Government boosts SME contract share to benefit small businesses, environment

In a major revamp, Australia has taken the first step toward increasing the number of small and medium-sized businesses that can profit from government expenditure contracts by revising the Commonwealth Procurement Rules (CPRs). 

The new CPRs will increase the government’s commitment to expanding opportunities for SMEs by mandating SMEs to procure 20 per cent of overall (government’s $70b average yearly spend) procurements.

This is a 10 per cent increase above the previous target, and it will open the door to more government employment for SMEs. The basic rule of the CPRs is value for money. Officials must examine the relevant financial and non-financial costs and advantages of each plan when determining a value for money. 

In addition to this value-for-money premise, the updated CPRs now compel procuring officials to consider the broader impact of purchase on climate change when conducting this value-for-money assessment.

As per the statement, the change goes hand in hand with the commitment to reducing Australia’s emissions by 43 per cent by 2030 and provides an opportunity to showcase Australia’s abundance of talent, resources and innovation.

Lastly, the CPRs will encourage entities to approach multiple suppliers, when procuring from a panel arrangement. Adopting this change improves competition, driving value for money outcomes and ensuring a better deal for the taxpayer.

Why does it matter?

The Australian government spends roughly $70 billion on contracts each year. These changes to the CPRs will provide greater chances for small and medium-sized businesses to apply for Commonwealth contracts. 

This spending is an important economic lever that can help Australian businesses by stimulating growth in small and regional firms as well as across industries. The improvements will help small and medium-sized enterprises develop and, as a result, employ more people.

“Small businesses shouldn’t be locked out from opportunities to gain government contracts just because they might not have the leverage of bigger businesses,” Minister for Small Business, Julie Collins said.

“The swift delivery of these changes shows the Albanese Government is serious about implementing our commitment for a better deal for small business.”

Small businesses are the engine room of the Australian economy, and these measures are aimed at making it easier for them to recover from the current epidemic and the bushfires and floods that have decimated sections of the country. 

Meanwhile, the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, stated that the revisions to Commonwealth procurement laws will provide small firms with more possibilities to secure government contracts.

“There is no substitute for customers and it’s great to see the Commonwealth’s commitment to be a bigger customer for small businesses,” Mr Billson said.

“An important element to ensuring these changes make a real difference will be to provide capacity-building contracts that will enable smaller businesses to really benefit from the contracts to grow their business.”

The changes will mean that 20 per cent of Commonwealth procurements by value must be sourced from small and medium enterprises. This doubles the existing target of 10 per cent.

“The Government spends about $70 billion a year on contracts, meaning at least $14 billion of this work will go to small and medium businesses,” Mr Billson said.

Procuring agencies will also be encouraged to approach multiple suppliers when they are sourcing from panels which will improve competition and provide more opportunities for smaller businesses to apply for government work.

The updated Commonwealth Procurement Rules are now online and will come into effect on 1 July 2022.

Read the full media release.

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