Affirmative action in buying: are bureaucrats brave enough?

By Stephen Easton

October 2, 2014

For several years now there has been support across the political spectrum for affirmative action in government procurement. In 2008, the Council of Australian Governments agreed it was an efficient way to help close the gap between the first Australians and the rest of the community. But more can be done to encourage and support the public servants expected to put good intentions into practice.

As Minister for Indigenous Affairs, Northern Territorian Senator Nigel Scullion assured The Mandarin that procurement policy is “a key area of focus” for him. “It provides a mechanism to take the development of indigenous business on a quantum leap,” he said via email:

“A key part of that is ensuring that there is an understanding of the policy across the public sector and that existing, and any new policies, are utilised to drive the sourcing of goods and services from indigenous businesses.”

One element of existing policy that is not well understood, and has barely ever been used, is exemption 17 to the Commonwealth Procurement Rules. It means the normal requirement for all procurement worth over $80,000 to go through a competitive tender process does not apply to suppliers that are at least half indigenous owned, and have under 200 employees. There is a similar exemption for disability service providers.

Since being introduced in 2011, exemption 17 has been used just once, this year, by Defence to award a $6 million naval dockyard contract to Pacific Services Group Holdings. The company subcontracted five other indigenous-owned suppliers on the job.

According to the Department of Finance, the hardest thing about using exemption 17 for agencies is finding an indigenous-owned business that provides the requisite goods or services. In an emailed statement, the department went on to point out that:

“For a fee, an entity can become a member of Supply Nation to gain access to its list of certified indigenous businesses. However, there are less than 300 indigenous businesses certified by Supply Nation. If an entity is not a member of Supply Nation, the Department of Employment provides a directory of indigenous businesses …”

Supply Nation CEO Charles Prouse told The Mandarin he felt the exemption could be quite a powerful weapon against the cycle of entrenched indigenous disadvantage, if it was used more often. “The problem,” he said, “is that it’s not well known within the public service, on the ground level.

“And I suppose the other thing is, the reality of procurement people generally is to be risk-averse, so there needed to be more guidance on how to use the exemption.”

“The problem is that it’s not well known within the public service, on the ground level.”

Prouse recalls a recent Supply Nation networking event in June where several government procurement officers thanked him for mentioning the exemption in his remarks because they weren’t aware of it.

Before they got the call from Defence, Pacific Services owners Shane Jacobs and Troy Rugless had contacted two other agencies with proposals for planned procurement needs they believed they could fulfil, on budget, and without the need for a tender process if the exemption was used. According to an article on Supply Nation’s website: “Both times they had to explain further what exemption 17 was and why they should use it.”

To provide more practical guidance, APS procurement co-ordinator John Sheridan recently posted a list of frequently asked questions about using exemption 17. It explains, among other things, how to demonstrate value for money without a competitive tender process, and confirms that the social value of supporting indigenous business does not come into assessing value for money.


Another reason the exemption wasn’t used until recently could be that it is simply an option. There is no impetus behind it, such as a target for a certain percentage of procurement to come from indigenous companies. It was only through its own initiative and tenacity that PSGH was able to secure the deal with Defence.

Brisbane-based creative agency Gilimbaa, which designed the G20 logo among other high-profile government work, recently decided to get proactive as well. The indigenous-owned firm invited 32 public servants responsible for procurement and communications to an event in Canberra at the start of September, to hear presentations focused on exemption 17. Lear and two other indigenous business advocates were joined by Michael Howell from Defence, who made a valuable contribution to the discussion, according to Lear, based on the experience with Pacific Services.


“There was a mix of procurement representatives and senior communications strategists from a cross-section of government there, and the dialogue between the government departments was really interesting,” Gilimbaa director Amanda Lear told The Mandarin. “And there was quite a lot of feedback that it was great to have different government agencies sitting beside each other, talking about one topic, which you don’t normally have.”

According to Lear, the response to the invitations was “immediate and very positive”. She suggests this was generally reflective of enthusiasm across the entire APS for the idea of supporting indigenous financial independence through procurement. Immediately after the event, she says, some delegates were already keen to discuss specific projects.

“I think the nature of procurement is equity and fairness, and I think this initiative is about equity on a much larger scale,” said Lear. “It’s about bringing equity into indigenous businesses, and that is going to create national equity for indigenous Australians, through employment and through opportunity.”

Prouse was encouraged to see this year’s Forrest review of indigenous training and employment recommend a target of 4% of Commonwealth procurement over four years — about $1.7 billion — to flow to indigenous companies. The Forrest review also set the eligibility threshold for preferential procurement at 25% indigenous ownership — much lower than the 50% needed to qualify for exemption 17 or Supply Nation certification. Despite this difference of opinion over whether indigenous control of the supplier is important, the concept of setting a target has Prouse’s full support.

“In the 2012-13 financial year the Australian government only spent $6 million with indigenous suppliers that it could account for; Shane’s contract at PSG alone was $6 million. Imagine we had a hard target? You can bet your bottom dollar there will be a big education campaign in the public service, every procurement officer will know about it and they will use the exemption,” he said.

The Supply Nation CEO is optimistic staff in other federal agencies will now be confident to follow the example set by Defence. “I do think Defence have a culture which has been good for the exemption — just get on and do it — whereas others might be more inclined to wait until someone else does it,” he said.

More at The Mandarin: The procurement gap: boost for indigenous-owned firms

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