Manufacturer says cash flow issues are restricting access to defence industry contracts

Brendan O'Connor challenged the federal government's commitment to getting at least 60 per cent of major defence project contracts to be based in Australia, citing delays and "retroactive" changes to the Naval Group submarine contract as an example.

"The government has failed there, and it's now incumbent upon the defence minister... to assure the Australian public that the commitment they made is secure," Mr O'Connor said.

Touring Penguin Composites, a Penguin-based manufacturer that recently secured a contract to make vehicle parts for Hawkei armored vehicles, Mr O'Connor said more focus needs to be put on engaging with local businesses to guide them through the defence industry contract process.

"The federal government needs to be much more focused on enlivening the manufacturing sector," he said.

"You've got to make it simpler. You need to make it very clear what the tendering processes are.

"We have some of the best companies in the world; they just need more support from the government."

He said this support should come through both government bodies reaching out directly to Australian boutique companies with relevant capabilities, as well as investment into vocational programs tailored to defence manufacturing and transferrable skills.

"It's vital that Australian businesses are able to have the requisite skills and capabilities to not only create these vehicles but to maintain them."

Penguin Composites general manager Adrian Polden said he strongly supported offering defence contracts to Australian businesses, but said there was work to be done in improving cash-flow before it would be a viable pathway for many small-moderate sized businesses.

"We should be maximising local contracts as much as we can," Mr Polden said.

"Most countries in the world do it, we should be doing it too.

"But easier access to cash flow, and better support from a line of credit would be very, very beneficial," he said.

He said often on contracts, particularly when it is a new endeavour and the project is being set up, a business will experience a lag in revenue versus cost. For small and moderately sized enterprises to be able to take on these defence contracts, they need to be able to access the allocated funds.

"We've been supported well, but we've also had to rely on, basically, personally finance.

"If we're really interested in getting more work into the smaller centres and the regional centres, it's got to be supported by line of credit."

The company was originally founded as a manufacturer of surfboards and other water sports items in 1976.

Since securing the defence manufacturing contract 18 months ago and pivoting to making vehicle parts, the business has been able to double its staff, growing from 30 employees to 60.