The procurement gap: boost for indigenous-owned firms

By Stephen Easton

Tuesday August 12, 2014

Peter Dunn with Waanyi Nation Elder Derek Aplin in the Kimberley last year.

A change to Commonwealth procurement rules in 2011 created a powerful way for the federal bureaucracy to help close the gap by giving more work to indigenous-owned companies. But it wasn’t used until June this year.

Under exemption 17 to the rules, companies with under 200 employees that are at least half indigenous-owned can be contracted without going to the full tender process normally required for goods and services worth over $80,000.

The first time it was used — a $6 million Defence contract awarded to Pacific Services Group Holdings, owned by Wiradjuri men Shane Jacobs and Troy Rugless — was hailed as “a significant step forward on the Prime Minister’s path to practical reconciliation” by Defence Minister David Johnston. Parliamentary Secretary to the Prime Minister Alan Tudge said at the time:

“Contracting indigenous businesses is one of the best ways government and corporate Australia can support indigenous advancement. Not only does it encourage entrepreneurship, but indigenous businesses are 100 times more likely to employ indigenous people.”

In 2011, a finance circular informed all relevant government entities of the exemption and encouraged its use, advising:

“In accordance with the Council of Australian Governments National Partnership Agreement on Indigenous Economic Participation, the Government is committed to increasing the opportunities available to Indigenous businesses, exploring options for Indigenous businesses to increase their share of government procurement, and assisting relationship building with Indigenous suppliers particularly those supplying Government.”

Jacobs and Rugless spent two years contacting federal departments advocating for the exemption to be invoked more often. They found public servants were cautious about applying it.

As the nation digests mining boss Andrew Forrest’s ideas to “end the cycle of entrenched indigenous disadvantage”, which include setting targets for government procurement from indigenous-owned businesses, another less famous — but no less qualified — voice from the private sector suggests it’s time public servants took another look at exemption 17.

Peter Dunn is “indigenous services consultant” for the giant engineering consultancy GHD, and has spent three decades working with indigenous and remote communities, including in the not-for-profit sector and academia. Together with Jacobs and Rugless, he has been advocating the wider use of the exemption to give indigenous companies a leg-up for several years.

“We’d been advocating with the Department of Prime Minister and Cabinet, Finance; I’ve been to 15 different government departments,” he told The Mandarin.

The reason for their campaign was “bewilderment”: “I could not fathom what was the obstacle. Value for money still applies — they still have to put in a proposal and meet all the requirements and offer a good price; it just means the procurement doesn’t have to go out to the open market.”

Dunn makes clear he’s not suggesting there’s anything “sinister” going on. “It’s more to do with the fact they’ve done really well in the public sector to ensure they conform to a linear procurement process; that protects them from any criticism and protects the Australian taxpayer as well,” he said.

“But when you’ve been in that mindset for decades, you would find it a bit unnerving and a bit unfamiliar to go outside of that process and start inviting a company in a single selection.”

Dunn says some of the responses he received from public servants in charge of procurement seemed to miss the point of what the exemption empowers them to do. “It has the possibility of growing more young Aboriginal people out of welfare — getting them off the taxpayer’s purse to becoming a taxpayer,” he said.

The contract awarded to PSGH was a deliberate attempt on the part of senior members of Defence to “break the ice” for other agencies to follow suit, according to Dunn.

As an adviser to PSGH and several other Aboriginal companies, some of which he has helped set up, Dunn believes there are now plenty of indigenous-owned businesses with the experience, skilled labour, insurances and safety approvals to provide a broad range of goods and services.

GHD, he says, has identified ways to support indigenous enterprise, particularly with firms like PSGH in the building and construction industry. But Dunn believes there are plenty of other Aboriginal-owned companies — including some backed by larger, established firms — who are ready to provide the taxpayer with value for money.

Helping indigenous businesses prosper had been identified by GHD as a way to be a good corporate citizen. “It means we can celebrate when we’ve helped an indigenous business get off the ground,” Dunn said. “Either we employ them or include them in one of our tenders, or we even help create them.”

Dunn worked with Supply Nation, an NGO which connects indigenous businesses such as PSGH, with corporate and government buyers like GHD and the Department of Defence. Corporate and government members of Supply Nation engage indigenous suppliers as part of a broad program to promote supplier diversity.

Supply Nation is funded from member fees and Commonwealth grant. It is modelled on a similar US agency — the National Minority Supplier Development Council — which brings marginalised minorities into corporate and government supply chains.

In relation to Forrest’s report — which suggests boosting procurement from indigenous companies to 4% or about $1.7 billion by the end of a four-year period — Tudge, assisting the Prime Minister on indigenous affairs, told The Mandarin:

“… the government can contribute to creating real jobs for indigenous people through improved procurement policies that ensure indigenous businesses receive a bigger slice of government work that is tendered out and that suppliers to the government provide jobs and business opportunities for indigenous people.

“The government will consider all of the measures in the Forrest review in relation to procurement as part of the consultation process.”

Image: Peter Dunn and Derek Aplin, a Waanyi elder and chair of the 100% indigenous-owned company Northern Project Contracting, in the Kimberley region last year

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