In the military, they have a saying: ‘Big hands, small map’. This essentially means you have completely skimmed over the details in your plan and are hoping for the best. It doesn’t instil confidence in your soldiers that the plan is well thought out, and they all know to expect massive problems along the way, which normally translates to more work for them, not less.
At the Defence Connect Budget Lunch in May, Minister for Defence Industry Melissa Price said a very simple sentence during her speech – “We will reduce the cost of tendering, to better support SMEs.” Then she moved on to the next political promise. No context, no detail, no plan, just the outcome statement. Big hands, small map.
No disrespect intended. Just a fact. And with really big problems like the cost of tendering, that take a lot of time and effort to solve, it’s unfortunately all too common.
I initially welcomed the statement knowing the enormous cost that SMEs must absorb to tender within Defence, especially considering the steep slope they are already on to win against the larger players.
It’s often talked about in industry circles so it’s always topical. Give any small business owner an opening, and they will be venting their frustrations to anyone that will listen. So, of course it got a reaction and attention.
But after the initial relief of hearing the statement, I realised, much like every other SME I spoke to after, I was going through the ‘Five stages of Big Hand Announcement reaction’ – Relief, Excitement, Examination, Pessimism, Cynicism/Disregard.
Talk to any SME and they will tell you the current Defence tendering system is too cost prohibitive for SMEs to meaningfully participate. One small business owner after the event told me that for their business to tender effectively, they calculated it would cost them at least $2.3 million. Huge cost for a small business, particularly when historically, larger companies are preferred due to the reduced risk they represent to Defence.
Of course, the potential to reduce that cost would open up a world of opportunity that may have previously been too risky for an SME to consider. Finally! Someone is listening and the problem will be fixed…
Could this mean that SME-primed consortia will have a competitive place in major tenders? Could they collaborate to provide new, innovative solutions that larger companies have been unable to provide?
Thoughts of growth, large program coups and Defence staff that see SMEs as viable players in the market, not just someone to connect to a larger enterprise start to materialise but then… Think of everything that would need to happen for that to become a reality, and is that reality really achievable?
A reduction in the cost of tendering will therefore increase the number of respondents, particularly in the smaller to medium tenders. While it would theoretically create greater competition and therefore value for money, would it also not increase the level of effort and time for all responses to be evaluated? No one wants to increase the time that it already takes Defence to complete tender evaluation. Ever felt the pain of an SME trying to keep their employees employed while they wait for a tender decision? Normally it means two things: either lose the staff and risk not being able to complete the work if they win it, or risk financially crippling the company while they pay salaries with no work on. Will Defence be coming up with a new, streamlined method of evaluation?
So, what size tenders are we talking about? Does it include tendering for large programs or is it just for tenders under a certain threshold? Will it be applied to consulting work or products and capability? If it’s just a universal reduction in costs that allows SMEs to respond to a few more of the minor tenders, then will this have a big effect for SMEs at all and why is the announcement directed at SMEs specifically?
Is Defence now going to take into account all costs for businesses in this assessment and not just the obvious ones? Risk costs money so either the cost is put on industry, which is Defence standard practice, or Defence accepts more risk in the tender process as well as during the program. Previously, an increase in risk acceptance, which is required for engaging with smaller players, is often accompanied with a proportionate increase in reporting which – drum roll please – increases costs for the business.
How will they engage with industry on this? Surely industry bodies such as AIDN, DTC, ADA etc will be consulted. But any change to tendering needs to include the primes and OEMs, as well as the larger players in the market. Who will ensure that the SME voice is not drowned out or lost in the analysis?
How long will this take? Are we talking about reducing the cost of tendering this year? Or a plan to look at reducing the cost of tendering that will be in place maybe in two to four years?
So many questions. Probably a bit early then to get excited.
Haven’t we heard this before? In 2000, Defence launched SMART 2000, which was designed to replace DEFPUR 101 v46 and streamline the acquisition process to make it cheaper, faster and more industry focused. The then under secretary defence materiel, Mick Roche, said, “SMART 2000 aims to address industry concerns over Defence contracting, by sharing risk, adopting a more commercial approach to acquisition documentation and reducing the cost and time of tendering and contracting.”
What happened? AUSDEFCON happened. And we are pretty much back where we started, or so I’m told. I wasn’t in the military then, so I can’t speak knowledgeably about the time BA (Before AUSDEFCON).
The first templates of AUSDEFCON were released in 2002, two years after the launch of SMART 2000. We haven’t heard the name of this new team for this round so we can safely assume that we are still a couple of years off.
The wheel keeps spinning around in Defence.
You can hear the average SME thinking, “OK, so what this really means is there will be a big song and dance about making it cheaper and easier for SMEs to tender, then they will put together a team. The team will spend a few years putting out surveys, meeting with key people in industry and redesigning the wheel. Then they will release a new way of tendering that pretty much is what we have now but in different packaging.”
“Yeah, I’ll believe it when I see it. And even if something is released, the working level of Defence won’t implement it properly for at least another few years. Sigh. Back to it then.”
End of depressing discussion.
While many of us at the event enjoyed discussing the topic and moving through the stages together over the course of the event, I can say that I saw SME owners that have been in industry for the last 30 years go from stage 1 – 5 in 4.3 secs. Perhaps we should be listening to those that been through all of this before about what doesn’t work and prevent this cycle from repeating.
So, where to from here?
This is a complex problem that will require deep, imaginative thought. Innovation is not just a buzzword. It will require resources, wide consultation, but most of all – the ability to accept change in the Department. Not just at the highest levels where the spokespeople live, but at the working level where the requirements are written, the tenders are assessed, and industry is engaged. Without this, it doesn’t matter what new ideas are released, we will just end up with more of the same with new packaging.
I believe that no solution will ever actually achieve the intent unless Defence begins to change its relationship with risk. Industry accepts risk in everything it does, Defence is allergic to it. Yes, we try to mitigate as much risk as possible and this costs money, but you can’t innovate and achieve improvement without risk. If Defence wants to more readily engage directly with SMEs, it needs to accept and be comfortable with risk. Don’t use it as the key discriminator that auto-precludes innovative solutions. Innovation inherently IS risky so you can see why continual rhetoric about innovation and greater collaboration with industry while still showing daily aversion to risk leads companies on a direct path to cynicism.
Please prove us wrong.
Tim Walmsley is a veteran and a small business owner. He is the CEO of BenchOn, which is an automated supplier matching platform, designed for enterprises to more effectively engage other businesses and independent contractors. The unique algorithm intelligently matches organisational demand for contingent specialist talent, and products and services, to other businesses with the best capability to support them.