NSW govt tweaks procurement rules ahead of bigger changes

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Joseph Brookes

The New South Wales government has raised the threshold for agencies to procure directly from smaller businesses as it seeks more fundamental changes to the current devolved procurement model to revive domestic manufacturing.

On Sunday, the Premier Chris Minns announced a government direction has been signed to increase the level at which government departments and agencies to purchase goods and services directly from small and medium businesses from $150,000 to $250,000.

Agencies have until the end of the year to implement the change.

The Minns government has also removed a requirement for small government suppliers to submit proof of insurance when they tender after warnings it was a barrier to bidding for work.

Proof of insurance will now only be required when a contract is awarded.

The tweaks come as the government pursues bigger changes like how value for money is defined and how procurement policy is managed across government.

Finance, Domestic Manufacturing and Government Procurement minister Courtney Houssos says big changes to government procurement promised in the election will take time

Each year, the New South Wales Government spends more than $9 billion on goods and services obtained directly from 46,000 small and medium businesses in in the state.

“Small and medium businesses have been through a very tough time over the past few years, the very least the government should do is make accessing government contracts simpler and easier,” Premier Chris Minns said.

While the new limits apply economy wide, with the exception of construction, the tech sector has been a recent focus of the state’s procurement arm.

In 2021, a 30 per cent target for the government’s technology spend was set. It was just missed in the first year.

The Minns government’s election commitments on procurement included the new $250,000 threshold and the removal of the insurance to bid requirements.

But the new government is eyeing more fundamental changes to the current devolved procurement framework that sees agency heads responsible for procurement.

Finance, Domestic Manufacturing and Government Procurement minister Courtney Houssos said there are limits to the current Procurement Policy Framework.

“The thing that really surprised me when I was first sworn in as Minister for Finance and received those initial briefings in relation to the current framework is the lack of central accountability, the lack of central coordination and even just data. A lot of that has been devolved down into the different clusters,” she said at a Budget Estimates hearing last week.

Ms Housous, who was given the formal task of identifying opportunities to redirect government spending towards local procurement opportunities in September, said the changes will be developed in conjunction with the state Parliament’s inquiry into procurement.

Also on the table are changes to defining ‘value for money’ in state procurement to better incorporate the multiplier effect of buying local, and how to implement the new government’s ambitious targets for local content in rail manufacturing.

The Parliament’s inquiry is not scheduled to report until mid 2024.

Ms Houssos said there is a long road ahead after the previous government’s “deliberate policy decisions”  and “neglect” of the state’s domestic manufacturing.

“When you take decisions to send billions of dollars offshore for key and major infrastructure projects — and those precious procurement dollars are sent offshore with really important multiplier effects — then it’s going to take some time to rebuild that capacity within the economy,” she said.

“We have already started work on how we can encourage spending those dollars right here in New South Wales, but it is going to take time.”

Ms Houssous has responsibility for domestic manufacturing as it relates to government procurement, while Industry minister Anoulack Chanthivong continues to have responsibility around domestic manufacturing policy, including areas like industry development and skills.

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