Tips on accessing defence business as an SME

In a year that has been chaotic at best and crippling at worst for Australian SMEs, there was a large collective sigh-of-relief when the Federal Government announced more than $270 billion investment into the defence sector that would “support local jobs and small businesses”, according to the government.

“The Morrison government’s investment in our Defence capabilities is creating and supporting thousands of local Aussie jobs and has opened new and exciting opportunities for small business,” Defence Industry Minister Melissa Price recently said.

But while companies already operating in the defence sector were quick to realise the opportunities, many SMEs who can contribute, are unable to as a result of procurement challenges and not having a foot-in-the-door.

The Federal Government’s vision of “a robust and resilient defence industry that maximises opportunities for small businesses and supports Australian jobs and local investment” is struggling to reach the very businesses it’s aimed at supporting, due to the challenging hurdles that SMEs must overcome to get started.

“‘Where do I start?’, is a common question for SMEs looking to tap into Federal budgets such as Defence,” Brydon Johnson, Business Development Director of procurement consulting and asset management specialists Systematiq said. “It’s an almost overwhelming task for the uninitiated.

“For many businesses looking at the Defence industry, the first step is to look at their existing operations and see if they are linked to the defence supply chain already, without knowing it. Sometimes existing customers or contacts have relationships that the SME can leverage – a friend-of-a-friend type scenario often ensures a softer landing than a cold call.”

Of the $270 billion promised in the Federal Government’s June announcement, $90 billion is has been earmarked for specialist military items such as fighter jets, hypersonic weapons, satellites, and expanding Australia’s cyber warfare capability. This leaves $180 billion that will go to defence contracts focussed on ‘upgrading existing Army and Navy fleets’.

“For SME’s in many manufacturing sectors this is huge. It might not mean building a submarine, but it could mean fabricating a structure and partnering with the companies who are providing componentry to a submarine,” Johnson added. “Finding out who the main contractors are and understanding their supply chain into the Defence industry is critical to the success of tapping into the large Federal budget.”

For innovative high-tech manufacturing businesses the timing is perfect, as all Defence contracts now require demonstration of Australian supply chain capability.

“I look for companies that are offering innovative products and capabilities in advanced manufacturing solutions, with a locally produced capability to establish an on-going working relationship,” Jack Kormas, CEO of Textron Systems Australia said.

“This enables us to lean on their expertise and work collaboratively on product development to work more efficiently and economically, which ultimately benefits the customer as reduces the cost of delivery.”

Queensland generator manufacturer Eniquest is an example of a company who successfully moved into the Defence sector, with more than 30 per cent of their business now supplying units for the Army’s Bushmaster vehicles with prime contractor Thales.

“The transition wasn’t without challenges,” Eniquest General Manager – Don Pulver said. “But the benefits are enormous. Defence is Australia’s biggest single customer, so you’re never going to go to anybody else and sell as many products as you can to Defence.”

Pulver’s advice to SMEs eager to pursue Defence contracts is simple: start by understanding the products needed, establish how you can meet those needs, and reach out to those in the supply chain.

“You’ve got to be patient and you’ve got to be persistent,” he added. “You’ve got to knock on doors.”

Many SMEs find their way into Defence via a prime, larger well established company that supplies across multiple defence domains.

“There are immense opportunities for SMEs in this country and the route to that market in many cases is the prime contractors,” Graham Evenden, Director of Soldier Weapons Systems, Thales Australia explained.

His advice for SMEs looking to explore the Defence arena is to get involved in the defence community, use existing organisations to expand their contact base and take advantage of any events where it is possible to have a social (or virtual) interaction with others in the industry.

Ready to assist are a number of industry associations formed specifically to help potential Defence SMEs, including the Victorian and Australian Defence Alliances or Australian Industry Defence Network, which supports member companies through advocacy, networking, collaboration, mentoring and capability building as they bid for work, and to offer advice on supply change management.

Similarly, the Defence Innovation Hub, which works with the Centre for Defence Industry Capability, is committed to building a “robust and innovative industry base” that can meet the capability needs of Australian Defence while the Industry Capability Network links Australian and New Zealand companies to projects in the sector.

Gareth Molnar, CEO of Chemical, Biological, Radiological, Nuclear and Explosive and Exploitation specialists J3Seven reminds SMEs there are a number of existing grants available to manufacturing companies in Australia including the Sovereign Industrial Capability Priorities Grant (SICPG), the Defence Global Competitiveness Grant and Capability Improvement Grant.

“Already this year eleven Australian businesses have received a total of nearly $5 million as part of the SICPG program to help them grow our nation’s Defence capability. The grants offer unique opportunities for a potential Defence SME,” Molnar said.

“Specific knowledge, plus the ability to think outside the box while remaining within the rules, is what specialist defence consulting advisors can help with,” Brydon Johnson of Systematiq added.

“It can be tricky to get the ball rolling, but government contracts and grants are well worth exploring. Defence is an outstanding government agency to work with, because of the regular spending, the size of their budgets, the array of opportunities for small businesses, and they pay on time and pay well,” Johnson said.