Australia’s smaller government IT suppliers could be set to win more public sector deals following a new report by Innovation and Science Australia (ISA) calling for a full third of Federal Government contracts to be awarded to small and medium-sized enterprises (SMEs).
Innovation and Science Australia (ISA) is an independent body responsible for researching, planning, and advising the Government on all science, research and innovation matters.
It was tasked by the Federal Government to conduct a performance review of Australia’s innovation, science and research system, and develop a 2030 strategic plan, which was released on 30 January.
The plan, Australia 2030: Prosperity Through Innovation, lays out 30 recommendations to the Government aimed at helping to make Australia a top tier innovation nation by 2030.
Among the recommendations it suggests is the establishment of a small and medium enterprise (SME) procurement target of 33 per cent of all contracts by dollar value being awarded to Australian SMEs by 2022.
Additionally, it suggests that the Australian Government Department of Industry, Innovation and Science should report on progress towards the recommended target annually.
If the Federal Government decides to adopt the recommendation, it would see the nation’s public sector double down on its existing efforts to procure IT services from smaller players.
Under Australia’s former Assistant Minister for Cities and Digital Transformation, Angus Taylor, the Federal Government unveiled sweeping IT procurement changes that saw a pledge to inject an additional $650 million – or 10 per cent -- annually into local tech companies that fall into the SME category.
The changes also saw a $100 million cap placed on IT contracts awarded by Federal Government entities to external IT suppliers.
However, figures provided by the Department of Finance in late 2016 showed that, across the board, SMEs accounted for roughly 24 per cent of the Government’s overall procurement contract value.
This is despite SME’s claimed 61 per cent of the number of total contracts, with 42,737 deals awarded to smaller suppliers over the course of the year.
Indeed, ISA’s report suggests that SME participation in Government tenders, when measured in respect to contract values, is steadily decreasing, from 39 per cent in 2011–12 to 24 per cent in 2015–16.
As such, the report suggests that more be done to engage SMEs at all levels, recommending that there should be an increase in the use of innovative procurement strategies to improve outcomes and optimise government operations.
It goes on to say that this goal could be achieved by establishing programs that promote, track and report on progress towards procurement practices that drive innovation; developing contractual frameworks to facilitate procurement from start-ups and young firms.
At the same time, the ISA advocated for the creation of a ‘government as first customer’ program designed for high-growth firms, including start-ups, to be trialled by two of the major procurement departments before a rollout across all government departments.
“Australian governments’ economic activity generates approximately one-third of the nation’s GDP,” the report stated. “There are opportunities to strategically use this expenditure to promote innovation through procurement, and to trigger more economic spillover benefits from existing major projects through strategic policy and project design choices.
“Supporting young, fast-growing firms through procurement is strategic because these firms are outsized contributors to innovation, jobs and growth,” it said.
The report also notes that the Australian Government ranks just 70th out of 140 countries on how well its procurement system fosters innovation.