A strengthened Indigenous Procurement Policy: but uncertainties remain

The web of our life is a mingled yarn,

good and ill together.

All's Well That Ends Well, Act four, Scene three.

 

All that glisters is not gold ...

Gilded tombs do worms enfold.

The Merchant of Venice, Act two, Scene seven.

 

From today, 1 July 2026, the Indigenous Procurement Policy operates under tightened eligibility rules. To access Commonwealth contracts, a business must now be 51 per cent or more First Nations owned and controlled or registered as being Indigenous owned by the Office of the Registrar of Indigenous Corporations (ORIC). This raises the threshold for access to the scheme, up from the original 50 per cent ownership threshold that has applied since 2015. A transition year allows firms sitting on the old criteria to adjust. The Commonwealth's purchasing target also steps up, from 3 to 3.25 per cent, on its way to 4 per cent by 2029–30. Minister McCarthy's announcement (link here) leans on a decade of headline numbers: more than 91,000 contracts, over $14.2 billion, some 4,900 First Nations businesses.

On its face, this is the continuation of a policy success story I have followed, on and off, since its early years (link here and link here). The IPP has consistently exceeded its own targets, attracted bipartisan support, and — as I noted when the Indonesia-Australia trade agreement was being negotiated in 2019 (link here)  — proven durable enough that Australian negotiators went out of their way to carve out explicit protection for Indigenous policy measures in an international trade agreement. That is not nothing.

But the reform arrives alongside two bodies of evidence that should temper the optimistic tone of the Minister's release, and that between them go some way to explaining why the ownership threshold, rather than the systemic changes I would argue are necessary, is where this round of incremental policy adjustment has landed.

The first is the ANAO's 2025 follow-up audit of the Mandatory Minimum Requirements, which I wrote about on this blog in some detail last year (link here). I urge interested readers to have a look at that post. The ANAO found that between July 2016 and September 2024, 63 per cent of contracts subject to mandatory minimum requirements (MMR) targets — worth $69.3 billion — were exempted from them, often for reasons NIAA could not adequately explain or assure. NIAA had also quietly cancelled a promised evaluation of whether the MMRs work at all, with no record of who made that decision or why. When the ANAO recommended NIAA assure itself that exemptions were legitimate, NIAA declined, arguing this was a matter for the individual Commonwealth agencies issuing contracts under the devolved procurement framework — an odd position for the agency legislatively tasked with monitoring the effectiveness of Indigenous programs across government, including those delivered by other agencies.

The second is Christian Eva's recent analysis (link here and link here) in the Australian Journal of Public Administration, the first substantial quantitative study of who actually receives IPP contracts. Using FOI data spanning 2015–16 to 2022–23, Eva finds that the policy's aggregate success conceals a striking concentration: half of all contracts over $10,000 went to just 11 firms, and half the dollar value to 18 firms, out of roughly 3,900 businesses cited as beneficiaries. Forty-one per cent of contracts and 30 per cent of value went to firms based in the ACT, where only one per cent of the national Indigenous population reside; firms in the 50–51 per cent Indigenous ownership band — precisely the group the new eligibility rule targets — received the largest single share of contract value, while ownership status for 64 per cent of suppliers could not be verified at all. Eva's broader argument is that the IPP measures itself against volume and value targets that are relatively easy to meet, while leaving largely unexamined whether contracts translate into Indigenous employment, community benefit, or anything resembling Indigenous-defined success.

Read together, these two pieces of evidence point to the same gap: a policy whose headline metrics are exceeded almost by design, sitting on top of compliance and verification infrastructure that neither NIAA nor the available data can currently vouch for. Raising the ownership threshold to 51 per cent addresses the most legible version of "black cladding" — but Eva's own account of the practice describes far more sophisticated arrangements than a bare ownership percentage. Moreover, the announced reform does nothing to address the MMR exemption problem, the absence of an evaluation strategy, or the concentration of contracts among a small, capital-city-based cohort of repeat winners.

There is also a wider governance backdrop worth noting. My recent post on ORIC's regulatory performance (link here) — CATSI corporation reporting compliance has fallen from over 75 per cent to under 30 per cent since 2015–16 — suggests a portfolio-wide pattern of declining regulatory capacity, not something confined to procurement. The NIAA web page describing the current changes (link here) reveals that the NIAA will be outsourcing the verification process, or to use the jargon of bureaucratese:

To implement the strengthened IPP eligibility criteria, the NIAA will soon approach the market to identify a provider to deliver the verification services.

A strengthened eligibility test is only as good as the verification and assurance work sitting behind it, and on current evidence that work is thin.

None of this is an argument against the announced sensible but modest changes, aimed at strengthening the leverage of Indigenous business owners vis a vis potential partners in joint ventures seeking to win government contracts. It is however an argument against mistaking a tighter ownership threshold for a genuine answer to the questions Eva and the ANAO have both now put on the public record: who actually benefits from $14 billion in Indigenous procurement since 2015, and does anyone in government know whether the policy is achieving what it was designed to achieve?

A decade on, with the headline targets rising to 4 per cent, those remain open questions — and the ‘strengthened’ IPP, as currently designed, is not built to answer them. Commenting to the National Indigenous Times last December on the extraordinary expansion of Commonwealth procurement with Indigenous firms, Christian Eva commented (link here):

That's not nothing. But with any Indigenous program at a federal level, we really do need stronger transparency and stronger accountability.

I agree wholeheartedly. But I would sharpen those observations by noting that the announced changes appear to avoid the hard questions such as how to ensure that the Indigenous partners in joint ventures benefitting from the IPP — even when formally in control — are not co-opted or inappropriately induced to participate in business arrangements that allow mainstream businesses to access government contracting opportunities.

Removing these potentialities requires robust and coordinated regulatory oversight that to date has been absent, regular independent evaluations, and an acknowledgment that if the IPP is to be sustained, it must demonstrate that it is benefiting both the interests of First Nations business owners and the public interest more generally. The IPP if well designed and effectively implemented can be win/win; but without rigorous regulatory oversight, it can easily slide into lose/lose.

The record of the development of the IPP is a mingled yarn, good and ill together: the question the Minister’s announcement does not ask, let alone answer, is how much of the gold is real.

 

This post has been developed with the research assistance of Claude Sonnet 5

1 July 2026

 

 

 

How effective is the Commonwealth’s Indigenous Procurement Policy?

My mind misgives

Some consequence yet hanging in the stars.

Romeo and Juliet Act one, Scene four.

 

The ANAO has just released a performance audit (link here) with the unwieldy and somewhat opaque title Targets for Minimum Indigenous Employment or Supply Use in Major Australian Government Procurements — Follow-up. This audit deals with the ongoing management of the Indigenous Procurement Policy, which is invariably cited by Commonwealth Governments as a crucial and successful element in its policy approach in relation to Indigenous Australians.

In this post I focus on NIAA’s management of the Indigenous Procurement Policy (IPP), a central plank in the Government strengthening focus on Indigenous economic empowerment (link here).

I previously published posts on the IPP which assessed its performance in positive terms while warning against over-reliance on the single minded focus on commercial businesses as the core of economic development policy (link here and link here).

Here are some key quotes from the ANAO’s report (paragraph numbers are from the Report; footnotes have been removed; emphasis added):

            Background

2. The Indigenous Procurement Policy (IPP) was established in 2015 with the objective ‘to stimulate Indigenous entrepreneurship, business and economic development, providing Indigenous Australians with more opportunities to participate in the economy’. One of three elements of the IPP are the mandatory minimum requirements (MMRs), which are targets for minimum Indigenous employment and/or supply use for Australian Government contracts valued from $7.5 million in certain specified industries.  The National Indigenous Australians Agency (NIAA) is responsible for administering the IPP, including the MMRs….

Conclusion

… 9. Almost five years after the recommendations were agreed to, entities had partly implemented recommendations from Auditor-General Report No. 25 2019–20 Aboriginal and Torres Strait Islander Participation Targets in Major Procurements. Although the NIAA had improved guidance for entities and sought to increase MMR reporting compliance, a recommendation for the NIAA as the policy owner to implement an evaluation strategy was not completed. The NIAA has not demonstrated whether the MMRs are improving Indigenous economic participation. A risk related to the inappropriate use of exemptions was not managed. Recommendations intended to address the risk that reporting on MMR contracts is incomplete and inaccurate were partly implemented by audited entities. Reforms to the Indigenous Procurement Policy were announced in February 2025 without a clear understanding of the policy’s effectiveness….

…. Exemptions from Mandatory Reporting Requirements

16. Between July 2016 and September 2024, 63 per cent (valued at $69.3 billion) of all contracts recorded in the Indigenous Procurement Policy Reporting Solution (IPPRS) were exempted from the MRRs by relevant entities. The proportion of contracts exempted by entities from the MMRs has increased over time. …. The NIAA does not provide complete guidance on the use of exemptions, or assurance over the legitimacy of exemptions. The NIAA has not considered the strategic implications of exemption usage for the achievement of policy objectives….

In a box headed Effectiveness of the Mandatory Minimum Requirements, the ANAO make the following comments:

While the application of the MMRs is trending upwards, between July 2016 and September 2024, 1,475 contracts valued at $69.3 billion were ‘exempted’ by entities from the MMRs, often for reasons that are unclear. There is a lack of performance information and evaluation data that allows for the impact and outcomes of the IPP to be assessed. The NIAA’s public reporting on the IPP does not provide information on the MMRs’ effectiveness. It is unclear if the IPP’s objectives of stimulating Indigenous entrepreneurship, business and economic development, and providing Indigenous Australians with more opportunities to participate in the economy, are achieved. (emphasis added)

There is much more of interest in the report, albeit it is comparatively technical and thus somewhat inaccessible. While the Minister’s February 2025 media release (link here) announcing an expansion of the IPP’s targets aligns with the Government’s pivot to economic empowerment as its signature Indigenous policy focus, the fine detail in this report suggests that NIAA is a long way from being on top of the policy detail. The ANAO documents in considerable detail how the NIAA dropped the ball comprehensively on commitments made in response to previous Parliamentary Committee and ANAO reports and does not appear to have the internal mechanisms in place to ensure that the IPP will be effective in meeting its stated aims.  While increased ambition for the IPP’s formal targets is creditable, Figure 2.1 in the ANAO report (page 51) suggests that the announced increased headline targets for future years are still well below current actual performance at least in terms of the numbers of contracts, thus suggesting that the targets are not intended to stretch actual performance. Meanwhile, the Minister’s commitment to addressing ‘black cladding’ appears almost nonchalant. As she states in the media release mentioned above:

The Government will also work with regulators to tackle ‘black cladding’ – disingenuous conduct designed to gain access to programs like the IPP – and explore options to make it easier to report the practice.

Let’s be clear; black cladding occurs when non-Indigenous firms engage non-contributing Indigenous partners to front a commercial entity with the aim of winning contracts paid by the taxpayer that they would not necessarily win through a merit-based process. A more accurate definition of black cladding might read: ‘dishonest conduct designed to gain access to taxpayer funded contracts’. It has been an issue of concern for a decade (link here). Working with unnamed ‘regulators’ to ‘explore options’ to report the practice [to who?] reeks of rhetorical flimflam. The NIAA expand on this on their website where they state (link here) that

The NIAA will work with relevant regulators and support services to identify opportunities to make it easier for First Nations people to report black cladding that might amount to unlawful conduct and provide targeted education, guidance and support for First Nations business owners.

The problem here is that, by definition, black cladding involves the co-option of Indigenous individuals, often involving the provision of financial incentives. The suggestion that the regulatory approach to minimising black cladding should rely on or be based primarily on voluntary reporting by Indigenous people strikes me as both naïve and destined to fail.

The combination of black cladding (at unknown levels) and exemptions from the mandatory minimum requirements (perhaps we should just call them ‘optional’ minimum requirements….though even this term is a contradiction in terms!) valued at $69 billion and comprising 63 percent of all contracts under the IPP since 2016 (see Table 3.1 on page 56 of the ANAO report) together have the potential to eviscerate the effectiveness of the IPP program. Yet despite having agreed to an evaluation after the ANAO’s previous audit of the employment programs, and after undertaking preparatory work for the evaluation, NIAA cancelled the evaluation. The ANAO in footnote 92 (page 49) note that NIAA advised it could find no evidence of the decision not to proceed. Presumably no officer within NIAA was prepared to take responsibility for the decision. It just happened! One is tempted to ask where were the members of NIAA’s Indigenous Evaluation Committee (link here) while this non-decision was rolling out? Perhaps the NIAA Audit and Risk Committee (link here) should consider how the non-decision to cancel the evaluation was made and what impact it might have on the effectiveness of the IPP. I guess not proceeding with the former commitment to undertake an evaluation does have the advantage of making it easier for the Minister to state with supreme confidence, as she does in her February media statement:

Given its success so far, the Government is also making the IPP more ambitious…

One final issue worth noting relates to ANAO Recommendation Four (see paras 3.10 to 3.13 in the ANAO report) dealing with exemptions to the minimum requirements. In para 3.11, the ANAO recommended (inter alia) that:

To ensure exemptions are accurately recorded in the Indigenous Procurement Policy Reporting Solution, non-compliance with the Indigenous Procurement Policy can be appropriately identified, all applicable contracts are subject to the mandatory minimum requirements reporting and assessment process, and the Indigenous Procurement Policy is achieving its policy objectives, the National Indigenous Australians Agency:

(d) implement a risk-based assurance process to ensure that reported exemptions or exclusions are legitimate.

In its response to this part of recommendation four, the NIAA stated:

Not Agreed to part d – The National Indigenous Australians Agency does not believe it is appropriate for it to be assuring the implementation of elements of the devolved Commonwealth procurement framework by Commonwealth entities. The National Indigenous Australians Agency maintains that it is the responsibility of each Commonwealth entity to ensure it meets its own obligations under Government legislation and guidance, including the Commonwealth procurement framework

Yet the 2019 Order establishing the NIAA as an Executive Agency, signed by the then Governor General (link here), listed the functions of the NIAA as including:

                             i.        to lead and coordinate Commonwealth policy development, program design and implementation and service delivery for Aboriginal and Torres Strait Islander people; and ….

                            ii.        to analyse and monitor the effectiveness of programs and services for Aboriginal and Torres Strait Islander people, including programs and services delivered by bodies other than the Agency…

 

The IPP is the responsibility of the NIAA, and while it is a fair expectation that other agencies will meet their obligations under the program, it is squarely within the NIAA remit for it to set in place processes that ensure all agencies involved in the program are meeting their obligations. The NIAA should view itself as the key regulator oversighting the effectiveness of the IPP’s implementation across government.

 

Conclusion

 

The takeout from this sorry tale is threefold:

·         it confirms that in relation to Indigenous economic policy, the Government is more concerned with appearance over substance;

·         it demonstrates that NIAA does not have the capability to ensure that it keeps its written commitments to the ANAO and the Parliament; and perhaps most importantly,

·         it reveals that no one inside government (including the Minister who is ultimately accountable), let alone outside government, actually knows whether the Indigenous Procurement Policy is effective or not.

 

The IPP opens a new conduit for rent seeking by businesses across the whole spectrum of government activities, and while its objectives are worthwhile, it ultimately stands or falls on the quality of the overarching regulatory oversight by NIAA as the policy owner and all the mainstream agencies in the Commonwealth responsible for letting contracts. Unfortunately, this is not the only public sector activity where regulatory oversight is in short supply (link here).

 

In relation to the IPP, the Commonwealth clearly prefers to operate in a state of blissful ignorance, a prisoner of its own rhetoric and good intentions ― assuming we give them the benefit of the doubt. If the program is in fact ineffective, or even partially ineffective, and the Government’s assessment of its undoubted success is wrong, the losers are Indigenous Australians, and taxpayers more generally.

 

The Commonwealth, and particularly successive ministers for Indigenous Australians and the NIAA, should do better.

 

 

5 June 2025

 

Trade agreements and Indigenous policy: implications

The Government recently (4 March 2019) announced the finalisation of negotiations with Indonesia on a proposed trade agreement (link here and here), the Indonesia – Australia Comprehensive Economic Partnership Agreement (IA-CEPA).

The agreement is highly significant, as the following two paragraphs form the Minister’s statement (link here) indicate:

The deal marks a new chapter in Australia’s partnership with one of our closest friends and neighbours. Indonesia offers significant economic opportunities right on our doorstep. Our neighbour has one of the fastest-growing economies in the world, averaging five per cent growth over the past two decades.

Most predictions have Indonesia on track to be the world’s fifth-largest economy by 2030. With a population of 270 million people – an expanding middle-class – the world’s third-largest democracy and most populous Muslim nation – our agreement with Indonesia helps build economic prosperity for both our nations and the region.

The agreement is yet to come into force, as it requires further ratification steps in both Australia and Indonesia (link here).

The DFAT summary of the agreement (link here) notes, under the heading Services and investment, that:

Australia’s services and investment commitments in IA-CEPA lock in Australia’s existing open policy settings, similar to those in other trade agreements. These commitments include exceptions that preserve policy flexibility in sensitive areas such as: • public health and education • social services • culture and broadcasting • indigenous policy • maritime transport (emphasis added).

The text of the agreement (Annex II: Schedule of Australia) states, inter alia:

Trade in Services and Investment

Australia reserves the right to adopt or maintain any measure according preferences to any Indigenous person or organisation or providing for the favourable treatment of any Indigenous person or organisation in relation to acquisition, establishment or operation of any commercial or industrial undertaking in the service sector.

Australia reserves the right to adopt or maintain any measure with respect to investment that accords preferences to any Indigenous person or organisation or providing for the favourable treatment of any Indigenous person or organisation.

For the purpose of this entry, an Indigenous person means a person of the Aboriginal and Torres Strait Islander peoples.

Existing Measures: Legislation and ministerial statements at all levels of government including Australia's Foreign Investment Framework, and the Native Title Act 1993 (Cth).

Implications

I wanted to make just three broad points regarding these developments.

The first is to acknowledge the preparedness of Australian negotiators involved in the IA-CEPA to carve out an exception that will allow continued policy measures designed to support Indigenous inclusion in economic and commercial development.

Second, and of most policy significance, the negotiation of these provisions by the Australian negotiators is tangible demonstration that mainstream policy settings, and in this case, mainstream international policy settings, have an increasing potential to impact on Indigenous issues.

For example, one of the current Government’s most successful policy initiatives has been the Indigenous Procurement Policy. The Government has recently published new data on the performance of the program and adopted new targets (link here and here). I remain concerned that the IPP may operate in many cases to benefit non-Indigenous firms more than promote Indigenous business engagement (link here and here). The only evaluation of the program so far published by PMC (link here) noted:

It is acknowledged that business structures will continue to vary, and some arrangements will continue to raise questions about alignment with the ‘spirit’ or ‘intent’ of the policy. The qualitative data suggested that the 50 per cent ownership structures may not work in the interests of Indigenous business partners, and due diligence was required by all parties to ensure no disadvantage.

Notwithstanding these concerns, there is little doubt that the IPP has substantial potential and has already taken Indigenous business policy to new levels. In these circumstances, it is extremely important that Australia’s international trade agreements do not constrain the capacity to strengthen the Indigenous economic policy sector further.

Third, it follows on from point two that Indigenous advocacy bodies and peaks will increasingly be required to build their capability to engage with mainstream policymakers, including international trade negotiators, to ensure that Indigenous policy interests are protected. My guess is that the provisions in the IA-CEPA related to excluding Indigenous related policy measures are not the result of lobbying or advocacy from Indigenous interests, but rather have been included at the instigation of Australia’s negotiators to ensure that existing government policies are not adversely affected. This is positive as far as it goes, but provides little guarantee that in the future, Indigenous interests will be prioritised.