New contracts to force Defence giants to give work to Australian companies, as audits begin

Pressure is building on the nation’s defence giants to give work to South Australian companies when they build the nation’s future frigates and submarines in Adelaide.

The defence giants building the nation’s future frigates and submarines in Adelaide will come under unprecedented pressure to boost employment and increase support for local industries.

In a major shift, the Defence Department also will overhaul how military contracts are written, so Australian companies are given more work in future, in a plan to be outlined on Friday.

Defence Minister Linda Reynolds will reveal new “contractual and non-contractual measures” to beef up requirements for Australian industry content in military contracts, with a new audit scheme to begin before Christmas.

Defence giants will be forced to make “specific and measurable commitments” on the amount of work they will give to local industry in future contracts

Defence giants will be forced to make “specific and measurable commitments” on the amount of work they will give to local industry in future contracts. Industry will be consulted on the requirements, which will start to be rolled out from January.

The move comes after local industry voiced concerns about contracts being sent overseas. The audit program, expected to begin by November, will “ensure large defence companies are meeting their contracted Australian industry commitments”.

“Large companies will know that the government expects them to honour their Australian Industry Capability (AIC) commitments, and small businesses know the government has their backs,” Ms Reynolds said.

The Arafura-class ship under construction at ASC’s Osborne shipyard.

Companies will not be audited automatically, but any firm with an “AIC Plan” in their contract can be audited, including BAE Systems and Naval Group building the frigates and the submarines.

Audits can be triggered if it is deemed there is a risk firms are not complying with promises to offer work to Australian industry.

The results will not be made public, as audits will contain commercial information.

Defence Industry Minister Melissa Price first announced the audits in February.

The Federal Opposition has criticised the government for taking months to begin the audits, but government argues its original announcement was only that it would launch an audit program.

Minister Price today said the audits and future contract changes were “the next big steps needed to create more opportunities for Australian businesses in Defence programs”.

The State Government has raised concerns foreign defence firms may face pressure to send work to their home-country supply chains, due to the economic impact of COVID-19.

Opposition defence industry spokesman Matt Keogh welcomed today’s announcement but said it had come too late.

“Australian defence industry has been crying out for support to ensure more defence industry work happens in Australia, now the Morrison Government has finally acknowledged its model up until now simply doesn’t work,” he said.

He added that the “long overdue” independent audit plan would only make a difference once the new contractual requirements were properly in place for future projects.

“For a Government that’s all photo op, no follow up, this is something they need to follow through on,” he said.