As one of the largest buyers of goods and services in Australia, a supply contract with the Commonwealth Government can be an important part of the commercial success of many private sector companies.
During a recent lunch, we spoke to The Hon. Richard Marles MP, Shadow Minister for Defence, on the topic of procurement in government and identified some key considerations for government that businesses operating in this space should take note of.
Strategic decision to meet a fundamental need
Mr Marles explained the importance of government having a clear strategy to underpin the procurement process. For example, if Defence's procurement strategy is designed to help build a domestic defence industry, we need to understand why this will benefit Australia and what will it achieve. The countries that are leaders in the global defence industry have developed their procurement strategy around meeting a fundamental need.
Sweden, for example, had a strategic plan for its defence industries in the lead up to the Second World War based on a set of national security considerations related to both their proximity to Russia and a desire to remain neutral. This position, and the establishment of SAAB to build the Swedish air force, received total commitment from the public and the private sector.
Similarly, both Israel and Singapore are known leaders in the defence industry and procurement, borne from a clear strategic direction driven by their shared status of being a small country surrounded by bigger powers. Defence investment was a large part of safeguarding their national security and shaking off any perceived vulnerability.
By understanding the government's strategy, businesses can ensure that their products and services have a clear fit with the government's strategic objectives.
Making the procurement process work
Mr Marles highlighted that choosing the right procurement model is also important to government. It plays a role in ensuring that there is the right level of competition in the process; in ensuring the procurement solution is sustainable throughout the life of the contract; and in making sure that appropriate amounts of risk are shared between the public and private sector.
In the age of the global supply chain, is the concept of building a domestic defence industry to grow sovereign capability still the best approach? Defence should be looking to procure the best available products and services to keep us and our armed forces safe and able to do their jobs. What if this means purchasing from overseas? If an Australian product is not the best, then it needs to become the best.
Mr Marles also touched on the government's considerations for delivering the best value for money, explaining that there is a delicate balance between using a bulk or single source purchasing approach to procurement which can draw on economies of scale to control costs, and reducing barriers to entry for small-medium enterprises.
Looking to the future of procurement
Mr Marles highlighted that research and innovation in technology, and the need to future-proof capability and technology, was a consideration for the government.
In the case of Defence, the digital revolution has influenced both warfare and security, with cyber security high on the agenda. The need to keep pace with advancements is critical for both communication and connectivity.
Understanding the bigger picture
How does all this translate to the success for the private sector who want to work with government? Initiating strategic conversations with the government during the procurement process to really understand the bigger picture is crucial. This is the key to ensuring that the products and services offered are in line with government's procurement strategy and deliver the best value for money.
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