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The government has set more ambitious procurement targets that require SMEs to receive 25 per cent of all contracts under $1 billion.
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Small business to get bigger share of $75bn federal spending
18 June 2024
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Small- and medium-sized enterprises will receive at least one-quarter of the annual $75 billion pie of contracts from government departments under new procurement rules set to apply from 1 July.
The government announced on Monday that it would amend the Commonwealth procurement rules to increase the target for procurements under $1 billion from 20 per cent to 25 per cent.
It would also introduce a 40 per cent target for procurements below $20 million and the exemption threshold, allowing agencies to directly engage SMEs, would be lifted from $200,000 to $500,000.
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Minister for Small Business Julie Collins said improving access was important because small businesses were eager to make the most of procurement opportunities.
“The changes we are introducing from 1 July will help to ensure Australia’s small businesses get a bigger slice of government procurement opportunities,” Minister Collins said.
Australian Small Business and Family Enterprise Ombudsman Bruce Billson welcomed the more ambitious sourcing targets.
“If you run a small or first nation’s business that hasn't previously been a supplier to the government, this is a bewildering space. It is really hard to understand how to get involved,” he said.
The ASBFEO’s recent report on the effectiveness of the procurement rules found that SMEs only received 11 per cent of the $75 billion in federal contracts in 2022–23, despite the government’s targets and small businesses making up 97 per cent of all businesses in the country.
The report, released in May, criticised the tender process for excluding SMEs due to its opaque and time-consuming requirements.
Its 11 recommendations did not include raising the procurement target but called for establishing an independent procurement commissioner, abolishing the procurement coordinator function within the Department of Finance and increasing raining for departmental officials. The government’s response only agreed with two.
Finance Minister Katy Gallagher assured the government was listening to feedback from SMEs.
“The Albanese government has listened to industry and small and medium businesses and is taking action to improve their participation and competitiveness in government procurement,” she said.
“When used effectively, government procurement supports Australian businesses, and can stimulate growth in small and regional businesses and across industry sectors.”
She said that in response to feedback about the operation of government procurement panels, the government would also require that at least one SME must be approached for every request for a quote from the mandated Management Advisory Services (MAS) Panel and the People Panel.
In addition to the changes to SME procurement rules, the government also announced changes to First Nations procurement and thresholds for economic benefit assessments.
It said a new Flexibility Allowance would allow 5 per cent of agency spending on services through the MAS and People Panels to be sourced directly to First Nations businesses that were not on those panels, increasing opportunities for First Nations businesses.
The threshold for procurements that required an economic benefit assessment would be reduced from $4 million to $1 million to ensure more would be scrutinised for their ability to provide value for money.
Billson said there was more that could be done to improve the genuine prospects of small businesses and businesses owned by First Nations people, urging the government to implement all 11 recommendations of the ASBFEO’s report.
“ASBFEO encourages the government to support these welcome changes with the practical steps we recommended including accelerating its consideration of a ‘sourcing strategy checklist’ and ‘assessment outcomes checklist’ as part of ongoing resource development,” he said.
“Capturing broader value-for-money considerations through these checklists would encourage more consistency in procurement deliberations across departments and more transparent and comparable reporting, and address a key SME concern that they are disadvantaged by inconsistent and non-transparent assessments.”
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