Plans to improve small business access to $70 billion in Commonwealth contracts are well underway, the federal government says, after a hard-hitting review found SMEs are frequently overwhelmed by complex, time-consuming, and costly application processes.
On Wednesday, Minister for Finance Katy Gallagher and Minister for Small Business Julie Collins released the government’s response to a long-expected report on the Commonwealth Procurement Framework and its outcomes for small business.
The report, prepared by Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson, found the federal government is exceeding its own self-imposed 20% target for procurements from small and medium enterprises.
However, those SME contracts only make up $8 billion, or 11%, of government procurements by dollar value.
The report said significant barriers still exist between SMEs and the contracts they are asked to tender for.
SME operators are often tasked with interpreting complex application guidelines by themselves, pitting their business against larger competitors that may have in-house teams dedicated to winning government contracts.
The ASBFEO heard from small businesses who said departmental officials did not value their time, responding to applications months after their submission.
Other officials asked enterprises to submit a tender within 10 days, stretching the limits of Commonwealth procurement rules (CPRs).
This behaviour was “infuriating and demoralising” for smaller businesses, the report found.
Knowledge gaps exist within government departments, making it difficult for officials to engage with SMEs, even when they want to.
Some 78% of operational staff surveyed by the ASBFEO said difficulty even identifying an SME is the primary barrier to them approaching or using an SME contractor.
A risk-averse culture is also discouraging departmental staff from trying new, small suppliers instead of large, trusted, and entrenched providers.
Small businesses who want to complain about their treatment can feel discouraged from doing so, as those complaints are referred to the government entity managing the procurement.
Businesses feel those complaints can create reputational risk and limit access to future opportunities, the report said.
Evidence surfaced by the inquiry also suggests that “improvements in process, professionalism, reporting and complaints-handling are required to motivate, assist, and elevate procurement across the Commonwealth,” the report found.
The ASBFEO levelled 11 recommendations, spanning from the abolishment of the Procurement Coordinator function within the Department of Finance and the creation of a new, independent procurement commissioner, through to increased training for departmental officials.
The federal government noted the importance of strengthening procurement opportunities for SMEs in its response, agreeing in principle or in part to most reform recommendations.
Work is already underway to assist SMEs across the procurement landscape, it said.
In a statement, Minister Collins said this includes “supporting procurement capability for both SMEs and the APS, increased transparency and streamlined processes for SMEs engaging with the Government’s procurement platform, AusTender, and the Payment Times Reporting Scheme“.
The government said plans to simplify and expand small business procurement through the Buy Australia Plan, including procurement and contract management training for APS staff, are ongoing.
Small businesses will also have greater visibility of contracts awarded through the AusTender platform from July 1 this year, with a wholly upgraded panel procurement system scheduled for mid-2025.
The Department of Finance is “developing a series of short videos for the Selling to Government website, aimed at SMEs and Indigenous-owned businesses, to supplement existing guidance available on the website,” the government said.
The response only rejected one ASBFEO recommendation: the removal of the Procurement Coordinator function in favour of an independent commissioner.
It noted “feedback from small businesses about the procurement complaints process,” but found recent guidance to businesses considering a complaint ought to support them.
The ASBFEO report and full government response are both available here.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
