Additional comments from Senator David Pocock

1.1I thank the Chair and other committee members for their engagement and note the extensive and important work undertaken by this committee looking into elements of procurement through the Inquiry into the management and assurance of integrity by consulting services. I also thank every organisation, individual and business who took the time to make a submission to the inquiry. Many submitters were small or medium enterprises (SMEs) that found space in busy schedules to put their views on procurement to the committee.

1.2The federal government spends tens of billions of dollars on goods and services every year. Procurement presents significant opportunities for the development, fostering and growth of innovative Australian SMEs. Procurement should reward SMEs who are committed to helping the Commonwealth deliver better services to Australians and help solve the big challenges we face.

1.3Under the current Commonwealth Procurement Rules (CPRs), foreign owned and operating firms with fewer than 200 staff and in possession of an Australian Business Number (ABN) are able to sell to the Australian Government under the guise of being an Australian SME.

1.4A number of Australian owned and operating tech SMEs submitted their frustration with these arrangements, arguing that it distorted the playing field in favour of foreign suppliers dominating government procurement opportunities in Australia.[1]

1.5Multiple submitters signalled their support for definitional changes in the CPRs. For instance, the Sovereign Australian Prime Alliance proposed a definition of a sovereign supplier as:

…an Australian company that is not a foreign subsidiary, that is based in Australia, controlled by Australian shareholders, and governed by an Australian Board of Directors.[2]

1.6The definition of ‘Small and Medium Enterprises in the Commonwealth Procurement Rules be replaced with a definition of ‘Sovereign Australian Small and Medium Enterprises’, being a firm that:

Has a valid ABN;

Has less than 200 full-time equivalent employees;

Is headquartered in Australia;

Is at least 51 per cent owned by Australian shareholders;

Is at least 51 per cent governed by Australian directors; and

Is not a subsidiary of a company that is not a sovereign Australian SME.

1.7Value for money is at the core of the CPRs. Though the CPRs clearly state that price is not the sole factor in assessing value for money, a recurrent theme over the course of the inquiry was that value for money is poorly understood and often misinterpreted by officials as lowest cost. While the CPRs provide some vague guidance on 'other relevant financial and non-financial costs and benefits' there is a clear need for procuring officials and entities to better understand value for money beyond the simple rubric of cost.

1.8A number of submitters proposed the incorporation of a comprehensive 'retained economic benefit' consideration within the CPRs for all procurements, which would take a more holistic approach to identifying and valuing potential for job creation, local wealth creation, domestic tax revenue, technology transfer, domestic investment in local research and development and Intellectual Property creation.[3]

1.9The Australian Information Industry Association, the peak body representing the information and communications technology industry, defined ‘retained economic benefit’ as:

…the value of enduring ‘positive externalities’ created from a vendor’s proposal, such as job creation, local wealth creation, technology transfer and propensity to reinvest revenue domestically, especially in local Research & Development activities and Intellectual Property creation.[4]

1.10Update the Commonwealth Procurement Rules to require officials to consider the economic benefit of procurement decisions to the Australian economy for all procurement decisions, removing the $1 million threshold, and that the Department of Finance update its guidance on Consideration of Broader Economic Benefits in Procurement to capture whether the supplier is a sovereign Australian firm.

Senator David Pocock

Participating Member

Independent Senator for the Australian Capital Territory

Footnotes

[1]See, for example: Sovereign Australian Prime Alliance, Submission 19, p. 3; Vault Cloud, Submission 12, p. 3; Pathology Technology Australia, Submission 8, p. 8; TechnologyOne, Submission 9 - Supplementary Submission, p. 2.

[2]Sovereign Australian Prime Alliance, Submission 19, p. 3.

[3]See, for example: Australian Information Industry Association, Submission 33, p. 2; Vault Cloud, Submission 12, p. 2; AUCloud, Submission 15, p. 8; Australian Information Industry Association, Submission 33, p. 2; Aura Clean Energy, Submission 38, p. 4; and Reason Group, Submission 50, p. 12; TechnologyOne, Submission 9 - Supplementary Submission, p. 2.

[4]Australian Information Industry Association, Submission 33, p. 2.