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Thursday, 22 May 1980
Page: 3088

Mr John McLeay (BOOTHBY, SOUTH AUSTRALIA) (Minister for Administrative Services) - I move:

That the Bill be now read a second time.

The purpose of this Bill is to provide for Commonwealth authorities to comply with the Government's policy of giving preference to Australian-made goods in Commonwealth procurement. The Bill will override certain provisions of legislation governing some statutory authorities which at present inhibit the ability of those authorities to carry out the Government's Australian preference policy, and will provide procedures whereby adherence to the policy will be facilitated.

This Government has taken the view that producers of Australian goods and related services and their employees should receive a measure of preference when bidding for contracts to be arranged by Commonwealth departments and authorities. The Prime Minister (Mr Malcolm Fraser) announced a policy of giving preference to Australian-made goods in September 1976. This policy was based on the traditional approach of giving selective assistance in special circumstances. Over the succeeding year, however, it became clear that the policy was not sufficiently effective. Accordingly, in October 1977, the Government decided to adopt a more positive preference policy, and this was announced by the Prime Minister in his election policy speech in 1977. In accordance with this policy government departments and authorities were instructed to:

(a)   give preference in Commonwealth procurement to goods of Australian origin or of relatively greater Australian content unless there were substantial reasons to the contrary; and

(b)   to draw up tender specifications so as not to exclude Australian supplies suitable for or reasonably adaptable to their needs.

Whereas, in the past, there had to be special grounds for giving preference to Australianmade goods, departments and authorities are now required to provide substantial reasons if they wish to do otherwise than purchase Australian-made goods or goods of relatively greater Australian content. The policy motivates companies bidding for Commonwealth contracts to examine carefully the possibility of increasing the use of materials and components from Australian sources, thus creating a flow-on effect.

Since the introduction of the policy, however, it has become apparent that there is some unevenness in compliance by the various Commonwealth authorities. The enabling legislation of some authorities has the effect that purchasing must be on the basis of best value for money. In some cases legislation provides for ministerial decision in respect of major purchases only, whilst in the majority of cases the enabling legislation of authorities does not provide for Government direction on purchasing matters. These and other factors have resulted in some inconsistency in implementation of the Government's preference policy.

I should point out that purchases by Commonwealth authorities represent a very significant proportion of total Commonwealth purchases. Purchases by departments of state are estimated to be in the region of $ 1,500m per annum whereas purchases by the Commonwealth authorities are estimated to be in the region of $3,300m per annum. It can be seen that purchases by authorities are more significant in total value than purchases by departments and are therefore of considerable importance in the context of the preference policy.

My Department has conducted a survey of the extent of compliance with the preference policy by authorities. The results of this survey show that, whilst the majority of authorities indicated that they were complying fully with the Government's policy of preference to Australian-made goods, there was another group of authorities which found it necessary to qualify their responses. A further group indicated that they were unable to comply with the Government's policy.

In view of all these factors, the Government decided to introduce overriding legislation to facilitate and ensure compliance by Commonwealth authorities with the preference policy, except where specific exemptions are granted. The Government recognises that there will be some special cases where authorities may need to be exempted from the provisions of the legislation; for example, full compliance with the preference policy might, in some instances, jeopardise the commercial viability of a business undertaking. The Bill provides the necessary flexibility to cope with these special cases.

In this regard, the Prime Minister has written to the Premiers of Victoria, New South Wales and South Australia concerning the possible extension of the Government's preference policy to certain bodies jointly conducted by the Commonwealth and a State government or governments. There would be obvious advantages in a uniform approach to preference in government purchasing across Australia as a whole. The practice of individual States pursuing their own purchasing preference schemes for suppliers in their States can lead to a distortion of trade among the States. This may encourage a greater degree of industry fragmentation than would otherwise occur. This could mean that we are not achieving the optimum use of our resources throughout the Commonwealth as a whole.

I now turn to the main features of the Bill. The Bill covers all authorities established under Commonwealth law and under the law of the Australian Capital Territory. Authorities which are jointly conducted by the Commonwealth Government and another government or governments will, however, be removed from the scope of the legislation by regulation, except where, in the case of Commonwealth-State authorities, the partners agree to the preference policy being applied to the authority. I should mention that the coverage of the Bill does not extend to companies incorporated under State law. Qantas Airways Ltd and other Commonwealth-owned companies established under State law are, however, subject to direction by the Government as principal or sole shareholder through their respective Ministers. Unless specifically exempted such companies will, therefore, be subject to the same requirements as those set out in this Bill.

The first of the operative clauses of the Bill, clause 4, recognises the possibility that the drafting of specifications for a procurement in a narrow or restrictive way can render Australianmade goods ineligible to meet a requirement. Clause 4 provides that specifications are not to be drawn up in such a way as to exclude suitable goods of Australian origin or higher Australian content from consideration. The Bill also contains, in clause 5, provisions requiring the invitation of tenders for significant purchases either publicly or from a list of registered tenderers. These requirements are based upon the finance regulations under the Audit Act which govern purchases by departments and authorities within the public account. They are designed to ensure that there is no undue restriction on the opportunity for firms to tender for the requirements of authorities. They include the normal exceptions to the general public tender rule which apply under the finance regulations.

The authority to approve exceptions, by a Certificate of Inexpediency' procedure, will be appropriately delegated to officers of authorities. I should mention that the system of open lists of registered tenderers set out in clause 6 represents a departure from the tendering procedures which apply to departments. It is included in the Bill because the Government recognises that some authorities, especially business undertakings, may require a more flexible purchasing system than departments. The registered tenderer system will, however, involve regular advertisements by the authority concerned to meet the underlying principles of public tendering.

I now move to the stage of tender evaluation and contract award, the stage where preference is applied. It is a long-standing principle of Commonwealth purchasing that Australian producers should be entitled to the same protection against competition for imports in relation to Government purchases as they enjoy under the Customs tariff in relation to commercial transactions. Accordingly, in the case of Government purchases, departments and authorities are required to evaluate tenders on a duty paid basis whether or not any imported goods offered are to be exempt from duty as Commonwealth Government imports. The Bill provides the necessary procedures to give effect to this policy.

Tenderers are also to be required to set out the Australian content of the goods tendered or, in the case of purchases of small value, information as to whether the goods are of Australian origin. Authorities will be required to follow the procedures already in general operation and which were described in my media release of 2 October 1979. These procedures have the effect that for purchases under the value at which public tenders are required to be invited, a simple Australian-made preference may be applied at point of purchase against products identified as imports.

For purchases above the public tender threshold, or in smaller purchases where the Australian content method is used, but where the lowest suitable tender is less than $50,000, a general Australian-made preference factor will be applied resulting in a margin of preference related to the Australian content of the goods tendered. In the case of all purchases costing $50,000 or more where the highest Australiancontent suitable tender is proposed to be passed over, or for lesser purchases with special features, cases are referred to the Minister for Administrative Services who decides the case or refers it for consideration by the Industry Policy Committee of Cabinet.

The preference margin applied in the case of purchases which follow the Australian content approach will be 20 per cent of the value of the Australian content of* each tender, the resultant figure being subtracted from each tender price. In the case of smaller purchases, generally below the $5,000 public tender threshold, a loading of 20 per cent is added to the duty paid prices of all offers identified as of imported origin. In both cases, the lowest suitable tender or quotation is then accepted. I propose to introduce an amendment to the Bill in the Budget session to incorporate these preference margins in the legislation.

I should mention that the present preference arrangements, and this Bill, recognise the difficulty of arriving at precise measures of Australian content. Accordingly, differences in Australian content between tenders of less than 10 per cent are to be disregarded. To ensure that contracts are not awarded to tenderers submitting inaccurate or misleading estimates of local content, selective investigations of claimed Australian content levels are undertaken by investigators from the Department of Administrative Services. Lists of suppliers who provide consistent or substantial misstatements of Australian content are to be compiled and circulated to Commonwealth departments and authorities.

Clause 15 of the Bill provides for the disclosure to interested persons such as unsuccessful tenderers of the level of Australian content of successful tenders. This enables unsuccessful tenderers to challenge any claims they consider doubtful. Also, to ensure that the level of content tendered is achieved, appropriate conditions are being developed to provide for enforcement of Australian content levels submitted by successful tenderers. Spot checks will also be carried out by departmental investigators, particularly in the case of period contracts to ensure that the Australian content, on the basis of which a contract was awarded, is achieved.

As I indicated earlier, the Bill also provides for certain exemptions to be granted by the Minister for Administrative Services where it can be shown that the commercial viability of a government business undertaking or the ability of a Commonwealth authority to fulfil all of its functions, including any financial requirements, would be jeopardised by applying preference to some or all of its purchases. The clause of the Bill concerned, clause 16, is drafted in such a way as to permit exemption of a particular purchase by an authority, of purchases of a particular class of goods by an authority, or of all the purchases of an authority. These exemption provisions are designed to allow the necessary flexibility to deal with special cases whilst not detracting from the overall impact of the policy. Other provisions of the Bill enable the Governor-General to make regulations prescribing various matters arising under the clauses, and enable the Minister for Administrative Services to seek such information as he may require concerning procurement by Commonwealth authorities to enable him to administer the legislation. I commend the Bill to the House.

Debate (on motion by Dr Klugman) adjourned.

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