Australian Industry Capability

The 2016 Integrated Investment Program (PDF) and the requirement to achieve value-for-money determine the investment priorities for Defence and the need for any specific in-country industry capabilities. In accordance with DIPS, the AIC Program aims to:

  • Provide opportunities for Australian companies to compete on merit for defence work within Australia and overseas.
  • Influence foreign prime contractors and original equipment manufacturers, including Australian subsidiaries, to deliver cost-effective support.
  • Facilitate transfer of technology and access to appropriate intellectual property rights.
  • Encourage investment in Australian industry.

The Minister for Defence and Minister for Defence Industry announced in a media release in September 2020 improvements to the enforceability, measurability and accountability of AIC plans in Defence contracts and an ongoing AIC Plan audit program to validate performance and strengthen the Australian Industry Capability Program.

Aligned to the requirements of the 2019 Defence Policy for Industry Participation, Defence is introducing:

  • a risk-based AIC assurance framework that includes the independent AIC Plan audit program; and,
  • an enhanced AIC contractual framework.

These changes have been made to ensure the Australian Industry Capability Program remains effective in enabling government’s defence industry policy of maximising opportunity for Australian industry involvement in meeting Australia’s defence capability needs.

Stakeholder communication on the implementation of these changes has now commenced; more information will be made available as implementation progresses through 2020.

For more information contact Defence’s Capability Acquisition & Sustainment Group

Defence has developed an enhanced Australian Industrial Capability (AIC) contractual framework and supporting artefacts with specific and measurable AIC commitments that promote greater accountability for achieving the AIC objectives.

Defence has changed the approach for AIC from a ‘one-size-fits-all’ approach across its acquisition and sustainment contracting templates to a more flexible and scalable approach. This approach enables greater alignment with the unique aspects of each procurement, and is consistent with the view of Defence industry as one of the fundamental inputs to capability.

The changes to be introduced by the new framework are all directed at:

  • better achieving Government’s and Defence’s requirements for maximising opportunities for Australian industry to participate in each procurement, while also recognising the core role of industry in delivering ADF Capability; and
  • strengthening the contractual terms to ensure that these requirements are achieved through introducing revised tendering processes and specific and measurable contractual commitments to enhance accountability.

Under the new framework, the key enhancements are to elevate AIC as a “core” clause with strengthened AIC obligations that contractors must comply with under contracts, and to complement these obligations with a new AIC remediation regime.

The enhanced contracting framework will not be applied retrospectively. Defence will adopt a phased implementation approach across the ASDEFCON template suite from 1 January 2021.

Defence will undertake industry consultation on the first package of draft documents—the AIC core package—which comprises:

  • updated Conditions of Tender, Conditions of Contract (and Glossary), and Statement of Work;
  • new Australian Contract Expenditure Measurement Rules; and
  • extracts of relevant artefacts to describe the enhanced framework.

Consultation on the AIC core package is already underway and will close by Monday 30 November.

It is intended that a second release of the entire revised documents in the AIC Core Package and other artefacts will be available four weeks after this initial release.

We welcome your feedback on both the AIC Contractual Framework and the Independent AIC Plan Audit Program at any time. Please provide your feedback to aic.pmo@defence.gov.au.

The Minister for Defence Industry issued a media release in June 2017 highlighting the strengthening of the Australian Industry Capability Program.

As the media release notes, the Australian Industry Capability Plan Template has been strengthened in line with government’s defence industry policy of maximising Australian industry involvement in meeting Australia’s defence capability goals.

The changes have been made to explicitly address:

  • the tenderer’s strategy for maximising Australian industry involvement in the project and enduring Australian industry capability benefit beyond the work period
  • maximised inclusion and evidence of having positively engaged Australian small to medium enterprises and Indigenous business enterprises
  • proposed investment in innovation, and collaborative research and development efforts in Australia
  • establishing, transitioning or enhancing skills, knowledge, systems, technology and infrastructure within Australian industry, and
  • identification and promotion of Australian defence export opportunities and as a contributor to the global supply chain.

The new template has already been applied in the Offshore Patrol Vessel and Future Frigate requests for tender and is now rolling out across all relevant materiel procurements.

The AIC Program aims to create opportunities for Australian companies to compete on their merits for Defence work on a value for money basis. Consequently, for tendered solutions to represent value for money, tenderers must describe how their proposed approach will enhance defence industry capability and capacity.

Industry requirements define the activities, tasks, or work packages within tender documentation. While industry requirements are specific to individual procurements, in each case they will address the relevant industry capability categories, these being defined as:

Sovereign Industrial Capability Priorities (Priorities) are industrial capabilities considered critical and for which Australia must have access to, or control over the skills, technology, intellectual property, financial resources and infrastructure that underpin the capability. The Sovereign Industrial Capability Priorities identified in the Defence Industrial Capability Plan are industrial capabilities that have been assessed as:

  • operationally critical to the Defence mission
  • priorities within the Integrated Investment Program over the next three to five years, or
  • in need of dedicated monitoring, management, and support due to their industrial complexity, government priority, or requirements across multiple capability programs.

The Sovereign Industrial Capability Priorities have taken the place of the previous Priority Industry Capabilities (PICs); however, Defence will continue to honour existing contracts or other commitments where PICs have been identified and implemented, such as in Australian Industry Capability Plans.

While addressing issues as diverse as AIC Program management arrangements, supply chain management, industry program integration, performance reporting and commercial strategy, AIC plans focus on how industry requirements will be satisfied through implementation of the agreed LIA.

AIC plans are sought for all defence procurements where the value of the tender is expected to exceed $20 million or where the procurement will impact on a PIC or SIC.

AIC plan date-item-descriptions (DIDs) are included with the ASDEFCON suite of tendering and contracting templates.

Government-to-Government procurements, including Foreign Military Sales and Direct Commercial Sales, are not exempt from AIC Program requirements. AIC Program requirements for these procurements are to be addressed through AIC deeds. All industry arrangements recorded in AIC deed annexes are contract deliverables.

AIC deeds formalise the expectation that international primes will market-test and engage Australian industry where cost-effective. Owing to the requirement to achieve value-for-money under the AIC Program, any determination that an AIC deed is required for a particular procurement is to be underpinned by a business case.

Public AIC plans set out the plans and forecast opportunities that contracted defence suppliers will provide for Australian industry involvement in major defence capability projects and sustainment activities.

The level of detail incorporated into each public AIC plan is expected to vary in content ranging from brief high-level summaries to more detailed statements depending upon the scope and complexity of the potential Australian industry component of the procurement.

The level of detail published will also depend on the security, commercial restrictions or caveats that apply to the information and the likelihood of any requirement to amend contracts and their associated AIC plans over their agreed term.

The implementation of this reform in Defence is consistent with the broader Australian Industry Participation initiative to strengthen opportunities for Australian industry to compete for work across government.

Under the AIC Program, it is a requirement that tailored versions of AIC plans be prepared for public release.

List of published public AIC plans