-08T01:45:42","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=32324"},"modified":"2017-06-08T09:49:03","modified_gmt":"2017-06-07T23:49:03","slug":"industry-fic-rose-name","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/industry-fic-rose-name\/","title":{"rendered":"Industry as FIC: a rose by any other name"},"content":{"rendered":"
<\/figure>\n

It has been a little over a year since the government released its Defence Industry Policy Statement. As well as setting a new world record for using the word \u2018innovation\u2019 in a single document, the Statement also elevated industry to the status of a fundamental input to capability. As I\u2019ll briefly explain, I think it\u2019s the latest attempt to square the circle that is the big-D Defence and industry relationship. I don\u2019t think it\u2019s doomed to failure by any means, but nor do I think it\u2019s guaranteed to work.<\/p>\n

And this isn\u2019t the first time we\u2019ve tried to do industry differently. We\u2019ve tried baroque variations on \u2018industry as FIC\u2019 before, a recent example being Strategic Industry Capabilities and Priority Industry Capabilities. There\u2019s nothing intrinsically wrong with the idea of identifying those areas of industry that are truly critical to the delivery and support of ADF equipment. But with the PICs and SICs we made the multiple errors of identifying too many\u2014including some that weren\u2019t critical by any sensible measure\u2014not putting any money where the policy\u2019s mouth was and, in at least one high profile case, we identified a priority area and encouraged substantial local investment, before deciding that the global market could provide a solution that better met Defence\u2019s requirements. Those sorts of experiences leave a sour taste for industry.<\/p>\n

It\u2019s hard to get the relationship between Defence and industry right. Defence industry policy is necessarily an exercise in balancing competing interests. I think it\u2019s fair to say that before the latest industry statement there was a prevailing view in industry that Defence\u2019s view was too much one of competition at all costs\u2014even when it came at the cost of a local industry player that was expecting to get a good run because of being in a PIC or SIC business.<\/p>\n

The First Principles review took a hard look the relationship between industry and defence and decided that it needed some work. I expect that they heard many of the same stories that Mike Kalms and I did when doing the legwork for the industry policy under David Johnston. The FPR was the origin of the \u2018industry as FIC\u2019 policy, though it didn\u2019t explain precisely how that change would fix the relationship. And for the reasons I explained a few minutes ago, there will always be tension there\u2014there aren\u2019t too many losing bidders in competitive processes that stand back to reflect on the beauty of the experience.<\/p>\n

At one level I can understand the logic of industry as FIC, because suitable industry support is clearly critical to both developing and sustaining the ADF\u2019s capability. And I agree that the relationship between Defence and industry isn\u2019t always as synergistic as it could be. So I think a new approach might work, but there are a couple of underdeveloped aspects that I think need further intellectual development.<\/p>\n

First, there\u2019s the simple observation that the new FIC isn\u2019t like any of the others. It doesn\u2019t belong to Defence, and it\u2019s not an asset that the department can manage through its own internal processes. Industry has its own interests and goals, and a profit motive that requires it to look at the Commonwealth as a source of revenue. None of the other FICS are like that. With his capability manager hat on, a service chief can task his people to rewrite doctrine or change the services personnel policy. He can swing resources around to do more training if he thinks it\u2019s needed. Defence facilities and the wider estate are managed internally, again with input from the capability managers. There\u2019s a Logistics Command that is responsive to service needs. In other words, all of the other FICS are within the control of either a service chief or a Defence committee into which the chief has a direct input.<\/p>\n

But a service chief can\u2019t tell Thales or Boeing or Austal, or an SME, what their corporate priorities are\u2014at least not in the same direct way they can direct the development of the other FICS. It\u2019s true that Defence has some sway over industry priority setting; the $195 billion of capital investment over the next decade is certainly enough to get their attention. But that brings me to the second way in which defence industry differs from the other FICS\u2014the party\/counterparty nature of the relationship. Defence wants to spend the money for capability outcomes and protect its own interests. Industry is happy to help to deliver the capability outcomes, but what it really wants is the money.<\/p>\n

When spending that $195 billion, it will be the duty of those in Defence signing those contracts on the behalf of the Commonwealth to do the best they can to obtain value for money for the taxpayer. That requires a degree of arm\u2019s length to the relationship quite different to the intimacy of the relationship between the capability managers and the other FICS.<\/p>\n

So there are some things that need to be worked out. And if it encourages some broader thinking about the ability of industry to deliver now and in the future within Defence\u2019s capability development and acquisition processes, that\u2019s a good thing. To give one example, if \u2018industry as FIC\u2019 means that the notion of value for money is extended beyond a narrow focus on the contract of the moment, that would likely be a good thing. Decisions on specific projects are often only locally optimal\u2014that is, it\u2019s the best decision for that particular purchase\u2014but mightn\u2019t look so flash when the whole portfolio of defence projects or the whole of life management of capability are taken into account.<\/p>\n

A simple example is contracting for construction projects without thinking about supporting the platforms after delivery\u2014just as is the case for the three Hobart class vessels about to be delivered. A truly smart buyer would have been thinking about \u2018building for support\u2019 a decade ago, and looking for ways to provide incentives for the builder to reduce through-life costs. The Chief of Navy certainly has an interest in making sure his new vessels are supportable, as well as driving down through-life costs. Instead, just as we did with the Collins class, we\u2019ve built first, and thought about support later.<\/p>\n

But let\u2019s be clear: you don\u2019t need to elevate industry to a FIC in order to think about it during the capability development process. The ability of the market to provide the desired capability or, conversely, the costs associated with creating an industrial base to get what we want should be part of the development of a business case for investment.<\/p>\n

If Defence reduces \u2018industry as FIC\u2019 to a few prescribed steps in the new capability development process, I don\u2019t think we\u2019ll gain anything. \u201cSought industry input \u2013 tick!\u201d won\u2019t help anyone. Nor will industry expectations of getting an inside rail. What this should be all about is a respectful, mature relationship where information is exchanged (or bought and sold) when appropriate and expectations are realistic. To be honest, I don\u2019t care how it\u2019s badged. “Industry as a FIC” is as good as anything.<\/p>\n","protected":false},"excerpt":{"rendered":"

It has been a little over a year since the government released its Defence Industry Policy Statement. As well as setting a new world record for using the word \u2018innovation\u2019 in a single document, the …<\/p>\n","protected":false},"author":6,"featured_media":32339,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[44,126],"class_list":["post-32324","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-australian-defence-force","tag-defence-industry"],"acf":[],"yoast_head":"\nIndustry as FIC: a rose by any other name | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/industry-fic-rose-name\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Industry as FIC: a rose by any other name | The Strategist\" \/>\n<meta property=\"og:description\" content=\"It has been a little over a year since the government released its Defence Industry Policy Statement. 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