Ace Business Desk – In short: Commonwealth work worth $70 billion was exempted from contractor requirements to employ a certain number of Indigenous people or use Indigenous businesses. An audit found the reasons given for billions of dollars’ worth of exemptions were often “unclear.”
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Indigenous employment rules dropped from two-thirds of Commonwealth contracts
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The responsible agency has agreed to review some of its methods, but says compliance ultimately rests with Commonwealth departments.
Indigenous employment rules have been dropped in two-thirds of Commonwealth contracts, meaning $70 billion worth of contracts did not have to hire a minimum number of Indigenous people or use Indigenous businesses.
The Audit Office found departments had exempted two-thirds of recorded contracts since 2016, or about 1,475 contracts, from requirements for at least 3 per cent of the workforce to be Indigenous, or that amount of components sourced from Indigenous-owned businesses.
Auditors said the exemptions were given “often for reasons that [were] unclear”.
But even among the contracts that were subject to Indigenous participation rules, just a fifth were actually assessed for compliance — with more than a quarter found to be non-compliant.
Commonwealth contracts are subject to Indigenous participation rules if they exceed $7.5 million in value and more than half of that value is spent in a nominated industry in Australia — such as in construction, healthcare, industrial cleaning or wildlife management.
Construction is one of a number of sectors where Commonwealth contractors must comply with Indigenous participation rules, unless exempted. (AAP: Jono Searle)normal
Auditors said contract exemptions were rising, and while some were legitimate exemptions, others were given with little explanation.
“The inappropriate use of exemptions impedes achievement of the Indigenous Procurement Policy’s objectives,” auditors said.
“Systems have been set up to allow potentially invalid exemptions.”
Exemptions for non-compliance, missing assessments, outdated guidance
Of those contracts that were exempted from Indigenous participation rules, a third listed their reason for exemption under the category “other”.
Auditors were told by the responsible agency, the National Indigenous Australians Agency, that contracts were sometimes exempted simply because they were “in practice non-compliant” with the rules.
For example, between July 2016 and September last year $35 billion worth of Defence Department contracts were exempted — with more than half of those contracts listed as “other” as the reason for exemption.
But even among the 870 contracts where Indigenous participation rules were applied, the NIAA only assessed compliance of a fifth of those. Of those assessed, 28 per cent, or 45 contracts, were found not to have complied.
The agency had also not updated its guidance to contractors on navigating Indigenous participation rules since July 2020, despite reporting requirements changing in that time.
“A commitment to publish guidance tailored for Indigenous businesses was not met,” the auditors found.
In a response to auditors, the National Indigenous Australians Agency said prior to the introduction of minimum requirements a decade ago, Indigenous businesses secured limited business from the Commonwealth, and the policy had “significantly” increased the rate of purchasing from Indigenous businesses.
The agency agreed to review its use of the “other” category for allowing exemptions, but argued it was the responsibility of Commonwealth departments to ensure each met their own obligations.
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