A significant portion of Commonwealth procurement contracts have been granted exemptions from mandatory indigenous employment and business participation requirements, according to reports from ABC News.
As part of the Indigenous Procurement Policy (IPP), Mandatory Minimum Requirements (MMRs) apply to contracts worth over $7.5 million – in any of 19 nominated industries in Australia – meaning they must ensure at least three percent Indigenous employment or source from Indigenous-owned businesses, unless a valid exemption is granted.
The stated objective of the MMRs is to “ensure that Indigenous Australians gain skills and economic benefit from some of the larger pieces of work that the Commonwealth outsources, including in remote areas”.
However, auditors found 63 percent (or 1,475) of all applicable contracts recorded in the Indigenous Procurement Policy Reporting Solution (IPPRS) – worth $69.3 billion – have been labelled as “exempt” from these requirements since July 2016.
The number of exemptions has increased over time, according to the auditor, who noted that the reasons given for exemptions were often “unclear”.
The portfolios with the highest exemption rates were Foreign Affairs and Trade (90 percent), Agriculture, Fisheries and Forestry (86 percent), Education (82 percent) and Industry, Science and Resources (82 percent).
The Department of Defence accounted for more than $35 billion of exemptions, with over half of contracts marked under the category of ‘other’ as the reason for exemption.
Of all exempted contracts, 34 percent – valued at $30.2 billion – also listed their reason for exemption under the ‘other’ category, which has raised concerns about the transparency and justification behind many of the exemptions.
The highest use of the ‘other’ category was found in the portfolios of Defence (59 percent), Education (52 percent), Climate Change, Energy, the Environment and Water (47 percent) and Veterans’ Affairs (47 percent).
Auditors were apparently told by the responsible agency, the National Indigenous Australians Agency (NIAA), that contracts were sometimes labelled as exempt because they were “in practice non-compliant” with the Indigenous Procurement Policy.
Among the 870 contracts that saw Indigenous participation rules applied, only a fifth were assessed for compliance by the NIAA, with 28 percent found not to have complied.
“Entities’ use of the ‘other’ exemption category for non-compliant contracts obscures the degree of non-compliance with the MMRs and is not appropriate,” said the auditor.
“The NIAA does not provide complete guidance on the use of exemptions, or assurance over the legitimacy of exemptions. The NIAA has not considered the strategic implications of exemption usage for the achievement of policy objectives.”
It was found that the NIAA had not updated its contractor guidance on navigating Indigenous participation rules since July 2020, even though reporting requirements have since changed.
It also failed to implement an evaluation strategy for the MMRs that outlines an approach to measuring the impact of the policy on Aboriginal and Torres Strait Islander employment and business outcomes.
The NIAA has responded to the auditor, agreeing to amend its protocols, review the use of the ‘other’ exemption category and include specific guidance on the use of MMR exemptions in its guidance updates developed for non-corporate Commonwealth entities.
However, it does not believe it is appropriate for it to be “assuring the implementation of elements of the devolved Commonwealth procurement framework by Commonwealth entities”.
Instead, the NIAA maintains that it is the responsibility of each Commonwealth entity to ensure it meets its own obligations under Government legislation and guidance, including the Commonwealth procurement framework.
