What is AUKUS?

AUKUS is a trilateral defense agreement between Australia, the United Kingdom, and the United States aimed at enhancing the security and stability of the Indo-Pacific region by strengthening defense ties between the three countries. The pact includes a range of initiatives with these being incorporated within pillars;

Pillar 1:

Pillar 1 focuses on the development of nuclear-powered submarines for the Royal Australian Navy. Under this pillar, the United States and United Kingdom will share their advanced nuclear submarine technology and expertise with Australia to support the design, development, and construction of a new fleet of nuclear-powered submarines. The submarines are expected to provide Australia with enhanced capabilities for conducting maritime operations and strengthening its deterrence and defense capabilities.

The usual cycle of submarine procurement lasts for many years, often decades, and a key aim of the pact is to expedite this through the use of proven technologies and design. However, this will still be a long-term project with the first Australian built submarine expected to be delivered in the 2040s.

Pillar 2:

Pillar 2 of the AUKUS pact focuses on enhancing the interoperability and capability of the three countries’ armed forces. Under this pillar, the three countries will work together to share information, technology, and expertise to develop advanced military capabilities and joint training exercises. The aim is to enhance the military readiness and effectiveness of the three countries’ armed forces, as well as strengthen their deterrence and defense capabilities in region. Pillar 2 initiatives are expected to include joint research and development programs, sharing of defense technology and expertise, and joint military exercises and training. Pillar 2 is seen as a key component of the AUKUS pact, as it will enable the three countries to work together more effectively to address shared security challenges in the Indo-Pacific.

Much of the coverage of AUKUS has focussed on the need for the three countries to build additional industrial capacity, with a particular spotlight on shipyard infrastructure and depth of engineering resource. An area that hasn’t been well covered is the likely contracting challenges that will come from companies providing the same equipment and services into three different countries each with it’s own peculiarities with regard to procurement regulations and pricing, especially as much of this will likely be supplied through non-competitive routes given the proven in-use nature.

FAR, DFAR, PCR and CPG: What does it all mean?

The regulatory regimes governing government procurement differ significantly between Australia, the United Kingdom, and the United States. In the US, the Federal Acquisition Regulation (FAR) sets out detailed rules and procedures for contracting, subcontracting, and procurement. The FAR mandates competitive bidding but allows for non-competitive procurement methods, such as sole-source contracting, in certain circumstances. The Defense Federal Acquisition Regulation Supplement (DFARS) further augments these rules for Defense, governing allowable and unallowable costs for Defense contracts.

In Australia, the Commonwealth Procurement Guidelines (CPGs) govern government procurement. The CPGs prioritize value for money, transparency, and fairness, and are designed to ensure efficient, effective, and ethical processes while also providing equal opportunities to businesses of all sizes and sectors. Competitive tendering is the default procurement method under the CPGs, but non-competitive methods such as limited tendering are allowed in specific circumstances. For defense-related procurement, Australia has the Defence Procurement Policy Manual (DPPM), which provides detailed guidance on defense procurement that builds on the aims of the CPGs and emphasizes risk management, project management, and quality assurance.

In the UK, defense-related procurement is governed by the Defence and Security Public Contracts Regulations (DSPCR), which is based on the Public Contracts Regulations (PCR). The DSPCR is designed to ensure that procurement is transparent, fair, and cost-effective and provides detailed guidance on defense equipment, materials, and services procurement. It also emphasizes risk management, project management, and quality assurance to ensure that the delivered products and services meet the required standards.

On the face of things this may appear that there is little difference between the regimes, however the devil really is in the detail and each country has its own way of assuring transparency and value for money. Companies involved in AUKUS will need to understand and navigate these differences before entering into contracts under an alternative regime to where their expertise lies today.


The AUKUS agreement is a massive opportunity for collaboration between three countries with a shared worldview. However, as well as the much documented technical and infrastructure challenges associated with delivering upon its promise, there are myriad commercial and financial considerations for companies who will be providing equipment and services in support of the pact. The scale of this challenge, particularly in light of skilled labor shortages in accounting, shouldn’t be overlooked and contractors would be well advised to begin engagement with specialists in this area well in advance of final contract placement.

Keep up to date with AUKUS news at the AUKUS Forum or if you need support in this area get started by contacting us.