The $80 billion question: New ASBFEO inquiry asks if small businesses are locked out of government contracts

The multi-billion dollar flow of taxpayer funds to small business contractors will come under investigation by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), as the federal government attempts to lock in its new small business procurement target.

Finance Minister Katy Gallagher has tapped the ASBFEO to lead a new inquiry into the updated Commonwealth Procurement Rules, and whether they are opening new opportunities for SMEs to obtain government contracts.

The CPRs were updated in July 2022 to lift the federal government’s small business procurement target from at least 10% of government contracts, by value, to 20%.

Small business procurement has risen in recent years. Of $69.8 billion in government procurement contracts in 2021-2022, some $18.7 billion, or 27% by value, went to SMEs.

In 2021-2022, government procurements rose to $80.8 billion in value, with just under $25 billion, or 30.8% by value, taking the form of SME contracts.

The review will investigate the full effect of the CPR changes to date.

It will also assess the challenges keeping small businesses from locking in government contracts, in an attempt to maintain the CPR target in the long-term.

The review will investigate small business concerns that government contracts are too difficult to find, too costly too apply for, and that application processes remain opaque, said Ombudsman Bruce Billson.

“We want to look at what support is given to small businesses to navigate what can be a complicated procurement process,” he said.

“In some cases, small businesses are deterred by a feeling there is a ‘closed shop’ while in other cases they simply don’t know about the opportunities available, or the size of the contract can be simply too big.”

The review’s terms of reference show the Ombudsman will investigate if “bundled” procurement contracts put small businesses at a disadvantage compared to bigger firms.

The array of government panels and sign-up requirements facing potential contractors is also set for review.

It will also consider if the CPRs could be strengthened to expand opportunities for small businesses led by women, First Nations entrepreneurs, and those from culturally and linguistically diverse communities.

Small business operators have been invited to submit their views to the inquiry by July 1, 2023, with the ASBFEO to present its report to the federal government no later than December 15 this year.

The federally-focused review comes as the new NSW government turns towards its own pledge to boost small business procurement.

Before last Saturday’s state election victory, the new Labor government vowed to more than double the value of small business contracts from 12% currently to 30% by the end of the decade.