Tighter rules to encourage supplier diversity

4 October 2021

A new rule forcing New Zealand government agencies to procure from a more diverse range of suppliers has come into force.

New procurement rule 18A aims to use public spending to create employment opportunities for women, Māori and Pacific peoples, and disabled and young people.

Economic and regional development minister Stuart Nash said the rule would encourage public agencies to cast the net widely when awarding contracts.

“Government agencies collectively spend NZ$51.5bn (US$35.7bn) procuring goods and services each year, and we will use that as a lever to support a wider range of jobs and businesses,” said Nash.

“The new rule is also flexible enough to recognise that many small to medium enterprises may lack the scale to hold a direct contract with government agencies, but can still be part of the supply chain for another business.”

Nash said agencies would be obliged to monitor and report on their delivery.

Across the Tasman Sea, the state of Western Australia has extended its Aboriginal Procurement Policy to include employment and subcontracting targets.

The strengthened policy will come into effect from 1 January 2022 and will build on the original policy introduced in 2018.

It will apply to goods, services and works contracts valued at A$5m (US$3.6m) or above advertised from 1 January 2022 within construction, community services, education and training, and public administration and finance. 

Tony Buti, state finance minister, said: "The intent of the Aboriginal Procurement Policy is to ensure we can build the capacity of Aboriginal businesses in WA so that opportunities get bigger over time.

"We are already seeing some government agencies, such as Main Roads, exceeding Aboriginal procurement targets on some of their projects and achieving great outcomes.”

In September, an Australian parliamentary report attempted to address the issue of so-called “black cladding”, where businesses make only superficial changes to benefit from contracts directed at Aboriginal businesses.

The Standing Committee on Indigenous Affairs’ Report on Indigenous Participation in Employment and Business made 17 recommendations aimed at eliminating the phenomenon.

One recommendation urges Supply Nation, a non-profit that certifies indigenous businesses in Australia, to tighten its definitions.

Committee chair Julian Leeser said the recommendations would ensure the benefits of the Indigenous Procurement Policy go to indigenous communities.

“Having richer criteria … addresses some of the allegations black cladding,” he said.

“It’s harder to make an allegation of black cladding if a company has to demonstrate some of those additional things like [Aboriginal] employment and skills transfer.”

Australia’s National Indigenous Times newspaper reported some businesses were using Aboriginal people as company figureheads without any actual role, in order to benefit from the revised procurement laws. 

Many companies winning contracts as supposedly “Aboriginal-owned businesses” had in fact been running for a long time but had recently set up an Aboriginal branch.

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