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Defence Estate Quality Management System (DEQMS) BSi Certification

Indigenous Procurement Policy

Introduction

The Indigenous Procurement Policy (IPP) commenced on 1 July 2015, and applies to all non-Corporate Commonwealth entities subject to the Commonwealth Procurement Rules.

The purpose of the policy is to stimulate Indigenous entrepreneurship and business development, and to provide Indigenous Enterprises with more opportunities to participate in the economy.

What is an Indigenous Enterprise?

An Indigenous Enterprise is any business that is 50% or more Indigenous owned.

Supply Nation maintains a list of Indigenous enterprises that meet this definition.

If an enterprise states that it is an Indigenous enterprise, but is not listed with Supply Nation, the Project Officer must take steps to assure themselves that the enterprise is 50% or more Indigenous owned. Guidance on how to check this is provided for at clause 1.8.1 of the IPP document.

IPP requirements

There are three ways in which the requirements of the IPP can be met:

1. Mandatory set-aside for remote contracts

Project Officers must, before making an approach to market, first look to Indigenous businesses for all contracts in remote areas regardless of value, using Supply Nation.

A remote contract is a contract where the majority (by value) of the goods and services will be delivered in a remote area:

  • For a good, the delivery point is the point where the Commonwealth buyer assumes control of the good
  • For a service, the delivery point is the point where the Commonwealth buyer receives the service, even if the end user of the services is located elsewhere

Refer to detailed maps of the Remote Areas on PM&C’s Indigenous Procurement website.

Exceptions:

  • Does not apply to transactions paid for by credit card
  • Does not apply to procurements to which the following paragraphs of the CPRs apply
    • Paragraph 2.6: where the Accountable Authority determines the procurement necessary for the maintenance or restoration of international peace and security, to protect human health, for the protection of essential security interests, or to protect national treasures of artistic, historic or archaeological value
    • Paragraph 10.3: conditions of limited tender

2. Mandatory set-aside for contacts valued between $80,000 and $200,000

All new domestic procurements where the estimated value of the procurement is between $80,000 and $200,000 (rules around estimating the value are set out in the CPRs).

Exception:

  • Does not apply to procurements to which the following paragraphs of the CPRs apply:
    • Paragraph 2.6: where the Accountable Authority determines the procurement necessary for the maintenance or restoration of international peace and security, to protect human health, for the protection of essential security interests, or to protect national treasures of artistic, historic or archaeological value
    • Paragraph 10.3: conditions of limited tender

3. Mandatory Minimum Requirements (MMRs)

Applies to all High Value Contracts (valued at $7.5 million and more, GST inclusive) where the Approach to Market commenced after 1 July 2015, with the MMRs becoming binding on contractors from 1 July 2016,

AND

where more than half of the value of the contract is being spent in one or more of the following industry sectors:

  • Building, construction and maintenance services
  • Transportation, storage and mail services
  • Education and training services
  • Industrial cleaning services
  • Farming and fishing and forestry and wildlife contracting services
  • Editorial and design and graphic and fine art services
  • Travel and food and lodging and entertainment services
  • Politics and civic affairs services

Exception

  • Does not apply to procurements to which the following paragraphs of the CPRs apply
    • Paragraph 2.6: where the Accountable Authority determines the procurement necessary for the maintenance or restoration of international peace and security, to protect human health, for the protection of essential security interests, or to protect national treasures of artistic, historic or archaeological value

What are the MMRs, and how can the requirements be met?

The contractor must elect to meet the MMRs directly or through subcontracts.

Over the initial term of the contract (the first term of the contract before any extensions), contractors must meet the following requirements, as they determine within their Indigenous Procurement Plan at the time of tender.

1. Contract based requirement

  • Employment requirement
    • At least 4% of the FTE on contracted project must be Indigenous Australians
  • Supplier-use requirement
    • At least 4% of the value of the goods and services provided under the contract must be subcontracted to Indigenous enterprises
  • Combination of both
    • Percentage of Indigenous Australians FTE deployed on the contracted project + percentage of the value of the goods and services provided under the contract subcontracted to Indigenous enterprises = 4%

2. Organisation based requirement

  • Employment requirement
    • At least 3% of the FTE of the contractor must be Indigenous Australians
  • Supplier-use requirement
    • At least 3% of the value of the contractor’s Australian supply chain must be subcontracted to Indigenous enterprises
  • Combination of both
    • Percentage of Indigenous Australians FTE in the organisation + percentage of the value of the contractor’s supply chain subcontracted to Indigenous enterprises = 3%

3. A component of a High Value Contract delivered in a remote area

  • Defence and contractor must ensure there is a contractual requirement that ensures the contract delivers significant Indigenous employment or supplier use outcomes in that area, including
    • Percentage of Indigenous Australians FTE in the organisation + percentage of the value of the contractor’s supply chain subcontracted to Indigenous enterprises = 3%

In determining what requirement would deliver a ‘significant’ indigenous employment or supplier use outcome, the purchasing Commonwealth entity and the contractor should have regard to the size of the local Indigenous population relative to the non-Indigenous population and the nature of the contracted goods and services.

For clarity, if the Commonwealth entity and contractor agree a Remote Area supplier use or employment contractual requirement under this paragraph 4.4.1, that supplier use/employment outcome can count towards the contractor’s overall performance against the mandatory minimum requirement required under paragraph 4.4.

Note CFI: All Suite of Facilities Contract tender and contract documents address the above requirements.


Indigenous Participation Plans (required for MMRs)

Tenderers must be required by the Commonwealth entity to submit an Indigenous Participation Plan, outlining how they will comply with the IPP. Commonwealth entities must also seek information from the tenderer in relation to current Indigenous participation in the tenderer’s business.

The Indigenous Participation Plan must be included in the resultant contract. The contract manger is responsible for ensuring compliance with the Indigenous Participation Plan during the contract term. The contract must include a requirement for the contractor to report on compliance with the plan at least quarterly, which should then be used to fulfil our reporting obligations to PM&C (see below).


Reporting Requirements

Commonwealth entities are required to report on IPP compliance every six months.

Indigenous supplier use (quarterly)
Report on Commonwealth entity to report on Contractor to report on Frequency
Target
  • in accordance with CPR requirements for AusTender reporting
  • subcontracts, contracts less than $10,000 and contracts with Indigenous Enterprises (IEs) not listed on Supply Nation
  • IEs not on Supply Nation, but to be counted against target
Indigenous supplier use (quarterly) Every 6 months
Pre-Tender due diligence
  • contracts between $80,000 and $200,000: report on AusTender
  • remote procurements: number conducted
  • remote contracts awarded to IEs
None Every 6 months
Supply chain participation
  • for each new contract subject to minimum requirements
  • whether contractor compliant with Indigenous Participation
Compliance with Indigenous Participation Plan (quarterly) Every 6 months

Which contracts are counted towards the target?

In addition to the contracts listed in the above table, the following contracts can be counted towards the target for Defence:

  • Direct subcontracts with an Indigenous enterprise
  • Subcontracts with an Indigenous enterprise, where the subcontract directly relates to the goods and services being contracted by the Commonwealth entity
  • Direct contracts with an incorporated joint venture, where the joint venture is at least 25% Indigenous owned

Commonwealth entities are also encouraged to report eligible contracts towards their target which are not required to be reported in AusTender. These will need to be manually reported to PM&C every six months. The contracts that will need to be manually reported to PM&C include:

  • Subcontracts with Indigenous enterprises
  • Contract with Indigenous enterprises using a credit card
  • Contract with Indigenous enterprises which are not registered with Supply Nation; and
  • Multi-year contracts with Indigenous enterprises for second and subsequent years (the contract will be reported on AusTender for the first year only)

Once DPA is tasked with compiling the report, DPA will approach all project teams whose projects have been identified for reporting purposes.