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Industry development requirements for major procurements of ICT products and services
This document states the industry development requirements relating to major procurements of information and communications technology (ICT) products and services. These requirements are Australian Government policies which must be complied with by procurement officers under Regulation 9(1) of the Financial Management and Accountability Act 1997 and are not part of the Commonwealth Procurement Guidelines issued by the Minister for Finance and Administration
Background
On 21 June 2002, the Government announced a revamp of the industrial development requirements associated with Australian Government procurement of ICT products and services. These requirements specify minimum mandatory small to medium enterprise (SME) participation rates determined by the nature of the contract.
The Government's intent is to foster SME participation in large ICT contracts (ie over $20 million in value). The Government considers that ICT SMEs should be well placed to compete successfully as prime contractors for small and medium-value Australian Government contracts.
In Report No. 36 of 1 April 2003, the Auditor-General recommended that data on industry developement commitments and achievements under this policy be collected on a contract by contract basis. The Government has agreed to this recommendation and intends to issue occasional summary reports of the data collected.
Scope
The minimum levels of SME participation apply only to major ICT acquisitions with expected contract values of $20 million and above entered into by agencies and departments which are subject to the Financial Management and Accountability Act 1997. Note, all ICT suppliers and their subcontractors must continue to be endorsed under the 
Endorsed Supplier Arrangement.
For the purposes of major ICT contracts, an SME is defined as a body corporate incorporated in Australia or New Zealand which, together with its related bodies corporate and parent entities, has an average annual revenue over the last four financial years of less than A$500 million.
Minimum SME participation requirements
For ICT contracts with an expected value of $20 million or more Australian Government agencies are to ensure that tenderers meet minimum SME participation levels as follows:
- hardware (for example personal computers, network equipment, mainframes, and printers) - minimum SME participation level of 10 per cent of contract value; and
- services (for example systems integration, software, software development/support, services provision, consultancies, telecommunications) - minimum SME participation level of 20 per cent of contract value.
Where a project contains elements falling under both of the above categories then the minimum SME requirement is the weighted average of these minimum levels based on each category's share of the total expected contract value.
Exemptions and adjusted levelsWhere significant commercial impediments exist to achieving the indicated SME participation levels as part of a major procurement - for instance if the nature of the goods or services required precludes the use of SMEs - the policy provides for an agency to adjust the level downward or to apply an exemption where:
- the contract does not fit well into the generic category of an ICT contract;
- the minimum SME levels would unfairly exclude potential suppliers; or
- any valid agency or industry concerns that the indicative levels are impacting on the efficient supply of ICT goods and services.
For further advice on this point agencies should consult the Department.
Implementation of SME participation levels
Agencies should specify the minimum SME participation levels in the request for tender document or any scoping document for the information of respondents/tenderers or any renewal of a major contract where applicable.
During the tender evaluation phase, agencies should satisfy themselves that:
- the successful tenderer has offered to meet the specified minimum SME participation levels; and
- the tenderer has the capacity to actually deliver the minimum participation levels.
There is no requirement to undertake a competitive evaluation of each tenderer's SME commitments during the selection process.
Contracts are to bind the contractor to meet the minimum level of SME participation. Agencies should include a reporting process in the contract and set up a monitoring process as part of their contract management regime to ensure compliance.
Reporting of SME participation levels
At the end of each financial year the Department will survey FMA agencies to obtain data on any contracts over $20 million entered into during the year, particularly the level of SME participation agreed to and achieved under the contract. The Department may, at its discretion, issue a summary of its findings on its website.
Linkages to other requirements
As previously noted, all ICT suppliers and their subcontractors must be endorsed under the Endorsed Supplier Arrangement.
These minimum SME participation levels for major ICT contracts are a separate requirement to the Government's general policy set out in the Commonwealth Procurement Guidelines & Best Practice Guidance which requires agencies to achieve a minimum overall level of 10 per cent SME participation across all purchases. However, any SME participation stemming from major ICT contracts will count towards the achievement of the agency wide 10 per cent target.
Further Information
For further inquiries regarding this policy contact:
ICT Development Branch
Department of Communications, Information Technology and the Arts
sme@dcita.gov.au