Tuesday, 20 December 2016

Indigenous Procurement Policy: Progress and Next Steps

As mentioned in a recent post, this is an area where the Government can point to substantial policy success. It aligns with the Government’s focus on economic development and clearly benefits Indigenous interests. It has the ancillary benefit of signalling to the majority of Indigenous Australians who live in non-remote areas that the Government is doing something for them, by supporting Indigenous owned businesses, and via the employment effect arising from the fact that Indigenous owned businesses are more likely to employ Indigenous people.

Here is the PMC webpage on the IPP. Here is the link to the key policy document.

Here are the current high level statistics on IPP performance taken from the PMC website:

The Indigenous Procurement Policy supports Indigenous economic development
·         1,509 contracts
·         valued in total around $284.2 million
·         493 Indigenous businesses 

In the first full year of the Indigenous Procurement Policy, targets were exceeded
·         Target: 0.5%>
·         Actual: 2.9%

Commonwealth procurements with Indigenous businesses increased from $6.2 million in 2012-13 to $284.2 million in 2015-16
Contracts were awarded to businesses of all sizes, across Australia:
·         Average value: $188,326
·         63 valued at over $1 million

The Parliamentary Library blog FlagPost recently published this excellent post on the IPP, which draws attention to the fact that the vast bulk of the financial benefits flowing to date from the IPP can be traced back to the Defence Department’s success in implementing the policy.

The genesis of the IPP can be traced back to the emergence of SupplyNation (formerly the Australian Indigenous Minority Supplier Council) which was founded by Michael McLeod and Dug Russell in 2009 and was modelled on the US National Minority Supplier Development Council. The then Government provided three years of funding as a pilot in 2009. See the short history of SupplyNation here. Over the past seven years, SupplyNation has received in excess of $11m in government grants, plus raised substantial revenue in membership fees. It appears to have had quite regular turnover in Board members (which include both Indigenous and corporate Directors) and senior staff. 

SupplyNation has clearly been well supported by the business sector and some key corporations.
For reasons which are unclear, SupplyNation have not published annual reports for the 2015 and 2016 financial years. However, SupplyNation’s most recent financial reports are available here on the ACNC website.

While the IPP has made huge progress in a relatively short period, admittedly off a very low base, it appears to have considerable potential for further progress.

This raises the question: what fine tuning would best prepare the program to take on the challenges of the next decade?

Answering that question requires answering a number of subsidiary questions. What is the role of SupplyNation in driving current performance? Is it operating effectively? Are the IPP targets currently set appropriate? They appear to have been exceeded by such a margin that there may be a case for raising them significantly. What is the relationship between numbers of contracts and contract value? Where do the benefits flow – in more contracts, or in higher value contracts? What is the Indigenous ‘employment effect’ of winning a government contract? Can it be leveraged further, and if so, how? Where is the potential for greatest future growth, both in terms of portfolios, industry sectors and geographic regions? And what have been the challenges for individual portfolios?

Other issues requiring ongoing attention include risks and risk mitigation which are essential elements in successful programs. For example, are there issues related to Indigenous businesses over-extending themselves, or becoming over-reliant on government contracts? Is there potential for gaming the program by non- Indigenous businesses utilising Indigenous front men and women to create the appearance of an Indigenous entity and thus gain a competitive edge? How effective is the cross portfolio coordination in awarding IPP contracts? And is there scope to broaden the base of potential Indigenous business suppliers to Government and if so, how might that be best encouraged.

These are all complex questions to which there are no obvious answers at present. The obvious way to begin to answer them would be a forward looking review or evaluation of some kind. Such a step appears timely and would go a long way to ensuring that what has arguably been the current Governments greatest policy achievement in Indigenous affairs is placed on a secure foundation and positioned to consolidate and expand over the next decade.

Of course, the larger issue in Indigenous policy relates to the role of economic development in addressing Indigenous disadvantage. While there is undoubtedly an important role for encouraging Indigenous participation in business, and in employment, other policy sectors such as health, education, social security, law and justice and even the arts require sustained policy attention, and can deliver substantial policy dividends (which can even include economic benefits) if successfully managed. The challenge is to successfully address the whole policy spectrum and find policy solutions which deliver gains in each sector.

This is a long winded way of saying that simplistic nostrums (such as private sector good, public sector bad) will not work. The IPP will be most successful to the extent that it supports, reinforces, and supplements a more sophisticated and balanced set of policy approaches across the span of Indigenous citizens aspirations. The jury is still out on whether the government can transform the considerable success of IPP to date into a sustained and substantive driver of more effective social transformation across the Indigenous policy spectrum.