Carnell: Governments need to shop small when handing out contracts

Small business ombudsman Kate Carnell says SMEs are missing out on too many government contracts, urging state and federal government officials to allocate a larger slice of government spending to local companies.

In a speech to the National Press Club on Wednesday, Carnell said SMEs were only awarded 26% of the almost 80,000 contracts tendered by the federal government in 2018-19, even though over nine in 10 jobs were valued under $1 million.

“It is clear small businesses should get a larger slice of that pie,” Carnell said.

“Small businesses often don’t get a look in because the first step of the procurement process often requires businesses to be on a panel. This can be an extraordinarily costly and onerous exercise.”

Echoing her prior calls for an SME procurement panel to manage Commonwealth contracts up to $10 million, Carnell said the federal government should only award big businesses contracts when the SME sector can’t do the job instead.

“If we really want to get the economy going, then we really should be giving as much business as possible to small and medium Australian businesses,” Carnell said.

“It’s also where innovation is. I’m not suggesting we shouldn’t care about value for money, we should, but what we shouldn’t say is price is the only issue.

“Value isn’t just price … it’s about jobs, it’s about economic development, it’s about Danilo’s coffee shop doing work with the local fate and the local charities and the local football teams.”

The wide-ranging speech, which was followed by an address from Council of Small Businesses of Australia (COSBOA) chief executive Peter Strong, sought to highlight the importance of small businesses in Australia’s economic recovery from the COVID-19 pandemic.

Carnell and Strong argued small businesses will be imperative to Australia’s economic prospects over the coming recession, and that the federal government had to step up to ensure companies survived.

Strong said the taxation system, specifically payroll tax, required urgent reform to give SMEs the runway they need to employ Australians.

“A job killer is payroll tax: the words say it, payroll tax,” Strong said.

“You employ people? We will punish you, we will tax you.

“It’s a job killer, have no doubt. I know businesses who refuse to employ more people because of payroll tax.”

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