Defence industry in Victoria is carefully managing the impact of the COVID-19 pandemic, with many companies reporting that they have been able to maintain a reasonable level of defence business, with flow-on benefits for developing long-term national resilience, explains Victorian defence industry advocate John O’Callaghan.
Of course, most companies in the defence sector undertake both defence and other work and many have reported that non-defence work has been severely impacted by COVID-19 restrictions.
State and federal government programs have been important in assisting our industry to deal with the current crisis. The Victorian government, the federal government and the Department of Defence have instigated effective programs to help maintain cash flow, provide work and preserve the workforce in those situations where workload levels have fallen.
While not meeting the needs of all, our experience has been that these programs are helping to sustain many businesses.
The Victorian government has supported Victoria’s Defence Alliances (involving a total of around 600 Victorian defence industry SMEs) to identify issues of concern.
Those alliances have been used to ensure the timely flow of information on initiatives to support the sector. This has underpinned industry confidence ensuring their concerns are being heard and action is being taken to assist.
Over the past three months, the Minister for Defence Industry, Melissa Price, and head of the Capability Acquisition and Sustainment Group in Defence, Tony Fraser, along with the Head of the Defence Industry Division, Dr Sheradin Kearnan, have hosted weekly teleconferences aimed at addressing COVID-19 issues impacting on defence industry.
More than 40 defence industry CEOs, defence industry associations, state and territory defence industry advocates and departmental representatives have participated in the regular conference calls. These will continue for some months or perhaps longer.
A number of key measures have resulted from these high-level engagements. Two initiatives have proven to be particularly successful. The first being the decision by Defence to bring forward a number of capability activities.
Thales Australia has increased assembly of its new Hawkei vehicle at Bendigo. This is allowing additional work to flow to its supply chain member companies in Victoria, including protecting local jobs in regional areas.
The second measure saw Defence encourage prime defence contractors to pay supply chain invoices more speedily. This initiative has seen invoices generally being paid within two weeks, with some having been paid within 48 hours.
This has provided a cash-flow fillip to SMEs, especially those experiencing severe disruption to non-defence work. A number of SME CEOs have reported that this activity will need to continue.
The COVID-19 Task Force established within Defence has provided a prompt avenue for defence industry companies to address other pandemic consequences.
The closure of national, state and territory borders has impacted on the movement of technical personnel needed for urgent Australian Defence Force aerospace, maritime and vehicle maintenance sustainment. Where possible, in-situ contractors have been engaged.
A further concern has been the availability of aircraft to deliver critical parts especially from off-shore. A 90 per cent reduction in air freight capacity both domestically and internationally has placed pressure on all businesses dependent on such supplies.
Not only were deliveries impacted but the cost of air freight had initially skyrocketed by up to nine times. Air Vice-Marshal (Ret'd) Margaret Staib, an experienced logistic officer, was appointed to co-ordinate defence industry’s air freight challenge.
A key lesson from COVID-19 is the need to boost the nation’s sovereign industry capability. Victorian companies have shown agility and innovation in meeting critical medical supply shortages.
One fine example is the work undertaken at Shepparton-based Med-Con. Australian Defence Force personnel helped the company quickly adapt to produce 2.6 million face masks.
The company is capable of producing 50 million face masks per year and has plans to increase this to 200 million per year. And, Clets Linen, a family-owned Victorian manufacturing business, retooled to produce 3,750 disposable isolation gowns.
Victoria’s defence industry has a proud history of supporting the ADF. This is across all key industry domains – aerospace, digital, land and maritime. Each contributes to developing sovereign capabilities essential for the ADF. Our ability to ensure that Victoria’s industry is well positioned to meet any increase to national sovereignty needs is underpinned by our strong research and development and manufacturing sectors.
Defence industry in Victoria contributes to advanced technologies in artificial intelligence, cyber, information technology and space. These domains are critical to the ADF meeting its operational and peace keeping roles.
Victorian businesses are playing their part by becoming more resilient and better linked to advanced technology commercial opportunities. This includes protecting intellectual property, investment in skilling and training, and deeper relationships with university research arms.
Increased defence industry involvement in these activities is helping transform Victoria’s economy away from traditional manufacturing to advanced manufacturing technologies for the future. This will strengthen our ability to access new defence industry supply chain opportunities.
World-class research capability is located within Victoria’s universities and associated entities such as the Defence Science Institute and DMTC (formerly the Defence Materials Technology Centre).
Nearly 40 per cent of annual national university R&D spend ($34 million) is contributed by Victorian universities. The Defence Science and Technology Group has a major presence at Fishermans Bend. Each of these entities have collaborated with industry throughout COVID-19 to produce crucial medical supplies.
Such capability and resilience within the defence industry sector does not happen without support. The Victorian government has provided assistance to its defence industry SMEs through such programs as the Victorian Defence Industry Supply Chain Program and the Boost Your Business Voucher Program’s Defence, Aerospace, Cyber and Security stream.
It has also partnered with the Australian Defence Alliance – Victoria to establish the well-regarded Victorian Defence Alliances and supports the Defence Science Institute to foster growth in Victoria’s defence R&D capabilities.
The Victorian government is considering how best to continue to support growth in the defence industry sector through further strengthening the business capability and maturity of its SMEs to participate in domestic and global supply chains.
It aims to attract large defence programs or key components of those programs. This will assist Victoria to grow the skilled workforce necessary to deliver high technology defence programs in the future.
COVID-19 has required Victorian defence industry companies to adapt to new work arrangements. Our companies are reporting that they have been able to work productively while meeting COVID-19 restrictions. Working from home via digital platforms is reported to have been successful for non-critical production personnel.
Victorian Defence Alliance networks have encouraged Victorian companies to share some of their solutions for coping with COVID-19 restrictions, allowing good practice to be applied by others.
A combination of measures have led to cost savings. Many companies believe that new work practices should continue.
Despite the challenges posed by COVID-19, Victoria’s defence sector has considerable strength. This includes long-term build and sustainment contracts, skilled and experienced personnel, mature supply chains, an appetite for investment in advanced manufacturing technology and strong relationships with Victoria’s impressive university and other research entities.
This combination offers confidence that the sector will play its part in Victoria’s economy over the coming months and beyond.
Australia’s response to the COVID-19 pandemic has been remarkably successful.
COVID-19 has seen Victoria’s defence industry at its resilient best. It will continue to adjust to meet any unintended consequences of the pandemic while contributing to recovery of the state’s economy.
John O’Callaghan offers a wealth of defence industry experience and knowledge, with a career spanning both defence industry and Department of Defence.
O’Callaghan spent 15 years in the Department of Defence, including as executive assistant to the Secretary, Department of Defence; Senior Executive Officer, Intelligence and Security Co-ordination; Assistant Secretary, Major Capital Equipment Co-ordination; Assistant Secretary, Special Naval Communications Project; and private secretary to former minister for defence Kim Beazley. O’Callaghan later became senior parliamentary adviser to Beazley.
O'Callaghan is a member of the advisory board of defence electrical systems and C4I provider, Cablex. Prior to this, he spent five years as Executive Director of the Australian Industry Group Defence Council, providing advocacy and support to CEOs of Australia’s leading defence companies on issues pertaining to the future of Australia’s defence industry.