23 November 2021
Re-evaluating the ‘Sovereign’ in SICP
In September this year, Defence announced four new Sovereign Industrial Capability Priorities (SICPs) in response to an evolving strategic environment. Like many in defence industry, TAE Aerospace welcomes the ongoing iteration of these priorities. It is now equally important to re-evaluate our concept of sovereignty in response to these same global shifts.
By examining what degree of self-reliance Defence needs from its industry partners in a deteriorating strategic environment, defence industry can play its part to manage and mitigate Australia’s strategic risk.
TAE Aerospace shares its view on sovereignty as a continuum, with full sovereignty at the far end. It explains why it aims to reach this goal and the steps it is taking to get there.
What does it mean to be ‘Sovereign’?
As others in defence industry have noted, Australia takes a broad view of sovereignty in the context of SICP. This extends to the criteria we use to qualify a company as sovereign, and how we assess sovereign capability.
If we view sovereignty as a continuum, then progress can be marked by increasing the level of sovereign control over capability delivery.
At the start of the continuum, we might place overseas-owned companies that establish an Australian entity to support a specific Defence project. They conduct work here, providing jobs, investment and capability, but sovereign control ultimately resides with their home country.
Further along the line are sovereign Australian companies that meet the more stringent Defence Industry Security Program (DISP) qualification. They are Australian owned, operated and headquartered, but rely on global supply chains for critical components. Limited control over their supply chain gives them only partial control over the delivery of certain capabilities.
At the far end of the continuum are sovereign Australian companies with end-to-end capability in-country, or a high degree of sovereign control over their supply chain. With unrestricted access to components, skills, labour and IP, they can assure priority capabilities are delivered in a timely way for sustained periods. This self-reliant capability, when delivered by a sovereign Australian company, is what TAE terms full sovereignty.
The concept of self-reliant capability that underpins full sovereignty seems closely aligned with Government intent. SICP policy defines priority capabilities as those “considered operationally critical because of the essential strategic advantage they provide to the ADF. They must be developed and supported by Australian industry because overseas sources do not provide the required security or assurances of access and supply.” (SICP Industry Plan: Aerospace Platform Deeper Maintenance and Structural Integrity, November 2020, p11).
Is full sovereignty necessary for Australia?
In times of relative stability, probably not. Companies that operate and invest in Australia are well placed to meet Government and Defence requirements, delivering both jobs and local capability. In uncertain times, however, lack of sovereign control over capability delivery could create an unacceptable level of strategic risk.
We’ve seen that when crises threaten global supply chains, national interests take priority. For example, Italy recently invoked EU regulations to block the export of Covid vaccines to Australia. We have also seen how sovereignty without self-reliance can compound a crisis. When Brexit-induced labour constraints combined with a Covid-induced escalation in shipping costs, much of Britain was left without fuel.
Some countries, like the US, have regulations in place to prioritise their own defence needs. In times of adversity, directives like the US Defense Priority and Allocation System (DPAS) could see Australia placed at the back of the queue.
To be fully prepared for a future where crisis and conflict coexist, sovereign Australian companies must aim for the highest possible degree of self-reliance for critical Defence capabilities.
When do we need full sovereignty and how long do we need to sustain it?
Each sovereign Australian company needs to determine this relative to the SICP(s) it contributes to. Some questions to consider are: What aspects of the capability are operationally critical or will deliver a strategic advantage to Defence? Where do gaps exist in the ability to develop and fully support this capability in Australia? How much buffer stock or additional resources are required to sustain this capability for an extended period? What investment is needed to close any capability gaps, is the investment justifiable relative to the benefit, and what is timeframe to achieve this?
What steps is TAE Aerospace taking?
A 100% Australian owned company, TAE has taken significant steps over the last five years to enhance current and future capability in priority areas. It has established Australia’s Centre of Excellence for Defence Propulsion MRO for multiple Defence engines – a facility designed to scale up capacity and take on new platforms as Defence requires. It is working to integrate Land and Aerospace Platform SICPs and leverage the many synergies between them. Alongside its MRO work, TAE is innovating in the area of data analytics, using data captured through HUMS on tank engines to improve engine performance.
TAE recognises that in-country capability does not equal full sovereignty, however. For example, TAE’s close relationships with engine OEMs allow access to IP and data for MRO work, but there is a weak link in Australia’s supply chain when it comes to manufacturing critical propulsion components. These vital engine parts are only manufactured in a small number of US plants, often with long lead times.
To address the shortfalls in self-reliance, TAE is looking at each ‘gate’ in its propulsion MRO process to determine where it has 100% capability in Australia, where it needs to invest in new capability or stock holding, and where to look for a different solution. One option is to strengthen regional supply chains; another is to explore potential for the AUKUS alliance to share IP beyond submarines to include mission critical aerospace parts. IP transfer could be sought to manufacture these parts in Australia, along with a commitment to train local companies in how to do the work.
For sovereign Australian companies, creating a plan to move toward full sovereignty on priority capabilities is essential. A reasoned and measurable plan, endorsed by Defence and shared with Government, will help determine Australia’s priorities for future investment. By this approach we can quicken our collective pace toward the highest degree of self-reliance possible for Australia’s defence industry. Only then can we ensure Defence has sustained access to mission critical capabilities in an increasingly uncertain future.