Speech

Address by The Hon Lindsay Tanner MP

Minister for Finance and Deregulation

Address to CIPSA Public Sector Procurement Forum

26 May 2010, Canberra

Good morning, it’s a pleasure to be able to join you here again for the CIPSA Public Sector Procurement Conference.

At last year’s conference I spoke about the importance of government making the most of every dollar it spends. Although economic conditions have arguably improved since that time, in Australia at least, our sentiment towards eliminating waste remains very much true.

Many of you will be aware of the Rudd Government’s fiscal commitments; that we restrain spending growth to two per cent in real terms until the Budget is in surplus to the extent of one per cent of GDP; that all spending is off-set by a saving; and so on.

Essentially we have imposed a fiscal straightjacket on ourselves and we need to continue examining all areas of expenditure very closely. The reforms to our procurement practices and activities in the last twelve months are about driving the efficiencies required to meet our fiscal commitments.

When I spoke to you last year I announced some fairly major changes to the Government’s procurement arrangements. The steps we have taken in the last 12 months have been about consolidating those arrangements and putting the Commonwealth’s house in order.

It may not necessarily be headline grabbing work, but we have made significant steps forward in areas such as improving the link between government policy and implementation.

We have increased transparency by making subcontractor arrangements available and are in the process of assisting industry by making our forward purchasing plans more searchable and more relevant.

And importantly, we have found ways to use our procurement practices to help groups that are sometimes kept on the sidelines of Australia’s economy. For example we recently announced changes to further assist Indigenous Australians benefit from government procurement contracts, through access to employment and business opportunities.

In the last financial year the Australian Government awarded contracts worth close to $33 billion, making it one of the largest consumers of goods and services in the country. As an organisation that purchases everything from office supplies, through to military machinery, there are obvious challenges in managing procurement across the vast range of government operations.

As always the Government’s focus remains on getting the best possible value for money in all our purchasing.

Since I addressed this conference last year the Rudd Government has initiated a number of procurement reforms that have achieved that.

Earlier this month, I announced changes to the procurement of a range of travel services that will save taxpayers $160 million over four years.

The new contractual arrangements, which take effect from 1 July 2010, have been implemented to optimise value for money through cost reductions and more efficient practices. They also promote behavioural change.

We have negotiated with the airlines to turn frequent flyer points off for MPs, their staff and officials and we have introduced policies that encourage travellers to utilise cheaper flights.  These policies also encourage officials to avoid travel entirely if there is a better way of doing business like using the Government’s new national teleconferencing system.

I expect that even more will be saved in the administrative costs avoided by having a centrally managed approach to travel services procurement.  I also look forward to additional savings coming from other coordinated contracts for travel products.

The Government has also made progress in other key areas, such as telecommunications, IT hardware and major office machines.

I expect to make more announcements in the coming months about the savings we will make and the efficiencies we are introducing by streamlining the way the Australian Government buys those products.

Whilst improving the efficiency of the way we procure goods and services is central to the work we are doing in our procurement reforms, it is not the only focus of our work.

As the Minister for Finance and Deregulation, I have direct responsibility for reducing the burden on business caused by cumbersome and ineffective red-tape.

One of the simplest things the government, as a buyer of goods and services, can do to make life easier for suppliers is to be consistent about what we ask for and how we ask for it. This is exactly what we are doing with the suite of standard documents we have produced for accounting services.

This is an initiative whose genesis was in a scoping study that my Department conducted in considering whether a coordinated procurement of accounting services would be feasible. 

That study showed that coordinated procurement was not feasible, but indicated efficiencies could be gained through an alternative approach to contracting. 

Encouraging innovation and flexibility in our procurement activities is something that I am keenly focused on.

I understand that at the coalface, the difficulties in actually changing procurement processes are extremely difficult, but the benefits from doing so are significant.

By introducing a suite of standard documents for accounting services we have been able to reduce the amount of resources accounting businesses have to dedicate to compliance activities and also improve efficiency within Government departments.

Another reform we are introducing that will assist our suppliers is becoming more transparent about what we intend to purchase and when we anticipate that will occur.

As I announced in the Australian Government Procurement Statement last year, we have made a series of improvement to the Government’s online procurement reporting system, AusTender.

These improvements make our Annual Procurement Plans more searchable and more relevant. 

This will assist industry to better identify future opportunities with Government agencies, and will also assist agencies in identifying opportunities for cooperative procurement with other agencies. 

To further assist in this area we have also appointed a Procurement Coordinator in the past 12 months. Engagement with industry is one of the key activities undertaken by the Coordinator and feedback from both sides tells me that this new arrangement is working well.

The other area that I would like to talk about this morning is promoting a more balanced approach to risk allocation in contracts.

The Liability Risk Assessment Guide is now available through the Department of Innovation, Industry, Science and Research.  This Guide provides consistency across Commonwealth agencies regarding the treatment of liability risk in Commonwealth contracts. 

It will assist procurement officers to understand the risks associated with procurement and how they might be mitigated. 

I am sure I don’t need to tell anyone in this room that excessive risk transfer and insurance requirements increase costs for both the Government and suppliers. 

The guide is intended to assist in reducing costs for both, and reduce barriers to small businesses accessing the Commonwealth Government procurement market.

These procurement initiatives and the associated drive to achieve better value for money are a key part of the Rudd Government’s agenda to reform the way the government operates.

As with the procurement changes specifically, our broader reform agenda is not something that you are likely to see on the front page of any tabloid newspapers. That does not make them any less important.

I am pleased to be able to release a scorecard of these reforms today. This document outlines what is being done through enhancing operations within government, between governments and between citizens and governments.

Some of the specifics I have discussed here today already but it includes further information on changes to our use of IT, advertising and property.

It also outlines the impact on the Budget bottom line.

In the past three budgets, more than $8.5 billion has been saved by improving the efficiency of our operations.

This document summarises our achievements since coming to office in 2007 and outlines the next steps in some of these key areas of reform.

The scorecard will be available on my website. 

I would like to finish this morning by making a few comments on the role of Australian businesses in supplying goods and services to the Federal Government.

Some of you may recall that in the lead-up to this conference last year there was a debate occurring around implementing protectionism in a range of industries.

I stood before this conference and made it clear that the Government had absolutely no intention of introducing local price discrimination into our procurement policy.

Predictions were made that a number of local industries would rapidly die due to increasing international competition.

Today I am pleased to announce that our latest research shows that Australian industry continues to be a very competitive supplier to the Australian Government.

This year, we refined our methodology to better reflect the balance in some sectors between imports and local production, for example in coal and petroleum products.

With these improvements, our research now shows more clearly that Australian businesses supply almost 80 per cent of what the Australian Government buys.

This is significant particularly when considering the fact that much of what the Government imports from overseas simply can’t be readily produced here. Items like office machinery and major military hardware are essential, but mostly not produced in Australia.

One of the key items on our procurement agenda for the next 12 months is continuing to improve the knowledge and skills of Commonwealth procurement officers.

This will occur through our Procurement Bulletin, the Procurement Discussion Forum and the Procurement Seminar series for agencies.  We will also continue to work with Government Skills Australia and universities to ensure that the range of accredited procurement qualifications they provide are relevant to the Commonwealth procurement environment.

I am sure this conference will also assist on that path.

Thank you.

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