General Procurement Direction 2021/08 - Aboriginal Procurement Policy

The Aboriginal Procurement Policy (APP) was introduced on 1 July 2018 for an initial 3-year term ending 30 June 2021. The Department of Finance (Finance) committed to reviewing the APP prior to the end of the term. The review was finalised in December 2020, as such all APP data referenced in this summary is limited to the 2018-19 and 2019-20 financial years. Finance has implemented the majority of the recommendations, with work ongoing for the remainder.

The review sought to determine whether the APP achieved its aim to increase the number of government contracts (valued $50,000 and above) awarded to registered Aboriginal businesses, and make recommendations for the next term. Registered Aboriginal businesses include any entity registered on Aboriginal Business Directory WA or Supply Nation Indigenous Business Direct and includes not-for-profit entities.

Recommendations

Nine recommendations were made.

Recommendation 1

Finance to monitor contracting data to analyse contract terms, to determine whether the APP is driving a tendency to award only shorter-term contracts to Aboriginal businesses.

Recommendation 2

Finance to provide updated guidance and education to agencies to support Aboriginal business contracting.

Recommendation 3

Finance to incorporate APP data into a public facing online interactive dashboard to allow Aboriginal businesses and members of the public to assess progress against the targets in real time (information will rely on the accuracy of information in Tenders WA, which is subject to discrepancies).

Recommendation 4

Finance to continue to work with the owners of the Aboriginal Business Directory WA to improve processes to ensure accuracy of business information.

Recommendation 5

Finance to continue to provide capability building services to Aboriginal businesses, particularly regarding the tendering process.

Recommendation 6

Finance to continue to support relationship building between the Aboriginal business sector and government agencies via events such as the Aboriginal Business Expo.

Recommendation 7

Moderate increases to the targets based on the number of contracts are to be implemented.

Recommendation 8

Increase communications to the Aboriginal business sector about the value of awarded Aboriginal business contracts.

Recommendation 9

Finance to develop a proposal to incorporate Aboriginal participation requirements in the new APP (comprised of subcontracting arrangements with Aboriginal businesses and employment of Aboriginal people).

Impact on the Aboriginal business sector

Comparison between contracts awarded in 2017-18, the year prior to the commencement of the APP, and its first two years of operation shows a dramatic increase in the number of contracts awarded to Aboriginal businesses.

The number of contracts increase from 78 in 2017-18, to 179 in 2018-19 and 234 in 2019-2020 (2017-18 data reflects businesses registered on Aboriginal Business Directory WA only and may not be comprehensive). The average value of those contracts and the number of unique Aboriginal businesses engaged by government agencies have also increased significantly.

Main contracting industries

Aboriginal businesses have been awarded contracts over a range of industries, with the top category being construction and maintenance. Other industries where Aboriginal businesses were frequently successful include human resources, management consultancy services, cleaning and the community services sector.

Regional impact

Aboriginal businesses have been successful in winning contracts throughout all regions of WA. Over the first 2 years of the APP, 63 per cent of all contracts were awarded to regionally based Aboriginal businesses. The Kimberley, Midwest and Pilbara regions had the most success (winning 137, 40 and 30 contracts respectively), reflecting both the higher numbers of Aboriginal people living in those areas and number of businesses.

The number of WA Aboriginal business contracts awarded in 2018-19 and 2019-20 include:

• Gascoyne: 1
• Goldfields/Esperance: 10
• Great Southern: 8
• Kimberley: 137
• Mid West: 40
• Peel: 11
• Perth: 151
• Pilbara: 30
• South West: 20
• Wheatbelt: 2.

Feedback from businesses

Aboriginal businesses regularly engage with Finance and feedback suggests the impact of the APP varies widely from business to business.

The following 2 quotes from Aboriginal businesses who were asked about the impact of the APP on their businesses, illustrate this variation:

‘We have had a positive experience to date, we found a great deal of enthusiasm regarding the story of our Aboriginal business and the social benefits we are bringing to the Aboriginal community.’ - Aboriginal business survey response

‘The policy hasn't had a great impact as in being proactively implemented by all departments/agencies. There is still a reluctance to participate.’ - Aboriginal business survey response

Based on contracting data and feedback from businesses, the APP has been successful in increasing the number of businesses being engaged by government and supporting Aboriginal economic development. It is noted, however, that businesses’ experiences were varied, and the Aboriginal business sector will need ongoing support to ensure success can be built upon.

Agency application of the APP and achievement of targets

The overall number of agencies who are contracting with Aboriginal businesses has increased significantly, demonstrating the APP has driven behavioural change across government.

There was a slight reduction in the number of agencies that met the targets in the second year of the APP, suggesting agencies will need continued support to engage Aboriginal businesses.

In 2018-2019, 47 per cent of agencies met the 1 per cent target. In 2019-2020,  44 per cent of agencies met the 2 per cent target.

Success factors

Factors contributing to agency success include high internal awareness of the APP, internal structures supporting Aboriginal business engagement and flexibility during the procurement process. Implementing positions dedicated to engaging Aboriginal businesses has been shown to have a dramatic impact, as demonstrated when the Public Transport Authority quadrupled the number of contracts awarded to Aboriginal businesses from four in 2018-19 to 17 in 2019-20 after they employed an Aboriginal Engagement Coordinator.

Barriers

Several factors were identified which may hinder agency performance, namely procurement culture, the perceived capacity and capability of the Aboriginal business sector, limited agency buying power or specialised buying requirements. Finance acknowledges it is difficult for smaller agencies to meet the APP targets and is committed to providing further support to agencies that have struggled to meet the targets so far.

While there has been a significant increase in the number of agencies contracting with Aboriginal businesses, less than 50 per cent of agencies are meeting the APP targets each year. Further work is needed to increase the number of agencies meeting the targets and to ensure change to agency culture continues. This needs to be driven from the top or a ‘champion’ in the agency.

Feasibility of new inclusions

When determining suitable inclusions for the updated Policy, Finance incorporated findings about agency performance and impact on the Aboriginal business sector, with feedback from stakeholders, previous commitments and examples from other jurisdictions and agencies.

Policy targets

Moderate increases to the targets based on number of contracts are proposed as follows:

• 2021-22: 3 per cent
• 2022-23: 3.5 per cent
• 2023-24: 4 per cent

These targets are recommended based on stakeholder feedback and the need to provide further support both to agencies that have not yet awarded a contract to an Aboriginal business, and to Aboriginal businesses to further increase their capability to contract with government. The targets also acknowledge the capacity of the Aboriginal business sector to respond to increased demand, noting in WA there are 874 businesses registered with only 146 having successfully won a contract with government to date.

‘The target percentage sounds very low, but when you consider capacity for us to deliver well and not be set up to fail with too much expectation too soon, maybe it isn't. We have been inundated with requests to quote and want to show that we can do a great job and get repeat work from the same government clients.’ - Aboriginal business survey response

A target based on the value of contracts is not recommended for inclusion as the average value of Aboriginal business contracts is relatively high ($659,776). The distribution of the value of those contracts is similar to non-Aboriginal business contracts, contrasting with the perception that Aboriginal businesses are awarded low valued contracts. On this basis, Finance does not believe the introduction of a value-based target is necessary and suggests there are other more effective measures that could be introduced to encourage further behavioural change and improve outcomes.

Aboriginal participation requirements

During consultation there was strong support for the recognition of both subcontracting arrangements with Aboriginal businesses and Aboriginal employment outcomes in a revised Policy.

Stakeholders noted that including subcontracting will provide further access points to government contracting for less mature businesses, and it is crucial that all businesses are providing employment opportunities for Aboriginal people (as opposed to Aboriginal businesses only).

Feedback from stakeholders and evidence from other jurisdictions and agencies suggests a model of Aboriginal participation is the most effective means to incorporate both of these elements in the Policy.

It is crucial the development of any targets or model is feasible, recognises regional differences and is culturally sensitive.