12% of suppliers dominate $8.6bn Digital Marketplace: ANAO

A relatively small group of suppliers have dominated the Digital Marketplace set up by the federal government to encourage competition, new data shows.

Just 12 per cent of its listed suppliers have won 80 per cent of the $8.6 billion in Digital Marketplace contracts over the past seven years, according to the national auditor’s latest report.

It makes the tech-focused marketplace one of the most concentrated panel arrangements in Canberra, and will only add to concerns the marketplace is doing little for the SMEs and startups its was originally designed to support.

The report, published on Thursday, also reveals that the value of amendments on existing government contracts have skyrocketed from $4 billion to $28 million over the last decade.

Parliament house Canberra

Analysis by the Australian National Audit Office (ANAO) shows the marketplace – the largest panel in terms of suppliers across the federal government – had facilitated 28,009 contracts valued at a combined $8.6 million, as at the start of September 2022.

Almost $2 billion of contracts awarded through the marketplace have occurred in the last year, with previously reported figures putting the value at $6.8 billion at the end of December 2021. In March 2021, the reported figure was $3.4 billion.

But of the 3,273 Australian suppliers listed on the Digital Marketplace, less than six per cent of — or 191 — suppliers were responsible for “at or over 80 per cent of the panel’s total [contract] value” of $8.6 billion.

Of the top 10 panels, the ANAO said the marketplace has the second highest concentration of suppliers awarded 80 per cent or more of contracts. Only the Hardware Marketplace established in September 2018 is higher at 9 per cent.

The analysis does not indicate what proportion of the suppliers are SMEs or startups, however previous reporting shows that contracts awarded to SMEs through the marketplace fell from 82 per cent to 60 per cent between 2017 and 2020.

As at late 2021, 72 per cent of all briefs posted by agencies on the Digital Marketplace were to source digital specialists, followed by software engineering and development and agile delivery and governance. All of the top ten sellers were recruitment and consulting firms at the time.

The Digital Transformation Agency is preparing to replace the current Digital Marketplace with a new marketplace that better meets the needs of buyers and sellers when it expires in February 2024.

The ANAO’s findings came on the same day as a hearing of the parliamentary inquiry into Commonwealth procurement sparked in part by a damning audit that found the Digital Transformation Agency was routinely bypassing procurement rules.

Committee chair and Labor MP Julian Hill raised concerns at the hearing that panels remained club-like because they only opening for membership infrequently, constraining the prospect of competition, despite recent changes to the procurement rules.

“If you’re not in the club, you’re not getting any work. So, it doesn’t allow for innovation. There’s not default presumption that panels should be either refreshed periodically, say annually or at least every two years,” he said.

Representatives from the Department of Finance said the issue is a “real concern” and that a review of panels across the Commonwealth is being undertaken as part of the Buy Australian plan to make it easier for small businesses to sell to government.

The Albanese government update the Commonwealth Procurement Rules in July, requiring officials to approach multiple potential suppliers on a standing offer where possible.

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