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Credit: SaiKrishna Saketh Yellapragada

The key to Defence contracts

With Defence funding forecast to exceed $575 billion over this decade, all signs are pointing to a substantial increase in Defence procurement activity in Australia. 

This means there’s never been a more opportune time for businesses seeking to work with the Commonwealth. And this is especially true for innovators who can develop and support the cutting-edge technology needs outlined in Defence’s Sovereign Industrial Capability Priorities—such as cyber security, robotics, autonomous systems, and artificial intelligence—that large defence primes cannot easily deliver at the scale and speed required.

However, while the opportunities are abundant for new players wanting to enter the industry, it’s important to note that winning work from Defence will continue to remain clouded in bureaucracy, politics, and very rigid processes. 

While Defence is aware that it must be more proactive in partnering with industry to achieve our sovereign’s strategic outcomes, its reluctance to contemporise its processes and approach makes it very complex for the industry to win contracts. Despite this being a huge threat to our sovereign’s ability to innovate and be fast to market, Defence doesn’t look to be changing its behaviour anytime soon. 

Therefore, the onus remains on industry to know how to navigate the many hurdles, roadblocks, and bureaucracies in Defence’s procurement process (and the sector at large), to get a foot in the door and ensure their solution can be integrated into a Defence environment.

Solving the procurement puzzle 

Unlike other industries, Defence is particularly specific in the way it likes to be engaged and communicated with. However, understanding how to engage with Defence doesn’t stop at knowing the many acronyms the sector uses—it also includes getting under the skin of its pace, how its structured, its complex processes, protocols, and most critically its politics.

The process of procurement is generally written by individuals who’ve worked in Defence and/or government for the entirety of their careers. These people have not come from corporate backgrounds and therefore the way Defence interprets value in the procurement process is very different to how corporates would in a business tender.

It’s important to be clear on the steps involved in presenting to Defence, the documentation you’ll be expected to provide, and the detail in which you’ll need to explain or demonstrate elements within your proposal. A lot of the details on these processes are accessible in the public realm so be sure to do your research. 

When responding to briefs, it is important to understand the requirements at hand and demonstrate how your product or service satisfies these. Keep in mind that your product may not be an exact match to certain aspects of the brief so you will need to ensure you are transparent where requirements can’t be met. You’ll likely need to provide evidence of your performance claims so do not exaggerate—be conservative with your specifications to ensure your product or service can meet (or exceed) expectations. Without an in-depth understanding of the procurement process from start to finish, you’ll be unable to produce deliverables on time and may find yourself creating friction.

Unfortunately, high procurement barriers can greatly limit a new entrant’s ability to succeed during procurement, regardless of how sewn up they are on the process. And this is especially true for SMEs and start-ups. 

While updates to the Commonwealth Procurement Rules in July 2022 increased the threshold SMEs can directly engage for defence procurements from $200K to $500K, the most innovative businesses are still struggling to win work from the defence. The very nature of start-ups means they are often developing cutting-edge capabilities that do not exist yet, and therefore in affect, Defence has no stated requirement for the technology.

Without a partnership, the onus will often fall on the SME/start-up to take on all the financial risk which inhibits many from being able to partner with defence. It’s a very flawed system but one new entrants should be aware of.

Internal politics

There are high standards for good corporate governance in public companies in Australia, with those at the helm held accountable to always work in the best interests of the company, above their own personal interests.

However, the same level of accountability doesn’t always apply in the Defence sector. Defence personnel tend to prioritise career development and rank over all else which means they are unlikely to take a chance on a product that presents even a very small risk—despite how much it could benefit the organisation—as an unfavourable outcome could damage their reputation and career.

In light of this, new entrants should be armed not only with a strong position on how their product or service will benefit Defence, but also messaging around how it might support the decision maker’s reputation; or at least not impact it by showing how any risks will be mitigated.  

When it comes to rank, it is vital that a business’s representatives are the same (or higher) seniority as the defence representatives they will be dealing with. Rank is incredibly important in Defence therefore sending someone of lower seniority is greatly frowned upon. 

Approaching contracts – don’t bite off more than you can chew

Annual reports published by Defence communicate the risks and pain points the sector has identified and offer invaluable datapoints. The right strategy to winning work with Defence is approaching them with a compelling solution to a risk. 

For new entrants, it’s wise to establish a product through a smaller contract and treat the modest contract seriously. From here, you’ll be in a good position to build towards larger projects. Let’s not forget that the various organisations that form defence have significant challenges to overcome, therefore it is perfectly acceptable to address a small portion of the problem at a time.   

A mistake contractors to Defence make often is taking on contracts too large for them which results in failure to deliver on the high expectations of Defence, and possibly irreversible reputational damage. In such a political environment, people will rarely risk their careers on a contractor who has a reputation of not delivering.

Relationships go a long way in Defence

Working with Defence is long term commitment. Aim to build relationships with Defence over time and use this period to educate your potential customers on your organisation, product, services, and systems. This way they will become familiar with your company and approach.

Networking with Defence personnel is crucial as these are the people who will evaluate your proposal when you approach Defence for a contract. If you understand how Defence personnel think, you’ll understand how to pitch to them. And this understanding can only be gleaned by putting in the time and effort to develop long-lasting relationships and professional connections.

The best way to build relationships with Defence is by keeping your ear to the ground and listening out for any challenges or pain points experienced by those in the industry. If you can step forward with a helpful solution—whether it’s offering your own knowledge and expertise, or a connection to another contact external to Defence—this invaluable assistance will be noted and rewarded later down the track. By adopting this approach, over time you’ll be able to develop high-quality Defence relationships that you can lean on for invaluable assistance and advice in the future.

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Mark Fortugno

Mark Fortugno

Mark Fortugno is the Chief Financial Officer for WithYouWithMe, a veteran-founded tech company that solves workforce management challenges for Defence & Government across the Five Eyes.

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