Finance

Small businesses are winning a third of federal government contracts, but the numbers are dropping

Stephen Easton /

Michael McCormack

Small Business Minister Michael McCormack.

Small businesses won a third of all federal government contracts in 2015-16, worth a total of $5.5 billion or 10% of total procurement spending—slightly less than the previous financial year in spite of the government’s efforts to encourage smaller suppliers to submit more tenders.

Minister for Small Business Michael McCormack reported the statistics last week and said the most recent result “demonstrates the Coalition’s commitment to encouraging Australian small businesses to apply for Australian Government contracts” and added:

“Government procurement is a key focus of mine as Small Business Minister. I want to help as many Australian small businesses as I can get access to tender information to ensure small businesses are in the driver’s seat of delivering Government goods and services.”

But small enterprises—defined as those with fewer than 20 employees—actually did a little better in 2014-15 when they won 34% of all Commonwealth contracts, adding up to a total of $5.9 billion, which was again 10% of the total spend for that year.

Data provided to The Mandarin by the Department of Finance shows that small enterprises also did more business with the federal government in 2013-14 than they did in the most recent financial year. They saw 12% of the federal government’s total procurement spending—$5.7 billion—or 30% of the total number of contracts in that year.

FY Small SME Total Contracts
$ $% # #% $ $% # #% $ #
2013-14 $5.7B 12% 19,887 30% $16.8B 34% 36,847 56% $48.9B 66,047
2014-15 $5.9B 10% 23,540 34% $16.6B 28% 40,849 59% $59.4B 69,236
2015-16 $5.5B 10% 22,883 33% $13.7B 24% 42,737 61% $56.9B 70,338

The department only has the information about small enterprise participation in federal procurement for the past three years—and says it will add the past years’ data to its procurement statistics website in the next few weeks. Finance gets the data from the Australian Bureau of Statistics, which matches Australian Business Numbers on AusTender contract listings with Australian Tax Office information on the size of the companies.

Unsurprisingly, the smallest suppliers also tend to take on the smallest contracts. McCormack said those businesses with under 20 employees fulfilled more than two-thirds of the contracts worth under $5 million.

Only 1.4% of Commonwealth contracts are worth over $5 million, but they account for 77.6% of total spending and most go to larger companies for obvious reasons.

Just over 60% of deals with the federal government in 2015-16 were done by small-to-medium enterprises—those with fewer than 200 staff. They provided $13.6 billion worth of goods and services to the Commonwealth or 24% of its total spend, smashing the government’s SME target of 10%, but still a reduction from previous years.

The data shows that SME participation as a proportion of total spending has generally declined since the Coalition government came to power: it was 28% in 2014-15; 34% in 2013-14; 32% in 2012-13; and 39% in 2011-12.

The government has previously claimed success from its Indigenous Procurement Policy, which aims to encourage departments to award contracts to suppliers that are majority-owned by Indigenous Australians where possible.

This article was first published by The Mandarin.

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Stephen Easton

Stephen Easton is a journalist at The Mandarin, based in Canberra. He's previously reported for Canberra CityNews and worked on industry titles for The Intermedia Group.