The two firms allege that Defence's procuring agencies designed a AU$700,000 equipment tender to lock out all bidders bar US multinational Rockwell Automation's subsidiary, Entek IRD.
The companies lodged complaints with federal Defence Minister Robert Hill after they became dissatisfied with the agency's reasons for eliminating them from the tender selection process. Kelvin Wright, managing director of Vitech, one of the companies that lodged a complaint, said the agency retrospectively contrived technical reasons for eliminating his company from the tender to cover its tracks, breaching Defence's Australian Industry Involvement (AII) guidelines.
For now Hill is remaining tight-lipped about the situation, withholding any further comment on the matter until after the investigation is complete.
The timing of the investigation coincided with the release this week of the Auditor General's report on Defence's AII program.
The newly-elected National President of the Australian Industry & Defence Network (AIDN), John Englaro, said the report reveals that AII can't provide a guarantee that Defence is honouring its commitment to sustaining the indigenous small and medium-sized technology sector.
The Australian National Audit Office assessed the performance of Defence AII across four major capital equipment projects and found that Defence was spending less than 0.002 percent of its $AU2.5 billion capital acquisition budget on ensuring that AII targets were being met.
The ANAO went on to question the reliability of Defence figures indicating how they were tracking against targets.
In its report, the ANAO wrote that the figures were "unreliable and unauditable", and went on to add:
"The accounting and management information systems of Defence and contractors do not readily separate out the imported component of supplies obtained in Australia. As a result, figures purporting to show AII achieved against project expenditures or contracts signed are of limited value."
Englaro said the report shows that Defence spending money simply isn't being monitored.
"We're talking about hundreds of millions of dollars that should be going towards Australian industry and [Defence] is only spending AU $320,000 to make sure it happens," said Englaro.
So what's news! I have seen and heard of many government departments, at one time or another, writing specifications to meet their own needs. Why should an organisation have to take a less attractive outcome just to appease the bureaucrats?