Oft-repeated, because it is true, Australia faces the most complex strategic circumstances since World War II. Instability and near-term risk of major armed conflict in our region are real. The circumnavigation of Australia by Chinese navy warships earlier this year was a wake-up call for many. The range and accuracy of guided weapons, coupled with the launch capacity of modern warships, mean that Australia’s geographic isolation no longer affords the protection that some had taken for granted in the past.

Given these circumstances, you would expect a healthy public interest in understanding the capability we need to safeguard Australia and the priority placed on the required funding. Current political and media focus, however, appears to be on watching how Prime Minister Anthony Albanese responds to calls by US Defense Secretary Pete Hegseth for an increase in defence spending, rather than examining if such an increase is actually warranted.

This superficial debate also comes at the expense of any serious analysis of the procurement reforms that are required for ensuring that defence capabilities will be available when needed, effective against threats, resilient throughout a protracted conflict and affordable.

To consider those reforms, first we must understand the significant national security implications of the historic pace of change occurring in warfare, international trade and even alliances around the globe. Conflicts are now being fought with a combination of weapons ranging from expensive, high-end, exquisite capabilities where they are available and sustainable, to large numbers of cheaper, novel, asymmetric weapons systems where they are either the preferred or the only option due to supply chain constraints, cost, battlefield losses or shifting political sands. The accelerating threat evolution—now measured in weeks or months rather than years or decades—also plays a key part in the emergence of unconventional weapons and suppliers. We can­—and should—continue to work closely with the United States, Britain and others, but we also need to re-envisage the significant role Australian industry must increasingly play to supply both our own capability needs and the capability gaps of our allies.

Secondly, to address the peak risk of regional conflict expected this decade, the Australian government must make defence procurement more timely, effective and efficient. This will require moving beyond a focus on defence policy statements. Canberra must take concrete steps to implement holistic reform of capability acquisition, which will require a whole-of-government approach to align the priorities of central agencies such as the Department of Finance and the Australian National Audit Office (ANAO). The government must also reassess how industry, Parliament and the media are appropriately informed about capability needs and risks.

The proposal to establish a Parliamentary Joint Committee on Defence, for example, is one such reform which has support from the main parties and which could be brought forward with minimal effort. Any reform must also remove the roadblocks that have prevented timely acquisition of capabilities produced by Australian industry, many of which have been successfully exported and are considered the best in their field.

In order to explain the more detailed reforms I believe are required, I will lay out a real-time example of delayed capability and wasted money resulting from the current procurement process.

Australian companies for counter-drone capabilities

The media frequently reports on drones having changed the nature of war in Ukraine, the Middle East and the Red Sea. Effective counter-drone capabilities are an immediate priority for Australia so it can protect equipment and infrastructure from a spectrum of drone-enabled threats ranging from disruption by issue-motivated groups to grey-zone sabotage and overt attacks.

In response, the Australian Army recently spent $8.2 million under to have a consortium of three globally successful Australian companies develop a counter-drone system to autonomously track and kinetically destroy drones, including those in swarming attacks. The consortium is reported to have met or exceeded all capability requirements in a live-fire demonstration at Cultana in late 2024. One of the companies has in fact won export contracts ($53 million and $125m to Europe) for counter-drone systems. Separately, a different Australian company was provided $10 million to develop a laser-based counter-drone system which, again, was reported to have met requirements. Incidentally, that company went on to out-compete 15 international companies to win funding from the Canadian forces for counter-drone lasers. In the domain of using radio frequency energy against drones, Australian company DroneShield has been a world leader in exporting for some years.

You might expect that a defence procurement program for counter-drone systems would build on these existing investments by the federal government and the demonstrated, export-proven capability. Instead, the Defence procurement organisation decided to issue a world-wide request for tender, asking for a company to tell us what we should buy and then integrate it with existing defence capabilities on our behalf.

Six months later, with the procurement processes still churning away, yet another arm of Defence (the Advanced Strategic Capabilities Accelerator, or ASCA) announced even more federal funding for a two-stage process to encourage industry to develop technologies for defending against uncrewed aerial systems. Ironically, ASCA made this announcement in the same fortnight that EOS announced its $53 million counter-drone export.

As well as counter-drone systems, Australian industry also produces globally competitive radars (passive and active) and exports systems-integration services. Collectively, this export-proven range of capabilities should enable Defence to expedite the procurement process by immediately shortlisting a consortium of Australian companies who can provide an initial layered counter-drone capability that could be scaled, modified or further integrated as required. Given global demand, the potential to amortise the cost base and see further improvement of system performance is highly probable via direct or government-to-government exports to allies.

In contrast, continuing the legacy process will likely involve two global tender evaluations before any company (potentially an overseas prime) is actually contracted to start providing capability. This would be a waste of funding already invested by the Australian taxpayer and cause an unnecessary delay in achieving initial operational counter-drone capability. We can—and must—do better.

Finally, despite the histrionics around the Trump administration’s call for more money, reform of how we assess funding required for national defence is not a bad thing. For all the aspiration of recent reviews and strategies, it is worth recalling the sage advice of former ADF vice chief Lieutenant General Des Mueller who said that ‘vision without dollars is hallucination’. Indeed, the notion that we will be capable of an effective and sustained deterrent or fighting force before the end of this decade could appear to be something of a pipe dream.

Defence spending at 3 percent

Independent analysis by ASPI and examination during Senate estimates highlight that a significant percentage of the new (and existing) Defence acquisition budget is being redirected to fund future naval submarine and surface capabilities that will only be in service after 2030. This is at the expense of a range of capability programs that were intended to enable core ADF missions across air, sea, land and space domains in anticipation of a peak threat in a regional conflict before 2030.

In respect to the quantum of funding required, history provides some useful metrics. Immediately after World War II, Australia’s defence spending fell from more than 30 percent to less than 2 percent. By 1952, however, it was back above 5 percent during the Korean War, despite Australia making a relatively small commitment of one fighter squadron, one (later two) infantry battalions and several warships, including the aircraft carrier HMAS Sydney, in 1951. The Vietnam War saw another increase approaching 4 percent and during the Cold War the average was just under 3 percent. Of note, a major power conflict in our region in the next four years will involve an adversary with a vastly superior economy and military than what we faced during the Korean or Vietnam Wars.

So forget responding to Hegseth. History tells us that under current circumstances, Australians should expect to see 3 percent as the budget floor for defence now. For those who argue that an increase should be a future aspiration, both Des Meuller and Darryl Kerrigan (The Castle) would say—tell ’em they’re dreaming.

Priorities in procurement reform

Regardless of the level of funding the Australian people accept from the government of the day, examples such as counter-drone systems highlight that we must spend more effectively. Priorities for change in how we procure capability must include the following.

Placing a value on outcomes. Think tanks and industry are replete with accounts of federally funded innovation programs that never led to a contract. Source selection must be expedited by placing a value on the outcomes of federally funded innovation and collaborative research.

By default, where the outcomes of such capability-driven, taxpayer-funded programs have met or exceeded the stated requirements, Defence procurement agencies should deem the company or consortium concerned to be the preferred tenderer. This will expedite the first phase of procurement and allow the government to contract for low-rate production. Companies would be required to agree to a suitable contracting model (for example, open book) in order to satisfy value-for-money considerations of contracts for production.

An Australian company that has won a competitive export contract or funding for defence capabilities from allied or partner nations should be considered for a fast-track procurement if their product meets an identified ADF capability need. This fast-track approach should apply unless there are compelling reasons identified by Defence and supported by the government on a case-by-case basis.

Phasing and update cycles. The concept of block replacement for platforms with an expected service life measured in decades still underpins much of Australia’s procurement process. Government approvals must be responsive to the reality that the evolution of many threats is now measured in weeks or months, not years or decades.

Where appropriate, programs and projects should be funded in phases with decision gates to approve rapid prototyping and test, low-rate production leading to in-service evaluation, follow-on phases which could include scale up or modification, and early retirement if the capability is no longer relevant to extant or emerging threats. It is also important to hold appropriate briefings for the media, Parliament and the ANAO so they can understand how the balance of capability need and risk is assessed when considering early termination.

Speed to an effective level of sustainable capability. Geostrategic circumstances no longer afford Australia the luxury of time to let generalists work their way through drawn-out procurement processes. As highlighted by previous ANAO, parliamentary and independent reviews, these increasing layers of process have often been the response as Defence has struggled to retain personnel with qualifications and experience directly relevant to the scope of the task.

Defence is aware of this, highlighting in evidence to the Senate that one of the key enablers to success for the AUKUS submarine program to the generation of a workforce made up of suitably qualified and experienced personnel. A similar focus must be applied to key capability development and procurement roles across all of Defence. Personnel in these roles must meet a mandated qualifications and experience matrix developed in conjunction with the relevant professional body (for example, Engineers Australia, Australian Institute of Project Management, International Test and Evaluation Association). They are more likely to be capable of using process to inform timely risk-based decisions, as opposed to somewhat blindly following process to an unintended outcome.

Timely, risk-informed decisions. Assessment of proposed contract capability requirements, technical risk and compliance, system performance, as well as operational effectiveness and suitability must be independent of the chain of command. Those conducting the assessment should not only be suitably qualified and experienced, but also be accountable to the minister for defence capability. The minister would then be in a position to ensure that timely risk-based decisions based on transparent reporting are being made by defence leaders who need the capability, those responsible for procurement and the National Security Committee of Cabinet.

Ensuring that all decision makers receive the same assessment of risk from independent, professional personnel will prevent the dismal outcomes detailed by ANAO in projects such as Seasprite and other contemporary acquisitions. The Defence Capability Assurance Agency bill which passed the Senate last year is one model to achieve this.

Sovereign defence industry capability. How to define ‘an Australian company’ has been an issue of contention for some time, as has the definition of ‘sovereign defence industrial capability’. The recent definition of an Australian business by the Department of Finance is welcome, but the various lists of priority or sovereign industrial capabilities developed over time have apparently not influenced actual procurement decisions in any meaningful way.

Further reform must include a framework that quantifies the independent defence industrial capabilities the Commonwealth requires industry to provide. This can then be used to inform procurement choices.

Having addressed this issue in several parliamentary inquiries, I believe the most robust approach is to establish a framework that assesses which of the military response options could be delivered—in the absence of usual collaborations with allies—only if Australian industry could manufacture or support a given military effect (such as air combat, integrated air and missile defence) or enabler (such as surveillance, communication or consumables).

This assessment will inform investment priorities for innovation and collaborative programs as well as those procurement contracts which will default to Australian industry. Procurement in areas deemed to be a national priority should be considered as part of a continuing cross-portfolio program (subject to regular review) rather than a series of isolated projects.

An example would be space-based ISR and comms. Credible scenarios forecast that overhead assets will be disabled or destroyed early in a conflict, and even those that survive are likely to be redeployed by the nations that own them to areas of priority tasking. The Commonwealth would likely expect Australian industry to step up with options for low earth orbit satellites carrying relevant payload to fill the gap. This may have been possible if the National Space Mission for Earth Observation had gone ahead, but the decision made by the industry portfolio to cancel that program apparently had little regard for the impact on Australia’s capability for national defence.

Another example is the current co-investment by Defence—with Australian industry and Australian subsidiaries of primes—in the Advanced Rocket Motor Technology Demonstrator (ARMTD). Testing shows that the program is delivering better performance than overseas options. If chosen as part of a GWEO procurement, the ARMTD outcomes will not only benefit approved guided weapons projects (such as GMLRS), but also be leveraged to meet export demand to the US for supersonic target missiles (under development by an Australian company) and potential domestic production of ordnance such as anti-radiation missiles.

Under current procurement rules, there is no obvious pathway to consider the aggregate value for money accrued by developing a national industrial capability through successful innovation contracts and individual procurement projects, which enable follow-on benefits for other ADF capabilities or opportunities for export.

Asymmetric approaches to capability. Be prepared to think outside the square about where to invest effort to optimise capability. The intended acquisition of Virginia-class nuclear submarines is a prime example. The purchase of SSN Virginia will be dependent on a future US president being satisfied that the US Navy has sufficient numbers of boats to be able to spare some for Australia. To date, most efforts to increase numbers of boats available to the USN has focused on increasing the rate at which new boats are constructed. At the same time, US Congressional reports highlight that due to US industry constraints, there are 18 boats awaiting deep maintenance—double the usual planning figure. The government should work with industry and the US to facilitate contracts for Australian industry to help remediate several of these 18 Virginias.

Just as we are investing in US shipyards, the US would need to provide an SSN-capable floating dock to Australia and allow Australian nationals into US shipyards as required for training.

I have explored this informally with relevant members of US Congress and the Pentagon as well as industry who see it as a viable way to bring more nuclear submarine capability online sooner. It is also the optimum way to grow a qualified and experienced Australian workforce who will be ready to keep our Virginias serviceable once they arrive.

The MQ-28 Ghost Bat uncrewed aircraft program is another example. Supporting Boeing Australia to conduct stores clearance activities at Woomera would likely secure an export contract for an armed aircraft development effort that deepens Australian aerospace capability and capacity. Doing the clearance work would provide options for Australia even if it does not choose to be the lead customer (which, incidentally, I believe it should—in air-air, electronic attack and reconnaissance configurations).

Recognising the value of a self-reliant defence industry capability in the Commonwealth Procurement Rules. In 2020, the Joint Standing Committee on Foreign Affairs, Defence and Trade issued a report on the lessons of global responses to the pandemic for defence and critical national capabilities. The government should amend the Commonwealth Procurement Rules in line with recommendation 16 of that report

It recommended that paragraph 4.5 of the CPR be amended to specify that once an industry capability is recognised by government as a national priority, procurement officials must give consideration to:

—whether a project or individual procurement is related to a recognised national priority and could contribute to the generation or sustainment of that independent industry capability; and, if so,

—give a priority weighting to the extent to which a tender response will engage Australian industry to fulfil the contract requirements.

A cabinet-level focus on capability and effective procurement. The government should create a position of minister for defence capability, whose sole responsibility should be ensuring that Defence has the material required to provide the military response options to government at the scale and in the timeframes directed by the defence minister and National Security Committee of Cabinet.

In conclusion, it is the strategic circumstances and historical metrics that justify spending more on defence, not a comment by Hegseth. Deciding the quantum should not be determined by what is available after other politically sensitive budget priorities are satisfied, but by what is required to address the threat.

Defending Australia also needs timely and effective leadership of procurement. The timeframe under current circumstances and budget priorities highlight that a drawn-out, process-based, business-as-usual approach to procurement is no longer fit for purpose. Urgent, holistic reform that aligns a whole-of-government—or indeed, whole-of-nation—approach to timely and effective capability procurement is both possible and essential to the defence of Australia and our interests.