Helping agencies reach indigenous spending targets

By Stephen Easton

September 8, 2015

As federal entities try to ramp up the amount of goods and services they purchase from indigenous suppliers to meet strict new targets that came into effect on July 1, Indigenous Business Australia is on hand to help.

IBA has working relationships with plenty of companies that are 50% or more indigenous owned and stand ready to take on significant government contracts right away. The organisation’s new commercial markets team is keen to play a matchmaking role, according to executive Kirsti McQueen.

“There are good, strong businesses that are ready, and in some ways we’re a nice intermediary,” McQueen told The Mandarin. “We’re a construct of the Commonwealth government and we’re working with these businesses, so [other agencies] can come and talk to us and say: ‘OK, we’ve identified four or five contracts that might be suitable, what have you got that might be able to help us meet the contracts?'”

Kirsti McQueen
Kirsti McQueen

Over the next year, IBA’s new commercial markets team will meet with federal agencies to work out how prepared they are to implement the new Indigenous Procurement Policy and meet its targets, which start at 0.5% of spending this financial year going to indigenous businesses, and increase progressively to 3% by 2020. An information sheet from the new team says it can also find ways for government buyers to “shape commercial opportunities so that they can be successfully contested and delivered by an indigenous supplier” and work with primary contractors that do not meet the indigenous ownership criteria to identify sub-contracting jobs that could go to indigenous suppliers and help agencies meet the targets.

The Minister for Indigenous Affairs, Nigel Scullion, has made it clear that compliance with the policy, which also includes a mandatory set-aside of certain contracts based on location and value, will strongly influence the government’s view of how agency heads have performed.

Deep roots in indigenous business

IBA has worked to support the indigenous business sector for about 25 years, originally as the Aboriginal and Torres Strait Islander Commercial Development Corporation, mainly by helping small-to-medium enterprises (SMEs) get going in their early stages with a view to growing the number of businesses in the sector. This support has mainly come in the form of basic start-up finance and access to expert business advice.

Procurement officials should find it easier to perform risk assessments of indigenous-owned potential suppliers that are already getting support from the Commonwealth via IBA, says McQueen, who has worked in business development for the organisation since 2006 and now oversees change management.

In 2009, at the former Department of Education, Employment and Workplace Relations, McQueen played a key role in the early establishment of a minority supplier council modelled on its United States counterpart, which was later rebranded as Supply Nation. The establishment of the non-government organisation was a key step towards getting more government spending into the sector, along with the addition of the indigenous business exemption to the Commonwealth Procurement Rules in 2011.

“We try and listen to our customers as best as we can, and with the advent of Supply Nation and some of those bigger businesses winning [larger] contracts, they started asking us for different types of support, and different types of finance,” said McQueen. “So they started asking for contract-backed lending as opposed to a five-year term loan, for example. They’d just ask for a short one — six months, 12 months — to complete a contract.”

The types of support being requested also began to change as the sector matured, from the basics like obtaining an ABN, market research and cash-flow management, to advice around fulfilling major contracts and competing with bigger players.

Shift in mission

In 2012, with Supply Nation and the exemption to the CPRs both in place, government spending with indigenous suppliers still wasn’t increasing much. McQueen and other indigenous business delegates went to a conference held by Supply Nation’s US sister organisation to look at what was working over there.

“As a business development agency, we probably weren’t seeing enough outcomes resulting from those policy changes,” said McQueen.

“[In the US] their system really was about pulling the lever that the federal government could pull in the United States, which was spend, but then also they had repercussions for not hitting targets, and that was all administered by the small business administration department.”

The delegation returned convinced of the need for an accountability mechanism just like the newly introduced targets to give the policy some momentum.

“We also then started a conversation with our board, saying: ‘We’ve been a start-up machine for 40 years, we’re getting all of these different types of support enquiries from our customers and we see there’s this opportunity through procurement to have stronger, harder targets. What do you want us to do?’

“And they said: ‘We still want you to focus on start-ups, but start allocating some of your resources to setting up a team focused on growth, focused on procurement.”

Playing matchmaker

18 months later, IBA was ready with the design of the new commercial markets team. Its eight members perform two main functions, the first being at the frontline, working directly with indigenous businesses to identify the big contract opportunities and help them win them.

“And then behind that team we’ve got project managers and a market analyst who’s collecting all the data around where the opportunities are — both geographically and also what we’re hearing from corporates and government buyers — so then we can use that for the business sector more broadly in the future,” explains McQueen.

“Really, the bit where we thought we could add value in this whole mix is we understand the suppliers,” said McQueen, explaining that IBA knows a lot about the balance sheets of the indigenous businesses on its books, their levels of equity and therefore their respective abilities to attract finance.

“So where we’re really focusing our efforts in the commercial markets team is at the contract or transaction level, because we know [an indigenous] business of a particular size can attract enough finance to get a contract of a particular size.”

The commercial markets team’s role also includes helping clients win big corporate supply contracts, but of course it is only IBA’s federally funded colleagues who are now required to go out and find more indigenous suppliers, thanks to the policy change. McQueen says this matchmaking role is a good opportunity to help IBA’s clients in a new way by working to stimulate demand, “which is actually a key component in managing the risk of those businesses that have lending with us.”

“Traditionally we haven’t performed that role, but in this team we will.”

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