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Queensland Procurement Strategy needs work

July 31, 2017

On the weekend the State Government released its Queensland Procurement Strategy and Policy (QPP) or the aptly named “Buy Queensland” procurement policy.

Each year the Queensland Government spends more than $14 billion on goods and services in delivering frontline services. A further $4 billion of capital expenditure is spent to build and maintain infrastructure assets such as roads, schools and hospital infrastructure.  In short the strategy and policy included:

  • Applying a local benefits test for all significant procurement where a weighting of up to 30 per cent may be applied to local suppliers within 125 km;
  • Inviting one regional and one Queensland supplier to quote or tender for every opportunity, where possible;
  • Delivering a more visible pipeline of opportunities for small and regional business and social enterprises; and
  • Using local contractors and manufacturers, where possible, in significant projects valued at $100 million and above.

Queensland businesses have raised significant and ongoing issues with the pre-existing procurement framework in Queensland, namely that they are not able to easily assess, access and participate in procurement opportunities.  Indeed this a perennial issue and there have been at least three major ‘policy announcements’ in the last several years alone.

As a former Committee Member of the Commonwealth Games Embracing 2018 Committee I have considerable familiarity with the difficulties that small businesses experience in procurement programs.

Local small businesses typically struggle to compete against larger national and international companies, due to their size, inability to complete complex applications/tender processes and the substantial time and effort required to do so without a guaranteed outcome. There are also concerns regarding the excessive conditions placed on potential contractors and many businesses are unable to meet project tender requirements.

At first glance the QPP looks pretty good particularly in raising awareness of opportunities but as I delved deeper there are a number of major concerns and I believe it can be considerably improved through the following:

  • Address the Scale Issue: The biggest issue as to why a small business loses a tender is not cost but scale.  Indeed most small businesses never even tender in the first instance as most contracts are simply too big for them to ever be able to consider.   The QPP rightly identifies breaking down tender packages to entice small businesses however more work needs to be done to encourage businesses to cluster together to access larger tendering opportunities.  Competitors can in fact be collaborators and joint ventures to win work.  This was overlooked.
  • Industry Capability Network: I note the Industry Capability Network was also not mentioned.  Maintaining a database of local suppliers interested in accessing major projects’ supply chains is crucial but feedback on the ICN leaves considerable room for improvement. 
  • Increase usage of private sector in public service delivery: The private sector is often able to deliver higher quality of services, greater value for money, operational efficiency and better customer service than many State Government entities.  More government service delivery should be outsourced.  That is we should grow the pie rather simply resize pieces of it between big and small business.
  • Reducing documentation, red tape and duplication: More needs to be done to improve the procurement process including assisting businesses from the agency or project tender manager and better managing reporting requirements and reducing documentation required.  There needs to be a matching of documentation with risk. 
  • Empower Schools and Hospitals: Give greater autonomy to Principals and Hospital Boards for their own procurement needs.  This ensures for example that local maintenance of facilities or stationery can be sourced locally.
  • Greater Transparency: Queensland businesses support increased transparency in the awarding of Government contracts to promote fairness, equity and learning of lessons.
  • Greater Accountability: Governments are great at making announcements but not so good in being held accountable to them.  A publicly available metric framework needs to be reported on with a core KPI being ‘Queensland small business as a percentage of total procurement spend’.  This would enable benchmarking across time and across jurisdiction to assess how we are tracking.

In addition to the above I am concerned with two red flag issues in the QPP.  They are the inclusion of a section relating to 'ethical businesses' and implications stemming from Australia's Free Trade Agreements.

Firstly in respect to ethical businesses the QPP states:

“As a significant investor in our state, the Queensland Government has the ability to lead by example. Value for money needs to consider more than just price paid. Our spend can also help to deliver on important economic, social and environmental objectives.“ 

Wrong! The State’s procurement policy is not the place for achieving secondary agendas to appease union or environmental interests. It is solely about purchasing goods and services to efficiently and effectively deliver roads, education, health, law and order and public transport.  This will undermine 'value for money' for the taxpayers of Queensland not to mention creating more barriers for businesses to participate.

Secondly the State Government’s policy is clearly at odds with the Australian New Zealand Government Procurement Agreement (ANZPA) and other FTAs.  In announcing the QPP the Premier states:  

We are going our own way. We will ignore restrictions that go against our interests. Cabinet has agreed the State Government would no longer be constrained or bound by free trade agreements that have seen jobs go off-shore or interstate.

The objective of the ANZPA is to create and maintain a single ANZ government procurement market by ensuring the opportunity exists for all suppliers to compete on an equal and transparent basis for government contracts and more specifically by ensuring the absence of preference schemes and other forms of discrimination in government procurement, based on the place of origin of goods and services.

The extent of any repercussions of Palaszczuk’s QPP is largely dependent upon how other Countries react.  However, given that Queensland is a net exporter and our exports are worth considerably more than State Government procurement  we have more to lose than we have to gain. When it comes to procurement the State Government’s primary objective must be to deliver maximum outcomes for the taxpayer’s dollar and not to jeopardise our exporters. As a secondary responsibility where all things are equal then the State Government can give preference to Queensland businesses. 

Rather than grandstand and say the State Government will provide local suppliers from 1 September 2017, a weighting of up to 30% on any tender we should instead focus on the above seven points and remove the consideration of 'ethical businesses'.  This I believe will deliver a greater benefit to Queensland small businesses.

 

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