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NSW mandates SME involvement in procurement

by Michael Read •
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A new NSW Procurement Board Direction is expected to result in ICT SMEs having a greater prospect of securing NSW government ICT contracts in a market that is estimated to be worth $1 billion per annum.

“As part of the changes to the Government’s prequalification scheme, agencies will be required to seek at least one quote from a small-to-medium enterprise for contracts worth up to $1 million”, said Minister for Finance and Services Dominic Perrottet. The new Direction is mandatory for all agencies to adhere to.

The Government’s SME Policy Framework defines SMEs as firms consisting of up to 200 full-time equivalent employees.

According to a spokesperson from the Office of Finance and Services (OFS), the Direction is applicable to all five of the Government’s major prequalification schemes, including the:

  • ICT Services Scheme;
  • Prequalification Scheme for Construction Consultant Services;
  • Prequalification Scheme for Construction Contractors;
  • Contingent Workforce Scheme; and
  • Performance and Management Services Scheme.

The move follows on from earlier reforms in 2011 that gave government agencies located in non-metropolitan areas the freedom to purchase goods and services up to $5,000 directly from local suppliers without having to go through whole-of-government contracts.

However, it is uncertain as to the effect that such a mandate will have for SME ICT suppliers who, according to a spokesperson from the OFS, already comprise 88 percent of suppliers in the ICT Services Scheme.

70 per cent of the total value of business conducted through the ICT Services Scheme is spent with SMEs, according to the OFS spokesperson. The OFS is optimistic that the new guidelines will increase this figure.

As he made apparent in his recent piece in the Guardian, Malcolm Turnbull holds a view that agencies are wary of engaging with SMEs due to the perceived risks associated with engaging with smaller suppliers. He argues against this, and outlines his admiration for the UK’s recent achievements in engaging SMEs.

The NSW Government seems similarly inclined to capture the benefits of SME engagement.

“The Government’s SME Policy Framework acknowledges that increasing engagement of SMEs has a wide range of positive outcomes for Government, including increased competition, greater innovation and more resilient and diversified supply chains”, said OFS’ spokesperson.

Victoria has similarly attempted to leverage the benefits of SME engagement. In November 2012 it released a ‘Guide to improving access to Government business for SMEs’.

According to the Guide, agencies are required to “consider SME engagement at the planning stage and improve transparency of procurement opportunities.”

Victoria perceives there to be several advantages of SME engagement including:

  • The potential for lower prices due to lower administrative overheads;
  • The capacity for SMEs to exploit new technology;
  • Greater responsiveness due to shorter management chains;
  • More personal levels of service; and
  • The tendency for SMEs to supply higher quality specialist products.

Related Articles:

Applications open for NSW ICT Services scheme

Guest Post: Positive Changes in ICT Procurement for SMEs

NSW eliminates additional State Contracts; ICT Services Scheme now even larger

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