Indigenous Preferential Procurement Programs Research Group

University of Melbourne

Indigenous Preferential Procurement Programs Research Group Submission to The House Standing Committee Inquiry Into Opportunities for employment and economic development for Indigenous Australians

1. Introduction The University of Melbourne Indigenous Preferential Procurement Programs Research Group (IPPPRG) welcomes this opportunity to make this submission to the House Standing Committee on Indigenous Affairs’ Inquiry into Opportunities for employment and economic development for Indigenous Australians (the Inquiry). The IPPPRG considers that the Inquiry creates a vital opportunity to identify mechanisms to improve on the capacity existing policy to make a real improvement to Indigenous Australians economic position and in achieving this goal also to improve their physical, social and cultural wellbeing. The Inquiry also creates the opportunity to identify new approaches to achieving these goals. The focus of this submission is upon the sixth of the Inquiry’s Terms of Reference: “The involvement of Government departments and agencies in facilitating business opportunities for Indigenous Australians.” However, in exploring this Term of Reference the submission will also touch upon a range of the other Terms of Reference such as employment pathways and the experience of successful Indigenous enterprises. Before commencing on the substance of the submission it is useful to briefly describe the IPPPRG. The Group is comprised of four academics based at the University of Melbourne as follows: Professor Marcia Langton AM: Associate Provost and Foundation Chair in Australian Indigenous Studies, Melbourne School of Population and Global Health, Faculty of Medicine, Dentistry and health Sciences Associate Professor Michelle Evans: Associate Professor of Leadership, Department of Management and Marketing, Faculty of Business and Economics Dr Cain Polidano: Senior Research Fellow, Melbourne Institute: Applied Economic & Social Research, Faculty of Business and Economics. Dr Matthew Storey: Honorary Senior Fellow, Melbourne Law School.

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The IPPPRG was formed to undertake a collaborative longitudinal and empirical research project that aims to evaluate the effectiveness of existing Indigenous Preferential Procurement Programs at a national, state and local government level and in the private sector in both resources-based and non-resources-based firms. The current industry collaborators in the project include: o BP o BHP o Crown Resorts o National Indigenous Australians Agency o Fortescue Metals Group o Minerals Council of Australia o Supply Nation o The Victorian State Government

Clearly then, given the focus of the IPPPRG and the Inquiry’s Terms of Reference, this submission will address primarily address itself to issues arising from the current Australian Government Indigenous Procurement Policy (IPP). However, the submission will also put views evidence and opinion in relation to two closely related issues. These are:

• the need for developing the higher education-based capabilities of Indigenous communities and individuals; and, • the critical role of data-based program evaluation of not just the IPP but Indigenous business-related programs more generally.

To commence however with the IPP.

2. Significance of and need for further research into the IPP and other Indigenous Procurement Programs

The objective behind the IPP and its component Indigenous Business Exemption (IBE) is contained in a joint statement by the Prime Minister and the Minister for Indigenous Affairs issued with the announcement of the IPP. The Prime Minister and Minister state: Getting Indigenous adults into work is a critical priority in Indigenous Affairs. With employment, people have financial independence, control over their own lives and the ability to provide for their families’ future. Indigenous businesses are key to creating jobs and employing more Indigenous Australians. Indigenous businesses are around 100 times more likely to employ an Indigenous person than other businesses. This policy is about creating opportunities for these Indigenous businesses to grow and employ more people. It is also about stimulating private investment in new Indigenous businesses.

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A strong Indigenous business sector will help drive financial independence and create wealth and opportunities for Indigenous Australians. It will also provide the basis for Indigenous economic development in regional and remote Australia. (C of A 2015, 2) The propositions put forward by the Prime Minister and the Minister are well supported by empirical data. Without fully exploring this particular issue, the key propositions can be characterised in the following four propositions. First, Indigenous Australians suffer considerably greater social disadvantage in relation to a range of attributes when compared to the broader Australian community (SCRGSP 2014; DPMC 2015). Second, the aspects of this multiple disadvantage are correlated. That is for example, an Indigenous Australian who is not in the labour force is also more likely to have lower educational standards, poorer health status and less adequate accommodation than an Indigenous Australian who is in the labour force (SCRGSP 2014). Third, an increase in the level of economic activity undertaken by Indigenous owned enterprises should lead to an increase in the number of Indigenous Australians in the labour force (Altman 2001; Furneaux & Brown 2008) and consequentially a reduction in the social disadvantage suffered by Indigenous Australians (Biddle, 2011). Finally, an increase in Commonwealth government purchasing of goods and services from Indigenous owned enterprises should lead to an increase in the level of economic activity undertaken by these firms (DPMC 2014) and thus an increase in the number of Indigenous Australian in the labour force (Altman 2001; Furneaux & Brown 2008). There are three further notable features regarding the IPP. First when Indigenous preferential procurements where first introduced into the Commonwealth Procurement Rules in 2011 as the IBE, the outcomes were negligible. It was only when the mandated procurements targets and other measures which are a feature of the IPP were introduced in 2015 that any significant beneficial results were shown. Second, the results since the introduction of the IPP have been overwhelmingly impressive. Since 2015 The IPP has (according to figures provided by the National Indigenous Australia Agency - NIAA) led to 19, 527 contracts being awarded to 1,935 Indigenous firms with an economic value of $2.7 billion1. Notably, as this was procurement expenditure that the Australian Government would have undertaken whether or not the IPP existed, the economic benefits which flow to Indigenous Australians from this expenditure has occurred at no cost to the Government. The third feature of the IPP is that it is not just about encouraging Indigenous economic activity in order to (for example) reduce unemployment or improve health outcomes. It has an additional and potentially more fundamental purpose. As the joint statement above describes it: [t]his policy is about creating opportunities for these Indigenous businesses to grow. The additional purpose of the IPP is this ambition, not just to encourage an

1 A good summary of some of the IPP outcomes and related policy issues is contained in realising the potential of the Indigenous Procurement Policy (IPP), PwC Indigenous Consulting, November 2019. Available at: https://www.pwc.com.au/indigenous-consulting/assets/realising-the-potential-ipp-nov19.pdf

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improvement in Indigenous employment outcomes, but to stimulate the development of an entrepreneurial Indigenous middle class in this country. It is important that this aspect of the IPP be borne in mind also. Research around the early stages of the IPP (Storey 2019) suggested that, along with the introduction of the mandatory targets the key factor that led to early success was the preparedness of procuring agencies to develop Indigenous suppliers through a deliberate program of repeatedly given a supplier contracts of increasing value. This allowed the supplier to develop the business which had the effect of achieving the Governments program objectives. The same research also suggested though that this approach could raise the prospect of reputational risk in the perception of procuring agencies who were concerned about the perception of favouritism. The move to incorporate both contractual number and contractual value in the calculation of targets has operated to mitigate this factor somewhat. However, the distinction between contract number targets for agencies (3%) and contract value targets (1%) still suggests a perception that the key to the IPP is a large number of small contracts. While there may be some benefit to encouraging early business development and economic participation through this approach, it operates against the ability of Indigenous firms to achieve optimal enterprise size. In addition to these key areas there are also a number of second order aspects of all Indigenous Preferential Procurements Programs including the Australian Government’s IPP that need further investigation. These include: Ø Analysis of employment outcomes on a regional basis. Even acknowledging the remote set aside aspect of the IPP, are jobs being created in remote communities? Ø Examination of the extent to which employment outcomes do correlate with a reduction in a range of other social well-being indices. Ø The effectiveness of joint ventures in developing Indigenous businesses. Ø The effect on in Indigenous employment levels of non-Indigenous JV partners of participation in a JV. Ø Indigenous business experience of the IPP and (and in comparison with) other programs. While analysis of the IPP with respect to these questions is useful, even more beneficial is the ability to undertake a comparative analysis of the effectiveness of Indigenous Preferential Procurements Programs, particularly on a longitudinal basis. There is a virtually total absence of research looking into these matters. Yet without this research policy makers are not equipped with the evidence base to implement adaptation to make a good program even better. The IPPPRG would urge the Committee to identify the need for this further research as an important aspect of the report that deals with this issue.

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3. Higher Education Building Business Capability of Indigenous Communities and Individuals How culturally appropriate educational programs and targeted research can contribute to impact for Indigenous business outcomes OVERVIEW In 2012, the MURRA Indigenous Business Masterclass Program was offered for the first time at Melbourne Business School. MURRA means “fish net” in the Woi Wurrung language of the Wurundjeri people. It symbolises the gathering of Indigenous business people in a safe environment to support each other in entrepreneurial skills development for the benefit of the community. The need for the program was identified by two academics and co-designed in partnership with Kinaway, the Victorian Aboriginal Chamber of Commerce. The shared belief was that entrepreneurialism offered Indigenous people a path to economic self-determination which would benefit both individuals and the community. Over nine intakes, 175 Indigenous business leaders have completed the program with impact at both individual and community level. Further, a portfolio of programs to meet the needs of Indigenous managers at various stages of their life journey has grown from those modest beginnings. In this submission, we detail the learnings from the program and offer recommendations for the future. PROGRAM CONTENT AND FORMAT The first of its kind, MURRA is a post-graduate level business education program designed specifically for Indigenous entrepreneurs and delivered in a culturally appropriate context. In consultation with Kinaway, the content and format reflected a mini-MBA: a. the areas which any business owner would need to grow their business: strategy, finance, marketing, negotiations, human resources and leadership; b. targeted at established business owners to address a gap in the market place. While many programs were available for new or aspiring business owners, there was nothing which looked at the specific requirements of established Indigenous entrepreneurs who were ready to scale up; c. with culturally appropriate content to reflect the priorities of Indigenous stakeholders; d. taught in a classroom format to promote the cohort effect and provide participants with the support network post-program and opportunities for joint ventures with each other; and,

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e. in three residential modules (of 4 days each) over 4 months to enable participants to return to their business and apply their learning and reconvene to share their experiences and seek expert advice from faculty. PARTICIPANTS Over nine intakes, 175 participants from across Australia completed the program, reflecting diversity in location, industry and sector and gender balance. See Attachment A (MURRA overview). Recruitment occurs mostly by word-of-mouth. Alumni actively recruit other entrepreneurs and managers to join the program once they have experienced the benefits of the program. Over 90% of our students come through referrals. In 2018, we expanded the selection criteria to include managers from Prescribed Bodies Corporate, private firms, government and the not-for-profit sector. It was clear that for Indigenous businesses to scale, joint ventures and sharing of ideas and networks across different entity types were important, and similarly, business skills were relevant to Indigenous managers operating in most sectors. PIPELINE While MURRA met a need in the market, on its own it wasn’t enough to address the demand. Over several years, a portfolio of programs was developed to address the growing interest and demand for business skills as a path to economic self-determination. See Attachment 2019 MURRA overview flyer. The Pipeline provides courses to engage Indigenous students from high school through to PhD programs, from emerging entrepreneurs to aspiring academics, from traditional classroom offerings to on-line and regional programs, from business-focused programs to community- led engagements. In short, the offerings sought to address the distinct needs of an emerging and vibrant Indigenous business sector and recognised that Indigenous people, due to family and community responsibilities, needed educational offerings that provided flexibility at all stages of their life journey. The Pipeline was possible because of the following factors: a. ownership by Indigenous stakeholders of our programs led to trust for other offerings; b. engagement of Indigenous peak bodies as sponsors and research partners; c. backing of an established academic partner (in this case, a University) providing subject matter expertise; and, d. a program of research demonstrating impact.

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IMPACT Our one-on-one interviews of participants post-program reveal that 30% of businesses go into growth within two years of MURRA, with a 25-30% increase in employment, with over 90% of positions going to Indigenous applicants. MURRA is shown to have positive impact at both firm and community levels. RESEARCH Beyond program impact, our team has sought to address the gaps in knowledge of the wider Indigenous business sector. While business is recognised as a pathway towards better education, health and employment outcomes for Indigenous people, very little data is available at the individual, firm and sectoral level on Indigenous entrepreneurship. Accessing an ecosystem of 175 Indigenous entrepreneurs and with Indigenous peak bodies as supporters, we are able to carry out research at the individual and firm levels: Individual models of leadership – with diverse businesses ranging from sole operators to multi-million-dollar turnover, our research reveals that Indigenous leaders often position themselves as the intermediary rather than the individualistic leader. In other words, Indigenous leadership revolves around community, rather than the individual and culture is foundational. Firm typology – we have identified three types of Indigenous businesses - Cultural (provides good and services in cultural products); - Broker (typically consultants who connect Indigenous stakeholders with non- Indigenous partners); and - Open market firms (compete openly and not immediately obvious that they are run by Indigenous owners, such as construction and building services firms). The figures indicate that the IPPP has been instrumental in the growth of broker and open market firms, especially those that are able to expand and grow and meet increasing demand in ways that cultural businesses or placed-based businesses can’t. Brokers have also benefitted from the IPP because corporates are increasingly seeking consultants to advise them on how they can meet the 3% employment target or engage with Indigenous communities. What is currently missing is support for cultural firms. For want of a better word, the “commodity” that they trade in is culture which not only has significance for Aboriginal and Torres Strait Islander people, it’s also important to represent culture in different spaces and organisations. We also know that as demand for tourism, agriculture and Indigenous land management techniques grow (particular in light of the impact of climate on Australia’s agriculture and tourism sectors), support for these businesses can have wider economic and social benefits for Australia as a whole.

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This research has led to us developing future research directions to explore: Firm impact - with the 3% Indigenous Preferential Procurement target, we also know that this has been a tremendous boost for the Indigenous business sector. However, what is missing is the impact on procuring firms, including employment outcomes and supplier diversity. Our partnership with a growing number of partners (BP, BHP, FMG, Vic Government, NIAA, Supply Nation, Minerals Council of Australia and Crow Resorts) have enabled us to launch research to understand the partners IPPPs at the strategic and operational levels in order to establish qualitative and quantitative studies Sectoral level research – data on Indigenous businesses across Australia exist in a fragmented form, held by numerous agencies with inconsistent categorisations making comparisons and research close to impossible. We are currently working with the ATO/ABS to develop the dataset linkages to conduct a snapshot study of the Indigenous business sector through the BLADE dataset at the ATO to establish a longitudinal baseline for the study By tackling sector and firm impact levels of research, we’re hoping to provide a rich picture of individual, firm, community, and sectoral impact. These insights will provide data to contribute to development of the next phase of the IPPP.

4. Pathways and Participation Opportunities for Indigenous Australians in Employment and Business

What does and doesn’t work? The need for causal evaluation The Closing the Gap framework was agreed by state and federal governments in 2008 to address Indigenous disadvantage, but more than ten years on, there has been little progress and a widening of the employment gap (Department of Prime Minister and Cabinet 2019). How can this be, given the myriad of programs introduced, including but not limited to, the Indigenous Advancement Strategy; The Indigenous Australians Health Program; The Community Development Program; The National Disability Strategy? The conclusion from Indigenous groups and policy makers is that the slow progress is not from a lack of effort, but from a lack of rigorous independent program evaluation. ‘Too often, evaluations of key Indigenous reforms have been of limited usefulness for Indigenous people and policymakers. The evidence about what works, including for whom, under what circumstances, at what cost, and why, remains scant’ (Empowered Communities 2015, p. 90). ‘Where evaluations have been conducted, many have lacked a suitable measure of rigour and independence’ (Department of Finance and Deregulation 2010, p. 12)

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If Australia is to make headway in closing the gap, we must develop better evidence on what does and does not work, which requires commitment to evaluate the causal impacts of programs. A challenge in estimating causal impacts of a program for participants is that we do not observe counterfactual outcomes, those that would have occurred if they didn’t participate in the program. The ‘gold standard’ for dealing with this issue is randomly allocating people to programs, but this is often ethically infeasible. A much more common approach is to compare outcomes of participants in a program against those of a comparison group. However, especially where program participation in voluntary, such a comparison means that some of the differences in outcomes are likely to be related not just to differences in the program effects, but also differences in the characteristics between participants and non- participants. While adjustments can be made to such comparisons to remove the impacts of program selection, such an approach relies heavily on having access to rich data for both participants and non-participants. Such data requires both contextual information about participants and non-participants that may affect their outcomes (such as education levels) and information about the factors that affected their relative chances of selection into the program (such as details about program eligibility criteria). Failure to make such adjustments can lead to the wrong conclusions about program effectiveness. A common misconception is that in the absence of a comparison group, that causal impacts can be estimated by comparing outcomes before and after program participation. However, using such an approach we cannot be sure that any changes may have been caused the other changes that coincided with participation, such as other policy changes or changes in the economic conditions. Access to linked federal administrative data is improving Because people regularly access government services/programs from multiple agencies, to be able to effectively evaluate the effects of one program relative to another (and their interdependencies) against legitimate comparison group, it is vital to be able to link data on government services data across departments, including for the comparison group. For example, to be able to fully understand the impact of complementary Indigenous employment services, such as Australian Employment Strategy and Vocational Training and Employment Centres, it is important to be able to link information on program registration and access (National Indigenous Australians Agency) to information on standard employment services provided (Department of Education Skills and Employment) and program outcome data such as income support receipt, education and earnings data (Department of Social Services, Department of Education Skills and Employment and Australian Taxation Office). While the Multi-Agency Data Integration Project (MADIP) is a step in this direction, at present only a very ‘homogenised’ version of the data is made available for research outside government, with more customised versions (typically required for program evaluation) only made available if the project is sponsored by government. It is our hope that the Data Availability & Transparency legislation, being prepared by the National Data Commissioner, will improve the co-ordination and availability of such data.

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Data sharing co-operation among states and federal agencies is a challenge Service and program delivery for Indigenous Australians cuts across state and federal jurisdictions, which necessitates co-operation on data sharing across state and federal agencies. As described above, there are changes underway to improve data sharing across federal agencies facilitated by the establishment of the National Data Commissioner. To date, there is no co-ordination of state and federal data sharing, which makes it very difficult to evaluate programs where there is state and federal overlap. A case in point is evaluation of Indigenous Preferential Procurement Policies (IPPP) that are being rolled-out by state and federal governments and the corporate sector. Currently we trying to estimate the impacts of these programs by measuring the growth in Indigenous businesses (and communities they serve) that can be associated with the growth in business opportunities (based on Indigenous business locations and services offered relative to the locations and service requirements of the contracts). However, to do this requires access to contract and procurement data from all state and federal agencies and the corporate sector, which is a very challenging co-ordination problem. There seems to be a pressing need for a parallel agency, like the National Data Commissioner to facilitate across state and federal data integration.

5. Conclusion and Recommendations

In an address to the Australia and New Zealand School of Government’s (ANZSOG) Reimagining Public Administration conference in February 2019, Professor Marcia Langton AM asserted that “the Indigenous Procurement Policy has shown the way in the last five years”.2 All members of the IPPRG agree with this statement. The IPP is the most significant development in advance the economic and social well-being of Indigenous Australians certainly in the last five years if not longer. This submission has attempted to demonstrate though that this significance can be greatly enhanced. It can be enhanced through research to facilitate program design, a commitment to developing Indigenous business education and a capability and by a thoroughgoing commitment to program monitoring and effectives evaluation. We urge the Committee to ensure that these objectives which are summarised in the following recommendations are identified in the final report of the Inquiry.

2 Langton, M. (2019). Self-governing not governed: empowering Indigenous people and communities, 20 February 2019, Australian & New Zealand School of Government Conference 2019: Reimagining Public Administration: First Peoples, governance and new paradigms, Melbourne. At: https://www.anzsog.edu.au/resource-library/news-media/marcia-langton-greater-power-indigenous-anzsog- conference

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RECOMMENDATIONS 1. Support for culturally appropriate education.

This includes: a. Offering a range of programs to meet the needs of the market – from early career to programs for upscaling for established businesses; b. Offering programs on country where the entrepreneurs and communities are located. This encourages the establishment of an ecosystem to provide ongoing support and build joint ventures; c. Classes taught by Indigenous entrepreneurs who have been experienced the same journey and understand the challenges whom the audience can relate to; d. Use of appropriate resources such as Indigenous case studies (the Aboriginal Carbon Foundation case study is the first Indigenous business case study created and used in a business school. In 2020, ten more case studies are being created but there is demand for more which cover the diversity of Indigenous businesses); e. Using technology to provide ongoing support and resources; and, f. Flexibility in delivery to enable participants to exercise leadership for the community.

2. Research to support the next phase of the IPPP

The IPPP has been a transformational policy in pushing the demand side for the Indigenous business sector. With five years of the policy now completed, the time is right to consider next steps. This can be done through support of research which can provide: a. data on the location/industries of businesses to assist in the creation of targeted programs into areas of demand; b. impact on procuring firms; c. programs to bring more procuring firms and suppliers together to encourage a long-term partnership; d. impact on the wider economic benefit and the value of the Indigenous business sector to the Australian economy; and, e. information on international best practice and how we can learn from the international experience.

Members of the IPPRG would be happy to provide any further information that they are able to assist the work of the Committee. Professor Marcia Langton AM Associate Professor Michelle Evans Dr Cain Polidano Dr Matthew Storey 17 March 2020

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References:

Altman, J 2001, ‘Indigenous communities and business: three perspectives, 1998-2000’, CAEPR working paper No 9/2001, Centre for Aboriginal Economic Policy Research, Australian National University, Canberra.

Biddle, N 2011, ‘Income, work and Indigenous livelihoods’, Lecture 5, Measures of Indigenous Wellbeing and Their Determinants Across the Lifecourse, CAEPR Lecture Series, Australian National University, Canberra.

Commonwealth of Australia (C of A) 2015, Commonwealth Indigenous Procurement Policy (IPP) 1 July 2015.

Department of Finance and Deregulation (2010), Strategic Review of Indigenous Expenditure, Canberra.

Department of the Prime Minister and Cabinet (DPMC) 2014, The Forrest Review – Creating Parity Commonwealth of Australia, Canberra.

Department of the Prime Minister and Cabinet (DPMC) 2015, Closing the Gap Report.

Empowered Communities (2015), Empowered Communities: Empowered Peoples — Design Report, Wunan Foundation, Sydney.

Furneaux, C & Brown, K 2008, ‘Australian Indigenous entrepreneurship: a capital-based view’, International Journal of Entrepreneurship and Innovation, Vol 9, No 2, pp 133-144.

Steering Committee for the Review of Government Service Provision (SCRGSP) 2014, Overcoming Indigenous Disadvantage: Key Indicators 2014, Productivity Commission, Canberra.

Storey, M 2019 ‘Factors Affecting the Efficacy of the Australian Indigenous Business Exemption’ (2019) 1, Journal of Public Procurement pp 68-86.

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