Delivering Defence Infrastructure In Australia's Decisive Decade

Understanding how strategic demand, evolving procurement models and industry capacity are reshaping the future of Defence infrastructure.

Introduction

With ongoing wars in the Middle East (Iran-US/Israel) and Ukraine, geopolitical tensions between the US and China and the rules-based order under significant strain, defence and defence infrastructure are becoming a high priority for national governments. 

Last year, NATO members committed to a new, historic target of investing at least 5% of their GDP on defence and security-related spending by 2035,D with 3.5% allocated to core military capabilities and 1.5% for infrastructure, resilience and industrial capacity, aimed at countering long-term security threats. 

It is in this context that Australia’s defence infrastructure landscape is undergoing a marked shift as the Commonwealth Government is under pressure to expedite the delivery of defence and related-enabling defence infrastructure. 

Demand for modern, resilient and technically sophisticated facilities continues to build, prompting closer scrutiny of how projects are shaped and procured. At the same time, the question of how private capital can appropriately support programs of the Department of Defence is becoming more immediate, especially as enabling infrastructure and broader precinct development begin to outgrow traditional Commonwealth funding channels. These changes are unfolding alongside tighter supply‑chain security expectations and a constrained workforce. Together, these forces are redefining infrastructure delivery by the Department from a BAU function to once-in-a-generation investments in naval infrastructure at Henderson and Osborne, an East-coast submarine base and “hardening” Northern Bases. 

Growing demand for defence infrastructure by governments

Strategic environment: denial and an integrated, focused force

The 2024 National Defence Strategy reframes planning by the Department around the concept of 'National Defence', placing a Strategy of Denial at the cornerstone of its planning for an integrated, focused force across all domains – maritime, land, air, space and cyber. The implications for infrastructure are significant: a major uplift in Defence’s posture and basing needs, requiring extensive modernisation and expansion of infrastructure to support a rapid and coordinated approach to address Australia’s most significant strategic risks. 

Budget uplift: sustained, multi‑decade investment

The 2024 Integrated Investment Program which was rebuilt to give effect to the 2024 National Defence Strategy outlines about A$330 billion of investment through to 2033–34, projected to reach ~2.4% of GDP by 2033–34, anchoring multi‑year programs for bases, digital systems, shipbuilding and sustainment. It includes dedicated funding for enterprise infrastructure such as Northern Bases, training institutions and national programs for airfields and maritime infrastructure, including infrastructure for conventionally‑armed and nuclear‑powered submarines and shipbuilding. Infrastructure is recognised as a capability in its own right, with an acknowledgement of the necessity to close the gap between “physical” infrastructure and “digital” war‑fighting systems. Key projects include: 

Ageing and capacity‑constrained estate

The public Defence Estate Audit Report concludes that the current Defence estate is too large, with legacy sites drawing resources away from readiness. It recommends faster delivery mechanisms, consolidation and divestment to realign the estate with contemporary capability. The Commonwealth Government has agreed or agreed‑in‑principle to all recommendations. It has begun a structured divestment program, with proceeds channelled into modern, strategically aligned infrastructure — accelerating delivery of priority bases and consolidating the estate around locations that directly support current and future Defence capability needs. 

Whole‑of‑government engagement

Delivery of defence infrastructure requires close cooperation between the Commonwealth and the States and Territories on planning, approvals, utilities, housing and skills. The Henderson Defence Precinct is a case study of this model, with a Commonwealth–WA cooperation agreement enabling a long‑term shipbuilding and sustainment hub tied to continuous naval shipbuilding and AUKUS. The scope covers general‑purpose frigates, army landing craft, surface‑combatant sustainment and contingency/ depot‑level maintenance for conventionally armed and nuclear‑powered submarines. 

A lack of alignment between the Commonwealth and relevant States and Territories – including over funding for surrounding infrastructure such as relocation of existing infrastructure, new roads and housing – has the ability to hold up much needed projects.

A shifting national infrastructure market and capacity constraints

Independent analysis reported by the Financial Times indicates that as defence‑related capital programs increase, these programs occupy a larger share of national construction and engineering capacity, with examples in Europe of projects being delayed due to defence priorities (Baltic high-speed rail link delayed as defence takes priority). As Defence’s pipeline grows, other State‑led transport and social infrastructure programs may be impacted, particularly projects dependent on the same labour pools or resources. This can lead to delays, higher delivery costs or reprioritisation of non-defence programs, and may affect the willingness (or otherwise) of States to cooperate with Defence programs.

Preferred Delivery Models: Two‑Stage MMC 

Unsurprisingly, Defence’s current approach to infrastructure delivery reflects a clear preference for models that balance schedule certainty, cost transparency and security assurance. To facilitate this, the Department relies on precedent contracts which it publishes to assist contractors. The precedent contracts it uses in relation to facilities delivery are accessible here.

Two‑Stage Managing Contractor Contract (MCC): certainty where it counts

For large or complex Defence infrastructure facilities, a two‑stage Managing Contractor Contract (MMC) procurement process remains the preferred approach. Stage 1 brings the contractor in early for design development, cost planning, market testing and risk workshops. Stage 2 sets the scope, deliverables and price for the works. As Defence is operating to constrained timeframes, this approach supports better design decisions, more accurate pricing, clearer risk allocation and improved schedule control—matching the Defence Estate Audit Report's emphasis on accelerating major infrastructure.

Early Contractor Involvement

Defence’s Early Contractor Involvement (ECI) model brings two head contractors into the development phase of a project to review design documents, test construction assumptions and identify issues before the project moves into delivery. Each contractor provides independent comments on the developing design and at the end of this phase, the Department selects the preferred head contractor on a value‑for‑money basis, negotiating the delivery‑phase price, scope and completion dates with the preferred contractor. This two‑stage, two head contractor structure is used as it gives Defence clearer visibility of design quality, project risks, programming requirements and likely costs before committing to a lump‑sum delivery contract, while maintaining competitive tension in the procurement.

The role of private capital and private finance 

Defence history with PPPs

The Department has used PPPs sparingly over the years, with notable examples being defence accommodation and Defence Headquarters Joint Operations Command (HQJOC). More recently a defence accommodation project to redevelop Randwick Barracks was proposed to be procured using a PPP model, however the project was reprioritised following the 2023 Defence Strategic Review and ultimately did not proceed. Other projects have suffered the same fate over the years.

Policy momentum and market interest

The Defence Estate Audit Report recommends adopting alternative finance to engage with private investment, and to further consider Public Private Partnerships (PPPs) and alternate delivery structures. Defence has also begun market discussions in relation to AUKUS‑related opportunities where private capital/finance may complement public funding. 

Where private capital/finance fits

The 2024 Defence Industry Development Strategy provide clear lanes for investment by private capital where investment can complement, rather than replace, Commonwealth responsibility for secure and mission‑critical assets. The goal is partnership on enabling elements, not outsourcing of core Defence functions, especially in areas aligned with the Sovereign Defence Industrial Priorities. In infrastructure terms, private capital will be sought to support precinct‑scale, non‑classified enabling works—such as utilities, logistics, ICT backbones, industrial facilities and workforce‑related infrastructure. 

The Department has indicated that it is seeking to work with private capital to align investment flows with its priorities, including by providing clearer information, supporting appropriate security clearances, and ensuring that projects linked to the Sovereign Defence Industrial Priorities have the certainty required to attract capital investors. The Henderson Defence Precinct is a practical example: a long‑horizon program with ~A$25 billion in infrastructure needs across a decade, underpinned by a A$12 billion early commitment to give industry certainty. 

Constraints and safeguards

Private capital/finance involvement would be adjacent to core military functions and structured to preserve Defence's security, ownership and control, data sovereignty, and operational command requirements. Current reforms provide the policy settings to ring‑fence secure functions while attracting capital. 

What precedent contract should the Commonwealth use?

As Defence facilities do not typically generate revenue, a precedent based on an availability PPP model (where return on investment is made through long term service payments by Defence) is likely to be most appropriate, although it is possible that certain common user facilities could generate revenue, replacing or supplementing a services payment as a source of return. 

Defence has not published a PPP Project Deed precedent. If it proceeds with PPPs, as we believe it should, we recommend that it adopt the Harmonised PPP Project Deed developed by Victoria and NSW (currently under review), with amendments to reflect the Commonwealth and national security requirements. The Harmonised PPP Project Deeds for linear and non-linear infrastructure are drafted on an ‘availability’ basis.

National security requirements around supply chain

Supply chain is national security

Defence treats supply‑chain assurance as a core element of national security, reflecting the reality that vulnerabilities in physical, digital or human systems can directly compromise capability. The 2024 National Defence Strategy and 2024 Defence Industry Development Strategy prioritise sovereign resilience in priority areas—including guided weapons and explosive ordnance, autonomous systems, battlespace awareness and test and evaluation. The Sovereign Defence Industrial Priorities set out the areas in which] Australia must be able to build and sustain domestically for an integrated, focused force.

Regulation and compliance uplift

The uplift in the Department’s expectations around security maturity extends to industry under Defence’s updated security framework, the Cyber Security Act (2024) alongside security vetting, foreign interference assessments and export‑control requirements. The Defence Industry Development Strategy highlights the increasing threat from cyberattacks, espionage and foreign interference, and reinforces that obligations are no longer limited to prime contractors but must reach deep into each supply chain. 

Commercial implications

Meeting supply chain integrity requirements is increasingly a selection factor in procurement by the Department. Contractors that can demonstrate Sovereign Defence Industrial Priorities‑aligned capability, pass cyber and personnel security audits with proper data handling and traceability, and show supply‑chain transparency will be better placed to win work and manage delivery risk. For priority Defence projects, particularly those tied to advanced technologies or AUKUS pathways, compliance with these requirements is not just an advantage but a precondition for participation. 

Workforce pressures—geography, security and immigration constraints

A system‑wide capacity challenge

Workforce availability, across the Australian Defence Force, Australian Public Services and industry, remains one of the most immediate constraints on delivering defence infrastructure and capability. The demand for skilled labour is rising sharply as major programs accelerate across Defence. The industry continues to face shortages across combat systems engineering, heavy fabrication, design, naval architecture, project management and electrical engineering roles. 

Geographic concentration

Geography compounds workforce availability pressures.Large‑scale naval, land and sustainment programs centred in defence‑intensive regions like South Australia and Western Australia are driving workforce demand in regions where labour supply is relatively thin and mobilisation costs are higher. With competition from Defence adjacent sectors also increasing, nuclear‑powered submarine construction and the northern posture emerging in the 2024 National Defence Strategy will intensify national competition for specialist trades and engineering talent at these locations.

Security clearance dependencies

Security requirements add a further layer of constraint. Many roles require Australian Government Security Vetting Agency (AGSVA) clearances, limiting the candidate pool and constraining international recruitment. Clearance timelines must be factored into schedules with Defence reporting that the vetting pipeline is already under pressure due to rising demand and the need to maintain stringent personnel security standards. The 2024 National Defence Strategy notes that Defence and industry must work together to address skills shortages while simultaneously uplifting security maturity, a dual burden that particularly affects SMEs and new market entrants. 

The AUKUS programs impose security requirements that extend beyond holding a standard AGSVA clearance, reflecting the sensitivity of nuclear‑propulsion, advanced technologies and trilateral information‑sharing arrangements. While there is no separate “AUKUS clearance”, personnel working on AUKUS projects must meet heightened vetting and access thresholds—including the emerging Top Secret–Privileged Access (TS‑PA) clearance now administered by ASIO for roles requiring deeper access than traditional Positive Vetting. In parallel, new export‑control rules under the Defence Trade Controls Amendment Act 2024 create the security architecture underpinning AUKUS collaboration. 

Constraints on Accessing Overseas Talent

Immigration settings also limit Defence’s ability to draw on overseas expertise and workforce at scale. Defence notes that security clearance requirements and global competition for relevantly skilled workers will constrain the speed and scope with which offshore talent can be integrated into sensitive programs. 

Strategy in response

Together, these factors create a workforce environment in which delivery schedules, regional capacity and security compliance are tightly interlinked. This results in greater emphasis on domestic training, apprenticeships, internships and long‑term talent development, including initiatives such as the Western Australian Defence Industry Pathways Program, the Commonwealth Schools Pathways Program and the emerging South Australian Skills and Training Academy which supports shipbuilding and nuclear‑submarine workforce pipelines. Effective responses include regional workforce hubs, mobility incentives with the 2024 Defence Industry Development Strategy incorporating grants, simpler procurement and clearer industry guidance to support these measures. 

Conclusion: an urgent national task

Delivery of defence infrastructure is now an urgent national task. A sharper strategy, a larger funding envelope, including use of private capital, an estate reset and a focused industry policy together create the chance to deliver capability quickly and well. Success depends on a coordinated national approach — across governments, industry, investors, communities and a skilled workforce spanning trades, engineers, cyber specialists and project professionals. The priority is not simply to build more, but to build what is needed, in the right places, with the security and reliability these uncertain times demand. 

Our predictions: 

1. Investment in defence infrastructure and related-enabling infrastructure will continue to grow and will begin to impact on state-led transport and social infrastructure projects, particularly projects dependent on the same labour pools or resources. 
2. Private capital/finance will be deployed to support the delivery of defence and defence related-enabling infrastructure. 
3. Supply chain disruptions and workforce constraints have the capacity to delay projects.

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