Government sidesteps mandatory employment rules designed to Close the Gap in two thirds contracts, audit finds
Indigenous employment requirements were sidestepped in two-thirds of the contracts issued by Commonwealth entities, including the Departments of Defence, Education, Workplace Relations, Infrastructure and Home Affairs, the audit report said.
The mandatory minimum requirements (MMRs) are targets to ensure that at least three per cent of the workforce is made up of First Nations peoples.
Government contracts over $7.5 million are also subject to these targets, which can alternatively be met through the engagement of Indigenous-owned businesses as suppliers. Tenderers are required to specify how they plan to achieve the MMRs.
The targets were introduced to ensure First Nations peoples benefit from some of the larger projects outsourced by the Commonwealth, including those in remote areas.
But since MMRs were made binding for contractors in 2016, 63 per cent of all recorded contracts have been exempted.
The 1,475 exempted contracts are worth a total of nearly $70 billion.
Of those exemptions, 34 per cent — valued at more than $30 billion — were filed with no explanation, with reporting officials simply ticking the 'other' category on the exemption form.
The National Indigenous Australians Agency (NIAA), which is responsible for implementing the MMRs, said these requirements are just one component of the Indigenous Procurement Policy (IPP), established in 2015.
The NIAA told the audit office that contracts were exempted under the 'other' category because entities 'are in practice non-compliant with the Indigenous Procurement Policy'.
'Entities' use of the 'other' exemption category for non-compliant contracts obscures the degree of noncompliance with the MMRs and is not appropriate,' the report said.
'The NIAA does not provide complete guidance on the use of exemptions or assurance over the legitimacy of exemptions. The NIAA has not considered the strategic implications of exemption usage for the achievement of policy objectives.'
This comes almost five years after a 2020 Auditor-General report found that the administration of well-designed MMRs 'had been undermined by ineffective implementation and monitoring by the policy owner and insufficient compliance by the selected entities.'
Of the recommendations handed down after the 2020 audit, the latest report found that entities had only 'partly implemented' them.
'Systems have been set up to allow potentially invalid exemptions. There is a lack of guidance and assurance over the appropriate use of exemptions.'
The latest audit also found that the NIAA has not been able to demonstrate that MMRs are improving Indigenous economic participation.
However, the NIAA said that prior to the introduction of the policy, Indigenous businesses secured limited contracts through Commonwealth procurement.
The policy has since significantly increased purchasing from Indigenous businesses.
All entities contacted by the audit office, including the NIAA, responded by welcoming the audit findings and committed to strengthening the procurement and reporting processes required to meet the compulsory targets.
The NIAA has pledged to continue supporting entities that are struggling to comply with the targets, but added:
'As with all other elements of the Commonwealth Procurement Rules, it is the responsibility of each Commonwealth entity to meet the obligations of the IPP.'
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