Senate debates

Thursday, 17 July 2014


Finance and Public Administration References Committee; Report

12:38 pm

Photo of Kate LundyKate Lundy (ACT, Australian Labor Party) Share this | | Hansard source

Pursuant to order, I present the report of the Senate Finance and Public Administration References Committee on Commonwealth procurement procedures, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

I move:

That the Senate take note of the report.

This important inquiry has explored the operation and effectiveness or, indeed, otherwise of the Commonwealth procurement rules. These rules set out the processes and rules for government purchasing. We also explored in some depth procurement related policies, which, interestingly, are not overseen by the Department of Finance but a range of other departments to which those procurement related policies belong.

The inquiry explored the impact of Australia's international obligations arising from bilateral free trade agreements on procurement policies. The committee formed the view that government procurement policies, as part of the value-for-money assessment, should take into account the effect of those procurement decisions on communities and the broader economy.

Throughout this inquiry, witnesses made clear to the committee that the value-for-money proposition is not merely a matter of comparing prices; it ought to be a matter of assessing the broader benefit, as well as the costs of the available options. For example, the committee received evidence suggesting that the procurement of locally produced stationery had definite economic benefits for government, including greater government tax revenues from individuals and companies, the benefit of supporting Australian jobs and, indeed, the development of Australian workers' skills in this area.

Mr Travis Wacey from the CFMEU reflected on the estimate of job losses in the paper and forestry industries as a result of Australian Paper not being awarded the envelopes contract in 2013 by DHS. He said:

We are not just talking about one or two jobs; we think that 15 to 20 direct production jobs were triggered by the loss of this contract, and it is a situation representing literally hundreds of thousands of dollars, if not millions of dollars in lost taxpayer revenue in the short, medium and longer term just for the $8,000 benefit.

That was the difference in the bottom line price in that particular tender. It was noted:

Australian Paper also provides significant revenue to all levels of Government; equivalent to $1.81 for each and every A4 ream of copy paper that we make and totalling $432 Million in 2012.

These are just some of the considerations that brought the committee to the conclusion that there is an urgent need for a stronger methodology to assess whole-of-life costs within the value-for-money assessment component of procurement decision-making. It is quite a mouthful, but this issue goes to the heart of how Australian industry has opportunities to compete on a level playing field.

The committee formed the view that, with consideration of the broad economic benefits of procurement as part of a comprehensive value-for-money assessment and the effective application of the range of procurement related policies, combined with the scrutiny and accountability measures contained in our recommendations, procurement outcomes for Australian companies would be considerably improved without impacting on our international bilateral trade obligations and without necessarily needing to change the procurement rules dramatically. In fact, one of the issues was that, if all of the procurement related policies and rules were applied with a genuine whole-of life, value-for-money assessment, the policy would not need to change much at all. It is about the application, effectiveness, oversight, transparency and genuineness of the objectives contained within procurement policies.

There was quite a deal of concern from a number of industries, including the IT industry. We heard evidence from Michelle Melbourne and Suzanne Campbell, representing the Business Council of the ACT and the Australian Information Industry Association. They spoke specifically about a company called Intelledox. Michelle Melbourne, through her own experience, reflected on this and said:

… it is not an even playing field … over there; it just isn't … So we—

that is, Australia—

follow 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?

The committee asked for details on how our international free trade agreements apply. The evidence we got is that we seem to not utilise the range of exemptions that are available for small to medium sized Australian businesses to the extent that our partners in these free trade agreements do. Therefore, our recommendations point to an exploration of the scope to work within those obligations—no-one is suggesting stepping out of those obligations—to fully garner the benefit that other nations have through those bilaterals and support our small to medium sized enterprises.

I am very conscious of time and I will, at the conclusion, seek leave to continue my remarks. However, can I thank the committee secretariat, in particular, Lyn Beverleyand Ann Palmer, and a particular thank you to my Senate colleagues, who worked constructively. A minority report came in from government senators, who, interestingly, agree with some, certainly not all, of our recommendations.

I would particularly like to acknowledge Senators Madigan and Xenophon, who have supported the recommendations of the majority committee and added strength and detail in their own words as they continue to promote these issues relating to Australian companies' access to Commonwealth contracts. The key issue is in the capacity of companies to grow and expand and support the local community. I seek leave to continue my remarks.

Leave granted; debate adjourned.