Primes are increasingly looking to improve their engagement with SMEs, although key challenges remain around imperatives for growth.
Defence Connect took time out to explore the trend with Chris Williams, general manager at H.I. Fraser – a mechanical and industrial engineering company with headquarters in Sydney and Perth.
The firm specialises in the delivery of gas, liquid and waste systems, and provides a raft of design, build, maintenance and certification services.
Williams argued that in order to gauge what primes were increasingly getting right in terms of connecting with SMEs such as H.I. Fraser, it was important to first look at how the Australian defence marketplace has been shaping up during the last decade.
“There have been a number of announcements, but no programs signed up,” he noted. “The submarine program was announced a number of years ago, frigates, LAND400, LAND121.”
While these projects were announced several years ago, Williams made the point that there had been some traction of late.
“When there's heaps of announcements but there isn't any tangible work, [it] means the pie in Australia stays the same size and shareholders need to see growth, so primes need to see growth,” said Williams.
He said the remaining issue here centred on primes, as it were, being obliged to chase opportunities themselves and subsequently, at times, straining to pass on business to SMEs.
“That then becomes quite a difficult loop,” said Williams. “You know, big primes get a purchase order from government that then filters through, [and] nothing creates goodwill better than a PO.”
“And the other thing that purchase orders do is it gives you gross profit, and that gross profit then gives you the luxury of training, innovation and marketing,” he added. “You don't get to do those things if you're not profitable.”
Williams highlighted a further challenge around competition within a limited marketplace.
“It's like that classic 'red ocean' strategy where everyone's going after everyone else,” he said. “It doesn't create room for those intangible things that provide benefit in the future: training, innovation and R&D.”