Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Joint Select Committee on Government Procurement, I present the committee's report entitled Buying into our future: review of amendments to the Commonwealth Procurement Rules.

Report made a parliamentary paper in accordance with standing order 39(e).

by leave—The Joint Select Committee on Government Procurement was established on 1 December 2016 to inquire into the Commonwealth Procurement Framework—in particular, the amended Commonwealth Procurement Rules. Amendments to the CPRs came into effect on 1 March 2017. The aim of the amendments is to make sure that the full benefits of Commonwealth procurement flow into the Australian economy. It will also ensure that Australian regulations and standards are upheld. The amendments are designed to mitigate the disadvantage faced by Australian suppliers accessing government procurement opportunities.

The evidence received by the committee showed overall support for the amendments to the CPRs. However, there are concerns over effective implementation. Many of the new clauses lack clarity or leave too much to the discretion of officials. The committee has made suggestions to tighten up the clauses by refining and expanding the terms. The committee heard about several problems with the implementation of the previous CPRs, including: a procurement culture that focused on lowest cost rather than value for money; a lack of accountability and transparency; and unacceptable risk-shifting. Also, there is a perception that due to a lack of technical skill and expertise the government has become an uninformed purchaser. The absence of a requirement to comply with Australian standards is considered another deficiency.

There are several flow-on risks that may be detrimental to Australia more broadly. These include: the loss of a skilled workforce; safety; economic and environmental risks; and potential wastage. Of real concern to the committee is the possibility that the procurement system itself may present barriers for domestic businesses attempting to take advantage of procurement opportunities.

The committee considers that comprehensive guidelines are essential to address the current deficiencies and to ensure successful implementation of the new clauses. New guidelines are required to remove the discretionary nature of decision-making and replace it with specific standards that must be met. The guidelines should also mandate the evidence required from tenderers. In particular, an explicit definition is required for 'economic benefit' and a weighting system to properly assess suppliers' claims. Additionally, the committee considers that procurement-connected policies are needed to provide guidance for environmental sustainability and human rights. These guidelines and policies should be supplemented with a Public Service-wide training program. Improved record-keeping is essential to address the lack of transparency and accountability in the current system.

Contract management is another area that the committee would like to see better utilised to control implementation and maximise procurement and contract outcomes. Good contract management ensures that tenderers meet their obligations and responsibilities. If the amended CPRs are to encourage Australian suppliers, the Australian government must not enter into international trade agreements which diminish the benefits that underpin these amendments. Additionally, procurement officers must be better informed of the exemptions currently available in international agreements to preference domestic businesses. The committee was made aware of a range of best-practice models available for Australia to draw on and improve our procurement system.

The committee believes that a three-pronged approach is necessary to address the implementation issues identified in this report and to ensure that new rules are applied consistently, transparently and to maximum effect. We would like to see:

Accordingly, the committee has made 16 recommendations to that effect. On behalf of the committee, I commend the report to the House.

Tony Zappia (Makin, Australian Labor Party, Shadow Parliamentary Secretary for Manufacturing) Share this | Link to this | Hansard source

by leave—I also make some remarks on the report of the Joint Select Committee on Government Procurement. Smart use of procurement policy is a subject I have spoken about on past occasions. Regrettably, it's a matter about which the Turnbull government has taken little interest, and the government had to be dragged reluctantly into the committee inquiry. Whilst responsibility for government policy ultimately rests with the government I don't excuse government bureaucrats, who have at times have taken the lazy option in overseeing government procurement rather than using some initiative of their own and maximising taxpayer return for the dollars spent.

Most of the committee's recommendations should have and could have been initiated by bureaucrats. Each year the federal government spends about $58 billion on procurement of goods and services. It is estimated that about the same amount is spent by state and local governments throughout Australia, which combined means that across the three levels of government over $100 billion of procurement is made annually. Procurement does matter, and communities understand the benefits that flow when government funds are spent locally. Of course, some of those funds are already spent locally, but the government and, indeed, all governments could do better. One only has to look at the effect the coalition submarine contract had on South Australian politics and, ultimately, national politics to understand just how well government procurement is understood by the Australian people.

Importantly, good policy can be used to achieve several other important objectives. Firstly, government procurement can be used to develop and sustain local economies. The economic flow-on in local economies, including the development of skills, securing apprenticeships, attracting new investments and investments made in research and development are all made possible when government contracts for which payment is assured are made. Secondly, government procurement policy can be used to ensure that workers, whether they are in Australia or in overseas factories, are fairly treated and paid. It should be a condition of government procurement that contracts will only be awarded to entities that do not exploit their workers and, in particular, do not use slave labour. Thirdly, government procurement should ensure products used in government contracts comply with Australian building and safety standards. It is clear that in the past product compliance was either not demanded or not checked. Fourthly, procurement policy can be used effectively to achieve environmental objectives.

The ability to pursue those objectives and adopt relevant policies should therefore not be traded away in unilateral or multilateral trade agreements. Wrongly referred to as 'free trade' agreements, such agreements are often neither fair nor free because they impose severe limitations on government procurement. It was notable from the inquiry that whilst in the past bureaucrat advice to government was that favouring Australian suppliers in government procurement would cause Australia to breach trade agreements to which Australia was a signatory, it now seems that there are ways of adopting smart procurement policy without breaching those same agreements.

The last matter I comment on is the notion of value for money. It's a broad term, and one that is difficult to measure when value implies so much more than up-front costs. It should, indeed, include whole-of-life cost, total tax return to government, welfare costs that may be saved, indirect benefit to other local industries and skills training. When all are taken into account, it would be difficult to go past local procurement. Other governments know that, and that is why they find ways of supporting their local economies—albeit that they too are signatories to trade agreements.

For example, in the US, the Federal Acquisitions Regulation, the Buy American Act, the Berry Amendment and the presidential executive orders all have the effect of maximising local procurement. Canada also has a proactive procurement policy for its government. Indeed, I note that both the South Australian and Victorian state governments in recent years have also adopted very proactive local procurement policies.

As the member for Moore has quite rightly pointed out, there are 16 recommendations to the committee's report and those recommendations were unanimously adopted. Recommendation 16 states:

The committee recommends that a parliamentary inquiry is established by March 2018 to evaluate the implementation process and report to the parliament by the end of 2018.

It is now up to the Turnbull government to act in the national interest and implement the 16 unanimous recommendations of the committee. I commend the committee's report to the House.