AIC – does it refer to capability or content?

With several interpretations of what the Australian Industry Capability (AIC) is, it continues to remain one of the most contested terms in the Defence and Infrastructure communities, with no agreed upon definition.

The ‘new’ AIC standard is rapidly evolving and even for organisations who believe they have had a good handle on it, are finding it hard to keep up with the increasing scale of requirements.
So, what really does the AIC refer to? Is it capability or content and can it be measured?

We spoke to Paul Gibbs, Program Director at Systematiq to tap into his AIC knowledge and expertise to understand what AIC means and what is required to tick the right boxes in this area.

“In its simplest form, AIC is defining how Australia will benefit from a particular investment. In its most complex form (including the emerging enhanced AIC framework), AIC is a detailed and rigorous undertaking to record all the proposed AIC benefits and the ongoing auditing and reporting regimen to ensure accountability to the commitments”

Making AIC a long-term objective for your business

In the current political and financial climate, Australian people need to see the Return on Investments made on major projects. The AIC plan will become a key element when making investment decisions in all future projects.

Organisations that are focussed on winning Defence or Government related work will need AIC to be a part of their strategic planning. AIC will need to become a part of an organisation’s ‘DNA’ as it shapes the decision making across the business in its entirety. No longer will it be acceptable or supportable to pay ‘lip service’ to the AIC component of a bid.

“The reality is that the Australian public expects to see real and meaningful commitments by organisations to ensure a particular project is on-time and on-budget but also as-promised with regards to opportunities for jobs, local supply chain expenditure, commitments to veteran and indigenous communities, investments in education and development of sovereign capability.”

The Rapidly changing AIC Standards and Requirements and its key takeaways

In a media release by the Ministry of Defence, in September 2020, Minister for Defence, the Hon Linda Reynolds said “Defence will strengthen the requirements for AIC in Defence contracts through additional contractual and non-contractual measures and will consult with industry on these changes over the coming months.”

Weighing in on this, Mandy Middlemist, Systematiq’s Business Development Manager commented, “Improvements being implemented to the enforceability, measurability and accountability of AIC plans in Defence contracts and an ongoing AIC Plan audit program to validate performance and strengthen the Australian Industry Capability Program, will encourage the participation of SMEs in defence projects, and allow Primes to showcase their commitment to the supply chain as stated in their AIC Plan.

By introducing a risk-based AIC assurance framework that includes the independent AIC Plan audit program and an enhanced AIC contractual framework, the changes being made to the AIC requirements will hold businesses accountable to their AIC commitments and will measure how effectively these commitments are being managed throughout the project.

Supporting AIC related commitments with evidence and case studies (and statistics showing it is a program and not a one-off success) will become crucial for successful tenders, as the depth of the AIC plan will play an important role in the evaluation process.”

Adding to this, Greig Hutton, Business Development Manager at Systematiq said “When it comes to contract delivery, the emphasis placed on meeting AIC requirements will provide Australian SMEs the chance to develop their sovereign capability, improve Australia supply chain networks and encourage larger investment into the Australian economy while also providing new skills to the Australian industry.”

The challenges of complying with the new AIC requirements

An important requirement that has emerged as part of the new changes made to the AIC standards, is the expectation for primes to drill down through the supply chain and provide details on specifications and expenditure down to second/third/fourth level of suppliers.

“Businesses are expected to conform to the AIC data requirements of the procurement teams, if they want to be an option for primes and the sub-contractors on large defence projects and to supply to Commonwealth contracts.

Small to medium organisations may not be able to provide the level of information required or might find it difficult to comprehend the AIC requirements and meet them. It can often be a steep learning curve that can be hard to get right without the involvement of Subject Matter Experts (SMEs),” reflected Paul Gibbs.

Having an SME who is well versed with the set of AIC requirements will make the process of dealing with primes and sub-contractors seamless and increase the chances for smaller and medium sized organisations to win bigger contracts.

Having an AIC expert on your team to liaise with Defence or infrastructure primes and sub-contractors

As the AIC Lead on the Land 400 Phase 3 project for EOS (being delivered to Hanhwa), Paul brings to fore his AIC expertise and knowledge of ASDEFCON standards to align the client’s own core business strategy with an AIC plan that ticks the right boxes.

“As part of my role as the AIC Lead, I perform a myriad of tasks:

    • Collating and drafting all documentary AIC responses.
    • Sourcing data for the AIC elements.
    • Liaising with stakeholders within Hanhwa, EOS, sub-contractors, suppliers, and Commonwealth representatives.
    • Representing EOS on all AIC related matters including industry events.
    • Participating in procurement activities including supplier visits; and
    • Guiding the client on best practice to ensure that the AIC response developed is compliant and compelling.

But other than that, for me, it is important that I go above and beyond and look at the bigger picture for the client when implementing these tasks.

Through the AIC related work accomplished for our clients, Systematiq operates as a ‘think tank’, wherein we have been able to tap into various resources within our network to lend our expertise to various areas of developing AIC related components- be it developing a template, responding to specific AIC related requirements, queries, and other specific questions.”

Systematiq’s consultants come from a variety of backgrounds and operate remotely, on-site, or virtually. Our subject matter experts have a deep knowledge of the Defence and Rail Industry and can support specific contract requirements.

“It is difficult to accomplish several AIC related tasks and requirements by hiring a single person to undertake the job as it often requires more than just one skill set. Having access to a network of professionals (both within Systematiq and within the Defence and Rail industry) who understand AIC and its associated requirements has been valuable when it comes to working with primes and sub-contractors and winning more work for our clients.”

Developing an AIC plan that meets the commercial objectives of a business

Apart from meeting specific AIC standards and requirements, organisations also need to look at the commercial value of a project when matching business objectives to their AIC plans.

“In order to successfully put forward an AIC strategy that has full buy-in, organisations need to tie their AIC strategy to a commercial imperative that gives a compelling reason as to why the organisation needs to invest time, energy and funds into what they may, on the surface, be seen as having little return on investment.”

Having an advisor like Paul who comes with 25 years of experience within the Defence environment and five years in a senior leadership position in global logistics organisation, means your business can look at the big picture and deliver results that are beneficial on several fronts.

“My unique understanding of any given project allows me to concurrently be across the technical details and their effects, as well as the strategic commercial realities of the programs or projects that I’m involved in. This means that I am not just able to stick to developing responses that meet the guidelines, but I understand the commercial aspect of the process too.

I understand that it is not just about following the dots. To run a commercial organisation, striking the right balance is very important.”

To see how Systematiq team members like Paul can help your business with developing and understanding AIC contract related requirements, chat to our Business Development Managers and see how we can take your business forward.