The Australian government has made a welcome commitment to be a bigger customer for small and family businesses and to give them an improved chance of bidding for - and winning - a greater share of the $81 billion it spends every year on goods and services.
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The government has asked me to have a look under the hood of the Commonwealth Procurement Rules to see how they are being applied, which departments are doing well, and whether there's further steps that can improve the system.
Enabling SMEs to fully compete for government work helps deliver better value, supports innovation and drives stronger Australian-based capability - all worthwhile and important benefits for the taxpayer and our nation.
Procurement might not sound like the most exciting topic but winning a government contract can be life-changing for a small business. As all businesses know, there is no substitute for good customers.
In 2021-22 the government and its entities awarded 92,303 contracts with a combined value of $80.8 billion.
It is estimated small and medium-sized enterprises were awarded 55 per cent of the contracts by volume or 31 per cent by value, worth almost $25 billion. Small businesses alone accounted for $8.5 billion worth of the work (or 10.5 per cent of all contracts by value).
Small and medium-sized firms that had the most success in winning work were in Defence, Health, Foreign Affairs, Education, Skills and Employment and Home Affairs.
However, since launching our inquiry in March, many small businesses have told us they feel shut out of the process or they simply find it too hard to navigate.
On Wednesday, we launched an issues paper and extended the deadline for submissions to September 15 so we can get more feedback and ideas from those using the procurement system or those who would like to but do not. Our report will be handed to the government in December.
What we have heard so far is that small businesses have low awareness about procurement opportunities unless they are already part of the "in-crowd" through existing relationships with procuring agencies, or previous experience in government procurement.
Small businesses wanting to break into this sector have told us they have been deterred, discouraged or frustrated by one or more of the following reasons:
- the cost and time required to tender;
- lack of consideration by agencies of the high opportunity cost for small business of tendering;
- limited or no feedback when a tender is unsuccessful;
- there is not a strong incentive for agencies to seek out opportunities for SMEs as "best endeavours" are deemed to be sufficient.
A great frustration that has been highlighted to us relates to the use of government panels for awarding contracts. Panels are a short list of providers that departments can draw from to have work carried out up to a particular value.
Yet being on a panel does not guarantee work. Many small businesses have told us how they have been on panels for years and never been approached for a request to quote.
They have invested considerable time, energy and resources applying for various government panels and complying with requirements, only to discover large agencies are using different panels to procure the same goods and services. There are currently more than 100 government panels.
Writing tenders for government does not come naturally for many small businesses and they are rarely provided with feedback about how to improve.
In some cases they have been told they must have certain kinds of expensive insurances just so they have the chance to do the work - with no guarantees.
These are among the barriers we've heard about and our issues paper seeks to draw out more experiences and insights about the challenges or difficulties small businesses face when approaching government for procurement and where things might be improved.
- Submissions can be made at www.asbfeo.gov.au/procurement
- Bruce Billson is the Australian Small Business and Family Enterprise Ombudsman.
