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