Public procurement rules ensure that SMEs have access to government contracts

Finance and Public Services Minister Katy Gallagher is preparing to start the new financial year with a new crackdown on established major suppliers, contractors and consultancies that benefit from the government’s $70 billion in annual procurement spending, tweaking a number of targets and thresholds in the hope that less companies can finally compete with large incumbents.

Updates to the Community Procurement Rules (CPR), due to come into force on July 1, 2024, presented by Gallagher on Monday reveal that the Government will increase the small business procurement target for contracts under £1 billion from 20% to 25%. dollars , while the small business target for transactions under $20 million increases from 35% to 40%.

The Department of Finance has also published a full list of changes to Commonwealth procurement rules from July 1.

A highlight of the July 1 CPR changes is the inclusion of a new, mandatory Supplier Code of Conduct, which, among other things, requires suppliers to “mimic” Australian Public Service Values ​​for government coins and generally prohibits former Australian Public Service violators of the Code of Conduct or others with a disadvantaged behalf returning as consultants or suppliers.

It also specifically prohibits employers working with the government from discriminating against employees who belong to a union or are involved in union activities, which is not something all employers would be happy about as the small business sector maintains a vigorous discourse on labor relations and regulatory compliance.

Gallagher’s push to increase and ease access for small businesses also comes amid growing concern in the services sector over the government’s many procurement reforms and its overt commitment to outsourcing work and separating contractors from so-called “core” government and public service tasks.

“The Government of Albania has listened to representatives of industry and small and medium-sized enterprises and is taking steps to improve their participation and competitiveness in government contracts,” Gallagher said.

“The effective use of government procurement supports Australian businesses and can stimulate the growth of small and regional businesses and a variety of industry sectors.”

The amendment package also lowered the threshold “for contracts requiring an economic benefits assessment from $4 million to $1 million, meaning more contracts will be subject to an economic benefits assessment for the Australian economy in the context of determining value for money.”

Theoretically, this could enable agencies to select more suppliers from Australia, local farmers and First Nations, given benefits such as the creation and retention of local jobs. This means that official guidance is still available for consultation, with submissions not due until 3 July 2024.

On the exemption side, small businesses are getting a boost with the threshold for allowable direct involvement raised from $200,000 to $500,000, an increase that brings the rest of the government in line with the Department of Defense threshold.

Larger government suppliers have historically been resistant to local industry imposing procurement quotas, arguing that large companies are best suited to deliver value at scale, while smaller companies are constrained by subcontracting arrangements.

Local companies obviously don’t see it that way, even if they work with large consulting firms and outsourcers that sell or resell their products.

A notable change in the Common Provisions Regulation is the “amended definition” of small and medium-sized enterprises so that they “must be an independent entity, rather than a small or medium-sized entity supported by the resources of a larger entity.”

It remains to be seen how effective the government’s major outsourcing initiative will be, particularly in areas of chronic skills shortages such as IT and systems design, integration and delivery.

A major concern is that thousands of contractors, many of whom are mainly agency workers, are likely to be laid off, making it much more difficult for recruiters on panels or those working directly with agencies to stick to deadlines.

Another problem for the services sector is that both New South Wales and Queensland are currently following Canberra’s leadership in culling contractors and outsourcing work, potentially worsening future figure targets if small businesses suffer greater losses than large ones, which is potentially perverse result.

In the consulting, technology and transformation space, there have been serious concerns that smaller and more agile competitors will be the first to be subjected to mandatory insourcing because their contracts are smaller, shorter and easier to take over than large players such as the Big Four, not to mention disproportionate lobbying power.

There is also a separate question about whether governments, federal and state, will be able to attract the necessary talent to replace the removed contractors and consultants, and what will happen if they fail.

One answer is that agencies make do with what they have and make it work, and this is a situation that can provide a large unexpected productivity boost.

This article was first published by Tangerine.

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