Government Procurement Bill 2018

Published on Wed 19 September 2018 4:44pm

There is much evidence to suggest that the main beneficiaries of open procurement markets are large global companies which have the capacity and economies of scale to monitor overseas procurement markets and tender for large government contracts. This means it is not a level playing field for most Australian companies.

Mr Wilson (4:44pm) — I am glad for the opportunity to speak on this bill, the Government Procurement (Judicial Review) Bill 2017, and to speak in support of the amendment moved by the member for Rankin. I acknowledge the work that he has done and continues to do in this space. Government procurement in Australia is very important for a number of reasons. Chiefly, we want to get procurement right. We want procurement to achieve its ends. We want the outcomes of government contracts to be fit for purpose and to be good value. We also want procurement processes to be accessible to Australian businesses, particularly small and medium enterprises, which face greater difficulties because of their scale when it comes to dealing with bureaucratic processes and when it comes to dealing with Commonwealth Procurement Rules.

There are some aspects of this bill that appear beneficial. They give access to the Federal Circuit Court, a magistrates court, rather than the full Federal Court for resolving issues or taking up what seem to be breaches of the Commonwealth Procurement Rules in a way that will be much less time-consuming and much less costly. So, on the face of it, that’s good for small and medium enterprises.

But it’s worth considering where this bill comes from and why we are going into it in this way and at this time. It is related to the comprehensive and progressive Trans-Pacific Partnership. It’s part of our obligations under that agreement. So it’s important to see that what we really are doing is making some changes to our procurement framework that are balanced by changes that will be made elsewhere. The concept is that not just that small and medium businesses in Australia will benefit from the changes to our own Procurement Rules but Australian companies more broadly will benefit from similar changes elsewhere where Australian companies want to be involved in procurement processes that are conducted by other governments. Whether that is actually achieved or not is an open question. I’ll come back to that in the context of some of our other trade agreements.

The timing of this bill is interesting, and what it seeks to achieve is interesting, if you look at the context of what’s been happening in this space over the last little while. Australia is in the process of acceding to the government procurement agreement framework that exists under the WTO. We have been going through that process for some time. In fact, my understanding is that the Australian government position with respect to our accession to that agreement is going before the relevant committee in October. It is passing strange that we’re entering into the framework covered by this bill at the same time that there’s an equivalent set of mechanisms and measures covered under the WTO GPA in prospect. Certainly, when the Joint Select Committee on Government Procurement handed down its report, titled Buying into our future: review of the Commonwealth Procurement Rules,a bit more than a year ago, last June, its recommendation was that this kind of arrangement, the framework that this bill introduces, not be advanced until that WTO process has been resolved. There is basic logic in that, I think.

But, coming back to what I said before, there are benefits in harmonised procurement arrangements for companies in Australia that want to take advantage of Commonwealth procurement opportunities and for Australian companies in other jurisdictions in other countries. I think, when we look at these things and we balance up those benefits, it’s valuable and important to have regard to instances of this kind of effort in the past. I’m mindful that there were some procurement arrangements put in place under the Australian-US Free Trade Agreement that, on the face of it, would have given Australian companies greater opportunities to participate in American procurement processes and, yet, since that time, the evidence is that those opportunities haven’t really eventuated.

In fact, the Australian Industry Group made a submission to the Productivity Commission inquiry into Australia’s bilateral and regional trade agreements, and, in so doing, cited a survey they’d conducted of Australian exporters to the US five years after that free trade agreement came into effect. The survey found that 87 per cent of Australian exporters to the US took the view that the Australia-US Free Trade Agreement was either of low effectiveness or no effectiveness in assisting their access to US government contracts. As we do these things, we must always keep track of, on the one hand, what they purport to achieve or secure for Australian companies and, on the other hand, what they actually deliver. As is the case with many aspects of trade agreements, they tend to overpromise and underdeliver. I think that’s probably a relevant consideration with regard to other aspects of the TPP. I know that’s been discussed elsewhere in this place this week.

It’s important to note, as the previous member did, that when you change procurement rules those changes carry risks. There is very good reason for governments to have control, discretion and flexibility when it comes to government procurement. Government procurement is extraordinarily costly. In any given year, government procurement in Australia is worth something like $50 billion. In the 2016-17 year, Commonwealth procurement involved 64,000 separate contracts with a total value of $47 billion. In the 2014-15 year, the total value was closer to $60 billion. It’s an extraordinary amount of money. First and foremost, we have to ensure that those procurement processes deliver the outcomes that we need. Inevitably, because they’re being undertaken by government, what we’re seeking to procure is of great importance to the wellbeing of Australians.

In addition to there being this imperative for procurement to achieve its ends and to do so at good value, there are other aspects of broad national and community wellbeing that governments should think about when they undertake procurement processes. One that has been mentioned here is being able to support small and medium businesses and recognise that, when it comes to Commonwealth procurement in particular, those kinds of enterprises do stand at a disadvantage to large companies—in some cases, large foreign companies. There is also the desire to use government procurement to achieve other ends: to build and sustain local industry and capacity, to address particular kinds of workforce shortcomings and those sorts of things.

The changes that this bill puts in place do contain exemptions for defence procurement. Again, that’s an area where government wants to retain the ability to make choices with its mind squarely on our security needs. There are also some changes that allow some preferential, or you would say discriminatory, treatment in the interests of small and medium enterprises. In this case, any entity can have access to the changed procedures, the faster and cheaper procedures, but whether they end up being for the benefit of small and medium enterprises or for the greater benefit of larger companies—in some cases, foreign companies—is something we’ll have to watch. In a submission on this issue, AFTINET made the following point:

There is much evidence to suggest that the main beneficiaries of open procurement markets are large global companies which have the capacity and economies of scale to monitor overseas procurement markets and tender for large government contracts. This means it is not a level playing field for most Australian companies.

I take the opportunity to make some general remarks on procurement more broadly. I think there are some process shortcomings with this bill around the timing and the way in which it’s not consistent with relevant committee recommendations. I also think that procurement is a space in which the government has been less than active. There are a number of recommendations in the Buying into our future report that are yet to result in any real action, such as recommendation 2:

… that the Attorney-General’s Department oversee the introduction and application of a procurement connected policy requiring Commonwealth agencies to evaluate suppliers’ compliance with human rights regulation.

and recommendation 3:

… that the Department of Environment oversee the introduction and application of a procurement connected policy requiring Commonwealth agencies to evaluate the whole-of-life environmental sustainability of goods and services to be procured.

There are a range of way in which procurement processes can be designed and operated for the broad social welfare of Australia, and I’m not sure that’s happening at the moment.

I have spoken before about the value of a debarment framework. Other countries make use of that sort of filter when it comes to any company—foreign companies in particular—that has been found to engage in any kind of exploitative, criminal or fraudulent conduct. Canada has such a framework. The OECD has noted this kind of thing on a number of occasions. It’s not something we have here in Australia at this stage, and I think it’s something we should consider.

On defence I would make the broad point that, while you can have exemptions in procurement arrangements that allow government to have a particularly free hand when making defence contracting provisions, the government of the day still has to use that free hand. When the Joint Standing Committee on Treaties inquired into and reported on the high-level agreement between Australia and France in relation to the Future Submarine program, it set out some high-level principles that should govern specific contracting arrangements in future, and I found it odd that the relevant provisions around achieving maximal Australian industry participation were pretty weak. The obligation put on France was that it require DCNS, the French prime, ensure Australian businesses participated in related work on an equal footing with French companies. I don’t understand why, when you’re paying $50 billion to a French prime for a massive multidecade project, you wouldn’t require the participation of Australian companies to occur on a preferred basis, all other things being equal. If we’re going to spend $90 billion on defence ships, at the end of the day we have to make sure a strong, secure, sustainable Australian shipbuilding industry comes out of that, which addresses the current problems we have in relation to how our defence procurement leads to related export opportunities. Most other countries do that much better than we do.

I note that Labor is active in this space and has done things. For instance, we talked about the requirement that one in 10 personnel in government contracts be apprentices. That’s the kind of thing you can do through government procurement where you get both a good value-for-money, fit-for-purpose outcome and a broader social benefit. I was happy to meet this week with a delegation from AMWU pushing to get more young women involved in male dominated trades. That’s another objective that could be met by properly framed procurement arrangements. To conclude, I support the amendment moved by the member for Rankin. It’s good to see some procurement changes that have the potential to benefit small and medium-sized Australian enterprises. It could have been done via a better process than we’ve seen with this bill, and we’ll have to watch the results.

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