MARY-ALICE PATON Partner Network of Procurement Professionals Procuring Locally: Supplier Relationships, the Law and Tensions

Economic Development and the Role of Local Government Times are changing – SA’s economy is in transition Councils can play an important role in this transition – particularly through economic development strategies and initiatives Weatherill Government’s 10 Point Plan to strengthen SA’s economic future Financial guarantees worth $50 million to drive business growth and jobs Access to finance will drive innovation Innovation drives efficiency dividends

SA Centre for Economic Studies Report, July 2013 Providing Local Economic Stimulus and Promoting Local Economic Development: Possibilities for Councils in SA Integral to the core purpose and objective of Councils – to build and enhance community development – is the promotion of economic development Effective development of local economies supports regional and state wide growth Councils can improve local economies by implementing economic development strategies and initiatives Report concludes that not only can Councils be actively involved in economic development but it is important that they actually do so Other than resources there are little or no constraints on Councils taking whatever role they may wish to play in promoting economic development in their areas Strategies and initiatives must be applied consistently and over a sustained period to ‘overcome the inertia caused by economic and social histories’

What can we do? Uncertainty drives cost but certainty drives competition Get your governance framework right Understand your spend Understand your commercial environment Approaches to market and procurement activities when bidders know the rules of the game are the critical success factors

Obvious Challenges for SMEs Sensible starting point – buy as close to home as we can In order to do so must still achieve value for money Generally only the larger Councils have a dedicated economic development officer Obvious challenges for SMEs and the way forward The SA economy must transition The SMEs that are the engine room of our economy are struggling to come to grips with the change required to survive Diminished access to finance Sales shrinking Productivity lags Innovation constraints This translates to diminished competitiveness, challenge to stay afloat

Local Buy Open to Councils to deliberately stimulate local economy by use of local suppliers and businesses Must do so by reference to framework Adopted Policy position Evaluation criteria in procurement processes which are not exclusionary

Australian Competition and Consumer Act 2010 Council is undertaking business activities in respect of its procurement and approach to market processes Subject to the Australian Consumer Law (ACL) enacted by the Act Section 46 of the ACL provides that where a corporation (including a Council) has a substantial degree of power in a market for the supply of goods or services they can not use this power for purpose of preventing a business from entering into that market Determining the required ‘substantial degree of power in a market’ done on a case by case basis ie all Councils in South Australia approaching the market for kerbside collection compared to regional shared services collaboration

Impact of Section 46 of ACL Section 49 policy and all approaches to market must be drafted in a way which ensures that their purpose not to exclude particular supplier from consideration because they are not a local supplier Assume Council has the ‘substantial degree of power in a market’ Must comply with ACL Draft framework in a way which allows consideration of local issue but not exclusion if they are not local

Practical Considerations Policy 1. Include wording along the lines of ‘After evaluation of responses to an approach to market, where all other factors are equal, the Council may give preference to local suppliers’ 2. Takes issue further ‘The Council supports the development of the local economy and the enhancement of local supplier capability. The Council will include local industry participation tests as part of its evaluation criteria in all procurement processes’ 3. Include a weighting for this criterion Maintain maximum flexibility If application of the local business and industry criterion results in an outcome that is unreasonable, does not deliver VFM or is not advantageous to the Council matter must be referred to the elected members for further consideration

Practical Considerations (cont) Evaluation Criteria Avoid offending the ACL and principles of probity by not facilitating exclusion of bidder by reason that they are not local Evaluate on basis that criterion is desirable not mandatory ‘...one of the factors that will be considered in determining the successful bidder is whether the relevant service provider is a local supplier within the Council’s area’ Indicate to bidders that the Council intends to foster strong relationships with its local suppliers, however at the same time not guaranteeing that a local supplier will be chosen over an interstate or international supplier Consider higher scores for the following:.Employing local staff.Increased job opportunities in the local area.Encouraging local participation Critical that all bidders are aware from approach to market that such considerations will be taken into account

State Government Initiatives Office of the Industry Advocate Reducing the threshold for contracts covered by Industry Participation Policy from $10M to $4M and $1M in regional areas Requirement to seek at least one local quote on contracts of up to $220K Single prequalifying tender process will be established across all government agencies so businesses don’t have to submit multiple forms Insurance liabilities capped at 5 times the contract value on low risk government contracts up to $1M Tender Ready