Australian Small Business and Family Enterprise Ombudsman Bruce Billson has described the response of the Australian Government to his inquiry into the effectiveness of Commonwealth procurement rules for small businesses as “underwhelming” and a “missed opportunity to meaningfully improve the opportunity for competitive small and family businesses to be a supplier to the Commonwealth”.
The Ombudsman shared these sentiments in his final report detailing the Review of the implementation of the 1 July 2022 changes to the Commonwealth Procurement Rules.
“Winning a government contract can be life-changing for a small business,” Billson said. “But the overwhelming response from our consultations with Australia’s small-business community is that too many feel excluded from the chance to tender for government contracts because they are not part of the ‘in-crowd’.”
“Repeatedly, small suppliers told us the existing system is just not working as the process involved in bidding is too complicated, not conducive to competition, opaque, inefficient, and incongruent with private-sector processes,” Billson added.
The Ombudsman did not hide his frustration with the Government’s response.
“I was surprised that several of the substantive recommendations and proposed reforms that have not been embraced, were rejected without any discussion at all,” he said. “It is a disappointing response and at odds with the evidence, research and reference group input, and the clear view of those who made submissions about their direct experience trying to navigate the existing system.”
Recent figures found that the Australian Government procured goods and services worth $75 billion in 2022-23. But despite making up 97 per cent of all businesses, procurement from small business suppliers accounts for only $8 billion (11 per cent) by value.
The report outlined a package of reforms that would re-purpose existing funding and resources to produce an efficient and easy-to-navigate procurement framework.
One recommendation is the introduction of the concept of ‘retained economic value’ as the evaluation framework where ‘price’ alone can undermine future ‘Made in Australia’ objectives.
Billson also emphasised the importance of active stewardship in ensuring that the Australian Government operates as a model customer, secures better value for money for taxpayers, and achieves its ambition to provide more opportunities for Australian small businesses and First Nations businesses.
“What we need is real engagement and commitment to improving procurement outcomes, with support for officials and consistent monitoring of what actually occurs,” Billson said.
Similarly, an online survey of 112 operational staff indicated that their main frustrations are manoeuvring through policies when dealing with complex tender processes (71 per cent) and additional administrative burden (69 per cent). 78 per cent cited difficulty of identification as the most common barrier to them approaching or using an SME.
“One of our recommendations was to abolish the Procurement Coordinator function and replace it with a Procurement Commissioner, who would have independent processes for resolving complaints and the ability to synchronise and support procurements,” Billson said. “Why wouldn’t you create a Commissioner like occurs in so many other policy areas with focus, authority, drive and independence? The current Procurement Coordinator complaints function is neither timely nor consequential, with the Coordinator having no authority to compel an outcome. Only three complaints a year on average have been lodged since 2011 and the results of these complaints are not transparent.
“A small business is not looking for a belated, legal victory through a judicial review,” Billson stressed. “They want a fair opportunity to compete to be the supplier.”
The report also made recommendations aimed at improving Defence procurement, making AusTender fit for purpose, supporting procuring officials to identify and use small businesses, reforming government panels, boosting women-owned business opportunities, and improving payment times.
