A West Australian group of 32 defence-focused companies, the Henderson Alliance, is seeking urgent policy change from the federal government ahead of the forthcoming navy build.
As reported in May by Defence Connect, the alliance is looking for more policy decisions from the federal government to provide greater surety for small to medium enterprises (SMEs).
Darryl Hockey, co-ordinator of the Henderson Alliance, said the group is supportive of Minister for Defence Industry Christopher Pyne's commitment to local content, but has concerns for SMEs after preferred bidders are announced for the Offshore Patrol Vessels and Future Frigates projects.
"We wholeheartedly support Minister Pyne’s local content commitment and insistence on comprehensive obligations in the bidding process towards local participation – however we are concerned that once the preferred bidders are announced, without an ongoing mechanism to hold them to account, the prime contractors could potentially soften their commitments in the future," said Hockey.
"Let’s face it, we all know that prenuptial promises are easy to make and even easier to wiggle out of – so all we ask is for the integrity of the local content regime to be fortified.
"We certainly aren't looking to place any undue burdens upon the primes nor to ask them to do anything more than they have already voluntarily committed to and been assessed upon – we just seek comfort that the contract management process has extra transparency and integrity."
The former WA Citizen of the Year also stressed that creating stronger measures in maximising local content participation will enhance the $195 billion government investment in defence.
"The PM has a mantra to create jobs and growth – but unless firm measures are taken to regulate local participation in this major 10-year government defence commitment of $195 billion of taxpayers' money, a significant national economic development opportunity may slip through his fingers," Hockey said.
"In seeking these policy changes, the SME community is not being critical of primes or anybody else, we are simply putting up our hands and publicly declaring confidence in our ability to play a central role in the delivery of defence work packages. We can deliver innovation and top-quality outcomes on-budget and on-schedule, thereby ameliorating risks on behalf of the primes – as a sector we have extraordinary capabilities and all we want is a fair chance to participate and prove ourselves.
"SMEs currently account for about 70 per cent of Australia's private job market, however over the past six to seven years the nation has seen little growth from SMEs, the growth has instead come almost entirely from larger companies. This is because the business factors and policy settings are increasingly favouring the larger end of town, and often these big firms aren't even Australian-owned."
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The alliance has called on the government and Minister Pyne to take as many steps, small or large, to create mechanisms that will guarantee SME participation is maximised by the foreign bidders.
"There is a vibrant ecosystem of SMEs in the Henderson precinct which has expertly supported naval sustainment for years and has the transferable skills to ensure optimal outcomes are achieved with building the new offshore patrol vessels, submarines and frigates. But to do this, we will need a fair go and a transparent local content regime with visible operating parameters," said Hockey.
“If the minister establishes a mechanism to hold the winning bidders to their word and demonstrates he has future enforcement powers in reserve then we will be happy – it will be a thoroughly sensible precautionary action for a responsible government to undertake. We want to ensure SME participation is enhanced so that maximum economic and social benefits will be achieved for Australia – that’s not too much to ask, is it?
"We also request tighter local content definitions to minimise any circumvention – as an example it isn't hard for a foreign supply chain contractor to create a local PO box and ABN to set up a business channel which meets local content reporting requirements."