Early Industry Engagement Better Practice Guide
Better Practice Guide
Industry Engagement
During the Early Stages of
Capability Development
A guide to the effective management of
pre-First Pass ‘probity’ risks
Exposure draft release version: July 2013
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Early Industry Engagement Better Practice Guide
Defence Scope
This publication should be considered better practice guidance for Defence staff undertaking industry
engagement during the early stages of capability development.
Authority
Procurement Better Practice Guides do not create new mandatory procurement policy. All Defence
mandatory procurement policy is contained in either the Defence Procurement Policy Manual or
Departmental Procurement Policy Instructions. Within DMO, additional mandatory procurement
policy is contained in either Defence Material Instructions (Procurement) or Defence Materiel
Handbooks (Procurement). Any mandatory procurement guidance referred to in this Better Practice
Guide is sourced from appropriate legislation and mandatory Commonwealth and Defence policy.
Monitor and Review
This BPG will be reviewed whenever relevant sections of any of the identified references are updated
or amended. All feedback and suggestions for improvement should be sent to:
procurement.policy@defence.gov.au
Note to External Agencies
External agencies intending to use this template will need to tailor it in order to meet their specific
procurement requirements (including relevant internal guidance) and should seek appropriate
professional guidance as required.
Disclaimer
The information in this publication is provided by Defence for the purpose of disseminating
procurement guidance to its staff. While every effort has been made to ensure the guidance in this
publication is accurate and up-to-date, any external user should exercise independent skill and
judgment before relying on it. Further, this publication is not a substitute for independent professional
advice and users external to Defence should obtain appropriate advice relevant to their particular
circumstances.
Defence does not make any representation or warranty about the accuracy, reliability, currency or
completeness of any material contained in this publication and nothing in this publication should be
considered a representation by the Commonwealth. In publishing this information, Defence does not
warrant that the information will be used in any particular procurement process. Defence is not liable
for any loss resulting from any action taken or reliance made on any information or material in this
publication (including, without limitation, third party information).
Copyright Notice
Commonwealth of Australia 2013. With the exception of the Commonwealth Coat of Arms, this
publication is provided under a Creative Commons Attribution 3.0 Australia licence.
The details of the relevant licence conditions are available on the Creative Commons website
(accessible using the links provided) as is the full legal code for the CC BY 3.0 AU licence.
This publication should be attributed as the Better Practice Guide - Industry Engagement During the
Early Stages of Capability Development.
Use of the Coat of Arms
The terms under which the Coat of Arms can be used are detailed on the It’s an Honour website.
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TABLE of CONTENTS
Contents
Foreword
Introduction
Chapter 1 – Overview
The Requirements Phase
Overview – Industry Engagement
Industry Engagement in the Lead Up to First Pass Approval
- Reasons and types of Pre-First Pass industry engagement activities
- What is the status of a Request for Information
Industry Engagement in the Lead Up to Second Pass Approval
Planning for Industry Engagement
Chapter 2 – Guiding ‘Probity’ Principles for Pre-First Pass Industry Engagement
Overview
Guiding Principles
Principle (1) – Seek advice and input from a broad spectrum of sources
Principle (2) – Ensure each activity has a clear objective that is well understood
Principle (3) – Base actions and decisions on reliable and defensible information
Principle (4) – Keep dealings and interactions consistent, transparent and open
Principle (5) – Keep communications consistent, accurate and timely
Principle (6) – Maintain accurate and timely records of engagement activities
Principle (7) – Considers industry requests to protect IP and commercially sensitive
information on their merits and on a case by case basis
Principle (8) – Refrain from expressing personal view or opinion
Principle (9) – Take appropriate steps to safeguard and protect Defence information
Principle (10) – Avoid accepting inappropriate gifts or hospitality
Chapter 3 – Options for Pre-First Pass Industry Engagement
Overview
Common Industry Engagement Methods
- Engagement of expert industry advisers
- Industry briefings
- One-on-one meetings
- Environmental Working Groups (EWGs)
- Release of draft capability requirements
- Request For Information (RFI) Process
- Rapid Prototyping, Development and Evaluation (RPDE)
Appendix A: Glossary and Key Documents
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Foreword
[To be completed]
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Introduction
1.
Every year Defence spends billions of dollars acquiring and maintaining
military equipment and systems as a means of achieving Australian Defence
Force (ADF) capability. However, Defence cannot do this alone and looks to
industry as its capability partner. Particularly in the early stages of capability
development, it is vitally important that Defence develops close productive
working relationships with innovative and sustainable Defence industry
companies that understand and can respond to Defence’s capability needs.
2.
To further emphasise the importance of this relationship, it is widely recognised
that the quality of Defence’s engagement with industry, particularly in the early
stages of capability development, can have significant implications for
delivering required ADF capability and the achievement of value for money
over the longer term.
3.
However, it is also the case that Defence’s engagement with industry can, if not
planned and managed appropriately, involve or give rise to ‘probity’ concerns
that risk damaging Defence’s reputation, the quality of Defence and
Government decision making and Defence’s ability to achieve best value for
money capability solutions. During the early stages of capability development
(ie prior to First Pass Approval) these concerns may involve allegations of bias
in favour of particular solutions or suppliers and / or risks to the competitiveness
or fairness of future Defence procurement processes.
4.
While acknowledging these concerns as legitimate, what is not always well
understood is that ‘early’ industry engagement gives rise to probity
considerations that are quite different to those that apply during the later stages
of capability development (ie following First Pass Approval).
As a
consequence, the ‘true’ probity concerns of early industry engagement may
sometimes be missed, or an inappropriate (sometimes unduly restrictive)
approach taken to their management at an arguably greater risk to Defence’s
capability outcomes. A key aim of this Guide is to assist Defence personnel
accurately identify and appropriately manage the probity risks of early industry
engagement and to elicit a widespread understanding that, while such risks are
often legitimate, they are rarely (if ever) insurmountable to prevent Defence
from fully effectively and constructively engaging with industry.
5.
After reading this Guide, Defence personnel should have a balanced and well
informed understanding of probity considerations relevant to early industry
engagement and the ability and confidence to design and conduct such activities
in a manner that appropriately responds to all relevant considerations. These
probity considerations can then be factored into the early industry engagement
strategy, which should be documented in the project’s Acquisition and Support
Implementation Strategy (ASIS).
6.
With this primary goal, this Guide has been divided into the following three (3)
chapters:
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
Chapter 1: provides a high level overview of the benefits and reasons for
engaging with industry during the capability development process and
outlines some of the key differences between industry engagement
activities that typically occur before and then after First Pass Approval;

Chapter 2: offers key general ‘guiding principles’ to assist Defence
personnel understand and appropriately manage the ‘true’ probity
considerations relevant to pre-First Pass industry engagement activities; and

Chapter 3: outlines a range of the more common engagement methods
typically used by Defence personnel during the early stages of capability
development and offers practical guidance to facilitate the successful
implementation of these activities. This chapter also attempts to ‘debunk’
some of the common myths and misconceptions that seem to have grown
over time with respect to the use of a number of these methods with a view
to optimising their outcomes for the benefit of both Defence and industry.
7.
While this Guide has been developed to apply to Major Capital Equipment
(MCE) projects, the general principles and advice that it offers may also be of
assistance to Defence personnel wishing to engage with industry during the
early planning stages of other types of major Defence procurements.1
8.
Importantly, this Guide does not attempt to replicate or replace guidance that is
already available in other Defence policy manuals and handbooks. Users are
encouraged to read this Guide in conjunction with the Defence Capability
Development Handbook (DCDH) 2012, Defence Materiel Instruction
(Acquisition and Sustainment) 14-0-NNN Development and Management of the
Acquisition and Support Implementation Strategy (DMI ASIS)2 and the
Defence Procurement Policy Manual. In addition, this Guide should not be
treated as a substitute for obtaining specialist advice on an issue or concern that
arises in the context of a particular project.
*
1
2
*
*
*
*
Additional guidance applicable to industry engagement activities in the period following First Pass
Approval is currently under development and is scheduled for release in Quarter 1 of 2014.
The DMI ASIS and accompanying Defence Materiel Standard Procedures (DMSPs) are currently under
development and scheduled for release in the second half of 2013.
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CHAPTER 1
Overview
The Requirements Phase
1.
The Requirements Phase of Capability Development takes MCE projects and
progressively defines and matures their requirements over a period that spans
many months, if not years, to the stage where Defence enters the contracts to
acquire a new or enhanced capability. This is generally achieved through a
standard two pass Government decision and approval process where the key
milestones are referred to as First Pass Approval and Second Pass Approval.3
2.
The standard two pass approvals process is designed to provide Government
with sufficient visibility of, and control over, the whole of the Requirements
Phase, from DCP entry to procurement of the new or enhanced capability. This
allows Government to make informed and deliberate decisions at key stages of a
project’s development.4
Overview - Industry Engagement
3.
For the purposes of this Guide, industry engagement is to be understood as any
activity (whether informal or formal) that involves Defence interacting with
industry in relation to Defence’s capability needs and requirements.
4.
In the context of the standard two-pass approval process, industry engagement
occurs in the lead up to First Pass Approval, and then following that Approval,
between First Pass and Second Pass Approval. However, reflecting the
different stages of the capability development process, the forms and types of
industry engagement between these two key Government decision points (and
the considerations relevant to each) vary considerably.
5.
The primary focus of this Guide is on early industry engagement (ie engagement
that occurs before First Pass Approval);5 however, this chapter also highlights
key differences between industry engagement in the period before First Pass
Approval and then following that decision point.
Industry Engagement in the Lead Up to First Pass Approval
6.
First Pass Approval allows Government to determine the capability options to
be further developed, the engagement and role of industry in that development,
and the resources (workforce and financial) required for Defence to undertake
detailed development and analysis of the capability options approved at First
3
If a non-standard Government approval process is being proposed for a project (eg Combined First and
Second Pass Approval), the considerations relevant to industry engagement may be different to those
discussed in this guidance and specialist legal / contracting advice may need to be sought.
For further information on the two pass approval process, readers should consult the DCDH (paragraphs
1.5.8, 1.5.9 and 1.5.17, pages 8-10).
Separate guidance material that deals with industry engagement in the period between First Pass and
Second Pass Approval can be found in DPPM Chapter 5 and a separate Better Practice Guide dealing with
industry engagement following First Pass Approval is under development and scheduled for release in
Quarter 1 of 2014.
4
5
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Pass. The outcome of First Pass Approval is approval to expend funds to
conduct further development of approved options and to obtain tender-quality
costings for consideration by Government at Second Pass.6
Reasons and types of Pre-First Pass industry engagement activities
7.
There are many reasons why Defence personnel should actively and frequently
engage with industry in the lead up to First Pass Approval, including for the
reason that industry is often the best or only source of essential information
required for inclusion in the First Pass Approval documentation suite.
8.
During this period, consultation with industry can be vital for assisting Defence
to:

identify and define the scope of the possible solution classes;

reduce and define the available option set, including by testing options,
solutions and assumptions to ensure achievability and practicality of
delivery within the available budget and schedule constraints;

define and resolve capability issues and requirements uncertainty, including
by removing ambiguities and identifying those requirements that may be
significant cost drivers or stifle innovation;

identify what the market has to offer, including to understand if capability
requirements can be satisfied by ‘off the shelf’ or, if not, the maturity and
development path of current day technologies and what may constitute the
‘art of the possible’;

understand industry’s capacity to support the required capability;

understand the nature of the industry sector, including how industry
generally conducts business in the sector, the degree of available
competition and proposed teaming arrangements; and

understand individual company situations – ie financial viability, cash flow,
ownership structures, possible takeovers and mergers, market segment, key
products and product maturity, development pathways, production plans,
customer base, depth of engineering and design expertise, etc.
9.
There are many different ways, both formal and often informal, through which
Defence engages with industry prior to First Pass Approval (typically being a
period of not less than 2 years) to source the information needed for
Government’s consideration and decision.
10.
Some of these methods include:
6

attendance at industry conferences and trade shows,

supplier and customer visits / tours,

product demonstrations and site / facilities inspections;
DCDH, paragraph 1.5.17, page 10.
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
Environmental Working Groups (EWGs), such as the Land EWG, Maritime
EWG and Aerospace EWG, or other industry forums;

engagement of consultants (including managing contractor), advisers or
other industry experts;

the Rapid Prototyping, Development and Evaluation (RPDE) Program,
which can be used, for example, to undertake ‘quick look’ activities into
particular aspects of a project or capability;

formal approaches to market such as Requests for Information (RFIs); and

release of exposure draft capability documents, such as draft Operational
Concept Document (OCD) or Functional Performance Specifications (FPS),
for industry review and feedback.
11.
In practice, much of the engagement that occurs before First Pass Approval,
particularly in the very early stages of a project entering the DCP, is necessarily
informal, occurs in the absence of formal established processes and takes
Defence on a gradual learning journey over which it progressively builds project
knowledge and relevant information. In the very earliest stages of a Project
entering the DCP, engagement frequently takes the form of one-on-one supplier
and customer meetings, attendance at trade shows and other industry fora, is
largely unstructured and heavily relationship based.
12.
However, as Defence’s knowledge builds, a project matures, options narrow and
the timing to First Pass Approval shortens, the nature of engagement tends to
change and these early informal methods are replaced or supplemented by more
formal engagement methods, such as RFIs.
13.
What constitutes an appropriate form or type of engagement in any given setting
will depend on a wide variety factors, including the nature and type of project,
any Government direction, the maturity and availability of suitable
technologies, known market conditions, key market players / suppliers, nature
and maturity of requirements, known constraints, specific project risks and
knowledge / information gaps.
What is the status of a Request for Information
14.
One of the most effective, yet potentially most costly, formal means of pre-First
Pass industry engagement involves the release of formal structured
documentation seeking specific project-related information in accordance with
specified terms (eg RFI). Sometimes different terms are used interchangeably
for an RFI, for example, ‘Market Sounding Document’ or ‘Structured RFI’,
however, all formal approaches to industry that occur before First Pass and
which are designed to elicit information should be titled ‘Request for
Information’ for consistency and clarity of purpose. In addition, all RFIs (and
other formal approaches to market)_should be released to industry by the
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Defence Materiel Organisation (DMO) (rather than by Capability Development
Group), notwithstanding they represent a pre First Pass Approval activity.7
15.
A key purpose of an RFI is to assist Defence gather sufficient information from
industry about capability options, including Rough Order of Magnitude (ROM)
costs, high level schedule details and key capability risks, as necessary to
support the development of the First Pass documentation suite. RFIs also assist
the DMO with gathering the necessary information required to put together the
strategy for implementing the materiel system, including the procurement
options for acquiring and sustaining the materiel elements. All considerations
relevant to the release and structure of a RFI should be documented as part of
the Project’s overall industry engagement strategy that forms part of the
project’s ASIS, and which is also compiled as part of the First Pass
documentation suite.
16.
With respect to the planning and conduct of RFIs, it is important to understand
that such activities are generally not ‘procurements’ for the purposes of the
Commonwealth Procurement Rules (CPRs).8 Rather, RFIs should be seen as
part of the ‘market research’ phase of a potential (generally post First Pass
Approval) procurement activity.
17.
What this means is that RFI processes are not strictly regulated or constrained
by the CPRs, for example, in terms of to whom Defence must issue the request
documentation, the response timeframe that Defence must allow for the
submission of responses and Defence’s required treatment of any ‘late’
responses. Unlike post-First Pass Approval approaches to market (such as
Requests for Tender (RFTs) or Requests for Proposals (RFPs)), decisions made
by Defence in the context of an RFI may be guided, but are not necessarily
bound, by the CPRs.
18.
However, this is not to suggest that in the lead up to First Pass Approval the
CPRs have no (or little relevance) to industry engagement activities. Rather,
during this period, Defence will typically engage in what may be termed ‘miniprocurements’ to assist Defence progress and mature a project to the point
where the main ‘capability’ procurement can be undertaken (ie post First Pass
Approval). Examples of such ‘mini-procurements’ include processes to engage
expert advisers to develop a concept design or other studies, undertake costing
or economic analysis, resolve requirements uncertainties and / or undertake
prototype testing. For these ‘mini-procurements’ the CPRs apply to the
procurement activity in the usual way.9
19.
A further important restriction that applies to formal pre-First Pass forms of
industry engagement such as RFIs is that, prior to this first key decision point
7
In Minute from CCDG dated 23 January 2012 (Ref: CCDG/OUT/2012/3), the direction was given by CDG
that DMO will issue all Requests for Information (RFIs) or similar formal solicitations to industry at the
request of CDG in order to provide a more consistent and co-ordinated approach by Defence to industry.
This statement will hold true provided the RFI is only used to seek information. If, however, the RFI is
used for some other purpose that involves the purchase of a good / service (eg to establish an Integrated
Product Team (IPT) to assist with developing FPS), then the process will likely constitute a procurement
that is subject to the CPRs.
Refer DPPM Chapter 1.2.
8
9
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and in the absence of Government approval or direction, Defence is generally
not permitted to conduct a process for which the purpose or outcome is a downselection or short listing of potential suppliers. Examples of formal processes
that are generally used by Defence for this purpose are ‘Invitations to Register’
interest (ITRs)10 and Requests for Proposals (RFPs).
20.
The primary reason for this restriction is because prior to First Pass Approval
Government generally has not had the opportunity to consider the different
identified capability options and strategy alternatives and any down selection or
short-listing by Defence prior to this time would therefore pre-empt or fetter
Government’s decision on the identified options and other proposed
alternatives.
21.
However, it is also recognised that RFIs can nevertheless have the indirect
effect of reducing the field of potential suppliers. This is because the
information obtained through an RFI process, along with other information
gained by Defence during its market research activities, is used to inform and
make recommendations to Government about the viable options that should be
further considered post-First Pass Approval, together with advice on which
options should not be pursued. That is, RFI information is generally used to
inform the project’s procurement strategy to be pursued by Defence post-First
Pass. Accordingly, through this ‘standard’ process of options consideration and
strategy development, particular suppliers may find they are ‘locked out’ of
potential future procurement processes and / or that their ability to successfully
compete in future processes is significantly reduced if they elect not to respond
to an RFI.
22.
For example, in an aviation training project, a possible option for the
requirement may be a simulation solution rather than a trainer aircraft solution.
If the RFI (or other) information obtained by Defence pre-First Pass indicates
that a simulation solution will not be viable (for reasons that are valid and
defensible), then Defence may advise Government that a simulation solution not
be further progressed, and that Government agree that only trainer aircraft
solutions (with a minor simulator component) be pursued. In such a case, while
the RFI has not been used to shortlist suppliers, it has most likely had the effect
that simulation solution providers will not participate in the future procurement
process (except as a subcontractor for the small simulator component).
23.
Industry engagement activities (including the issue of Requests for Quote
(RFQs)) can be more complex and raise different considerations when Defence
intends seeking Combined Pass Approval and specialist contracting and legal
advice will generally need to be sought in such circumstances.
10
Within Defence, ITRs tend to be used for different purposes and in different ways. However, like RFIs, an
ITR cannot be used ‘pre-First Pass’ to down select or shortlist potential suppliers for a subsequent
procurement process for the capability – and to the exclusion of other potential suppliers. However, an
ITR could be conducted pre-First Pass if Defence is simply using the process to identify and assess a nonexhaustive group of potential suppliers - leaving scope for other potential suppliers to participate in any
subsequent capability procurement process.
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Industry Engagement in the lead up to Second Pass Approval
24.
At Second Pass Approval, Government is asked to consider more fully detailed
and costed proposals for the capability options approved by Government at First
Pass. By Second Pass Approval, a well-defined budget and technical, schedule
and cost risk profiles will have all been established for the acquisition and
support of the materiel system, and the future provision for through-life support
costs (including the workforce allocation) identified.
25.
Following First Pass Approval and to successfully progress a project to Second
Pass Approval, Defence initiates and conducts the ‘main’ capability
procurement process (or processes) to identify the best value for money solution
and supplier for the materiel elements of the capability.
26.
Industry engagement activities following First Pass Approval involve the more
conventional formal methods of engagement such as ITRs and RFPs (both of
which can now be used to down select or short list suppliers), RFTs and Letters
of Request (LORs) in the case of a Foreign Military Sales (FMS) purchase.
Most major (non-FMS) procurement processes will also include a formal offer
definition activity (ODA) phase during which the Commonwealth will
undertake detailed tender clarification and refinement, and potentially contract
negotiation, with (usually) two shortlisted tenderers prior to finalising the tender
evaluation and selecting the preferred tenderer.
27.
Formal industry engagement activities conducted during this stage are subject to
the CPRs in the usual way.11
Planning for Industry Engagement
28.
Before commencing any form of engagement (whether formal or informal), it is
important that Defence personnel undertake sufficient detailed planning
(including as part of a broader overall project industry engagement strategy) to
ensure each activity has a clear purpose and is appropriately designed and
structured to target this objective.
29.
This detailed planning is essential to ensure:

the information is obtained at the right time, in the right form and to the
level of detail consistent with the purpose of the engagement;

the engagement forms a logical and rational step in the project’s overall
industry engagement strategy;

the resource, cost and time burden associated with the engagement is kept
to a minimum;

all relevant probity considerations / risks are understood and appropriately
managed; and
(Refer further Chapter 2 – Guiding ‘Probity’ Principles for Pre-First Pass Industry
Engagement and Chapter 3 – Options for Pre-First Pass Industry Engagement)
11
Refer DPPM Chapter 1.2.
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
30.
long lead time industry inputs can be identified and appropriately factored
into a project’s overall strategy and planning.
The DMI ASIS requires that the industry engagement strategy be documented
and approved in the Project’s ASIS. For the early industry engagement
conducted pre-First Pass Approval, the strategy for this engagement will
initially be documented in the Concept ASIS and as the Project progresses and
moves past First Pass Approval it is documented in the Detailed ASIS. One of
the roles of the early industry engagement strategy is to enable the DMO to
compile the information that it needs to determine the strategy alternatives to be
set out in the Detailed ASIS, taking into account considerations relevant to
materiel implementation risk, the nature of the marketplace, opportunities for
Australian industry, and compliance with procurement and other policy
requirements.
*
*
*
*
*
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CHAPTER TWO
Guiding ‘Probity’ Principles for Early Industry Engagement
Overview
1.
As mentioned in Chapter 1 – Overview, ‘probity’ is one of many considerations
that Defence personnel must have regard when engaging with industry during
the early stages (ie pre-First Pass Approval) of capability development.12
2.
During this stage Defence personnel will almost certainly be dealing with
companies that are keen to participate in any (generally) post-First Pass
‘capability’ procurement process and strongly motivated to use each
engagement activity as an opportunity to promote their products and capabilities
over other potential suppliers. It is therefore important that Defence personnel
engage with industry in an open and impartial manner that affords fair
opportunity to all potential suppliers and in a manner capable of withstanding
external scrutiny and public criticism. Otherwise, Defence’s reputation may be
compromised, public confidence diminished and the fairness and
competitiveness of any future Defence procurement process undermined.
3.
Recognising these risks but also the critical importance of industry input to the
capability development process, it is vital that Defence personnel have a
realistic appreciation of the ‘true’ probity considerations relevant to pre-First
Pass engagement and not misunderstand or overstate these risks so as to respond
in way that unduly restricts or limits Defence’s interactions.
4.
As mentioned in the introduction to this Guide, probity considerations
applicable to early industry engagement are rarely (if ever) insurmountable so as
to prevent Defence from effectively and productively engaging with industry.
5.
Probity considerations relevant to pre-First Pass engagement are also different
to those that apply in the period following First Pass Approval. Compared to
the very structured and process rich environment in which post-First Pass
industry engagement occurs, pre-First Pass industry engagement is often
unstructured, frequently occurs in the absence of established processes and is
heavily relationship based. Unavoidably therefore, central to the effective
management of pre-First Pass ‘probity’ is the judgment, common-sense,
integrity, experience and skills of the individuals involved.
6.
When planning and conducting early engagement activities, Defence personnel
should strive to structure all activities at the lowest possible cost to industry
(and Defence), ensure all interested suppliers are afforded a fair opportunity and
not lead any supplier ‘down the garden path’ by creating ‘false hope’ and
unrealistic expectations of potential business opportunities and / or suppliers’
likely competitiveness in future procurement processes.
7.
However, Defence alone is not responsible for successful industry engagement.
Equally important to effective engagement is industry’s willingness and
12
Refer paragraphs 28 and 29 of Chapter 1 – Overview of this Guide.
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preparedness to engage and share information and views with Defence.
Recognised barriers to industry’s full participation include concern from
suppliers that participation in a pre-First Pass Approval engagement activity
may compromise their ability to participate in a subsequent (generally post First
Pass) procurement process, a reluctance by suppliers to discuss ideas in the
presence of other suppliers out of fear of losing a competitive edge and / or
suppliers taking the view that the costs of participating in an activity outweigh
the expected benefits or return.
8.
Accepting these challenges as real and with the aim of encouraging both ‘sides’
to constructively engage, this Chapter outlines a number of key guiding
‘probity’ principles relevant to the design and conduct of pre-First Pass
engagement activities. Applying these principles, Defence officials should be
able to accurately identify and appropriately manage probity risks relevant to
early industry engagement and also address those concerns in a way that
encourages full industry participation. With the benefit of this guidance,
Defence personnel should be in a position to generate the quality of information
needed to support optimal decision making, free of risk to Defence’s reputation,
criticism and the competitiveness / fairness of any future related Defence
procurement process.
Guiding ‘Probity’ Principles
9.
The 10 guiding ‘probity’ principles that Defence personnel should keep in mind
when planning and conducting pre-First Pass industry engagement activities are:
Principle 1 – Seek advice and input from a broad spectrum of sources

Defence project teams should seek a broad spectrum of views and advice
from a diverse range of industry sources to ensure that it acquires a
sufficient awareness and understanding of all potentially feasible capability
options and strategy alternatives.

Broad engagement is fundamental for building a reliable and accurate
project knowledge bank essential for supporting optimal decision making
by Defence and Government. It should also avoid the risk of Defence’s
early strategy development, options selection and requirements
development from prematurely focusing on, or inadvertently embedding, a
particular solution or supplier’s product without a sufficiently complete and
accurate understanding of all potentially feasible options and alternatives.
Principle 2 – Ensure each interaction has a clear objective that is well understood

Before embarking on any engagement activity, the activity should be
carefully researched and planned to ensure it has a well defined objective
that is clearly articulated and well understood.

In the case of early informal engagement efforts (such as visits to supplier
or customer premises or other face to face meetings) preparation is critical
given the expectations often associated with these types of activities and the
largely informal and unstructured manner in which they occur. This
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preparation should include background research (as appropriate for the
particular engagement) and the development of a focused and targeted
agenda which is circulated in advance to relevant participants to ensure a
clear common understanding of the purpose of the engagement.

Focused and detailed planning is also important for more formal types of
industry engagement (eg RFIs) given their high relative costs for both
Defence and industry. Recognising the not insignificant costs associated
with RFI processes (if done correctly), it is generally recommended that a
Project team not issue an RFI without first undertaking more informal types
engagements (eg attendance at trade shows, supplier visits, one-on-one
meetings) and only to target specific information gaps that cannot be
adequately addressed through more informal means.
Principle 3 – Base actions and decisions on reliable and defensible information

Given the considerable flexibility and discretion that generally applies in
terms of how and with whom Defence engages in the lead up to First Pass
Approval13 – all decisions and actions taken by Defence personnel when
planning and conducting early engagement activities should be based on
robust and reliable information. This information should be sufficient to
readily (and defensibly) explain the reasons and aims of the engagement
without the need for elaborate justification.

This requirement is particularly important for any engagement activity that
involves only a subset (or select number) of potentially interested suppliers
given the heightened risk of allegations of bias and favouritism in these
types of circumstances.
Principle 4 – Keep dealings and interactions consistent, transparent and open
13

Given the largely informal and often discretionary manner in which much
early industry engagement occurs, it is vital that Defence interact with
industry in as open and transparent a manner as possible. Open and
transparent dealings will assist Defence counter any allegations of bias or
favouritism of particular suppliers or products and ensure that Defence’s
dealings can stand up to public scrutiny / criticism and that public
confidence is maintained.

With a view to preserving the integrity and fairness of any future post First
Pass procurement process, Defence’s dealings with industry should be as
‘even handed’ and consistent as possible. In particular, no single supplier
(or select group of potential suppliers) should be given information that
would give it an unfair advantage over other suppliers in relation to
participation in any future (competitive) Defence procurement process.
Refer discussion at paragraphs 16 and 10 of Chapter 1 – Overview and Chapter 3 – Options for Pre-First Pass
Industry Engagement more generally.
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Principle 5 – Keep communications honest, accurate and timely

Defence should communicate early and often with industry about its
capability needs and requirements. As a result of early and timely
communication, Defence may, for example, acquire information that
reveals a new approach or technology option not currently under
consideration and which offers a potentially better value for money
solution.

Project or capability related information provided to industry should be
accurate, consistent and current. If, for example, a project’s timetable or
requirements change from those previously announced, it is important that
this new information is promptly conveyed (with reasons, if possible) so as
to allow industry to adjust its planning and any proposed investments to
ensure they remain aligned with Defence’s current and changing needs.

Honest, accurate and timely communication is also critical to ensure no
supplier is given ‘false hope’ and to prevent a situation where suppliers
make plans and investments based on unrealistic or inaccurate assessments
of potential business opportunities and their likely competitiveness in any
future Defence procurement process.
Principle 6 – Maintain accurate and timely records of engagement activities

In the interests of full transparency and accountability, Defence personnel
should keep comprehensive project records of all industry engagement
activities undertaken in the lead up to First Pass Approval.

With respect to each specific activity, the form and content of the record
will necessarily differ with respect to each engagement but should include
at a minimum: the rationale and purpose of the engagement; details of
participants / attendees; summary of discussions / information exchanged,
key outcome(s) and any follow on actions / steps.
Principle 7 – Consider industry requests to protect intellectual property (IP) and
commercially sensitive information on their merits and on a case by case basis

While less likely to be a genuine ‘live’ issue in the early stages of capability
development when discussions tend to be relatively general, unstructured
and more conceptual in nature, as options start to firm and requirements
mature, industry may seek to qualify their participation in an engagement
activity with caveats or restrictions that attempt to restrict Defence’s use of
the information supplied and / or outputs derived from the engagement.

Any industry requests to protect sensitive commercial information or
intellectual property (IP) should be considered on a case by case basis based
on their merits. In a perfect world, Defence would have unfettered access
and use of all industry sourced information and IP that it needs to develop
and progress a project to First Pass Approval. However, this is often not
commercially realistic – particularly where the information / IP concerned
has been developed at industry expense, comprises a company’s
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competitive edge and there are minimal (if any) other sources of the
information available to Defence.

If Defence personnel are prepared to limit Defence’s use or disclosure of a
company’s information, care should be taken to ensure any agreed
restrictions do not operate to defeat the very purpose or utility of the
engagement. Any negotiated restrictions or conditions should be as narrow
and specific as possible in terms of the types / categories of information to
which they apply and the third parties to whom they relate.
Principle 8 – Refrain from expressing personal view or opinions

Whenever interacting with industry, Defence personnel should refrain from
making verbal or written representations that could be perceived as binding
or committing Defence or Government to a particular option or course of
action that has not been officially endorsed or approved.

Personal opinions should be avoided, but if expressed, clearly identified
and caveated with the disclaimer that they may not necessarily reflect the
views of Defence or Government.

Representations should also be honest and factually based. Defence
personnel should resist any temptation to embellish the capability and / or
the relative importance of the project to ensure that industry acquires an
accurate appreciation of the required capability, available budget and the
level of priority that Defence affords to the project.
Principle 9 – Take appropriate steps to safeguard and protect Defence information

Defence personnel must routinely consider the extent to which any
information that it is proposing to make available to industry contains
classified information, confidential information (whether owned by
Defence or a third party) or is otherwise sensitive. If any such information
is identified, this information must be managed in accordance with all
relevant statutory and policy requirements, including that contained in the
Defence Security Manual (DSM) and the DPPM.14
Principle 10 – Avoid accepting inappropriate gifts or hospitality

In the pre-First Pass stage of a project’s development, Defence officials
may find themselves vulnerable to offers of (inappropriate) gifts and
hospitality given the desire for suppliers to build strong and lasting
relationships with Project personnel.

Recognising the vital importance to Defence of ensuring that all dealings
with industry accord to the highest standards of integrity and commercial
behaviours, Defence personnel must at all times remain mindful of their
obligations if placed in such a situation and ensure all offers are dealt with
in accordance with DI(G) PERS 25-7 – Gifts, Hospitality and Sponsorship.
*
14
*
*
*
*
See in particular, DPPM Chapter 3.11.
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CHAPTER THREE
Early Industry Engagement Methods
Overview
1.
There are many different ways and means, both formal and informal, by which
Defence can interact and generally engage with industry in the lead up to First
Pass Approval. Some of the more common methods of engagement were
mentioned in Chapter 115 and are further described in this Chapter 3.
2.
When considering which of the methods discussed in this chapter is the most
appropriate in any given situation, various factors should be taken into account,
including:
3.

the maturity of the project / requirements;

specific information gaps;

other potential sources of the required information;

extent of Defence’s reliance on industry input or expertise;

the purpose or intended uses of the information being sought;

the preparedness of industry to participate in the different types of activities;
and

the anticipated cost of a particular activity and the availability of resources
and expertise to support the engagement.
With respect to the main different types of engagement methods, this Chapter
provides a high level overview of each option and, consistent with the principles
outlined in Chapter 2, highlights some of the common pitfalls associated with
their use. It also attempts to ‘debunk’ some of the myths or misconceptions that
seem to have arisen over time with respect to their use, with the aim of
improving / optimising their effectiveness for the benefit of both industry and
Defence.
Common Industry Engagement Methods
Engagement of expert/industry advisers/managing contractors
4.
15
In the period before First Pass Approval, Defence frequently engages expert
industry advisers for a wide range of purposes and using a variety of methods
(eg use of a pre-existing panel such as the DMOSS panel or by running a
bespoke open tender process). This may also extend to the engagement of a
managing contractor, who may be engaged by Defence to manage the delivery
of the particular project. The procurement process used to engage the adviser (or
managing contractor) must be conducted in accordance with the CPRs.
Refer paragraphs 9 - 10 of Chapter 1 – Overview.
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5.
An industry adviser (or managing contractor) may be a representative of a
professional advisory firm, a contractor with specialist expertise or skills, or a
person drawn from academia or industry. An adviser (or managing contractor)
may be engaged for a wide range of purposes, including undertaking costing or
market analysis, to develop requirements or a concept design – possibly
individually, as part of an integrated project team or a collaborative working
group – or to facilitate or coordinate other engagement activities on behalf of
Defence.
Common pitfalls – ‘Above the line’ vs. ‘below the line’ considerations
6.
Depending on the role or task for which the adviser is engaged, an issue that
commonly arises with this type of engagement concerns its implications for the
adviser (or his / her employer company) in terms of eligibility to participate in a
subsequent (generally post-First Pass Approval) related procurement process.
7.
A common misconception is that under no circumstance can an industry
participant engaged by Defence as an adviser to work on a project in a pre-First
Pass development stage (ie in an ‘above the line’ capacity) be permitted to
tender or otherwise participate (eg as a subcontractor to a prime) in a subsequent
procurement process related to the same project / capability (ie act in a ‘below
the line’ capacity).
8.
In fact, depending on the role performed by a particular adviser, it is possible
for an adviser (or his / her employer company) to act in both an ‘above the line’
and a ‘below the line’ capacity in relation to the same project / capability.
Whether or not this outcome is possible will generally depend on a range of
factors, including:
9.

the criticality to Defence in ensuring the adviser’s advice / assistance is
wholly independent and impartial;

what incentives or other influences may exist to motivate the adviser to
provide advice that is other than wholly impartial;

what measures Defence could put in place to remove or lessen the impact of
such influences, to identify when other than wholly impartial advice has
been provided and to counter or remove any identified biases; and

whether, as a result of the engagement, the adviser may gain an unfair
advantage over other suppliers in relation to a subsequent tendering activity
and, if so, the extent to which Defence can eliminate this advantage (ie
create a ‘level playing field’) through the taking of other measures – eg
providing information equivalent to that provided to the adviser to other
potential suppliers via other means.
Generally speaking, when an adviser is engaged in the very early stages of
capability development (eg at a stage where Defence is still considering a range
of options and strategy alternatives at a conceptual or principle level), it is far
less likely that the engagement would prevent the adviser (or his or her
employer) from participating in a future related procurement process.
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10.
However, in the later stages of a project’s development where an adviser may be
involved with say, developing ‘top level’ requirements or drafting the Function
and Performance Specification, then it may not be possible for the adviser to
work in both an ‘above the line’ and ‘below the line’ capacity. In this situation,
the adviser (or his / her employer) may be excluded from participating in a
future related procurement process.
11.
However, this need not always be the outcome and each situation should be
considered on its merits taking into account all relevant factors, including the
following:
12.

the extent of the adviser’s ability to influence or skew the development of
project request documentation to his / her employer company’s advantage;

whether Defence can establish a level playing field in relation to any
subsequent related procurement processes by ensuring that information
made available to the adviser can be disseminated more generally to other
potentially interested suppliers;

whether it is possible to require the adviser to execute a confidentiality
undertaking with Defence to ensure project related information is not passed
on by the adviser to his / her employer and used for any other purpose; and

the extent to which the adviser’s employer can put in place effective
‘information barriers’ so as to quarantine the individual adviser (and
information gained through the engagement) from other parts of the
employer’s organisation.
For all such engagements, it is important that Defence determine its position on
this threshold issue at the outset and that this position is made known to industry
prior to the actual engagement of the adviser. This advice is necessary to ensure
that the adviser (or more relevantly, his / her employer) can make an informed
business decision about which of the mutually exclusive business opportunities
it wishes to pursue.
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Practical Example 1 – Engaging Expert/Industry Advisers
Context: To assist the Project team develop the requirements for a future naval electronic
warfare capability (SEA1234), Defence is looking to engage a well known former Defence
Electronic Warfare (EW) engineer (X) as an expert adviser to provide specific technical input.
X’s particular expertise is no longer readily available within Defence or considered widely
available within industry. X is currently an employee with Future Tech, a company that has
expressed potential interest in participating as a subcontractor to a prime in the future (postFirst Pass Approval) procurement process for this capability.
Issue: Future Tech has contacted Defence and sought confirmation that if X provides the
required assistance to Defence this will not prejudice Future Tech’s ability to participate as a
subcontractor in a future tender process.
Outcome: There are a couple of options. First, Defence could reasonably decide that X’s
services cannot be used in relation to the pre-First Pass engagement and Future Tech still be
permitted to tender in any post First Pass procurement process. In this case, assuming
Future Tech decision remains to preserve its option to participate in the future procurement
process, Defence would then need to source similar specialist skills from other sources,
including most likely overseas. This may cost more than X’s rates.
Second, after considering other options (eg, whether the expertise required could be obtained
from another unconflicted source; the risks that would be posed to the fairness /
competitiveness of the future procurement by X’s engagement), Defence may conclude that it
wishes to engage and utilise X’s expertise.
This decision could be possible under the following approach:
a) Defence requires X to execute a personal deed of confidentiality to protect the project
information from disclosure to third parties, including Future Tech;
b) Defence requests Future Tech to provide a written undertaking that they will not:
i) utilise X’s services for the purposes of undertaking a subcontractor role in any future
procurement; and
ii) request or otherwise seek access to X’s knowledge of the project gained from the
provision of X’s services to Defence.
c) Defence advises Future Tech that on the basis of compliance with the above requirements
they would not necessarily be barred from subcontracting to a prime in the proposed
tender process, however noting that a future Request for Tender (RFT) will require
tenderers to provide a statutory declaration which confirms that their tender has not been
prepared on the basis of information that has been improperly obtained.
Of course, Future Tech may not agree to provide X’s services on the above basis, particularly
if X is a key person under any proposed subcontract arrangement. Also, Future Tech may
conclude that they have greater prospects of reward through the future subcontract role,
rather than simply providing X’s services to Defence.
It should also be noted that the risk mitigations mentioned in the second option above may
not prevent competitors from criticising Defence for allowing Future Tech to subcontract in the
tender process. Nevertheless, the example shows that there may be possible options for
dealing with conflict and probity concerns, even in difficult circumstances.
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Practical Example 2 – Engaging Expert/Industry Advisers - IPT
Context: Given the risks and difficulties associated with Defence engaging X (employee of
Future Tech) to assist develop the functional requirements for Project SEA1234 (refer
Practical Example 1), Defence expands its inquiries of potentially suitable (international and
national) experts and determines that the necessary technical expertise could be sourced in
combination by engaging a team of experts.
Based on this further research, Defence decides to establish an Integrated Product Team
(IPT) consisting of Defence personnel and a small team of technical experts from various
companies to work with Defence to develop and refine the project’s options / requirements.
However, similar to Example 1, a recognised challenge with this approach is that most of
identified experts are employees of companies that wish to participate in the subsequent post
First Pass procurement process for Project SEA1234
In addition, for the purposes of developing the First Pass documentation suite for Project SEA
1234, Defence determines that a RFI is also necessary to elicit specific information on key
non-technical aspects of identified options including schedule, costs and risks (refer also
Practical Example 8).
Issues: Defence is concerned that there may not be sufficient industry interest in
participating in the IPT – particularly:
-
if doing so would result in exclusion of the company (or the relevant technical expert) from
participation in future procurement activities; and
-
noting that the ideas and input of the IPT members (which would have some ‘value’ to their
employers) would be required to be shared openly within the IPT and would inform
requirements that would ultimately be released to market.
In addition, Defence is concerned about:
-
the risk of actual or perceived unfair advantage to the individuals, or companies, which are
selected to participate in the IPT in relation to participation in any future procurement
activity; and
-
the fact that Defence has limited internal expertise and knowledge and may not in a
position to identify whether any particular IPT member’s participation is leading to draft
requirements that have an inherent bias in favour of that member’s employer company’s
potential solution.
Outcome: To increase industry’s willingness to participate in the IPT process (and the RFI),
Defence decides to adopt a range of measures:
a) run a single process covering both the request for experts to participate in the IPT and for
companies to respond to the RFI in order to minimise the level of effort (for both Defence and
industry) in establishing the IPT and conducting the RFI; and
b) offering to pay companies for their participation in the IPT given that the ideas and
information gained from the experts’ input into the IPT would be used, in future, freely by
Defence;
c) opening dialogue with industry informing them about the process Defence was intending to
conduct and what it was trying to achieve, including providing industry briefings about the IPT
and RFI at industry conferences; and
d) deciding (and making it clear in the RFI) that the experts involved in the IPT process (and
their employer organisations) would not be excluded from participation in the future (post First
Pass) procurement process relating to the capability.
It is acknowledged that paying for industry involvement in pre-First Pass activities may not
always be appropriate or feasible. However, if there is a significant resource impost on
industry, and real value will be obtained by Defence through the process, then payment (even
if in the form of a contribution for discrete parts of industry’s involvement) may be considered
appropriate and necessary to motivate participation.
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To manage the risk of actual or perceived advantage to the IPT members and their
companies in relation to any future procurement activity, Defence decides to establish
controls around IPT members’ access to non-technical information about Defence’s
requirements. In addition, the IPT members would be required to provide confidentiality
undertakings to Defence prior to their engagement, and their employers would also be
required to provide undertakings not to seek to obtain information from the IPT members for
use in future procurement activities.
To ensure that there would still be a ‘level playing field’ for the future (Post First Pass)
procurement activity Defence also decides to keep detailed records of information provided to
the IPT and of the discussions and analysis of the IPT, so that this information could be
released (more generally) to industry in the context of a future procurement, if relevant (ie if
the information was thought capable of affording the IPT members with any competitive
advantage). Having these records available also meant that Defence could readily respond to
questions about the workings and conclusions of the IPT.
To manage the risk of potential inherent bias in IPT outcomes that Defence would not, itself,
be able to identify, Defence carefully considers the appropriate size / composition of the IPT
and decides to use a number of experts from a range of different companies so as to ensure it
obtains a sufficiently diverse cross-section of industry perspectives. To further respond to this
risk, Defence decides to include within the IPT terms of engagement the following options:
a) to have the IPT outcomes subject to an independent expert assessment or peer review (if
necessary); and
b) to make the outcomes of the IPT available for general comment by industry so that any
perceived bias could be identified and addressed by Defence prior to being incorporated in
the RFT documentation for any further procurement process (refer Practical Example 6).
Industry Briefings
13.
Industry briefings are a frequently used method of pre (and also post) First Pass
industry engagement as they provide a convenient forum for keeping industry
generally informed on current Defence thinking on all matters of interest
relevant to a project.
14.
Industry briefings can also be used to seek informal industry feedback on
identified capability options and proposed strategies, to gauge the level of
market interest in the project and to keep industry informed on current proposed
key events (eg anticipated timing of First and Second Pass Approval). By
keeping industry abreast of current developments, industry can make informed
decisions on business opportunities, including by appropriately timing any long
lead time investments aimed at enhancing future competitiveness.
15.
When preparing material for presentation or distribution at an industry briefing,
Defence personnel need to be aware of applicable security and confidentiality
requirements, including in relation to the use and handling of classified Defence
information and confidential information, and ensure that Defence has sufficient
intellectual property rights in relation to any material it is proposing to use and /
or release as part of the briefing.
16.
Defence personnel should also take steps to ensure that any information it
proposes to release is consistent with that previously provided in other forums
(eg at an Environmental Working Group) and, where it is not, attempt to explain
the nature and reason (if possible) for the inconsistency or changed approach.
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17.
Advance notice of briefings (eg via newspaper advertisements and / or
AusTender notice) should also be provided in sufficient time to allow all
interested organisations to arrange their attendance and to mitigate the risk of
any organisation complaining that they have been unfairly “locked out”.
18.
As it is likely that not all interested parties will be able to attend a scheduled
briefing, it is recommended that Defence also use other forms or media to
facilitate access to information provided at the briefing (eg by uploading a
recording of the industry briefing on a designated project website).
19.
It is open to Defence to limit the number of personnel from each company that
can attend an industry briefing to ensure that the briefings are administratively
manageable and also to reduce the cost to industry. However, Defence should
also consider reasonable requests for additional attendees, including
representation from the prime’s key subcontractors or suppliers and advisers.
Practical Example 3 – Industry Briefings
Context: During the early pre-First Pass phase of Project SEA1234, Defence decides to
conduct an industry briefing to gauge the level of market interest for providing the intended
EW capability and to obtain feedback on Defence's proposed options / approach.
Because of the wide level of interest in the project, Defence implements the following industry
briefing strategy:
-
a series of briefings are planned in the key industry locations – in this case, Sydney,
Canberra and Adelaide;
-
Defence intends to release at the briefing some non-public information about the capability
requirements, general budget and pricing information, intended platform integration
timeframes etc – accordingly, it requires companies and the individual attendees to sign
confidentiality undertakings to attend the briefings; and
-
Defence limits the briefings to 3 personnel from each company wishing to attend.
Defence also intends to hold one-on-one briefings with selected companies (key industry EW
players). These companies receive a separate invitation to the one on one briefings (refer
Practical Example 4).
One-on-One Supplier Meetings
20.
From Defence’s perspective, one of the key drawbacks or deficiencies of
industry briefings are that they tend to operate as a one way flow of information
during which Defence keeps industry informed and “up to date”, but without
generating any meaningful two way exchange of information and views.
21.
For this reason, Defence typically structures industry briefings to include a
program of face-to-face private meetings with select companies, with the aim of
encouraging participating companies to openly share and discuss ideas without
fear of disclosing commercially sensitive information / intellectual property in
the presence of other suppliers and losing a competitive edge. Face to face
meetings (including at supplier premises) can occur in a wide range of
circumstances, at either the request of Defence or industry.
22.
When conducting face to face meetings, Defence needs to ensure that the
information it provides is accurate, current and broadly the same as that
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provided to all other potentially interested suppliers (whether or not they are
also meeting with Defence) to ensure that no single supplier gains an unfair
advantage in relation to any future (competitive) procurement process.
23.
When undertaking a program of selective private meetings, Defence should also
take care not to create any perception of bias or favouritism by indiscriminately
agreeing to meet with some suppliers but not others. All Defence decisions to
meet (or not meet) should have a clear rationale, supported by accurate and
reliable information.
24.
A common misconception associated with one-on-one meetings is that Defence
cannot be selective and that if it decides to meet with one company, it must offer
the same opportunity and meet with all potentially interested organisations.
25.
In fact, in the pre-First Pass stage of capability development, Defence may
legitimately meet with only select companies and is under no obligation to meet
with all interested parties. However, any such seemingly ‘discriminatory’
decision to meet with some, but not all, potential suppliers must be capable of
clear explanation and supported by robust and reliable information. For
example, Defence may have particular information ‘gap’ in a specialist area that
a niche supplier has been identified as having the relevant expertise to address.
In this case, Defence may justifiably decide to meet with only this company for
that purpose.
26.
Where Defence itself approaches and invites companies to participate in a
program of one-on-one meetings, it should propose to meet with a sufficiently
broad representative sample of suppliers. A wide ranging program of visits
should avoid the risk that a particular company’s views or interests may become
overly dominant or influential on Defence’s thinking – noting that companies
will almost always seek to use such opportunities to strongly represent and
further their own commercial interests.
27.
Defence personnel must also ensure that any selective program of one-on-one
meetings does not provide participating companies with an unfair advantage
over non-participating suppliers who are also potentially interested in
participating in any post First Pass procurement process. Accordingly, if
information relevant to a capability or project is made available by Defence
during these meeting that could (or may be perceived) to provide an advantage
to the participating companies, this information should be made generally
available to other interested companies via other means – such as posting the
information on a project specific website, including it on a SharePoint site
accessible to all interested suppliers or via email to companies’ identified points
of contact.
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Practical Example 4 – One-on-One Meetings Organised by Defence
Context: Following an industry briefing, Defence organises a program of one-on-one
meetings with a select number of suppliers, being the key EW industry players previously
identified by Defence through its Priority Industry Capability (PIC) Health Check analysis.
Issue: During the course of the separate one-on-one meetings, one of the companies offers
to provide the Defence project team with an options analysis study on EW solutions relevant
to Project SEA 1234. The company provides the paper on the condition of confidentiality, in
particular that the paper cannot be disclosed by Defence to any of the company’s
competitors, without prior consent.
Outcome: Defence carefully considers the potential value of the paper and hence the basis
on which it is willing to take receipt Defence subsequently writes to the company and agrees
to receive and consider the paper for the purposes of further capability development around
Project SEA1234 and more generally for ongoing analysis of the EW PIC. However, Defence
agrees not to disclose the paper to any third party other than its employees, ADF members
and ‘above the line’ advisers. Defence specifically agrees with the company that the paper
can be disclosed to members of the IPT (refer Practical Example 2) on the condition that the
IPT members sign a confidentiality agreement. Defence formalises these arrangements in a
letter to the relevant company.
(Note: confidentiality deeds should not be signed by a Defence official in their personal
capacity).16
Practical Example 5 – One-on-One Meetings Requested by Industry
Context: Following the industry briefing, Defence is approached by one of the companies
which attended the briefing – Maritime EW Company – for the purpose of organising a oneon-one discussion with Defence about the company’s interest in the project and to outline the
extent of their matching capability, noting that Maritime EW Company has been providing a
similar capability to the UK Ministry of Defence.
Issue: Defence agrees to this meeting but refuses other similar company requests for oneon-one discussions given schedule constraints and perceived value to Defence. Industry
participants whose requests have been denied subsequently complain to the Minister that
they have been denied the opportunity to present their credentials to Defence and allege that
there appears to be bias in favour of Maritime EW Company.
Outcome: Defence agrees to also offer the opportunity for one-on-one meetings to other
interested companies who have existing MOTS capabilities in service with other Defence
forces broadly equivalent to the one being sought under SEA1234.
Environmental Working Group (EWGs) (and other industry forums)
28.
EWGs provide an established forum for Defence and industry to periodically
engage on a range of domain specific capability issues early in the capability
development lifecycle process, with a particular focus on understanding the
industry implications of relevant DCP projects.
29.
There are currently five EWGs residing under the Capability Development
Advisory Forum (CDAF), namely:
16
Refer to DPPM Chapter 3.11.
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30.

Command,
Control,
Communications,
Computers,
Intelligence,
Surveillance, Reconnaissance and Electronic Warfare (C4ISREW) EWG;

Land EWG;

Synthetic (simulation) EWG;

Maritime EWG; and

Aerospace EWG.
EWGs assist Defence establish open communication channels with industry
representatives and provide a formalised mechanism for on-going interactive
engagement. This is generally achieved by Defence using EWGs to:

provide general updates in relation to relevant DCP projects;

raise issues and considerations specific to a project;

discuss wider sectoral implications for Defence and industry arising from
specific projects; and

conduct workshops on projects or themes of interest for Defence and
industry.
31.
Membership of the EWGs (and attendance at EWG meetings) is by written
expression of interest and EWG members may include industry sector
associations, Australian companies and overseas based corporations.
32.
As EWG membership may not extend to all companies with a potential interest
in a project, Defence personnel need to be aware that project related information
provided at a EWG meeting may not reach all potentially interested
organisations. For example, access to summaries of EWG discussions is
currently limited to those industry participants who attended the EWG meeting.
33.
Accordingly, if Defence uses a EWG meeting to release or exchange
information on a specific project, Defence personnel need to consider whether
further steps should be taken to ensure an appropriately wide dissemination of
that material to all potentially interested suppliers. This could be achieved by,
for example, making the information available on a project website or a
SharePoint site available to all interested companies.
Release of draft capability requirements
34.
This increasingly used form of industry engagement involves the release of
exposure draft documents detailing Defence’s intended requirements for
industry comment and feedback – for example, draft OCD and / or FPS.
Defence may consider using this option to obtain industry feedback on draft
proposed requirements with a view to identifying any major issues, cost drivers,
constraints or uncertainties.
35.
Draft documents should be released by Defence under a relatively simple
covering letter that clearly identifies the matters or areas on which Defence is
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seeking feedback and the purpose / reasons for seeking this feedback and
Defence’s intended uses of the feedback.
36.
37.
The areas on which industry feedback may be useful include:

whether Defence’s capability needs are adequately and sufficiently detailed;

whether industry fully understands and is able to respond to Defence’s
requirements, as presented;

the feasibility of what Defence is seeking from a technical and scheduling
perspective; and

whether there are major cost drivers and constraints (including any essential
requirements) embedded in the draft requirements that may stifle innovation,
drive up costs and potentially inhibit a better value solution.
The key considerations for Defence associated with this form of engagement
concern:

identifying those companies (from a potentially much larger group) to issue
the draft documents for review and feedback; and

Defence’s management and response to the feedback received.
38.
It is often the case that Defence wishes to limit the number of participating
companies to whom it issues the draft documents to a manageable number given
the resource, time and cost impositions of considering and responding to
industry feedback.
39.
A common misconception is that ‘probity’ prevents Defence from taking a
selective approach with any request for feedback and that it must issue draft
documents to all potentially interested suppliers for review and comment.
40.
In fact, it may be defensible for Defence to issue draft documents to only a
select group of companies where, for example, it has identified a subset of
companies as having the required specialist expertise to comment on the
specific matters that Defence is seeking feedback. However, if taking this
approach, Defence should still consider making the draft documents available to
all potentially interested companies, even if the request for feedback is limited
to select companies17. This may be necessary to that no supplier is
disadvantaged by reason of not having had access to the draft documents at the
same time other suppliers are provided a copy for review / feedback.
41.
As regards Defence’s management of industry feedback, it is incumbent on
Defence to properly consider all feedback received, determine an appropriate
response and to advise industry respondents of the outcome taken. Depending
on the nature of the feedback / action taken, this advice may be general or
specific to each company.
17
In any circumstances where Defence is required to conduct an open tender process for a related
procurement (refer DPPM Chapter 3.1), sound probity generally requires that Defence issue the draft
documents to industry at large for review and comment.
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42.
If using industry feedback / responses to further develop and refine project
requirements or to draft Project solicitation documents (eg FPS), Defence
personnel must also be alert to ensuring this feedback does not inadvertently
result in the RFT documents being developed in a manner that may skew
Defence’s requirements in favour of a particular supplier’s solution.
43.
On occasions, industry feedback may contain sensitive commercial information
in relation to which a company may attempt to caveat Defence’s use of the
information. In this situation, care must be taken to ensure Defence does not
breach the company’s confidentiality or infringe any IP rights when using the
feedback. If Defence wishes to avoid being constrained in its use of feedback,
this needs to be made clear at the time feedback is sought and respondents
advised at the time feedback is sought not to include any commercially sensitive
or IP constrained information within its response.
Practical Example 6 – Release of Draft Capability Requirements
Context: Following initial forms of industry engagement, Defence oversees the development
of a draft capability requirement (FPS 001) with assistance of the industry IPT (refer Practical
Example 1). To help mitigate the risks associated with the IPT comprising only select
suppliers, FPS 001 is released to all participants who registered their interest at the SEA1234
industry briefing for peer review / comment.
During Defence’s subsequent review of industry feedback on the draft FPS, Defence
considers that the response provided by Maritime EW Company sets out an innovative
approach for integrating the EW capability with the ship's current systems to save power and
weight margins. Maritime EW Company does not have a representative on the IPT. Defence
amends FPS 001 to reflect Maritime EW Company’s innovative approach and commentary.
Issue: By amending FPS 001 in line with Maritime EW Company’s proposal, the Project
team further develops the requirements in such a way as to effectively mandate the adoption
of Maritime EW Company’s solution. Without appreciating the full impacts of the change, the
Project team submits amended FPS 001 to the IPT for review. Although the amended FPS
001 does not directly refer to Maritime EW Company, the IPT object to the change on the
basis that FPS 001 now contains a new integration section that includes as an essential
requirement the use of a particular power / weight saving technique that many companies
may not be able to meet in the specific manner proposed but which objective could feasibly
be achieved in other ways.
Outcome: On becoming aware of the implications of the change, the Project further revises
the requirements in FPS 001 so that they request a solution that addresses Defence’s
objective of ‘saving power / weight’ as ‘highly desirable’ (or ‘important’) but not with the effect
of effectively mandating a particular supplier’s solution. By making this change, Defence
avoids incorporating Maritime EW Company’s proprietary information into FPS 001, from
skewing the requirements in favour of Maritime EW Company and allows other potential
suppliers to submit their own innovative solutions to address Defence’s capability objectives.
Request For Information (RFI) Process
44.
This commonly used early engagement option involves the release to industry
of formal request documentation that typically seeks information on a range of
matters, typically including:

available capability solutions and relevant technologies, including current
users and associated support arrangements;
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
the key technical and materiel implementation risks and potential
mitigations;

the extent of industry interest in the relevant project, in particular, the
potential for Australian industry involvement;

the nature of the marketplace, including industry capability, proposed
teaming arrangements and market constraints for both acquisition and
support;

high level schedule information; and

ROM cost data for both acquisition and support.
45.
RFIs can be a highly effective form of early industry engagement through which
Defence gains significant information not otherwise available through other
means and which can be instrumental for narrowing capability options, refining
strategy alternatives and generally preparing the Project’s First Pass
documentation suite.
46.
As mentioned in Chapter 1 – Overview, if an RFI is exclusively used to seek
information from industry, then the process is not strictly subject to the CPRs.
Accordingly, in these circumstances, there is no obligation on Defence to issue
an RFI to industry ‘at large’ and the decision as to which select companies to
issue the RFI can be based on considerations specific to the project.18
47.
As a general rule, Defence should issue RFIs to all known potentially interested
suppliers, unless there is a specific reason for why this may not be appropriate.
In most cases, Defence will have gathered sufficient information from prior
market engagement activities to reliably make a determination of all genuinely
interested companies.
48.
When determining those companies to issue an RFI, the purpose / objective of
the RFI may influence this decision. For example, if an RFI is being used to
ascertain what (if any) Australian based capability exists, there would be little
value or sense in issuing the RFI to foreign based companies. Similarly, if
Defence has acquired sufficient evidence to demonstrate that no Australian
based capability exists, little would be achieved by issuing the RFI to Australian
based companies.
49.
When planning and developing an RFI, Defence personnel need to be cognisant
of the considerable time and costs incurred by industry in (properly) responding
to RFIs. To minimise this burden and maximise the quality of industry
responses, the purpose of the RFI must be well understood and clearly stated in
the request documentation. In addition, all questions asked of industry should
be focused and targeted on achieving this specific purpose.
50.
A common misconception associated with the use of RFIs is that Defence may
use a company’s willingness to respond, or the quality of its response, to an RFI
18
Refer paragraphs 16 - 17 of Chapter 1 – Overview.
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as a pre-condition or qualifier of the company’s participation in a future related
procurement process.
51.
In fact, a company’s willingness to respond to an RFI, or the quality of its
response, cannot be treated as a relevant factor in determining the company’s
eligibility or entitlement to participate in a future procurement process (but note
the risks to a supplier of not properly, or at all, responding to an RFI).19
52.
There are many reasons why a company may not respond to an RFI (or may
issue a sub-optimal response), including the assessed time and costs involved in
developing a response in the form required by Defence and the perceived value
or benefit the company would receive from this investment. Consequently, a
company’s failure to respond to an RFI (fully or at all) is not necessarily a
reliable or valid indicator of its interest or potential competitiveness in any
future related procurement process.
53.
However, a very real risk for a company in choosing not to respond to an RFI is
that Defence may not otherwise gain a sufficient or accurate awareness or
understanding of a company’s credentials or product offerings and therefore
develop the project’s option set, draft requirements and / or the project ASIS in
a way that inadvertently excludes or materially reduces the potential
competitiveness of the company when it comes to any future capability
procurement process.
54.
If this risk is not of itself sufficient to motivate companies to respond to an RFI,
other approaches could be considered to actively encourage companies’
participation. For example, an RFI could state that if respondents provide the
relevant information, Defence may engage one or more of the respondents to
participate in a joint working group or IPT to workshop capability solutions,
develop ‘top level’ requirements or assist with other capability development
activities. In effect, such participation (which could be funded, part funded or
not funded) could be used as an incentive for encouraging suppliers to provide
Defence with the information it is seeking under the RFI.
55.
A further misconception associated with the use of RFIs is the belief that RFIs
can be used to down select or short list suppliers or solutions (to the exclusion
of other suppliers / solutions) for participation in a post First Pass procurement
process.
56.
In fact, an RFI cannot be used as the basis for down selecting solution options
or suppliers for any future procurement process.
57.
In the pre-First Pass stage of capability development, an RFI does not form part
of the actual capability procurement process as Government has not generally
considered, and has not given approval, for the project to proceed past this
decision point. Any ‘short listing’ by Defence prior to First Pass Approval
19
Refer paragraphs 21 and 22 of Chapter 1 – Overview and paragraph 53 of Chapter 3.
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would effectively pre-empt Government’s direction and the decision it makes at
First Pass Approval.20
Practical Example 7 – RFI
Context: Following the update of FPS-001 in response to industry feedback and in order for
the Defence to obtain more detailed information on industry’s capability and indicative
costings, Defence decides to issue an RFI.
Without understanding the differences between an RFI and RFT, the Project team bases the
RFI on an existing RFT precedent taken from an unrelated Defence procurement project.
The RFI contains provisions that provide Defence with the discretion to exclude a respondent
from any further participation in a future procurement in the event of a failure to submit a
response to the RFI.
In due course, Defence receives industry responses to the RFI and notes that:
a) one response was received after the nominated closing time for receipt of responses;
b) one of the industry participants who received the RFI did not submit a response to the
RFI; and
c) the quality of the RFI responses was very patchy and only two of the five respondents
provided a comprehensive response.
Issue: The project officer prepares a brief to the delegate in relation to the responses
received to the RFI. In this brief, amongst other things, the officer recommends that:
a) the late response which was submitted should not be considered in accordance with the
RFI condition requiring exclusion of late responses;
b) Maritime EW Company, as the industry participant that failed to respond to the RFI,
should not be invited to participate in any future industry engagement activity or capability
procurement for the Project; and
c) Defence should only take forward into the intended capability procurement phase those
respondents that provided a comprehensive response to the RFI, with other respondents
being excluded from further participation in any subsequent related procurement process.
Outcome: Based on the delegate’s review of the submission, the officer is advised that:
a) although a response was received late, as the RFI is not a formal procurement process
and is not subject to the CPRs, Defence is able to open and consider the late response;
b) as the RFI does not constitute part of any formal procurement process, simply because
Maritime EW Company failed to respond to the RFI, this cannot be used as a legitimate
basis for excluding Maritime EW Company from any further industry engagement activities
or the post First Pass capability procurement for the project; and
c) the purpose of the RFI was to elicit information from industry to assist Defence to further
develop the First Pass documentation suite and to gain an understanding of the extent of
industry capability to meet these requirements. In the pre-First Pass stage, an RFI is not
the first step in undertaking a procurement for the actual intended capability. No decision
has been made by Government at this stage to proceed with any formal capability
procurement. In addition, the quality of the responses received to the RFI should not be
used as the sole determinant of whether or not a participant should be down selected for
participation in a future capability procurement. For all these reasons, it was determined
that the down selection decision was not valid and should be overturned.
20
Refer paragraphs 19 and 20 of Chapter 1 – Overview.
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Practical Example 8 – RFI – Incentivising industry response
Context: As mentioned in Practical Example 2, Defence decided to run a single ‘RFI’
process to establish the IPT and to elicit certain specific information from industry on nontechnical aspects of Defence’s options, including schedule, costs and risks.
Issue: As responses to the RFI are not generally funded and they do not form part of the
actual capability procurement process, Defence is concerned that industry may not make the
investment needed to fully respond to the RFI. The requested information is essential to the
preparation of the Project’s First Pass documentation suite and there are no other potential
sources of this information available to Defence.
Outcome: Defence decided to adopt a single process covering both the request for suitable
experts to participate in the IPT (Part A) and for companies to respond with the information
sought by the RFI (Part B). The RFI was also structured to make respondents eligibility for
inclusion in the IPT (Part A) “conditional” on it having also responded to Part B. Accordingly,
Defence included a statement in the RFI documentation that it would not necessarily consider
proposals to participate in the IPT from companies that did not also respond to the more
general information requests in the RFI.
This approach did not involve any ‘shortlisting’ based on the RFI (as companies’ participation
in the IPT and / or its responses to the RFI did not impact on their participation in any post
First Pass capability procurement process), but made very clear to industry that Defence
considered the RFI to be as important as the IPT.
Rapid Prototyping, Development and Evaluation (RPDE)21
58.
RDPE activities involve prequalified participants from Australian industry and
academic institutions. CDG governs the RPDE program and RPDE activities
can take the form of a ‘Quicklook’ or a ‘Task’. Industry participants
undertaking these activities do so under a Deed of Standing Offer arrangement
with Defence.
59.
A Quicklook can deliver guidance, advice and input to Defence and provide
options analysis to assist Defence determine feasible capability options by
bringing together a broad range of industry and academia experts. The result of
Quicklook activities is the delivery of a report within an agreed timeframe,
which is usually less than three months.
60.
The purpose of a Task is to deliver a prototype solution to Defence. It focuses
on identifying, understanding and then facilitating change and can involve the
introduction of new organisations, concepts and technologies. A Task normally
takes between twelve to eighteen months to complete.
61.
In the pre-First Pass environment, undertaking an RPDE activity can be a useful
means of engaging with industry, particularly where Defence’s requirements
may not be mature and Defence is wishing to test the feasibility of a range of
possible solutions.
62.
The primary purpose of RPDE is to enable Defence to obtain sufficient
information to inform decisions as to whether or not Defence should proceed to
procure a particular capability and, if so, what the capability might look like.
21
Further information on RPDE activities is available via www.rpde.org.au
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Accordingly, RPDE is a prelude to and does not form part of the formal
capability procurement process.
When Defence could consider using this form of industry engagement
63.
64.
Defence personnel may consider utilising a Quicklook where:

there is a specific need for Defence to confirm the feasibility of technical
options within a short period of time and / or where the information that
could be gathered from other forms of industry engagement would not be
readily accessible within the timeframe; or

Defence is seeking to assess the feasibility of specific technical options
where the enhancements are not currently in the marketplace.
A Task, on the other hand, may be an appropriate option where Defence is
seeking to produce a prototype solution for a particular or range of capabilities.
How RPDE can help
65.
As RPDE is a pre-existing process for industry engagement, a governance
framework is already established to address a variety of issues (eg ownership of
intellectual property and protection of confidential information). Also, RPDE
allows Defence to utilise RPDE personnel within short timeframes to determine
feasibility and capability within an established framework.
Common pitfalls
66.
If an RPDE activity is undertaken, Defence personnel should take steps to
ensure that an appropriately broad spectrum of RPDE participants are consulted
with a view to ensuring capability requirements are not developed in a way that
has the practical effect of mandating or skewing a solution or approach in
favour of a particular supplier.
67.
Furthermore, as RDPE participants are only Australian organisations (although
some are subsidiaries of international companies), Defence will need to consider
if other broader forms of industry engagement should be undertaken in parallel
to a RDPE activity to ensure that it has a sufficiently informed and complete
understanding of the totality of the market and relevant options and strategy
alternatives in relation to an intended capability. This will be particularly
important where the capability or the required expertise do not currently exist in
the Australian market place.
*
*
*
*
*
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Appendix A - Glossary and Key Documents
22
23
24
25
ASIS
Acquisition and Sustainment Strategy detailed in Defence Materiel
Instruction (Acquisition and Sustainment) 14-0-NNN Development and
Management of the Acquisition and Support Implementation Strategy.
This DMI requires two versions of the ASIS for a Project – namely, a
Concept ASIS and a Detailed ASIS.
AusTender
The central web-based facility for the publication of Australian
Government procurement information, including business opportunities,
annual procurement plans and contracts awarded.
Capability
Development
Advisory Forum
(CDAF)
The CDAF is a forum for invited industry representatives, Chief
Capability Development Group (CCDG) and Head Capability and
Enabling Services (DMO) to consider Defence industry related views
and considerations early in the capability development process. 22
Commonwealth
Procurement Rules
(CPRs)
The CPRs set down the rules for Australian Government procurement
and articulate the Australian Government’s requirements for officials
performing duties in relation to procurement.
Defence Capability
Plan (DCP)
The DCP outlines Government’s long-term Defence capability plans. It
is a detailed, costed, 10-year plan comprising the unapproved major
capital projects that aim to ensure that Defence has a balanced force that
is able to achieve the capability goals identified in the Defence White
Paper and subsequent strategic updates.23
DMOSS
DMO Support Services panel
First Pass
Approval
The process that gives Government the opportunity to narrow the
alternatives being examined by Defence to meet an agreed capability
gap. First Pass approval allocates funds from the Capital Investment
Program to enable the options endorsed by Government to be
investigated in further detail, with an emphasis on cost and risk analysis.
FMA Act
Financial Management and Accountability Act 1997
FMARs
Financial Management and Accountability Regulations 1997
Functional
Performance
Specification (FPS)
Defines a validated set of requirements for the capability system, which
will provide a basis for acquiring the system, satisfy the needs expressed
in the OCD at an affordable cost, and invite maximum reasonable
competition consistent with the acquisition strategy.24
Major Capital
Equipment
Equipment projects of $20 million or more, or of less than $20 million
but with individual items of $1 million or more, or equipment projects
of less than $20 million but with significant strategic significance.
Operational
Concept Document
(OCD)
The primary reference for determining fitness for purpose of the desired
capability to be developed. A complementary document to the function
and performance specification (FPS) and the test concept document
(TCD), which form the capability definition document to define the
capability baseline.25
‘probity’
Probity means integrity, honesty, and ethical conduct and propriety in
dealings. In the Government context, probity is often used in a general
sense to mean a defensible process which is able to withstand internal
and external scrutiny.
For further information see http://www.defence.gov.au/capability/_home/cdaf_info.asp
DCDH, pg 108.
Ibid.
Ibid.
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26
27
Requirements
Phase
During this phase, projects included in the DCP are progressively
transformed from a broad consideration of possible capability options
into well-defined and costed solutions through a two-pass approval
process. Each capability of the project is transformed progressively into
a costed, defined capability solution with a schedule for acquisition
leading to operational release. Net whole-of-life workforce numbers
and budgetary provisions to acquire, operate and support the capability
solution are developed. The project will move out of this phase and into
the Acquisition phase once Government has given Second Pass
Approval.26
RPDE
Rapid Prototyping, Development and Evaluation
Second Pass
Approval
The final milestone in the Requirements Phase, at which point
Government endorses a specific capability solution and approves
funding for the Acquisition Phase. The project cannot proceed to the
Acquisition Phase until this approval is obtained from Government.
Value For Money
(VFM)
Value for money is the core principle governing Commonwealth
procurement and should be evaluated on a whole of life basis. Cost is
not the only factor in determining value for money.27
DPPM Chapter 5.0, paragraph 6.
DPPM Chapter 1.2, paragraphs 11 to 16.
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Document Administration Sheet
Reference Number
Document Type
Title
Version No
Amendment Details
Review Period
Defence Domain Category
Defence Business Policy Owner
DMO Business Process Owner
DMO Business Process Authority
Group
Division
Branch
Directorate
Domain Expert
CPP/BPG04
Better Practice Guide
Effective Industry Engagement During the Early Stages of
Capability Development
Exposure Draft Version 0.1
NIL
Every 2 years
Procurement and Contracting
General Manager Commercial
General Counsel DMO
Director Procurement Group Instructions
Commercial Group
Contracting and Legal Division
Procurement & Contracting Support Branch
Procurement & Contracting Policy and Practice
Director Procurement Policy
Procurement Better Practice Guide Suite
BPG 01:
BPG 02:
BPG 03:
BPG 04:
BPG 05:
Better Practice Guide for Defence Tender Rooms
Better Practice Guide for Tender Evaluation in Simple Procurement
Better Practice Guide for Tender Evaluation in Complex and Strategic
Procurement.
Better Practice Guide Industry Engagement in the Early Stages of Capability
Development.
Better Practice Guide for Tender Debriefing.
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