Embedding SMEs in Australia’s defence delivery

Australia’s defence landscape is entering a decisive phase, underpinned by the 2026 National Defence Strategy, and projected annual funding expected to exceed AUD 100 billion by 2033-34¹. As the nation sharpens its strategic posture and accelerates investment in sovereign capability, the question is no longer whether small and medium-sized enterprises should be involved, but how effectively they are integrated into delivery models that must operate at pace, at scale, and under increasing complexity.

Drawing on more than two decades of experience in naval operations and the Australian defence industry, including service as a Principal Warfare Officer in the Royal Australian Navy, AtkinsRéalis’ Defence Market Director for Australia, David Eyles, comments, “Across regulated defence programs, delivery outcomes are increasingly shaped by how industry is integrated into program environments from the outset, rather than introduced later through layered subcontracting.”

A system under evolution

Australia’s defence priorities place clear and increasing emphasis on resilience, readiness, and sovereign industrial capability. The Defence Industry Development Strategy identifying sovereign capability as a core requirement across seven priority industrial capabilities and national defence spending now accounting for approximately 2% of GDP².

These priorities are also prompting a closer scrutiny of delivery frameworks, commercial models, and the way industry is mobilised across the capability lifecycle.

Industry experts recognise that frameworks such as the Major Service Provider (MSP) model have brought greater structure and accountability to complex defence programs. Yet increasing program scale and concurrency are now placing greater demands on how specialist capability is integrated within delivery environments that must operate across multiple suppliers, interfaces, and regulatory constraints.

Unlocking SME potential at scale

With SMEs comprising the majority of Australia’s defence industry base and more than 15,000 Australian businesses currently engaged across Defence supply chains³, Australian SMEs bring agility, niche expertise, and deep technical capability that are critical to modern defence outcomes.

However, familiar challenges persist across the landscape:

• Engagement is often concentrated downstream, limiting early-stage technical influence
• Access to programs can feel indirect and opaque
• Commercial structures do not always reflect the operating realities of smaller organisations
• Capability uplift across the supply chain remains uneven

These are not failings of any single framework; rather, they are signals of a system under pressure to deliver faster, more complex outcomes with a finite workforce expected to require almost 20,000 additional skilled personnel by 2040⁴  and a highly specialised industrial base.

Applying proven delivery principles at scale: Engineering Delivery Partner (EDP)

AtkinsRéalis already operates within delivery environments that demand this level of integration, accountability, and orchestration.

Through long-standing delivery models such as the Engineering Delivery Partner (EDP) framework, and the Aurora Engineering Partnership within it, AtkinsRéalis and its partners have supported defence clients, like Defence Equipment & Support (DE&S), to operate at scale by simplifying client‑supplier interfaces, embedding specialist capability directly into program teams, and managing complex supplier ecosystems through a single accountable delivery structure aligned to program outcomes.

One SME operating within the Aurora Engineering Partnership is SA Group, a specialist consultancy working across defence programmes. For SA Group, access through Aurora has expanded the nature of work it delivers. “The work we have been awarded on Aurora has allowed us to expand beyond our traditional project management roots. We have diversified our technical capability across IT systems engineering, technical architecture, cyber security assurance and infrastructure support.”

This GBP 2.5 billion contract, administered by DE&S, covers the entirety of the MOD and the Aurora Engineering Partnership acts as a service integrator with the rest of industry, and especially the SME marketplace.

At any one time, the provider network accounts for 40% of the Aurora Engineering Partnership revenue and there is a commitment to channel at least 20% of all work to the SME community; what differentiates this approach goes beyond the scale of SME participation to how it is structured:

• SMEs are integrated into delivery teams from the outset, not engaged at the margins
• A single, coherent interface simplifies access to defence programs and reduces friction for the client and the supply chain
• Capability is drawn in dynamically based on program need
• Sustained program relationships enable SMEs to operate as trusted delivery partners, allowing specialist suppliers to contribute during upfront planning phases rather than being introduced later through downstream subcontracting structures.

That continuity has enabled delivery experience to translate beyond a single framework, notes SA Group.

“The case studies developed through our involvement in EDP have directly contributed to contract awards through other routes to market, ranging from small specialist teams through to multi team delivery in secure MOD environments. Aurora allows SMEs to lead and support consortiums as part of the partnership, with support from prime partners across delivery.”

Over time, this continuity enables SMEs to earn the delivery trust required to influence design maturity and integration pathways during upfront planning phases. Reflecting on its experience, the SA Group says, “The Engineering Delivery Partnership, Aurora, has been revolutionary for us as a business. It has become a critical entry point, improving our interface with MOD and allowing us to grow rapidly in size and technical capability.”

These principles are already embedded in how AtkinsRéalis delivers complex, regulated programs where accountability, assurance, and pace are non-negotiable. This includes delivery in highly regulated environments where nuclear safety, governance, and program assurance are central to delivery continuity.

What this means for Australia’s MSP evolution

The evolution of MSP presents an opportunity to structure delivery environments that simplify supplier interfaces, integrate industry earlier, and maintain clearer accountability across regulated programs. Managing supplier ecosystems as delivery enablers rather than contractual interfaces allows programs to integrate specialist capability dynamically in response to evolving delivery requirements.

Three areas stand out for this:

1. From access to integration

Programs where SMEs are embedded as trusted delivery partners tend to see fewer downstream integration challenges because specialist capability is aligned with program architecture from the outset.

2. Strengthening supply chain resilience through managed diversity

A broader, actively managed SME ecosystem enhances delivery resilience by leveraging SMEs’ already established supplier networks and preferred delivery partners earlier in the program lifecycle without increasing complexity for Defence so the focus shifts from managing suppliers to managing capability. 3. Driving accountability through simplified interfaces

Reducing the number of interfaces Defence must manage creates clearer accountability and improves delivery certainty. Orchestration becomes the defining feature of the model.

An active role in what comes next

In these environments, earning the trust required for SMEs to influence program planning is supported through sustained leadership commitment and long‑term delivery continuity across program phases.

“Strengthening sovereign capability depends not only on who participates in delivery, but on how effectively industry is mobilised across the program lifecycle,” states Eyles.

This includes structuring delivery models that balance scale with accessibility while maintaining continuity across complex supplier ecosystems.

As Defence delivery models continue to mature, the opportunity is to move toward approaches that are more connected, more flexible, and more outcome focused; ones that strengthen sovereign capability by how effectively specialist capability is integrated into delivery environments across the program lifecycle.

Because the next phase of Australia’s defence journey will be defined by ambition and building a defence ecosystem that is resilient, innovative, and future-ready.

Sources:

¹ 2026 National Defence Strategy and 2026 Integrated Investment Program: 2026 National Defence Strategy and 2026 Integrated Investment Program

² 2024 National Defence Strategy: A generational investment in Australia’s Defence

³ Defence Industry Development Strategy: Defence Industry Development Strategy

⁴ Defence Workforce Plan: Defence Workforce Plan