UBH Group Public Submission
Dear honourable members of the Senate of Finance and Public Administration Committee,
UBH Group (UBH) is pleased to provide a submission to this inquiry. UBH offers our recommendations in the spirit of positive and helpful collaboration for your consideration.
UBH is a veteran-owned SME tech company, providing technology services to Australian Government Departments, State Government Departments, and other business-to-business clients. Our purpose is to bring people, process, and technology together, building national resilience and unlocking Australia’s technological advantage. We do this by providing a range of applications and services, including Operations, Training and Engineering services as well as AI applications. Our submission includes observations following decades of experience in the Government, Defence and Technology sector, evidenced by data that supports our recommendations. Statistics of government procurement imperatively showcases the challenges and adversity faced by sovereign technology SMEs.
Recommendations
The current procurement landscape, as illustrated by recent experiences and data from the Australian Government Department of Finance, highlights a need for attention and reform. To increase sovereign tech company participation, and to maintain a competitive focus, UBH has proposed the following recommendations:
Government procurement panels should be opened permanently and/or refreshed more regularly.
Government procurement officers should be able to select from a broader range of panels.
Government staff need to be trained on how to find, engage, and partner with smaller sovereign technology providers.
Government procurement policy should prioritise and value sovereign tech companies over multi-national companies.
Government policy needs to direct that Commonwealth staff have sought out sovereign technology providers first and only hire multinationals where sovereign providers were not an option.
Work packages should be tailored to avoid tender responses solely from foreign multinational companies.
Establish Government contract value of procurement targets for Australian technology SMEs to greater than 20% of overall Government technology spending.
Government Procurement Panels
Government procurement panels should be opened permanently and/or refreshed more regularly. The Digital Marketplace Panel, administered via the Digital Transformation Agency, is a good example where companies can request evaluation for admission at any time. Unfortunately, and in contrast, the Defence Support Services (DSS) panel is a poor example where refresh has been delayed for years. This has prevented Australian technology companies from being considered. This diminishes competition, and decreases value for money, by encouraging sub-contracting where margin on margin must be applied.
Government procurement officers should be able to select from a broader range of panels. For example, limiting selection to the Defence Major Service Providers (MSP’s) and DSS panel does not achieve increased participation of sovereign technology companies. The existing barriers to entry, such as the reliance on MSPs and the DSS panel, pose significant challenges for sovereign tech SMEs. These panels, predominantly constituted of foreign entities, limit the direct involvement of sovereign providers in government contracts. With no adjustments or refreshment planned until 2025 and 2026 for the DSS and MSP panels, respectively, this extended closure inhibits the introduction of new, innovative providers into the market until at least 2026.
Government staff need to be trained on how to find, engage, and partner with smaller sovereign technology providers. This includes broader awareness of Government Procurement Panels, cultural and change management training aimed at improving trust in our technology SMEs. Broader awareness of Australian tech companies currently not providing services to Government (usually because it’s too hard) should be a focus area.
Government Procurement Policy
Government procurement policy should prioritise and value sovereign tech companies over multi-national companies, particularly when the contract requires technology services (labour) and does not require Intellectual Property (IP) offered non-Australian companies. Indigenous Procurement Policy is a good example that could be adapted to develop and prioritise sovereign capability in the Australian tech sector.
Government Policy needs to direct that Commonwealth staff have sought out sovereign technology providers first and only hire multinationals where sovereign providers were not an option. Again, Indigenous Procurement Policy is a good example that could be adapted.
A specific UBH example that has identified issues and recommendations in correlation with barriers to entry is with REDSPICE Implementation Phase 2 Request for Tender. UBH has observed instances where local tech SMEs, possessed the capabilities and met all specified requirements, yet prevalence of bias ousted trust to multinational corporations. The cliché, “No one ever got fired for buying IBM” seems to be a cultural preference in Australian Government technology procurement decisions. This preference for established international entities undermines the potential contributions of sovereign providers, hindering the development of a robust and competitive domestic technology sector. As expressed by the Department of Defence in ICT Industry Roundtables, it is within the National Interest to diversify with SMEs outside of Canberra, line of effort 3 in REDSPICE stated it has the deliberate focus on a non-Canberra workforce. This therefore puts indication outlining barriers to entry for sovereign providers.
Work packages should be tailored to avoid tender responses solely from foreign multinational companies. This includes opening submissions beyond incumbent companies, particularly projects at risk where incumbents have underperformed. Recent Defence Digital Group (DDG) approaches-to-market for the Enterprise Resources Planning (ERP) Change Management Request for Tender, provides a good exemplar.
Establishing Government contract value of procurement targets for Australian technology SMEs to greater than 20% of overall Government technology spending is highly recommended. The data from the Department of Finance iterates these challenges. 86% of Australian Government suppliers in 2022-23 were estimated to be SMEs (as shown in Figure 1 below), only 27.3% of the total contracted value was awarded to SMEs (as shown in Table 1 below).
Business Participation Summary
86% of Australian Government Suppliers in 2022-23 were estimated to be SMEs
Figure 1 - Total Business Participation Summary 22/23 (all sectors)
2022-23 Procurement Contracts: Estimated SME Participation
Total | SME | Other | |
Value $Million | 78,824.4 | 20,461.9 | 54,362.5 |
% | 100% | 27.3% | 72.7% |
Table 1 - Total SME procurement participation by $ value & %
(Australian Government Department of Finance data)
Further, data from the Department of Finance suggests the situation is even worse for the Information Technology, Broadcasting, and Telecommunications category where Australian SME participation falls from 86% to less than 50% (as shown in Figure 2 below).
Figure 2 – Information Technology, Broadcasting, and Telecommunications
category participation of 42.9% in 22/23
Contrasting the percentage of SME contracts won to the total dollar value of accrued contracts, indicates a lack of proportional trust and investment in Australian SMEs. This is potentially stifling innovation, growth and retention, and reinvestment of the finances within the Australian economy.
As shown in Figure 3 below, SME procurement contracts won 53% of total contracts awarded, whereas the total contracts value was only 27%. This signifies a large value discrepancy between SMEs and large business, limiting fair competition and showing a bias to multinationals. Although SMEs are winning a quantity of contracts, they are not obtaining a proportion dollar value commensurate with investing and developing Australian sovereign technology capability.
Figure 3 – Comparison of SME number (NO.) of contracts/value to Total
(Australian Government Department of Finance data)
UBH proposes an increase in the target contract value for SMEs. By elevating the value of contracts accessible to SMEs, we believe it will foster cultural trust, instil confidence in smaller companies, and ensure due diligence is applied for the best value for money. A competitive market with fair access to government procurement is crucial for the mutual benefit of all parties involved.
There is a need to reform the cultural bias and perceived trust in multinational corporations. This mindset perpetuates a risk-averse culture that hinders the exploration of more fitting partnerships with smaller, local entities. We encourage initiatives to reduce bias, promote effective due diligence, and nurture sovereign capabilities within the Australian technology sector.
Conclusion
Addressing these issues is crucial for fostering a more inclusive and competitive government contracting environment. By supporting sovereign technology SMEs, promoting fair access, and reducing cultural and procedural barriers, we can build a sovereign technology sector that thrives on growth, competition, and value.
UBH would be happy to engage in further Parliamentary inquiries and would welcome dialogue in person to further explore recommendations for changes to legislation, regulation, and government policy. UBH can provide additional information regarding our individual experiences that may further enhance the committee's understanding of the issues and our recommendations. I look forward to further discussions.
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