Australian Industry Participation Working Group
Report to the Australian Government on implementation of
measures to extend Australian Industry Participation
AIP Working Group Report February 2012
Contents
2. Publishing Australian Industry Participation Plans and outcomes 3
3. Enhanced Project By-law Scheme 8
4. Major Commonwealth Grants 12
5. Australian Industry Participation Plans for Commonwealth Funded major projects 15
6. Australian Industry Participation Plans for large Commonwealth Procurements 18
7. Reporting on Australian Industry Participation 19
AIP Working Group Report February 2012
Executive Summary
On 6 October 2011, the Prime Minister, the Hon Julia Gillard MP, announced changes to Australian Industry Participation (AIP). The Australian Government announced that it will extend AIP Plan requirements to large government grants over $20 million, further tighten the administration of the Enhanced Project By-law Scheme (EPBS), and require publication of AIP Plans and outcomes. The Government also announced that it would be consulting with interested parties through a Working Group whose membership would include industry representatives, unions and Commonwealth agencies as well as state and territory government representatives.
The Working Group was tasked with advising the Australian Government on the implementation of the following measures:
a requiring publication of AIP Plans and outcomes;
b requiring more comprehensive evidence of opportunities being made available to Australian industry through all stages of the EPBS;
c requiring project proponents to list details of opportunities for Australian industry to participate in major projects on a public website for large EPBS projects (greater than $2 billion);
d requiring project proponents to report more regularly on AIP Plans and their outcomes, for large EPBS projects (greater than $2 billion);
e amending the EPBS guidelines to require approval of eligible goods as an additional step for large projects (greater than $2 billion),
f extending AIP Plans to projects which receive Commonwealth grants over $20 million;
g extending AIP Plans to large infrastructure projects where funding over $20 million is provided by the Commonwealth through the states and territories, and where a local implementation plan is absent.
In undertaking this task, the Working Group consulted through their networks and also took into consideration a range of views received in response to the public Consultation Paper. The public Consultation Paper was released on 22 November 2011, and invited stakeholders to comment on the implementation of the new measures. Twenty-three submissions from industry groups, unions, Chambers of Commerce and companies were received (Appendix A provides a list of stakeholder submissions). The majority of the submissions supported the announced changes.
The Working Group has made the following recommendations on implementing the announced Australian Industry Participation changes:
Publishing AIP Plans and outcomes
Recommendation 1
Companies should provide a breakdown of the key goods and services to be procured for the project, and the estimated percentage of Australian industry value added as a measure of Australian content. The Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE) should produce a template, along the lines of the template in the Australian Petroleum Production and Exploration Association (APPEA) submission, as a basis for this reporting. For public reporting purposes, only an aggregate percentage of Australian industry value added should be published for each company or project.
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Recommendation 2
Where companies can identify specific items that will be procured for the project these should be published. Companies should provide an estimate of Australian versus overseas content to DIISRTE, but this should not be published where it is commercial-in-confidence.
Recommendation 3
An executive summary of AIP Plans should be provided by companies in a standardised form for publication by DIISRTE. DIISRTE will work with the companies to ensure the executive summary is an accurate reflection of the AIP Plan. The summary of the AIP Plan for publication would need to exclude any commercially confidential information.
Recommendation 4
The executive summary of AIP Plans should include a summary of actions under each of the AIP Plan criteria, specifically incorporating:
· a description of the project;
· how the company or project will actively seek and utilise information on Australian industry capability and communicate opportunities to potential suppliers;
· details of expected areas of opportunities for Australian suppliers, including how the company/project will provide opportunities to Australian industry through all stages of a project and through all tiers of supply;
· an explanation of the process and criteria to assess potential suppliers (including any prequalification processes); and
· how the company will work with suppliers (and government programs where applicable) to encourage capability development and integration into global supply chains.
Recommendation 5
The executive summary of AIP Plans should be published in a central location maintained by the government, preferably at www.aip.gov.au. Executive summaries should be allowed to be updated or modified by companies in consultation with DIISRTE.
Enhanced Project By-law Scheme
Recommendation 6
For major projects accessing the EPBS, evidence should be provided to demonstrate how AIP Plan commitments will cascade to tier 1 or Engineering, Procurement and Construction Management (EPCM) companies. Attention should also be focused on how projects translate the AIP Plan into the overall procurement strategy.
Recommendation 7
Projects over $2 billion should incorporate information on prequalification requirements when publicly listing opportunities, rather than only listing tender information.
Recommendation 8
It is suggested that projects over $2 billion report to DIISRTE regularly (every 6 months) on:
· Activities taken for local industry engagement (i.e. steps taken to implement the AIP Plan).
· Contracts awarded in the last reporting period including information as to why Australian based bids were unsuccessful.
· Information on Australian industry capability gaps.
· A summary of forthcoming major contracts.
Recommendation 9
The Australian Government should seek to align with existing state and territory government processes wherever possible, including giving consideration to joint approvals where appropriate.
Recommendation 10
A Functional Unit guide for the EPBS should be finalised as soon as possible, as it is seen as an important step in providing greater transparency and certainty for applicants on functional units and other eligible goods for EPBS. Consideration should be given by DIISRTE in renaming functional units to avoid confusion with the Australian Customs and Border Protection Service (Customs) definition.
Major Commonwealth grants
Recommendation 11
Grant recipients should be required to submit a DIISRTE approved AIP Plan either prior to signing the funding agreement (as a condition of offer of the grant) or at the latest within 30 days of signing a funding agreement.
Recommendation 12
DIISRTE should conduct in-depth analysis of several AIP Plans per year, to verify opportunities provided to Australian suppliers and reporting of AIP Plan outcomes.
Recommendation 13
DIISRTE should review the resources required to effectively administer AIP Plans for Commonwealth grants after 12 months. In particular, DIISRTE should examine whether there may be better value in adopting a more targeted approach in future.
AIP Plans for Commonwealth funded major projects
Recommendation 14
State Local Industry Participation (LIP) policies, where they exist, should be applied to Commonwealth funded major projects managed by state or territory governments. This should make use of existing state and territory institutional arrangements.
Recommendation 15
Where a state or territory LIP policy does not exist or is not applied to a project, a Commonwealth AIP Plan will be applied.
Recommendation 16
Effective implementation of the measures to require Industry Participation Plans for Commonwealth funded major projects will require close cooperation with states and territories. The renegotiation of the AIP National Framework Agreement may be the appropriate forum for this discussion.
AIP Plans for large Commonwealth procurements
Recommendation 17
The Australian Government should give consideration to the Department of Defence non‑military purchases being covered by either the AIP policy or the Australian Industry Capability program.
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Reporting on Australian Industry Participation
Recommendation 18
An AIP Report Card should be published annually by the Industry Minister to summarise AIP developments and achievements across various AIP programs, and to better inform public debate.
Other issues
Recommendation 19
The AIP National Framework should be updated by Commonwealth, state and territory governments by the end of 2012 and reviewed every five years.
Recommendation 20
The Australian Government should give consideration to the requirement for AIP Plans for government procurement to include other forms of financial assistance such as loans by the Clean Energy Finance Corporation.
Recommendation 21
The Australian Government should consider re-establishing the Working Group within 12 months to review and report on progress on the implementation of the measures adopted by the Government.
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1. I ntroduction
1.1 Australian Industry Participation
Australian companies have demonstrated that they can successfully compete against global companies to win work supplying major projects. However, Australian firms still face challenges in gaining access to global supply chains and major investment projects. For example, the trend towards greater use of global Engineering, Procurement and Construction Management companies (EPCMs) and established global supply chains by investors can create significant impediments to Australian industry participation in major projects if Australian companies are not known to overseas based EPCMs or not part of established global supply chains.
The AIP National Framework was signed by Commonwealth, state and territory governments in 2001 to encourage a national approach to maximising opportunities for Australian industry to participate in major investment projects. The purpose of the AIP National Framework is two fold: firstly to provide Australian industry with full, fair and reasonable opportunity to participate in major projects in both the public and private sectors, in Australia and overseas; and secondly to promote, develop and maintain a sustainable competitive Australian industry capability by encouraging competitive Australian industry participation in investment projects. Consistent with the AIP National Framework, each jurisdiction has its own industry participation policies.
While this report is focussed on implementation of measures to extend opportunities for Australian industry through the application of AIP Plans, it is important to note that through the broader Buy Australian at Home and Abroad initiative the Australian Government is also working with industry to build capabilities and increase competitiveness.
The Buy Australian at Home and Abroad initiative includes funding for the Supplier Access to Major Projects (SAMP) program, Industry Capability Network (ICN) and the Australian Government’s Australian Industry Participation initiatives which are designed to maximise Australian industry participation in major projects. The Supplier Advocates initiative, Resources Sector Supplier Envoy and resources sector Supplier Advocates fit within the Buy Australian initiative but have a focus on both enhancing capability and opportunities. Finally, the Buy Australian initiative’s efforts in building capability are complemented by the work of Enterprise Connect and the Government’s innovation system, for example through programs delivered by AusIndustry such as the R&D Tax Credit. Similarly, the work of Austrade also plays a key role in assisting Australian firms’ access opportunities overseas.
Many of the public submissions received made suggestions on how to improve competitiveness of Australian companies which are outside the Terms of Reference for this Working Group. These issues have been referred to the Prime Minister’s Taskforce on Manufacturing.
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Diagram 1: Australian Government programs which enhance access to opportunities
and build capability
1.2 Measures to extend Australian Industry Participation
On 6 October 2011, the Prime Minister, the Hon Julia Gillard MP, announced changes to Australian Industry Participation. The Australian Government will extend AIP Plan requirements to large government grants over $20 million, further tighten the administration of the EPBS, and require publication of AIP Plans and outcomes.
On 22 November 2011, the government released a Consultation Paper and appointed the Working Group to advise the Australian Government on the implementation of the new measures.
Membership of the Working Group is as follows:
· Mr Mike Lawson (Chair), Head of Manufacturing Division, Department of Industry, Innovation, Science, Research and Tertiary Education
· Mr Innes Willox, Director International and Government Relations, Australian Industry Group
· Mr Nixon Apple, Industry and Economics Advisor, Australian Manufacturing Workers Union, nominated by the Australian Council of Trade Unions
· Mr Murray Motroni, Customs and International Trade Adviser, Woodside Petroleum Limited, nominated by the Australian Petroleum Production and Exploration Association
· Mr Stephen Grocott, General Manager, Industry Participation Branch, Western Australian Department of Commerce
· A senior representative from the Department of Foreign Affairs and Trade
Submissions to the Consultation Paper were made available to the Working Group, which took stakeholder input into account in drafting this report.
The Submissions are available at www.aip.gov.au.
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2. Publishing Australian Industry Participation Plans and outcomes
2.1 Background
This measure aims to increase the transparency of AIP arrangements for projects supported by Commonwealth grants, payments to states and territories, the EPBS and Commonwealth Government procurements by requiring the publication of related AIP Plans and outcomes.
2.2 Content of an Australian Industry Participation Plan
This section describes the current requirements for an AIP Plan to assist the reader understand the context in which specific recommendations are made.
AIP Plans encourage greater access for Australian businesses to supply goods and services to major projects. AIP Plans require companies to outline how they will provide full, fair and reasonable opportunity to Australian industry. Currently, AIP Plan criteria include:
1. Communication Strategy
The core requirement of an AIP Plan is demonstrating how full, fair and reasonable opportunity will be provided for capable Australian industry, especially small and medium sized enterprises (SMEs), to supply goods and services (Australian and New Zealand SMEs for government procurement requirements). A communication strategy is fundamental in demonstrating how opportunities will be conveyed to Australian industry, along with the length of notice given to participate in projects (i.e. when the communication strategy is implemented). Both considerations are deemed equally important and are given significant consideration when assessing an AIP Plan.
These criteria will not be deemed to be ‘met’ if a company states that they will only rely on pre-existing, closed supply chains and sub-contractors and will not communicate opportunities for Australian industry. A key consideration in providing full, fair and reasonable opportunity is the degree of notice given of opportunities to participate. Therefore, a company’s communication strategy is encouraged to be implemented as early as possible. This aims to maximise the length of notice given to Australian industry and hence increase the opportunities available.