The recently released 2016 Defence White Paper provides an insight into the challenges and opportunities faced by Defence in managing and developing an infrastructure portfolio with some 600 sites with a replacement value of approximately $68 billion.
What is the Defence White Paper?
The 2016 Defence White Paper is the principal Defence policy statement of the Australian government and is updated periodically (the last update being in 2009). For the first time it includes:
- an Integrated Investment Program which sets out the key investments needed to deliver the White Paper over the next 10 years; and
- a Defence Industry Policy Statement which (amongst other things) promises to cut red tape in order to streamline procurement practices.
What does the White Paper tell us about Defence infrastructure?
Building on the First Principles Review delivered in 2015, the Integrated Investment Program identifies Defence infrastructure such as airfields, port facilities and training areas as key'enablers' for Defence capability. The White Paper states that increased investment in Defence infrastructure is a'high priority'.
The most striking feature of this planned investment is the emphasis on Australia's north. Consistent with the recentForce Posture Review which recommended that Defence shift its assets further north to be closer to the Asia Pacific region, RAAF Tindal, RAAF Learmouth, HMAS Coonawarra, RAAF Darwin, the port of Darwin and even the Cocos (Keeling) islands are slated for significant investment. Coupled with the US Force Posture Initiative which will see up to 2,500 US Marines permanently based in Darwin, the investment in Defence infrastructure in northern Australia over the next 10 years is planned to increase significantly from current levels of approximately $1 billion per year.
In addition, the integrated nature of the Investment Program means the major equipment purchases planned by Defence each have a corresponding investment in infrastructure to support the equipment. Accordingly:
- new naval platforms, including 12 new submarines will requirement significant investment at HMAS Stirling in Western Australia and Garden Island in Sydney;
- new strike and combat platforms, including the long awaited Joint Strike Fighter will require investment in RAAF Tindal (NT), RAAF Williamtown (NSW), RAAF Scherger (North QLD) and airfields in north western Australia; and
- new land combat and amphibious combat systems will require investment in the major army bases at various locations around Australia.
What can the construction industry expect from the White Paper?
To procure this new infrastructure the Defence Industry Policy Statement promises to cut red take by adopting a leaner 'smart buyer' model.
There is scant detail regarding how this will be achieved and it remains to be seen how Defence's procurement processes and policies can be reformed, although the Defence remains committed to the government's regulatory reform agenda. That means the construction industry should be alert to changes in policy such as the Building Code 2013 and other Commonwealth procurement policies that drive the government's policy objectives in the building and construction industry. Changes to procurement documentation, the introduction of e-tendering and changes to the way Defence interacts with industry are imminent.
An example of these changes is the case study offered in the Industry Policy Statement for the Base Services retender project. This project involves the procurement of long term (up to 10 year) contracts for facilities maintenance services across the Defence estate. Instead of the regional focus previously adopted by Defence, this project has re-packaged the various services along national lines with the aim of increasing purchasing power and efficiencies across those services. Whether such long terms arrangements can be put in place for other Defence services remains to be seen but Defence is clearly looking to use its purchasing power to drive greater efficiency over the longer term.
The White Paper will be welcomed by the construction industry because it re-commits Defence to a pipeline of infrastructure projects for the next 10 years. To win a share of the work, builders will need to understand the unique requirements of Defence and the policy and legal landscape in which it operates.