Small businesses to benefit from bigger share of federal spending

From 1 July, new procurement rules come in to force to increase the target from 20 per cent to 25 per cent of the annual $75 billion of contracts from government departments.

It would also see the introduction of a 40 per cent target for procurements below $20 million and the exemption threshold, allowing agencies to directly engage SMEs, would be lifted from $200,000 to $500,000.

The Australian Small Business and Family Enterprise Ombudsman’s report on the effectiveness of the procurement rules, found that SMEs only received 11 per cent of the $75 billion in federal contracts in 2022–23, despite the government’s targets and small businesses making up 97 per cent of all businesses in the country.

Finance Minister Katy Gallagher assured the government was listening to feedback from SMEs.

“When used effectively, government procurement supports Australian businesses, and can stimulate growth in small and regional businesses and across industry sectors”, she said.

In response to feedback about the operation of government procurement panels, she said that the government would also require that at least one SME must be approached for every request for a quote from the mandated Management Advisory Services (MAS) Panel and the People Panel.

In addition to the changes to SME procurement rules, the government also announced changes to First Nations procurement and thresholds for economic benefit assessments.

It said a new Flexibility Allowance would allow 5 per cent of agency spending on services through the MAS and People Panels to be sourced directly to First Nations businesses that were not on those panels, increasing opportunities for First Nations businesses.

The threshold for procurements that required an economic benefit assessment would be reduced from $4 million to $1 million to ensure more would be scrutinised for their ability to provide value for money.

Date published 25 Jun 2024