Chapter 3
Commonwealth procurement and the
non-discrimination principle
3.1
During the inquiry witnesses and submitters raised concerns about the
content and application of the Commonwealth Procurement Rules (CPRs). These
issues can broadly be categorised as issues about:
-
the application of the non-discrimination principle; and
-
the interpretation of the value for money criteria.
3.2
The application of the non-discrimination principle is discussed in this
chapter and the interpretation of the value for money criteria is covered in
Chapter 4.
Application of the non-discrimination principle
3.3
The Department of Finance (Finance) explained that the CPRs incorporate
Australia's commitments pursuant to free trade agreements, including the
Australia-United States Free Trade Agreement (AUSFTA):
These commitments provide access for Australian suppliers to
the government procurement markets of other countries, whilst also placing
obligations on the Commonwealth Government to open up access to our procurement
market. These commitments limit the extent to which the Commonwealth
Government can preference local suppliers.[1]
3.4
The application of the non-discrimination principle in Commonwealth
procurement processes was reflected in evidence to the committee. For example, the
Department of Human Services (DHS), in discussing the arrangements for the
procurement of paper, stated:
DHS conducted these procurements in accordance with the
requirements of the [CPRs] and other relevant Commonwealth policies. These
requirements, based on Australia's obligations under international free trade
agreements, necessitate all government procurement to be non-discriminatory and
for all suppliers to be treated equitably based on their commercial, legal,
technical and financial abilities and not discriminated against due to size,
foreign affiliation or ownership, location, or the origin of goods or services.[2]
3.5
Similarly, the Clerk of the Senate, Dr Rosemary Laing, also referring to
the procurement of paper by the Department of the Senate, noted:
Because of the department's focus on the best value for
money, it does not discriminate for or against Australian made products. This
is in line with the approach espoused in the CPRs that the products or services
must be assessed on the basis of their suitability for the intended purpose,
rather than solely on the country of origin.[3]
3.6
Ms Carol Mills, Secretary of the Department of Parliamentary Services,
also referred to this issue in evidence at the Additional Estimates 2013-14
hearings, when questioned as to whether there was a requirement that the flag
to fly above Parliament House is made in Australia:
All our tenders, regardless of what they are for, comply with
Commonwealth tender processes and legislation, which under free trade means
that we can specify quality, we can specify design, we can specify value for
money and other criteria; we cannot specify place of origin.
...
We have a philosophy that wherever possible we should strive
to have Australian products, but we cannot breach Commonwealth guidelines in
doing our procurement.[4]
Support for policies promoting
local preference
3.7
Witnesses expressed concern that Australia's commitment to the
non-discrimination principle was idealistic and that other countries were
taking steps to protect their domestic industries. For example, Ms Lynne
Wilkinson, CEO of The Australian Companies Institute Limited (AUSBUY) argued:
Every other country looks after itself first, but we seem to
be the ones, at our expense, who look after the international obligations. We
are purists and idealists. In terms of the government procurement process,
there is very often laziness, lack of integrity, naivety and lack of
accountability in that process. So they are the things that we would like to
see changed, and it really needs to come from the top. The Commonwealth
government needs to say, 'We're going to support local businesses.' We have
never signed any free trade agreements under which we have not failed and
suffered. We signed a free trade agreement with [America] in 2005; we still
have tariffs for another 11 years with that. So we cannot say that we are very
smart. We are very smart at giving away what we have, but we are not very smart
at building what our people have built for the last 226 years.[5]
3.8
Ms Michelle Melbourne, Chair of the Canberra Business Council, outlined
the experience she has had with her own IT company, Intelledox, in US
procurement processes. She contended that while Australia follows the rules of
the AUSFTA, the United States (US) proactively advocates for its local
industry:
[I]n my experience, and we certainly have a lot of experience
in the US and in the face of the free trade agreement in that context, it is...not
an even playing field for our company over there; it just isn't. So [Australia]
mind[s] our p's and q's and follow[s] the rules with the free trade agreement,
but the US do not do that. They are fiercely parochial. Each state and
procurement body that you deal with over there asks you: 'Who is your local
partner? What are you going to leave behind? What are the skills that you're
bringing? What are the innovations? Are you working with a veteran-owned company? Are you working with a company that is owned by African
American directors? Are you working with a company that is owned by a director
with a disability?' They are asking all of these questions, which is about
driving behaviour. They are policy settings that are either state based or
nationally based that drive me, as an overseas supplier, to engage with local
industry.[6]
3.9
Some evidence focussed on US legislation which contains 'buy American'
provisions. For example the Buy American Act 1933, which provides
preference for domestic components in US federal government procurement:
The Buy American Act applies to direct purchases by the [US] federal
government of more than $3,000, providing their purchase is consistent with the
public interest, the items are reasonable in cost, and they are for use in the United
States. The act requires that "substantially all" of the acquisition
be attributable to American-made components. Regulations have interpreted this
requirement to mean that at least 50% of the cost must be attributable to
American content.[7]
3.10
At the public hearing, Mr John Brent, a Board Member of AUSVEG, referred
to the operation of the Buy American Act and argued:
I would suggest we need to look towards other countries as to
how they go about looking after, firstly, people within their own bounds...
...I believe our focus should be on what is best for Australia.
What can we do in the best interests of our 22 million-odd people? What can I
do, representing 38,000 people in my community? In my community we have
implemented a 'buy local' week and it has gone from strength to strength over a
period. It is about trying to engage with our community to ensure that we give
them better knowledge and a better understanding of what we can do locally.
Just as we are doing at a local government level to try to create interest in
product, I believe we need to try at both state and federal levels to do our
best to encourage people to buy our own product.[8]
3.11
The AUSVEG submission noted the Buy American Act 'provided adequate room
for Free Trade Agreements that are mutually beneficial to continue to operate
with Presidential sign off'.[9]
3.12
The Construction, Forestry, Mining and Energy Union (CFMEU) referred to the
American Reinvestment and Recovery Act of 2009 which was introduced
in response to the Global Financial Crisis and was designed to stimulate
economic activity. The Reinvestment and Recovery Act specifically provided that
none of the funds appropriated under the Act may be used for a project unless
all of the iron, steel and manufactured goods used in the project are produced
in the United States. The 'buy American' provision is to be applied in a manner
consistent with US obligations under international agreements.[10]
The CFMEU argued these 'buy American' requirements are an 'indicative of a way
forward for the Australian Government'.[11]
3.13
In answers to questions on notice, Finance emphasised that the US
legislation made specific exemptions for its obligations under free trade
agreements:
The Buy America[n] Act of 1933 relates to the
procurement of goods by the US federal government. The US has waived the Buy
America[n] Act for procurements covered by AUSFTA (and its other international
agreements).
Similarly, Australia cannot apply legislation or policies
which preference local suppliers to procurements covered by AUSFTA (and our
other international agreements).[12]
3.14
This point was reiterated at the second public hearing:
[The Department of Finance has] conclusive evidence that [the
'Buy American' legislation does] not apply to countries that are signatories of
free trade agreements with Australia, so they do not apply to Australian
arrangements.[13]
3.15
Australia has previously implemented policies which protected local
industries. Mr Tony Butler noted that Australia's last preferencing scheme was
the 'Commonwealth Purchasing Preference Margin' – an arrangement which provided
a margin of preference against imports for locally made goods. This scheme was
abolished in 1989 after it was found to be ineffective, affecting 'the outcome
of only 107 contracts with a value of about 0.1% of total Commonwealth
purchasing expenditure'.[14]
3.16
Dr Nick Seddon, a lawyer and academic specialising
in government contracts, observed that policies promoting local preference
conflict with the purpose of free trade agreements:
It is a fundamental principle of free trade agreements that
trade should be subject to unfettered competition so far as possible. Local
preference is therefore inimical to this principle and is the specific target
of prohibition.[15]
3.17
Dr Seddon stated that in his opinion, aside from the specific exemptions
to the AUSFTA, the Commonwealth government is not free to develop 'buy
Australian' policies. If the government were to develop such policies, it would
risk the United States invoking the dispute resolution procedures under the
AUSFTA.[16]
Committee view
3.18
The committee notes the evidence from Finance that 'Buy American'
provisions in US legislation do not apply to Australia because of the operation
of the AUSFTA. However, the Department of Finance has failed to address the
other question which was asked of it in this context, which was whether
Australia could put in place preferencing schemes, which take into account
Australia's free trade obligations, along the lines of the Buy America
provisions. The committee is therefore seeking a detailed explanation of the
barriers to putting such a scheme in place.
Recommendation 2
3.19
The committee recommends that the Department of Finance provide a
detailed explanation of the barriers to developing a preferencing scheme, which
takes into account Australia's free trade obligations.
Need for a level playing field
3.20
One of the reoccurring arguments advanced during the inquiry was that the
application of the non-discrimination principle disadvantaged Australian
manufacturers and producers. Witnesses and submissions contended that
Commonwealth procurement is not a 'level playing field' because Australian
businesses are subject to more rigorous regulation than their overseas
competitors.
3.21
Mr Wayne Gregory, Managing Director of Carroll & Richardson
Flagworld, explained:
[W]hile the Commonwealth procurement rules seek to be
non-discriminatory, in reality they offer a free kick to many importers. We do
not compete with overseas suppliers who want to sell here; they sell through
local importers. Obviously, the manufacturer overseas does not have to comply,
so it is not a level playing field with regard to legislative requirements,
regulations, standards, fair work, income tax, payroll tax, superannuation, and
occupational health and safety. Clearly the local importer has to, but the
local importer may well be two people and a little factory out the back.[17]
3.22
Similarly, the Australian Industry Group's submission argued:
Local producers are required to produce to stringent
Australian and International Standards and nonconformity or false claims of
conformity are much more rigorously enforced than is the case with many
imported alternatives. This puts local businesses at a disadvantage.[18]
3.23
Mr John Brent, a Board Director of AUSVEG, used biosecurity as a
specific example of how Australian food producers are disadvantaged:
[T]here is discrimination at the wharf, at the port, where biosecurity
does not apply the same level of scrutiny to the imported product as it does to
the Australian product. We know the integrity of the Australian food product
and I think it measures up quite well, and yet we have imported product that
does not go through the same regime.[19]
3.24
In its submission, SPC Ardmona outlined the testing that Australian food
producers undertake:
Australian food products are produced to the highest quality
standards ensuring product safety. Farmers test their soil, water and fruit for
such things as pesticides and heavy metals. These same strict standards may be
an implied requirement for products imported into Australia, but evidence of
non-compliance of imported products to the Australia and New Zealand Food Standard
Code suggest that testing procedures are not widely being used...Testing
procedures add cost to Australian manufactured products, but ensure the safety
of consumers.[20]
3.25
The Furniture Cabinets Joinery Alliance outlined the types of
regulations that it viewed as creating a disadvantage to its industry:
Australia has in place a range of regulations, codes and laws
necessary to provide protection to employees, consumers and the general public.
The [Furniture Cabinets Joinery] industry supports the need for these
regulations and codes however it is incongruous to have such a domestic
regulatory framework if the Government, in its own purchasing decisions, does
not require competing imported product entering Australia to abide by similar
principles.
Commercial furniture, cabinet and joinery manufacturers
cannot compete with countries which have virtually no environment and safety
regulation and policies and thus companies operating in them need not invest in
capital and processes to prevent this occurring. Similarly, less stringent
labour laws and employee protections – such as annual leave, superannuation
etc. – place Australian producers at a competitive disadvantage to these
countries.[21]
3.26
Mr Julian Mathers, General Manager External Affairs, Australian Paper,
drew out the effects of more stringent standards Australian businesses complied
with, which increased costs and reduced competitiveness:
On the cost side of our business, we have some things that we
do that we are proud to do as an Australian company in regard to workplace laws
and occupational health and safety as well as compliance with environmental
laws and other things that are different from the rest of the world—it is good
and part of Australia and part of the high standards that we have here, but they
are different from the rest of the world.[22]
3.27
In its submission, the Australian Companies Institute Limited (AUSBUY) set
out a number of case studies of 'brand substitution' in procurement processes,
that is, where locally manufactured goods which conformed with Australian
standards, had been replaced by overseas sourced goods which did not meet
Australian standards.[23]
Ms Lynne Wilkinson, the CEO of AUSBUY contended:
The management of the process needs to be much more closely
scrutinised and there needs to be much more accountability within the
management of that process—spot checks to see whether it meets the standards.
If it doesn't, the people who have allowed that through will be the ones
accountable.[24]
3.28
The Australian Services Union and the Finance Sector Union proposed that
Commonwealth procurement policy should include a requirement that overseas
suppliers or sub-contractors comply with the same standards as domestic
suppliers.[25]
3.29
The Australia Council of Trade Unions supported a model where overseas
tenderers demonstrate compliance with international standards:
In the event of contracts being awarded offshore, successful
tenderers should be required to demonstrate compliance with the relevant
employment standards contained within the [United Nations] human rights
instruments, the [International Labour Organisation] Conventions and, where applicable,
the [Organisation for Economic Co-operation and Development] Principles for
Multi-National Enterprises. Opportunities should be afforded to stakeholders to
verify such compliance via appropriate compliance mechanisms.[26]
3.30
A number of witnesses emphasised that they were not seeking a
'protectionist' policy in relation to procurement.[27]
Mr Travis Wacey, National Policy Research Officer with the CFMEU, stated:
We do not want special treatment necessarily, but we feel
that if we do have a level playing field we can compete with the best.[28]
3.31
Dr Seddon advised the committee that it would be possible to include in
tender documents a requirement that tenderers adhere to relevant standards, for
example that wood products must be sourced from sustainable forests. However,
Dr Seddon indicated that he is unsure of the extent to which that type of
specification is happening:
I know that it is done sometimes, but I do not think it is
systematic. It is a bit sporadic. It depends on the type of purchase,
obviously. But it would be possible to, in a sense, raise the standard so that
you as a tenderer must conform to these standards. Australian companies then
would not be disadvantaged.[29]
3.32
In terms of whether overseas tenderers would have a legitimate complaint
if such specifications were included in tender documentation, Dr Seddon stated:
There would be a remote possibility that a foreign company
could then say, 'You are now erecting a form of barrier to trade.' This has
happened in the past with lots of imported products. They claim that it is not
a fair competition because Australia erects a barrier based on health...It is a
possibility that if Commonwealth agencies insisted on certain standards
somebody could complain. They would have to complain in the international forum...
But my view about that is that if the Australian government
wants to set a high standard then it is perfectly free to do so. The chance of
a challenge occurring under the processes of the free trade agreement is
extremely low, I would think. Secondly, I think Australia could stand up and say,
'This is legitimate standard setting. It is not discriminating against foreign
companies. All they have to do is meet the standard.'[30]
3.33
In answers to questions on notice, Finance responded to the argument
that overseas suppliers were at an unfair advantage because they are not
required to meet the same policies, regulations and standards as Australian
manufacturers:
It is inaccurate to say that overseas suppliers are not
required to meet the same policies, regulations and standards as Australian
manufacturers. Procurement contracts can only be awarded to suppliers who
satisfy any relevant Commonwealth policies, including regulations. In
prescribing standards, Commonwealth agencies must do this in a
non-discriminatory manner and may use Australian standards. These requirements
are captured in the Commonwealth Procurement Rules and reflect the Financial
Management and Accountability Regulations 1997 that the spending of public
money cannot be approved where it is inconsistent with Commonwealth policy.
Hence, if an overseas supplier is not compliant with a particular standard as
specified in tender documents, the agency is not required to award a contract.[31]
3.34
At the second public hearing, Mr John Sheridan, First Assistant
Secretary, Technology and Procurement Division, Business, Procurement and Asset
Management Group, Department of Finance, explained:
[A] procuring agency can apply the qualifications or the
requirements that they might have for a particular procurement of any
reasonable amount. So they might say not that you have to have an Australian
certification because that may well discriminate against an overseas supplier,
but it would be quite legitimate to say you should have an Australian
certification or the equivalent or prove the equivalent. That would be
reasonable in those circumstances and meet our Commonwealth procurement
requirements and of course free trade agreement requirements.[32]
3.35
In terms of agencies' abilities to test whether overseas suppliers did,
in fact, meet Australian regulations and standards, Mr Sheridan stated it is
open to agencies to do their own testing as to whether goods meet Australian
standards or to get independent testing done, however '[t]hat would be a matter
for the procuring agency'.[33]
Current assistance programs
3.36
While witnesses and submissions considered that other countries did a
better job in providing for local preference in government procurement, there
was also consternation that the current government programs which provide
support for Australian small to medium enterprises (SMEs) might be under threat.
AIP Plans
3.37
In its submission the Department of Industry explained the Australian
Industry Participation (AIP) Plans:
Since 1 January 2010, tenderers for large Commonwealth
procurements (over $20 million) have been required to prepare and implement AIP
Plans. These plans outline actions a tenderer will take to provide Australian
suppliers, especially SMEs, with access to supply opportunities in the project.[34]
3.38
Since 2012 the requirements for AIP Plans have applied to Commonwealth
grants as well as to Commonwealth procurements over $20 million.[35]
3.39
The AIP Plan policy applies to all Financial Management and
Accountability Act 1997 agencies, and has also been adopted by some of the Commonwealth
Authorities and Companies Act 1997 bodies. However, it does not apply to
the Department of Defence, which supplies its own policies to provide for
Australian industry participation in defence procurement projects.[36]
3.40
The Department of Industry outlined the objectives of an AIP Plan:
Demonstrate how full, fair and reasonable opportunity will be
provided to Australian SMEs to supply goods and services to a project;
Endeavour to maximise opportunities for Australian SMEs to
participate in all aspects of a project[;] and
Make large procuring entities aware of capable Australian
suppliers and assist them to be competitive both nationally and overseas.[37]
3.41
Mr Michael Green, Acting Head of the Industry Division, Department of
Industry informed the committee that as at 28 February 2014, there had been six
AIP Plans approved for government grants over $20 million.[38]
3.42
Dr Tom Skladzien, National Economic Adviser for
the Australian Manufacturing Workers' Union (AMWU), explained the benefits of
AIP Plans:
[T]he recent AIP plans are really good...because they allow
competitive firms to win work in a situation where they otherwise would not
because they just do not have the information. The large investment programs
are run by global procurement companies who have established supply chains and
unless you force them to open up their procurement decisions then they just do
not, even if it [is in] their commercial interests. They do this for the same
reason that I go to the same barber every week...It is not because he is the best
barber in the city but because I have a relationship with the barber. The same
thing determines a lot of the procurement work on large investment projects:
they have relationships with suppliers and they just go back to the same
supplier even if there is a more competitive, better quality, domestic supplier
available. AIP plans essentially open up that decision and force the firm to
make a decision, where it would otherwise be a decision by default.[39]
3.43
Ms Melbourne, of the Canberra Business Council, also supported policies
which encouraged industry collaboration:
[E]ssentially it is about that industry participation, where
the large and the small coexisting and collaborating and partnering is what is
the accepted culture. We do not want to exclude anybody from the supply chain.
The policy settings must drive behaviour of the big guys to be pulling along
and including the smaller guys, and vice versa—that is, that the smaller guys,
who are the subject matter experts largely, are not locked out of influencing
or participating with the big guys.[40]
3.44
Specifically in relation to AIP Plans, Ms Melbourne observed:
I know there are some fabulous federal programs. There is the
Australian Industry Participation Plan, which we have had a lot to do with, but
it has no teeth. Unfortunately, it needs more life. We need to make sure that
it does not lose its funding...[41]
3.45
Ms Suzanne Campbell, Chief Executive Officer of the Australian
Information Industry Association, referred to the example of small companies in
the ACT working collaboratively with multinational companies:
The global multinationals say, 'We can rely on our own [research
and development] facilities to present us with innovation, and we know that
will come, but it is a matter of time. So it is better for us to turn to the
local environment and incorporate smaller, more agile, innovative companies in
our solution, and they represent to government a package of solution[s] and are
successful'. Those individual companies by themselves would not have been
successful.[42]
3.46
Mr Green, representing the Department of Industry, informed the committee
that AIP Plans were being continued. However, it appears that this continuation
is subject to an ongoing review:
We are continuing to look at a range of obligations that are
imposed on business as part of the government's agenda to look at regulatory
costs on business, so it is one of a number of things that are being looked at
in terms of obligations and costs on business.[43]
3.47
The Portfolio Budget Statements 2014-15 for the Industry Portfolio referred
to an evaluation of 'the costs, benefits, appropriateness and effectiveness of
existing [Australian Industry Participation] policies and programmes' to be
completed in 2014.[44]
The 'Opening up opportunities through Australian Industry Participation'
program does not appear to have been allocated any funding for the forward
estimates and is listed as a 'closed/closing programme' in the Portfolio Budget
Statements
2014-15.[45]
At the June 2014 estimates hearings, the Department of Industry confirmed that
the 'Opening up opportunities through Australian Industry Participation' measure
is only funded until 31 December 2014.[46]
Enterprise Solutions Program
3.48
In early 2013, the former government announced the establishment of the
Enterprise Solutions Program. The program is intended to:
[H]elp small to medium companies develop innovative solutions
to problems identified by government agencies...The Enterprise Solutions Program
will assist companies overcome key barriers to providing solutions for
government agencies, including: limited access to finance; limited access to skills
and expertise; the cost of early product development; and uncertainty in market
demand.[47]
3.49
The Enterprise Solutions Program was allocated $24.6 million over five
years. The program was anticipated to involve three stages:
-
a call for proposals from government agencies for unmet
technological needs and the establishment of 'Technological Requirement
Specifications' (TRS) which Australian companies will be consulted for solutions;
-
a call for feasibility studies on potential solutions to unmet
government technological needs will be made to Australian industry with competitive
grants of up to $100,000 for feasibility studies of up to three months to meet
a specific TRS; and
-
assessment of feasibility studies for specific TRSs will be
assessed for a proof of concept grant. If successful, proof of concept grants
of up to $1 million will be provided to companies to undertake further design,
prototyping and testing a proposed solution for a period of up to 18 months.[48]
3.50
At the public hearing in March, Mr Ken Pettifer, Head, Business
Competitiveness and Trade Division, Department of Industry, noted that the
Enterprise Solutions Program had been designed but never rolled out and was, at
that stage, under review by the government.[49]
3.51 Both the Australian Council of Trade Unions and the Australian
Manufacturing Workers' Union supported continuation of the Enterprise Solutions
Program.[50]
3.52
Following the announcement of the 2014-15 Federal Budget, the Enterprise
Solutions Program will no longer continue.[51]
Along with the closure of the 'Opening up opportunities through Australian
Industry Participation' program, the discontinuation of the Enterprise
Solutions Program is yet another measure designed to assist Australian industry
to work with government which has been cut by the current government.
Committee view
3.53
The committee supports the intent of bilateral free trade agreements,
where such agreements provide both parties with unimpeded access to the other's
markets.
3.54
However, the committee is deeply concerned that the non-discrimination
principle is being interpreted too narrowly and may inadvertently discriminate
against Australian manufacturers. For example, the committee notes that at the
2014-15 Budget Estimates hearings, the Finance and Public Administration Legislation
Committee investigated the requirements in the request for tender for the flag
to fly above Parliament House.[52]
Those tender documents set out 17 conditions with yes/no tick boxes, regarding
a tenderers' compliance with Australian legislation, such as occupational
health and safety provisions, discrimination and environmental legislation. The
documents then appear to suggest that Australian suppliers are required to
certify their compliance, whereas overseas suppliers are not.
3.55
The committee therefore believes that the government should review the
application of the non-discrimination principle to ensure that it does not
inadvertently discriminate against Australian manufacturers.
Recommendation 3
3.56
The committee recommends that the government review the application of
the non-discrimination principle to ensure that it does not inadvertently
discriminate against Australian manufacturers.
3.57
Further, the committee is also sympathetic to the view of witnesses and
submitters that Australia is idealistic in its application of the
non-discrimination principle. In the committee's view, part of the problem lies
with the application of the non-discrimination principle, but also the failure
by the Australian government and industry to fully capitalise on the exemptions
provided for within Australia's free trade agreements.
Policies supporting SMEs
3.58
Specifically, the committee believes that more can be done to assist SMEs
while still upholding the non-discrimination principle in the CPRs. The
evidence to the committee is that one of the best ways in which SMEs can become
involved in procurement processes is through 'the big guys to be pulling along
and including the smaller guys'.[53]
3.59
While the committee notes that the 2014-15 Budget provides $2.8 million
over four years 'to assist small business to access the Commonwealth
procurement market',[54]
the committee believes that this comes at the expense of existing policies to
assist SMEs. In this context, the committee is concerned and disappointed at
the closure of the Enterprise Solutions Program. The Enterprise Solutions
Program offered SMEs the opportunity to develop innovative solutions for
government. In the committee's view, the cancellation of the Enterprise
Solutions Program before it had a chance to properly commence, means that the
program has never been given the opportunity to reach its full potential. The
committee recommends that the Enterprise Solutions Program should be
recommenced.
3.60
Further, the committee notes the review of AIP policies and programs and
the apparent discontinuation of funding for these programs. The committee
supports the evaluation and monitoring of government programs but the committee
places on the record its concern that this review is a precursor to a removal
of funding for AIP policies and programs which include: Buy Australian at Home
and Abroad;[55]
Supplier Advocates;[56]
Supplier Access to Major Projects;[57]
and the Industry Capability Network.[58]
Recommendation 4
3.61
The committee recommends that the government continue to fund the
Australian Industry Participation policies and programs and reinstitute funding
for the Enterprise Solutions Program.
SMEs and the CPRs
3.62
The committee notes Dr Seddon's comments regarding the drafting of the
SME provision in the CPRs. The committee agrees that the current framing of
this provision does not reflect the exemption as it is framed in the AUSFTA.
Where the AUSFTA provides that the government procurement provisions do not
apply to 'any form of preference to benefit small and medium enterprises', the
CPRs provide that 'officials should apply procurement practices that do not
unfairly discriminate against SMEs and provide appropriate opportunities for
SMEs to compete'.
3.63
The committee supports a clear statement being included in the CPRs to
the effect that the CPRs do not apply to any practice designed to preference
SMEs. In the view of the committee such a statement is consistent with Australia's
obligations under the AUSFTA. The committee therefore recommends that paragraph
5.4 of the CPRs be redrafted to provide an explicit exemption from the CPRs for
practices to benefit or preference SMEs.
Recommendation 5
3.64
The committee recommends that the Commonwealth Procurement Rules be
redrafted to provide an explicit exemption for practices to benefit or
preference small and medium businesses.
Australian standards
3.65
The committee recognises that there is significant concern regarding the
failure of imported goods to meet Australian standards. The committee notes the
advice from Finance that an agency may apply qualifications or requirements to
a particular procurement and, further, that it would be 'quite legitimate' for an
agency to require a successful tenderer to 'have an Australian certification or
the equivalent or prove the equivalent'.[59]
3.66
The committee believes that this is a matter where the Department of
Finance can provide agencies and procurement officers with improved guidance
and education.
Recommendation 6
3.67
The committee recommends the Department of Finance provide education and
training to agencies and their staff regarding the inclusion of Australian
standards, or the equivalent, in tender documentation.
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