Andrew Hodgkinson - video transcript

Defence Innovation Hub Industry Update

Andrew Hodgkinson: Thank you, Jonathan. And thanks very much to Chief of Air Force for providing today’s frank and thought provoking keynote presentation. Good morning, everyone and welcome to the Second Annual Defence Innovation Hub Conference.

This is my third week in the role of Assistant Secretary Defence Capability and Innovation. And I’m already learning a lot. I want to acknowledge the excellent work, since December 2016, to establish the Hub. I’m keen to keep the momentum going. And we’ll also be looking for opportunities to improve the way the programme works over time.

Today, we will be informing you about the Hub, how it works, and how you can engage with it. We will also be providing you with opportunities to ask questions and offer your perspectives. And towards the end of the programme, we have an industry case study of engagement with the Hub.

So what have I learned so far in my first three weeks in the role? I’ve learned that there are some excellent innovations coming through from defence industry, many from small to medium enterprises and even micro companies. The portfolio of Defence Innovation Hub projects is already addressing a wide spectrum of Defence gaps and opportunities.

Examples include Silentium Defence, which is developing ground-based passive radar technology to allow Australian forces to see without being seen and unique wide field of view space surveillance technology to track and monitor objects in orbit around Earth.

Core Defence, which is developing wireless control technology to enable soldiers to control electronic devices on their weapons and body while maintaining situational awareness of their surroundings. UAV Vision and Textron Systems Australia who are undertaking development of unmanned aerial systems to provide superior surveillance, intelligence, and force protection. These are just a few examples. There are many others.

In my first three weeks, I’ve also learned that making the Hub work effectively is a whole of Defence endeavour. I’ve been impressed with the quality of the work and the collaboration within Defence that goes into assessing proposals from industry.

So thank you to everyone who has already participated in the Defence Innovation Hub Programme. I’m looking forward to your contributions today as we seek to strengthen our partnerships and to further develop the Defence Innovation Hub as a world leader in driving innovation.

Now, I want to step back a bit to provide a brief overview of the context for the establishment of the Defence Innovation Hub. In 2016, the Australian government released the Defence White Paper, Integrated Investment Programme, and the Defence Industry Policy Statement. For innovation, the Defence Industry Policy Statement specifically identified the need to reset the Defence and defence industry relationship.

It called for a more focused, coordinated, and transparent relationship between Defence and industry to maximise delivery of Defence capability. The policy statement outlined a plan for new operational models, rationalisation of Defence’s previously disparate innovation programmes, and a simplified and streamlined approach to innovation. The aim was to cut red tape, lower the barriers to doing business and innovating with Defence, and develop a more friendly, less complicated contracting and intellectual property framework.

As a result, two new signature Defence innovation programmes were established-- the Next Generation Technologies Fund and the Defence Innovation Hub. Together, they make up the single innovation pipeline for Defence. Underpinning the Defence innovation system, the Centre for Defence Industry Capability was established as another initiative.

The CDIC plays an important two-way enabling role between Defence and Australian industry through facilitating innovative proposals, providing tailored advisory services, export and sector development initiatives, and providing grants for Defence business development and skilling. Together, the Next Generation Technologies Fund, the Defence Innovation Hub, and the CDIC make up a $1.6 billion investment in Australian industry over the 10 years out to 2025-26.

Defence’s approach to innovation complements the government’s broader strategy. The increasing pace of geopolitical, economic, and technological change means it is critical that Defence ensures it has continued access to the best innovation that Australia has to offer. Investment in innovation helps ensure that Defence remains resilient to emerging threats, including the possible use of disruptive technologies by adversaries, as Chief of Air Force was alluding to.

It also enables us to take advantage of new or developing areas of technology that have the potential to provide a capability edge for Australia’s relatively small fighting force. Almost two years on from the launch of the Defence Innovation Hub, I will now share some reflections and statistics from the programme to date.

In December 2016, the then Minister for Defence Industry, Minister Pyne, talked about innovation being essential to drive the development of Defence capability that anticipates and is able to respond to an increasingly complex security environment. Minister Pyne also said that just as we need a potent, capable, and agile future force, we also need a strong, capable, and innovative Defence industry behind it.

Almost two years into the programme, the Innovation Hub is playing a key role in achieving these objectives. Since it opened for business in December 2016, the Hub has received over 630 innovation proposals. Almost 200 proposals have made it to the second stage, whereby a request for a more detailed proposal has been issued.

The second stage involves outlining specific activities and outcomes to be completed as part of a project phase. To date, 62 contracts have been signed with a combined contract value of over $76.2 million. These successes have been enabled by the new processes and governance arrangements the Hub has implemented. For example, the Hub has implemented a contracting framework that is more flexible, agile, and collaborative. And we have just moved to version 2.0 of our standard contract terms.

Chief of Air Force referred to challenges around intellectual property. Hub innovation contracts employ a different intellectual property framework. Defence will not seek to own the foreground IP created in connection with the Hub unless there are national security reasons to do so.

We are also now starting to see some Defence Innovation Hub projects transition from the earlier phases of concept exploration through to more mature capability demonstration activities. By bringing together key Defence personnel to engage in decision making, the Hub is seeking to improve pathways to acquisition relative to earlier innovation programmes.

Chief of Air Force acknowledged that he doesn’t have a complete understanding of the Hub’s priorities, but he also acknowledged that he doesn’t necessarily need to have that detailed understanding. In its dealings with industry, the Hub has been transparent about its priorities and its assessment criteria. That clarity on our priorities has been effective with 85% of proposals received aligning with Defence’s top three innovation priority capability streams.

The graph on the left represents the proposals that have been submitted to the Hub by capability stream. And number one priority-- intelligence, surveillance, reconnaissance, electronic warfare, space and cyber-- has received the highest number of proposals. The chart on the right represents the value and quality of investments that have been made through the Defence Innovation Hub. ISREW Space and Cyber received the most investment.

Although our second priority area key enablers received less investment than our third priority stream. This is because the quality of proposals received under the key enablers stream was not as strong as other streams. The Hub has worked closely with Force Design this year to improve clarity regarding the key enablers we are interested in. This should help improve the focus of future proposals within this stream.

The more focused, coordinated, and transparent approach to Defence innovation has also lowered the barriers to doing business with Defence and attracted innovative proposals from non-traditional Defence organisations. In the 2017-18 financial year, 13% of Defence Innovation Hub partners were new to doing business with Defence. 78% of contracts were awarded to small to medium enterprises with five to 199 employees and to micro businesses with zero to four employees.

Since the launch of the Defence Innovation Hub, the primary market interface has been through open solicitations with industry and research organisations encouraged to push proposals towards Defence. The Hub is now offering a new special notice service, which pulls proposals from industry. A special notice is a novel challenge-based solicitation that seeks innovative solutions to specific Defence capability challenges. So far, the Hub has executed seven special notice contracts worth $4.3 million.

The Defence Innovation Hub has also recently piloted another new service called Rapid Assessments. Rapid Assessments will replace and enhance the Quick Look Service that was offered through the former rapid prototyping development evaluation programme, RP D&E. Further information on these new arrangements will be provided later on today.

There is always room for improvement. Our current thoughts on key focus areas for the innovation hub in the future 12 months are covered in this final slide. One, communication with industry. Much has been done to build an understanding of the Hub and how it works, but it seems that some misunderstandings persist. And at times, it takes time for information to filter out.

Proposals to the Hub are assessed through a highly competitive procurement process that is focused on value for money, taking account of Defence capability priorities against a set annual budget. While there will be many successes, unfortunately, there will inevitably be good proposals submitted that are not progressed. We recognise that these decisions may sometimes be difficult to understand. And we are working to improve the frequency and quality of communications with our participants about both the process and our decisions.

Two, timeframes for assessments. Assessment timeframes are one of the main areas where industry has called for improvement. Since the early days of the programme, the average time to assess and process innovation proposals has improved.

We are looking at what more can be done to make internal processes more efficient and to further reduce the timeframes for assessing proposals. It will be important we do this in a way that maintains the quality of our assessment process across the high volume of complex proposals we receive.

Three, support for the Defence Industrial Capability Plan. Another area of focus for us will be how the Defence Innovation system can support the strategic intent of the Defence Industrial Capability Plan launched in April 2018. That plan outlined an initial list of the government’s 10 sovereign industrial capability priorities.

Implementation plans for each sovereign industrial capability priority will be released from mid-2019. The Defence Innovation Hub will be closely involved as the implementation plans for each sovereign industrial capability priority are developed.

Fourth, support to the innovation sector. Growing the capability and capacity of Australia’s industry and innovation sector is a key policy objective for the Defence Innovation Hub. So we’re continuing to strengthen relationships that will enable us to support this goal. This includes our partnerships with the Centre for Defence Industry Capability and with the recently established Defence Exports Office.

And lastly, exploring capability challenges and building partnerships with special notices. We’ve already begun seeking innovative solutions to specific Defence capability challenges through special notices. This includes two current special notices focused on Army innovation challenges that will be assessed at the upcoming Army Innovation Day on the 25th of October.

Special notices provide a mechanism that enables Defence to focus the attention of industry innovators on pressing capability challenges. And I expect that we will see more of these in the future.

Interestingly, the Chief of Air Force referred to the need to consider the balance between open solicitation and solicitation that’s more specifically aligned to specific Defence capability needs. And special notices are a mechanism that provides Defence with an opportunity to focus on key pressing challenges. So the balance between those two things is something that the Hub is actively considering. And we will be focusing more on this over the next 12 months.

Special notices also offer opportunities to support cooperation with our international partners where a shared capability challenge is identified, and it’s mutually beneficial to work together on innovative and disruptive solutions.

Finally, thank you all very much for your involvement today. I appreciate the effort to attend. And I hope it proves a valuable experience for you. Please take the opportunity to gain an understanding of how the Hub works in practice and to meet with some of the many innovators who are here today. Thank you.

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