Kate Lundy (ACT, Australian Labor Party) Share this | Hansard source

The Labor Party has a strong and proud record of supporting Australian businesses, and this has extended to the supporting of Australian businesses, in particular small- to medium-enterprises, through procurement policy. This support has been reflected through the genuine initiatives that Labor governments have established to support Australian business. For example, in 2013 the Labor government acknowledged certain barriers faced by Australian suppliers and established the requirement for Australian industry participation plans. The AIP plans require bidders for major tenders exceeding $20 million to develop plans that set out how they will offer opportunities for capable Australian suppliers of goods and services. This approach sought to assist Australian industry to gain a foothold in major projects and tenders by encouraging industry to innovate, develop competitive capability and take advantage of investment opportunities.

The Australian industry participation plans also acknowledge that in many cases the supply chains involving very large corporations often were preset, and therefore served as a systemic barrier for Australian businesses seeking work in that particular sector. It was a very tangible response to an entrenched problem, and on the larger scale reflected a lot of the barriers that small businesses face in other areas of procurement.

The Australian industry participation plans in that regard are supported by the supplier advocates program. This was also established by the Labor government and was a direct response to the issue of systemic barriers facing small Australian companies seeking to compete in a very competitive procurement environment. Supplier advocates play a strategic role and provide leadership to improve the capability of Australian industry and suppliers to win project work—not just in government procurement contracts but also in large private sector contracts. Work of the supplier advocates could include coordinating opportunities for companies to showcase their capabilities and products to government, and promoting supply chain activity.

I am most familiar with the information and communications technology supplier advocate. For many years, particularly during the previous coalition government under Prime Minister Howard, there were a series of moves early in the period of that government—and, yes, we are talking some 16 to 18 years ago now—that undid the systems that were in place to promote SME involvement in ICT government contracts. Looking at the role of the IT Supplier Advocate now, the very fine work of Mr Don Easter, who has performed the role admirably, there have been a number of challenges to take on—in particular, mitigating the risk that is perceived to be associated with engaging an SME in the ICT space. Indeed, risk management and helping small businesses understand risk management in the context of tendering for government contracts has been a key part of his work.

Another area that presented a systemic blockage for companies was the level of professional indemnity insurance and public liability insurance. Some time ago it was evident that often these insurances not only were required far beyond the value of the contract but were not commensurate with the work being performed. Thanks to Don's work and the advocacy of the Australian Information Industries Association and others, these have been brought more into line so that the requirements for the appropriate levels of insurance, both professional indemnity and public liability, reflect the risk associated with the given contract.

Another area of systemic challenge, I suppose you would call it, for small businesses was in the scope and scale of the tender documentation. In many cases, particularly for new entrants to the government procurement market, the scope and scale of the tender documents again went well beyond the work required. The effect was that companies tendering for work had to have a far broader capability than was required to respond to a particular tender that may in some cases be quite narrow. This had the effect of ensuring that all the work was funnelled towards the companies that were already in that marketplace. Many Australian companies, particularly in the ICT sector, who were new and innovative, doing things in a very different way and challenging the standard practices perhaps with some very economic solutions, often found it very difficult to compete as their tenders were not able to be compared on the basis of apples with apples. Because they did not fulfil the scope and scale preconditions, they found themselves excluded from the process.

Many of these challenges require constant attention and many require the education of both the small businesses themselves but, equally, the departments and agencies seeking to procure innovative ICT solutions. I should add here that these issues are not peculiar to ICT. The characteristics and the nature of these challenges extend in one way or the other, or in one characteristic or another, to many of our small business sectors seeking to get that elusive government work.

Before I go on to other issues relating specifically to procurement I think it is worthwhile underscoring why procurement is so important to many Australian companies. Australian companies see a government contract as an export credential. Indeed, because the Australian government is seen as a high-standard procurer, that means that an Australian company having a contract with the Australian government is seen as an enormously important credential when that company is seeking work internationally. So for many years now I have talked about government contracts as being an export credential for many of our small businesses. Often the first question an ICT company is asked overseas is: do you have any of your own government's contracts? If the answer is yes then that establishes that company in a good position. But if the answer is no then the question that is always asked is: why isn't your own government trusting the goods and services that you are supplying? In this way the importance of fair and equitable access to the Australian government procurement market is elevated if we are serious about supporting our small businesses in being able to operate and participate in the international marketplace—but I digress.

The Labor government also acted in the interests of emerging business by making exemptions to mandatory requirements of the Commonwealth Procurement Guidelines to allow direct sourcing from small to medium enterprises that are either Indigenous owned or that primarily exist to provide the services to people with a disability. The Labor government announced during the election campaign that we would move to ensure all Commonwealth government fleets were 100 per cent Australian owned. This strong and proud record of supporting Australian businesses while in government plays out in the latest statistics provided by the Department of Finance for 2012-13, which show that over 82 per cent or $32 billion out of over $39 billion in Australian government contracts for goods and services were Australian sourced or delivered.

I would now like to speak about the Commonwealth procurement policy itself. The Australian government Procurement Framework operates on a non-discriminatory basis and, as we have already heard, has achieving value for money as the core rule. Indeed, all potential suppliers are supposed to be treated equitably and not discriminated against due to size, ownership or location. The procurement policy aims to strike a sensible balance between non-discriminatory procurement principles and strong support for Australian businesses to supply goods and services to government.

The issue of Australian made goods and services and government procurement is, as we have also heard from Senator Madigan, the subject of a reference currently being heard by the Senate Finance and Public Administration References Committee, which is due to report on 30 June 2014. I am very proud to chair that committee and I would like to reflect a little on a couple of the submissions that have been presented to that committee, as it is of relevance to the motion we have before us.

The paper industry is a significant industry and my colleagues have rightly included reference directly to it in the motion we are discussing today, given the significance to government procurement and that industry. As a brief aside, I note that, according to evidence presented to the Senate references inquiry, the Australian government annually purchases up to 6½ thousand tonnes, or $13 million worth of copy paper. Additionally, by some estimates, there is a further 50,000 to 60,000 tonnes, or $117 million worth, of paper used by government agencies in external printing and publications. The evidence also suggests that, by the best estimates, the Australian government uses approximately $100 million worth of tissue paper per annum.

It is from this lens of the paper industry where we perhaps see the clear interaction of government procurement policy per se with other elements of government policy. I would like to evoke two in particular: the ICT Sustainability Plan and the National Waste Policy. The procurement rules refer to issues of environmental sustainability and other non-financial considerations in relation to the concept of 'value for money'. The National Waste Policy, for example, aims to avoid the generation of waste; reduce the amount of waste for disposal; manage waste as a resource; and ensure that waste disposal, recovery and reuse is undertaken in an environmentally sound manner. The ICT Sustainability Plan, for example, mandates a minimum of 50 per cent recycled copy paper for Financial Management Act agencies on the basis of improved waste management outcomes. Australian Paper noted in their submission to the current inquiry:

Imported recycled paper which only delivers waste reduction outcomes for the country from which it originates cannot deliver the same benefits as locally made recycled paper.

And:

The local landfill benefits of Australian made recycled paper will deliver enhanced environmental benefits for Australia over imported recycled papers which also have a much larger transport footprint based on shipping from their country of origin.

On the basis of these complementary policies requiring procurement decisions to be framed around inherent environmental and other non-financial considerations, the committee heard from Australian Paper that, in their view, the policies and frameworks in place that could automatically promote the use of Australian made goods and services, particularly paper, in government agencies specifically could be achieved if the:

Commonwealth Government more broadly assess and enforce recognition of the economic, social and environmental values of all aspects of the Government's paper and printing services procurement decisions ...

The issue in their view was one of implementation. The Australian Forests Products Association further noted:

… there is a lack of robust risk assessment tools and due diligence for the adequate consideration of sustainability issues.

This point of lack of transparency in procurement was also acknowledged in evidence provided to the committee by the Australian National Audit Office. It is clear that guidelines are required to help guide all officials who are making procurement decisions and an enforcement role is needed to make sure the policies in place are applied appropriately. We heard evidence presented that there are limits to procurement in relation to international obligations from free-trade agreements, including in particular the Australia-United States Free Trade Agreement. These agreements include obligations for the government to open our procurement market to international suppliers and that international procurement markets are open to Australian suppliers. These obligations also limit the ability to preference local suppliers in procurement.

So we operate in a framework informed by international constraints. However, we do have a framework that still has resulted in significant support for Australian businesses in Commonwealth procurement. So we have a framework that we know functions well. The significance of the complaint being put forward by Australian Paper, in my mind at least, is in part that these associated policies—that is, the National Waste Policy and the ICT Sustainability Plan, are not complied with equal or appropriate weight in informing the decisions guided by the procurement rules. It is these issues which inform our ongoing consideration in our very important inquiry into Commonwealth procurement procedures.