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

I'm pleased to have this opportunity to comment on the government's response to the report of the Joint Select Committee on Government Procurement, and I move:

That the Senate take note of the document.

The report is titled, quite cleverly I thought, Buying into our future: review of amendments to the Commonwealth Procurement Rules, and it was presented in August. I spoke on the report at that time. The Minister for Finance, Senator Cormann, has now sent me, as deputy chair of the committee, the government's response to the report, and I thank him for that.

The committee held its hearings on this subject and prepared a report under the leadership of its then chair, former senator Nick Xenophon. As we know, Mr Xenophon has resigned from the Senate in order to return to South Australian politics. Although perhaps on this side of the chamber we may have had some differences in political outlook from Mr Xenophon, I do want to thank him for his enthusiastic chairing of this committee during the conduct of this inquiry and, in a wider sense, for his contribution to the Senate during the nine years he served here. I do wish him well, and maybe only a moderate amount of success in contesting the upcoming South Australian election.

The subject of this inquiry is a very serious one. As I noted in August speaking on the report, Commonwealth agencies and departments enter into more than 70,000 contracts every year, with a value that exceeded $57 billion in 2015-16. This direct expenditure is in addition to the funding provided by the Commonwealth to state and territory governments, who procure goods and services on its behalf predominantly in the form of infrastructure spending. Of this $57 billion, Defence is the largest single procurer, but it's quite a forward-looking and forward-thinking procurer. I want to raise one issue—and I note the Minister for Indigenous Affairs is in the chamber. Defence has significantly exceeded its portfolio target for contracts awarded to Indigenous suppliers by awarding 285 contracts totalling $141 million. Due to the Commonwealth's successful implementation of the Indigenous Procurement Policy portfolio targets, these have been brought forward from financial year 2019-20 to financial year 2016-17. So they have come forward quite significantly. For Defence, this equates to a revised portfolio target for this financial year of 420 contracts, and Defence is on track to achieve this.

To further support this, Defence is undertaking initiatives to enhance awareness of the Indigenous Procurement Policy requirements and is identifying opportunities where Indigenous businesses could be engaged and is working with Indigenous businesses to raise awareness of Defence procurement opportunities. The $57 billion and how this money is spent and where it is spent is obviously of great importance to the Australian economy, to Australian business and to Australian workers. We did have a large number of submissions from business, from unions and from economists, so it was actually quite a well fleshed out committee process and submission process. We were lucky that quite a lot of those submitters were able to give evidence as well to the committee.

Whatever free market economists may say, government spending is an important engine of the modern mixed economy, and government procurement is a key driver of economic growth and a supporter of employment, as we can see in the Indigenous Procurement Policy. That spending has a multiplier effect that boosts growth and employment throughout the economy. There are many industries that benefit greatly from government spending and government procurement. These include, as a simple example, vehicles—commercial, private and military. It also includes healthcare services, management, business and administrative services, building construction and maintenance services, and engineering, research and technology based services.

There was an interesting range of submissions from the Australian Workers' Union, which included the benefits of a local procurement policy for steel, for example. Obviously when the AWU are not busy dealing with the media on their front doorstep because they're being raided, they're actually quite a busy union trying to contribute to the thought leadership that goes on about procurement. These submissions are available on the committee's website, but they include, for example, the report State of steela report into the future of the Victorian steel industry, the impact on government procurement and the regional economic impacts of the closure of BlueScope Steel operations in Port Kembla, for example. Obviously local steel procurement in government construction projects is quite a large expenditure in itself.

I don't think government spending can be seen solely as a way of putting money into the economy. The money that government spends is taxpayers' money, and the government must ensure it gets value for the taxpayers. Nor can government procurement be used as a form of economic protectionism. Australia, as a member of the WTO, the World Trade Organization, has international obligations. Government purchasing must be conducted through a process of open and transparent tendering and not through opaque deals with favoured suppliers. The committee heard quite a lot of evidence about open tenders and limited tenders. I think how the government conducts purchasing and procurement in way that is open is now common ground among all political parties.

This does not mean, however, there is nothing Australian governments can do to see that government procurement has beneficial effects for the Australian economy and for Australian jobs. Work in negotiations with the government secured the inclusion of new, economic benefits criteria in the Commonwealth Procurement Rules. Senator Xenophon, as he was then, was quite assiduous in ensuring that the Commonwealth Procurement Rules were amended in this regard. This is a welcome step, but the implementation by the Public Service will be critical to maximising Australian jobs. In this context it is important that the Commonwealth be a leader and have robust procurement processes.

The joint inquiry covered a number of important issues, including safeguarding standards of safety, human rights and ethics, sustainability and environment, consistency and transparency and how to effectively evaluate economic benefit. For example, just on one of those issues, we heard about the importation of certain materials where some economies or jurisdictions allow very questionable work practices, whether they be the employment of children or of indentured servitude, really. We had a number of submissions in that regard. I think it's critical that there be a consistent, transparent and effective application of the new rules, and it's not clear whether the government's response will ensure this.

The committee's report made 16 recommendations. They made up a three-pronged approach which aimed to address the implementation issues identified and to ensure a consistent, transparent, and effective application of the new rules. This approach would involve the publication of comprehensive implementation guidelines which would explicitly address hitherto ambiguous terminology, such as the practical definition of the term 'economic benefit'. It became obvious during the hearings that economic benefit had different meanings for different people. The definition of a threshold for a business to be considered Australian would also need to be considered.

Of the 16 recommendations, the government has supported only one—that is, that the procurement guidelines specifically require that, for all procurements over $4 million, a record be created including the reason for the tender approach chosen, the reason for the selection of the preferred tenderer and details of what economic benefit derives from the chosen tender. Another four recommendations are supported by the government in principle, and all of these, I have to say, deal with fairly minor matters, such as the training of the Public Service and developing a process for allowing the consideration of supplier feedback to the tender process. Another recommendation is supported in part, and this deals with the economic benefit criteria in the Commonwealth Procurement Rules. The government response notes that, for procurements of over $20 million, Australian industry participation plans are already required by successful tenderers. There are two recommendations simply noted—

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Kitching, your time has expired.

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

I seek leave to continue my remarks later.

Leave granted; debate adjourned.