I commend the member for Herbert on his motion on small business and the defence sector, and I rise to highlight the major role and growth potential of the defence sector in my electorate of Indi.
First, I’ll talk about Indi’s small and medium-sized businesses and the role they play in supporting the defence industry and the local economy. Second, I’ll speak to some concerns from those very businesses that measures intended to support Australian companies in defence procurement are not transparent enough and that this lack of transparency is leading to wasted time on bids, preventing businesses from being as efficient as they could be.
So what’s at stake here?
The Hume region, of which Indi makes up a significant part, is host to the largest Australian Defence Force presence in Victoria. In my electorate the Albury Wodonga Military Area consists of five sites and hosts the Joint Logistics Unit (Victoria) and the Army Logistic Training Centre. Therefore, many prominent defence industry businesses conduct major operations in the area. A recently released report, commissioned by the Hume Regional Development Australia Committee, quantified the current value, challenges and projected growth of the defence sector in the Hume region. This report found that the defence sector and relevant industries provided 5,600 jobs and $185 million per annum in spending for the Hume region. This spend is expected to increase to $266 million by 2021—an $81 million increase.
In the Hume region, prime contractors, vendors or original equipment manufacturers whose main business is defence contribute more than 1,300 jobs and $52 million in spending to the economy. Notable businesses include Thales Australia—who operate Australian Munitions in Benalla—BAE Systems, Hide-Away Safe Securities, Milspec Manufacturing and Scientific Management Associates.
Another key group are contractors, service providers and vendors who conduct substantial business with Defence. This includes businesses such as Australian Textile Mills and Red Baron ALSE. This potential growth of $81 million for defence and industry showcases the economic and industrial potential of the Hume region. It’s so important to us. However, this growth will be highly dependent on government effectively maximising the participation of Australian companies in defence procurement.
In December, last year, as part of a quarterly meeting of the Hume region defence sector roundtable, I visited Milspec Manufacturing in Albury. Milspec specialises in electrical subsystems for defence and industry, with clients including Thales, BAE Systems, Rheinmetall, Boeing, V/Line and Metro Trains. They employ 75 people, including tradespersons, apprentices and engineers, and have a turnover of between $10 million and $20 million per year. They’re located in Albury, but half of their employees come from the Victorian side of the border in my electorate. Wherever possible, they buy materials from local suppliers, putting an estimated $10 million into the local economy.
On this site visit, Milspec spoke to me of their concerns regarding the Australian Industry Capability Program, the AIC program. Milspec told me this program is not transparent enough, depriving them of the ability to realistically plan their future business. The AIC program requires businesses bidding for defence contracts to describe how their proposed supply chain will enhance Australian defence industry capability.
Milspec are not alone in these concerns—that the AIC program lacks sufficient transparency for the Australian industry. During the last parliamentary sitting week, Minister Price herself launched a new defence business advocacy group, Industry Voice. Industry Voice have around 30 members, and they’re calling for a measurable and enforceable AIC policy to ensure Australian businesses have the best chance to secure defence contracts.
Industry Voice members, such as Milspec, are concerned that the current program leaves smaller Australian suppliers with little to no certainty when preparing bids. For example, Milspec prepared a bid with another Australian company for an element of a large defence company’s project for 18 months. It involved trips overseas and intense research and development, but, at the last minute, they were told this element of the project was now closed to Australian bidding. This was because the Australian component required by the plan had already been met in the time it took Milspec to prepare their bid. There was no realistic way for Milspec to see that coming, and clearly this is not a level playing field.
There’s great growth potential in Indi for businesses involved in defence, and the predicted $81 million in growth for my region is vital as it will underpin not only the defence industry but the wider local economy. But we need a level playing field.
[February 25, 2020]