Reducing the $1B+ Cost of Defence Tendering

The cost to industry of bidding Defence programs is higher than ever – in FY22-23 we estimate $1.4b was invested by industry bidding not delivering, not in R&D. Increased incidence of delays, extension and cancellations (industry players estimated 1 in 4 RFTs resulted in no award) have added cost to what is already an expensive function in every Defence business. We estimate that up to 1.5% of contract value is invested by every bidder to a Defence project. For a $1B contract opportunity with seven respondents, this equates to a $100m investment in responding. In the best case, one respondent will get to recover $15m in bid costs during delivery, while $30m (we estimate 30% of bid costs are real dollars, or non-time) is placed on industrial balance sheets for recovery from other client work. Improvements in partnering behaviour from Defence procurement groups, counterparty transparency and improved management of delay, extension and cancellation decisions would lead to lower costs across the Defence ecosystem, including to the Defence Agency.