Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Jac underwood.

Radio 2BS Bathurst

Subject: Procurement Inquiry

Jac Underwood

You would have heard in national news today that the Australian Small Business and Family Enterprise Ombudsman has launched an inquiry to examine the impact of reforms to Commonwealth procurement rules on small business. What does that all mean? Why don't we just welcome the Australian Small Business and Family Enterprise Ombudsman now. His name, Bruce Billson. Good afternoon.

Bruce Billson
Jac, how fab to be with you and your listeners.

Jac Underwood
How fab to have you. I know you were dancing out to that song before, weren't you?

Bruce Billson
Look, there was a little bit of rhythm just working its way out, but I thought I'd better keep a lid on it because this is serious stuff. This is serious money and serious opportunities for small and medium enterprises that we're keen to explore.

Jac Underwood
Okay. So, looking at 2021-22, the Australian Government awarded $80.8 billion in procurement contracts. What are you keen to find out with this inquiry? Why launch it?

Bruce Billson
Well, that's a big number. That's 81 thousand millions of dollars’ worth of works and services that are contracted out by the government. And the government recognises that small and medium and family businesses are an important component of our economy, and they try through what are called the procurement rules - that's the way in which it goes about tendering - to give small and medium enterprises a chance for a piece of that action.

Now, pleasingly in that last financial year, about $25 billion worth of those government contracts for works and services were won by small and medium enterprises. But what's been observed is that some departments do that well. Some make it extremely complicated. Some, it's so confusing you need to pay a consultant to navigate your way through the arrangements. And what the government's asked of me is to have a look under the hood, just to see how those rules are going, which departments are doing well, and whether there's some further steps that can be taken to make sure small and family and medium sized businesses have a chance to compete for that work, win that work based on value, and then the nation and the government benefits from that.

Jac Underwood
It seems strange that there would be a different experience for which department they're applying to.

Bruce Billson
And this is something that's a little bit confusing for small and medium sized businesses that want to offer their services or present some goods to those departments. They may have different ways of going about assessing them. There's a broad set of rules called the Commonwealth Procurement Rules. They're supposed to apply consistently across all of the Australian Government and its agencies. But they're updated from time to time and what can happen is those procurement professionals managing those projects may not be fully embracing ways of implementing them that could be really helpful.

There’re also things called panels. Now, panels are effectively a short list of providers that you can draw from to have work carried out up to a particular value. Otherwise, if it's over certain amounts, you have to go out to a tender, get multiple quotes. All those things represent the rules. Now, for a small business, putting the time and the energy and the resources into getting onto those panels or to even bidding for that work or in some cases being asked to have certain kinds of insurances and other things just so they have the chance to do the work - when work might not come - those are the sorts of things that we're having a look at.

Jac Underwood
What's the process as it stands with the tender process? Do you see that work is awarded to, I don't know, Joe's contracting because they've used them before, they've done the job before?

Bruce Billson
Familiarity is a bit of an element. There's a few things that are often said, and your listeners might not pick up how humorous this is, a lot of people say no public servant’s ever been fired by engaging one of the big advisory firms, you know KPMG, PwC, they’re names that just roll off the tongue. So that might be the safe way to go because no one's going to criticise you.

But the best way to go might be to get a consultancy that has deep and specific expertise but isn't one of those household names. How do they get that strength of their bid and their capacity to be considered in a risk-adverse environment were going with a big firm is probably the easiest and safest way to go? So that's part of it.

In other areas people are used to certain providers that have delivered good value and know the process and find comfort in that familiarity. But how does a new provider get into that space if the opportunity is not there for them?

And then in other examples, let's use Defence for instance, a big firm often referred to as a prime or a tier one - that's part of the jargon - might win that work to manage a military base, for instance. But in the contract, it actually says look, you've won the overarching contract but we're expecting you to use local contractors to fulfill a certain percentage of it. So those rules are all part of what's there. And for the average business who's not familiar with it, my goodness, it's bewildering. And so that's why we're having a look to see how we are refreshing and inviting small and medium enterprise that have something to contribute. And frankly, the benefits of having the Australian Government as a customer are quite significant. How do we make sure that opportunity and the benefits that arise from that can be made more broadly available?

Jac Underwood
You raise a good point though. Governments do employ consultancy firms an awful lot to do work, right? That's normal practice. But don't we pay government officials and bureaucrats to sit in departments and do this work? Why is there so much outsourcing?

Bruce Billson
Yeah, look, it's an interesting point. And to the credit of the current government, they've actually said, why do we use so many consultants? Surely a certain level of expertise should be within the public service. What can happen over time where there's a close focus on budgets of government departments and agencies, and in some cases a hard cap on the number of people that can be employed, if you're needing new capacity and there's not the flex in the budget to be able to employ someone directly, well you go out and grab a consultant.

So, the current government said, well, let's have a rethink about that. Are we thinning out the knowledge, the horsepower, and the policy skills within the permanent public service team by going out to consultancies too much? Or can we bring some of that back in house that bolsters the capability of the Australian Public Service and in some cases may represent a better value for money proposition as well.

Jac Underwood
Now, this was referred to you by the Minister for Finance, Katy Gallagher. When will you have some answers? What are the terms of the scope of the inquiry?

Bruce Billson
We've announced the inquiry, which I'm obliged to do under our legislation. We are looking to have a report to the Finance Minister by early to mid-December. So, there's a little way to go. What we're planning to do - and really this is a good chat, Jac, I really appreciate the time with you and your audience - we are planning to put out a discussion paper to actually unpick and describe some of these policy moving parts around procurement rules and all that, just so people have a good handle on what's there now, how it's working and what might be better for the future. So, your questions reveal that that'll be a good, worthwhile piece of work and that's our next step.

Jac Underwood
Can't wait to keep talking about it. Thank you, as always, for your time.

Bruce Billson
Always great to be with you and keep that rhythm going.

Jac Underwood
You too. See you, Bruce.

Bruce Billson
Bye, Jac.

Jac Underwood
The Australian Small Business and Family Enterprise Ombudsman there, Bruce Bilson, having a talk about the inquiry into Commonwealth procurement.