13 November 2024

Industry leaders call for more robust ICT procurement practices in Australia

Australian technology companies have welcomed a new report highlighting the need for urgent reform to Government procurement policy, saying research shows Australia has fallen out of step with international practice when it comes to supporting local industry.

The report, by independent economic analysts Insight Economics, makes a range of recommendations and proposals for reforming procurement guidelines to ensure the Australian community, economy, and taxpayers benefit more from the massive public spending on government procurement.

The group includes SaaS ERP provider TechnologyOne (ASX:TNE), government and critical infrastructure cloud vendor Vault Cloud, cyber security, data centre and ICT business Macquarie Technology Group (ASX:MAQ), custom software development firm Agile Digital, counter-drone defence solutions DroneShield (ASX:DRO), space technology company Gilmour Space,  software and data company Psithur and the Australian Computer Society, the largest professional body in Australia representing the ICT sector.

The group welcomed the Government’s recent initiatives to create more opportunity for Australian business and to examine how public servants could better understand the economic value that is created through individual procurement decisions – such as supporting local R&D and intellectual property creation, tax payments, and skilled job creation.

However, the paper highlights two clear issues.

First, while reforms announced by the Albanese Government in the past two years were a step in the right direction they need to go further and cannot be the end of the reform agenda. Secondly, Australia’s major trading partners have been far more explicit and aggressive in using procurement to directly support their own technology industries than Australia has been.

The paper says properly valuing economic benefits of procurements does not mean discriminating against overseas businesses. However, Australia’s trading partners in the past decade have themselves put in place explicit rules that do exactly that, leaving Australian high-tech businesses in a loss-loss situation.

For example, the US, Canada and the UK have recognised their ICT industries as fundamental pillars of their national self-reliance and economic growth and use procurement to boost them.

International policies favouring local buying have contributed to a rapid global consolidation of high-tech industries. Australia is at serious risk of being left behind and reliant on overseas supply lines, a situation the Covid pandemic has already exposed as high risk to the economic and social stability of the community.

The paper underlines the importance of procurement as a tool for driving economic outcomes, noting that just two years’ worth of Federal Government spending on ICT is greater than the entire investment in the new National Reconstruction Fund.

Industry representatives called for a commitment by all political parties to recognise the urgency and importance of this issue, and to expedite urgent reforms.

In line with the report’s recommendation, the ICT industry is calling for a clear framework for measuring and evaluating procurements based on:

• A weighted scorecard approach, especially for smaller contracts;
• A "calculator” to transparently value benefits of medium deals, using standard economic multipliers;
• An economic impact assessment for larger deals, making explicit the expected outcomes, for very large procurements, as is commonly done in large non-tech procurements already.

TechnologyOne CEO, Ed Chung, said: "Australian tech is world-best and has shown it can compete and win in every market in the world, but continually finds itself fighting for recognition and respect with Governments at home. All we are asking for is that our contribution is properly valued before taxpayers’ money is spent supporting the pension funds of people in other countries.”

Australian Computer Society CEO, Josh Griggs, said: "ICT continues to be the defining enabler of Australia's economic growth, yet our highly sophisticated and world class technology sector is not adequately prioritised by government procurement processes. It's time to give Aussies businesses a fair go so we can all share in the benefits of a truly advanced, high tech 21st century economy."

DroneShield Chief Technology Officer, Angus Bean, said: "When we empower Australian sovereign companies, we drive locally led research and development, enabling Australian engineers to lead the forefront of technological advancement. For companies like DroneShield, a world-leading innovator in counter-drone solutions, this support not only strengthens our capabilities but also fosters growth in opportunities for emerging talent from our Australian university pipeline, building a skilled, future-ready workforce – right here in the heart of Sydney."

Vault Cloud CEO, Rupert Taylor-Price, said: "Our allied national security partners are very clear on what control and economic benefit they require when deploying their taxpayer's funds - they see it as part of their patriotic duty. This paper provides a rational and evidence-based path forward for Australia to join our allied partners in building a secure and resilient country."

Psithur co-founder, Felix Barbalet, said: “Australian ICT companies are producing world-class innovation. By adopting smarter procurement practices, the government could leverage local expertise to deliver better services and value to all Australians while contributing to economic growth and high-skilled jobs."

Agile Digital Executive Director, David Elliot, said: "As the cost of living crisis continues, Australians are questioning why so much time and taxpayer money goes into large, often unsuccessful Commonwealth ICT projects. As a country, we need to rethink awarding massive ICT contracts to multinational companies and consider turning to our local industry instead. This report from Insight Economics urges policymakers to learn from our trading partners — and to consider the benefits Australia could gain if our Government were more strategic, focused, and sovereign in its ICT procurements."

Read the full report here