INTRODUCTION. P a g e 1 20

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1 INTRODUCTION LET ME START BY MAKING THE OBSERVATION THAT, ON THE EVE OF THE 2016 DEFENCE WHITE PAPER S RELEASE, INDIGENOUS DEFENCE INDUSTRY HAS ARRIVED AS A KEY COMPONENT OF AUSTRALIA S NATIONAL DEFENCE CAPABILITY. WE CAN BOAST THAT DEFENCE INDUSTRY IS NO LONGER JUST AN ARMS-LENGTH PROVIDER OF COMMODITY GOODS AND SERVICES BUT RATHER ONE OF THE FUNDAMENTAL ELEMENTS OF THE NATIONAL SECURITY INFRASTRUCTURE. AUSTRALIAN DEFENCE INDUSTRY HAS STRONG CAPABILITIES - WE, HAVE THE ABILITY TO DELIVER RESULTS BEYOND EXPECTATIONS AND, FOR THE MOST PART, WE OPERATE IN MATURE, ENDURING RELATIONSHIPS WITH DEFENCE. THERE IS NO DOUBT WE HAVE COME A LONG WAY FROM THE PARLOUS STATE OF THE EARLY 1980 S WHERE OUR INDUSTRY WAS CHARACTERISED BY GOVERNMENT OWNED AND OPERATED INDUSTRIAL FACILITIES, LIMITED COMMERCIAL IN-COUNTRY INVESTMENT, AND MERE SHOPFRONTS OF FOREIGN DEFENCE COMPANIES, FOCUSSED ON SELLING INTO AUSTRALIA RATHER THAN DOING IN AUSTRALIA. P a g e 1 20

2 AT OUR BEST, AUSTRALIAN INDUSTRY HAS BECOME TRUSTED PARTNERS WITH DEFENCE, SHARING OUR COMBINED INTELLECTUAL, TECHNOLOGICAL AND HUMAN CAPITAL TO ENSURE THAT THE AUSTRALIAN DEFENCE FORCE CAN DELIVER ON ITS OPERATIONAL OUTPUTS AND ACHIEVE ITS MISSION SUCCESS. IT IS UNDENIABLE THAT WE HAVE LEARNED MANY LESSONS ALONG THE WAY ABOUT THE NEED TO ONLY MAKE PROMISES WE CAN KEEP AND, BY SQUARELY FOCUSING ON EXECUTION, TO DELIVER ON OUR COMMITMENTS. MANY OF US HAVE LEARNED THESE LESSONS THE HARD WAY. AUSTRALIAN DEFENCE INDUSTRY MUST NOW ENSURE IT IS MAKING THE RIGHT STRATEGIC DECISIONS TO HAVE THE CAPABILITIES AND THE CULTURAL ORIENTATION NECESSARY TO SUPPORT THE ADF IN THE FUTURE. IN MY VIEW THE NEXT BIG STEP IN CAPABILITY FOR THE ADF WILL BE WHAT SOME HAVE CALLED THE 'INTEGRATED FORCE'. THIS IS A CONCEPT BASED NOT JUST ON AN AGGREGATE OF IMPRESSIVE PRODUCTS (AND LET US BE CLEAR THE ADF NOW HAS MANY AND THE ACQUISITION OF OTHERS IS IN TRAIN) CONNECTED BY PERSONNEL, BUT ON A TRULY INTEGRATED SYSTEM OF SYSTEMS THAT CONNECTS INDIVIDUAL CAPABILITIES AND DELIVERS A POWERFUL FORCE MULTIPLIER FOR THE ADF. P a g e 2 20

3 TO ACHIEVE THE 'INTEGRATED FORCE' THE ADF WILL BE DEPENDENT ON INDUSTRY AS A FUNDAMENTAL INPUT TO CAPABILITY TO DELIVER ENDURING, SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES IN INTEGRATION AND SMART SUSTAINMENT. THIS IS THE CHALLENGE FOR INDUSTRY OVER THE NEXT DECADE TO ENSURE IT HAS THE ENDURING, SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES NECESSARY TO SUPPORT THE ADF S FUTURE NEEDS. WE SHOULD ALL ACKNOWLEDGE THAT EMBARKING ON COMPLEX INTEGRATION AND/OR SUSTAINMENT ACTIVITIES WITH TO BE RATHER THAN AS IS CAPABILITIES IS AN EXTREME RISK THAT THE ADF, THE NATION AND INDUSTRY CANNOT AFFORD TO BEAR. RECOGNITION OF INDUSTRY FIC INDUSTRY THE RECOGNITION OF DEFENCE INDUSTRY AS A FUNDAMENTAL INPUT TO CAPABILITY IN THE FIRST PRINCIPLES REVIEW WAS A VITALLY IMPORTANT STATEMENT ON BEHALF OF THE GOVERNMENT AND DEFENCE. P a g e 3 20

4 IT IS A CRUCIAL RECOGNITION THAT THE DAYS WHEN INDUSTRY WAS SIMPLY AN ARM S LENGTH PROVIDER OF GOODS AND SERVICES TO DEFENCE ARE OVER. WHILST THERE WILL ALWAYS BE THE REQUIREMENT FOR DEFENCE TO PURCHASE COMMODITY GOODS AND SERVICES, THE GENERATION OF MODERN WARFIGHTING CAPABILITIES REQUIRES ENTERPRISE ARCHITECTURES POPULATED BY INTEROPERABLE, INTEGRATED SYSTEMS NOT JUST PRODUCTS. AND THE SUPPORT OF THOSE CAPABILITIES REQUIRES SOPHISTICATED INTEGRATED LOGISTICS SYSTEMS NOT JUST THE COMMODITY PROVISION OF INDIVIDUAL LOGISTIC TASKS. OF COURSE, THE INDUSTRY CAPABILITIES REQUIRED TO SUPPORT THE NEXT GENERATION OF ADF CAPABILITIES ARE, IN THEMSELVES, SOPHISTICATED AND ADVANCED. BUT THE STATED INTENTION TO ACHIEVE SOVEREIGN SUSTAINMENT CAPABILITIES REQUIRES THAT THEY BE INDIGENOUS, WHICH IS AN IMPORTANT DISTINCTION FROM DAYS GONE BY WHERE FIFO OR OFFSHORE SUPPORT MODELS WERE USED. WHAT MANY HAVE FAILED TO APPRECIATE IN THE PAST IS THAT SUCH SOVEREIGN INDUSTRY CAPABILITIES TAKE CONSIDERABLE TIME AND INVESTMENT TO ESTABLISH, THEY ARE QUICK TO ATROPHY AND REQUIRE CONSTANT NURTURING AND DEVELOPMENT IN ORDER TO REMAIN RELEVANT. P a g e 4 20

5 SO THIS IS THE CHALLENGE FOR AUSTRALIAN DEFENCE INDUSTRY OVER THE NEXT DECADE TO BUILD ON EXISTING CAPABILITIES IN ORDER TO ESTABLISH, GROW AND DEVELOP ENDURING, SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES IN INTEGRATION AND SMART SUSTAINMENT. TO BE CLEAR, THESE CAPABILITIES ALREADY EXIST WITHIN SOME ELEMENTS OF AUSTRALIAN DEFENCE INDUSTRY AND THEY WILL BE VITAL TO SUPPORTING NEAR TERM PROJECTS FOR THE ADF BUT WE WILL NEED MORE CAPACITY AS WE MOVE INTO THE 2020 S AND BEYOND. IT IS INTERESTING TO NOTE THAT AT CURRENT (AND FORESEEABLE) EXCHANGE RATES, SUCH SOVEREIGN CAPABILITIES ARE NOT ONLY ESSENTIAL BUT THEY ARE COST EFFECTIVE ALLOWING DEFENCE TO STRETCH THEIR BUDGET FURTHER IN A PERIOD WHERE THE LOWER EXCHANGE RATE IS NECESSARY TO POWER AN EXPORT CULTURE IN OTHER SECTORS OF THE ECONOMY BUT THERE WILL BE AN ELEMENT OF MUTUAL OBLIGATION REQUIRED OF INDUSTRY. IF GOVERNMENT IS GENUINELY PREPARED TO MANDATE THAT INDUSTRY IS A FUNDAMENTAL INPUT TO CAPABILITY WITH ALL THE CONSEQUENCES FOR THE PROVISION OF ONGOING WORK THAT NATURALLY FLOW FROM SUCH A COMMITMENT THEN THIS WILL REQUIRE CONSIDERABLE STRATEGIC INVESTMENT BY INDUSTRY, THE LIKES OF WHICH MANY FIRMS HAVE FAILED TO PROVIDE IN THE PAST IN THE ABSENCE OF GOVERNMENT SUPPORT. I BELIEVE THIS WILL BE P a g e 5 20

6 ESSENTIAL IF INDUSTRY IS TO REMAIN CREDIBLE AS A FIC AND FOR A NEW MATURITY IN OUR RELATIONSHIP BETWEEN DEFENCE AND INDUSTRY TO BE REACHED. THIS MEANS THAT IT IS COMMITMENT ON THE PART OF GOVERNMENT AND INVESTMENT ON THE PART OF INDUSTRY THAT WILL BE REQUIRED TO DRIVE THIS NEW COALITION OF THE WILLING FOR THE SAKE OF THE ADF S MISSION SUCCESS. DEFENCE/INDUSTRY PARTNERSHIP AS I HAVE SAID, FOR INDUSTRY TO SUPPORT THE ADF OVER THE NEXT DECADE IT WILL TAKE A BROAD RANGE OF SKILLS AND CAPABILITIES. BUT TO SPECIFICALLY SUPPORT THE GENERATION, DEVELOPMENT AND SUSTAINMENT OF THE INTEGRATED FORCE INDUSTRY WILL NEED DEEP SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES IN INTEGRATION AND SMART SUSTAINMENT. THESE INDUSTRY CAPABILITIES CANNOT BE RAISED THEN DEMOBBED ON A PROJECT BY PROJECT BASIS BUT WILL NEED TO BE ENDURING. FOR ITS PART, INDUSTRY WILL NEED TO TAKE STRATEGIC DECISIONS ON HOW TO ACHIEVE THAT. FOR EXAMPLE, THIS MAY TAKE THE FORM OF INVESTMENT DECISIONS OR CHOICES RELATING TO WHERE IN THE MARKET INDUSTRY IS TO FOCUS THEIR BUSINESS EFFORTS. DEFENCE ALSO HAS A PART TO PLAY IN THIS REGARD. IT MUST WORK WITH INDUSTRY IN STRATEGIC PARTNERSHIPS RATHER THAN P a g e 6 20

7 TACTICAL TRANSACTIONS AND IT NEEDS TO CONSIDER INDUSTRY (ESPECIALLY SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES) WHEN MAKING DECISIONS ABOUT POSTURE, CAPABILITY AND EXPENDITURE. BUT ULTIMATELY FOR THE PARTNERSHIP TO WORK THERE MUST BE ONGOING WORK. IT IS A COMMERCIAL REALITY FOR US ALL THAT NO COMPANY CAN AFFORD THE LUXURY OF SUCH A VALUED WORKFORCE SITTING ON THE BENCH WAITING FOR THE CALL OF THE COACH TO RUN ON TO THE FIELD. EQUALLY NO TALENTED AND SKILLED ENGINEER OR PROJECT MANAGER CAN BE EXPECTED TO TOLERATE BEING OUT OF THE PLAY FOR ANY PERIOD OF TIME. LET ME BE CLEAR. DEFENCE INDUSTRY CANNOT TAKE A RENT SEEKING APPROACH AS SOME FIRMS HAVE UNDENIABLY DONE IN THE PAST. NOR SHOULD INDUSTRY EXPECT A FREE RIDE. LIKE ANY GENUINE PARTNERSHIP EACH PARTY (IN THIS CASE DEFENCE AND INDUSTRY) NEEDS TO CONSIDER THE DEMANDS AND IMPACTS ON THE OTHER IN ANY DECISION MAKING PROCESS. FROM OUR PERSPECTIVE INDUSTRY EXISTS TO SUPPORT THE NATION S REQUIRED DEFENCE CAPABILITIES BUT IT CANNOT TURN ON A DIME NOR MAINTAIN STRATEGIC INVESTMENT PLANS IN AN ENVIRONMENT THAT IS MANAGED ON A PURELY TACTICAL BASIS. P a g e 7 20

8 I WOULD ALSO POINT OUT THAT WHILE WE ARE FOCUSED ON RETAINING THE STRONG IN-COUNTRY WORKFORCE AND CAPABILITY THAT WE HAVE BUILT IN AUSTRALIA, IT IS TIME AGAIN FOR INDUSTRY TO ADAPT TO MEET THE EVOLVING NEEDS OF OUR CUSTOMER. AND WE MUST MOVE QUICKLY BECAUSE OUR CUSTOMER S ORGANISATION IS CHANGING DRAMATICALLY BEFORE OUR EYES. LAST YEAR, WE ACKNOWLEDGED THE RELEASE OF THE FIRST PRINCIPLES REVIEW INTO DEFENCE. THIS REVIEW WAS NECESSARY AND ITS FINDINGS WERE WELCOME. THE REVIEW HAS KICK-STARTED A NUMBER OF CHANGES AND IMPROVEMENTS TO THE WAY THAT GOVERNMENT, DEFENCE AND INDUSTRY WILL COLLECTIVELY DO BUSINESS. THE FIRST PRINCIPLES REVIEW HIGHLIGHTED ISSUES THAT ARE CRITICAL FOR ALL OF US TO UNDERSTAND. FIRST AND AS I MENTIONED EARLIER, IT RECOGNISED THAT INDUSTRY SHOULD BE VIEWED AS A FUNDAMENTAL INPUT TO CAPABILITY AND INTEGRATED INTO THE ACQUISITION LIFECYCLE. SECONDLY, THE REVIEW EXPLAINED THAT THE FUTURE MAY REQUIRE A MORE IMAGINATIVE USE OF A SMALLER POOL OF POTENTIAL CONTRACTORS EARLY IN THE EXECUTION PROCESS WHILE MAXIMISING THE USE OF EXISTING COLLABORATIVE TOOLS FROM THE ONSET. P a g e 8 20

9 ULTIMATELY, IT PROVIDED RECOGNITION THAT INDUSTRY SHOULD BE CONSTANTLY ENGAGED WITH DEFENCE ACROSS THE CAPABILITY DEVELOPMENT LIFECYCLE. THIS INCLUDES THE INCORPORATION OF INDUSTRY VIEWS THROUGHOUT THE ENTIRE ACQUISITION AND SUSTAINMENT PROCESS INCLUDING ATTITUDES ON COST, SCHEDULE, FEASIBILITY AND CAPABILITY. I BELIEVE THAT THE OUTCOMES OF THIS REVIEW WILL SIGNIFICANTLY IMPROVE THE RELATIONSHIP BETWEEN THE GOVERNMENT, DEFENCE AND INDUSTRY. I AM DELIGHTED THAT KIM GILLES, THE DEPUTY SECRETARY FOR DEFENCE S CAPABILITY ACQUISITION AND SUSTAINMENT GROUP, SHARES THIS ENTHUSIASM. IN A RECENT ARTICLE IN THE CASG BULLETIN, KIM IS QUOTED AS SAYING THAT THE FIRST PRINCIPLES REVIEW INTENDS TO GIVE US THE TOOLS AND MANAGERIAL SUPPORT STRUCTURE THAT (WILL) ALLOW US TO DO OUR JOB MORE EFFECTIVELY AND EFFICIENTLY THAN EVER BEFORE. KIM WENT ON TO SAY THAT BY BUILDING AND MAINTAINING BETTER RELATIONSHIPS WITH INDUSTRY, WE WILL ACHIEVE COMPETITIVE AND DESIRABLE OUTCOMES FOR DEFENCE. I AGREE WITH KIM S SENTIMENT THAT THERE IS ROOM TO DEVELOP BETTER RELATIONSHIPS BETWEEN DEFENCE AND INDUSTRY. FOR INDUSTRY, THIS WILL REQUIRE A MORE STRATEGIC PARTNERING ARRANGEMENT INVOLVING A GREATER EMPHASIS ON FOSTERING LONGER TERM RELATIONSHIPS WITH DEFENCE. P a g e 9 20

10 IF WE DON T MAKE THIS FUNDAMENTAL SHIFT IN STRATEGIC PARTNERING, THEN WE WILL COLLECTIVELY STRUGGLE TO MEET THE CHALLENGES OF DELIVERING ON PROGRAMS THAT ARE INCREASINGLY COMPLEX, OF HIGHER VALUE AND HIGHER RISK IN AN ENVIRONMENT OF DYNAMIC TENSION BETWEEN A GREATER DRIVE FOR INNOVATION AND CONTINUING NEED FOR COST CONTAINMENT. THIS BRINGS ME TO A KEY POINT THAT I WOULD LIKE TO MAKE TODAY. AS AN INDUSTRY, IT IS OUR RESPONSIBILITY TO EVOLVE WITH OUR CUSTOMER. OUR ROLE IS TO CONTINUE TO GROW OUR STRATEGIC PARTNERSHIP WITH DEFENCE AND LIFT OUR GAME ALONG THE WAY. NONE OF US CANNOT AFFORD TO HAVE A COMPLACENT INDUSTRY - THERE IS TOO MUCH AT STAKE. THE NATURE OF OUR INDUSTRY MEANS THAT WE PLAY A SIGNIFICANT ROLE IN PROTECTING THE LIVES AND WELFARE OF DEFENCE PERSONNEL WHILE MAKING A SIGNIFICANT CONTRIBUTION TO AUSTRALIA S NATIONAL SECURITY CAPABILITY. THAT IS A HEAVY BURDEN ON US ALL. GIVEN THAT THERE IS SO MUCH AT RISK WE IN INDUSTRY HAVE TO BE CONSCIOUS OF THE WEIGHT OF OUR RESPONSIBILITIES.RATHER THAN SATISFYING OURSELVES WITH THE HANDOUTS OF GOVERNMENT IT IS OUR OBLIGATION AS AN INDUSTRY TO PERFORM OUR WAY TO SUCCESS. P a g e 10 20

11 WE MUST REJECT THE MISCONCEPTION THAT THE DEFENCE INDUSTRY IS IMMUNE TO CHANGE AND THE FALLACY THAT SIGNIFICANT CHANGE WILL TAKE ANOTHER 20 YEARS. THAT LUXURY OF TIME HAS PASSED US BY, AND THE INVESTMENT WE HAVE MADE SINCE THE PRONOUNCEMENT OF BRONNIE S RULES ALL OF THOSE YEARS AGO SHOULD STAND AS THE FOUNDATION UPON WHICH WE CONTINUE TO BUILD. WE MUST EVOLVE JUST AS DEFENCE IS EVOLVING AND, JUST AS THE ADF IS ADVANCING, WE MUST BE IN LOCK-STEP. OUR CONSTANT FOCUS AND PRIORITY AS AN INDUSTRY SHOULD BE OUR PERFORMANCE AND FOR ITS PART, GOVERNMENT AND DEFENCE SHOULD PLACE GREATER EMPHASIS ON PAST PERFORMANCE WHEN SELECTING FUTURE INDUSTRY PARTNERS IF FOR NOTHING ELSE THAN TO INCENTIVISE INDUSTRY TO PERFORM ACROSS THE BOARD. IT IS OUR SOLEMN RESPONSIBILITY AS AN INDUSTRY TO ENSURE THAT PAST MISTAKES ARE NOT REPEATED AND THAT BEST PRACTICES ARE TRANSFERRED FROM PROGRAM TO PROGRAM. WE MUST MAKE THIS A DELIBERATE PRIORITY IT WILL NOT HAPPEN BY CHANCE. P a g e 11 20

12 THE INTEGRATED FORCE LET ME RETURN TO THE CONCEPT OF THE INTEGRATED FORCE - A TRULY INTEGRATED SYSTEM OF SYSTEMS THAT BECOMES THE FORCE MULTIPLIER FOR THE ADF. THE INTEGRATED FORCE WILL NOT BE ACHIEVED AS A BIG BANG BUT RATHER THROUGH AN EVOLUTION. IT WILL NEED TO TAKE ADVANTAGE OF SPIRAL DEVELOPMENT. IT WILL NEED TO KEEP PACE WITH EVOLVING TECHNOLOGY. IT WILL REQUIRE INTEROPERABILITY. IT WILL NEED ROBUST ARCHITECTURES THAT PROVIDE FLEXIBILITY RATHER THAN IMPOSING CONSTRAINTS. IT WILL NEED A STRONG FOCUS ON THE ENABLING CAPABILITIES. AND IT WILL RELY NOT ONLY ON AUSTRALIAN INDUSTRY CAPABILITIES BUT STRONG PARTNERSHIPS BETWEEN DEFENCE AND INDUSTRY. REQUIRED INDUSTRY CAPABILITIES INTEGRATION TO SUPPORT THE DEVELOPMENT OF THE INTEGRATED FORCE INDUSTRY WILL NEED DEEP SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES IN INTEGRATION. SO WHAT IS AN ENDURING, SPECIALIST, SOVEREIGN INDUSTRY CAPABILITY IN INTEGRATION? P a g e 12 20

13 IT IS PEOPLE ENTERPRISE ARCHITECTS, ENGINEERING FELLOWS, SYSTEMS ENGINEERS, COMPLEX PROGRAM MANAGERS, SUPPLY CHAIN MANAGERS, SUB-CONTRACT MANAGERS, TEST AND ACTIVATION SPECIALISTS, AND MANY MORE. IT IS PROCESSES REQUIREMENTS DERIVATION AND MANAGEMENT, MANAGING ARCHITECTURES, PROGRAM MANAGEMENT, ENGINEERING MANAGEMENT AND CERTIFICATION, PROCUREMENT, TEST AND ACTIVATION, AND AGAIN MANY MORE. IT IS SYSTEMS AND TOOLS. IT IS HISTORICAL METRICS. IT IS LESSONS LEARNED (AND APPLIED). IT IS APPROPRIATE MECHANISMS FOR TECHNICAL AND PROGRAM REVIEWS. IT IS THE CORPORATE CAPABILITIES NECESSARY TO APPLY THE APPROPRIATE OVERSIGHT AND ASSISTANCE TO INTEGRATION PROGRAMS. AND IT IS CULTURE - THE CULTURE OF DISCIPLINED APPROACHES TO ENGINEERING AND PROGRAM MANAGEMENT (AND ALL OF THE OTHER FUNCTIONS), THE CULTURE OF TRADE STUDIES, THE CULTURE OF WORKING ON COMPLEX TASKS P a g e 13 20

14 WITHIN A COMPLEX ENVIRONMENT, AND MOST OF ALL IT IS THE CULTURE OF WORKING WITH DEFENCE TO ENSURE THAT THE OUTPUT MEETS THE NEED. IN AND OF THEIR OWN, EACH OF THESE ASPECTS (OR ELEMENTS OF A SYSTEM-OF-SYSTEMS INTEGRATION CAPABILITY) ARE DIFFICULT TO ESTABLISH AND MAINTAIN. WHEN THEY ARE COMBINED THE TASK BECOMES VERY COMPLEX AND NOT SOMETHING THAT CAN BE APPROACHED HALF-HEARTEDLY. BEING AN INTEGRATOR REQUIRES SIGNIFICANT COMMITMENT AND INVESTMENT AND A VERY STRONG CORPORATE FOCUS. THAT SAID, IT IS CERTAINLY NOT BEYOND AUSTRALIAN INDUSTRY TO PROVIDE SUCH CAPABILITIES. AS I MENTIONED EARLIER, SUCH DEEP INTEGRATION CAPABILITIES ALREADY EXIST WITHIN SOME ELEMENTS OF AUSTRALIAN DEFENCE INDUSTRY AND THEY WILL BE VITAL TO SUPPORTING NEAR TERM PROJECTS FOR THE ADF. NOTWITHSTANDING THIS, WE WILL NEED GREATER CAPACITY AS WE MOVE INTO THE 2020 S AND BEYOND. THIS IS THE CHALLENGE FOR AUSTRALIAN DEFENCE INDUSTRY TO BUILD ON EXISTING CAPABILITIES IN ORDER TO ESTABLISH, GROW AND DEVELOP ENDURING, SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES IN INTEGRATION. P a g e 14 20

15 TO BE VS AS IS CAPABILITY WE SHOULD ALL ACKNOWLEDGE THAT EMBARKING ON COMPLEX INTEGRATION ACTIVITIES WITH TO BE RATHER THAN AS IS CAPABILITIES IS AN EXTREME RISK THAT THE ADF, THE NATION AND INDUSTRY CANNOT AFFORD. THE PAST IS LITTERED WITH EXAMPLES OF PROGRAMS GONE BAD AND/OR CAPABILITIES NOT DELIVERED AS A RESULT OF COMMENCING COMPLEX PROGRAMS ON THE BASIS OF TO BE CAPABILITIES. GIVEN THE COMPLEXITY OF INTEGRATION (ESPECIALLY SYSTEM-OF-SYSTEM INTEGRATION) THE RISK PROFILE ASSOCIATED WITH EMBARKING ON THE BASIS OF TO BE CAPABILITIES IS EVEN GREATER. ESTABLISHED INTEGRATION CAPABILITIES CAN SCALE EXPANDING AND CONTRACTING IN RESPONSE TO THE SIZE OR PHASES OF THE PROGRAM BUT THAT SCALING CAN ONLY BE DONE EFFECTIVELY AROUND AN ENDURING CORE CAPABILITY. ONE FINAL COMMENT ON THIS POINT. INTEGRATION IS A TASK THAT MUST BE DONE AT HOME TO PROTECT OUR SOVEREIGN INTERESTS AND THOSE OF OUR ALLIES IN RELATION TO OUR MOST COMPLEX AND SENSITIVE COMBAT AND COMMAND AND CONTROL SYSTEMS. THIS IS ESPECIALLY TRUE FOR SYSTEMS- OF-SYSTEMS INTEGRATION. SO THE INDUSTRY CAPABILITIES THAT SUPPORT SUCH INTEGRATION MUST BE INDIGENOUS. THIS MEANS THAT THE FIFO MODEL IS NOT AN ANSWER FOR COMPLEX SOVEREIGN SYSTEMS INTEGRATION ACTIVITIES. P a g e 15 20

16 SO IN SIMPLE TERMS IF YOU WANT TO KEEP THE RISK PROFILE LOW AND THE CHANCES OF SUCCESS HIGH THEN EMBARK ON COMPLEX INTEGRATION ACTIVITIES WITH AS IS INDIGENOUS INDUSTRY INTEGRATION CAPABILITIES. REQUIRED INDUSTRY CAPABILITIES SMART SUSTAINMENT A QUICK WORD ON SUSTAINMENT BEFORE I FINISH. TO SUPPORT THE DEVELOPMENT OF THE INTEGRATED FORCE INDUSTRY WILL NEED DEEP SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES IN SMART SUSTAINMENT. IF WE ARE TO DRIVE DOWN THE COSTS OF SUSTAINMENT AND DRIVE UP AVAILABILITY AND PERFORMANCE, INDUSTRY MUST DEVELOP AND MATURE THE CAPABILITIES TO IMPLEMENT SMART SUSTAINMENT MODELS AND DEFENCE MUST BE PREPARED TO EMBRACE THEM. I WOULD ARGUE THAT THIS IS THE BEST APPROACH TO ENSURING INDUSTRY IS HELD FULLY ACCOUNTABLE AND DEFENCE GETS EXACTLY WHAT IT IS CONTRACTING FOR. P a g e 16 20

17 SMART SUSTAINMENT MODELS INVOLVE THE COORDINATION OF DATA AND FUNCTIONS USING AN INTEGRATED SYSTEMS APPROACH ACROSS SUSTAINMENT UTILISING DATA TO COMBINE SYSTEMS ENGINEERING, LOGISTICS ANALYSIS AND TRAINING WITHIN A SINGLE, INTEGRATED PROCESS FRAMEWORK TO IMPROVE AVAILABILITY AND CAPABILITY GROWTH OF AN ASSET WHILST DRIVING DOWN ITS TOTAL COST OF OWNERSHIP. THESE MODELS SHOULD BE A KEY COMPONENT OF TRANSITIONING THE SUPPORT OF ADF SYSTEMS PROCURED OFFSHORE TO IN-COUNTRY ARRANGEMENTS AS SOON AS PRACTICABLE. THIS HAS THE POTENTIAL TO TAKE ADVANTAGE OF INDUSTRY S CAPABILITIES AND DELIVER COST AND SCHEDULE DIVIDENDS TO DEFENCE. IT WILL ALSO MITIGATE THE RISKS INHERENT IN HAVING MISSION ESSENTIAL SUSTAINMENT ACTIVITIES OUTSOURCED TO NON-SOVEREIGN THIRD PARTY SUPPLIERS. FOR SUPPORT OF THE INTEGRATED FORCE THERE IS ANOTHER ASPECT WHICH MUST BE CONSIDERED FOR SUSTAINMENT MODELS. THEY MUST BE ABLE TO MANAGE THE ON-GOING ASPECTS OF SPIRAL DEVELOPMENT OF TECHNOLOGY INSERTS AND OF OBSOLESCENCE MANAGEMENT. MOREOVER, THESE ASPECTS NEED TO BE MANAGED WITHIN A TIGHT TECHNICAL REGULATORY FRAMEWORK AND IN AN ENVIRONMENT WHERE DEFENCE S REQUIREMENTS WILL BE CONTINUALLY MORPHING TO MEET CHANGING THREATS AND EVOLVING OPERATIONAL APPROACHES. P a g e 17 20

18 TO DELIVER AGAINST THIS REQUIREMENT INDUSTRY NEEDS AN ENDURING, SPECIALIST, SOVEREIGN CAPABILITIES IN SMART SUSTAINMENT. THESE CAPABILITIES REQUIRE MANY OF THE SAME PEOPLE, PROCESSES AND, TOOLS REQUIRED TO SUPPORT INTEGRATION TASKS BUT WITH A FOCUS ON GENERATING GREATER BENEFITS IN COST, CAPABILITY AND AVAILABILITY. THERE IS A LOT TO THIS AND FOR SUPPORT TO THE INTEGRATED FORCE THERE WILL BE, IN MANY RESPECTS, A BIT OF A BLURRING OF THE PURIST VIEWS OF THE CAPABILITIES REQUIRED FOR ACQUISITION AND SUSTAINMENT WITH SPIRAL DEVELOPMENT, TECHNOLOGY INSERTS AND OBSOLESCENCE MANAGEMENT DRIVING THE CHANGE IN THE SUSTAINMENT SPACE. CONCLUSION MAY I CONCLUDE BY SAYING THAT, DESPITE OUR CHALLENGES THESE ARE EXCITING TIMES TO BE IN OUR INDUSTRY. WE ARE AT A POSITION WHERE DEFENCE INDUSTRY IS NO LONGER JUST AN ARMS-LENGTH PROVIDER OF COMMODITY GOODS AND SERVICES BUT RATHER EMBRACED AS ONE OF THE FUNDAMENTAL ELEMENTS OF THE NATIONAL SECURITY INFRASTRUCTURE. P a g e 18 20

19 AUSTRALIAN DEFENCE INDUSTRY HAS GREAT CAPABILITIES, AND WE CAN AND DO DELIVER GREAT RESULTS. AT OUR BEST, MEMBERS OF AUSTRALIAN INDUSTRY ARE TRUSTED PARTNERS WITH DEFENCE, SHARING THEIR COMBINED INTELLECTUAL, TECHNOLOGICAL AND HUMAN CAPITAL TO ENSURE THAT OUR DEFENCE FORCE CAN DELIVER ON ITS OPERATIONAL OUTPUTS AND CONTRIBUTE TO ITS MISSION SUCCESS. BUT WE ARE AT A CROSSROADS. WE NEED TO ACKNOWLEDGE THE PAST AND THAT THE CUSTOMER REQUIREMENT FOR THE FUTURE IS CHANGING. NOT ONLY IS OUR CUSTOMER BECOMING MORE SOPHISTICATED AND STRATEGICALLY FOCUSED BUT THE NEXT BIG STEP IN CAPABILITY FOR THE ADF WILL BE THE 'INTEGRATED FORCE' AND IT IS SOMETHING THAT INDUSTRY MUST BE PREPARED TO EMBRACE AND SUPPORT. THERE IS LITTLE DOUBT THAT TO ACHIEVE THE 'INTEGRATED FORCE' THE ADF WILL BE DEPENDENT ON US AS A FUNDAMENTAL INPUT TO CAPABILITY. AND DEFENCE WILL RELY NOT JUST ON INDUSTRY BUT ENDURING, SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES IN INTEGRATION AND SMART SUSTAINMENT. FOR OUR PART INDUSTRY CANNOT EXPECT TO EFFECTIVELY SUPPORT THE ADF IN THIS ENDEAVOUR BY OFFERING TO BE CAPABILITIES IN SUPPORT OF COMPLEX INTEGRATION AND/OR SUSTAINMENT ACTIVITIES - THIS WOULD BE FOLLY AND INTRODUCE AN EXTREME RISK THAT THE ADF, THE NATION AND INDUSTRY CANNOT AFFORD. P a g e 19 20

20 SO THIS IS THE CHALLENGE FOR INDUSTRY OVER THE NEXT DECADE TO ENSURE IT HAS THE ENDURING, SPECIALIST, SOVEREIGN INDUSTRY CAPABILITIES NECESSARY TO SUPPORT DEFENCE AS IT ACTS IN AUSTRALIA S EVOLVING NATIONAL SECURITY INTERESTS. P a g e 20 20