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Government purchasing: a better deal for business

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Minister for Finance and Administration

The Hon John Fahey, MP

Minister for Industry, Science and Tourism The Hon John Moore, MP 11,4411 7




The Government is pleased to announce new streamlined and simplified Commonwealth purchasing arrangements to cut the cost of doing business with Federal Government departments and to provide greater opportunities for small business to participate in Government markets.

The Commonwealth presently spends more than $10 billion a year buying goods and services.

The new arrangements follow a major review of Commonwealth purchasing, announced in the last Budget. The review found widespread support from within Government and industry for retaining the existing purchasing principles but identified a number of ways to improve government buying.

The major initiatives announced today include:

• The Government will maintain its election commitment to Commonwealth departments and agencies sourcing at least 10% of their purchases from small and medium enterprises (SMEs).

• Industry development requirements and opportunities for SMEs will be required to be included in tender documents. Model guidelines will be developed by the Government, in consultation with industry, for use by agencies when formulating their tender documents.

• The complex and time consuming two envelope tendering requirement and industry impact statements will be abolished.

• The commission imposed on suppliers by the Common Use Arrangements (CUA) will be abolished.

• Common Use Arrangements will be restructured so that they apply to a smaller number of strategic markets. The use of these arrangements will be mandatory for agencies for the term of the arrangement.

• A pre-qualification scheme will be established for businesses supplying in specific markets where the government is a major purchaser but CUAs are not cost effective or there is a risk of market failure.

• A Purchasing Advisory and Complaints Service within the Department of Finance and Administration to assist suppliers with problems they may experience with purchasing processes.

Value for money, open and effective competition, ethics and fair dealing will remain the key principles of

Commonwealth purchasing. The advantage of the new system is that it answers calls from business, particularly small business, to cut red tape and the cost of dealing with the Commonwealth.

In this context value for money does not simply mean obtaining the best purchase price — quality of the goods or service is a key consideration.

Industry has overwhelmingly called for the Government to reduce the bureaucracy and unnecessary central prescription which have had the effect of blocking entry to Government markets by small business in particular. Areas of consistent concern have been the unpopular two envelope tendering' system and the mandatory commission charge for Common Use Agreements.

The two envelope system had required tenderers to respond by submitting their price in one envelope and their industry development proposals in another.

Industry was highly critical of this process, introduced by the former Government, as being overly complex, subjective, lacking objectivity and transparency and failing to provide any significant opportunities for SMEs.

The new arrangements will require clear industry development criteria to be placed up front in tender documents with the evaluation methodology clearly explained. Government will work closely with industry in the development of the model guidelines to be used in the tender documents.

The Government is committed to assisting and encouraging SMEs to access Government markets and to using the size of its purchasing power to facilitate Australian industry development.

Canberra 11 December 1997

Media Contact: Anna Schulze Minister Fahey's Office 02 6277 7400

Jane Harriss Minister Moore's Office 02 6277 7580