4. Implementation concerns

Introduction

4.1
The amended Commonwealth Procurement Rules (CPRs) came into effect on 1 March 2017. This chapter examines concerns raised over the implementation process for the procurement system prior to the introduction of the amended CPRs. The chapter also explores some of the risks which may result from the concerns identified and concludes with a case study that demonstrates some of the issues discussed in the chapter.

Concerns

4.2
The Commonwealth Procurement Rules (July 2014) (CPR14) have attracted considerable criticism, particularly with regard to the evaluation of Australian domestic bids against international bids. Even where the CPR14 are seen to be adequate, the implementation process has been perceived as flawed. Concerns raised with the Committee include:
procurement culture;
value-for-money versus lowest cost;
inconsistent interpretation; and
utilisation of existing provisions;
accountability and transparency;
risk allocation;
government as uninformed purchaser;
application of Australian standards; and
exemptions.

Procurement ‘culture’

Value for money versus lowest cost

4.3
Although the core principle of both the CPR14 and current CPRs is value for money, there appears to be ongoing tension between the concept of value for money and lowest cost.1 The lack of a clear definition of value for money within the CPRs is seen as contributing to the problem.2 The Australian National Audit Office (ANAO) makes it clear that lowest cost does not equate to value for money:
This is not always a simple matter of lowest cost, but requires the thoughtful consideration of the financial and non-financial cost and benefits associated with a specific procurement.3
4.4
Professionals Australia indicated that a risk adverse public sector tends to select the lowest cost tender.4 The Australian Manufacturing Workers’ Union (AMWU) pointed out that the simplest option is often to make a decision on the basis of cost:
We say that there is a short-term and limited focus on cost, which is often the determinant, rather than looking at broader aspects of procurement decisions and the nation-building potential behind them.5
4.5
The prevailing perception is of a procurement ‘culture’ that focuses on lowest cost rather than considering value-for-money and the implication of broader social or economic benefits. The Council of Textile & Fashion Industries summarised the general opinion of many witnesses:
I have heard it said a number of times by junior and senior procurement officials that, so long as specification is met in a tender, the lowest cost bid will win.6
4.6
Whole-of-life factors must be considered in value-for-money decisions.7 Such factors would include not just the provision of the procurement but ongoing maintenance through to final disposal:
Assessment of value-for-money should thus include the cost of tendering, the initial cost of purchase, service, support, warranty, operating costs, anticipated maintenance and repair and disposal or removal of the product at the end of its useful life.8
4.7
However, the difficulties of assessing and measuring these types of factors appear to discourage their consideration:
The requirements under section 4.5 and 4.6 of the Framework that require purchasing officers to consider whole of life costs are another area where the culture lags behind community expectations. Many of the concepts in this section are hard to quantify and implement without proper support for purchasing officials. This has led to a culture where the easiest decision to justify (usually selecting the goods or services with the lowest cost) is the one selected.9

Inconsistent interpretation and implementation

4.8
Inconsistent interpretation and implementation across Commonwealth departments and agencies is also seen as a significant problem. Consult Australia identified the connection between procurement culture and inconsistent implementation:
The issue that we have with the procurement rules is not necessarily the rules themselves but the interpretation and implementation of those rules and the cultures and behaviours that drive those implementations and interpretations. What we find is that there is inconsistent application of the procurement rules as they flow through to effect and influence procurement across not just the Commonwealth government but in the states and territories …10
4.9
Similarly, the South Coast Labour Council (SCLC) agreed on the importance of the value for money provisions but emphasised the ‘patchy and certainly inconsistent’ application of the provisions.11
4.10
Consult Australia maintained that the problem cannot be dismissed as the result of preferences being exercised by an individual procurement officer:
It often goes to the culture of particular agencies, or the culture of particular departments within particular agencies. So there is a large degree of inconsistency. It can also go to the specifics of the project in particular.12
4.11
This perception was reinforced by complaints received by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO):
They tend to focus on, anecdotally, around three or four major departments that have a large procurement spend and they do tend to notice the differences. Although they are not necessarily complaining about those differences, they are complaining more so about a unique process that has gone through … there is recognition of differences between departments. But we do not have a broad view across all departments. Our complaints tend to be very focused on particular large-spend departments.13

Utilisation of existing provisions

4.12
The previous and current CPRs contain a general exemption for small and medium enterprises (SMEs) and a range of exemptions under Australia’s various trade agreements, including the national interest, health and safety, and environmental considerations. Dr Thurbon, among others, emphasised the discretion that the Australian government has to implement exemptions, particularly for SMEs:
Under its international obligations, the Australian Government retains a significant degree of scope to discriminate in favour of locally produced goods and services—so long as those goods and services are provided by local SMEs.14
4.13
According to Dr Thurbon, the following policy objectives are permitted under Australia’s trade agreements:
compulsory local industry participation plans for large projects;
reserving some government contracts for local SMEs;
mandating local content requirements in contracts reserved for SMEs;
small business innovation research-style pre-commercial technology procurement;
import substitution focused procurement plans;
requiring government agencies to purchase specific goods made by SMEs;
government issued ‘performance insurance’ for purchase of specific goods by local SMEs; and
mandating local content in government-led foreign aid projects.15
4.14
The Australian Fair Trade and Investment Network (AFTINET), argues that not enough is being done to take full advantage of these existing provisions to preference domestic suppliers, particularly with regard to Australia’s trade agreements:
… Australia’s current international trade commitments do permit interpretations of value for money and preferences for local companies. However, Commonwealth Procurement Rules have until now lacked clarity about how these can be implemented and there appears to be a lack of awareness about them amongst those who implement tendering processes.16
4.15
Although the CPRs state that procurement practices are not to ‘unfairly discriminate against SMEs’17, there have been ongoing claims that government departments are not aware of, or effectively implementing, the broad exemptions that apply to SMEs.18 The AMWU argues that ‘our international obligations are poorly understood’ by procurement officers:
… they are generally considered by purchasing officers to be much more restrictive on our ability to preference locally made goods and locally delivered services than is actually the case.19
4.16
The Australian Forest Products Association (AFPA) reiterated concerns ‘regarding the lack of awareness and implementation amongst Government procurement officials of the environmental sustainability guidelines and broader socio-economic benefits when purchasing’.20 AFPA go so far as to contend that ‘there has been a deliberate attempt through processes to ignore those things’.21

Accountability and transparency

4.17
The lack of accountability and transparency surrounding procurement decisions, particularly the assessment of value for money, was repeatedly raised. The ANAO found that this was a significant issue, noting that recent audits have highlighted:
shortcomings in the planning and conduct of procurements, including in relation to keeping records of reasons for decisions and the assessment of value for money; and
shortcomings in record keeping systems, which complicate external scrutiny and review processes and can affect entities’ ability to protect the Commonwealth’s interests.22
4.18
The AFPA expressed frustration concerning the difficulty of determining what factors had been taken into consideration in evaluating value-for-money by procurement officials because of the ‘continued lack of transparency and consistent, measureable approaches across the agencies’.23
4.19
Professionals Australia consider that the lack of formal guidance with regard to accountability in the CPRs nullifies any advantages:
Procurement officers must consider value for money and must consider broader economic benefits, but at present they do not need to provide any firm evidence or reporting to demonstrate that they have satisfied the requirements of the CPRs. Regulation and rules without accountability, transparency and enforceability serve no purpose, and will not result in any tangible improvements to the procurement process.24

Risk assessment and allocation

4.20
ANAO audit reports have highlighted ‘insufficient attention to the identification and ongoing management of risks’ as an area of concern.25
4.21
Consult Australia identified the ‘inappropriate transfer of risk’ as the most significant issue with regard to current Australian government procurement. Although proportionate liability legislation was introduced in the early 2000s to ensure that liability is apportioned equitably between parties, Consult Australia claims that it ‘is inconsistently applied between the states and territories’ and this has a range of detrimental effects:
So that creates uncertainty in terms of viability for our members, and that is fed into competitive pressures. It is fed directly into pricing, it is fed into decisions to not bid for work where that contract condition, for example, might be in the play. It can lead to firms taking on potentially uninsurable risk and a whole range of consequential behaviours that fall out of that.26
4.22
The ASBFEO identified a ‘certain degree of rigidity’ and inflexibility faced by SMEs in negotiating with government departments, particularly ‘around transfer of risk’.27 Similarly, the Department of Defence indicated that they have received complaints from SMEs that prime contractors are ‘passing too many contractual burdens and too much risk down to subcontractors’.28
4.23
Professionals Australia warn that the unacceptable shifting of risk to the private sector can be detrimental in the long term:
If something goes wrong, the government ends up having the risk anyway, and the private sector then tries to either have a big enough balance sheet to wear the risk or tries to ensure against the risk. And who pays for the insurance? We do—the taxpayer.29

Government as uninformed purchaser

4.24
Professionals Australia maintains that governments have become uninformed purchasers and no longer possess the technical expertise to make informed procurement decisions, particularly with regard to infrastructure. It blames the steady increase of outsourcing over several decades for the loss of expertise and identifies a range of problems caused throughout the infrastructure delivery cycle by poor decision-making:30
Governments have consistently confused value for money with low cost, and budgets for engineering workforces have consistently been stripped. As a result, governments are no longer informed as to what they are buying, and have no objective ability to reasonably decide whether specific cases of procurement represent value for money.31
4.25
Consult Australia echoed these concerns and emphasised the damage the lack of expertise creates during the tendering process:
The procurement skills in government, and particularly the skills required to make a good client—that is, in-house design skills and in-house engineering skills—have been lost largely due to the 30 years of outsourcing that we have experienced in the Australian market. This has led to clients often not really knowing what they want and therefore putting incomplete information in briefs or just putting substandard briefs together for the private sector to base their tenders on.32

Application of Australian standards

4.26
The lack of any requirement to comply with Australian standards in the CPR14 was frequently identified as a deficiency. Imports have grown to meet increasing demand in Australia raising concerns over quality:
With a declining manufacturing sector, Australia has seen a significant increase in the use of imported materials, components and structures to meet industrial demand. In all too many cases the quality of the supplied products is not in line with Australian Standard requirements.33
4.27
A number of witnesses drew the Committee’s attention to a report by BIS Shrapnel commissioned by the Australian Workers’ Union (AWU), which estimated that ‘domestic production now supplies less than half of the steel used in public sector construction’ indicating that the remainder is sourced from overseas.34 The Australian Steel Institute (ASI) told the Committee that in the case of fabricated steel product, over the last decade ‘we have gone from 20 per cent imported product in the marketplace to closer to 60 per cent imported product in the marketplace’.35 With raw steel, the figure is approximately 60 per cent Australian to 40 per cent imported, due to a tightening of antidumping laws.36 The reliance on imported products is contributing to a sense that Australian standards are being eroded by lower quality products:
The evolution of the global economy in the last little while—say, 10 or 15 years—has meant that the globe has become awash with supply of a wide variety of products that previously were not on the market from sources that previously were not supplying, and some of those do not conform with the standards that we require for community safety, worker health et cetera.37
4.28
AFPA said that a recent report found that 92 per cent of responding companies reported non-conforming products (NCPs) in their supply chains in the building industry. AFPA is concerned that the ‘NCP volume and the number of organisations responsible for placing it onto the market, are both growing’. AFPA quotes a recent report from the Engineered Wood Products Association of Australasia (EWPAA) that said ’28 per cent of imported panel products were found to not meet Australian Standards’.38
4.29
The cost of complying with Australian standards is seen as disadvantaging Australian businesses. For example, the SCLC argues that the cost of certification for Australian steel manufacturers should be taken into consideration:
Our steelmakers meet certain standards. They are required to have certification, and we can have some confidence in that certification. Why is it that someone who imports steel should not be subject to certification here in Australia at their cost in the same way that the local producers are? We say that that would be one way to level the playing field …39
4.30
It was also suggested that the risk of sub-standard products is increased because of inadequate monitoring and inspection. The SCLC commented that a ‘standard is only as good as its ability to be enforced’.40
4.31
The South Australian Industry Advocate explained that his office discovered the extent of the problem when it was looking at the impacts on the steel industry:
When we looked into it more, it was not just that steel products were coming into the country that were considerably low quality and substandard; there was little being done to police the requirement of Australian Standards or equivalent.41

Exemptions

4.32
In addition to the exemptions regarding Australia’s international obligations and SMEs, limited exemptions from the application of the CPRs are in clauses 2.6, 10.3 and Appendix A: Exemptions from Division 2. Defence, the largest Australian Government procurer, takes advantage of the range of exemptions as required. It has a framework in place to ensure that the exemptions are not abused:
Ultimately, it is the financial delegate who makes the decision. They are responsible for ensuring that the method of procurement is consistent with the Commonwealth Procurement Rules and meets value for money. We have quite a robust framework that underpins all of our decisions regarding the method of procurement. It gives effect to the CPRs, in terms of procurement processes not being one size fits all. We spend a lot of time and effort ensuring that the procurement methodology that is exercised is commensurate with the value, the scope, the risk and the nature of the procurement. It really is about how you outline what will be the best procurement methodology that is consistent with the principles in the CPRs, noting that there are certain elements, particularly regarding division 2, that are mandatory unless you exercise an exemption.42
4.33
Concerns were raised that some of the exemptions from the CPRs were being overused and impeding access for Australian suppliers. The use of limited tenders, in particular, appears to be excessive. The ANAO warned against utilising limited tender provisions to circumvent best practice:
The CPRs also make provision for limited tender in defined circumstances such as extreme urgency, to benefit from exceptionally advantageous conditions, and where there is no reasonable alternative or substitute. In utilising this flexibility, a key factor for entities is to ensure that procurement approaches continue to deliver best value for taxpayers’ money and that corners are not cut simply for the convenience of the public sector.43
4.34
The ANAO referred the Committee to the findings of its Report 48 2014–2015: Limited Tender Procurement where it found extensive use of limited tendering and stressed the uncompetitive nature of the practice:
By its nature, limited tender is less competitive than open and prequalified tender as it does not provide the opportunity for all potential suppliers to compete for the provision of goods and services. In 2013–14 limited tender was the most widely used of the available procurement methods representing 56 per cent by number of procurements and accounted for the greatest percentage of expenditure at 48 per cent by value, $23.8 billion.44

Risks

4.35
The link between the concerns identified above and the detriment caused is not easily quantifiable. However, given the significant economic role of government procurement and the support it provides for Australian businesses and industry, witnesses identified areas where there may be detriment, including:
loss of a skilled workforce;
lack of compliance with Australian standards, leading to safety, economic and environmental risks;
waste; and
barriers to domestic business participation in government procurement.

Loss of skilled workforce

4.36
A range of industries linked the loss of workforce skills and capability with the difficulties accessing government procurement opportunities. Discussing the value of a ‘whole of life’ approach to procurement, the ASI emphasised the connection between maintaining the ‘existing high skills base’ and ongoing work.45 The AWU reiterated the risks of the ‘trend to imported modular construction for key components of resource projects’ including the loss of essential fabrication and heavy engineering skills:
These are important skills that will be required for ongoing maintenance and extensions to existing and new plant. This is not only in resources, but essential services areas like power, water and basic infrastructure—thereby being in the nation’s interest that this skill base is kept viable.46
4.37
The Council of Textile & Fashion Industries of Australia provided the example of the possible cumulative effect for the Australian textile industry of failing to secure procurements such as the dress uniforms for the Australian Defence Force. The industry still possesses the skills to produce structured apparel but the concern is that the capability will be lost altogether:
Tailoring, which is a big part of that uniform, is a pretty unique [skill]. There is not a lot of tailoring that is done at scale anymore in Australia.
Tailoring is one of the things that has suffered the most in our industry with going offshore.47

Australian standards: safety, economic and environmental risks

4.38
The lack of adherence to Australian standards is considered to pose safety, economic and environmental risks.
4.39
AFPA stresses the safety and economic risks of the increase in NCPs in the building industry:
The risks of NCPs in building products (e.g. plywood, steel, plastics, electrical, glass and aluminium) is a significant issue in terms of workplace health and public safety as well as the direct economic costs of product failure.48
4.40
AWU also notes not only the safety risks involved in using sub-standard product, but the false economy for government procurement:
Industry reports have shown that roughly half of all imported steel does not comply with Australian standards. This is alarming from both a safety and a quality standpoint. From the perspective of governments, sub-standard steel is known to have a shorter life span and is likely to need replacement, significant repairs or retrofitting earlier. These costs are hidden from government budgets in the first instance, but emerge in capital works costs far earlier than otherwise would be the case if high quality steel had been used in the first instance.49
4.41
ASI provides an example demonstrating the direct economic cost that can result from ignoring Australian standards in infrastructure and construction, and the flow on effect to government and the community:
There was a recent case in Western Australia where a bridge was built to the new Crown stadium. It was imported from China and was totally nonconforming. It was cracking, completely unsafe and had to be pulled down and put back up again to the value of $3.5 million, I think. As to who picked up the tab, I am not too sure, but it is an unproductive practice. If the contractor is picking up the tab, he is clipping somebody else along the way.50
4.42
However, ASI also quotes the warning from the Australasian Procurement and Construction Council (APCC) that the dangers of sub-standard products extend beyond economic concerns:
This has the potential to create significant constraints and risks to a construction project. In Australia there have been numerous instances where non-compliant construction products have caused the collapse of buildings, motorway signs, glass panels and more. The risk of loss of life and severe injury should not be underestimated.51
4.43
The Welding Technology Institute of Australia (WTIA) is alarmed by the increasing safety risk of non-adherence to Australian standards:
Over the past three years the number of reports of unsafe steel structures received by the WTIA from its Certified Welding Inspectors has increased exponentially. This appears to be supported by reports of increased events from State Safety Regulators for the same period. The primary cause of safety concerns has been welding which is not fit for purpose and does not comply with recognised Australian or International Standards resulting in failure.52
4.44
AFPA drew attention to the sound environmental record of the Australian wood and paper industry and stressed that the production of imported product may not meet sustainable practice requirements. Environmental risks associated with unsustainable practices include:
land use conversion for fibre supply (i.e. deforestation or conversion of natural forests to plantations);
environmental and social impacts of poor forestry practices (i.e. issues such as product yield, forest health, biodiversity and lack of community consultation);
manufacturing practices (e.g. use of chemical, water and energy inputs);
illegal logging and trade in wood and paper products;
the carbon emissions footprint of products, including transport impacts; and
the waste implications of additional landfill from using non-domestic recycled content paper sources.53

Waste

4.45
Professionals Australia suggests that there is broad consensus across government agencies and stakeholder groups that ‘weak procurement systems are costing the Australian economy billions’.54 With regard to infrastructure projects, Professionals Australia told the Committee:
There are multiple reports conservatively quoting waste and significant delays. The minimum waste is 6.5 per cent. When it is over a billion dollars, the evidence shows 12.7 per cent is the waste. And, if you do a surfeit of projects at once, as happened in 2009, it gets up to 21.2. On the figures from this committee, a $59 billion procurement spend would be $3.8 to $7.5 billion waste a year. If you go to a surfeit, it gets up to over $12 billion.55
4.46
Consult Australia identified unverified information in briefs as one area that caused cost overruns and waste:
For example, a building needs to be built. A geotechnical report is undertaken by the client and forms part of the tender documentation so that the designer can design the buildings - that is, the geotechnical information says what is in the subsoil or the clay or what is under the ground. The tender information will often not verify that geotechnical report, which means that each of, say, eight or 10 or 12 or 15 tenderers will have to spend the money doing their own geotechnical report so that they can rely on the information in those reports to complete their tender and subsequently any design work that might happen as a result of winning the project. That is clearly waste, and we are able to put a figure on that through our report: somewhere in the vicinity of $45 000 per bid is wasted on unverified information.56

Barriers to domestic business participation

4.47
The inefficient implementation of the procurement system presents an initial threshold barrier for domestic businesses attempting to participate in the process. For example, with regard to the transfer of risk, Consult Australia indicated that businesses may decide not to bid for a project rather than attempt to manage the risk.57
4.48
The failure of many SMEs to take advantage of the opportunities presented by government procurement was highlighted throughout the inquiry. The Australian Chamber of Commerce and Industry (ACCI) warned that government must be careful to ensure that SMEs are not discouraged through onerous requirements or processes:
The Government needs to remain vigilant to ensure that departments are simplifying the procurement process, that the rules are not unreasonably burdensome and that they are fit for purpose. SMEs often do not have the time or the expertise to read and understand complicated rules and write lengthy submissions. There may also be a case to reduce liability cover on small value contracts.58
4.49
ASBFEO has received feedback from SMEs suggesting that the practice of bundling smaller contracts into one large contract and employing a larger firm to ‘manage and deliver parcels of government work’ is making it difficult for SMEs to access government procurement contracts.59
4.50
ASBFEO confirmed that it has received complaints from discouraged SMEs regarding the difficulties they face attempting to apply for government contracts under the current system:
In terms of the size of the contracts being offered—frequently, we have had information passed to use by unsuccessful tenderers that were unable to satisfy the requirements because they have been set much broader, requiring a range of skill sets that sort of locks out participants that have previously been providing those services as they get recontracted, and they roll in a whole range of other requirements. That then tends to require the small business to partner with a larger firm or multiple firms to satisfy them.
We have also had information passed to us that there is a certain degree of rigidity in negotiation with government departments and an unwillingness to enter into conversations about flexibility and contracting to be able to either accommodate innovative or novel proposals or even have discussions around transfer of risk …60

Case study: Rossi Boots

4.51
The experience of Rossi Boots, a family-owned company established in South Australia in 1910, demonstrates many of the issues discussed above. The Company produces around 250 000 pairs of boots each year, has annual revenue of $12 million and employs approximately 80 people at its small factory in Adelaide.
4.52
In 2014 Rossi Boots missed out on a $15 million contract to supply 100 000 pairs of non-combat boots to the Australian Defence force. The Company was told that their tender was compliant but did not measure up on ‘value-for-money’. Rossi Boots’ tender was ‘somewhere around 15 per cent more expensive than the imported product out of Indonesia’.61
4.53
Rossi Boots’ difficulties with the government procurement process centred on the definition of value for money. The Company included information in their tender regarding the broader economic benefits that would accrue from choosing an Australian supplier:
We certainly put forward in the tender the benefits that we believed would be forthcoming to both the economic situation in South Australia and in Australia in general, because we would be buying supplies from other places. We certainly talked about the desire from our own research and development of the Australian troops wanting to wear Australian made product.62
4.54
The Company also identified the anomalies that are not always taken into consideration when an Australian bid is assessed against an overseas bid. For example, government imposed costs such as the superannuation guarantee levy, payroll tax, annual leave loading or long service leave, penalty rates and workers compensation all have to be factored into any tender bid for an Australian business but are not necessarily part of the costs for an international tenderer:
The point is that these are rarely seen when we start to look at the pricing overseas. They make up about 25 per cent additional cost on top of whatever your manufacturing costs are.63
4.55
Rossi Boots emphasised that they were not implying that these costs should be removed. On the contrary they acknowledge the important part such factors play in maintaining Australian conditions and standards. The Company stressed the positive effect meeting the extra costs has on its performance:
So the first thing we have to do in order to be competitive is to overcome that by being more productive in many ways, and you will find that a lot of Australian companies, including Rossi Boots, are very advanced in their manufacturing. We use advanced ways of cutting the leather. We use computerised stitching machines. We do all sorts of things to overcome those additional costs of labour.64
4.56
As well, Rossi Boots pointed out the ongoing economic impact that the award of the tender would have provided. The Company expected to increase its workforce by 15 to 20 people:
We have about 75 to 80 people, so it is a fairly significant increase in the number of people we would have had to hire. We buy a lot of raw material from local manufacturers, so that spinoff would have occurred without any doubt, and we would probably have invested in some new advanced computerised stitching.65
4.57
However, the Company is of the opinion that such details would not attract any weight in securing the tender and that, before the rules were changed, ‘there was no allowance for considering any secondary economic benefit’.66
4.58
Another point of contention for Rossi Boots was the regulatory requirements imposed on domestic companies. Again, the Company’s argument was not with the regulations, but the uneven playing field it created for Australian companies:
In addition to high labour costs there are regulatory burdens on domestic manufacturing activity such as:
Trade Waste Costs;
EPA Licences, restrictions and autocracy; and
Fire Levies.
As these costs are imposed by Government, they should be compared with the global supplier’s costs with regard to these items and an appropriate credit should be allowed in ‘value for money’ considerations.67
4.59
Seeking feedback on the procurement process, Rossi Boots raised these issues with the office of the Minister for Finance and were told that, under Australia’s international obligations, ‘they could not consider secondary economic benefit’.68 The Company find it difficult to understand the inconsistency between Australia’s approach and that of many of its trading partners:
I think a lot of other countries have found ways to deal with this. Whether they mandate a certain content or whether they have a formula that says, ‘We’ll get so much back on the dollar if we spend it locally,’ they have found ways to do this, pricewise.69
4.60
Overall, Rossi Boots suggests, as other witnesses have, that the government tends to take the easier option of selecting a tender on the basis of lowest cost, shifting responsibility and accountability to the supplier:
I felt that there was no genuine desire to look at Australian manufacturing whatsoever. In my view it is because of the fact that, if they buy from overseas, they do not have to come to our factory and audit; they do not have to check whether I am complying with all the legal obligations that I should. They simply send the contract offshore. They buy the goods. They do not go and check. They do nothing. The goods arrive here with no quality assurance.70
4.61
The experience encapsulates the difficulties faced by many smaller companies when attempting to take advantage of government procurement opportunities. Rossi Boots estimates that the bid cost it $25 000:
There is a lot of sampling, a lot of prototyping and all those sorts of things that have to be done. There are specialist people who write these tenders. We used one because we knew from past experience - it would be highly unlikely, if you and I sat down and tried to write one of these tenders, that we would ever win one because we would not use the right language, the right ‘government speak’ and all that. There are specialist people who cost a lot of money to help you write these tenders.71
4.62
In conclusion, Rossi Boots told the Committee the Company would be unlikely to pursue such a tender again:
I think [Defence] have left me with a view that it is highly unlikely I would ever win a contract or a tender with Defence, and the cost of actually participating is too high to spend that money up-front and then realise that you have no chance.72

  • 1
    Department of Finance, Commonwealth Procurement Rules, July 2014, paragraphs 4.4 and 4.5.
  • 2
    Bus Association Victoria (BusVic), Submission 1, p. 7.
  • 3
    Australian National Audit Office (ANAO), Submission 22, p. [1].
  • 4
    Mr Christopher Walton, Chief Executive Officer, Professionals Australia, Committee Hansard, Melbourne, 19 April 2017, p. 24.
  • 5
    Mr Andrew Dettmer, National President, Australian Manufacturing Workers’ Union (AMWU), Committee Hansard, Melbourne, 19 April 2017, p. 43.
  • 6
    Mr David Giles-Kaye, Chief Executive Officer, Council of Textiles & Fashion Industries of Australia, Committee Hansard, Melbourne, 19 April 2017, p. 52.
  • 7
    Department of Finance, Commonwealth Procurement Rules, July 2014, paragraph 4.6; Department of Finance, Commonwealth Procurement Rules, 1 March 2017, paragraph 4.6.
  • 8
    Consult Australia, Submission 9, p. 6.
  • 9
    Australian Manufacturing Workers’ Union (AMWU), Submission 18, p. [1].
  • 10
    Ms Megan Motto, Chief Executive Officer, Consult Australia, Committee Hansard, Melbourne,
    19 April 2017, p. 39.
  • 11
    Mr Arthur Rorris, Secretary, South Coast Labour Council, Committee Hansard, Melbourne,
    19 April 2017, p. 13.
  • 12
    Ms Motto, Consult Australia, Committee Hansard, Melbourne, 19 April 2017, p. 41.
  • 13
    Mr James Strachan, Director Advocacy, Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Committee Hansard, Canberra, 8 May 2017, p. 15.
  • 14
    Dr Elizabeth Thurbon, Submission 46: Attachment A, p. 582.
  • 15
    Dr Thurbon, Submission 46: Attachment A, 591.
  • 16
    Australian Fair Trade and Investment Network (AFTINET), Submission 10, p. 4.
  • 17
    Department of Finance, Commonwealth Procurement Rules, July 2014, paragraph 5.4; Department of Finance, Commonwealth Procurement Rules, 1 March 2017, paragraph 5.4.
  • 18
    AFTINET, Submission 10, p. 3; Australian Chamber of Commerce and Industry (ACCI), Submission 5, p. 2.
  • 19
    AMWU, Submission 18.1, p. [5].
  • 20
    Australian Forest Products Association (AFPA), Submission 20, p. [1].
  • 21
    Mr Ross Hampton, Chief Executive Officer, Australian Forest Products Association (AFPA), Committee Hansard, Canberra, 8 May 2017, p. 22.
  • 22
    ANAO, Submission 22, p. [2].
  • 23
    Mr Hampton, AFPA, Committee Hansard, Canberra, 8 May 2017, p. 19.
  • 24
    Professionals Australia, Submission 16, p. [5].
  • 25
    ANAO, Submission 22, p. [2].
  • 26
    Ms Motto, Consult Australia, Committee Hansard, Melbourne, 19 April 2017, p. 40.
  • 27
    Mr Strachan, ASBFEO, Committee Hansard, Canberra, 8 May 2017, p. 14.
  • 28
    Mr Kim Gillis, Deputy Secretary, Capability Acquisition and Sustainment Group, Department of Defence, Committee Hansard, Canberra, 8 May 2017, pp. 51–52.
  • 29
    Mr Walton, Professionals Australia, Committee Hansard, Melbourne, 19 April 2017, p. 22.
  • 30
    Professionals Australia, Submission 16, p. [2].
  • 31
    Professionals Australia, Submission 16, p. [3].
  • 32
    Ms Motto, Consult Australia, Committee Hansard, Melbourne, 19 April 2017, p. 41.
  • 33
    Australian Institute of Non-destructive Testing (AINDT), Submission 8, p. 2.
  • 34
    BIS Shrapnel, The Benefits of a Local Procurement Policy for Local Steel in Government Construction, September 2015, p. i.
  • 35
    Mr Ian Cairns, National Manager, Industry Development and Government Relations, Australian Steel Institute (ASI), Committee Hansard, Canberra, 8 May 2017, p. 31.
  • 36
    Mr Cairns, ASI, Committee Hansard, Canberra, 8 May 2017, p. 31.
  • 37
    Dr Peter Burn, Head of Influence and Policy, Australian Industry Group (AiGroup), Committee Hansard, Canberra, 29 March 2017, p. 10.
  • 38
    AFPA, Submission 20, p. 13.
  • 39
    Mr Rorris, South Coast Labour Council, Committee Hansard, Melbourne, 19 April 2017, p. 9.
  • 40
    Mr Rorris, South Coast Labour Council, Committee Hansard, Melbourne, 19 April 2017, p. 9.
  • 41
    Mr Ian Nightingale, Industry Advocate, Department of State Development, South Australia, Committee Hansard, Canberra, 29 March 2017, p. 5.
  • 42
    Ms Victoria Bergmann, Acting First Assistant Secretary, Procurement and Contracting, Capability Acquisition and Sustainment Group, Department of Defence, Committee Hansard, Canberra, 8 May 2017, pp. 52–53.
  • 43
    ANAO, Submission 22, pp. [1–2]; Dr Tom Ioannou, Acting Deputy Auditor-General, Australian National Audit Office (ANAO), Committee Hansard, Canberra, 8 May 2017, p. 41.
  • 44
    Australian National Audit Office (ANAO), Report 48. 48 2014–2015: Limited Tender Procurement, 10 June 2015, p. 14.
  • 45
    Australian Steel Institute (ASI), Submission 27, p. 13.
  • 46
    Australian Workers’ Union (AWU), Submission 36, p. 20.
  • 47
    Mr Giles-Kaye, Council of Textile & Fashion Industries of Australia, Committee Hansard, Melbourne, 19 April 2017, p. 54.
  • 48
    AFPA, Submission 20, p. 13.
  • 49
    AWU, Submission 36, p. 6.
  • 50
    Mr Cairns, ASI, Committee Hansard, Canberra, 8 May 2017, p. 29.
  • 51
    Australasian Procurement and Construction Council (APCC), Procurement of Construction Products: A Guide to Achieving Compliance, p. 5 quoted in AIS, Submission 27, p. 13.
  • 52
    Welding Technology Institute of Australia (WTIA), Submission 2, p. 1.
  • 53
    AFPA, Submission 20, p. 7.
  • 54
    Professionals Australia, Submission 16, p. [4].
  • 55
    Mr Walton, Professionals Australia, Committee Hansard, Melbourne, 19 April 2017, p. 23.
  • 56
    Ms Motto, Consult Australia, Committee Hansard, Melbourne, 19 April 2017, p. 41.
  • 57
    Consult Australia, Submission 9, p. 3.
  • 58
    ACCI, Submission 5, p. 2.
  • 59
    Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Submission 19, pp.
    [3–4].
  • 60
    Mr Strachan, ASBFEO, Committee Hansard, Canberra, 8 May 2017, p. 14.
  • 61
    Mr Myron Mann, Managing Director, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 31.
  • 62
    Mr Mann, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 31.
  • 63
    Mr Mann, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 30.
  • 64
    Mr Mann, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 30.
  • 65
    Mr Mann, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 33.
  • 66
    Mr Mann, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 35.
  • 67
    Rossiter’s Pty Ltd, Submission 53, p. 2.
  • 68
    Mr Mann, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 36.
  • 69
    Mr Mann, Rossiter’s Pty ltd, Committee Hansard, Melbourne, 19 April 2017, p. 38.
  • 70
    Mr Mann, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 34.
  • 71
    Mr Mann, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 34.
  • 72
    Mr Mann, Rossiter’s Pty Ltd, Committee Hansard, Melbourne, 19 April 2017, p. 34.

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