Visiting Research Fellow at the University of Adelaide’s South Australian Centre for Economic Studies, Darryl Gobbett, arrived at the figure after analysing the March draft report of SA’s Productivity Commission inquiry into state government procurement.
The report found that SA businesses believed it should be spending between 25% and 70% less time on preparing tenders for government contracts.
Gobbett said his analysis of the Commission’s report indicated that the private sector outlaid about $70 million in 2016-17, tendering for government contracts valued at $5.1 billion.
“This is likely an underestimate, depending on the size distribution of non-reported contracts and the number of bids per contracts,” he said.
“However, it would still suggest potential savings of over $20 million to the private sector per year if the possible time reductions noted by private contractors could be achieved.
“These could be early wins at little or no cost to the government at a time when the slowing national and SA economies are putting more pressure on local business.”
The state Productivity Commission was established by the Marshall Government last year, and its first brief was to examine the time and costs associated with procurement; the level of compliance by public authorities with government procurement guidelines and policies; the appropriateness of governance and reporting arrangements; the effectiveness of the Industry Participation Policy; the risk management framework used by public authorities to evaluate tenders, and interstate and overseas procurement practices.
“The Commission found a number of shortcomings – from both public and private sector perspectives – in the design, context and operation of State Government procurement processes,” Gobbett said.
“High on the list was a lack of knowledge and experience about local markets’ capability and the context of government purchases, and little understanding within the public sector of the concept of value for money.”
The Commission found that feedback from agencies and business “indicates that value for money is seen through the narrow lens of ‘lowest price’ as against broader government objectives, for example, supporting the development of competitive local businesses and environmental sustainability”.
“The Commission’s view is the State Procurement Board guideline on value for money is unsatisfactory and provides limited guidance for officers in public authorities on practical application in the procurement activities they undertake,” the draft report said.
The report is currently being considered by the State Government, with a final report due by the end of October 2019.
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