Aussie tech SMEs say government procurement favours large multinational players

A landmark survey of 86 Australian small-to-medium enterprise (SME) technology companies of their experiences in selling to the government has laid bare a raft of entrenched obstacles local firms face in winning public sector business, with deals still routinely favouring large, multinational players.

The independent poll, conducted by industry policy hub InnovationAus, is being used to collect otherwise unavailable data to inform industry policy in the hope that “the results will be considered in any planned review of federal procurement policy,” said publisher Corrie McLeod.

A major issue local tech SMEs face is the voices on many industry issues, especially around procurement reforms and local industry development, which tend to be dominated by groups resourced by large multinational tech suppliers who game the cost of bidding for government work to their advantage.

Asked “how would you rate your experience in selling products and services to government?” just 21% rated their experience as ‘positive’, with 26% rating it ‘neutral’, 26% ‘negative’, and 23% ‘very negative’.

Asked about preparing and submitting bids for government work, a whopping 67% said this required ‘too much effort’, while 43% said ‘rarely’ and 22% ‘never’ when asked: “how often are RFTs/RFIs prepared in a manner suitable for SMEs to bid on?”

In comments to the poll, de-identified respondents were withering in their descriptions of the difficulties they faced.

“Bids for $250k work cost about $15k effort and have 1/6 success rate. The first job with a new department is always a loss-leader. Our success rate for second and subsequent jobs is 1/2 or better, and only then do we make any profit,” one respondent said.

“Massive cost, effort and exploitation of privacy regulation for no purpose given the pre-determined (and orchestrated) agenda for dysfunctional tender process,” said another.

How long is …

One of the more alarming statistics was the slowness with which procurement decisions appear to be made.

A typical response time for government bids was between 6 and 12 months, 38% of respondents said.

“Depends on the mechanism — seeing significant delays at the moment. Poor government and prime behaviour,” said a respondent. “Depends on department. Some are hopeless (waiting 3 years for longest so far) said another.

Asked about the government’s capability to adopt or integrate SME products and services, the comments were telling.

“Cross agency integration, process reengineering with best-practice, improved services, platforms and applications which would save $billions but there is no will with politicians or empire building bureaucrats to lose power and control,” one respondent said.

“We could save the education sector hundreds of millions. But we can’t get in the door because State and Federal Governments are so keen they don’t make a mistake, they go for large organisations which by their very nature will be slow, expensive and un-innovative,” said another

“The net effect are successive grand failures, which in education means continued loss of money, loss of time, loss of morale, and loss of students’ prospects.”

Said another:

“The capabilities of government are contracted, usually to one of the Big Four consulting firms, who are also bidding for the contract in competition to us. As the government do not have the internal resources to evaluate on merit, they will often take the low risk (high cost) international firm in partnership with a tier 1 consulting firm.

“This is at an extremely high premium — however due to lack of internal competency to evaluate on merit they are often left with no choice. (no one gets fired for buying SAP).”

Out of sight, out of mind

A former public servant working in industry was even more scathing.

“There are prevailing attitudes within many areas of government (and I am ex-government) that for-profit businesses are untrustworthy and that government knows best. The skills are often less than what is offered and instead of leveraging emerging products [and] services and using interactions to drive change and capability development, procurement is focussed on compliance with existing arrangements and known requirements.

“Utterly defeats the purpose of spending money and rules out smaller, innovative companies.”

The business of arm’s-length influencing is also alive and well, according to some respondents.

“…unless we put years of wining [and] dining subcontracted government ‘staff’ in Canberra there’s no chance of anything. Government only uses panels and the marketplace to legitimise procurement from the big companies who can afford the presales lunches [and] golf and are located in Canberra.”

One response in particular should have Finance and APS Minister Katy Gallagher concerned.

“In recent years we find that internal digital/tech capabilities within the APS have withered. This gap in internal competency has been replaced by labour hire contractors & tech vendors,” the respondent said.

“It is difficult for us to create the best impact for government clients when the agencies cannot take an authentic leadership role over their own (digital) future. i.e., it is harder to create long-term solutions when direction is given by contractors or vendors who don’t have a longer-term view on the agency’s future.”

Sounds like a case for insourcing. The question now, is with what?