Mandarins to close the gap: new APS indigenous procurement, personnel targets

By Stephen Easton

March 17, 2015

The minister left little wiggle room: the Australian Public Service will meet ambitious new targets to employ and do business with more Aboriginal and Torres Strait Islander people.

That is the message cabinet has delivered to federal mandarins ahead of Close the Gap Day, and any failure will be noted, says Indigenous Affairs Minister Nigel Scullion.

The new targets, announced today, are to have 3% of the Commonwealth government’s procurement contracts go to indigenous suppliers by 2020 and 3% of its workforce indigenous by 2018. Speaking at a lunch event at Parliament House hosted by indigenous business council Supply Nation, Scullion did not mince words as he explained how public servants would be held to meeting them, and what would happen if they don’t.

“I will be watching,” the minister said of the employment target. “This is a KPI to secretaries. This is a KPI for department heads. If it’s something you fail in, we will note that failure, and movement up and down the political scale within the public service will no doubt take place.” The remarks could be interpreted as a threat that failure could result in a loss of ministerial confidence.

According to Finance Minister Mathias Cormann’s calculations, the procurement target would equal about 1,500 contracts annually by 2020, worth about $135 million in total based on an average contract value of $90,000. That would be more than 20 times the current spending with indigenous businesses, which the ministers put at about $6.2 million in the last financial year.

“If it’s something you fail in, we will note that failure, and movement up and down the political scale within the public service will no doubt take place.”

Scullion said the current amount was “completely paltry and unbelievable” and noted the government has barely used a special exemption to the Commonwealth procurement rules designed to give indigenous businesses a leg-up, despite it being in place for several years. He described the indigenous opportunities policy as “something that we’ve hung on the wall and haven’t used”.

Department of Human Services national procurement manager Phil Lindenmayer said public servants working in procurement had rarely used the exemption — which allows them to bypass an open tender and go straight to a majority indigenous-owned business — because they were used to going through a well-established, standardised process, and were often very busy. Momentum has been building however, with successful indigenous-owned companies trying to raise awareness of the mechanism within the APS.

Agencies will be expected to meet interim targets every quarter and if they aren’t on track to meet them, the question from the minister will be: “Why not?”

“And it’s going to be tough,” said Scullion. “It’s going to be tough in an employment environment where the Commonwealth public service is not in expanding mode, but certainly in the area of procurement I can see there is no impediment to immediate activity. So we will need to award, within each government portfolio, around about half a per cent of their contracts to indigenous businesses in 2015-16, with this increasing each year [until] 2020.”

If progress towards the interim targets is going better than expected, “that number will change and it will only change going upwards”.

“This is not an aspirational target; this is something that will be achieved.”

In a significant shift, the tough new policy also requires agencies to check if they can go to an indigenous supplier first before looking to the wider market.

Scullion said the rule applied to “anything from a box of pencils to a hundred million dollar contract … and only after you’ve exhausted those enquiries, will you then go to the open market”.  He also made clear that the policy had the prime minister’s imprimatur and said progress towards the targets would be made public:

“In terms of public accountability and transparency, the prime minister has made absolutely sure from a prime ministerial level … that each agency head will be accountable for meeting their share of both of these targets. Again, for the first time, KPIs for the secretaries and the heads of departments.

“We will be transparent about this; the Commonwealth performance as a whole will be reported and published every year and for those department heads who are not doing so well, they’ll probably see more of me than they like. So we will know, as a nation, what each portfolio target is, the number and value of contracts that every Commonwealth government portfolio secures with indigenous business.”

Scullion spoke of a belief that workplace diversity is good for any organisation’s workforce, and challenged corporate Australia to follow the government’s lead. Currently, about 2.6% of federal public servants are First Australians. “That’s obviously not enough,” he said, explaining the new employment target aimed to have the same proportion of indigenous people in the APS as in the general population.

“This is not an aspirational target; this is something that will be achieved,” he said bluntly. “… I’m very, very confident that the secretaries of the department[s], and the individuals in the department[s] who already enjoy the input of Aboriginal and Islander people across the service, will be working extremely hard to ensure that we meet those lines.”

“… This is something that I’m declaring is just simply going to happen, and I will be, as will be every one of our heads of our ministry, in a political sense, all of our ministers will also be keeping a very careful eye on this and ensuring that we’re working with people. If there are particular difficulties, we want to know why that is, and how else government can move to ensure that this happens.”

Applications for the APS Commission’s indigenous traineeship program open on March 30 and the indigenous graduate program is open now.

Supply Nation joins the dots

One way for government agencies to connect with indigenous-owned suppliers is through Supply Nation, which certifies that a business is 51% or more owned by people of Aboriginal or Torres Strait Islander descent, and charges the prospective purchasers a fee for a kind of matchmaking service. To aid the new policy, the list of certified businesses will be made public from July 1 and expanded as well as having a search engine and more detailed information added about each supplier’s capabilities. It will also be faster for indigenous-owned businesses to register.

“Currently we have a register that consists of Supply Nation certified suppliers, and we make that available to our member organisations,” board member George Mifsud told The Mandarin. “What we’ll be doing is working with government and other indigenous organisations to add to the register, make it bigger, and then make that publicly available.”

Mifsud said paying members of Supply Nation would still receive “additional benefits” and “sophisticated matching services” even after the list becomes public, and that a new category was being added for companies that are half indigenous-owned in order to bring partnerships and joint ventures into the fold.

“We’ll have two categories,” he explained. “One is our indigenous certified groups, which is what we’ve been working with — 51% or more indigenous owned — and the other group are what we call recognised, not certified, but recognised indigenous businesses, and they’ll be 50-50 [indigenous-owned] businesses.”

As well as supporting financial independence for more Aboriginal and Torres Strait Islander people by supporting businesses they own, Scullion said the new procurement target would also increase indigenous employment.

“We know that an indigenous-owned business is around a hundred times more likely to employ an indigenous person than otherwise; it’s just a fact,” he said. “And part of that, in my observations, has been Aboriginal people prefer to work in a place, unsurprisingly, where they’re not the only Aboriginal person there.”

But indigenous business owner Leigh Harris says that’s not always the case, and questions why the definition of indigenous-owned — both under the Commonwealth Procurement Rules exemption and Supply Nation certification — refers only to ownership, not the number or proportion of indigenous employees. Harris says his Cairns-based graphic design company Ingeous Studios was one of the first nine businesses invited to become certified by Supply Nation but after initial enthusiasm, he decided not to support the organisation because he felt it was “not walking the talk”.

“It’s always been my argument that they need to have some sort of certification level in Supply Nation of indigenous employment,” he told The Mandarin. “I know for a fact that — even though Supply Nation will rebut this — I know there’s a number of businesses [certified by] Supply Nation that have a majority non-indigenous staff.”

Mifsud says that while employment is important, Supply Nation is focused on fostering indigenous financial independence and getting more Aboriginal and Torres Strait Islander people into leadership positions in the corporate and government sectors.

“Whilst we very much support organisations who employ indigenous Australians, and employment’s a very important part, that’s not the area that we play in,” he told The Mandarin. “We’re really working in the area around business-to-business engagement, and growing, helping economic independence.”

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