Spectacular success for indigenous supply rules, only nine months in

By Tom Burton

May 3, 2016

The federal government’s new indigenous procurement targets have been spectacularly successful, causing Commonwealth spending with indigenous-owned firms to increase fifteen-fold in less than one year.

The head of the Department of the Prime Minister and Cabinet’s indigenous affairs division, Nadine Williams, told a Supply Nation conference yesterday about 250 indigenous businesses had signed over 750 government contracts, worth $91 million, in the first six months of the policy’s operation.

“The collective effort of agencies across the Commonwealth has been phenomenal.”

This represents a massive turnaround with two agencies, the Department of Defence and the Australian Taxation Office, both embracing the new Indigenous Procurement Policy (IPP) targets to dramatically increase their supply chain diversity.

According to Michael Howell, the recent head of procurement at Defence, the department wrote contracts totalling $1820 with indigenous companies in 2013-14. Less than two years later, the figure for this financial year up to April was at $38 million.

The ATO similarly contracted $2622 with indigenous firms in 2013-14 and this year has contracted nearly $27 million so far.

Williams said the uptake in indigenous procurement levels was increasing as more agencies came on board with the program.

The IPP targets were announced last year by Minister for Indigenous Affairs Nigel Scullion, who said he saw them as a “KPI for secretaries” at the time, following a review by mining magnate Twiggy Forest.

The IPP requires 3% of all contracts be offered to indigenous firms by 2020. This financial year, agencies are collectively required to offer 0.5% of all contracts to indigenous businesses. Next year the target rises to 1.5% with 0.5% increases in following years. There are also mandatory rules for contracts between $80,000 and $250,000, and minimum indigenous employment requirements for contracts of more than $7.5 million.

Williams said each portfolio was on track to meet or better its target, and was effusive how positive agencies had been to engage with the IPP.

“Many agencies were nervous,” she told the conference delegates. “Many were not sure they could meet their targets. Many were not experienced in dealing with the indigenous sector.

“Commonwealth agencies have risen to the challenge. This is the fruit of a collective effort. You couldn’t get results like this if it was just one or two agencies pushing it.

“The collective effort of agencies across the Commonwealth has been phenomenal. It is very hard to get agencies to work together. To see such a big push in one direction has been truly incredible.”

Previous attempts to use procurement policies to promote diversity and indigenous involvement in Commonwealth procurement had been frustrated by a conservative procurement culture in many agencies that resisted attempts to give indigenous firms a chance to demonstrate their capability.

Williams said there were three reasons for stunning IPP success:

  • The targets are public, strong and accountable, and work to build predictable demand for indigenous business.
  • The policy was strongly backed by high-level leadership within the Commonwealth — backed in by ministers and secretaries.
  • The rules gave indigenous businesses a procedural advantage.

The first assistant secretary described the rules as a “game changer” and said COAG had recently agreed to work with the states and territories to strengthen their own procurement policies to share the wealth in similar ways.

“Once we can see that momentum, the opportunities will be historic,” said Williams.

About 40% of contracts were for construction, she said, with a wide spread of other work including many that were becoming repeat jobs. The biggest single deal was a $9.1 m domestic security contract between Field Security and the Department of Foreign Affairs and Trade.

While the average contract was $123,000, there were lots of smaller purchases, suggesting a good spread of work for smaller indigenous firms.

Williams said PM&C was teaming with the Australian Chamber of Commerce and Industry to provide training for indigenous firms keen to share in the benefits of Commonwealth procurement. She said contracts were being let in all parts of the country, including remote areas.

For businesses, Williams said the IPP changed the way the government does business and if firms wanted to deal with the national government, they needed to involve indigenous people.

PM&C partners with Supply Nation, which independently certifies suppliers meet a minimum threshold for indigenous ownership, to operate the official database of indigenous businesses and promote supplier diversity. The federal government contracts around $60 billion of services every year.

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