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Small business is struggling to benefit from changes to procurement rules, says ASBFEO.
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Government contracts ‘in crowd’ keeps small business in dark
02 August 2023
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Small businesses feel shut out of government purchasing because the process is too hard to navigate or they are excluded from the “in crowd”, according to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
Ombudsman Bruce Billson said many small businesses were left in the dark about procurement opportunities because they lacked the right contacts or previous experience supplying to government.
They were also hampered by the high costs of tendering and left bewildered by a lack of feedback when they failed.
Mr Billson said ASBFEO is conducting an inquiry into the impact of changes to the procurement process introduced last July.
“Since beginning the inquiry in March, many small businesses have told us they feel shut out of the process or they simply find it too hard to navigate,” he said.
“They have low awareness about procurement opportunities unless they are already part of the ‘in crowd’ through existing relationships with procuring agencies, or previous experience in government procurement.”
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Government figures from 2021–22 revealed SMEs won $24.9 billion – less than a third – of the $80.8 billion in contracts awarded.
This was despite winning more than half – 55 per cent – of contracts by volume.
An ASBFEO issues paper, released today, highlighted last July’s changes to procurement rules which included the unbundling of major projects, right-sizing insurance requirements, allowing Defence to source directly from SMEs, and requiring 20 per cent of Commonwealth procurements by value be sourced from SMEs.
However, ASBFEO said many small businesses believed barriers to contracts remained.
“Stakeholders raised concerns about the awareness of the changes within government departments, and levels of education and training provided to procuring officers,” the paper said.
“While the changes were expected to increase SME procurement, our consultations suggest a focus remains on large businesses and familiar counterparties. Instead, SMEs are encouraged to participate in supply chains with large businesses.”
Mr Billson said the use of panels to award contracts was a particular source of frustration.
“Panels are a short list of providers that department can draw from to have work carried out up to a particular value,” he said. “Yet being on a panel does not guarantee work. Many small businesses have told us how they have been on panels for years and never been approached for a request to quote.”
“Small businesses also point to the high cost and investment of time required to tender, and lack of consideration of the opportunity cost by agencies.
“The provision of limited or no feedback when a tender is unsuccessful is also a source of bewilderment and vexation.”
There was also a requirement for “expensive insurances” just for the chance to tender, he said, with no guarantee of eventual work.
The deadline for submissions to the ASBFEO inquiry has been extended to 15 September and Mr Billson’s report will be handed to government in December.
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