Australian government tech procurement practices have fallen out of step with global best practice, leaving local tech companies without the same support enjoyed by international peers.
While Australia’s major trading partners have been more explicit and aggressive in using procurement to directly support their own technology industries, Australia has not.
A new report from Insight Economics – with the inspiring title Improving evaluation of economic impact of ICT procurement – has found Australia has been left behind by the more active governments that use their significant purchasing power to support local capability and supply chains.
The United States, Canada and the UK have recognised their ICT industries as fundamental pillars of their national self-reliance and economic growth and have put in place procurement policies to boost them.
International policies favouring local buying have contributed to a rapid global consolidation of high-tech industries. Australia is now at serious risk of being left behind and reliant on overseas supply lines, a situation the pandemic has already exposed as high risk to the economic and social stability of the community.
The report, which was commissioned by enterprise software outfit TechnologyOne and supported by local tech companies ranging from Macquarie Technology Group, Agile Digital, DroneShield, Vault Cloud and Gilmour Space, calls for broader economic impact analysis to be used in technology procurement.
There are a growing number of the capabilities delivered by the ICT sector increasingly critical to the functioning of Australia’s economy, from cloud services, cybersecurity, data management and payment systems.
Ensuring the continued supply of these capabilities is increasingly important to governments around the world. This has particularly been the case in the wake of the pandemic, with governments overseas placing greater focus on the economic security provided by improved industry resilience.
“Given the size and criticality of the ICT industry, improving outcomes from ICT procurement activities can lead to significant upside for Australia,” the report says, noting that the federal government spends more than the $15 billion National Reconstruction Fund on its technology needs every two years.
“Considering a broad range of economic and social impacts as part of the ICT procurement process can lead to much greater outcomes for Australia.”
A deeper investigation of the economic impact of these multi-billion-dollar federal investments in technology would bring ICT spending in line with large investments in other sectors.
“No mining proposal, transport project or health infrastructure receives a green light without robust economic impact analysis – but in ICT, major investment decisions are made in the absence of economic impact analysis,” it said.
The need to improve analysis of the broader economic impact of ICT spending has been acknowledged by successive governments through a series of reviews.
But progress had been stymied by a multitude of factors including “a lack of strategic capability in the Australian Public Service, risk aversion in procurement processes and a systemic failure to value innovation”.
The report, which was also supported by the Australian Computer Society, puts forward a framework to measure economic, social and environmental impacts of procuring ICT capability.
These include not only the benefits of the capability to be delivered, and the cost of the capability to be delivered through competitive pricing, but also potential impacts on:
- Improved government revenues through increased tax receipts
- Export growth opportunities for industry
- Leveraged investment in infrastructure
- Leveraged expenditure, including expenditure on SMEs, Indigenous businesses, R&D and skills development
- Jobs creation and wages paid to households
- Environmental outcomes, such as avoided carbon emissions
Many of these factors have second round, multiplier effects. The direct impacts of the capability acquisition lead to improved market valuations for industry, ICT cluster development, supply chain resilience, knowledge spillovers and the potential to pay dividends to households, as well as long run improvements to government revenues and social cohesiveness.
“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,” Canberra-based Agile Digital chief executive David Elliot said.
“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.”
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