For decades, Indigenous businesses have been told that government procurement policies would level the playing field, that the billions in government contracts would lead to economic independence, and that systemic barriers would finally be dismantled.

But in reality, loopholes were exploited, fraudulent operators flourished, and black cladding one of the most insidious forms of corporate deception thrived in the shadows.

Now, after years of mounting evidence, political pressure, and legal scrutiny, the Australian Government is implementing the most significant overhaul of the Indigenous Procurement Policy (IPP) in history.

The changes, set to roll out between 2024 and 2026, will introduce:

• Stronger eligibility criteria to ensure Indigenous businesses are genuinely owned and controlled by First Nations people.
• Increased procurement targets that compel government agencies to allocate more contracts to Indigenous businesses.
• Tougher compliance measures to prevent companies from gaming the system.
• A crackdown on black cladding that includes severe penalties for fraudulent operators.

These reforms aren’t just policy tweaks they are a direct response to a long running scandal that saw millions in government contracts misdirected into the hands of non Aboriginal or Torres Strait Islander entities.

This is an accountability moment. And it has serious legal, financial, and reputational implications for businesses, government agencies, and corporate Australia.

The Legal and Economic Case for Indigenous Procurement Reform

The Indigenous Procurement Policy (IPP) was first introduced in 2015 under the guise of economic justice a means of correcting the gross underrepresentation of Indigenous businesses in government supply chains.

The principle was straightforward:

• Government contracts should be awarded to Indigenous businesses.
• Indigenous business owners should have control over their enterprises.
• Procurement spending should foster long-term economic empowerment for First Nations people.

And yet, despite its promising intent, loopholes in the system were not only left open they were exploited at scale.

A loophole that allowed non-Indigenous businesses to create token Indigenous partnerships while maintaining control led to an industry-wide black market in procurement contracts.

This practice, known as black cladding, became the go-to strategy for businesses looking to circumvent Indigenous participation rules while reaping the financial benefits of government contracts.

The Problem: Black Cladding Became Institutionalised

What started as a fraudulent practice quickly morphed into an institutional problem.

• Corporations established Indigenous shell partnerships creating the illusion of Indigenous ownership while keeping real power and financial control in non Indigenous hands.
• Government agencies turned a blind eye as long as a business appeared to meet the baseline requirements, contracts were approved with minimal scrutiny.
• Indigenous businesses were locked out genuine Aboriginal and Torres Strait Islander enterprises, which were supposed to be the primary beneficiaries of the IPP, were left to compete against fraudulent operators with greater financial backing and corporate influence.

This was not a case of a few bad apples it was a systemic failure that undermined the fundamental purpose of the policy.

The 2024-2026 IPP Reforms: The End of Black Cladding?

The National Indigenous Australians Agency (NIAA) has now stepped in with a suite of reforms designed to stop black cladding in its tracks and restore integrity to the IPP.

1. Tightened Eligibility Criteria (Effective 1 July 2026)

New Rule:

From July 2026, a business will only qualify for Indigenous procurement contracts if it is at least 51% Aboriginal or Torres Strait Islander-owned AND controlled.

Legal and Business Implications:

• Black cladding operations will no longer pass legal scrutiny.
• Businesses with token Indigenous partnerships will lose access to government contracts.
• Genuine Indigenous businesses will regain a competitive advantage in the government procurement space.

This is a legally enforceable shift businesses that fail to demonstrate genuine Indigenous ownership and control will be barred from future contracts.

2. Higher Procurement Targets (Effective 1 July 2025)

New Targets:

• The minimum Indigenous procurement target will increase to 3% in 2025.
• The target will rise annually by 0.25%, reaching 4% by 2030.

What This Means for the Private and Public Sectors:

• Government agencies must actively engage Indigenous suppliers not just as a box-ticking exercise, but as a core procurement requirement.
• Non-compliance will carry reputational and financial risks agencies that fail to meet targets will face public scrutiny and potential funding consequences.
• Corporate supply chains will need to adjust businesses that want to win government contracts must build genuine partnerships with Indigenous suppliers.

The era of symbolic procurement is over. The new targets will demand real, measurable participation from Indigenous businesses.

3. Greater Transparency and Legal Accountability

 What’s Changing?

• Government agencies must report on Indigenous supplier engagement in real-time.
• Stricter compliance audits will ensure businesses are not falsely claiming Indigenous status.
• Data on Indigenous procurement will be made publicly accessible, allowing for greater scrutiny.

Why This Matters:

• No more backroom deals Indigenous procurement data will be subject to public and legal scrutiny.
• No more unchecked instances of black cladding, they will be exposed through mandatory audits.
• A legal foundation for Indigenous businesses to challenge fraudsters if a company misrepresents its Indigenous ownership status, legal action will follow.

This is not just a policy shift it is a legal shift. Compliance will be enforced, and failure to comply will have consequences.

4. Severe Penalties for Black Cladding

New Enforcement Measures:

• Companies caught black cladding will face severe financial penalties.
• A streamlined reporting system will allow Indigenous businesses to flag fraudulent competitors.
• Legal support will be provided to Indigenous businesses fighting procurement fraud cases.

What This Means for Fraudulent Operators:

• Companies that have engaged in black cladding will be identified and blacklisted.
• Executives who knowingly participated in fraudulent procurement practices may face personal liability.
• The Indigenous business sector will have a direct legal pathway to challenge procurement fraud.

The government is no longer tolerating exploitation. The free ride is over

What Government and Corporate Procurement Teams Must Do Now

The 2024-2026 Indigenous Procurement Policy (IPP) reforms are not just about Indigenous businesses meeting new requirements they place a legal and ethical responsibility on government procurement teams to ensure compliance, transparency, and genuine engagement with First Nations suppliers.

For procurement officers, contract managers, and policy advisors, the time for passive compliance is over. These changes demand active participation, rigorous vetting, and strict enforcement to eliminate fraud, prevent black cladding, and meet increasing Indigenous procurement targets.

Failure to comply will have serious reputational, legal, and financial consequences for government agencies. Here’s what procurement teams must do right now to prepare for the IPP reforms.

Strengthen Supplier Vetting and Indigenous Business Verification

All businesses seeking Indigenous procurement contracts must be at least 51% Aboriginal or Torres Strait Islander-owned AND controlled by July 2026.

What Government and Corporate Procurement Teams Must Do:

• Implement stricter due diligence when verifying Indigenous business status.
• Cross-check supplier credentials against Indigenous Business Direct (IBD) and ORIC databases.
• Review current Indigenous procurement levels and assess whether your agency is on track to meet new targets.
• Establish department-wide Indigenous procurement action plans to ensure year-on-year compliance.
• Identify procurement categories where First Nations businesses can realistically supply goods and services.
• Engage Indigenous businesses early not as an afterthought when procurement targets aren’t being met.
• Require formal proof of ownership and control, such as:

1. Indigenous Business Certification (IBD registration).
2. Corporate governance structures proving Indigenous leadership.
3. Financial documents showing Indigenous shareholders have majority control.

Procurement teams that fail to conduct proper vetting risk awarding contracts to fraudulent operators, which could lead to contract cancellations, reputational damage, and legal action.

Start building long-term relationships with Indigenous suppliers NOW. Scrambling to meet procurement quotas at the last minute often results in rushed contracts and compliance failures.

With these new enforcement rules in place, government procurement teams must take immediate action to ensure they are not inadvertently awarding contracts to companies engaging in black cladding.

The first step is to conduct deeper contract audits to verify that businesses truly meet the 51% Indigenous ownership and control requirement. This means examining corporate structures, financial records, and leadership roles to ensure that Indigenous businesses are not being used as a front by larger, non-Indigenous corporations.

Procurement teams must also scrutinise subcontracting arrangements to prevent businesses from exploiting loopholes. In many black cladding cases, a non-Indigenous company forms a token partnership with an Indigenous business, while keeping financial and operational control behind the scenes. This must be flagged and stopped before contracts are awarded.

Additionally, procurement officers should require regular reporting from suppliers, ensuring that Indigenous businesses are not just listed on paperwork but are actively delivering the contract themselves. This includes tracking financial transactions, monitoring project execution, and holding contractors accountable for their Indigenous participation commitments.

To effectively investigate and act on black cladding cases, procurement teams should establish an internal task force dedicated to identifying fraudulent claims. This unit must operate with full transparency, conducting independent reviews and swiftly addressing complaints raised by Indigenous businesses.

Government and corporate procurement teams that fail to detect and prevent black cladding will face serious consequences. With public scrutiny growing, agencies caught awarding contracts to fraudulent Indigenous businesses could face government enquiries, media backlash, and significant reputational damage.

Non-compliance will not only erode trust in government procurement policies but could also lead to financial penalties and contract disputes. Agencies must act now to ensure their procurement processes are watertight, ethical, and fully aligned with the new IPP reforms.

What Indigenous Businesses Must Do Now

If you are an Indigenous business owner, you must act now to prepare for these changes.

• Confirm Your Business Meets the 51% Indigenous Ownership and Control Rule
• Register on Indigenous Business Direct ensure government agencies can find and engage your business.
• Report Black Cladding if you suspect a competitor is fraudulently claiming Indigenous status, file a complaint.
• Build Strategic Partnerships align with other Indigenous businesses to maximise procurement opportunities.

Final Verdict: A Turning Point for Indigenous Business Rights

The 2024-2026 IPP reforms are more than just policy adjustments they are a direct response to a system that has failed Indigenous businesses for too long.

The message is clear:

• Black cladding is over.
• Fraud will no longer be tolerated.
• Indigenous businesses will finally have a fair shot.

But policy alone is not enough.

Indigenous businesses must claim their space. Corporate Australia must change its approach. And the government must enforce the law.

This is a defining moment. And the time to act is now.

Want to take real action against Black Cladding? The Battle Against Black Cladding (BaM💥) Masterclass equips procurement teams and businesses with the tools, knowledge, and strategies to engage ethically with First Nations businesses and comply with the latest IPP reforms. Find out more here.

Disclaimer

This article serves as a general introduction and is based on information available at the time of publication, in many instances what is stated in this article is of opinion nature only. Nothing in this article should be relied upon and you will need independent legal advice in respect of all matters stated in this article.  This article is not intended to be legal advice and should not be relied upon in any manner. You must not make any decisions or take any action on the matters discussed in this article and you should seek professional legal advice tailored to your unique circumstances. Certain details may have been sourced from external references, and we do not guarantee the accuracy or up to date status of anything stated in this article.

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AMK Law acknowledges the Traditional Custodians of the land on which we are fortunate to live and work. We pay our respects to Elders, both past and present and further acknowledge the important role that First Nations peoples continue to play within our communities.