Kimberley Kitching (Victoria, Australian Labor Party) Share this | Hansard source

I rise to support the tabling of the Joint Select Committee on Government Procurement report, Buying into our future. I would like to take this opportunity to thank my colleague, the Senator for South Australia, Nick Xenophon, who served as chair of the committee and who I, as Deputy Chair, found very easy to work with, as well as the other members of the committee, those who gave evidence and those who made submissions. I'd particularly like to thank the committee secretariat, who are the vital backbone of every committee, so thank you Ms Ducker, Dr McClusky, Ms Leahy, Ms Lim and Ms Rowland.

The Australian government has a significant role to play as an investor and employer in Australian jobs and the Australian economy, which is why it's so important that all of our departments and agencies get procurement right. This review came about as the result of amendments to the Commonwealth Procurement Rules which were introduced in December last year and came into effect in March 2017. The committee was formed, and we've now handed down 16 recommendations, which are contained in the report. We received 53 submissions and held three public hearings across Melbourne and Canberra. Although it may sound rather dry, government procurement holds so much exciting potential for Australian industry. It can be a model procurer for other levels of government and, indeed, can have processes relevant for anyone procuring supplies and services.

To put some context around it, in 2015-16 Commonwealth agencies and departments reported entering into 70,338 contracts with a value of $56.9 billion. This direct expenditure is in addition to the funding provided by the Australian government to state and territory governments who procure goods and services on its behalf, predominantly in the form of infrastructure spending. Our biggest ticket items are vehicles—commercial, private and military; healthcare services; management; business and administrative services; building construction and maintenance services; and engineering, research and technology based services.

If I could refer to an inquiry currently being undertaken by another Senate committee, the Foreign Affairs, Defence and Trade References Committee, which is currently looking at the impact of Defence training activities and facilities on rural and regional communities, I would like to use this as an example of why the exemptions to the Commonwealth Procurement Rules contained in 'Appendix A: Exemptions from Division 2' allow flexibility and can enable the Commonwealth to be a more effective procurer. The example I'd like to use is the Department of Defence, who take their procurement policies and outcomes very seriously. As an example, Defence was awarded recently for being the No. 1 procurer supporting Aboriginal and Indigenous procurement in the Commonwealth. They use exemption 17, which is 'the procurement of goods and services from an SME with at least 50 per cent Indigenous ownership'. The Department of Defence have used this, particularly in northern Australia, to ensure that they are responsive to the communities that are there, particularly—obviously—the Indigenous communities. The reward for that has been better relationships in the North of Australia. The CPRs therefore have the flexibility contained in the exemptions, but the committee did have regard to whether they were the most appropriate and whether those exemptions were sufficiently broad.

Going back to whether the Commonwealth is an effective procurer, every time the Commonwealth spends taxpayer dollars, it provides a chance for a company to provide its services. These companies then employ people to carry out their work. In doing so, government procurement directly contributes to the health of the Australian economy. Government procurement, if done ethically, effectively and strategically, has the potential not only to create jobs and contribute to the economy but also to boost the skills of the Australian workforce, foster innovation and even create new industries. I will come back to that.

The Australian Labor tradition is of fiscal responsibility. Australians deserve to be sure and certain that the Commonwealth is spending Australians' money wisely and well. Additionally, government procurement has the potential to create what the CFMEU and the Textile, Clothing and Footwear Union of Australia have termed a 'multiplier effect', where government investment increases economic activity in downstream industries and communities and stimulates private investment in Australian industries.

Given the magnitude of Commonwealth spending on government procurement and the significance of this investment to the health of our economy, it was concerning to hear of some of the loopholes and inconsistencies which did exist and may well still exist under the new CPRs. The amendments to the CPRs were generally well received by those we heard from over the course of the review; however, there were significant concerns raised over the capacity for those amendments to be implemented effectively. Did clauses lack clarity? Did they leave too much up to the discretion of officials? Was there a culture of procurement focusing on lowest cost rather than genuine value for money? Was there a lack of accountability and transparency?

There was also a discussion regarding former procurement plans that some submitters believed had operated well. The ICT sustainability plan was mentioned by a number of submitters. As an example of that, Australian paper, for example, a business in the Latrobe Valley, invested in a $90 million de-inking and recycling plant. This is now the largest private employer in the Latrobe Valley, an area of Victoria which needs more investment whether that be private or public. It is also the largest exporter from the Port of Melbourne. It is Victoria's largest value-added processor of local wood. It generates $900 million of Australia's GDP. It supports 5,786 direct and flow-on jobs. It supports $494 million in household income. It generates $452 million in annual revenue to government, which equates to $1.88 for every ream of office paper manufactured. The Maryville operation supports 7.9 per cent of the Latrobe Valley's household income and 6.8 per cent of Latrobe's gross regional product. As you can see, good can come from government plans.

The committee's 16 recommendations make up a three-pronged approach which aims to address the implementation issues identified and ensure a consistent, transparent and effective application of the new rules. This involved the publication of comprehensive implementation guidelines which would explicitly address hither-to ambiguity terminology, such as the practical definition of economic benefit and the threshold for a business to be considered Australian.

As Senator Xenophon has already highlighted, we heard from South Australian footwear manufacturer Rossi Boots. He lost a Defence Materiel Organisation tender to a company which was based in Western Australia but manufactured their products in Indonesia. The South Australian Industry Advocate, which the committee looked at as a best practice model, reported that they considered where the majority of the workforce was based in assessing procurement, with 65 per cent of South Australian procurement going to companies with a predominantly South Australian workforce.

In addition to the publication of explicit implementation guidelines, we recommended that public service wide training be developed and undertaken to support and empower officials to interpret the rules as intended. The second prong, if you will, was the introduction of procurement related policies in order to safeguard the position of the Australian government as a model procurer, a role which has been overshadowed by doubt and the perceptions of the government as a procurer lacking skills and expertise. Again, we looked at another state-based best practice model in Victoria, where the Andrew's Labor government Project 10,000 policy has a major project skills guarantee where projects over a relatively low limit require at least 10 per cent of jobs on it to be set aside for engineering cadets, graduates or apprentices. As such a major investor in the Australian economy, the government has a responsibility to create policies which support and strengthen the procurement framework. The third and final element of the committee's recommendations involves a formation of an independent industry participation advocate modelled on the South Australian system, which would facilitate consideration and evaluation of the Australian economic benefit.

To summarise, the amended CPRs do provide a good working point for the structure and form of future government procurement in Australia. However, it was the opinion of the committee that more can be done in the implementation to safeguard standards of safety, human rights and ethics, sustainability and the environment, consistency and transparency, and a more effective evaluation of economic benefit. I recommend the report to the Senate and look forward to hearing the results of the inquiry, if established. I seek leave to continue my remarks.

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