Department of Defence announces a review to simplify contracts, streamline procurement and improve access for SMEs

On 4 December 2020, the Minister for Defence Industry released the Terms of Reference for a comprehensive review of the Australian Standard for Defence Contracting (ASDEFCON) templates and the Department of Defence’s procurement practices and processes. The review plans to cut red tape, reduce avoidable costs, improve access for small to medium enterprises (SMEs), and facilitate delivery of a simpler and less burdensome procurement system. 

In this article, we outline the terms, scope and objectives of the review.

Background

Companies that supply goods and services to the Department of Defence will be very familiar with the ASDEFCON suite of tendering and contracting templates. The ASDEFCON suite includes a number of procurement and contracting templates which are used by Defence when preparing tender documents and procurement contracts. 

Different templates apply depending on the complexity of the relevant procurement activity. 

The contest between industry and the Department of Defence has been that:

• the Department of Defence sees the adherence to the ASDEFCON suite as an important mechanism to ensure that contracting is standardised and reflects Commonwealth and defence policies; whereas
  
  
• suppliers consider that the suite is too rigidly applied and not adaptable to the commercial realities of large-scale procurements. 

Scope and objectives of the review

The review follows the engagement by the Minister for Defence Industry, the Hon Melissa Price MP, with the Australian defence industry, which identified a number of opportunities to improve defence procurement. The areas for improvement include:

• simplifying and streamlining the ASDEFCON contracting templates;
  
  
• removing complexity and onerous flow-down obligations that lead to additional cost and risk to the suppliers;
  
  
• developing subcontracting templates for industry to use;
  
  
• expanding the Department of Defence’s commercial acumen within its procurement practices;
  
  
• mandating the Department of Defence’s payment terms through the supply chain and considering partial payments of milestones to facilitate cash flow to industry, including SMEs; and
  
  
• relaxing some barriers to industry’s (particularly SMEs’) participation in the Department of Defence’s supply chain.

Minister Price and the Minister for Defence, Senator the Hon Linda Reynolds CSC, have jointly announced that the review is set to result in ‘a major revamp to cut process times and costs for Australian businesses’. 

The findings of the review are expected to drive development of the ASDEFCON suite and the Department of Defence’s procurement processes, potentially including:

• amendments to existing templates or processes;
  
  
• development of new templates or processes; and
  
  
• removal of existing templates or processes.

Feedback from industry invited

For many suppliers to the Department of Defence, the review signals a long-awaited opportunity to provide feedback on the commercial aspects of the ASDEFCON suite, including, importantly, the conditions of contract.

To ensure this opportunity is not missed, suppliers and other stakeholders in the defence industry need to adhere to the deadline of 28 February 2021. Submissions can be lodged at this link. 

Next steps

The review is expected to be finalised by mid-2021, and the Department of Defence will release a summary of the key findings. 

We will provide an update once that summary is released.