Small businesses feel "excluded" from govt tenders: inquiry

A number of small businesses say they feel excluded from the chance to tender for Australian government procurement contracts, according to a report from the office of the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).

The findings were released in the agency’s recently released issues paper following the ASBFEO’s inquiry examining the impact of reforms to Commonwealth procurement rules on small business.

Ombudsman Bruce Billson said the small businesses feel excluded from competing for government tenders because they say they are not part of the ‘in-crowd’ or find the process too hard to navigate.

“Enabling SMEs to fully compete for government work helps deliver better value, supports innovation and drives stronger Australian-based capability – all worthwhile and important benefits for the taxpayer and our nation,” Billson said.

“Since beginning the inquiry in March, many small businesses have told us they feel shut out of the process or they simply find it too hard to navigate.

“They have low awareness about procurement opportunities unless they are already part of the ‘in-crowd’ through existing relationships with procuring agencies, or previous experience in government procurement.”

Billson added those are among the barriers his office has heard, and the issues paper released seeks to draw out more experiences and insights on the challenges and difficulties faced when approaching government for procurement and where things might be improved.

The government in 2021 to 2022 awarded some 92,303 contracts with a combined value of $80.8 billion, with SMEs awarded 55 percent of the contracts by volume or 31 percent by value, worth $25 billion.

Small businesses on their own accounted for $8.5 billion worth of the work, or 10.5 percent of all contracts by value.

Billson said he was keen to get more feedback and ideas from those using the procurement system or those who would like to but do not.

“Winning a government contract can be life-changing for a small business. As all businesses know, there is no substitute for good customers,” Billson said.

“A great frustration that has been highlighted to us relates to the use of government panels for awarding contracts."

"Panels are a short list of providers that departments can draw from to have work carried out up to a particular value."

Billson added being on a panel does not guarantee work.

Many small businesses told the agency how they have been on panels for years and never been approached for a request to quote.

“Small businesses also point to the high cost and investment of time required to tender, and lack of consideration of this opportunity cost by agencies,” Billson said.

“The provision of limited or no feedback when a tender is unsuccessful is also a source of bewilderment and vexation.”

Billson said the requirement to have certain kinds of expensive insurance just so they have the chance to do the work with no guarantees was another significant barrier imposed on small businesses.

“We are looking at the Commonwealth Procurement Rules to see how they are being applied, which departments are doing well, and whether there's further steps that can be taken to improve the system,” he said.