Government sets 20% procurement target to give SMEs “a better deal”

The Albanese government says it will ensure small and medium businesses are awarded a greater share of Commonwealth contracts, as part of its commitment to creating “a better deal for small business”. 

From today, revised Commonwealth Procurement Rules (CPR) will require at least 20% of government contracts, by value, to be awarded to SMEs, up from a previous target of 10%. 

The change, which will apply to any new procurements undertaken from July 1, could see the annual value of federal government contracts going to SMEs continue to climb. 

In 2020-21 the Commonwealth spent $69.8 billion on contracts, with $18.7 billion, or 27% by value, going to SMEs. 

This level of spending represents “a significant economic lever”, says the government, and ensuring a greater share to SMEs has the potential to stimulate more growth and employment across small and regional businesses. 

The revised CPRs were announced on Friday by Finance Minister Katy Gallagher and Small Business Minister Julie Collins, who said it is the first step in the government’s ‘Buy Australian Plan’ promised during the election campaign. 

“This announcement is a clear demonstration that we won’t waste time when it comes to taking practical steps to support businesses to grow, create more jobs and ultimately help to boost the Australian economy,” Gallagher said. 

Collins said small businesses “shouldn’t be locked out from opportunities to gain government contracts just because they might not have the leverage of bigger businesses”.

“The swift delivery of these changes shows the Albanese government is serious about implementing our commitment for a better deal for small business,” she added. 

Small business procurement received some attention by the previous Coalition government, which had proposed measures to help improve access to government contracts in both its 2021 and 2022 budgets.

A number of Australian states and territories have also adapted their procurement policies in recent years to increase the likelihood of SMEs winning a greater share of contracts, with New South Wales in particular focused on this area. 

Under the government revised CPRs, officials will now also be required to consider the impact on climate change when assessing the value for money of procurements, in line with the government’s stated commitment to reduce emissions by 43% by 2030. 

Officials will also be encouraged to approach multiple suppliers when procuring from a panel arrangement under a change the ministers say will improve competition, “driving value for money outcomes and ensuring a better deal for the taxpayer”.

The updated CPRs are available online here.