Billions of dollars have flowed through Australia’s Indigenous Procurement Policy (IPP) since its introduction, but as claims of “black cladding” intensify, concerns are being raised about upcoming changes to the policy.
The IPP has become one of the Federal Government’s most significant examples of procurement being used to deliver policy outcomes beyond price and service delivery, with contracts awarded to Indigenous businesses and corporations more than doubling since 2015.
However, questions are emerging about where the money is actually flowing and whether the intended transfer of opportunity is taking place.
Recent reporting by the ABC has sharpened these concerns through the experience of Wonnarua man Scott Franks, who became involved in a joint venture, Glad Indigenous, after being drawn in by the opportunity to start a business that had Indigenous employment and training at its heart.
“The goals of the Indigenous Procurement Policy is to ensure that Aboriginal prosperity grows in a society where we can design and build businesses so that we can look after our own people, our communities,” Franks told the news outlet.
“We would always be best placed to look after local communities and employ our people.”
However, he says his experience shows how easily that intent can be compromised when ownership and control mix.
Glad Indigenous – a joint venture between Glad Holdings and Scott Franks – was certified as majority Indigenous-owned and controlled, yet Franks told the ABC that he believes the non-Indigenous minority partner exercised greater influence over the business.
“In effect, the minority partner is controlling or taking control of the company,” he said.
“They’re restraining the voice, the actions and the control of the Aboriginal or the 51 percent shareholder.”
From a policy perspective, tightening ownership thresholds may seem like the solution, with the IPP requiring businesses to be at least 51 percent Indigenous-owned and controlled from 1 July 2026, up from the previous 50 percent threshold.
However, the current debate suggests the question is not about who owns the shares on paper, but who actually controls business decisions on a daily basis.
“We’re creating this new economic stolen generation…it comes back to this policy. It’s wrong. It’s not fit for purpose here,” Franks told the ABC.
“The government needs to accept [it’s] responsible here. Because they’ve allowed it to happen.”
For years, supplier diversity and social procurement schemes have relied on verification processes such as registration, certification, statutory declarations and ownership structures to establish whether a supplier qualifies.
The renewed black cladding debate is now suggesting that while these checks may be necessary, they may not be sufficient, as a supplier can satisfy requirements on paper while still being dependent on, controlled by or financially subordinate to a larger non-Indigenous partner.
“What we’re seeing across the sector is that people are taking more opportunities from Indigenous businesses, and it’s becoming more of a regular occurrence,” Sinead Singh, founder of the Indigenous business consultancy First Nation Start Up, told the ABC.
“We’re seeing a huge increase in these opportunities. We’re seeing an increase in more Indigenous businesses being established. But then what we’re not seeing is [more] ethical business deals.
“The real issue lies with individuals wanting to basically have a piece of a procurement opportunity that wasn’t made for their benefit.”
In this case, procurement teams across Australia may be recording policy successes even though the intended economic transfer never truly occurs, with the scale of the spend involved only heightening the concern.
Recent research has also sharpened the debate around where the money is actually going, with Australian National University academic Christian Eva finding that half of all contracts over $10,000 were awarded to just 11 organisations during the first eight years of the IPP.
In his Who defines success? A critical analysis of the Indigenous Procurement Policy article, Eva found that half of the total value of all contracts was awarded to only 18 businesses, with more than 40 percent of the number of contracts awarded to businesses based in Canberra.
Most importantly, under half (47 percent) of the total value of all contracts was awarded to businesses of between 50 percent and 51 percent Indigenous ownership, with an additional 27 percent awarded to businesses with unidentified Indigenous ownership status.
These figures suggest that even when Indigenous procurement targets are met, the distribution of benefits may be narrower and more concentrated than the headline numbers imply.
It also raises concerns about the growing reputational risk to procurement itself, one that increases the longer the gap between headline spend and genuine outcome goes unaddressed.
Adding to the controversy, former Indigenous Australians minister Ken Wyatt has warned that if black cladding continues, the policy should be reconsidered.
“If that is happening, then something needs to be done. Or alternatively, the government should shut the program down,” Wyatt told WA Today.
He pointed to cases in which Indigenous directors were paid salaries but had little participation in the company.
This, he said, is the hallmark of black cladding, with a genuine Aboriginal business partner, in his view, co-leading and involved in decision-making as any director would be under the Corporations Act.
Wyatt believes the new 51 percent threshold won’t solve the problem and rejects claims that few Indigenous people have the skills to sit on a corporate board or fully participate in business decisions.
“You can still enter into a joint venture where on paper you own 51 percent of the company, but an innovative person will find ways around ensuring non-Indigenous control remains,” he told WA Today.
“If you can’t find local people, then bring in a couple of executive directors who can work with community people to ensure that the company is managed according to their wishes, and within the context of the Commonwealth legislation.
“Then at some stage, that board should identify a couple of very bright individuals in that community and mentor them, letting them shadow in board meetings, teaching them how to read papers and then how to make decisions, how to ask questions.
“You cannot understate the importance of the Indigenous Procurement Policy in closing the gap for Aboriginal people and creating a wealth basis.
“If we can’t grow Indigenous companies in a way the IPP was intended, then shut the program down.”
Across Australia, governments and organisations are increasingly using procurement to advance policy goals, whether through Indigenous procurement, modern slavery compliance, decarbonisation or broader social value commitments.
In each of these areas, procurement is being asked to assess not only what a supplier says about itself, but also whether its operating model genuinely aligns with the intended outcome.
Black cladding, therefore, serves as a warning about what happens when a policy’s surface appears compliant while the underlying structure may remain unchanged.
