Factors affecting the efficacy of the Australian indigenous business exemption
| DOI | https://doi.org/10.1108/JOPP-03-2019-026 |
| Pages | 68-86 |
| Date | 04 March 2019 |
| Published date | 04 March 2019 |
| Author | Matthew Storey |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public finance/economics,Taxation/public revenue |
Factors affecting the efficacy of
the Australian indigenous
business exemption
Matthew Storey
Charles Darwin University, Melbourne, Australia and School of Law,
La Trobe University, Melbourne, Australia
Abstract
Purpose –This paper aimsto describe a qualitative research project thatinvestigated factors leading to the
very low use of the Australian Commonwealth Government’s indigenous business exemption (IBE),
particularlyfrom 2011 to 2015.
Design/methodology/approach –The project involved interviewswith 12 selected stakeholders from
Indigenousfirms, procuring agencies and policy designers, whichtook place in 2016.
Findings –Analysis of the interviews suggestedthat poor use of the IBE was primarily attributed to risk
aversioninside government and limited communication of the existenceof the policy outsidegovernment.
Originality/value –A range of other factors and methods of overcoming these problems are also
identified;principal amongst these is the need for procuringagencies to engage with Indigenous suppliersin a
coordinatedand deliberate fashion.
Keyword Australian indigenous business
Paper type Research paper
Introduction
Division 2 of the Australian CommonwealthGovernment Procurement Rules (CPR) sets out
the public tender requirements that apply to contracts for goods and services of a value of
greater than $80,000 or construction projects of a value greater than $7.5m. Appendix A is
part of the regulations (the CommonwealthProcurement Rules) referred to the CPR sets out
a range of exemptions to the Division 2 requirements, although the CPR Division 1
requirement to achieve “valuefor money”still applies to these procurements. The Appendix
A exemptions include a range of matters including engaging barristers; purchasing motor
vehicles or blood plasma products; and procurement from a business that primarily
provides services to disabled persons. In May 2011, a 17th exemption was included:
“procurement of goods and servicesfrom an small- and medium-sized enterprise (SME) (less
than 200 employees) with at least 50 per cent Indigenous ownership.”This exemption is
usually referredto as the indigenous business exemption (IBE).
Despite the potentially profound possibilities created by the IBE the Australian
National Audit Office (ANAO) reported that between May 2011 and June 2015 only four
contracts were let under the IBE (ANAO, 2015). The contracts had a total value of $10.4m.
The last contract let in February 2015, comprised $8.3m of this total value. By way
of contrast, in 2013-2014 the Commonwealth Government entered into 66,047
procurement contracts with a total value of $48.9bn (ANAO, 2015,p.31).Duringthat
financial year one contract was let using the IBE with a value of $0.7m. In percentage
terms IBE contracts amounted to 0.0015 per cent of the number contracts for 2013-2014
and 0.0014 per cent of value for that year.
JOPP
19,1
68
Journalof Public Procurement
Vol.19 No. 1, 2019
pp. 68-86
© Emerald Publishing Limited
1535-0118
DOI 10.1108/JOPP-03-2019-026
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1535-0118.htm
However, in July 2015, the IBE was enhanced when the Commonwealth Government
introduced its Indigenous Procurement Policy (IPP). Two relevant components of the IPP
that were introduced at this time were, first,that Commonwealth Government departments
and agencies must ensure that 0.5 per cent of all procurement contracts (in 2015-2016,
increasing to 2.5 per cent by 2018-2019)are awarded to Indigenous owned firms. The second
component introduced was a mandatoryrequirement that procurements of a value between
$80,000 and 200,000 for provisionof goods and services in remote areas must be awarded to
Indigenous firms.
Data published by the Departmentof Prime Minister and Cabinet (PMC) has shown that
over 2015-2016, after the introduction of the IPP targets and compulsory set-asides, there
were 1,509 contracts with a total value of $284mawarded to Indigenous SMEs. This figure
was well above the IPP mandated 0.5 per cent target of 256 contracts.
This current paper describes research that was undertaken in the period February to
April 2016. The research examined the factors that had impacted upon the limited
effectiveness of the IBE at that point. Given the dramatic turnaroundin the usage of the IBE
following the introduction of the IPP targets in July2015, it may, at first blush, appear that
the introduction of those targets served to provide a complete answer to the research
question. However, the research provides useful insights into the dynamics of the
implementation of the IPP targets and into the other factors that have negatively affected
use of the IBE (and continue to do so) and mechanisms by which thesecan be overcome. In
so doing the research also provides valuable insightsinto the factors that affect use of other
“social procurement”programmes both in Australia, its constituent states and
internationally.
Specifically, the question that the research sought to address was: What factors have
limited the effectiveness of the IBE? To explorethis overarching question a number of sub-
questions were posed.These were:
What are the circumstances when the IBE has been used?
What benefit to Indigenous people can be attributed to the IBE?
Why is the IBE not used more often?
How can these identified limiting factors be overcome?
The first two of these sub-questions go to the matter of whether the IBE is effective in
achieving its goals.The second two go to the issue of its effectiveness in operation.
The research was qualitative research undertaken through interview and subsequent
transcriptanalysis with 12 selectedstakeholders in the IBE development and implementation
process. The 12 stakeholders included respondents involved in: Indigenous firms who had
used the IBE; the Commonwealth agencies engaging in procurement; and individuals and
agenciesthat were responsible for the developmentand oversight of the policy.
In addition, one informant was responsible for an Indigenous preferential procurement
program in a nationally prominent resources company. The inclusion of this individual
allowed some level oftriangulation of results across public and private sectors.
An analysis of the interviewsis contained in the third section of this paper. The following
section of this paper presents some description of the programme logic of the IPP and its
IBE component and the rationalefor the methodology adopted in the research.
Summary of findings
The research showed various negative factors and methods of improvement were often
connected in respondents’responses. There were several such “clusters”ofresponses.
Business
exemption
69
To continue reading
Request your trial