An Introduction to Indigenous Procurement Process (IPP) for your project

The Indigenous Procurement Policy (IPP) has been implemented to promote Indigenous entrepreneurship, business growth, and economic development among Indigenous Australians. Prior to this policy, Indigenous enterprises had limited success in securing contracts from Commonwealth procurement. The policy has three main elements:

  1. Annual Targets: The policy sets annual targets for the volume and value of contracts to be awarded to Indigenous enterprises by both the Commonwealth and individual government portfolios. This aims to significantly increase the amount of business conducted with Indigenous businesses.
  2. Mandatory Set Aside (MSA): The MSA is designed to give Indigenous enterprises the opportunity to prove their value for money before a broader competitive procurement process. It applies to procurements in remote Australia and others with an estimated value ranging from $80,000 to $200,000 (GST inclusive).
  3. Indigenous Participation Targets: For high-value contracts (valued at $7.5 million or more) in specific industry categories, known as 'mandatory minimum requirements' (MMR), the policy mandates Indigenous participation targets. These targets require that tender evaluations consider a tenderer's past performance in meeting MMR targets outlined in relevant Commonwealth contracts.

The Indigenous Procurement Policy (IPP) applies to non-corporate Commonwealth entities, and Corporate Commonwealth entities listed in section 30 of the Public Governance, Performance and Accountability Rule 2014 are encouraged to make their best efforts to comply with the IPP. However, it's important to note that the IPP does not extend to Commonwealth grants.

Indigenous Enterprises (1.8):

  • To be considered an Indigenous enterprise, a business must be at least 50% Indigenous-owned.
  • Supply Nation maintains a free registry of Indigenous enterprises called 'Indigenous Business Direct.'
  • Businesses can also be recognized as Indigenous enterprises under the IPP if they are listed on the public register maintained by the Office of the Registrar for Indigenous Corporations (ORIC).
  • If a business is not listed with Supply Nation or ORIC, the procuring official must take steps to verify that the enterprise is 50% or more Indigenous owned. This can include requesting evidence of Indigeneity from the owners, such as a statutory declaration or certificates/letters of Indigeneity from recognized Indigenous organizations.
  • Checking whether the enterprise is listed with an Indigenous Chamber of Commerce or another business list and confirming their eligibility as per IPP requirements is also an option.

Exemptions (CPRs and Exemption 16):

  • The Commonwealth Procurement Rules (CPRs) contain exemptions that outline specific circumstances under which procurement processes are exempt from certain rules (Appendix A exemptions).
  • Exemption 16 pertains to the procurement of goods and services from small and medium-sized enterprises (SMEs) with at least 50% Indigenous ownership.
  • When using Exemption 16, the procuring official must also ensure that the enterprise meets the definition of an SME as defined in the CPRs.

IPP Targets:

  1. Volume Target: This target aims to award contracts to Indigenous enterprises equivalent to three percent of the total number of eligible procurements in each financial year.
  2. Value Target: Starting from July 1, 2027, this target seeks to award contracts to Indigenous enterprises equivalent to three percent of the total value of eligible procurements in each financial year. However, from July 1, 2019, there is a gradual increase in value targets each year until reaching a maximum of three percent in 2027-28.
The calculation and counting of procurement against Indigenous Procurement Policy (IPP) targets are outlined as follows:

Calculation of Portfolio Value-Based Target:

  • The value-based target for a given financial year within each portfolio is determined based on the relevant target percentage (as specified in a table) applied to the expected value of eligible procurements.
  • The expected value of eligible procurements is calculated as the average of the total value of eligible procurements over the previous three full financial years.
  • The value of eligible procurements for a specific financial year is derived by subtracting the value of contracts associated with certain exclusions from the total value of contracts published on AusTender during that financial year.

Exclusions from Value-Based Target:

  • Several types of contracts are excluded from the value-based target, including those exempt from CPRs Division 2 (except Exemption 16), those subject to CPRs paragraph 2.6, those procured through coordinated procurement arrangements, those within a Restricted Market, and those considered extraordinary expenditure unlikely to be repeated.

Counting Procurement Against Targets:

  • Portfolios are encouraged to count various types of procurement and purchases with Indigenous enterprises against their IPP targets. This includes direct contracts and purchases awarded to Indigenous enterprises within the portfolio, subcontracts directly related to goods and services contracted by the portfolio, and multi-year contracts.
  • Multi-year contracts awarded to Indigenous enterprises can contribute to the portfolio's volume-based target for each year the Indigenous enterprise receives revenue under the contract. The total value of the multi-year contract is counted against the portfolio's value-based target for the year in which the contract was executed, with any increases in contract value counted in the year of the variation.
  • Official orders, including subcontracts, awarded to Indigenous enterprises under panels, coordinated procurement arrangements, and cooperative procurement arrangements can also be counted toward both volume and value-based targets.
  • Reporting of procurement and purchases to the National Indigenous Australians Agency (NIAA) is required via the IPP Reporting Solution (IPPRS) if they are not already reported on AusTender or reported by a supplier through IPPRS. The NIAA may confirm extraordinary expenditure with each portfolio's Chief Finance Officer before establishing value-based targets for the upcoming financial year.

The Mandatory Set-Aside (MSA) arrangements aim to give Indigenous Small and Medium-sized Enterprises (SMEs) the chance to prove their value for money before a general approach to the market is taken. Here's a summary of when the MSA applies and when it doesn't:

MSA Applies To:

  • All procurements conducted in remote areas.
  • Procurements wholly delivered in Australia with an estimated value falling between $80,000 and $200,000 (GST inclusive).

MSA Does Not Apply To:

  • Procurements covered by paragraphs 2.6 or 10.3 of the Commonwealth Procurement Rules (CPRs).
  • Procurements made through mandated coordinated procurement arrangements.
  • Procurements where an exemption from the CPRs in Appendix A is used (except for exemption 16).

Applying the MSA (3.3):

  • When the MSA is applicable, procuring officials must first determine whether an Indigenous Small and Medium-sized Enterprise (SME) could provide the required goods or services on a value-for-money basis.
  • The MSA rule must be applied before other procurement processes, except for coordinated procurement arrangements.
  • To meet the MSA requirement, the procuring official should:a. Search Supply Nation's directory of Indigenous enterprises for suitable Indigenous SMEs.b. Depending on the search outcome:
  • If a suitable Indigenous SME is found: i. Assess whether the Indigenous SME can deliver the required goods or services with value for money, in accordance with the Commonwealth Procurement Rules (CPRs).ii. If value for money is determined, purchase the required goods or services from the Indigenous SME. For procurements at or above the relevant procurement threshold, Exemption 16 of Appendix A of the CPR can be used.iii. If multiple suitable Indigenous SMEs are identified, assess them based on the scale, scope, and risk of the procurement, and award the contract to the Indigenous SME offering the best value for money.iv. If the chosen Indigenous SME declines the contract, offer it to subsequent SMEs that met value for money requirements.
  • If no suitable Indigenous SME is found:i. Document the outcomes of the search.ii. Proceed with the entity's regular procurement practices to award the contract.

Recording and Reporting Requirements (3.4):

  • For contracts valued between $80,000 and $200,000, the NIAA publishes the percentage of MSA-eligible contracts awarded to Indigenous enterprises on AusTender.
  • For remote procurements, portfolios must report to the NIAA via the IPP Reporting Solution (IPPRS) every six months, providing information on remote procurements conducted by the portfolio and contracts awarded to Indigenous SMEs in remote areas.

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