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Federal government says it will ‘open the door’ for SME suppliers following damning report

Small Suppliers

The highly anticipated Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Procurement Inquiry Final Report was released on 1st May, providing 11 recommendations to improve outcomes for small businesses who wish to tender for federal government contracts.

According to the report, the federal government procured goods and services worth $75 billion in 2022-23. Small suppliers accounted for only $8 billion (11 percent) by value, despite making up 97 percent of all businesses.

Australian Small Business and Family Enterprise Ombudsman Bruce Billson said, “While the government is exceeding its 20 percent procurement target for small and medium-sized enterprises (SMEs), enabling and encouraging more smaller business to compete for government contracts will help achieve better value for money for taxpayers and advance the Buy Australian Plan, including its ambition to grow First Nations businesses.”

“During the course of our Inquiry, small business told us that the Commonwealth procurement framework is too hard to navigate and often not worth the investment of their time and resources,” he added.

Small businesses without experience in selling to government struggle to understand what they need to do, says the report, with suppliers claiming that officials often appear to fail to value their time or cash-flow constraints, or provide timely or transparent responses.

“We have heard cases of officials giving suppliers less than 10 days to submit a tender (contrary to the CPRs), not responding to submissions until months have passed (or not at all) and not receiving any explanation, encouragement or advice when unsuccessful,” it said.

“The Department of Industry, Science and Resources observed that some businesses have reported that it sometimes seems to them as though they were invited to tender solely for government to be able to say they made procurement activities accessible to underrepresented groups.”

Calling this behaviour ‘infuriating and demoralising’ for small business owners, the report revealed that small suppliers are reluctant to use formal and lengthy grievance processes as the complainant is effectively referred back to the entity that managed the procurement, which is why only three complaints have been received per year, on average, since 2011.

The ASBFEO’s recommendations include establishing an active and independent procurement commissioner, supporting procurement officials, making AusTender fit-for-purpose, and decoding rules and guidance.

It also suggests ensuring prompt payment of subcontractors participating in procurement, developing quantifiable and public indicators to measure the performance and effectiveness of the procurement system, and making ‘panels’ more transparent, accountable and conducive to competition.

In response to the report, Finance Minister Katy Gallagher said, “SMEs are the powerhouse of this nation. We want to ensure the government is a buyer of choice for SMEs and secures value for money for Australians.

“We’re committed to supporting SMEs participate in government procurement and our response to ASBFEO’s inquiry reaffirms that commitment.”

Minister for Small Business Julie Collins added, “Procurement reforms are just one way that the government is supporting small businesses through competitive and fair market conduct.

“Other government initiatives and reforms include improving payment times for small businesses, removing unfair contract terms, and establishing a small business designated complaints function.”

The government responded positively to all but one of the recommendations, saying it ‘does not agree’ to abolish the procurement coordinator function.

Read the full report and government response here.

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