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Defence Innovation Redesigned: Actions for prime system integrators

Defence Innovation: Actions for Primes

Prime System Integrators (Primes) will need to collaborate with many other parts of industry to coordinate the full scope of Defence requirements, not simply the equipment.

Col Thorne

Partner, Engineering & Asset Management

KPMG Australia


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Royal Australian Navy

Integrated Investment Plan

The Integrated Investment Plan (IIP) has significantly increased visibility of Defence budgets and plans. The key enhancements are that the IIP:

  • better describes the entire budget for a new capability, not just the equipment cost
  • includes the cost of infrastructure, information technology, and training (defence and contractors).

As a result of this move to an IIP, the pricing calculations that Primes will need to perform are expected to be more complex than the calculations under the DCP. Already we are seeing complex scopes requiring Primes to work outside their traditional equipment manufacture or sustainment business lines. This DWP accelerates that trend.

An important consequence is the need for more collaboration. Primes will no longer be able to simply focus on delivering the equipment. The IIP reinforces signals already in the market, that Primes will need to work increasingly with infrastructure, information, communications and technology (ICT), Defence services and SMEs to address the full scope of Defence requirements.

Perhaps the Primes’ most important role will be to expand on the idea of industry as a fundamental input to capability. The consequence of this is not yet explored, but likely will be a key discussion point when leaders of the industry associations meet with their Defence counterparts.

Actions for Primes

  1. The Global Supply Chain (GSC) program and similar local development programs are seen as successful and will grow. Use these for competitive advantage and push even further for closer supply chain collaboration and integration.
  2. Timing your investments will be difficult, as how quickly Defence ‘moves out’ on this IIP is made more complex by the FPR and the new Capability Life Cycle. Primes must be on the front foot and revisit previous costing assumptions.
  3. Forget ‘swim lanes’. You will be forced into non-traditional segments, above and below the line thinking will not work going forward, but effective conflict management and independence will.
  4. Defence will be seeking long-term collaborative and trusted industry partners. This will be a significant opportunity for industry but will require Primes to step up to share in Defence outcomes and associated risks. Defence may look to leadership from industry, especially the Primes, in what will be a significant cultural adjustment.

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