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PM’s dept sets indigenous procurement targets, failure not an option

The Department of Defence has been asked to find 70 new contracts for indigenous-owned corporations by next year, while Education only has to find four.

The federal government has released its new Indigenous Procurement Policy, which takes effect from July 1, demanding 3% of contracts go to businesses that are majority-owned by Aboriginal and Torres Strait Islander people by 2020.

The policy document released by the Department of Prime Minister and Cabinet includes a list of the 2015-16 targets for each portfolio (see table below), and the formula for calculating them.

In total, the government wants 256 contracts going to indigenous-owned businesses in the coming financial year, 70 of those with the Department of Defence. The next highest targets are 19 contracts each for the Attorney-General’s portfolio, Treasury, and Immigration and Border Protection.

The whole-of-government 2015-16 target is 0.5% of the total spend, going up to 1.5% in 2016-17 followed by 0.5% increases in the following two years.

Minister for Indigenous Affairs Nigel Scullion first announced the targets in March, speaking at a lunch ahead of Close the Gap Day and and putting mandarins on notice in no uncertain terms.

“I will be watching,” Scullion said at the lunch. “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 policy builds on exemption 17 to the Commonwealth Procurement Rules, which has allowed public servants to preference indigenous-owned companies since 2011 but was not used until last June by the Department of Defence.

Apparently, one of the reasons it was not used more is that most public servants responsible for procurement were not confident to bypass open tender processes on the basis of affirmative action. The now well-known story of Defence giving the inside run for a $6 million contract to indigenous business Pacific Services Group Holdings became the basis to raise awareness in other agencies of the exemption, how it can be used, and the reasons for doing so.

The policy itself explains its main purpose is:

” … to stimulate Indigenous entrepreneurship and business development, providing Indigenous Australians with more opportunities to participate in the economy. As the Indigenous business sector is dominated by small to medium sized enterprises (SMEs), the new policy focuses effort on these enterprises to drive improvements in Indigenous economic development and Indigenous employment.”

In a joint statement attached to the new policy, Scullion and Finance Minister Mathias Cormann repeat the government’s belief that: “Indigenous businesses are around 100 times more likely to employ an indigenous person than other businesses.”

The indigenous procurement targets for each portfolio:

Portfolio Average number of contracts over previous 3 financial years 2015-16 Target for indigenous-owned businesses
Education 711 4
Veterans’ Affairs 827 4
Parliamentary Departments 843 4
Communications 933 5
Agriculture 1,037 5
PM&C 1,255 6
Social Services 1,281 6
Employment 1,474 7
Infrastructure and Regional Development 1,597 8
Finance 1,616 8
Health 2,440 12
Foreign Affairs and Trade 2,595 13
Environment 2,804 14
Industry and Science 2,987 15
Human Services 3,521 18
Immigration and Border Protection 3,715 19
Treasury 3,806 19
Attorney-General’s 3,817 19
Defence 14,005 70
Total 51,264 256

The procurement rules also favour small-to-medium enterprises — the target for SMEs being 10% — and those that support people with disabilities, but independent senators Nick Xenaphon and John Madigan and others believe Australian companies should get similar preferential treatment though another change in the rules.

The two independents pushed for the Senate’s Finance and Public Administration committee to run an inquiry into procurement practices, and the government’s response to its findings displays a different attitude to its purchasing rules when it comes to buy-local provisions:

“The Commonwealth Procurement Rules are not intended to target specific categories of goods or services, nor specific industries. … The government cannot support the committee’s recommendations to implement initiatives that preference local suppliers when procuring goods and services above the procurement thresholds ($80,000 for general good and services and $7.5 million for construction services). Any recommendation to treat suppliers inequitably through schemes that preference local suppliers, beyond those that are specifically included in the 17 exemptions listed at Appendix A of the CPRs, would be inconsistent with Australia’s international obligations.”

According to a speech Xenaphon made in the Senate, our allegiance to free trade principles led one “Scandinavian official” to describe Australia as “the free trade Taliban” due to a “fundamentalist, literalist and purist approach to free trade” that the South Australian Senator said was shared by no other country.

Top image: Indigenous procurement advocate Peter Dunn, indigenous services business leader with engineering firm GHD, with Waanyi Nation Elder Derek Aplin.

Read more at the Mandarin: Tom Burton: Abbott’s new procurement game changer

Author Bio

Stephen Easton

Stephen Easton is a journalist at The Mandarin based in Canberra. He's previously reported for Canberra CityNews and worked on industry titles for The Intermedia Group.