Small businesses left out in the cold by government procurement process

Small businesses in Australia have raised concerns about feeling excluded from government procurement opportunities, citing difficult tender processes and a sense of being left out from the ‘in-crowd’ according to findings from an inquiry by the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson.

In 2021-22, the government and its entities awarded 92,303 contracts with a combined value of $80.8 billion. Of these, $25 billion went to small and medium-sized businesses, representing 31 per cent of the value. However, Billson believes this number could be much higher if barriers to the tender process were removed.

In line with this, the ombudsman initiated an inquiry in March to investigate the impact of Commonwealth procurement reforms on small businesses. As part of this effort, Billson has released an issues paper with his findings to date and extended the deadline for public submissions.

Key points

• Small businesses feel excluded from procurement processes
• Tenders can be time-consuming and costly
• Insurance requirements a barrier to entry

Barriers to procurement

Billson suggested small business owners had expressed significant hindrances to participating in the government tender process.

“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.

“These are among the barriers we’ve heard about, and our issues paper seeks to draw out more experiences and insights as we hear what small businesses and individuals say about the challenges or difficulties they face when approaching government for procurement and where things might be improved.

The ombudsman said he was equally keen to hear examples of government agencies who were doing the right thing so that these ‘best practices’ could be extended more widely across government agencies to transform the procurement process. Billson emphasised the vital role of government contracts in shaping the prosperity of small businesses.

“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.

Tender process can be frustrating

Billson shared that many small businesses also expressed frustrations concerning government panels for contract awards.

“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. Yet being on a panel does not guarantee work. Many small businesses have told us how they have been on panels for years and never been approached for a request to quote.”

The high cost and investment of time required to tender, was also pinpointed by those surveyed as a substantial barrier to the procurement process.

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

Billson noted another significant barrier faced by small businesses, was the requirement to have certain kinds of expensive insurances in place to be able to tender.

“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.”

Still time to have your say

As the inquiry continues, the ombudsman is encouraging more business owners to come forward to provide feedback and ideas from both businesses regardless of whether they are currently using the procurement system or simply aspiring to do so. Billson said that extending the range of the inquiry will allow for a broader range of voices to be heard and for constructive solutions to be explored,

Small business owners and stakeholders who wish to contribute to the inquiry can find the issues paper and the terms of reference on the Australian Small Business and Family Enterprise Ombudsman’s website at www.asbfeo.gov.au/procurement.

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