The new Indigenous Procurement Policy – operational from 1 July – requires Commonwealth agencies to consider Indigenous providers before approaching the open market for mid-value purchases (those between $80-$200k).

Slipping under the radar last week was the biggest thing to happen to Commonwealth procurement in more than a decade.

Missed it? You’re not the only one.

After years of mandating open tendering as the best way to maximise competition and achieve the ever-elusive value for money, the new Indigenous Procurement Policy – operational from 1 July – requires agencies to consider Indigenous providers before approaching the open market for mid-value purchases (those between $80-$200k).

The policy is a joint effort of the Department of the Prime Minister and Cabinet and the Department of Finance, with input from the Minister for Indigenous Affairs and Supply Nation, the peak body for Indigenous business. It sits alongside the Commonwealth Procurement Rules as a ‘Procurement Connected Policy’. It operates in conjunction with the Annex A exemption that currently allows agencies to award contracts directly to Indigenous SMEs.

New Mandatory Requirements

Whereas the Indigenous exemption has previously been available to agencies to utilise at their discretion, the new policy goes much further. It inserts a new, mandatory step in the procurement process for contracts with an estimated value of between $80-$200k, or which are being delivered in a remote area. The effect is that agencies must first seek to identify an Indigenous supplier before embarking on an open tender process. If a potential candidate is found, the agency evaluates whether that Indigenous supplier is able to meet the requirements on a value for money basis. If the agency is satisfied that value for money has been established, it mustuse Exemption 17 to award the contract. This aspect of the policy is known as the ‘mandatory set-aside’ provisions, that is, certain purchases are ‘set aside’ for special Indigenous consideration.

The policy provides no guarantee of work to any particular sector of the Indigenous business community. Rather, it gives Commonwealth buyers proper visibility of the capabilities of Indigenous suppliers and forces those buyers to actively consider the merits of Indigenous suppliers before looking to the wider market. Indigenous businesses can capitalise on this opportunity by registering with Supply Nation and upskilling themselves in Commonwealth tendering practices so their proposals better resonate with Commonwealth purchasers.

Targets

To ensure this process does not become merely a tick-box pre-tender exercise, the policy also sets ambitious targets that will see a potential 61-fold increase in Indigenous procurement by 2020 if all goes to plan. Targets are publicly available and agencies will be required to report progress against those targets on a six-monthly basis.

Changes to Major Projects

But it is not only mid-value procurement that will be affected. The biggest government contracts will also see a new Indigenous focus.

The second key element of the policy is a new requirement for major projects (that is, those valued in excess of $7.5M in a range of sectors), which will now need to include Indigenous engagement strategies and targets in both the procurement and contract management phases.

Whereas the ‘mandatory set-aside’ provisions insert a new step in an otherwise unaffected procurement process, the major project provisions will require agencies to make changes to their template Request for Tender, Evaluation Plan and contract templates for high value purchases. While the tendering process itself will still proceed in accordance with the usual stages, tenderers must be asked to submit evidence of their Indigenous Participation Plan, and these must be assessed by agencies as part of the evaluation process. The Participation Plan of the successful tenderer will be annexed to their contract, and they must meet specific targets for Indigenous employment and supply chain participation during the term of the contract.

The four working weeks between now and 1 July will no doubt involve considerable planning activity for procurement departments, as agencies develop their own strategies and procedures to give affect to the new policy. The effectiveness of those strategies will become apparent early next year, when we should see the numbers arising out of the first 6 months of the policy’s operation.