From capital to capability: Why investability matters for delivering the future Australian Defence Force 

While Australia is not alone in confronting the immense costs of its ambitious defence modernisation program, partners from the United States, the United Kingdom, Germany to Japan are seeking novel solutions to deliver the suite of defence capabilities at speed and scale.

The scale of that challenge is reflected in the 2026 National Defence Strategy and Integrated Investment Program with $425 billion earmarked over the next decade against a total 10-year defence funding envelope of $887 billion.

Increasingly, “alternative finance” mechanisms, ranging from public-private partnerships (PPP), revenue-based financing, asset recycling and peer-to-peer lending, have all emerged as potential solutions to address constrained budgets at a time of increasing geopolitical risk.

However, the use of “alternative finance” mechanisms, as envisaged by the government, is not without its risks, particularly in the public consciousness, as the Australian public have, in some quarters, shown their displeasure and unease with private investments in defence businesses.

While that is certainly not a uniform attitude, it is a hurdle that bears consideration by policymakers and industry seeking to leverage these systems to support the delivery of Australia’s defence capabilities.

Herein lies the opportunity for “alternative finance” to add value for Defence. Where public discussion understandably gravitates towards ships, missiles and emerging technologies, capability is only as effective as the infrastructure that enables it and novel mechanisms, like PPP can serve as a test case for greater use of “alternative finance”.

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The Department of Defence identified around $5 billion over the forward estimates and $15 billion over the decade in projects where alternative financing options will be explored as part of delivering capability at the scale and pace required. These figures sit alongside a Defence estate already valued at approximately $40 billion and a growing pipeline of infrastructure requirements expected to require a further $14–18 billion over the coming decade.

Recent projects provide a clear indication of what this future looks like.

At HMAS Stirling in Western Australia, significant investment is underway to support Submarine Rotational Force - West and future AUKUS activities. In South Australia, the expansion of the Osborne Naval Shipyard will underpin Australia’s continuous naval shipbuilding enterprise and future nuclear-powered submarine construction program. Northern Australia is seeing major investments in runways, fuel infrastructure, logistics capabilities, accommodation and supporting estate upgrades as Defence strengthens force posture and operational readiness across the country’s north.

Meanwhile, projects ranging from integrated air and missile defence infrastructure through to future littoral manoeuvre facilities, industrial support precincts, sovereign fuel storage and manufacturing capabilities all continue to expand the estate pipeline outside the traditional remit of traditional defence infrastructure.

Collectively, these investments point to a broader shift taking place across Australia and many of its allies.

Defence has traditionally relied on public expenditure and long-term capital programs to fund the infrastructure required to support capability. That remains the foundation of sovereign defence investment. What is changing is the scale, pace and complexity of future infrastructure requirements.

Recent discussions around alternative financing, the establishment of the Defence Delivery Agency and efforts to strengthen sovereign industrial capability demonstrate Australia’s exploration of how defence capability can be delivered with greater speed, certainty and scale. Funding reform, procurement reform and industrial development are often discussed separately, but each reflects a growing focus on improving the way defence capability is brought to life.

Alongside traditional public investment, governments are increasingly exploring complementary funding and delivery models. These include public-private partnerships for enabling infrastructure, government-backed finance facilities, co-investment mechanisms to support sovereign industrial capacity and private capital models that can accelerate the development of critical assets.

The direction of travel is becoming clearer: governments retain control of strategic defence outcomes while inviting greater participation from private capital in the infrastructure, industrial capability and innovation ecosystems required to support them.

Rather than replacing public defence budgets, private capital’s value lies in helping accelerate the delivery of investable defence infrastructure, sovereign industrial capacity and capability-enabling assets where responsibilities, risk allocation and security requirements are clearly understood.

Consistent with Australia’s public-private partnership framework, alternative financing models should be considered where they deliver demonstrable value for money, allocate risk to the parties best placed to manage it, preserve sovereign control and support long-term public interest outcomes. Viewed through that lens, investability becomes one measure of suitability alongside affordability, capability outcomes, delivery confidence and the broader interests of Defence and government.

Which raises a question that extends beyond financing itself. How do we deliver the infrastructure that enables defence capability at the scale, pace and certainty required to support Australia’s evolving defence posture?

Australia already has a clear picture of the capabilities it wants to build. The challenge now lies in creating the physical foundations that allow those capabilities to be generated, sustained and expanded over time, which is why success hinges on investability.

Institutional investors are ultimately assessing confidence in an asset. They want to understand how it will perform throughout its life cycle, how risk is managed, whether delivery pathways are realistic and how long-term value will be sustained. Defence is asking many of the same questions through a different lens, focusing on readiness, resilience and operational effectiveness. Whether the asset is a logistics hub, fuel network, accommodation precinct, industrial facility or command centre, both perspectives depend on confidence in its ability to perform reliably over decades of service.

Infrastructure that is planned, designed and delivered with a clear understanding of performance, risk and life cycle requirements creates stronger foundations for investment decisions while also supporting more reliable delivery outcomes for Defence and industry.

The relationship between investability and engineering outcomes, therefore, becomes particularly critical.

Well-defined requirements, credible delivery pathways, transparent approaches to risk allocation and a thorough understanding of long-term asset performance improve confidence for all stakeholders involved. They provide investors with greater certainty around delivery and performance while giving Defence greater confidence that infrastructure will continue supporting capability outcomes long after construction is complete.

Viewed in that context, engineering plays a much broader role than the delivery of physical assets alone. Decisions made during planning, design and delivery influence cost certainty, resilience, maintainability, future adaptability and operational performance. Those same decisions shape both investment confidence and capability confidence, creating a direct connection between the infrastructure being financed and the outcomes it is expected to deliver.

As the relationship between investment confidence and capability outcomes becomes more closely aligned, sound engineering becomes the bridge between capital and capability. Partners who understand both become a vital part of efficient, outcome-based delivery.

Australia already has practical experience that demonstrates how these principles can work in practice.

The successful public-private partnership that delivered Headquarters Joint Operations Command in Bungendore remains one example. Opportunities extend well beyond one-off facilities. Accommodation precincts, logistics infrastructure, energy resilience projects and industrial facilities all provide examples of assets where long-term infrastructure thinking, clearly defined operational requirements and strong life cycle management can help align investor expectations with user outcomes.

Accommodation illustrates the point well.

Housing availability and affordability increasingly influence workforce attraction and retention in locations such as Darwin, Townsville and regional Western Australia. Infrastructure partnerships that support accommodation delivery may help address Defence workforce needs while simultaneously contributing to broader regional housing supply. The value created extends beyond the asset itself and into the capability outcomes it supports.

Energy infrastructure presents another opportunity. Defence continues to invest in fuel security, energy resilience and base sustainability. Many of these assets generate stable, long-term performance requirements that align closely with the characteristics institutional investors typically seek, while also contributing directly to operational readiness and resilience objectives.

Northern Australia provides perhaps the clearest example of how these interests converge.

Future requirements across ports, fuel storage, logistics networks, telecommunications and transport infrastructure often carry both defence and broader economic benefits. Carefully structured arrangements create the potential for government, Defence, industry and investors to accelerate project delivery while sharing costs, responsibilities and outcomes more effectively.

None of this diminishes the importance of governance, transparency and appropriate risk allocation.

Defence must retain operational authority over strategically sensitive assets, and any arrangement that compromises sovereignty should be rejected outright. International examples demonstrate that poorly structured financing arrangements can fail to deliver value when objectives, responsibilities and risks are not aligned from the outset.

At the same time, there are risks associated with relying exclusively on traditional delivery approaches in an environment where infrastructure requirements continue to grow in scale and urgency.

Every discussion about deterrence, force posture, industrial capacity and military capability ultimately relies on infrastructure that must be funded, delivered, operated and maintained.

The Australian Defence Force cannot operate nuclear-powered submarines without upgraded port facilities. It cannot sustain long-range operations without resilient fuel and logistics networks. It cannot support a growing workforce without accommodation, training environments and modern bases. It cannot expand sovereign industrial capacity without the infrastructure required to enable it.

The future Defence Estate is far more than a collection of buildings, roads and runways. It is the physical foundation of Australia’s national security strategy.

As Defence explores new funding and delivery models, success will ultimately depend on creating infrastructure that inspires confidence; confidence in its delivery, in its performance and in the capability outcomes it is designed to support.

If alternative financing can help bring those outcomes forward while preserving sovereignty and strengthening resilience, it has the potential to become an important enabler of Australia’s next generation of defence capability.

David Clark is the global market lead – defence for AtkinsRéalis.