Review to target ‘black cladding’ practices that divert contracts away from Indigenous businesses

‘Black cladding’ is a practice where a non-Indigenous business takes unfair advantage to win otherwise inaccessible Indigenous deals.

Rudi Maxwell 19 December, 2023

Assistant Minister for Indigenous Australians Malarndirri McCarthy black cladding — Assistant Minister for Indigenous Australians Malarndirri McCarthy. Source: AAP Image/ Mick Tsikas

Businesses ‘black cladding’ or trying to muscle in on federal contracts destined for First Nations companies will be targeted in a government review.

The Commonwealth is looking at ways to strengthen its Indigenous Procurement Policy, which aims to award 3% of its contracts to Aboriginal and Torres Strait Islander businesses.

Since it was introduced in 2015, the policy has generated more than $9 billion in contracts for more than 3600 Indigenous businesses.

But, concerns have been raised about so-called ‘black cladding’, when a non-Indigenous business takes unfair advantage to win otherwise inaccessible Indigenous deals.

Assistant Indigenous Australians Minister Malarndirri McCarthy said reviewing the eligibility criteria was the first step to ensuring benefits were genuinely flowing to First Nations businesses as intended.

The consultation will seek to gather perspectives around several priority reform areas, including a proposal to require Indigenous enterprises to be majority Indigenous-owned, managed and controlled.

“Indigenous businesses across the country have demonstrated their ability to consistently deliver high-quality work for government,” Senator McCarthy said.

“This consultation process will provide valuable insight into ensuring economic benefits are flowing to First Nations people, businesses and communities.”

Under existing rules, businesses must be at least 50% owned by Indigenous Australians to be eligible under federal and state-based Indigenous procurement policies.

For the first time, spending in the last financial year with Aboriginal and Torres Strait Islander businesses exceeded $4 billion.

That compared to just $300,000 spent with 12 Indigenous businesses in 2009.

Supply Nation, which verifies Indigenous companies, said the increase showed the program was having a major impact.

“This result is a credit to the growing number of Indigenous suppliers who are energetically seeking new opportunities from the corporate, government and not-for-profit sectors,” chief executive Kate Russell said.

Public consultations on the Indigenous Procurement Policy will continue until March 2024.

This article was first published by AAP.