A primer for SMEs who want to work with Defence

This week, ICT Illawarra hosted Air Commodore Anker Brodersen, Director General Defence Preparedness, and his colleague, Rick Souness, who runs the Defence Materiel Office’s (DMO) Business Access Office, as they ran a half day workshop and a follow up day and a half of one on one interviews for Illawarra based technology companies.

For half a day on Monday morning, Anker and Rick presented to a few dozen businesspeople – representing a wide range of small and medium businesses in the general technology space – taking us through what Defence is doing at the moment, and how we can take advantage of the opportunities large changes in big organisations always bring. In terms of Defence, the changes surrounding Anker’s work are are massive – through around 15 distinct programs happening throughout Defence, they’re working to save $20billion over the next 10 years. This requirement is baked into their forward funding arrangements – it isn’t aspiration, but very, very real.

Anker spoke first, giving the audience an overview of the wider Defence organisation. There were more acronyms then you could poke a stick at, but the main take-away I took on board was that there are two main parts to Defence and its expenditure – the big capital expenditure part which eats up lots of billions of dollars over a long period, and then the operational expenditure on personnel, training and deployment issues (abbreviated as POC).

While thinking about Defence spending leads people to naturally think about capital acquisitions, the big ticket military hardware stuff – especially when things don’t work out so well, like with recent investments on Submarines and Helicopters – around half of the money spent on Defence each year goes into running the organisation and executing missions, whether training, humanitarian or combat related. While a lot of Defence’s capital expenditure is run through large, multinational ‘Prime Contractors’, other operational requirements for Defence provide a more of a realistic opportunity for domestic firms, including SMEs.

In addition to painting a big picture of “what does Defence spend money on”, Anker also provided a great insight into why they spend money; the rationale and things that drive Defence, and specifically why they’re different to almost everywhere else. Defence is a ‘command’ or planned economic system. It doesn’t have competitors – there’s only one Army in Australia, and they don’t tender for the work in a competitive process. The fact taxpayers are expecting people to risk their lives also creates an interesting dynamic to whether something is “necessary”. And finally, while Defence has been able to successfully increase their efficiency through contracting services to the private sector, it isn’t possible for the organisation to contract away risk (and responsibility): while the Australian Submarine Corporation built the Collins Class submarine, it is the Defence Department that has to answer to the Australian people when things go wrong.

These factors mean Defence is looking for different types of ROI compared with the private sector.

For example, when Qantas buys a jet, they maximise their ROI by keeping the plane in the air and as full of paying passengers as they can, earning as much money as as they can for their monthly lease finance payments to have the jet. The plane is well maintained and operated safely, but within these parameters, they fly the crap out of it until it gets to the end of its useful life, and then they sell it or give it back to the finance company.

Defence, on the other hand, buys F-111’s, for example, and has a target service age. The equipment gets regular refits to keep its technology up to date, but the airframes will be keep in service for decades and decades – the priority is to maintain the required level of readiness and to maximise ROI by keeping the platform operable for as long as possible.

Anker answered a lot of questions from the floor and gave us some frank insights into the changes Defence is going through, and also undertook to look into a few specific issues raised by some of the companies in the room more experienced with working with Defence.

After a coffee break, Rick then took to the stage and basically explained how he and his team are the ideal first point of contact for SMEs, particularly if they’ve got a product or service that they think would be of benefit to Defence. He covered the various programs and activities that his office either manages or channels enquiries through. The main highlights were:

  • The Business Access Office (BAO) themselves, the first port of call for most SMEs wanting to do business with Defence: http://www.defence.gov.au/dmo/id/publications/dmobao_Sep09.pdf. They’ve got offices in every Capital city, and a 1800 phone number you can call.
  • There is a Defence + Industry website, where businesses can register, set up a capabilities profile, and get alerts about opportunities in Defence. This also helps people within Defence find your business/product/services.
  • The Unsolicited Promotional Product Offers (UPPO) Scheme, which is administered through the BAO, and which represents a good opportunity for companies to pitch their offerings to Defence. The process is that you get in touch with the BAO, pitch (not sure how), you’ll either tell them who within Defence is your target, or they’ll help you work it out, you then pitch to the unit of Defence who would be your customer, and then they decide whether they don’t want it (now), they want it and will need to go out to (a select) Tender, or they’re prepared to go into negotiation with you and buy it directly.
  • The Unsolicited Innovation Proposals. Like inventions that aren’t COTS type products, which you think might have a defence application. It goes through the DSTO. More info at http://www.defence.gov.au/dmo/id/ic/duip.cfm.

Rick also covered a bunch of other things and answered questions, before the questions got more specific, then it became an Anker and Rick show with each of them taking the specific questions as they best know.

In short, while Defence is a big organisation, there are doors that are open to your offers and solicitation. Your mileage will vary depending on whether a section of Defence has a need for what you’re trying to sell, and you’ll need to have a lot of patience no matter what (you’re dealing with a very big government department after all), but the fact Defence has big wide open doors (admittedly with high hurdles and no certainty you’ll be successful) was news to me.

In networking over lunch, I was told by more experienced SMEs that having good, professional but not pushy relationships with prime contractors was also an important way of doing business with Defence: while SMEs might like to think they deserve the opportunity to contract directly with Defence for what they do, the size and complexity of an organisation who’s mission spans the globe, and which employs over 100,000 people, often in very demanding circumstances, means Defence needs to focus its efforts on working closely with fewer contractors than the tens of thousands of SMEs who could be helping them fulfill their mission. From an SME’s perspective, it isn’t nice, but it makes sense, and the tip I got was that if you do good work through a prime, they’ll keep getting you back in again and again and again and again.

A big thanks to Anker and Rick for taking the time to come to Wollongong, and for not only speaking to us, but speaking with us: Anker and Rick both then did a day worth of one on one interviews with many of the businesses in the room, an opportunity I really appreciated them taking the time to make available.

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