Indigenous Procurement Policy (IPP)
Introduction
Many companies are now joining the movement of reconciling with the Indigenous society of Australia. The Australian government introduced the Indigenous Procurement Policy (“IPP”) on 1 July 2015 to take advantage of the large budget the Commonwealth is given yearly to propel the development of the Indigenous business industry.
The IPP mandates a procurement of Indigenous goods and services by introducing a “target number of contracts that need to be awarded to Indigenous businesses”, a “mandatory-set aside for remote contracts and contracts valued between $80,000 – $200,000”, and a “minimum Indigenous participation requirements in contracts valued at or above $7.5m in certain industries”.[1]
Background
The construction industry is closely connected to many government as well as private agencies. For example, the Commonwealth requires the construction industry to provide infrastructure and the like, providing major projects to construction businesses. The total work done by the construction industry is an estimated $203 billion for the 2019/2020 financial year.[2] Therefore, with an increasing number of agencies putting Indigenous Procurement Targets in place, it means that the fraction of the $203 billion pie being awarded to Indigenous businesses is growing too as organisations with an Indigenous Procurement Target policy in place will be looking to hit their procurement targets by awarding those contracts to Indigenous businesses. Building, construction, and maintenance services constituted 20.7% of the total number of contracts awarded to the Indigenous business sector via the IPP between 1 July 2015 and 30 June 2017.[3]
For example, constructing giant Laing O’Rourke has introduced a company-wide IPP in April 2017.[4] Laing O’Rourke has established a minimum target to spend on work with Indigenous businesses. As a constructing company themselves, they are able to provide both an example and a chance to other constructing companies to work together. They had a tender package that closed in December 2017 that included them looking for “Concrete Cutting and Drilling Subcontractor”, “Demolition Subcontractor”, and “Environmental Consultant” amongst others.[5] This illustrates the pertinence of fulfilling the criteria that the IPP has set out.
In addition to the IPP, states have also introduced other policies which promote awarding projects to Indigenous businesses, such as the Aboriginal Participation in Construction (APIC) policy which applies to all NSW government agencies.[6] The APIC provides a mandatory minimum target percentage in increments to be allocated to contractors that provide Aboriginal Participation Plans.
Another example can be found in mining leaders Fortescue Metals Group, who have awarded contracts and sub-contracts with a total worth of over $1.9 billion to Aboriginal-owned businesses and joint ventures since the inception of its own Indigenous Procurement Targets policy, the Billion Opportunities Program in 2011. Amongst the contracts awarded are contracts for infrastructure works and industrial services,[7] contracts that your construction business might benefit from. Similarly, Rio Tinto’s Tier 1 contractors who are awarded work packages worth over $1 million are expected to complete Rio Tinto’s project specific Local and Indigenous Participation Template.[8]
Additionally, Reconciliation Australia’s Reconciliation Action Plan (“RAP”) comprises an Indigenous Procurement Target in its multi-step programme in assisting organisations joining the national reconciliation movement. The RAP furnishes organisations which adopt its structure with programmes that encourage reconciliation of businesses and the Indigenous society. This is a broad structure that encompasses employees to procurement and partnership agreements.[9]
How do you get involved?
Generally, to be considered for an IPP contract, your business would have to qualify as an Indigenous Enterprise. An Indigenous enterprise as defined by the Australian Government through the IPP is one that has a fifty percent or more ownership by Indigenous Australians.[10]
If your business is Indigenous-owned, one easy way is to get onto recognised Indigenous business platforms such as Supply Nation. Another is to get your business qualified is through adopting a RAP. This will help build your business’ qualifications towards meeting the IPP’s criteria.
Alternatively, this can be done by convincing the procurement officer by providing a statutory declaration evidencing that your business’ ownership is more than 50% Indigenous or showing that your business is listed on an Indigenous Chamber of Commerce list.
Occasionally, there may be provisions in certain contracts providing advantages where your construction business specifically engages an Indigenous business/contractor. When this occurs, some construction companies engage Indigenous labour-hire firms to fulfil their goals of hiring a certain percentage of Indigenous contractors. AMK Law is an Indigenous business and may be able to assist in fulfilling Indigenous spend requirements.
Seeking out what the requirements are for the various policies is always a good way to start before applying for any tender. Some policies are more lenient than others and your business may already qualify for certain Indigenous Procurement Targets. For example, Fortescue Metals Group’s Billion Opportunities Program considers eligible contractors to be at least 25% owned by an Aboriginal person or group.[11] This is a vast difference from the 50% that the IPP demands. Sometimes a little restructuring is all it takes to qualify your business for Indigenous Procurement Target policies.
Conclusion
The growing trend of organisations becoming involved with the Indigenous procurement targets translates into a significant amount in terms of monetary value in contracts. Businesses take time to “restructure” in order to fulfil the necessary criteria demanded by the IPP. It is crucial for constructing businesses to reflect on whether gaining work through the IPP or any other Indigenous Procurement Target policy is a direction they want to take.
Important disclaimer: The material contained in this publication is of a general nature only and it is not, nor is intended to be, legal advice. This publication is based on the law as it was prior to the date of your reading of it. If you wish to take any action based on the content of this publication, we recommend that you seek professional legal advice.
[1] Department of the Prime Minister and Cabinet, Indigenous Procurement Policy Australian Government <https://pmc.gov.au/indigenous-affairs/economic-development/indigenous-procurement-policy-ipp>.
[2] Australian Construction Industry Forum, Construction Industry Leaders Forecast a Healthy Recovery in Non-Residential Building Activity Australian Construction Industry Forum < https://acif.com.au/forecasts/summary>.
[3] Department of the Prime Minister and Cabinet, Indigenous Procurement Policy Exceeds Targets (29 September 2017) Australian Government <https://pmc.gov.au/news-centre/indigenous-affairs/indigenous-procurement-policy-exceeds-targets>.
[4] Indigenous Procurement Policy (20 April 2017) Australian Tenders <https://australiantenders.com.au/news/325/indigenous-procurement-policy/>.
[5] Ibid.
[6] NSW Procurement Board Secretariat, NSW Government Policy on Aboriginal Participation in Construction (1 May 2015, updated 1 August 2016) NSW Department of Finance, Services and Innovation <https://procurepoint.nsw.gov.au/system/files/documents/apic_policy_1_august_2016.pdf>.
[7] Monica Gameng, Aboriginal Businesses and JVs Win $100m Worth of New Work in the Pilbara (4 July 2017) Plantminer <https://aboriginal-businesses-and-jvs-win-100m-worth-of-new-work-in-the-pilbara>.
[8] Amrun Project, Local and Indigenous Participation Strategy (November 2015) Rio Tinto <https://riotinto.com/documents/Amrun_Project_Amrun_Local_and_Indigenous_Participation_Strategy.pdf>.
[9] Reconciliation Australia, What is a RAP? <https://reconciliation.org.au/reconciliation-action-plans/>.
[10] Department of the Prime Minister and Cabinet, Commonwealth Indigenous Procurement Policy (1 July 2015) Australian Government <https://pmc.gov.au/resource-centre/government/commonwealth-indigenous-procurement-policy>.
[11] AMMA Australian Resources & Energy Group, FMG Awards $1bn in Aboriginal Contracts (14 August 2013) AMMA Australian Resources & Energy Group <https://amma.org.au/news-media/media-center/fmg-awards-1bn-in-aboriginal-contracts/>.