NSW government procurement rules out of step with other jurisdictions

article-body

NSW procurement disclosure rules are preventing adequate oversight of public spending, according to Per Capita research fellow Osmond Chiu.

Submissions to the state’s inquiry into procurement practices of government agencies and its impact on social development closed earlier this month, following the inquiry’s referral late last year.

The standing committee on social issues will examine whether NSW’s procurement rules are ensuring the state is getting good value for money on procurement, contracts and labour.

Intent to change the rules around government procurement was an early announcement of the NSW Labor government.

Chiu’s submission to the inquiry highlights the fact the state’s procurement disclosure thresholds are significantly higher than other jurisdictions.

“Only contracts over $150,000 (including GST) are required to be recorded in the register of NSW Government contracts and published on the eTendering website. This threshold also applies to local governments,” he wrote.

“In contrast, most agencies at the commonwealth level must publish details about contracts awarded by an agency at or above $10,000 (including GST) on Austender.

“The additional transparency and accountability associated with a lower threshold will result in more supplier competition, deliver better value for money and more community confidence in public procurement.”

A comparison of the procurement results achieved at the federal and NSW state level reveals why this is a problem.

Evidence from the European Union found the number of bids received per request for tender increased by approximately 12% and prices decreased by approximately 8% for contracts valued above disclosure thresholds relative to contracts below these thresholds.

With the state government’s total spend on goods and services over $36 billion, and an unknowable number of contracts below the disclosure threshold, NSW could be flushing tens of millions down the toilet.

Chiu said lowering NSW procurement disclosure thresholds to $10,000 would help preserve confidence in government, reduce waste, and ensure there was accountability when things go wrong.

“With such a high threshold, there is not a lot of transparency about government spending. If no one knows about the contracts, questions won’t be asked,” Chiu told The Mandarin.

“The median value of a contract at the federal level at 2021 – 22 was $122,066, which makes you wonder how many contracts are not getting published at the NSW level.

“Greater transparency will ultimately lead to more competition, and better value for money.”

Responding to the social dimension of the inquiry, Chiu thinks we need to think more about the way wealth is used in individual communities.

It has been a running issuers for many councils they can’t levy their own taxes, and have little control over their takings from rates. This has left rural and regional councils in particular with a widening gap between what needs doing, and what they are able to afford to do.

Coupled with the running skills shortage afflicting many parts of the country, this challenges the fabric of individual communities, unable to fund road repairs or, in some cases, basic civil infrastructure.

Chiu thinks community wealth might be the solution to this problem.

Community wealth building is an approach to economic development that seeks to build a long-term sustainable economy where people own, have a stake in, access and benefit from the wealth our economy generates.

Community wealth building centres on five pillars, namely procurement, workforce, land and property, inclusive ownership, and finance. Pioneered in the Midwest of the United States, it is an approach that has been adopted in a diverse range of settings from Chicago to Scotland to Amsterdam.

“The idea is to look at incremental changes that governments can employ to turn the dial to create better social, economic and environmental outcomes,” Chiu said.

“It’s about asking ‘What are the social outcomes that need to be addressed, and how can you work with entities that will never leave the community to really improve things?’

“Things like local content, supporting small and medium enterprises, improving diversity in your workforce … the way it works in one jurisdiction will not be the same as another, but it’s about being able to focus in on what you can do with the resources you have.”

---

READ MORE:

NSW ministry revamp gives government procurement special attention