Richard Smith is a bids and tenders specialist. In this piece, he highlights the compliance issues that exclude SMEs from Government opportunities.
Government in Australia at all levels – Commonwealth, State and local council – states as a major objective the intention to support small to medium enterprises (SMEs).
For contracts with a value of up to $1 billion, the Commonwealth Government has committed to procuring a quarter (by value) from SMEs. For contracts up to $20 million, it has committed to procuring 40 per cent, by value, from SMEs.
That’s a big commitment to SME business in Australia. Especially when you consider that, in 2023-24, the Commonwealth Government issued 83,453 contracts with a combined value of $99.6 billion.
Add the recent announcement that the Commonwealth Government is “looking to increase the opportunities for Australian businesses to win public sector contracts by redefining the term ‘Australian business’”, and you would be right to believe that the Government was fully supportive of the SME sector.
However, what Government policy might be trying to achieve, procurement would appear to be stifling.
What do we mean by this? Well, increasingly at my tender-writing business, we are seeing that businesses conducting business with Government are required to have:
- $5 million cyber insurance
- $10 million professional indemnity insurance (for those in the service sector)
- $50 million public liability
- $20 million product liability
Added to this is that businesses doing business with Government are required to:
- Submit monthly, quarterly reporting that requires the resources of at least one full-time employee;
- Procure goods and services from First Nation suppliers in the amount of x% of the annual revenue from the Government contract;
- In some circumstance, ensure compliance with anti-slavery requirements in the supply chain;
- Ensure compliance with ESG key performance indicators.
These are all very noble requirements. But when you consider that the definition of an SME in Australia is “a business with less than 200 people”, and with most of these falling within the definitions of micro-enterprise (1-4 people) and small business (5-19 people), these requirements are a major drag on profitability.
Indeed, in most cases complying with these requirements means many SMEs simply cannot tender for the Government work. This is defeating the Government’s stated aim by stealth – if you are not in the game you are, by extension, excluded from the opportunity.
What can be done about this?
It is time that the Government – particularly at Commonwealth and State level – acknowledge that the requirement to meet compliance requirements is costing SMEs in Australia opportunities to do business with the Government.
It is time the Government in Australia introduced a tiered approach to compliance dependent on (a) size of the business, and (b) amount of revenue earned.
It is time SMEs in Australia are given a ‘fair go’ at winning a share of Government work that their tax paying dollars help contribute to!
