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The Australian government needs to more clearly refine “Australian business” definitions and reallocate domestic spending from foreign-owned subsidiaries to Australian primes for greater economic benefit, according to a recently published defence industry report.
The findings were outlined in the extensive December 2025 report, titled The Defence dividend: Strengthening Australia’s economy through sovereign Defence procurement, produced by DeltaPearl Partners and tasked from the Sovereign Australian Prime Alliance (SAPA).
SAPA membership at the time of the commissioning of the report included Aspen Medical, NIOA, DroneShield, Macquarie Technology Group, AUSTAL, Nova Systems, and Gilmour Space Technologies.
The report found that a greater proportion of defence procurement spending towards genuinely Australian-owned and operated prime contractors could deliver economic and strategic benefits, as well as a strategic “sovereign dividend” for the nation.
The report sets out five strategic recommendations for the Australian government to provide a more sophisticated framework for a stronger nation. These include redefining “value for money”, adopting a quantitative framework for procurement decisions, strengthening “Australian business” definitions, empowering procurement officials and adopting a whole-of-government approach to Defence procurement as a key driver of national economic strategy.
“True value for money in the context of Defence procurement incorporates sovereign capability, supply chain resilience, economic multipliers, innovation spillovers, local job creation, and national security considerations. The Australian government should establish a mandatory weighted procurement evaluation framework that quantifies the total value proposition of a bid,” according to the report.
“Without this foundational shift in perspective and mandate, procurement practices will continue to undervalue the wider economic and strategic benefits that may accrue from supporting Australian-owned and operated firms in high-value defence contracts.
“The government should adopt a quantitative tool, such as the recommended Sovereign Dividend Scorecard prepared as part of this project for Defence procurement. This framework moves the assessment beyond the ticket price to a holistic ‘net benefit to nation’ calculation.
“The definition of Australian business in Defence’s industry policy should be strengthened to ensure contracts awarded in the national interest deliver genuine sovereign benefits, prioritising firms with Australian ownership, control, and IP retention, reflecting the new 2025 definition included in the CPRs, and use it for all future tender design, analysis and subsequent reporting.
“Defence must adopt a more rigorous, multidimensional definition that distinguishes genuinely sovereign companies from local branch offices.
“Policy intentions are failing at the operational level because procurement officers lack the tools and confidence to prioritise sovereign outcomes … The Australian government should develop and adopt user-friendly tools, such as the Sovereign Dividend Scorecard with its simple spreadsheet format, to make assessing broader benefits straightforward and repeatable.
“The Australian government should reframe Defence procurement as a primary instrument of national policy, not merely a cost impost … Defence procurement cannot operate in a silo. A coordinated, whole-of-government strategy is essential to integrate industry policy, workforce development, and strategic priorities, ensuring Defence investment builds enduring national capability and prosperity.”
As an example, the report sets out a conservative scenario where 5 per cent of Defence spending is reallocated from imports to domestic firms, without increasing the total defence budget. It alleged that modelling estimates could see a potential gross domestic product uplift of between $5 billion and $8.2 billion annually, and creation of 25,569 to 43,205 full-time equivalent jobs within Australia.
Under potentially ambitious reforms, the report also argued that by shifting more contracts to domestic primes, Australia could begin to build a resilient, sovereign-capable defence industrial base.
This act, in itself, is designed to provide a “sovereign dividend” through the supply-chain resilience and risk mitigation of being less reliant on foreign suppliers, reducing vulnerability to global disruptions as well as domestic primes reinvesting profits, building research and development capability, retaining intellectual property and promoting high-skill jobs within Australia.
Over time, these firms could evolve from domestic contractors into exporters of defence materiel and services, potentially becoming a source of sovereign export capacity.
“Procurement decision making continues to rely on outdated, narrow definitions of value for money focused on upfront cost rather than whole-of-life and whole-of-nation benefits,” according to the report.
“Ambiguities in defining an ‘Australian business’ allow foreign-owned entities to capture contracts, limiting genuine domestic capability development. Furthermore, public servants in charge of procurement lack clear, practical tools and guidance to prioritise strategic national interests in tender evaluations, perpetuating risk-averse behaviour favouring large foreign primes over innovative Australian SMEs and primes.
“To fully realise the sovereign dividend revealed by economic evidence, reforms are required. These include redefining value for money to encompass the broader economic, strategic growth, and sovereign capability dividends; strengthening the definition of Australian business to capture ownership, control, supply chain commitments and IP retention; empowering procurement officials with quantitative decision support frameworks; and adopting a whole-of-government approach aligning procurement with national strategy.
“This integrated approach will ensure that future defence procurement not only delivers required capability but also builds a resilient, innovative, and sovereign Australian defence industrial base that supports national security, sustainable economic development, and global competitiveness.”
The statistics and findings of the report not only urge decision makers to “buy Australian” but to go further by establishing a concrete framework or “Sovereign Dividend Scorecard” to be embedded in procurement decision making.
The Defence dividend report doesn’t call for dramatically increased spending or an industry overhaul, it advocates for defence contracts to be judged more on long-term returns (national resilience, employment etc) than upfront cost.
“Strategically mixing local capability building with selective international partnerships avoids inefficiency, protects against overdependence, and ensures optimal outcomes for the ADF and the broader economy. A realignment of the Commonwealth Procurement Rules to direct more procurement towards Australian firms is one of the most powerful policy levers available to maximise Australia's sovereign capability and economic growth,” according to the report.
