Rationalisation concerns loom

A PROPOSAL to consolidate the number of defence contractors from four to one or two could pose major concerns for the subcontractors that service the industry.

In Western Australia, companies such as Veem Engineering, Austindo, Reeds Electrical, EJ Electrical Engineering Contractors, Westrek, Wiltrading and Kaz Group provide services to the major defence contractors Australian Defence Industries, the Australian Submarine Corporation, Tenix and Forgacs.

The Federal Government indicated several years ago that it was keen to have a single prime defence contractor. Such a consolidation would have meant a major shifting of prime and subcontractor alliances as companies scrambled to keep their position in the industry. However, that plan seems to have fallen by the wayside.

At a defence industry conference in February, Defence Minister Robert Hill said he believed there would still be some rationalisation.

“We believe that competition is a legitimate tool in the process of rationalisation,” Senator Hill said.

However, he said the major contracts coming up would not be affected by any rationalisation attempts. His comments suggested that the Government preferred to keep some competition in the industry. That could still mean a consolidation down to two major players and pose problems for the subcontractors in the industry.

Subcontractors WA Business News spoke to were all confident that the industry would continue to operate the way it has for the past few years.

Austindo managing director Charlie Reeves said his firm was well placed to ride out any consolidation because it had strong relationships with three of the four major players.

The only company it has not done work for is eastern States-based ship builder Forgacs.

Veem Engineering commercial manager Robert Poggioli said he was unaware of any talk of rationalising the defence industry.

The company holds contracts with ASC and ADI and is active in fleet maintenance work.



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