Commonwealth buyers across a range of high value industries including engineering, mining and defence will have to source a minimum number of goods and services from indigenous businesses under changes to procurement policy.

Increased mandatory indigenous procurement requirements will be phased in from July 1, the federal government says.

The current Indigenous Procurement Policy (IPP), which requires three per cent of government contracts to go to Indigenous businesses, has reaped $2 billion worth of Commonwealth Government contracts since its introduction in July 2015.

However most of the contracts have been low value with only a narrow range of industries – a total of eight – subject to mandatory minimum requirements (MMR) for contracts valued over $7.5 million.

Under the changes, the IPP will require three per cent of the value of Commonwealth contracts to go to Indigenous businesses by 2027, with MMR  expanded to 19 industry categories from July 2020.

The 11 new categories also include industrial production, environmental services, management, financial products, insurance, healthcare, personal and domestic, and organisations and clubs.

Government and indigenous business

Indigenous Affairs minister Nigel Scullion told a gathering of Indigenous businesses in Sydney last Wednesday that the IPP has changed the relationship between the government and indigenous business. 

Before the IPP, Indigenous businesses were “all but locked out of Commonwealth contracts”, Mr Scullion told the Supply Nation Connect Conference, with just 30 Indigenous businesses winning $6.2 million worth of Commonwealth contracts in 2012-13.

Since the IPP began in July 2015 1,500 Indigenous businesses have been awarded 12,000 government contracts worth $2 billion, he said.

IPP 2.0, coming in from July, would introduce further reforms, Mr Scullion said.

“This next phase of the IPP promises to supercharge an already successful policy,” he said.

The revamped procurement policy will involve a target based on the value of contracts. The target will be set at one per cent for the 2019-20 financial year and will increase by 0.25 per cent until it reaches three per cent in 2017.

The three per cent figure is a reflection that Indigenous Australians represent three per cent of the population.

Indigenous capital scheme

The drive will get a boost from a new $17 million Indigenous Entrepreneurs Capital scheme, designed help larger indigenous businesses get bank finance, Indigenous Affairs minister Nigel Scullion says.

“This new financial product will help Indigenous businesses that are looking to access bank finance but cannot because of historical undercapitalisation,” he said.

“This fund will … provide one-off guarantees to assist Indigenous businesses access commercial finance for the first time.”

The capital scheme forms part of the government’s Indigenous Business Sector Strategy which includes:

• Support for start ups
• Development of a CDP Business incubator model
• Support for Indigenous construction firms to win road and construction projects
• Investment in equipment in remote and regional areas to help indigenous businesses win new contracts

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