South Australian Industry Participation Policy
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- Margery Parsons
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1 South Australian Industry Participation Policy P 1
2 Contents Foreword P 2 01 Introduction P 3 02 South Australian Industry Participation Policy Objective P 4 03 National and International Agreements P 5 04 Definitions P 6 05 Industry Capability Network (SA) P 7 06 Policy Scope P 8 07 A Tiered Approach to Reducing Red Tape P Government Procurement: Contracts less than $10 million P Government Procurement: Contracts of $10 million and over, and less than $50 million P Government Procurement: Strategic projects & contracts of $50 million and over P Major Developments or Projects P Government Support and Indenture Agreements P South Australian Industry Participation Policy Plans and Government Procurement P IPP Plans Tendering Process P IPP Plans Tender Evaluation P Compliance After Contract Award P Measurement and Reporting P Policy Review P 16 P 1
3 Foreword South Australia is undergoing a period of unprecedented opportunity, with a record $109 billion in major projects underway and in the pipeline across our State. This has created enormous potential for our expanding mining, energy and defence sectors, as well as our world-class services and manufacturing industries. To seize the opportunities that lie before us, the government has identified seven key priority areas of action, including a focus on growing advanced manufacturing and realising the benefits of the mining boom for all South Australians. To deliver these priorities, the Government is committed to maximising the economic benefits flowing from our major projects into opportunities for local businesses. This commitment provides our local businesses the opportunity to compete on an even footing alongside established national and international supply chains. To reinforce our support for local business, the State Government is proud to announce a new Industry Participation Policy (IPP). The Policy builds on the ethos of the former policy, which is to ensure local businesses receive full, fair and reasonable opportunities to tender for major project work. However, the 2012 Industry Participation Policy goes further, broadening the range of projects and contracts covered, while lowering the commencement threshold and introducing a tiered approach to ensure compliance costs are appropriate for the size of a contract. The result of these amendments will be that significant additional tender and contract opportunities will be open for local businesses to take advantage of. Particularly, the Policy will help anchor the mining boom s economic benefits in our State and provide significant new opportunities for the State s manufacturers, including advanced manufacturers, to compete for work on our State s most significant projects. Through the introduction of the new Industry Participation Policy, the South Australian Government aims to not only assist local business but show project proponents how they can benefit from the engaging with our innovative and world-class industry. Hon Tom Koutsantonis MP Minister for Manufacturing, Innovation and Trade Minister for Mineral Resources and Energy Minister for Small Business P 2
4 01 Introduction The South Australian Government is committed to ensuring that competitive small and medium enterprises (SME s) are given full, fair and reasonable opportunity to be considered for major work being undertaken in this state by the public and private sectors. The development of a revised Industry Participation Policy addresses this commitment. In addition, the government has identified seven key priority areas to drive the ongoing growth and development of the State. This policy contributes to the achievement of these priorities, with a particular focus on: Growing advanced manufacturing Realising the benefits of the mining boom for all South Australians. The Economic Development Board (EDB), in its 2009 Economic Statement identified the importance of local businesses receiving fair opportunity to compete for government contracts, and that opportunities to develop strong efficient local supply chains, are lost often because large investors and government are reluctant to look beyond their established supplier networks. The EDB considers the South Australian IPP to be critical to the transition of the State s economy, driving local investment, developing strong value chains from the State s portfolio of major projects, supporting the development of the advanced services sector and leveraging opportunities for innovation. The directions proposed in this policy are consistent with observations on public procurement made by former Adelaide Thinker in Residence, Professor Göran Roos. During his residency Professor Roos highlighted: The increased use of public procurement as a demand side policy to build local capabilities in places such as the United States and Europe; The need to leverage opportunities arising from resource sector projects by implementing strategies to improve the capabilities of local firms and their opportunities to break into resource sector supply chains; Value for money assessments should be made on a whole of life basis, not just purchase price; and Successful small economies are characterised by government intervention to combat market failure. Industry Participation Policies are used throughout Australia and in many other countries to develop local industry. This policy supports the government s desire to provide opportunities to develop globally competitive local firms. The South Australian Government will continue to work with SME s to promote innovation, flexibility and best practice through initiatives to develop the manufacturing and services sectors and ensure that employment; training and skills development programs are aligned to industry requirements. The policy complements, and should be applied in conjunction with, other State Government policies including the Workforce Participation Policy and Sustainable Procurement Guideline. The policy will not apply retrospectively to projects already bound by the 2005 policy. P 3
5 02 South Australian Industry Participation Policy Objective The objective of the South Australian IPP is to ensure that capable South Australian small and medium enterprises are given full, fair and reasonable opportunity to tender and participate in significant public and private sector projects. Achieving this objective provides additional benefits for South Australian business and the State s economy. These benefits include: Improved industry capability and capacity; Employment creation and workforce development; Additional value adding activities, innovation and supply chain development; and Regional development. Value for money remains the prime consideration in evaluating tender bids for South Australian Government contracts. However, when assessing value for money, the broader impact of the contract to South Australia on a whole of life basis, including the benefits to local industry, should also be considered. The policy supports this outcome. This policy directly contributes to the seven key priority areas of government, with a particular focus on: Growing advanced manufacturing Realising the benefits of the mining boom for all South Australians. P 4
6 03 National and International Agreements The South Australian IPP operates within the context of relevant national and international agreements and procurement policies to which South Australia is a signatory. Consistent with these agreements, the South Australian IPP does not mandate local content levels or provide preferential treatment for local suppliers. It is a policy that focuses on creating opportunities for small and medium enterprises. As South Australia is a signatory to the Australia and New Zealand Government Procurement Agreement, it is required to adopt a broad interpretation of the term local that includes South Australia, other Australian states and New Zealand. P 5
7 04 Definitions In the term full, fair and reasonable these words have the following meanings: -Full: - local SME s have the same opportunity afforded to other global supply chain partners to participate in all aspects of a project from project design through to completion; -Fair: - local SME s are provided the same opportunity as global suppliers to compete for contracts on an equal and transparent basis, including being given adequate time in which to tender; and Reasonable: Subject to any explicit requirement of the head contract, tenders are free from technical requirements that might rule out local industry and are structured in such a way that they do not preclude local SME s from the opportunity to participate in projects and compete for contracts. When technical specifications are being prepared for contracts, care should be taken to use Australian standards, or standards regularly used in Australia, to ensure that local suppliers are not designed out of the contract. Responsible Government Agency is: For government procurement, the agency responsible for awarding the contract; For government support, the agency responsible for administering the support package; For Major Projects, the agency responsible for assessing Major Project proposals; and For Indenture Agreements, the agency responsible for negotiating the Indenture Agreement. Small and Medium Enterprises (SME s) are defined by the Australian Bureau of Statistics (ABS) as businesses employing less than 200 people, or in accordance with the ABS Estimated Value of Agricultural Operations. Value for money is defined (consistent with the State Procurement Board) as being achieved by formulating procurement decisions that achieve the best possible outcome in both financial and non-financial terms in a timely and efficient manner, commensurate with the nature of the purchase. Factors which may be considered in assessing value for money include: Fitness for purpose - Contribution to government priorities Service support and warranty - Flexibility Whole of life cost - Intangible costs and benefits Quality - Price Timeliness - Efficiency and effectiveness Metropolitan Adelaide is the State Government regions of Western Adelaide, Northern Adelaide, Eastern Adelaide and Southern Adelaide. Regional South Australia is defined as those parts of South Australia not included as Metropolitan Adelaide. P 6
8 05 Industry Capability Network (SA) The Industry Capability Network South Australia (ICN SA) is the government s key agency to optimise local industry participation. It is responsible for supporting and promoting the participation of South Australian businesses in major public and private sector projects. ICN SA is part of a national network that provides capability information on Australian manufacturing and service companies. It optimises local industry participation and import replacement by matching buyer requirements with supplier capabilities, helping to lift targeted capabilities in industry and identifying capability gaps and technology transfer opportunities. ICN SA will play a major role in implementing the South Australian IPP. This role includes: Assisting tenderers to develop South Australian IPP Plans by providing information about local supplier capability; Advising agencies of tenderers who have submitted non-compliant IPP Plans; Providing a comparative assessment of the IPP Plans for responsible government agencies to use in tender evaluation; Providing industry capability information to responsible government agencies, tenderers and contractors; Promoting awareness of the South Australian IPP to government agencies and private sector proponents; Assessing contracts valued over $10 million against the key criteria for Strategic Projects; Compiling information for agencies to use for annual reporting; and Annually reporting to Cabinet on South Australian IPP outcomes. P 7
9 06 Policy Scope The South Australian IPP applies to South Australian Government contracts with a value of $5 million or more in metropolitan Adelaide or $3 million or greater in regional South Australia, and private sector projects where significant Government support or endorsement is required. The policy applies to the following activities. South Australian Government procurement of goods and services including infrastructure and construction; Public Private Partnership projects; Federally-funded infrastructure and construction projects managed by the South Australian Government; Private sector projects receiving significant South Australian Government support, (over $2.5 million cash and in-kind) or an Indenture Agreement; and Projects seeking Major Development status under Section 46 of the Development Act P 8
10 07 A Tiered Approach to Reducing Red Tape The policy has a tiered structure to ensure that the costs of compliance are appropriate to the opportunity for local industry participation and minimise red tape requirements for business and government. The policy will be embedded into government procurement policies and procedures Government Procurement: Contracts less than $10 million Contracts below the Policy s lower threshold There are no specific requirements for contracts with a value less than $5 million in metropolitan Adelaide or less than $3 million in regional areas, however government agency procurement policies should encourage successful tenderers to identify and consider local industry wherever possible Contracts between the Policy s lower threshold and $10 million Contracts within the scope of the policy valued at, or over $5 million in metropolitan Adelaide or $3 million in regional areas but less than $10 million will require tenderers to complete a Statement of Intent. The Statement of Intent signifies the contractor: acknowledges the IPP; is committed to giving full, fair and reasonable opportunities to local suppliers; and will work with ICN SA after the contract is awarded should the contractor be unable to identify competitive local suppliers of required goods and services. No formal reporting is required for projects requiring a Statement of Intent although tenderers are encouraged to provide feedback to ICN SA on the level of local supplier participation Government Procurement: Contracts of $10 million and over, and less than $50 million Contracts within the scope of the policy with a value of $10 million and above, but less than $50 million, will require tenderers to prepare a South Australian IPP Plan that identifies how the tenderer will: Provide full, fair and reasonable opportunity to identify and consider products and capabilities provided by local SME s; and Monitor and record the outcomes of local SME involvement. P 9
11 All tenderers should contact and work with ICN SA to complete their South Australian IPP Plan. Successful tenderers are encouraged to contact and work with ICN SA post contract award. Annual reporting on local SME participation will be required throughout the duration of the contract and at its completion. Reporting requirements will be a contractual obligation for successful tenderers Government Procurement: Strategic projects & contracts of $50 million and over Projects of significance to the South Australian economy that fit one or more of the following criteria may be declared Strategic Projects by Cabinet: Provide significant opportunities for job creation; Contribute to the diversification of the South Australian economy; Significantly expand the productive capacity of South Australian industry and businesses; Provide an opportunity for developing skills that will substantially enhance the competitiveness of South Australian industry; Contribute to the long-term growth of South Australia; and Have a high degree of contestability related to their value add component. This may include any government contract, including those relating to ICT procurement. Responsible government agencies will be required to discuss contracts valued at, or over $10 million with ICN SA during the project inception stage. ICN SA will assess projects against the key criteria for Strategic Projects and where appropriate recommend that agencies seek Cabinet endorsement for the project to be declared a Strategic Project. All contracts with a value of $50 million and over will be treated in the same manner as Strategic Projects and will need to meet the same requirements. Tenderers for Strategic Projects and contracts of $50 million and over will be required to prepare a more detailed South Australian IPP Plan that includes how the tenderer will: Provide full, fair and reasonable opportunity to identify products and capabilities of local SME s; Ensure equitable access for local SME s; Monitor and record the outcomes of local SME involvement; Encourage the use of local SME s to undertake value added research, provide advanced services or perform design work; and Enhance South Australia s economic growth and industry capability. Successful tenderers are required to contact and work with ICN SA post contract award. For projects in this category, reporting requirements, including frequency, will be negotiated between the agency and successful tenderer during contract award. This will occur at least bi-annually and at the completion of the contract. Reporting obligations will be contractual requirements Major Developments or Projects In addition to public sector projects, many of the larger projects occurring in South Australia are undertaken by the private sector. For the larger and more complex of these, the South Australian Government can streamline the approval process for the project by declaring it a Major Development or Project under Section 46 of the Development Act P 10
12 Where ICN SA considers the development or project to be significant (which will be in line with the guidelines for assessing Strategic Projects), it will ask the Development Assessment Commission to include the requirement to develop a South Australian IPP Plan as part of the Environmental Impact Statement (EIS) or Public Environment Report (PER). ICN SA will, as for other projects, be available to work with project proponents to prepare the Plan and to work with the proponent during the life of the project. Whilst there will be no formal reporting requirements for Major Developments, project proponents will be encouraged to continue to work with ICN SA Government Support and Indenture Agreements Private sector projects that receive support, including in-kind support, valued at, or greater, than $2.5 million from the State Government to assist with the development of a business or construction of plant, equipment or infrastructure fall within the scope of the South Australian IPP. The total value of the project, not the value of the government contribution, shall determine whether a basic or detailed IPP Plan will be required. A basic IPP Plan will be required for projects with a value under $50 million while a detailed IPP Plan will be required for all other projects. IPP Plans will need to be completed before work relating to the grant or Indenture Agreement commences. The level of reporting requirements is to be determined by the responsible government agency, with input from ICN SA, but shall occur at the completion of the project and at least annually for projects under $50 million and at least bi-annually for projects valued at, or over, $50 million. Reporting obligations will be contractual requirements. P 11
13 08 South Australian IPP Plans and Government Procurement A central feature of the IPP is the requirement that tenderers for government contracts valued at, or over, $10 million and proponents of private sector projects within the scope of the policy prepare IPP Plans. IPP Plans have a role in tender evaluation and form the basis of reporting on policy outcomes. South Australian IPP Plans will provide a clear statement of the tenderer s commitment to the policy and identify the approach a contractor will undertake to identify opportunities to optimise the use of local industry. The level of detail required will depend on size and complexity of the contract. The table below identifies the various South Australian IPP requirements. Contract Value $5 million/$3 million and above and less than $10 million $10 million and above and less than $50 million Strategic Projects and projects over $50 million South Australia IPP Plan Requirement Completion of a Statement of Intent to work with ICN SA to ensure that local suppliers are given full, fair and reasonable access to supply to the project. Completion of a basic SA IPP Plan containing detail on the approach to be taken to give local suppliers full, fair and reasonable opportunity and the processes to be put in place to support that. Completion of a detailed SA IPP Plan containing details on the approach to be taken to give local suppliers full, fair and reasonable opportunity, the processes to be put in place to support that and identification of broader economic benefits. For Major Developments and Projects, Indenture Agreements and Government Support, the following applies: Contract Value Major Developments or Projects Government Support and Indenture Agreements South Australia IPP Plan Requirement Include a SA IPP Plan as part of the EIS or PER in response to the guidelines established by DAC. The level of detail in the IPP Plan will be determined by the project value. Requirement to prepare a SA IPP Plan. The level of detail in the IPP Plan will be determined by the overall project value, not the value of the government contribution. Guidelines and templates have been developed to assist tenderers understand the detail and information required to prepare compliant IPP Plans. P 12
14 8.1. IPP Plans Tendering Process All tenderers shall be advised of the requirements of the South Australian IPP at the initial invitation stage. The initial invitation stage applies to any approach to market including, but not limited to Request for Quotes, Request for Tenders or Request for Proposals. At that time, potential tenderers will be informed of IPP requirements including: Tenderers will be required to complete a South Australian IPP Plan. The choice of IPP Plans will be determined by the quotation price provided by the tenderer. If short listing is to occur, then the South Australia IPP Plan requirements will apply to short listed tenderers only; The South Australian IPP Plan will identify how the tenderer will provide full, fair and reasonable opportunities for local SME s to compete for State Government contracts or participate in major public and private sector projects and the approach it will adopt to monitor its commitments. For projects over $50 million additional information is required on how the tenderer will give full, fair and reasonable opportunity to local SME s and provide broader economic benefits to South Australia; ICN SA can assist tenderers to prepare South Australian IPP Plans by providing capability information on local suppliers, however ownership of the Plan and responsibility to deliver against it remains with the tenderer; IPP Plans that are judged to be non-compliant will preclude the tenderer from contract award. Compliant IPP Plans will be weighted in the tender evaluation process; and The successful tenderer s South Australian IPP Plan commitments will be included within the contract and reporting on IPP Plan outcomes will be required by the successful tenderer. Firms tendering to gain a position on a panel, will be required to sign a Statement of Intent as part of that process. Should the tenderer subsequently be awarded a contract over $10 million through the panel arrangement, the successful tenderer will be required to prepare a basic IPP Plan or detailed IPP Plan as appropriate. The commitments made by the successful tenderer in its IPP Plan will be binding on any subcontracting arrangements. Where sub-contracting occurs it is the responsibility of the successful tenderer to monitor the application of the South Australian IPP over the entire contract term. Given the broad range of procurement undertaken by the Government of South Australia, ICN SA can consider requests from Government Agencies to vary the standard requirements for IPP Plans. Requests for variation accompanied by supporting evidence need to be provided during the project inception stage and will be considered by ICN SA on a case by case basis IPP Plans Tender Evaluation For government procurement, IPP Plans and Statements of Intent will be received by the responsible government agency with the tender submission, and who will submit a version to ICN SA. Tenders under $10 million that do not contain a signed Statement of Intent will be precluded from contract award; however the Statement of Intent will play no further role in tender evaluation. Tenders valued at, or over, $10 million are required to submit an IPP Plan. ICN SA will make an initial judgement about whether the IPP Plan is compliant. Failure to submit an IPP Plan or submitting a non-compliant IPP Plan will result in the tender being excluded from tender evaluation and ICN SA will advise the agency if this is the case. The responsible government agency will forward a hard copy of IPP Plans to ICN SA who will make a comparative assessment of the Plans. While the assessment criteria will vary depending on the nature of the contract, typically it will include: P 13
15 the approach outlined to consider local SME involvement in the contract; the extent to which the Plan furthers the government s objectives as set out in the South Australian Strategic Plan; proposed processes to support the tenderers IPP Plan; and past performance of the tenderer in meeting IPP Plan commitments. ICN SA will provide a comparative report to the project proponent outlining the strengths and weaknesses associated with each IPP Plan and a ranking of the Plans. IPP Plans will be a weighted evaluation criterion in the tender evaluation process for State Government contracts. This weighting will be determined by the procuring agency but will be a minimum of 2%. ICN SA can provide assistance to the project proponent during the tender preparation stage to determine an appropriate weighting. The project proponent will determine the score for each IPP Plan taking into consideration the comparative assessment made by ICN SA. This process is designed to inform the evaluation of value for money. Consistent with the definition of value for money, responsible government agencies are required to consider whole of life costs associated with the procurement. Additional guidance on calculating whole of life costs can be obtained from the State Procurement Board s Life Cycle Costing Guideline. For Major Developments or Projects, projects receiving significant State Government support or subject to an Indenture Agreement, an IPP Plan will need to be prepared by the project proponent, submitted to the responsible government agency and evaluated by ICN SA Compliance After Contract Award Procurement of goods and services by a contractor, as required to undertake its contractual obligations for a procuring entity, remains the responsibility of the contractor. Nothing in this policy entitles the contractor to charge additional costs over and above the price agreed in the contract, depart from the performance standards applicable to the goods and services required by the contract, or depart from any other requirement or obligation set out in the contract. In the same manner, nothing in this policy requires a successful tenderer to bear a cost penalty to deal with local companies. Following the execution of a contract, any changes proposed by the successful tenderer will need to be authorised by the responsible Government agency. Ongoing monitoring of South Australian IPP Plan commitments will be undertaken by ICN SA when working with contractors, by responsible Government Agencies as part of their contract management regimes and by requiring regular reports from contractors to be submitted. ICN SA may be directed by Cabinet to audit IPP Reports. P 14
16 09 Measurement and Reporting Reporting on South Australian IPP Plan commitments will be a contractual requirement for successful tenderers, private firms subject to Indenture Agreements with the State Government or granted Major Development status under Section 46 of the Development Act 1993, Public-Private Partnerships and recipients of State Government assistance valued at $2.5 million or greater. Templates to assist businesses with their reporting requirements are included in the South Australian IPP Guidelines and will be available on the SA IPP website. Reporting requirements for IPP Plans will depend on the value of the contract and are set out in the table below. Reports will be required to demonstrate how the tenderer has performed against commitments in their IPP Plan and provide details on the value and source of major items purchased for the contract. Contract Value $5 million/$3 million and above and less than $10 million $10 million and above and less than $50 million Strategic Projects and projects over $50 million Major Developments or Projects Government Support and Indenture Agreements South Australia IPP Plan Requirement No reporting required Reporting annually and on completion of the contract. Reporting is a contractual obligation. Reporting requirements to be negotiated between the agency and successful tenderer during contract award but to occur at least bi-annually and at end of contract. Reporting is a contractual obligation. No formal reporting requirements but companies are encouraged to provide feedback to ICN South Australia Reporting shall occur at the completion of the project and at least annually for projects under $50 million and at least bi-annually for projects over $50 million. Reporting is a contractual obligation. Reports are to be provided to ICN SA on the templates provided. Reporting entities should work with ICN SA to ensure that reports are of a suitable quality. Failure of organisations to comply, in part or in whole, with the South Australian IPP and the commitments in their South Australian IPP Plans will be a factor that will be taken into account in the award of future contracts by the Government of South Australia and may be considered a breach of contractual agreements. South Australian Government agencies will be required to include a statement in their annual reports on the outcomes of IPP Plans for which they are responsible. ICN SA will report annually to Cabinet on South Australian IPP outcomes. P 15
17 10 Policy Review ICN SA shall issue Guidelines in accordance with the IPP. Implementation and compliance with the IPP is required in accordance with the Guidelines. The Department for Manufacturing, Innovation, Trade, Resources and Energy will review this policy within five years of its implementation. P 16
18 Contact SOUTH AUSTRALIAN Principal Industry Participation Advisor Industry Capability Network SA Telephone For more information visit: Published. No responsibility for any loss or damage caused by reliance on any of the information or advice provided by or on behalf of the state of South Australia, or for any loss or damage arising from acts or omissions made, is accepted by the state of South Australia, their officers, servants or agents. Produced by the South Australian Department for Manufacturing, Innovation, Trade, Resources and Energy. Content correct at time of printing. P 17
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