Australia urged to back sovereign defence prime firms

The Sovereign Australian Prime Alliance has backed the Government's push to build Australian-owned defence prime contractors, arguing that procurement policy will determine whether that ambition succeeds.

The industry group also endorsed the planned Defence Delivery Agency, but said organisational reform alone would not create larger domestic contractors capable of leading major defence programs.

Its intervention follows comments by Defence Industry Minister Pat Conroy on the need to develop Australian-owned prime contractors that can operate alongside established global defence groups. SAPA said that goal reflects a long-standing concern in local industry that Australia remains too reliant on foreign-owned primes for key functions in major projects.

Jamie Morse, spokesperson for the alliance, said the next stage would depend on how defence contracts are awarded.

“Minister Conroy has issued an important challenge to Defence and to industry. The next step is ensuring Defence procurement practices actively support the emergence of Australian prime contractors,” Morse said.

He said local companies could not reach prime status without the opportunity to hold prime contracts.

“Australian companies cannot become prime contractors if they are never trusted with prime contracts,” Morse said.

SAPA represents seven large Australian prime contractors and was formed to argue for a stronger sovereign defence industrial base. It said Australia already has locally owned businesses operating at scale across sectors that defence considers strategically important.

Those sectors include space, cyber security, guided weapons, explosive ordnance, autonomous systems, shipbuilding, communications and systems integration. The alliance said Australian firms are already developing launch systems, satellite technologies and cyber products used in sensitive government, defence and critical infrastructure networks.

It also pointed to domestic manufacturing in guided weapons and autonomous systems, as well as exports to allied markets. In shipbuilding, SAPA said Australia has end-to-end expertise in the design, development, delivery and sustainment of patrol boats and littoral manoeuvre vessels.

Procurement focus

The alliance's central argument is that industrial depth already exists, but policy settings have not kept pace. It said the main barrier to building national champions is not a lack of technical skill or ambition, but the absence of procurement rules that allow Australian-owned firms to scale.

“If the Government wants sovereign Australian primes, Defence must deliberately create opportunities for sovereign Australian companies to lead, integrate and deliver capability in Australia's national interest,” Morse said.

SAPA said this should include more opportunities for Australian-owned and controlled companies to act as prime contractors on defence programs, as well as acquisition frameworks that distinguish between foreign-owned subsidiaries in Australia and genuinely Australian-owned sovereign businesses.

The group also wants procurement decisions to weigh broader industrial and economic effects, including local employment, domestic supply chains, reinvestment and the amount of profit retained in Australia. It cited independent economic analysis it commissioned from DeltaPearl Partners, which found greater domestic benefit from purchasing through Australian-owned suppliers.

Capital and scale

The alliance welcomed government discussion about industry consolidation and the role of private equity, venture capital and long-term investment capital in expanding the sector. Even so, it argued that capital will flow only when investors can see a reliable path to growth through government purchasing.

“Investors will back Australian defence companies when they can see a credible pathway to growth,” Morse said.

He said the decisive factor was defence acquisition policy, not finance alone.

“That pathway ultimately comes from government procurement decisions. Defence acquisition policy remains the single most important lever available to government to build sovereign industrial capability. Defence is the only Australian customer available to Australian defence industry,” Morse said.

The remarks underline a wider policy debate over how Australia defines sovereign industrial capability as defence spending rises and strategic concerns sharpen. While governments have long promoted local industry participation, prime contractor roles on major programs have often remained with overseas-owned groups that control design authority, intellectual property and systems integration.

SAPA argued that changing this pattern should be seen not just as a defence policy goal, but as an economic development strategy. It said Australia has the chance to build domestic industrial strength in defence, space, cyber security, advanced manufacturing and critical technologies, much as earlier industrial policy supported the automotive sector.

The alliance said the new Defence Delivery Agency could become an important test of that approach. It described the agency as the biggest overhaul of defence acquisition in decades and said its value would be measured not only by the speed of project delivery, but also by whether it leaves behind a larger cohort of Australian-owned prime contractors.

“The Defence Delivery Agency represents the most significant reform of defence acquisition in generations,” Morse said.

“The true measure of success will not simply be whether projects are delivered faster. It will be whether Australia emerges with stronger sovereign industrial capability, more Australian-owned prime contractors, deeper technical expertise and greater national resilience,” Morse said.