Build awareness Create opportunities Initiate change
Mr Ian Nightingale Industry Participation Advocate
Our Objectives
Build capacity of local businesses to successfully tender for Government contracts
Policy and practices that remove impediments and support local participation
Procurement reforms that provide greater economic benefit to the State and local businesses
The proportion of contracts public authorities entered into during 2012-13, categorised by supplier location:
Regional SA 8.8%; 9%
Overseas 2.6%; 3%
Other Australian States/Territories and New Zealand 33.2%; 33% Metropolitan Adelaide 55.4%; 55%
Value-for-money and enhanced economic growth • How procurement can treat business as a partner to deliver on the Government’s strategic aims • How to identify the most economically advantageous tenders • What are the impacts from taking a least cost approach versus a true value-for-money analysis
The importance of supplier relationships “Supplier relationships are key to the next phase of innovation in procurement and should be treated like customers because building a better relationship with them can reduce risk in the supply chain… Procurement has moved from the left, more cost centric approach to the right which is relationship and value‐driven.” Dr Remko van Hoek, Global Procurement Director, PwC
Quick Wins for SMEs The State Government could establish these quick wins: • Payment Schedules in contracts should be more responsive to completion of work • Doubling the threshold for Simple Procurement from $220K to $440K will reduce compliance costs for both business and State Government • Using the Commonwealth model and documents for Simple Procurement • Stripping out commercial terms that are overly onerous (insurance, liability levels, contract length) • Regular feedback from business groups on contract terms will help keep them in check
Key drivers of economic contribution from procurement
Investment
Employment
Raise the Economic Contribution from procurement even further • • • • • •
Policy change is already well advanced based on advice from Deloitte Access Economics but can be developed further Major projects are already incentivising use of South Australian labour, capital investment and supply inputs The Policy is working and is sending a strong message to the market Enhancements to policy in areas of high specialisation is needed Proposed 90 Day Change Project to address this issue There is the potential to adopt the Most Economically Advantageous Tender approach as used in many parts of Europe.
Industry Participation Requirements CONTRACT VALUE
REQUIREMENT
$22,000 to $220,000
• • •
Can the product or service be sourced within the State or region. Obtain one quote from a local source. Employment Contribution Test applies to primary and secondary contracts.
$220,000 to $4m (metro) or $1m (regional)
•
Employment Contribution Test – minimum weighting of 5%
Above $4m (metro) or $1m (regional)
•
Industry Participation evaluation – minimum weighting of 5% or 10%*
*A minimum weighting of 10% applies across the following sectors; • Heavy and civil engineering construction • Professional, scientific and technical services • Non-residential building construction • Electrical equipment manufacturing
New Cabinet requirements Cabinet Submissions now require; Where a proposal includes government expenditure subject to the State Government’s Industry Participation Policy – which covers expenditure over $4 million (or $1 million in regional South Australia) and grants over $2.5 million – the Office of the Industry Advocate must be consulted early in the decision-making process. This will assist in maximising the economic contribution of the expenditure to the State.
Lifting the weighting Prior to a decision to lift the weighting a merit assessment would need to be conducted Examples where lifting the weighting may be justified • Address high unemployment / low socio-economic standing • Import replacement • Stimulation of a local industry sector in decline • Opportunity for skills transfer / upskilling local workers • Opportunity for local capital investment providing long term benefit to the State
Industry Participation Scorecard EMPLOYMENT Number of South Australian jobs or labour hours
INVESTMENT
SUPPLY INPUTS
Amount of new capital expenditure in South Australia
Value of goods and supplies sourced from South Australian businesses
directly linked to the delivery of contracts on behalf of the South Australian Government*
Employment The purpose is to measure the potential economic benefit to the State or region through the use of local labour
•
How many labour hours will be used to perform the contract by the Prime contractor?
•
What percentage of labour hours will be in SA?
•
Sub-contracted labour hours are picked up in the section about supply inputs.
Investment The purpose is to measure the potential economic benefit to the State through investment expenditure associated with contract.
Investment of > $110,000 that has been made or will made to deliver the contract eg – • Land, buildings, machinery, equipment • R&D • Skills development • Other significant capital expenditure
Supply Inputs The purpose is to measure the potential economic benefit to the State or region through the use of supply inputs (eg merchandise, finished products, food & beverages, supplies & raw materials)
Sub-contracted packages of work > $110,000 • • •
Where products are manufactured Where services will be performed What percentage of labour hours will be in SA
Connecting with Business Workshops – A Supplier's Guide to Winning Government Business Topics covered include: – – – – – –
Knowing Your Customer Understanding the Rules Understanding the Process Finding Opportunities Building Relationships Tendering to Win
Meet the Buyer Themes Good and Services Office equipment & supplies, printing, food & beverage, environmental services, fuel & chemicals, travel & accommodation, motor vehicles and accessories.
Professional Services Human Resources, specialist advice and services in; science, architecture, engineering, computer systems, law, accountancy, management and other consultancies.
Building and Construction Road Construction, building construction, heavy machinery & equipment purchases, building fit-out and maintenance.
Creative Industries Publishing, graphic design, film making, web design, communications, advertising, market research, professional photography, events management.
Information, Communication and Technology Communication devices, software, printing devices, digital & electronic displays, computer networks and hardware.
Price versus Value – there is a difference “Price is what you pay. Value is what you get.” Warren Buffett
Government agencies + local business = partners in driving economic THANK YOU development for the State Ian Nightingale Industry Participation Advocate