Where to next for government policy on Indigenous procurement?

The Department of Defence has exceeded its targets for contracts awarded to Indigenous Australian businesses by 600% in the latest data release on the government’s Indigenous procurement policy. Although this represents a doubling of contract value, from $300 million to $600 million, a House of Representatives committee report tabled in August suggests that consolidating the policy would push procurement towards further quality alongside volume.

The Indigenous procurement policy has been a key way to stimulate the development of First Nations enterprises by setting annual targets for the number and value of contracts awarded to Indigenous businesses in each federal government portfolio.

When the policy was introduced in 2015, Defence aimed to award 70 contracts to Indigenous enterprises; instead, it delivered 278 contracts amounting to $159.3 million that year.

In 2019–20, the department outstripped its target of 676 contracts, awarding 6,476 contracts to Indigenous businesses worth $610 million. Defence was by far the largest procurer of Indigenous business, followed by Health ($80 million) and Social Services ($72 million).

The Indigenous procurement policy has been a bright spot in the wider policy area of Indigenous affairs, where the complexity of vested interests, stigma and discrimination ensure that inertia is common and even minor changes are tremendously contentious.

There has been a flurry of announcements of Indigenous policy over the past few months. But, unfortunately, a common characteristic of these initiatives is the deferral of actual delivery on many programs. It’s a worrying sign that Indigenous economic and social development continues to be a second-tier priority.

The government announced in August that it would work towards a national roadmap for Indigenous skills, jobs and wealth creation, which would aim to provide a long-term commitment and organising framework to implement actions that increase economic opportunities for Indigenous Australians. It’s unclear, however, whether and how this is different from the Indigenous Reference Group on Northern Australia (whose recommendations to government have not been made public) or the Closing the Gap initiative, which was already meant to provide a framework for change.

In September, the government released a discussion paper on developing a digital inclusion plan, which would act on the triennial regional telecommunications inquiry that, since 2008, has identified an acute need for better telecommunications services for those living in rural and remote Australia.

In this context, Defence’s achievement, which involves actual delivery at levels beyond its commitments, is nothing to be sneezed at. With exponential growth in contract value, there are signs that Defence’s momentum won’t lose pace. Nonetheless, it’s important to consider ways in which its current commitment can be strengthened.

Earlier this year, the House of Representatives Standing Committee on Indigenous Affairs heard testimony from numerous First Nations people to understand the opportunities for economic development and employment for Indigenous Australians as well as the barriers.

The committee heard testimony on a host of issues, including about ‘black cladding’ (creating a management structure that satisfies the ownership criteria of the Indigenous procurement policy but where control of the enterprise may be vested in the hands of non-Indigenous managers). The committee recommended a series of random, independent audits of entities that have been awarded contracts to ensure that black cladding isn’t happening.

The committee recommended an investigation of how Indigenous businesses are defined under the policy. This would include consideration of alternative measures such as the proportion of Aboriginal and Torres Strait Islander people employed, how skills and training are transferred and how company profits are used to promote philanthropic causes. Many Indigenous businesses have sponsored young people through education pathways, including Baidam, which has funded cybersecurity qualifications, and Australian Expedition Vehicles, which has placed students from the Proud Warrior program.

Although the overall volume of contracts awarded to Indigenous enterprises is high, the average value of contracts is low compared with non-Indigenous businesses. This is a sign that Indigenous businesses need opportunities in business development and capacity building. The committee recommended expansion of Indigenous business hubs and business networking and of financing of Aboriginal and Torres Strait Islander housing and business loans. There are also opportunities in international trade and investment for the expansion of the Aboriginal and Torres Strait Islander business sector.

Wider issues include a ‘data shortfall’ in tracking the role of Indigenous businesses in providing employment. The Central Analytics Hub in the Department of the Prime Minister and Cabinet initiated a project in 2019 to improve the quality of labour force statistics for Indigenous Australians. However, the project was shelved because of the pandemic and bushfire season. When contacted by ASPI, the department reported that the feasibility of the project was limited by significant issues with data access.

Notwithstanding the many challenges of making Indigenous affairs part of the core business of Defence, there’s widespread senior executive support and an overall commitment to use scale effects to lift Indigenous communities via the business sector. This is largely a reflection of the fact that Indigenous businesses have substantially better employment outcomes than non-Indigenous businesses. The House Indigenous Affairs Committee’s inquiry found that the employment rate for Aboriginal and Torres Strait Islander people in Indigenous businesses is 60% higher than in other businesses.

Testimony to the committee showcased the ways in which Indigenous business owners are absolute experts in business and are building their capabilities while at the same time making a difference in communities by providing career options and second chances to young people. With some concerted government support, the next phase of Indigenous procurement is bright.

ASPI’s International Cyber Policy Centre recently hosted a roundtable on the future of the Indigenous procurement policy, featuring the recently appointed Defence Indigenous Champion Celia Perkins and a panel discussion with Australian Army Elder Lorraine Hatton, army veteran Edwin Jim Mi Mi, Bullroarers Co-Founder and Director Neal McGarrity, Michael McMillan of Australian Expedition Vehicles, and Darren Godwell, CEO of i2i Global.