Government promises audits, simpler ASDEFCON to boost local participation in defence work

The federal government has promised increased scrutiny of defence project decision-making to increase opportunities for local project suppliers.

A statement on Friday from defence minister Linda Reynolds announced “significant improvements” to the Australian Industry Capability (AIC) program and a “major revamp” of the Australian Standard for Defence Contracting (ASDEFCON).

Concerns have emerged from the defence industry — which is made up of about 4,000 companies and 30,000 employees — about  involvement in projects such as the Future Frigates and Future Submarine builds. The latter, which is budgeted at $90 billion, saw an original commitment of 90 per cent of local content from Naval Group fall to 60 per cent. 

Changed AIC requirements would come into effect on January 1 and involve, “additional contractual and non-contractual measures” with consultation on these “over the coming months” with industry, according to Reynolds. 

“Additional AIC provisions in future contracts will require companies to make specific and measurable commitments,” said Reynolds.

“Independent audit firms will then ensure large Defence companies are meeting their contracted Australian industry commitments.”

The Australian Financial Review reports that the annual independent audits will be for contracts worth over $20 million, and projects since 2016 with an AIC program. There is a threat of reputational damage for those failing an audit, with their work added to “projects of concern” list and then audited every quarter.

A review of ASDEFCON aims to “simplify and streamline contracting and subcontracting templates and remove unnecessary complexities.” Terms of reference for this review and the consultation process are due out in November.

Picture: Defence

Subscribe to our free @AuManufacturing newsletter here.