Govt procurement changes on the horizon for Aussie partners

Govt procurement changes on the horizon for Aussie partners

New rules could give local IT providers cause to review their geographical footprint and sourcing processes

The government is set to plough on with changes to the Commonwealth procurement rules that may give some local IT partners reason to pay more attention to where their products and services are sourced.

The changes, which are on track to come into effect from early next year, come after independent South Australian Senator, Nick Xenophon, struck a deal late on 29 November with the Coalition government to give local businesses an advantage when competing for public projects.

Under the proposed new rules, which are set to take effect from 1 March next year, bidders on government projects worth more than $4 million must show how they are contributing to local employment and growing local skills – an Australian first, according to Xenophon.

Additionally, companies competing for government work will need to demonstrate how much locally-produced material they expect to source, while making sure that the materials used comply with Australian standards. They will also have to provide the whole-of-life cost of a project.

Further, the new rules mean that the regulatory framework involving labour regulations, including ethical employment practices, occupational health and safety, and environmental impacts must be considered in any procurement.

According to Xenophon, the proposed rules represent “the most significant changes to the way the Australian government purchases goods and services that this country has ever seen”.

“Until now, the Commonwealth government has been spending $59 billion on goods and services without having to consider compliance with Australian standards, employment, and environmental regulations, and the broader impact on the economy,” Xenophon said in a statement.

“Starting 1 March 2017, these new procurement rules will make a very real difference for Australian industry and jobs,” he said.

While many of the new rules are most likely to have an impact for bidding companies in verticals such as construction and the apparel industry, the local IT industry could come up against the changes if they bid for government work after March 2017.

More than a few local IT channel partners make use of offshore software development teams and other operational footprints in areas outside of Australia, while much commonly-used IT hardware is sourced from other markets to be re-sold locally.

Given that the measures are aimed at giving Australian providers greater power on an increasingly global playing field, the new rules could, in fact, work in local IT partners’ favour, even if it may give them reason to review their geographical footprint and sourcing processes.

"The updates ensure that contract decisions are informed by more complete information," said Minister for Finance, Mathias Cormann, in a statement.

"Potential suppliers to government will continue to be treated equitably and cannot be discriminated against based on their size, location or ownership. This is an important principle that ensures access by Australian exporters to overseas markets," he said.

There will be a Joint Select Committee of both Houses of Parliament to further examine the question of procurement and further reforms that can be moved.

The proposed changes are the just latest in a string of alterations set to affect the nation’s government procurement landscape, with the Assistant Minister for Digital Transformation, Angus Taylor, outlining his vision of the country’s procurement future at an event on 24 November.

A future platform for Australia’s IT procurement system should be able to “ingest and provide technology,” said Taylor.

“In this framework you would be able to build on Government platforms to provide services and solutions. These solutions may be based entirely or partially on high quality Government data,” he said.

In mid-October, the government’s ICT Procurement Taskforce kicked off. It is an initiative aimed at helping to overhaul the way the country spends its $5.6 billion annual IT investment dollars.

Meanwhile the creation of the national Digital Transformation Agency, which is set to take on the management of government-wide IT procurement, is likely to streamline the tender process and give smaller players a greater chance at bidding for public work.

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