Three new SME-friendly policies in the federal government’s Digital Sourcing Framework

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The Digital Transformation Agency’s Digital Sourcing Framework for ICT Procurement has three new policies that will make it easier and fairer for SMEs to participate in government procurement.

In a bid to make it easier and fairer for small and medium enterprises (SMEs) to participate in government buying opportunities, the federal government’s Digital Transformation Agency (DTA) has established new digital sourcing policies as part of the Digital Sourcing Framework for ICT procurement.

Originally known as the ICT procurement framework, the digital sourcing framework incorporates a set of best-practice principles, policies (including three new policies that came into effect 1 July 2019), tools and guidance for government buyers of digital products and services.

Among the principles of the digital sourcing framework are a focus on encouraging competition and innovation, and enabling SMEs to compete fairly to provide components of large ICT projects.

digital sourcing framework opportunity for SMEs

The framework also drives the formation of closer relationships between government buyers and industry suppliers – a goal that the digital sector is driving across all of government.

This is all very good news for SMEs!

Tasked with assisting federal government departments and agencies to undergo digital transformation, the DTA has a central oversight of the government’s ICT agenda.

It is pleasing to see a federal agency like the DTA recognising the importance of SMEs as government suppliers, and actively responding to their needs.

Overview of the digital sourcing framework

The digital sourcing framework was established in response to the ICT Procurement Taskforce recommendation for ‘adopting a framework for ICT procurement that includes ICT procurement policy principles to guide decision-making’ (August 2017).

Significantly, three new policies came into effect on 1 July 2019. The four major policies are:

  1. Digital Sourcing Consider First policy – guides agencies through early consideration of important factors in a procurement (came into effect 1 July 2019)
  2. Digital Sourcing Panels policy – encourages competition and makes using prequalification panels easier and clearer (came into effect 1 July 2019)
  3. Digital Sourcing Fair Criteria policy – increases fairness in digital sourcing by allowing more companies to sell to government, regardless of their size or previous experience with government (came into effect 1 July 2019)
  4. ICT Contract Capped Term and Value policy – limits the length and value of government ICT contracts to encourage competition and innovation

The first two policies above (Consider First and Panels) govern processes around setting up a procurement. Once a proposed investment becomes a procurement activity, then the next two policies (Fair Criteria and ICT Contract Capped Term and Value) are considered.

We’ll now take a look at these policies in more detail…

Digital Sourcing Consider First Policy

The Digital Sourcing Consider First Policy, along with its associated assessment tool, helps federal government agencies make more considered investment decisions right from the start of a procurement process. The policy is backed by five key principles that must be considered early in a digital investment:

  1. be user-centred and prioritise usability
  2. allow room for innovation (promote innovative solutions from potential suppliers)
  3. engage early and consult widely. This consultation includes seeking advice from technology, industry and procurement experts, as well as other agencies or areas within an agency to establish if an existing solution or platform is suitable to reuse. Agencies are also required to consider how the investment fits into the existing agency and technology environment.
  4. consider the whole-of-life cost (avoid equating value for money with initial cost)
  5. align with whole-of-government requirements, including the requirement to design digital investments for all users (e.g. people with disabilities, older people, and those who struggle with technology). Tender responses must demonstrate the capability to meet this standard.

This policy must be applied to any investment in digital products and/or services with an expected or realised whole-of-life cost of $80,000 or greater (aligning with the good and services tendering threshold used by the Federal Government). However, agencies are encouraged to also apply this to procurements below $80,000.

Industry should be encouraged by the fact this policy urges government buyers to seek early engagement to gain better understanding of available products and services. This means suppliers need to be ready to make the most of opportunities by being able to communicate an understanding of government needs in tender responses and address other procurement policy requirements, such as local jobs and social procurement, etc.

Digital Sourcing Panels Policy

The Digital Sourcing Panels Policy provides the opportunity for all suppliers, both new and existing, to gain the same access to tenders and tender information.

Important aspects of the policy include:

  • panels must be easy to find and registered on the DTA website
  • panels must have consistent design and requirements
  • panels must be open at least annually for suppliers/sellers to apply to join, and
  • all certified digital panels must be available and regularly updated before undergoing an open tender process.

This is a welcome policy that is very important for suppliers. It encourages competition and makes using prequalification panels (such as the Digital Marketplace and others) easier and clearer for both buyers and sellers. Importantly, it enables new sellers to join panels more often.

Digital Sourcing Fair Criteria Policy

Through use of a Fair Criteria checklist, the Digital Sourcing Fair Criteria Policy increases fairness in digital sourcing by allowing more companies to sell to government, regardless of their size or previous experience with government.

The policy aims to give agencies access to a competitive, vibrant and diverse market of sellers, while addressing the imbalance between sellers who already have access and new players. Two additional points are that government agencies need to provide better feedback to sellers, and improved visibility of opportunities across government need to be provided for all sellers.

ICT Contract Capped Term and Value Policy

The ICT Contract Capped Term and Value Policy limits the length and financial value of government ICT contracts. For example, ICT contracts can’t be longer than three years, and whole-of-life value can’t exceed $100 million.

This is a win-win for buyer and seller, as by breaking contracts into shorter periods and reduced value, it allows SMEs to bid for smaller parts of larger projects contracts AND allows government agencies to bring in new and innovative technology and services earlier.

Mia view: Digital sector driving procurement reform

The digital sourcing framework addresses some of the key government procurement reform issues Mia has been advocating for quite some time – in particular, the need for closer relationships between government buyers and suppliers, and how to increase opportunities for SMEs to participate where there has in the past been incumbent larger suppliers.

The DTA is certainly one of the key drivers of this much-needed procurement reform across government. We heard this in November last year, when CEO Randall Brugeaud presented at an Australian Industry Information Association (AIIA) event on the DTA’s priorities and vision, manifested as a Digital Transformation Strategy.

In his opening comments, Mr Brugeaud acknowledged the need for the DTA and government agencies to build closer government and supplier relationships as part of achieving more efficient procurement. (See our November 2018 post, Priorities of the Digital Transformation Agency.)

We also spoke to Mr Brugeaud separately about the hurdle incumbent large suppliers present to SMEs seeking to become involved. He advised his intention to encourage agencies to identify ways of breaking down large projects/tenders into smaller components that could be bid for by SMEs. It is very pleasing to see this is being progressed in aspects of these new policies.

These same objectives, especially the need for government buyers to seek early engagement to gain better understanding of available products and services, were the key themes at a series of Public Sector Network conferences earlier this year. (See our May 2019 post, Digital sector driving government procurement transformation.)

Industry suppliers need to understand that government is making these changes in order to improve procurement outcomes. That is, government is responding to SME needs because it recognises the value of SMEs – the overall objective is to achieve greater value, flexibility and product/service benefits.

SMEs, therefore, need to be prepared to make the most of these opportunities. Businesses will get the best return on their engagement with government when they take the time to understand government priorities and align their service offerings to those priorities.

Any SMEs seeking government contracts should be registered with the Digital Marketplace. Since its launch in August 2016, contracts worth more than $300 million have been awarded to SMEs through the Digital Marketplace platform. (Also see our March 2018 post Digital Marketplace – Why set up your stall?)

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