SME micro-partnerships can underpin AUKUS success

Sarah Pavillard

Earlier this year, I launched a white paper, Micro-Partnerships in the Age of AUKUS, at the Sea-Air-Space Exposition in Maryland in the United States as part of the Team Defence Australia official delegation.

Sea-Air-Space is the largest maritime expo in the US and attracts Pentagon decision-makers and maritime leaders from sea services around the world.

ADROITA is a defence sector small-to-medium enterprise (SME) specialising in maritime engineering, professional services, and strategic advisory for local and international companies seeking to enter the defence market.

We were one of the only SMEs that travelled to the US for the occasion, with our aim to make hay while the AUKUS sun shone.

It was an instructive and rewarding experience, building new contacts and relationships with American companies that are working to deliver AUKUS and looking to partner with Australian companies. A trip to the UK is on the agenda soon for the same purpose.

AUKUS is a game changer for the Indo-Pacific, but its true strategic value will need key industry enablers, such as government policy support, trusted international business-to-business partnerships, the relaxation or elimination of ITAR restrictions, and the use of technology transfer mechanisms.

These industry enablers need to materially impact, benefit and support SMEs, not just the big end of town.

Submarines are the headline, but don’t forget Pillar Two

The announcement of the AUKUS optimal pathway to the purchase of three-to-five Virginia class submarines, and for the design, construction and delivery of the SSN-AUKUS as an enduring nuclear-powered submarine capability, heralds a new age of military cooperation in the Indo-Pacific.

It is as impactful as the signing of the Australia, New Zealand and United States (ANZUS) Security Treaty was in 1951. 

The trusted expertise, experience, and technology dwelling in specialist Australian, American and British defence sector SMEs must be unlocked to support this security step-up.

AUKUS helps create unprecedented opportunity for collaboration, cooperation and co-working between businesses in the partner countries. It is becoming clear that integrating the Australian industrial base into the American and British sectors is a critical element of the agenda. 

Australia has committed up to $368 billion under Pillar One of AUKUS. The scale of investment to support the Pillar Two advanced technologies is not yet clear, but will no doubt be substantial.

There has never been a better time for Australian businesses – and particularly SMEs – to partner with American and British businesses to bring their skills and experience to bear in the market. 

Micro-partnerships to support AUKUS should not be ignored

Together we need to find adaptive, innovative and agile ways to work together business-to-business to bring the full potential of AUKUS to life.

The AUKUS partnership must enable micro-partnerships in order to fully catalyse the potential for all levels of each economy to contribute.

After all, SMEs working individually in the Indo-Pacific face common challenges that require regulatory, policy and political interventions to succeed. That can be eased through business-to-business cross-border partnerships.

Right now there are insufficient indicators that the Australian government is committed to policies to enable Australian SMEs to succeed on the AUKUS stage.

Australian demand for skilled workers with defence expertise continues to grow as the industry expands, but entering this market successfully means partnering with local companies who can make introductions and act as trusted advisors.

These partnerships between SMEs are powerful. They have the potential to deliver big results for relatively small investment.

The nation-to-nation partnership is the perfect opportunity for AUKUS SMEs to grow together, and to deliver more, for the whole of their capability to be more than the sum of their individual parts. 

Why should Australian SMEs partner with overseas companies?

SMEs account for half of GDP in the AUKUS nations and form the entrepreneurial backbone of their economies, creating jobs and driving innovation.

SMEs have a level of agility, adaptability and responsiveness that large corporations can lack, due to SMEs’ focussed expertise, smaller workforces, and general willingness to adapt or die. 

US SMEs face significant challenges when compared to local companies in Australia. This includes slow access to skilled migration or temporary work visas, limited access to digital security infrastructure, cumbersome procurement requirements, the ITAR obstacle, and a less-developed knowledge of policy and processes.

SMEs also face challenges related to the recognition of security clearances and program participation, poor understanding of work, health and safety statutory requirements, lack of trust in the market, and smaller networks. 

Business-to-business micro-partnerships between American and Australian SMEs offer benefits to companies and individuals on both sides. These collaborations facilitate trust transfer, allow access to expertise and knowledge, and provide high value with lower overhead costs. 

Micro-partnerships also enable capability pooling, increased flexibility, and access to new markets and customer bases. SMEs can particularly benefit from micro-partnerships, leveraging the existing networks of their partners.

By co-working with complementary skills and capabilities, both parties can benefit from shared expertise and learn together, leading to more innovative outcomes.

ITAR is a problem, but there are other ways

ITAR is an impediment when it comes to moving with haste, but it isn’t the only way to facilitate the transfer of technology and skills to the Australian defence sector. There is still the Australia-US Defence Trade Cooperation Treaty. 

The treaty came into force in 2013 and aims to improve the efficiency of two-way transfers of controlled goods by facilitating their export within an approved community without an export license.

The treaty is limited to approved organisations, with benefits including reduced delivery time, improved sustainment, more efficient sharing of technical data, and consistent compliance requirements.

The approved community comprises an Australian community and a US community that are managed their respective governments. 

The treaty may offer the best shot for expediting AUKUS-related capability – if the US and Australian governments update their end user lists.

The US has made recent strides towards exempting Australia from ITAR via the introduction of the Truncating Onerous Regulations for Partners and Enhancing Deterrence Operations (TORPEDO) Act in May that aims to address AUKUS partner concerns regarding ITAR, but it had yet to pass through the US legislative process at the time of writing.

The work begins now

As the CEO of an Australian SME that wants to win AUKUS-related work, and that advocates for other SMEs as well, there is no higher priority than forging partnerships with American and British companies.

Industry can mobilise faster than government, and the work to prepare industry begins now. To find out more check out my white paper, Micro-Partnerships in the Age of AUKUS.

Sarah Pavillard is the founder and chief executive officer of ADROITA, a national consultancy delivering engineering services to the defence sector, and advisory services companies seeking to grow their defence business. Sarah is an ex-Royal Australian Navy Weapons Engineer, studied electrical engineering at the Australian Defence Force Academy, and has more than 25 years of Defence experience. She is also a director of the Australian Industry and Defence Network (AIDN) and a member of the executive committee of the Submarine Institute of Australia (SIA).

Do you know more? Contact James Riley via Email.

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