Indigenous Procurement Policy overview

How do the Commonwealth Procurement Rules support Indigenous businesses?

Exemption 16 of the Commonwealth Procurement Rules (CPR) enables Commonwealth buyers to purchase directly from Indigenous small and medium enterprises (SMEs) for contracts of any size and value. Under this exemption, value for money must still be determined but this can be done through a simple quote process.

What is the Indigenous Procurement Policy (IPP)?

The IPP gives direction to procurement officers on when Exemption 16 to the Commonwealth Procurement Rules (CPR) must be considered.

The IPP has three parts:

1. Targets for the number and value of Commonwealth contracts to be awarded to Indigenous businesses. Commonwealth porfolios’ performance against these targets are published each financial year.
2. A requirement that Indigenous businesses are the first to be approached to quote for contracts delivered in remote areas and for contracts valued between $80,000 to $200,000. This is known as the Mandatory Set Aside.
3. Indigenous participation requirements for Indigenous employment and/or supplier use in contracts valued at $7.5 million or more in specified sectors. These are known as Mandatory Minimum Requirements.

What is an Indigenous business?

The IPP defines an Indigenous business as any business that is 50 per cent or more Indigenous owned. Supply Nation maintains a free Indigenous business register at www.supplynation.org.au.

What is a small and medium enterprise?

A small and medium enterprise (SME) is a business with fewer than 200 full-time equivalent employees.

What are remote contracts?

Contracts in which the majority (by value) of goods and services will be delivered in a remote location. A map of remote locations is available on the National Indigenous Australians Agency website:

Who needs to comply with the IPP?

The policy applies to all Commonwealth non-corporate entities that are subject to the Commonwealth Procurement Rules (CPR). All other Commonwealth entities are encouraged to adopt the policy as best practice.

For the purposes of applying annual targets, entities are grouped into their portfolios.

How does the government target work?

Annual targets for the number and value of contracts awarded to Indigenous businesses apply to the Commonwealth as a whole and to each Commonwealth portfolio. The targets are based on a three-year average of contracts that each portfolio awarded in previous years. Results against targets are published on the NIAA website each year.

• Volume target - 3 per cent of the number of contracts wholly delivered in Australia awarded to Indigenous businesses.
• Value target – a percentage of the value of contracts wholly delivered in Australia awarded to Indigenous businesses. The target was set at 1 per cent on 1 July 2019 and will increase by 0.25 per cent each year to 3 per cent on 1 July 2027. See Table 1.

How does the mandatory set-aside work?

For contracts delivered in remote areas or valued between $80,000 and $200,000 the Commonwealth buyer must offer an Indigenous SME the opportunity to deliver the goods or services on a value for money basis before approaching the open market.

The Commonwealth buyer must at a minimum search Supply Nation’s Indigenous Business Directory to identify if an Indigenous SME is able to deliver the goods or services.

• If an Indigenous business is identified the buyer must determine whether the Indigenous SME offers value for money.
• If the Indigenous business does offer value for money then the contract must be offered to the Indigenous SME.
• If the Indigenous business does not offer value for money then the outcome of the search must be documented and ordinary procurement processes followed.

What contracts are subject to the Indigenous participation requirements (MMR)?

Mandatory minimum Indigenous participation requirements (MMRs) apply to high value contracts of $7.5 million or more that are wholly delivered in Australia where the majority of the value of the contract is being spent in the following industry sectors:

• building and facility construction and maintenance services
• transportation, storage and mail services
• education and training services
• industrial cleaning services
• farming and fishing and forestry and wildlife
• editorial and design and graphic and fine art services
• travel and food and lodging and entertainment services
• politics and civic affairs services.

From 1 July 2020 this list will extend to the following sectors:

• Financial instruments, products, contracts and agreements
• Mining and oil and gas services
• Industrial production and manufacturing services
• Environmental services
• Management and business professionals and administrative services (sub-category exemptions apply*)
• Engineering and research and technology-based services
• Financial and insurance services (sub-category exemptions apply*)
• Healthcare services
• Personal and domestic services
• National defence and public order and security and safety services (sub-category exemption applies)
• Organisations and clubs

These sectors are determined by the United Nations standard products and services codes. For help determining which sector category your procurement falls within, refer to the UNSPSC page.

What are the MMR targets?

MMR are minimum levels of Indigenous employment and supplier use that must be met over the life of the contract.

MMR targets may be applied at contract level or organisation level.

Contract-based target:

4% (FTE) of the workforce required to execute the contract must be Indigenous Australians or 4% of the contract value must be subcontracted to an Indigenous business (or a combination of both) by the end of the contract.

Organisation-based target:

3% (FTE) of the supplier’s workforce must be Indigenous Australians or 3% of the organisation’s spend must go to an Indigenous business.

Supply chain and Indigenous workforce targets will be higher in remote contracts, relative to the local Indigenous population.

How is performance against MMR targets measured?

Over the term of the contract, the contractor is required to report quarterly to their contracting agency on their supply chain and/or workforce outcomes through an online reporting solution database.  

This information will be held in a central database and Commonwealth Agencies must consider a contractor’s past performance in relation to the MMR as part of any future tender assessment.

For further information on MMR compliance refer to the Mandatory Minimum Requirements policy guide.