Factsheet - Using the Commonwealth Procurement Rules Indigenous Exemption (No.17)

Indigenous AffairsGrants and Funding
Monday, May 25, 2015
Publication author(s):
Department of the Prime Minister and Cabinet
Publication abstract:

Exemption No. 17 included in Appendix A of the Commonwealth Procurement Rules allows an entity to engage directly (via limited tender) with a Small and Medium Enterprise (SME) with at least 50 per cent Indigenous ownership.

About the exemption

Exemption No. 17 included in Appendix A of the Commonwealth Procurement Rules allows an entity to engage directly (via limited tender) with a Small and Medium Enterprise (SME) with at least 50 per cent Indigenous ownership.

About the Indigenous Procurement Policy

The Indigenous Procurement Policy (IPP) commences on 1 July 2015 and replaces the Indigenous Opportunities Policy. The objective of the IPP is to stimulate Indigenous entrepreneurship and business development, providing Indigenous Australians with more opportunities to participate in the economy.

As the Indigenous business sector is dominated by small to medium sized enterprises (SMEs), the new policy focuses effort on these enterprises to drive improvements in Indigenous economic development and Indigenous employment.

The IPP has three elements:

  1. A target for Commonwealth Government departments purchasing from Indigenous SMEs.
  2. A mandatory set-aside for certain procurements to direct some Commonwealth contracts to Indigenous enterprises.
  3. Minimum Indigenous participation requirements for certain Commonwealth contracts.

Where can I find out more information about the Indigenous Procurement Policy?

Information on the Indigenous Procurement Policy, including on the process that must be followed to apply the mandatory set aside, can be found on the Department of Prime Minister and Cabinet’s website.

How does Exemption 17 of the CPRs support the Indigenous Procurement Policy?

This Exemption supports easier and more streamlined purchasing from Indigenous SMEs and can be used by Commonwealth entities as a tool to assist them to meet the requirements of the policy.

From 1 July 2015, Commonwealth entities will be required to apply the mandatory set aside to all new domestic procurements:

  1. that are valued between $80,000 and $200,000; or
  2. where the majority of the goods and services (by value) being purchased will be delivered in a remote area.

To satisfy the mandatory set aside requirement, the procuring officer must conduct a search for a suitable Indigenous SME on Supply Nation’s list of Indigenous businesses here. When a suitable Indigenous business is found, either from the Supply Nation directory or via other means, then Exemption 17 of the CPRs can be used to directly engage the business via limited tender as long as value for money is achieved.

Where can I find a list of Indigenous businesses and what they sell?

Supply Nation is a business-to-business membership body dedicated to growing diversity within the supply chain. Supply Nation provides a free list of Indigenous businesses, which can be found here.

If a suitable business is not found on Supply Nation’s directory, the procuring officer may elect to conduct additional searches for Indigenous SMEs. In particular, where the procurement is likely to offer local Indigenous employment opportunities in a remote area, the procuring officer could consider contacting PM&C’s Regional Network staff for advice on Indigenous SMEs.

The procuring officer may also wish to consult other lists of Indigenous suppliers that are maintained by organisations, such as Indigenous Chambers of Commerce.

Is it up to me to determine if a business is 50% Indigenous owned?

Before using exemption 17, the delegate must be satisfied that the business is 50 per cent or more Indigenous owned and that the business is an SME1.

Any Indigenous business which is registered with Supply Nation is taken to meet the definition of an Indigenous business.

If the business is not registered with Supply Nation, the delegate needs to take steps to satisfy himself or herself that the business is 50 per cent or more Indigenous owned. This could be done by:

  • Requesting that the owners of the business provide evidence of Indigeneity. This could take the form of:
    • A statutory declaration, declaring that the enterprise is 50 per cent or more Indigenous owned; or
    • Certificate(s) or letters of Indigeneity of the Indigenous owners (this is not a document that every Indigenous Australian holds) provided by a recognised Indigenous organisation such as a land council.
  • Checking whether the enterprise is listed with an Indigenous Chamber of Commerce or another business list.
  • Checking whether the business is listed with the Office of the Registrar of Indigenous Corporations.

Does Exemption 17 apply to all of the Commonwealth Procurement Rules (CPRs)?

No. The exemption only applies to the additional rules set out in Division 2 of the CPRs for procurements with values over the relevant procurement threshold. The rules in Division 1 still apply to the procurement, including the requirement to achieve value for money.

What type and size of procurements can the exemption be applied to?

The exemption can be applied to any procurement where its estimated value is at or above the relevant procurement threshold ($80,000 for general goods and services, and $7.5 million for construction services).

The exemptions at Appendix A cannot be used for the procurement of goods or services for which a mandatory whole of government arrangement is in place. A list of these can be found on the Department of Finance website.

Can I apply the exemption to procurements under the relevant threshold?

As the CPRs allow you to approach one or more businesses directly via limited tender for procurements with an estimated value under $80,000 for general goods and services ($7.5 million for construction services), there is no need to apply the exemption under the threshold. It is important that you check what your entity’s internal operating processes are and follow them as required.

What’s required when approaching an Indigenous business?

It’s the same process as any limited tender, you will need to issue a request for quote including key information to allow the business(es) to provide a competitive submission. As with any procurement, entities will need to be satisfied that a procurement achieves value for money.

How do I demonstrate ‘value for money’ in the absence of competition?

In the absence of an open tender, understanding the market, including an estimated cost, is a good start to demonstrating value for money. For low risk procurements you could also:

  • research comparable offerings on the internet;
  • search AusTender (www.tenders.gov.au) for similar contracts ;
  • talk to procurement officials both within and outside your entity about other similar procurements; or
  • create competition by approaching more than one Indigenous SME.

In addition to understanding the market, you might also obtain benchmarks for other contract deliverables such as the delivery timeframe, quality or nature of materials to be used.

Should I measure the social benefit as part of the ‘value for money’ consideration?

There is no specific requirement to measure the social benefit of procuring from an Indigenous business. Your assessment of value for money should be based around delivery of the goods or services at the quality you require. These should generally be in line with market rates.

How do I ensure accountability and transparency in the procurement process and in selecting Indigenous SMEs?

In terms of accountability, officials must maintain records for each procurement commensurate with the scale, scope and risk of the procurement including:

  • the requirement for the procurement;
  • the process that was followed;
  • how value for money was considered and achieved; and
  • relevant decisions.

Documentation should also be commensurate with the scale, scope and risk profile of the procurement.

AusTender is the mechanism for transparency. All contracts awarded above $10,000 must be reported on AusTender within 42 days of being entered into (or amended).

When applying the exemption, what procurement method do I report on AusTender?

Typically, where an exemption has been used, the contract should be reported as ‘limited tender’. Further information on the procurement methods is in the CPRs.

If I have issued an open tender via AusTender, then find an Indigenous business which can supply the service I need, can I cancel the RFT and engage the Indigenous business directly?

You should avoid cancelling an approach to market in order to directly engage an Indigenous business. A decision to use the exemption should be made prior to approaching the market.

If I have previously unsuccessfully attempted to engage an Indigenous business through the exemption, can I later include the same business in a tender process for the same procurement?

Yes. If you have been unsuccessful in engaging an Indigenous business directly via the indigenous exemption, and subsequently broaden the approach to market it is reasonable to advise the Indigenous business of the opportunity to bid.

Who can I contact for help with applying the exemption?

In the first instance contact your entity’s Central Procurement Unit.

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