Senator promises less defence risk, more profit for SA business

In a late-night pitch to industry leaders, Senator Simon Birmingham has vowed to make defence contracts less risky and more profitable for local companies.

Federal Finance Minister Simon Birmingham has pinpointed changes to the government’s procurement policies that would bolster the chances of SA firms securing defence projects.

Senator Birmingham told a special defence industry event in Canberra on Monday night he doesn’t want small- and medium-sized firms left behind under the historic AUKUS pact.

It comes as two new major defence projects were locked in for the state.

Boeing Australia was awarded a $60m contract to maintain the P-8A Poseidon fleet at the RAAF Edinburgh base, creating 37 new jobs.

Defence Minister Peter Dutton said the new contract was an “important contribution to Defence’s mission”.

“It brings heavy maintenance work to Australia that would otherwise have been performed in the US,” he said on Monday.

Holden Hill manufacturing company Supashock was given a $19.7m contract to supply 37 automatic load handling systems for Defence’s fleet of HX77 Medium Heavy vehicles.

Mr Dutton said the equipment would enable Army officers to load and unload shipping containers and NATO-standard flat racks without leaving the vehicle.

At the BAE Systems event, Senator Birmingham told industry leaders changes to the procurement framework were in the pipeline that would make it less risky for small firms entering defence supply chains.

Senator Simon Birmingham at the official opening of the Supashock Headquarters in Holden Hill in 2019. Supashock has just been awarded a new $19.7m defence contract.

They include implementing new “defaults” in the framework, which would minimise insurance costs for local companies and make the “starting point for any contractual relationship … more reasonable”.

“If we can strive for a fairer sharing of risk with our suppliers, then there will be greater willingness by potential suppliers to participate in procurements,” Senator Birmingham told the event, hosted by BAE Systems. Under other proposed changes, small-business suppliers could have their profit margins boosted by having more direct relationships with the government, rather than with multinational corporations acting as prime contractors.

A UK Royal Navy nuclear-powered submarine visiting HMAS Stirling last month.

In September, Prime Minister Scott Morrison tore up the Attack-class contract with Naval Group and announced Australia would instead acquire a fleet of nuclear-powered submarines under a new pact with the US and Britain.

The decision has put more than 1100 South Australian jobs in limbo and, according to industry estimates, affected up to 350 small and medium SA businesses.

Likely to draw the ire of Labor, Senator Birmingham did not specify a minimum local content requirement for the nuclear-powered submarines to be built in Adelaide.

But he did assure industry leaders SA companies would have a critical role in boosting the economy through local procurement and entering international supply chains.

“Opportunities to embed Australian defence industry businesses in international supply chains, including procurement activities by other nations, has the same beneficial impacts on the Australian economy,” he said on Monday.