Guest Post: Strengthened Indigenous Procurement Policy

Allan Barger
The Department of Finance Archive

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This post was submitted by Maya Stuart-Fox, Assistant Secretary, Economic and Employment Policy Branch, Indigenous Affairs Group of the Department of the Prime Minister and Cabinet.

On 17 March 2015, the Minister for Indigenous Affairs and the Minister for Finance announced a new Indigenous procurement policy. This policy will be a game changer for the Indigenous business sector, creating an engine room for growth and diversification.

The Prime Minister’s Closing the Gap Report for 2015 highlighted that despite the good will and effort of successive governments, the gap in employment outcomes for Indigenous and non-Indigenous Australians is widening, from a 27 percentage point difference in 2008 to a 30 percentage point difference in 2015.

The Government has recognised that it must change the way it operates if it is to make a difference to Indigenous employment and get more Indigenous adults into jobs.

One of the ways the Government has committed to change is through the new Indigenous procurement policy. The evidence shows that Indigenous businesses are around 100 times more likely to employ an Indigenous person than other businesses. By driving up demand for Indigenous businesses, we can make a difference to Indigenous employment.

The new Indigenous procurement policy has three parts:

A target for purchasing from Indigenous businesses

  • The Commonwealth will award 3 per cent of its new contracts to Indigenous businesses each year, by FY19-20.
  • Work will start immediately, with interim targets applying each year until FY19-20. In FY15-16, the target will be 0.5 per cent, then 1.5 per cent target in FY16-17, 2 per cent in FY2017-18 and 2.5 per cent in FY2018-19.
  • Recognising that the current Indigenous business sector is mostly made up of small and medium size enterprises, contracts with incorporated joint ventures (with at least 25 per cent Indigenous equity) and sub-contracts with Indigenous businesses can be counted towards the target.

A mandatory set aside to direct contracts to Indigenous businesses

  • For certain contracts, Government agencies will have to first check whether an Indigenous small or medium business can deliver the good or service on a value for money basis before making a general approach to the market.

Minimum Indigenous participation requirements

  • Certain contracts will include mandatory minimum Indigenous employment and supplier use requirements to help drive more Indigenous employment and supplier use in some of Australia’s biggest companies.

The importance of these changes should not be underestimated. They are intended to put Indigenous businesses at the front and centre of the way the Commonwealth does business. The Prime Minister is absolutely committed to achieving the target and performance will be published, on a portfolio by portfolio basis, each year.

Work is underway to ensure that tools and support are available to help Commonwealth entities and contractors transition to the new arrangements. Supply Nation will publish an expanded register of Indigenous businesses on 1 July 2015. This will provide Commonwealth and private sector procurement officers with much better visibility of the great Indigenous businesses that are operating.

More information on the policy can be found here.

Last updated: 08 September 2016