Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Hansard source

I commend Senator Kakoschke-Moore for her speech on Commonwealth procurement. I am very pleased that she has been able to bring her perspective to the Senate on these matters. I share her concerns about the development of procurement policies in this country. These matters are of such concern that we actually took to the last election a series of revised proposals with regard to procurement issues, particularly relating to Australian industry capability.

I note the contrast—in terms of the dynamics of Australian politics—between the parties on this issue. Those that say there is no difference between the Labor Party and the conservative parties in this country should look to this area, because it highlights the very substantial difference of approach. The Prime Minister, during the last election, spoke at length about the prospect of jobs and growth. It is a less audible proposition since that time. And of course we saw in recent days in this chamber the discussion about the purchase of Australian Army uniforms, through a contract entered into just last year by this government, when the Minister for Defence was the senior minister in the portfolio. The contract was awarded to a company that was manufacturing in China. The government announced the Australian dress uniform with great fanfare, with a display on this issue in Paris. It did so in a manner which immediately aroused my concern, because there was no mention of where this uniform was being made—this brand-new uniform the government said was such an important improvement.

When I pursued this matter with the minister, she said this was a question of value for money. It was an answer we have heard all too often in this place and it fundamentally highlights a misunderstanding of what that principle involves, because it is not just a question of the price of the uniform; it is a question of what 'value for money' actually means in these circumstances. For taxpayers to receive value for money in the awarding of procurement contracts, we should take into account the whole-of-life costs of a contract. That is the Labor Party's position. The whole-of-life costs need to be considered here. It is not simply a matter of the immediate cost of a product when a contract is awarded to a low-wage offshore manufacturer. Domestic manufacturers employ Australians, who pay Australian taxes and spend their wages in Australian shops and on other Australian products. They contribute to their local communities in a myriad of ways. They buy homes, they pay rates and they send their kids to Australian schools.

By doing these jobs, Australian workers maintain and extend the capability of Australian industry, they increase the capacity of the enterprises in which they work to tender for other contracts and they make Australian businesses more competitive in global markets. In doing these things, workers and the businesses that employ them are able to contribute to the growth of the Australian economy. The purchase of Chinese products for the Australian Army, for our soldiers, strikes me to be in contravention of those principles. It is a position which essentially sees the offshoring of Australian jobs. A suggestion by the minister that this could be defended on the basis of value for money is risible, because it delivers jobs and growth not to Australia but to another country.

The minister asserted it was all about 'value for money', as I say. It would appear that the government did not even consider exemptions to ensure Australian production, as the Labor government did when it came to the combat uniform and the slouch hat. And it strikes me that this is a case that demonstrates a negligence, that these matters are not put forward, to ensure that there is a national interest test that applies.

The problem here is that it is a habit of thought that develops in procurement officers, who pass it on to others, and it goes up the chain, to the point where nobody actually takes notice of the consequences of procurement, particularly for our defence products—and we are talking here about the uniforms for our soldiers—in a proposition which sends the production of these offshore. This is described as 'value for money'. It is a perverse undermining of the meaning of that term.

It is stated, 'Well of course those are our obligations under international trade treaties.' That is not the case. Most of our trade agreements have explicit exemptions for defence and for small business. The government has the capacity, if it chooses to exercise it, to ensure that procurement policy is actually in Australia's interests and that that becomes a crucial element of our industry policy in this country.

I note that the motion points out that Commonwealth procurement is in the range of $59 billion—and that is in just one year. With an economy with a diverse industrial base that is capable of generating high-skill, high-wage jobs, the question of where the Commonwealth places its contracts is critical to the industrial development of the nation. And, in an economy which is seeing increasing casualisation of employment and increasing numbers of people dependent upon the vagaries of the commodity market, is it any wonder that Australians are so concerned when Australian taxpayers' dollars for the defence industries are being used in this way?

So, despite all the talk about 'innovation' and 'creativity', which of course marked the transfer between Mr Abbott and Mr Turnbull—a point that we acknowledge this week—the preference, in fact, when it comes to procurement, is not for a creative, innovative or agile Australia. It is for an Australia with narrow, blinkered vision—a little Australia, in which the government refuses to use its purchasing power to build the economic capabilities of the nation.

This is a clear case of ideology prevailing over the reality of economics as ordinary Australians experience it. So it is vital that the procurement guidelines for our government agencies prevent that kind of blinkered thinking when it comes to the determination of the spending of public money on public contracts. Agencies should be required, of course, to take into account the proper use of public money at all times. But value for money involves a process that ensures that we get genuine value for the use of the Australian dollar. We cannot have money spent on inferior products, and higher maintenance and replacement costs. The procurement guidelines need to ensure that agencies are required to consider all direct and indirect costs—the whole-of-life costs of products.

Let me quote directly from the Labor Party's National platform on this. It says that:

Labor will adhere to a national interest test for government procurement policy by considering whole-of-life costs, rather than purchase prices alone, and ensure procurement policies take into account the direct and indirect economic benefits of buying locally, including estimated taxation revenues, employment opportunities and industrial capability.

That is the kind of assessment we need to apply when it comes to issues like the ADF uniform.

Workers in Bendigo at Australian Defence Apparel were told by this minister that the new defence industry strategy would give particular emphasis to local capabilities. This is when she knew that the contract had already been issued to produce the uniforms not in that factory, which of course is where they normally would have been produced, but in China, and that that decision had been taken a year before she appeared before those workers. That was kept secret, and was recently revealed only because the government sought to make a show in Paris about a new uniform.

The Australian government needs to ensure that we are able to develop capabilities, whether those be in the textile industry, the steel industry, or electronics. Wherever it is necessary for us to procure products and where there is a local capability that is competitively priced, there ought to be an emphasis in the Australian government procurement arrangements, as we say, on ensuring that Australian industry capability is actually advanced.

We say there needs to be a national procurement coordinator to oversee the Commonwealth procurement practices. We say that they must stipulate that contracts worth $20 million or more should be subject to an Australian Industry Participation plan. In fact, at the last election, we proposed that that be reduced to $10 million. The measures were intended to increase the opportunity for small and medium-sized enterprises to supply goods and services for the Australian government. We also say that we must be able to ensure that tender specifications are not written in such a way as to actually exclude Australian suppliers.

This is not about shielding Australian firms from competitive pressures. On the contrary: it is about ensuring that we do get some competitive pressures put into the system so that we can build the capabilities in Australia and ensure that the competitive process is fair. It is designed not to exclude people but to include people. Of course it is not a matter of standing aside and letting the market rip. We know that if you apply that policy the market will determine an outcome all right, but it will not be in Australia's favour.

That is why Labor in a government had the policy Buy Australian at Home and Abroad—a policy with a suite of measures to ensure that Australian producers got a fair go when it came to supporting domestic work through government contracts. It included such things as supplier advocates for major projects. It ensured that we properly used the Industry Capability Network so that we knew what Australia could do and the proponents for contracts understood that—this is not just in the public sector but in the private sector as well—and companies that were trying to build products for use in this country knew what capabilities this country could provide.

We also had improvements in the Enhanced Project By-Law Scheme so that, if people wanted a tariff concession when importing material for a project in Australia, they had to have undertaken a proper study of what work could be done locally. We also advocated that there needed to be proper management assistance by building management capabilities through Enterprise Connect. We argued that supplier advocates across a range of sectors needed to be put in place to assist small- and medium-sized enterprises to secure new contracts. Frankly, in this world arrangements are put in place that make it very difficult for local suppliers to bid for work. There needs to be assistance provided to local companies so that they can be properly trained and put in the right position to tender for work on a competitive basis.

Under our $1 billion Plan for Australian Jobs, which we introduced in 2013, these measures, which were intended to promote Australian industry participation, were strengthened. We are continually working on these principles. This area is a bit like tax avoidance—no sooner do you put in place propositions to improve the integrity of the administrative arrangements and some smartie comes along and finds a way to get around them. So you cannot stand still. Programs like this need to be adjusted to meet changes in economic conditions. Previous Australian industry participation was set at a time when there were much higher rates of private investment in mining and resource projects. That is why we said at the last election the change in circumstances means that the threshold for private projects needs to be lowered so that we can put in place support arrangements so a project of $250 million rather than $500 million can have these measures applied. That is why we said that, in the public sector, the threshold need to be lowered from $20 million to $10 million. It is an essential strategy and it requires governments to change attitudes about not only what is the role of government when it comes to the spending of public money on government contracts but also what is the role of government in ensuring that large international firms who want to build in this country the very large projects that we have seen in recent times use local suppliers where they are available and where they have the capability to perform work properly.

This is a government that says, basically, let the market roll. They have a hands-off attitude. They take the view that if we have to get a defence uniform made in China that is no big deal. They take the view that if the jobs are lost in Bendigo, that is not a problem. Anyone who looks at what is happening with full-time employment in this country, particularly in manufacturing, knows how foolhardy that attitude is. The fact that we cannot even put uniforms made in Australia on the backs of members of our defence forces strikes me as quite bizarre. The government's attitude is that that circumstances is okay. The government has the capacity to say, 'We want to ensure proper prices, competitive prices, whole of life costings, so these projects can be built in Australia.' The idea that we cannot even make in Australia a uniform for our soldiers demonstrates the foolhardy attitude of this government—that the free market is the solution to our problems. We will rue the day over this attitude. If it is good enough to have our combat uniforms made here, it is good enough to ensure that the uniforms that our soldiers wear in other circumstances are made here as well. It is particularly serious when it comes to the question of ensuring future competitive tenders—you undermine the capacity of our industry to compete by making sure the work goes offshore so that when the next contract comes along the firm is not there to compete. Of course, then we are told, 'There is no-one here who can do the work.' There are a whole series of other contracts, for uniforms in the Navy and the Air Force. I will be pursuing at estimates how it is that this contract has gone offshore, under what circumstances and why there was not a national interest test put in place to ensure that we keep the industrial capabilities so important to this country's future in Australia.