Mendoza-Jones discusses his years of experience with the Department of Defence, Defence’s Smart Buyer Program, how he started his own firm and specialised in government business and defence industry matters, and the rise of commercial and legal advice needed in defence industry in relation to intellectual property and risk sharing.
The RAAF Reserves legal officer explores how his firm looks at the range of broad strategic commercial advice about a procurement process, all the way down to negotiations with the government agency on Defence contracts through to the execution.
Join us as we look at the fundamental aspects of how Defence operates a business where national interest and the projection of Australia's military force is the key goal.
Enjoy the podcast,
The Defence Connect team.
Listen to previous episodes of the Defence Connect podcast:
Episode 77: PODCAST: Driving Australia’s defence industry at home and abroad, The Hon Christopher Pyne MP, Minister for Defence Industry
Episode 76: PODCAST: Fixing veteran unemployment, Tom Moore, WithYouWithMe, co-founder and CEO
Episode 75: PODCAST: More than just a builder of tanks and trucks, Gary Stewart, managing director, Rheinmetall Defence
Episode 74: PODCAST: Building a sovereign space capability – Rod Drury, managing director Australia and New Zealand, Lockheed Martin Space
Episode 73: PODCAST: Building long-term capability for defence and industry through LAND 400, Brian Gathright, vice president of business development, BAE Systems Australia
Episode 72: PODCAST: Shaping the conversation in defence industry, Kate Louis, head of defence and industry policy, Australian Industry Group
Episode 71: PODCAST: Technology transfer in naval shipbuilding, Sean Costello, director, Fincantieri Australia
Episode 70: PODCAST: Taking the reins of a defence prime, Gabby Costigan, BAE Systems Australia, CEO
Episode 69: PODCAST: A smooth transition to defence industry – Colin Thorne, partner, engineering and asset management, KPMG
Episode 68: PODCAST: Leading from the front in defence industry, Warren King, chairman, Navantia Australia
Announcer: Welcome to the Defence Connect podcast, with your host, Phil Tarrant.
Phil Tarrant: Well, good day everyone, it's Phil Tarrant here. I'm the host of the Defence Connect podcast. Thanks for joining us today. We're going to get a little bit legal today. I've asked someone to come into the studio who has a pedigree within the law, in particular within government and defence services. He's also a legal officer with the Royal Australian Air Force Reserves. Daniel Mendoza joins us. Daniel, how're you going?
Daniel Mendoza: I'm well, thank you. How are you, Phil?
Phil Tarrant: I'm very good, mate. Thanks for coming in. It's good to see you.
Daniel Mendoza: Thanks for inviting me.
Phil Tarrant: Founder of Mendoza Legal and Consulting, but you have come out of one of the major firms. Allens Arthur Robinson, which is now, I think, Allens Linklaters after one of the many, many mergers that happened within the law.
Daniel Mendoza: That's right.
Phil Tarrant: Let's have a chat with this. Why the shift from big law into doing your own thing and why the specialisation on defence in particular?
Daniel Mendoza: Well, starting off in a big law firm was probably one of the best things I could've done in relation to getting my legal career off with the best possible standing, the sort of technical, commercial and legal training that graduates and junior solicitors receive at these big firms, in this case, Allens is second to none. And since that time, it's really stood my in very good stead and much of what I do now, I can even see the heritage in the advice that I give coming back from what I was taught in those few years at Allens.
I moved on from that to take up an opportunity to actually work with the Defence Department for a few years to run a special project for the service chiefs in relation to financial services and consumer protection issues, which was a wonderful opportunity. And since having done that, having had some private sector experience and some public-sector experience working for the Defence Department directly, I started my own practise a few years ago in corporate and commercial law, specialising in particular in government business and defence industry matters.
Phil Tarrant: So, there's a couple ways that we can take this podcast. Going to try and tackle both of them. One is you as a business, SME working within defence, and the other side of that is the services that you provide into defence and some of your observations on the markets. Let's handle the first one first. How have you found setting up a business within the defence space? Has it been easy or has it been quite trying?
Daniel Mendoza: I think, given my experience in working for the Defence Department previously and the association that I've had with the Defence Force and the department over nearly 12 years now, I don't think I was necessarily surprised about the issues that I'd come up against or that I would have to address in making a new offering in the market. What I think the challenge has been is identifying opportunities within the defence industry market for good commercial legal advice from suppliers to either other suppliers to the Defence Department, or to the Defence Department directly, who don't necessarily have the inclination or the budget or any other reason to necessarily involve a particularly large law firm and identifying those opportunities has actually been the key to the success that I've had so far in identifying what that niche has been and it's actually been a very encouraging experience so far.
And the, I think what it's indicated is that for a long time, there's been an assumption that the only place to go to for good, commercial legal advice with application to defence industry and government business has been either a top-tier law firm or a mid-tier law firm, but of course, and perhaps that's been therefore an under-serviced market and that's not necessarily the case anymore. And for that reason, I've been very encouraged by the level of reception that my new practise has had amongst certain of the industry participants.
Phil Tarrant: Yeah. I guess, for our listeners who aren't familiar with some of the changes happening within law right now, you're going from old-school traditional law into new law and new law means a lot of different things, but it's pretty much people getting better value for money.
Daniel Mendoza: Yeah, yeah.
Phil Tarrant: Through greater efficiencies, greater focus on service and more nimble players are able to deliver quality advice but do it in a way in which they don't need the most expensive offices in town to do so. So, this is what we're seeing within the law and then also what you're painting here, within defence. So, your services, as in what do you do, can you just give us a quick brief on that?
Daniel Mendoza: Oh, sure. I mean, the services that I and others that become involved in my practise when necessary offer to clients in this area range from broad strategic commercial advice about a procurement process, all the way down to the actual negotiation with the government agency on the actual contract, all the way through to execution, and in many cases, advising the client on the ongoing management of that contractual relationship between the client and the government entity.
So, the different areas of commercial and legal advice within that is myriad in that it could relate to intellectual property, it could relate, in particular, to risk sharing, which has become a particularly prominent issue recently, all the way through to more regular features of contract negotiations that your listeners would be well familiar with. So, the way in which I've been engaged so far has either been at the outset of a procurement process, whether a particular client is considering responding to a request for tender that they've notice pop up on the AusTender website, for example, or the decision's already been made and in providing the advice and the guidance all the way through the procurement and contract negotiation process, that's the sort of stability we've been able to offer clients so far.
Phil Tarrant: And does defence industry and dealing with the customer, Defence, differ that much from other market segments that you work within?
Daniel Mendoza: I think, on the one hand, they don't in that they're running businesses and they've got clear objectives and those objectives are commercial and they're either trying to return value or maximise value for their shareholders or do something that increases profitability for their particular commercial organisation.
On the other hand, I've found them fundamentally different because what they're doing is operating in a sector which has regard, of course, to the national interest and the projection of Australia's military force, perhaps on an expeditionary basis overseas or for more local purposes. And that common purpose and that common interest in participating to that national interest effort is not something that I've found in providing services to clients outside defence industry.
Phil Tarrant: Interesting. And this goes on to the second part of what I wanted to chat to you about, and that's, the customers that you work for, so, your clients, I imagine the primes engage your major law firms.
Daniel Mendoza: That's right, yeah.
Phil Tarrant: And there's a lot of established, incumbent relationships there.
Daniel Mendoza: Yes.
Phil Tarrant: So, you work within this ground of people supplying into large primes or people the third rung down.
Daniel Mendoza: Yeah, that's right. And that's been the, I think, the opportunity that has given rise to the welcome reception that my practise has had amongst those particular clients. Because of the fact that we, as you were referring to before, the cost basis to our fees are necessarily much lower. We don't have the overheads of running an established practise and the level of personal attention to detail, personal attention to the relationship that my practise is able to offer to those, perhaps, smaller clients has been very well received.
Phil Tarrant: And we have a lot of SMEs that listen to this podcast, we like to fly the flag for SMEs within the defence space. How would you grade or judge their level of sophistication when it comes to legal components, legal ramifications when it comes to working within the defence space? Are they pretty savvy or, some room to grow?
Daniel Mendoza: Look, I think there's always room to grow in a sector that is constantly evolving. Those clients that I think have been able to achieve the most successful relationship with government agency, in this case, defence, have been those that have really kept up to date with the changes, the legal and policy changes that have taken place. Classic examples, those industry participants who are operating with a, perhaps, outdated mindset about their approach to dealing with the government, take a, perhaps, unnecessarily adversarial approach in dealing with, in this case, the Commonwealth.
Whereas, I think, what government agencies are looking for much more these days are a partnership-oriented relationship with their potential suppliers and those suppliers that enter into a more collaborative approach of dialogue with the government agencies tend to be those who are much more across those legal and policy developments that I was mentioning before.
The rate with which, for example, the Defence procurement policy manual is updated or, more recently, completely rewritten. A few years before that, we've had the replacement of the Financial Management and Accountability act with the Public Government's Performance and Accountability act, these are the sorts of changes that those clients who've been able to successfully walk into negotiations with the government and then successfully conduct the negotiations through to contract execution, they're across these details.
And I think it doesn't need to be anything more complicated than simply staying across the defence industry media about what those updates mean and getting good advice when the time's right.
Phil Tarrant: So, the picture you're painting to me would appear to have changed quite a lot over the years. So, within Defence themselves and the lawyers sitting on that side of the table, there's this, now, level of pragmatism around contract negotiations where, there's a job to be done, let's get there as easily as possible without the hostility between the two parties.
Daniel Mendoza: Yes.
Phil Tarrant: So that is actually happening? That's taking place?
Daniel Mendoza: The number of reforms that have taken place that affect the approach that the Defence Department and its officers that I've seen while being on the other side take has changed dramatically compared to, say, 10 years ago. Having said that, of course, in any particular procurement process or negotiation, the extent to which the new reforms and the words put behind them in the new policy documents are actually experienced by the defence industry participant really depends on who you get representing the agency across the other side of the table, and I suppose in some circumstances, that's why the experience still remains a little bit varied. But I suppose over time, once the new philosophies about, well, you know, a recent example being Defence's Smart Buyer programme and that very flexible and adaptive approach makes its way across all generations of Defence procurement officers and lawyers advising them, I'm sure defence industry participants will notice a more collaborative, flexible and responsive negotiation experience with the Department.
Phil Tarrant: That's very encouraging, obviously. And for yourself and the work that you do dealing with leaders and executives in the organisations that you're advising, what to the very good ones do the best, in terms of framing or shaping the way in which they are entering contract negotiations and needing some legal assistance? Is it just openness or willingness to change?
Daniel Mendoza: Well, I think the first thing they do that separates them from other leaders and organisations which, perhaps, aren't so successful, is that they're always putting their best foot forward and that they're always, one, maintaining relationships and open communications with the relevant people in the agency and staying across what needs might be emerging and so that when, in this case, a request for tender pops up on AusTender, they're not the first to know about it or it's not a surprise, because they've been engaged in the dialogue through Defence's new industry consultations and industry participation mechanisms and they're already well advanced in relation to the commercial and legal issues that would be required for that organisation to be in a advantageous position if they were going to be a successful tenderer.
Those who have struggled act in a more responsive way and wait for opportunities to be presented to them, either by way of Tender and then, in many cases I feel, playing catch-up on the legal issues simply because they've been put in a situation where even if they go through to contract award, they're being offered a contract on an almost "take it or leave it" basis with very little opportunity for the negotiation of what otherwise might be fixed-template terms and conditions, which could otherwise have been framed very differently from a very early engagement or intuitive engagement in the process earlier on.
Phil Tarrant: I think a lot of people frame legal advice as a reactive asset you need sometimes when you find yourself in trouble and what you're saying here is, needs to be very much proactive. So, making sure you've got the right people within your team, way before a request for tender even comes into play. So, you know that you've got the best business possible prepared to go when that tender actually hits the open market and you can actually negotiate, is what you're saying. It's just not ... The government doesn't always dictate exactly what it is. If you've got good proposition, you can actually ... The terms become negotiable.
Daniel Mendoza: Yeah, that's right. And I think that's different to how it might have been 10 or 15 years ago, when industry's view of the Defence organisation might very well have been that it was relatively inflexible in its contracting approach and it took a very template-based and risk-averse approach to entering into legal negotiations with particular suppliers, but having advised and acted for clients recently, I've noticed a definite change in that way and a much improved approach to contracting flexibility, which I think comes down to improved empowerment of defence officials in relation to their contracting activities and a professionalisation of the skills within the legal and procurement areas of defence, so that they do know what the requested change might mean, its commercial and legal implications and then to be empowered to actually reflect it in the contract. I think that's something that we've seen emerging, which is quite positive.
Phil Tarrant: And what we have seen emerging also is a lot of new entrance into the defence space from organisations that haven't traditionally operated in this area and that's a result of huge investment, government investment over the next decade into defence acquisition and sustainment, which is good. Good news for the country, good news for businesses right across Australia. But all these new entrants coming in, I don't know if you've done much work with them beforehand, but a lot of them, this is their first foray into it and they have a lot of challenges understanding, I guess, the playing field, about how you go about securing defence contracts. Any tips for these new entrants into the market?
Daniel Mendoza: Yeah, well, look, I suppose without being too direct about it, this is a perfect example of when having someone there to guide you through the process, who understands the defence landscape in the context of the particular legal issues and commercial issues and the assessment of things like risk and how that might appear to a government agency, whether that's similar or different to how that's received by the commercial organisation. Someone on hand to provide that high level and also detailed guidance on navigating what is, otherwise, quite an opaque environment to new entrants or outsiders can be invaluable.
Phil Tarrant: And for people coming into this marketplace and even for established players who are understanding that they need to potentially evolve their organisation to secure greater defence work, how can you build a business which is most de-risked in terms of, in the eyes of the government? Is there any couple of things that you can actually minimise and make it part of your DNA so it never comes up as a potential issue you've got to negotiate about when it comes to a contract?
Daniel Mendoza: Yeah. That's an excellent question, because there are so many emerging priorities that the government agency, in this case Defence, focuses on in identifying a successful tender up to go through to contract award. And to answer your question from the other tend, would be for an organisation to identify what steps it can take to make to increase its attractiveness to the defence department for the purposes of contracting and the organisations only need look at the range of different access mechanisms that the Defence Department's put in place to be able to, in many cases, even bypass the tendering process and gain justified and fully legal access to a single supplier limited tender arrangement. There are opportunities for indigenous involvement, there's opportunities for organisations that employ people with disabilities to go directly through to a limited tender, single supplier arrangement.
Which, in many cases, will be attractive to departmental representatives who are looking to be able to achieve some other kind of national interest purpose and also to not necessarily take the department through a time-consuming, expensive tender process, but the ... To come back to your question, the principal risks which I'm seeing that are being raised by departmental representatives with clients that have to be overcome, either through the request for tender process or through contract negotiation, are relating to personnel. Their backgrounds, their ability to obtain and maintain relevant security clearances. And it might sound logical and it might sound obvious, but I'm sure all of your listeners will be aware, the time that it takes to achieve certain security clearances from the Australian government security vetting agency, it's not necessarily quick and all of these things should be put in place well before the entering into of a request for tender process.
The number of times that I've seen contract negotiations become relatively advanced and then things go off the rails simply because the right personnel weren't in place with the right clearances at the right time, could have easily been avoided. So, this, I suppose, is one example of a range of regulatory or legal issues that are easily addressed much earlier on in the piece, that can, from the Department's point of view, de-risk the procurement process with that particular organisation.
Phil Tarrant: And keeping on people, so if you're an SME or a mid-tier type of defence organisation, how granular can you get at that hiring process to cover off all the information that you need to be able to cover off so that at point time, it might be one or two or three years away, when person number A needs the relevant clearances to do a particular job, how granular can you get? Can you get that information? Because a lot of legislation around privacy, with this type of thing.
Daniel Mendoza: That's right, and examples of where I've seen organisations approach this somewhat tricky question successfully is have been quite open, honest and upfront about it through the recruitment process of their particular personnel, employees. Examples might be after listing all of the desirable criteria that a new employee will meet about experience in the relevant areas and education, a key selection criterion is that the successful applicant must hold or be able to obtain a relevant government security clearance at the appropriate level and for that to be held for the ... Either on an as-required basis or throughout the duration of the employment.
And in that way, expectations are managed, the privacy issues are almost always overcome and potential employment applicants who think they're going to have a problem in achieving security clearance mostly don't apply.
Phil Tarrant: And how does that work for you, as a lawyer getting involved in some of this work? You'd have to hold some level of security as well?
Daniel Mendoza: Yeah, that's right.
Phil Tarrant: Okay, interesting.
Daniel Mendoza: Yeah. And that's necessary whether it's because of the sensitivity of the commercial arrangements, the subject of the procurement and the contract negotiations, it might involve, for example, equipment that's being purchased from an overseas, or from a foreign government that might be subject to their own security arrangements or otherwise, on a non-national security, equipment-based basis, it might relate simply to confidentiality and the consequences of that confidentiality being breached, if it in any way can go to the effect of the national interest, that's when security clearances become involved in these sorts of arrangements are necessary.
Phil Tarrant: A lot of moving parts, isn't it?
Daniel Mendoza: There are, indeed, yeah.
Phil Tarrant: But, this has been very technical. Why defence, why do you like it? Tell us a bit about you. What is it that you find particularly attractive about this space?
Daniel Mendoza: I think the reason why I find this area so interesting and the reason why, I suppose, I've ended up specialising in defence industry as part of my commercial legal practise has been my interest in all matters aviation and aerospace for a long time and I think that actually goes back to when I was a young boy and I had the ... My father was, and still is, in advertising and he was fortunate enough to have airlines as clients and so we tended to do a lot of flying around the place, which was, of course, the most exciting thing that a young boy can do.
And since then and having remained closely involved in matters aviation through my involvement with the Air Force Reserve in more recent years, I've just, through that proximity have developed the familiarity and the level of involvement with different aspects of the aerospace and aviation industries that gives rise to real enthusiasm and a great deal of passion on my part, which is ... And I actually feel very privileged to be able to identify this area as a way of practising commercial law, because, of course, there are many ways of practising commercial law that aren't necessarily as important or as interesting or as exciting, but this is.
Phil Tarrant: And do you think it helps, having a foot in both camps? So, within the Reserves and also on the commercial side, representing organisations who are equipping our nation's forces? It must give you interesting insights.
Daniel Mendoza: It does. It also can make things a little bit difficult, which is why I need to be very careful about how I hold myself out. For example, talking to you here today, I'm here strictly in my private capacity, but it's not a secret that I'm also a Reservist with the Air Force. But the work that I do, either for private clients or work that I might happen to have done for the Air Force in the past, I've got to be very careful about how that affects conflicts of interest and the need to remain clearly focused on who is my client, which is why, as you'd expect, that has to be managed very carefully to ensure that a potential client I'm actually able to take on, I haven't acted on the other side of a transaction, for example, that might conflict me out of taking on that new organisation as a client or I might have information based on something that I've been involved with either for the Commonwealth or for another client that would create professional practise problems. So far, all of which have been well managed and totally avoided, I'm very happy to say.
Phil Tarrant: That's good to hear. That level of awareness, it's fundamental to what you guys do for a living in terms of representing people.
Daniel Mendoza: Sure, that's right, yeah.
Phil Tarrant: But your time as a reservist, so, how far through your professional career were you before you went, "You know what? I want to put a uniform on."
Daniel Mendoza: It was as soon as I was admitted as a solicitor here in New South Wales. That's the sort of threshold after which legal officers can be considered for appointment to the Specialist Reserve in the Air Force and my involvement in matters to do with the Air Force actually goes back to when I was at school. I did Air Force Cadets and thought that was a wonderful experience in many ways, those experiences in Air Force Cadets were formative as a teenager at school, both in relation to my personal and professional development and my ability to speak to large groups of people and be confident about the sorts of things that I'm communicating in either a leadership or advisory context and of course, the military connection between Air Force Cadets, the Air Force and what I'm doing in my private practise. You can see how it all links together.
Phil Tarrant: That does. And how did you find that recruitment process, into the Specialist Reserve? Was it quite a simple process or it took a while?
Daniel Mendoza: Look, I've got no doubt that the good people at Defence recruiting are always finding ways to improve their processes. I'm not sure whether you'd come across many people who have joined the Specialist Reserve who would have found the process a particularly rapid or smooth sailing one. Having said that, of course, Defence is a large organisation and they've got lots of processes and checks that they need to do to make sure that their recruitment process is a robust one. But it does, for any potential applicants listening, I suppose, it's just important to keep in mind the need for patience and perseverance.
Phil Tarrant: And what's been the most rewarding thing you've done as a reservist, so far?
Daniel Mendoza: The work that I've done as a reservist has been quite broad across the different areas of military legal practise, whether that's military administrative law, military discipline law, military operations law. Some of the most rewarding work, other than advising commanders on particular decisions that have legal considerations, has actually been able to assist members with what they otherwise would seem to be completely intractable legal problems, and whether that's attending as the rostered legal officer at the Legal Aid Day at the particular Air Force base or being assigned to somebody who's been given notice of potential adverse action in an administrative context. In cases where you've actually been able to assist a person achieve what they genuinely see as justice in their eyes, is, I don't think as a solicitor, as a lawyer, you could ask for more professional satisfaction than that.
So, certainly worked on larger matters and matters of greater organisational interest, but having, being actually able to help individuals with their particular problems, with their particular legal problems, which are totally outside their areas of familiarity or expertise, have been particularly rewarding.
Phil Tarrant: Well, it's a very important service you provide our serving Air Force men and women, so I thank you for that. Daniel, I've really enjoyed the chat, I think we covered quite a lot. Particularly for the SME sector, I would take from this particular conversation the need for proactivity when it comes to legal matters and not just thinking you need a lawyer when things go wrong.
Daniel Mendoza: That's right.
Phil Tarrant: Lawyers ... I know I spend quite a lot of time with lawyers in some of the other stuff that I do and it's something that resonates all the time, but I don't think ... I think, big business gets it but a lot of SMEs don't get it, that it's okay to have a lawyer on side to use them for proactive work, rather than reactive work and it can be very commercially beneficial, you know?
Daniel Mendoza: I'm pleased you think so, because I'd certainly agree with you.
Phil Tarrant: It's good. So, how would you ... We'll finish up on this question and you've been in this space for a little while now, how would you describe today's defence industry versus what it was a decade ago?
Daniel Mendoza: Those participants in the industry that I've had the privilege of working for recently, I think are much more finely tuned to the evolving nature of the Defence Department and its needs than, say, 10 or 15 years ago. I ... The number of organisations that I'll speak to that will be right across the philosophical, and believe in the philosophical underpinnings for example, of Defence's new Smart Buy programme and they'll be able to talk conversantly about the contents of the Complex Procurement Guide or the Simple Procurement Process tool, that's fantastic, because it means those organisations, those clients have been proactive. They have been kept up to date about changes in this area, whereas 10 or 15 years ago, if you started a conversation about the relevant procurement laws or departmental policies, I think you would have got many more glazed eyes looking back at you and I think that's a principal difference.
And I think to the extent that defence industry participants can remain interested and up to date on those evolving procurement policies and attitudes, evolving attitudes towards procurement, the better they'll be off and the more successful their procurement ventures will be.
Phil Tarrant: Well said. Daniel, thanks for your time, I've enjoyed it.
Daniel Mendoza: My pleasure.
Phil Tarrant: That's Daniel Mendoza Jones, he's the founder of Mendoza Legal and Consulting. Thanks for joining us today, it's all very good to have you on board once again. We'll be back again next week, until then, make sure you subscribe to DefenceConnect.com.au. If you're not getting our Morning Market Intel and News, make sure you subscribe. DefenceConnect.com.au/Subscribe. Keep those reviews coming on iTunes, we do appreciate them, it's good to know that we're doing some good stuff.