Indigenous procurement targets undermined by implementation and compliance issues, audit finds

By Shannon Jenkins

Friday February 21, 2020

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Departments have failed to comply with targets set out by the Commonwealth’s Indigenous Procurement Policy, the Australian National Audit Office has found.

The government introduced its Indigenous Procurement Policy (IPP) in 2015, as a way to generate economic opportunities for Aboriginal and Torres Strait Islander people. Under the policy, departments and agencies must apply Aboriginal and Torres Strait Islander participation targets in major procurements, known as mandatory minimum requirements (MMRs).

Responsibility for the policy was originally held by the Department of the Prime Minister and Cabinet, but was handed over to the newly created National Indigenous Australians Agency (NIAA) last year.

In its latest report, ANAO looked at how the MMRs have been managed. Six entities were audited on their compliance with procurement targets, including the Defence, Education, Employment, Home Affairs, and Infrastructure departments, as well as NIAA.

Auditor-General Grant Hehir found the design of the MMRs aligns with the government’s goals, and MMR policy settings are “reasonable and supported by evidence”. Despite this, “ineffective implementation and monitoring” by NIAA, and “insufficient compliance” by the departments has undermined the policy, Hehir concluded.

NIAA failed to give entities and contractors sufficient guidance on compliance, according to the report, while the departments’ compliance with procurement targets “fell short”.

“In the procurement phase, while selected entities mostly recognised when the MMRs applied, they failed to comply with all required steps,” ANAO noted.

“In the contract management phase, entities have not established appropriate performance reporting arrangements. Where reporting has been occurring, entities have not gained appropriate assurance over reported performance.”

Excluding contracts for invalid reasons, and not creating a contractual requirement to meet targets were the key compliance issues. However, the entities have mostly provided appropriate guidance to staff on complying with the MMRs.

READ MORE: PM&C should do more to raise awareness of Indigenous Procurement Policy, review finds

Hehir suggested applying the policy to Commonwealth corporate entities and companies would broaden opportunities for Aboriginal and Torres Strait Islander people to gain skills and economic benefit from large government projects.

The auditor-general made three recommendations to NIAA, including to develop guidance on managing targets throughout the contract lifecycle, and implementing reporting compliance and evaluation strategies.

The audited departments, on the other hand, should:

  • Update their procurement protocols to ensure staff comply with required steps in the procurement process,
  • Establish or update processes to ensure contract managers and contractors regularly use the IPP Reporting Solution for MMR reporting,
  • Establish appropriate controls and risk-based assurance activities for active MMR contracts, after guidance has been provided by NIAA.

NIAA and the departments accepted all of the recommendations. However, there were some criticisms.

The Department of Defence thought the ANAO could have broadened its scope a little.

“Overall, Defence considers the findings presented by the ANAO are weighted toward observations of non-compliance with limited consideration given to better practice. The Defence Indigenous Procurement Strategy outlines Defence’s commitment and pathway to delivering Indigenous Procurement Policy outcomes,” Defence wrote in its response to the report.

“As the Commonwealth’s largest procurer, Defence continues to exceed portfolio targets for contracts awarded to Indigenous suppliers. A number of Defence contracts voluntarily include MMRs, despite being exempt or categorised outside of a specified industry sector. Inclusion of this information would present a more balanced view of Defence’s management of Aboriginal and Torres Strait Islander participation targets in major procurements.”

NIAA argued the audit “would have benefited from greater acknowledgement of the scale of the reform”.

“The IPP represents a significant change to how the Australian government procures goods and services. It challenges procurement officers to step outside often deeply ingrained and, in some cases, rigid procurement processes to consider how they could preference their procurement activities to benefit Aboriginal and Torres Strait Islander people while still achieving value for money for the government,” the agency noted.

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


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