LIDP changes are good news for local businesses

Recent LIDP changes came into effect on 1 June. We summarise the main changes and outline what they mean for local businesses bidding for government contracts.

The Victorian Government has recently implemented changes to the Local Industry Development Plan (LIDP) process. These LIDP changes came into effect on 1 June and simplify the process of completing the LIDP.

We certainly welcome these LIDP changes. Anything that makes complying with government procurement policies easier has got to be good!

In this article we explain the LIDP changes and, crucially, what they will mean for businesses that need to complete an LIDP as part of tendering for government business.

VIPP, LIDP, Local Content, ANZ Value, Local Jobs First

Recap: What is an LIDP?

The Victorian Government has a strategic goal to drive opportunity for local small and medium enterprises (SMEs), create local jobs, and develop industry skills through trainees and apprentices. It implements this strategy through its procurement process under the Local Jobs First Policy.

Under the Local Jobs First Policy, completion of an LIDP is a mandatory requirement of some projects. The LIDP requires suppliers to provide information about:

  • Whether the goods and services they will supply are local (i.e. sourced within Australia and New Zealand (ANZ)) or from overseas
  • How many SMEs are in their supply chain
  • The number of jobs and apprenticeships created and retained
  • The processes they use to maximise local content and jobs

ICN Victoria assists with implementing the Local Jobs First Policy on behalf of the Victorian Government, providing assessment services and assistance to both government buyers and suppliers. (Also see our post on New digital bidder portal for LIDPS.)

And now for the three key LIDP changes.

Change 1 – New LIDP form for standard projects with low contestability

The first change, and the most significant for suppliers, is the introduction of a new and far less onerous LIDP form to be used for standard projects that are deemed to have ‘low contestability’.

‘Contestability’ refers to the degree to which there is competition between overseas and local suppliers. In this case, ‘standard projects with low contestability’ are those for which 97% of the goods and services are deemed to be available locally.

(Standard projects are those with a total value of $3-50m in metropolitan Melbourne and $1-50m in regional Victoria. Note that standard projects with a value of $20m or more also have a requirement to complete a Major Project Skills Guarantee – see our post here for more information.)

The new LIDP ‘short form’ differs from the ‘long form’ in that:

  • It has no local content table, and requires information about job creation only.
  • It uses tick boxes to replace the narrative required in the longer form.
  • It requires suppliers to indicate their commitment to a minimum 97% local content.

Importantly, if successful, suppliers will continue to have the standard reporting and monitoring obligations against this minimum 97% local content commitment, and thus must provide honest local content undertakings.

The new short form is better suited to projects procuring services, where the longer form has a leaning towards construction, works and infrastructure projects. However, it’s important to understand that the sole criteria for using the short-form LIDP is not the category of what is being procured, or even dollar value, it’s all about the level of contestability.

We understand the short-form LIDP will be included in the tender documents when the procuring agency, with the ICN, determine that the required service or products have minimal contestability.

Finally, the government has also updated the standard LIDP template for all other standard category projects, streamlining response requirements. Where written answers are required there are fewer sections and multiple questions are rationalised. The new template also makes greater use of tick boxes.

The following link takes you to the updated LIDP templates:

Change 2 – LIDP may not be required at evaluation stage

Some procurements start with an expression of interest (EOI) or some first-stage process to determine technical compliance. An EOI helps the procuring agency to understand the market and explore which suppliers can meet their technical requirements.

Under these LIDP changes, and on a case by case basis, agencies may not need to ask suppliers to provide an LIDP at the first stage of a multi-step procurement.

This new process applies where the agency must first assess bidders’ ability to meet technical capabilities and safety requirements. It is subject to the Local Jobs First Commissioner’s oversight to ensure that local businesses are not being excluded from the process.

If an agency uses this process, its market approach document (e.g. an EOI) must make it clear to respondents that the procurement is subject to Local Jobs First and submission of an LIDP will be required at a later stage in the process.

We see this as great news for suppliers who want to respond to an EOI, but may have been deterred from doing so by the need for an LIDP, before they even know if they are a realistic contender for the project.

It’s good news too for government agencies, who may get a wider range of responses to their EOI (which, after all, is its purpose).

Change 3 – Agencies can no longer exempt contracts valued at less than $100,000

Previously there were exemption clauses that permitted government agencies to exempt certain contracts of under $100,000 in value – tempting because of the previous ‘one size fits all’ nature of the process. With the recognition of ‘standard with low contestability’ projects and the new short-form LIDP for suppliers, the exemption clauses have been removed.

Our thoughts on these LIDP changes

Overall, we see these LIDP changes as extremely positive for businesses wanting to do business with government – in particular local businesses. Companies tell us that, whilst they would love to count government amongst their clients, they have been somewhat overwhelmed by the process of bidding, particularly the LIDP.

The previous ‘one size fits all’ approach for standard projects meant that the LIDP process created a great deal of overhead. This new streamlined process will save time, effort and money.

That said, we would love to see government take this reform a step further by developing templates for industry sectors.

The technology sector, for example, will continue to be constrained by the fact that the software platforms used by government tend to constitute imported content. Even if the bulk of the contract value is in local service delivery, if the imported software value exceeds 3%, the standard ‘unstreamlined’ LIDP would need to be used.

Having an LIDP template that recognises such nuances for different industries would be a huge bonus.

But, overall, these LIDP changes are clear evidence that government is listening to industry, understands the issues and wants to actively make it easier for local businesses to tender for supply. By making the process less onerous and daunting, it is a further step to encouraging businesses to bid for government work.

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