Published on the 20/11/2024 | Written by Heather Wright
Australian report and industry call for ‘urgent’ reform…
Australia’s government technology procurement policies have fallen out of step with international practice when it comes to supporting local industry, with a need for urgent reform.
A report by independent economic analysts Insight Economics, for Technology One, says despite recent reforms by the Albanese Government, Australia is falling behind its major trading partners, who have been more explicit and aggressive in supporting their local supply chains leaving Australian high-tech businesses in a ‘loss-loss’ situation.
“It’s time to give Aussie businesses a fair go.”
The Improving Evaluation of Economic Impact of ICT Procurement report highlights the importance of procurement as a tool for driving economic outcomes, noting that just two years’ worth of Federal Government spending on ICT is greater than the entire $15 billion investment in the new National Reconstruction Fund.
Given the size and criticality of the ICT industry, improving outcomes from ICT procurement activities and considering a broad range of economic and social impacts as part of the ICT procurement process can lead to much greater outcomes for Australia, it says.
International policies favouring local buying have also contributed to a rapid global consolidation of high-tech industries, leaving Australia at ‘serious risk’ of being left behind and reliant on overseas supply lines – a situation the pandemic has already exposed as high risk to economic and social stability.
A number of capabilities delivered by the tech sector, including cloud capabilities, cybersecurity and data security and payment systems, are increasingly essential to the functioning of the economy and ensuring the security of those capabilities is an increasingly important priority for the government.
Josh Griggs, chief executive officer of the Australian Computer Society, says ICT continues to be the defining enabler of Australia’s economic growth, yet the country’s highly sophisticated and world class technology sector is not adequately prioritised by government procurement processes.
“It’s time to give Aussie businesses a fair go so we can all share the benefits of a truly advanced, high tech 21st century economy,” Griggs says.
The report notes a range of initiatives from other countries, including Canada where a range of policies and programs have been put in place to support ‘domestic innovation’, Shared Services Canada, which procures IT operations, infrastructure and communication and workplace tech services for public service, reported that 65 percent of its contracts in FY2023 – valued at CAN$1.2 billion – were awarded to SMEs, with 99.6 percent of the value of those going to Canadian SMEs. Among its offerings are the Agile Procurement Process (APP 3.0) reforms and ScaleUp social procurement policy which aims to increase diversity of bidders by targeting minorities and micro and small businesses.
In the UK, reforms have also pushed the value of buying local, including requiring large contracting agencies to publish pipelines of future procurements to enable new suppliers – especially smaller players – to form consortia and prepare bids.
The report does note New South Wales’ ‘if not, why not?’ rule, announced in September, which mandates that NSW Government agencies engage with local NSW suppliers before going to tender for projects worth more than AU$7.5 million. If contracts are awarded outside of NSW, agencies will need to go through a ‘please explain’ process prior to the contract being awarded, outlining why a local supplier was not successful.
The report says reforms announced by the Albanese Government in the past two years are ‘a step in the right direction’ but need to go further and cannot be the end of the reform agenda.
It says while in theory, procurement practices should be valuing economic impacts to determine overall value for money to the taxpayer, in practice they tend to be narrowly focused on considerations of costs, and made without consideration of the wider economic, industry and innovation policy considerations.
“Where wider economic benefits have been considered, metrics have often been relatively simplistic, focused on jobs creation and expenditure data.
“There have been missed opportunities to recognise how enduring capability and competitiveness are developed, through the creation of innovation ecosystems, skills development (particularly skills relevant to sovereign capability and industry resilience), R&D investment, IP creation and export potential.”
Several Australian technology companies, including Macquarie Technology Group, Gilmour Space, Vault Cloud, Drone Shield, and the Australian Computer Society professional body, have used the research as a rallying point for a renewed call for an overhaul of government ICT procurement .
In line with the report’s recommendations, they’re calling for a new framework for evaluating procurement decisions, including a weighted scorecard approach, especially for smaller contracts, and an economic impact assessment for larger deals, making explicit the expected outcomes – something already done in large non-tech procurements.
“No major mining proposal, transport project or health infrastructure receives the green light without robust economic impact analysis but in ICT, major investment decisions are made in the absence of economic impact analysis,” the report says.
Successive governments have acknowledged the need to improve consideration of wider economic impacts, but a lack of strategic capability within the Australian Public Service, risk aversion and a ‘systemic failure to vaule innovation’ have stymied progress.
“While substantial improvements in guidance have been made for the valuation of economic, social and environmental benefits in ICT procurement, more can be done to better support implementation to ensure effects are not undervalued simply because they are complex,” the report says.
