Australia starts audits to assess collaboration obligations

The Australian Department of Defence (DoD) has confirmed that audits of foreign contractors’ partnerships with local businesses have now begun.

A DoD spokesperson told Janes on 19 January that the DoD engaged “independent Australian audit firms” in the fourth quarter of 2020 to start the checking process.

The checks are intended to ensure that contractors are working with local companies in accordance with the contractual obligations laid out in their industrial collaboration programmes – also known as Australian Industry Capability (AIC) plans.

“[The] audits will be conducted to validate the performance of individual companies against their contracted AIC Plan obligations,” said the spokesperson.

The spokesperson did not elaborate on what penalties the DoD might impose on contractors in the event of non-compliance with AIC obligations, but said that any actions arising from the audit “will depend on individual audit findings and will be developed cognisant of this aim”.

In addition, the DoD will take into account the results of the audits in contractors’ bids for future defence contracts. The spokesperson said, “[The DoD] will consider the audit outcomes of a company’s performance in future tender evaluations and contract negotiations.”

Activity to be checked under the audit includes contractors’ commitments to transfer intellectual property to Australia, the scope of their partnerships with Australian businesses, their efforts to develop capability in Australia, and their investments in the Australian economy.

The spokesperson said the process will increase the “certainty and visibility” of a contractor’s performance against its AIC contractual obligations and provide an “additional level of confidence for both government and Australian industry”.