In July 2015 The Department of Prime Minister and Cabinet (PMC) introduced a new initiative called the Indigenous Procurement Policy (IPP). The IPP sets a target for Australian Government contracts to be awarded to Indigenous businesses.
Does Australia need an IPP and what are the barriers to Commonwealth Contracts?
From July 2014 to June 2015 the Australian Government issued 69,236 contracts with a total value of $59,447,000,000 according to the Department of Finance Statistics on Australian Government Procurement Contracts. Clearly, acquiring Government contracts can provide a stable source of income to support a business and provide jobs in the community.
However, there are a number of barriers for entry into these contracts. The Government has complex processes on negotiating tenders outlined in the Commonwealth Procurement Rules (CPR). Obstacles include extensive documentation, long legal documents, high professional indemnity insurance requirements, evidence of prior work history, demonstrating value for money and long time lines. Many business owners will not pursue Commonwealth contracts as they are high risk in time and money with uncertainty in securing the contract.
Indigenous owned businesses face the same challenges and more again. Contracts lead to job, jobs lead to money: money that can provide the Indigenous community with financial empowerment and lead to social advancement. The 2011 Census suggested an unemployment rate of 17.2% for Indigenous people, more than 3 times the average figure for all Australia. Yet Indigenous owned and controlled business enterprises are 100 times more likely to employ Aboriginal and Torres Strait Islander people when compared to a non-Indigenous business.
If even a small portion of the $59.4 billion in Government contracts could be directed to Indigenous owned businesses, the result will be more Indigenous jobs, greater business experience and capacity as well as serious and lasting social change.
Andrew Pitt, Terri Janke and Sarah Grant at
Supply Nation's Indigenous Business Tradeshow (Connect 2015)
What are the targets and aims of the Indigenous Procurement Policy (IPP)?
The Australian Government has set a target for 3% of their contracts each year to be with Indigenous enterprises by 2020, though the initial target for 2015-16 will be 0.5% of contracts.
Supply Nation is a business-to-business membership body dedicated to growing diversity within the supply chain. The policy encourages registration with Supply Nation, to verify Indigenous ownership.
The Indigenous business sector is dominated by small to medium size enterprises (SMEs). The policy focuses on growing these businesses, with a primary purpose to stimulate Indigenous entrepreneurship and business development. Through increasing contracts with Indigenous businesses, the Government aims to drive Indigenous economic development and strengthen the Indigenous business sector.
Who is involved with the IPP?
The policy is for contracts between:
non-corporate Commonwealth entities that must comply with Commonwealth Procurement Rules (CPRs), and
Indigenous businesses that are 50% or more Indigenous owned and are small to medium sized (SMEs)
What are the details of the IPP?
The Indigenous Procurement Policy has three parts:
A target number of contracts that need to be awarded to Indigenous businesses
By 2020, 3% of contracts procured by the government each year must be awarded to Indigenous businesses
This target is to be gradually phased in over some years – starting at 0.5% for the 2015-16 financial year
The target is applied at a Commonwealth level and also Portfolio level to increase accountability
Government entities with the top number of contracts to award:
A mandatory set-aside of contracts for Indigenous businesses to apply in certain situations
Mandatory minimum contractual requirements for Indigenous employment and Indigenous supplier use applying to certain Commonwealth contracts
In addition to the requirements of the policy, Indigenous businesses can benefit from the Indigenous business exemption (Exemption 17) in the CPRs. The exemption allows a Government entity to engage directly with the Indigenous business, through a limited tender, for contracts of any size and value. The advantage is that Indigenous businesses do not need to go through the costly process of an open tender. Indigenous businesses will still be assessed for value for money, but the process is simplified and the risk reduced.
An example of the IPP
Following is an example of how the policy would apply. The Department of Agriculture and Water Resources was allocated a target of 5 contracts for financial year 2015-16.
This figure was calculated on the following formula, Agriculture had an average of 1037 contracts over the last 3 years, 1037 x 0.5% = 5
The policy also provides the option to convert this to a $ value, using an average where 1 contract = $91,931. For example, 5 x $91,931 = $459,655 in FY2015-16.
In FY2018-19 Department of Agriculture and Water Resources may need to award approximately 26 contracts (or $2.39 million) to Indigenous owned businesses
Terri Janke and Company is an Indigenous owned and controlled business
Legal firm Terri Janke and Company (TJC) started in April 2000 and has strength in intellectual property (IP), commercial matters, Indigenous cultural and intellectual property, mediation and government legal work. In May 2013 the firm joined the LSMUL (Attorney-General’s Department Legal Services Multi-Use List). Solicitor Director Terri Janke is Cairns born with Wuthathi/Meriam heritage and she was a 2015 finalist in the Telstra NSW Business Women’s Awards.
Our firm is a 100% Indigenous owned and controlled law firm and is a Certified Supplier with Supply Nation. Contracts awarded to TJC would be included in targets for the Indigenous Procurement Policy.
Solicitor Terri Janke observes: “We have completed more than 3000 matters and work for a range of clients including; organisations, councils, business owners and government. My business is growing and more than half the team are Indigenous. The Indigenous Procurement Policy is a fantastic opportunity to promote our legal services to government departments, quote on work and secure new clients.”
Terri Janke and Company has noted certain trends in the market and can provide advice to clients on IPP implications, targets, risks and opportunities.
Contact us for more information.