{"id":53984,"date":"2020-03-03T11:25:56","date_gmt":"2020-03-03T00:25:56","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=53984"},"modified":"2020-03-03T11:25:56","modified_gmt":"2020-03-03T00:25:56","slug":"local-industry-content-the-key-to-future-defence-funding","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/local-industry-content-the-key-to-future-defence-funding\/","title":{"rendered":"Local industry content the key to future defence funding"},"content":{"rendered":"
<\/figure>\n

In late 2014, Australia was engaged in a vigorous national debate about whether 12 new submarines should be imported directly from Japan in a \u2018captain\u2019s pick\u2019 or built here after some form of tender process. In the heat of that campaign, I was invited as South Australia\u2019s minister for defence industries to visit Rossi Boots, a footwear manufacturer in the west of Adelaide. Rossi was keen to do business with the defence and police organisations that had been importing footwear and kit from overseas.<\/p>\n

As I toured the workplace, I was besieged by a group of mature-age skilled and semi-skilled workers, mainly women, who just wanted to talk about submarines. They had heard the debate and they understood the idea that government should, where possible, spend the people\u2019s taxes in Australia, growing wealth and jobs in our own country. It was no different to the challenge they faced. They felt their jobs were at risk because the government was buying from overseas and not from companies like Rossi. Whether it was boots or submarines, the issue was a barbecue stopper.<\/p>\n

The success or failure of the $80 billion Attack-class submarine build may end up shaping the nation\u2019s future attitude towards funding defence. The arguably rushed selection of Naval Group as preferred designer was made on the cusp of the 2016 federal election to put the matter to rest. To win that contest, Naval Group promised<\/a> that \u201890% of the build activities will be performed in Australia\u2019. The Senate recently heard evidence that local content in the Naval Group build could be as low as 30%, and the Australian National Audit Office has revealed that the government\u2019s Naval Shipbuilding Advisory Board questions \u2018whether the programme risks outweighed the benefits of proceeding\u2019.<\/p>\n

On 13 February, national reports<\/a> revealed that Naval Group Australia CEO John Davis \u2018was unable to say whether the boats\u2019 Australian industry content would reach 50%\u2019 due to \u2018cultural problems\u2019 and \u2018specific challenges\u2019. Davis was dismissive of the capability of Australian defence suppliers, saying that it was \u2018falling short of expectations\u2019. Naval Group\u2019s comments shocked many and resulted in a strong response from the government and the commentariat.<\/p>\n

By 24 February, Naval Group\u2019s executive vice president, Jean-Michel Billig, shifted the company\u2019s position yet again when he assured a Senate committee<\/a> that \u2018we commit to a level of Australian industry capability that will have the effect of at least 60% of Naval Group contract value spent in Australia\u2019.<\/p>\n

The 70% mandated and achieved with the Collins class might have been an aspiration, but the idea of 60% is a welcome development, and one that will need to be formalised in contracts and measured and reported on by audit if there is to be confidence and certainty. Too often Australian parliaments, industry, workers and taxpayers have heard assurances on local content only to later find a winding back at the contract stage.<\/p>\n

Billig appears to be guaranteeing 60% of the \u2018contract value spent\u2019 for Australia, an important distinction. Naval Group\u2019s new position includes an indication<\/a> that the company will \u2018work to give Australia an even bigger cut of the contract than 60%\u2019, which is an encouraging sign.<\/p>\n

Questions will remain about how Naval Group will classify items manufactured overseas but assembled in Australia, how work done by French-owned subsidiaries with front offices in Australia and ABNs will be accounted for, and what investment and intellectual property effort will go into genuine partnerships and joint ventures between French and Australian companies. The devil, as usual, will be in the detail.<\/p>\n

Achieving these goals for the first batch of vessels may prove particularly difficult, suggesting that higher local content in later batches might need to balance out targets overall. But it\u2019s a start. If the government and Naval Group can sign up formally to this position both deserve credit.<\/p>\n

Then there\u2019s the question of the Lockheed Martin AN\/BYG-1 combat control system intended to provide an open-architecture submarine combat control system for analysing, tracking and engaging targets. Equal attention needs to be given to optimising opportunities for Australian universities, cooperative research centres, and industry centres of excellence to participate in this part of the spend. The Senate could continue asking the same questions about local content of the Americans as have been asked of the French.<\/p>\n

The Abbott government wisely acted to lift defence spending towards 2% of GDP. An array of commentators, authors and strategists are now advocating a budget closer to 3% for new capabilities in these uncertain times. It\u2019s a whole lot easier for the defence minister to win funding in cabinet when ministerial colleagues responsible for employment, infrastructure, science, education and training, and regional development are on side, supporting the benefits of defence spending from the standpoint of their own portfolio aspirations. And it empowers the prime minister at Council of Australian Governments\u2019 meetings, where state and Commonwealth financial arrangements are hammered out, if he can demonstrate to premiers the many shared benefits of increased defence budgets to states because of local industry participation.<\/p>\n

We need to keep reminding ourselves that the money which funds defence capability acquisitions belongs to the hardworking families who pay taxes. They keep a close eye on how the government spends that money. They don\u2019t like seeing waste, mismanagement or money flowing overseas to create jobs, intellectual property and enterprise in someone else\u2019s country if we can build the capability at home and reap the associated benefits.<\/p>\n

If the public don\u2019t like what they see and won\u2019t vote for it, expect trouble securing funds in the future for defence. It\u2019s very easy to cut the number of overseas-manufactured submarines from 12 to six, or to reduce the number of foreign-made aircraft or armoured vehicles and to invest that money on alternative here-and-now priorities like health, education or infrastructure, no matter how urgent our future strategic circumstances may seem.<\/p>\n

Defence decision-makers should see their choices not in terms of operational capability versus local industry participation. Local industry and the university sector are Defence\u2019s friends, not its enemies when it comes to funding. We need to be able to both walk and chew gum.<\/p>\n

Capability must always come first, but without the shared benefits of high levels of local involvement by universities, workers, small and medium enterprises, and state and local government, we risk losing community support. It then becomes a question of whether the taxpayers are prepared to keep paying the bills.<\/p>\n

That\u2019s why making sure that the Attack-class submarines have the highest possible level of local content is so important and why the program is being watched so intently. It\u2019s a test case. If we fail, future defence budgets are likely to face renewed public and parliamentary scrutiny. As importantly, what message will we be sending to our children and grandchildren about our national ambition and our future?<\/p>\n","protected":false},"excerpt":{"rendered":"

In late 2014, Australia was engaged in a vigorous national debate about whether 12 new submarines should be imported directly from Japan in a \u2018captain\u2019s pick\u2019 or built here after some form of tender process. …<\/p>\n","protected":false},"author":1021,"featured_media":53985,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[44,2436,126,1051],"class_list":["post-53984","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-australian-defence-force","tag-attack-class","tag-defence-industry","tag-future-submarine-project"],"acf":[],"yoast_head":"\nLocal industry content the key to future defence funding | 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\/local-industry-content-the-key-to-future-defence-funding\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Local industry content the key to future defence funding | The Strategist\" \/>\n<meta property=\"og:description\" content=\"In late 2014, Australia was engaged in a vigorous national debate about whether 12 new submarines should be imported directly from Japan in a \u2018captain\u2019s pick\u2019 or built here after some form of tender process. ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.aspistrategist.ru\/local-industry-content-the-key-to-future-defence-funding\/\" \/>\n<meta property=\"og:site_name\" content=\"The Strategist\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/ASPI.org\" \/>\n<meta property=\"article:published_time\" content=\"2020-03-03T00:25:56+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/03\/20190211ran8440972_115-e1583127586594.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"900\" \/>\n\t<meta property=\"og:image:height\" content=\"564\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Martin Hamilton-Smith\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:site\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Martin Hamilton-Smith\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.aspistrategist.ru\/#website\",\"url\":\"https:\/\/www.aspistrategist.ru\/\",\"name\":\"The Strategist\",\"description\":\"ASPI's analysis and commentary site\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.aspistrategist.ru\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-AU\"},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-AU\",\"@id\":\"https:\/\/www.aspistrategist.ru\/local-industry-content-the-key-to-future-defence-funding\/#primaryimage\",\"url\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/03\/20190211ran8440972_115-e1583127586594.jpg\",\"contentUrl\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/03\/20190211ran8440972_115-e1583127586594.jpg\",\"width\":900,\"height\":564,\"caption\":\"Minister for Defence, the Hon Christopher Pyne, MP (left), Australian Prime Minister, the Hon Scott Morrison, MP (centre), and French Minister for the Armed Forces, Madame Florence Parly, sign the Strategic Partnering Agreement for the Future Submarine Program during a ceremony held at Russell Offices, Canberra. *** Local Caption *** On February 11, 2019 the Government announced the formal signing of the Strategic Partnering Agreement for the Future Submarine Program between Defence and Naval Group. 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