Federal Indigenous procurement spending tops $2 billion, but to whose benefit?

By Stephen Easton

Monday May 13, 2019

Federal spending with companies that qualify as Indigenous-owned under the current procurement policy has ticked over $2 billion since mid-2015, but one outspoken Aboriginal businessman argues only a few have benefited while acknowledging recent efforts to tighten up the rules.

Indigenous Affairs Minister Nigel Scullion is not running in this Saturday’s election but clearly sees the Indigenous Procurement Policy as a major achievement of his time in office. Last week he proudly announced it had delivered “unprecedented growth” to Aboriginal and Torres Strait Islander business owners and “changed the relationship” between them and the Commonwealth.

“Its introduction in July 2015 required government agencies to look for Indigenous businesses and procure 3% of their overall number of contracts from Indigenous businesses — reflecting that Indigenous Australians are 3% of the population,” Scullion said at a recent conference run by Supply Nation, the non-government organisation that supports the policy by certifying the Indigenous ownership of companies.

The next goal for what the government calls “IPP 2.0” aims for companies that meet the Indigenous-ownership requirements to take care of 3% of federal procurement by value, by 2027 — a much more ambitious aim than targeting 3% of contracts by number.

The minister pointed out once again the stark contrast to the time before the policy came into effect. He said “Indigenous businesses were all but locked out of Commonwealth contracts” and noted the government spent just $6m with 30 of them in 2013-14.

“We now have had over 12,000 Commonwealth contracts being won by over 1,500 Indigenous businesses totalling $2 billion since the IPP began,” said Scullion, who linked this to a 30% growth in the “Indigenous business sector” and a 23.3% increase in the number of Indigenous Australians with jobs.

“Importantly each and every one of these IPP contracts has had to demonstrate the value-for-money requirements in the Commonwealth Procurement Rules meaning we are not paying any more for the goods or services we are procuring or receiving a lower quality — we are just better leveraging our existing spend to achieve an important social outcome.”

Aboriginal businessman Dean Foley, who set up the Barayamal Indigenous business accelerator, said he would like to see greater accountability around the scheme. His recent election wish-list included “greater impact in communities vs making a few people rich” through the IPP.

Foley noted Scullion’s recent announcement that the government would crack down on so-called “black-cladding” where non-Indigenous investors ride on the policy’s coat-tails, after spending several years dismissing concerns about this.

“However, the feeling within the Barayamal Network and the greater community is that the IPP only really benefits a select few and will only create a few Indigenous millionaires instead of helping close the massive disparity gap and making a difference in communities,” Foley said in his statement.

The new efforts to improve the integrity of the IPP were only announced last October, so they are not relevant to much of the $2bn that has been spent under the policy since 2015.

AusPost, Defence receive Supplier Diversity Awards

Government business enterprise Australia Post was recognised as a champion of supplier diversity at the Supply Nation conference with four awards out of 10 categories, while the Department of Defence took out the government category.

The postal service was named Corporate Member of the Year and also received an award for Outstanding Impact.
“They are a leading example of what happens when organisations set clear strategy and are supported by talented and dedicated people to make a real difference,” commented Supply Nation’s chief executive Laura Berry.

Steve Hansen, who manages various kinds of purchasing for AusPost, received an award for Procurement Professional of the Year.

“With two decades in procurement, Steve recognised the need to challenge traditional sourcing processes and diversify the supply chain so that every Australian has the opportunity to succeed,” explained the judging comments. “He ensures Indigenous procurement is included in KPIs and that all team members feel empowered to engage with the sector.”

His colleague Stephanie Roache, head of corporate responsibility, was named Supplier Diversity Advocate of the Year. “She champions positive change at Australia Post through spearheading their social procurement and supplier diversity strategy,” said Supply Nation’s statement. “Stephanie believes supplier diversity is one of the most powerful mechanisms for delivering positive social impact.”

Australia Post topped Supply Nation’s corporate list because its procurement staff were “driving systemic change by positioning themselves as thought-leaders in the supplier diversity space; playing a leadership role in communicating the benefits and challenges of supplier diversity; building capacity in the sector and giving opportunities to all Indigenous businesses regardless of size.”

Defence topped the list of government members because it “has supported and championed the growth of the Indigenous business sector” by signing $485 million worth of contracts and signalled its commitment to the idea with an Indigenous Procurement Strategy in late 2018.

Scullion also pointed to the government’s decision to invest $17m in a scheme to finance Indigenous business loans through the federal agency Indigenous Business Australia, as part of its policy to stimulate Indigenous business growth.

“This new financial product will help larger Indigenous businesses that are looking to access bank finance but cannot because of historical undercapitalisation to get a foot in the door,” said the minister. The Indigenous Entrepreneurs Capital Scheme would provide “one-off guarantees to assist Indigenous businesses access commercial finance for the first time and set them up on a relationship to continue to grow.”

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