Government to make it easier for SMEs to win procurement contracts

The government plans to make it easier for small and medium-sized businesses to win infrastructure, defence and other government procurement contracts, as part of its budget announcements.

The changes will help reduce insurance costs for SME suppliers bidding for government work by removing the requirement that companies have insurance during the bid process until a contract is awarded.

The Defence Department procured goods and services alone was worth $37.4 billion in 2020-21.

To help smaller contractors compete against larger bidders, government departments will be told to break up major projects into smaller components.

Finance Minister Simon Birmingham said the changes will help SMEs gain a leg-up in the government procurement market.

The federal government tenders millions of dollars in work each year but to a large extent, these contracts are awarded to the largest firms in the big end of town.

“These reforms are game changers that will remove perceived barriers that may have discouraged some SMEs from participating in particular tenders, particularly where they think the cost of entry is too high,” Birmingham said.

“This is all about enhancing the commercial opportunities for SMEs and allow more suppliers to offer their services for the benefit of taxpayers.”

The finance minister reiterated the government’s commitment to giving Australian contractors “the maximum opportunity” to win work.

This will be achieved by “unbundling major projects in ways that maximise efficiency for taxpayers, local job opportunities and the potential growth of Aussie businesses,” Birmingham said.

Minister for Defence Industry Melissa Price said the increased threshold — which will see the the Department of Defence able to limit tenders to SMEs for projects worth up to $500,000 — was a win for SMEs.

The changes would be supporting a competitive Australian defence industry, Price said.

“This is a great initiative for small and medium defence industry businesses because it will give them more opportunities to tender for Defence contracts,” she said.

The Morrison government’s 2021 budget also sought to lower the barriers for SMEs to win government contracts. It committed $2.6 million over a four-year period to “support and strengthen” SME participation in Commonwealth procurement, and Decembers’s Mid-Year Economic and Fiscal Outlook signalled the government was eyeing additional funding to improve this.

According to the MYEFO statement, some of the additional funding was set aside to develop a digital platform which the government says will “streamline and enhance” access to tailored events for SMEs.