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Small business ombudsman calls government’s procurement report response ‘underwhelming’

Government Report Response

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson has called the government’s response to the ASBFEO Procurement Inquiry Final Report ‘underwhelming’.

Billson said the government had missed an opportunity to meaningfully improve the opportunity for competitive small and family businesses to be a supplier to the Commonwealth.

“The government’s initial response to our inquiry is underwhelming and I was surprised that several of the substantive recommendations and proposed reforms that have not been embraced were rejected without any discussion at all,” he said.

“It is a disappointing response and at odds with the evidence, research and reference group input, and the clear view of those who made submissions about their direct experience trying to navigate the existing system.”

The ASBFEO made 11 recommendations within its highly-anticipated report, as reported last week by PASA, including establishing an active and independent procurement commissioner, making AusTender fit-for-purpose, and decoding rules and guidance.

It also suggested improving defence procurement, supporting procuring officials to identify and use small businesses, reforming government panels, boosting women-owned business opportunities and improving payment times.

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.

In its response, the government said its Buy Australian Plan committed to ‘opening the door’ to more government work for SMEs by simplifying procurement, while it disagreed to abolish the procurement coordinator function as recommended by the ASBFEO.

Commenting on the difficulties faced by small suppliers, Billson said winning a government contract can be life-changing for a small business.

“But the overwhelming response from our consultations with Australia’s small business community is that too many feel excluded from the chance to tender for government contracts because they are not part of the in-crowd,” he said.

“Repeatedly, small suppliers told us the existing system is just not working as the process involved in bidding is too complicated, not conducive to competition, opaque, inefficient and incongruent with private-sector processes.

“This is why there has been a bipartisan view and requests from successive governments for me to independently examine how procurement rules and processes are working for existing and potential small business suppliers and what improvement could be made.”

Billson said there will be great disappointment by those participating in the inquiry process, who were hopeful for substantial improvement in the way the Commonwealth deals with current and prospective small business suppliers.

“It’s abundantly clear that the existing system isn’t working as intended for many small businesses and the steps already taken have not shifted the dial to achieve the government’s own stated objectives,” he added.

“We were encouraged to be bold and bring fresh thinking and new ideas to this long-standing area of contention and frustration for small business.

“We consulted extensively with government departments and agencies throughout the inquiry and in developing the recommendations.”

Billson noted that it was encouraging to see the government concur with recommendations to better support procurement officials and advance women’s entrepreneurship, alongside agreements in part or in principle to many other recommendations.

However, he said dismissing considered and evidence-based reforms as potentially expensive, inefficient or duplicative without any meaningful examination to justify retaining current and known-to-be ineffective and perfunctory arrangements, is at odds with the stated ambition of successive governments to improve Commonwealth procurement for small business suppliers.

“Introducing ‘retained economic value’ as the evaluation framework where ‘price’ alone can undermine ‘Future Made in Australia’ objectives, is a crucial recommendation that is too important to dismiss,” Billson said.

“Active stewardship is essential to ensuring that the Australian government operates as a model customer, secures better value for money for taxpayers, and achieves its ambition to provide more opportunities for Australian small businesses and First Nations businesses.

“The extent of the challenge is revealed by analysis by the e61 Institute, which found that Commonwealth procurement has increasingly favoured large and existing suppliers since 2014.

“What we need is real engagement and commitment to improving procurement outcomes, with support for officials and consistent monitoring of what actually occurs.”

The ASBFEO recommended abolishing the procurement coordinator function and replacing it with a procurement commissioner, who would have independent processes for resolving complaints and the ability to synchronise and support procurements.

Questioning the government’s lack of willingness to accept this recommendation, Billson said “Why wouldn’t you create a commissioner like occurs in so many other policy areas with focus, authority, drive and independence?”

“The current procurement coordinator complaints function is neither timely nor consequential, with the coordinator having no authority to compel an outcome. Only three complaints a year on average have been lodged since 2011 and the results of these complaints are not transparent.

“During our inquiry, no small business supplier was prepared to go on record because of fear of retribution.

“Let’s be clear. A small business is not looking for a belated, legal victory through a judicial review. That brings no comfort. They want a fair opportunity to compete to be the supplier,” he added.

The government’s decision to consider the potential for use of a ‘sourcing strategy checklist’ and ‘assessment outcomes checklist’ as part of ongoing resource development was, however, said to be ‘encouraging’.

“Capturing broader value-for-money considerations through these checklists would encourage more consistency in procurement deliberations across departments and more transparent and comparable reporting within government,” Billson said.

“Further, employing a ‘retained economic benefit’ approach would be a game changer driving ‘Buy Australian’ ambitions and allow the Government to quantify (without prescribing) the contributions of procurements, in terms of value of expenditure on goods and services supplied by domestic firms, labour provided by residents and First Nations Australians, and investment in capital and social infrastructure.”

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