Small businesses feel excluded from the chance to tender for government contracts because they’re not considered part of the ‘in-crowd’, a report from the small business ombudsman says.

Bruce Billson examined the impact of the implementation of recent changes to Commonwealth Procurement Rules on small and family businesses after receiving a referral from finance minister Katy Gallagher. 

His report was handed to the government last December and released on May 1.

“The overwhelming response from our consultations with Australia’s small business community is that too many feel excluded from the chance to tender for government contracts because they are not part of the ‘in-crowd,” Mr Billson says.

“Repeatedly, small suppliers told us the existing system is just not working as the process involved in bidding is too complicated, not conducive to competition, opaque, inefficient, and incongruent with private-sector processes.”

Officials on the other side of the fence also face frustrations and impediments when dealing with small business, he added.

Govt response ‘underwhelming’

But he’s slammed the government for rejecting many of the report’s suggestions, saying it’s a missed opportunity to help small and family businesses become a government provider.

“The government’s initial response to our inquiry is underwhelming and I was surprised that several of the substantive recommendations and proposed reforms that have not been embraced, were rejected without any discussion at all,” he said.

“The sentiment that it is ‘all sorted’ or more of the same with a minor tweak here and there, was not reflected in any of the submissions, research or reference group input. 

“There will be great disappointment by those participating in the inquiry process, hopeful for substantial improvement in the way the Commonwealth deals with current and prospective small business suppliers.”

Mr Billson said the existing system clearly isn’t working as intended for many small businesses, yet the government doesn’t seem interested in changing anything.

“Dismissing considered and evidence-based reforms as potentially expensive, inefficient or duplicative without any meaningful examination to justify retaining current and known-to-be ineffective and perfunctory arrangements, is at odds with the stated ambition of successive governments to improve Commonwealth procurement for small business suppliers,” he said.

Call for independent Procurement Commissioner

The Commonwealth procured goods and services worth $75 billion in 2022-23. But despite making up 97 per cent of all businesses, procurement from small business suppliers accounts for only $8 billion, the report says.

It also cites analysis by the e61 economic research institute which found Commonwealth procurement has increasingly favoured large and existing suppliers since 2014.

Mr Billson makes 11 recommendations, including that the Procurement Coordinator function be abolished and replaced with a Procurement Commissioner, who would have independent processes for resolving complaints and supporting procurements.

“The current Procurement Coordinator complaints function is neither timely nor consequential, with the Coordinator having no authority to compel an outcome,” he said.

Only three complaints a year on average have been lodged since 2011.

The Ombudsman’s report also makes recommendations aimed at improving Defence procurement, making AusTender fit for purpose, supporting procuring officials to identify and use small businesses, reforming government panels, boosting women-owned business opportunities and improving payment times.