The 2009 Defence White Paper outlined the Government's commitment to ensure that certain strategically important industry capabilities continue to be available from within Australia. In July 2009 the Government announced a set of twelve Priority Industry Capabilities (PICs). This list was confirmed in the 2010 Defence Industry Policy Statement, Building Defence Capability.
The PICs, are those capabilities that confer an essential strategic advantage by being available from within Australia and which, if not available, would significantly undermine defence self-reliance and the ADF's operational capability. The PICs are not 'companies': they represent strategic, high-priority Defence industry requirements. These requirements may change from time to time as Defence's needs change.
The following criteria are used to identify Priority Industry Capabilities.
- Operational military and security requirements: We must keep this capability within Australia for operational reasons.
- Discretion in capability development: We need to be able to pursue alternative capability options and avoid over- dependence on options offered by particular allies or partners.
- Critical information and technology sharing: Australian industry capability is necessary to demonstrate a level of technological capacity to our allies.
- Comparative trade advantage and leverage: Australian industry capability contributes significantly to increasing Australian leverage in international relationships by providing high value goods and services sought by allies and partners.
- Significant risk to international supply: Potential for an industry capability to be unavailable if there is no local alternative to allied or other international supply options.
- Regeneration: Difficulty and long timeframe of regenerating an industry capability if it were lost necessitates its continued availability in Australia.
- Effectiveness and efficiency: Significant effectiveness or efficiency margin over internationally-sourced options.
Government may be prepared to intervene in the marketplace to sustain Priority Industry Capabilities to meet strategic, military self- reliance and ADF capability outcomes. Defence will regularly monitor the health of the Priority Industry Capabilities to determine whether any intervention is required. This monitoring might include assessing the particular capabilities within certain Australian companies, as well as the capabilities resident in Australian scientific research and academic institutions.
As part of the annual Defence Planning Guidance process, Defence advises Government whether amendment to the Priority Industry Capabilities list is recommended. Amendments could be due to factors such as changes in strategic circumstances, changes in Defence demand, or changes in the structure of Australian Defence industry.
The DMO and Defence industry are inextricably linked as partners in the successful delivery of the materiel element of capability requested through the MAAs. It is therefore good business practice for the DMO to provide assistance to Defence industry to make sure it has the necessary capacity to deliver projects and meet the Australia's self sufficiency goals.