Opportunity Builds Capacity

There are two major forces holding back the capacity and growth of the Indigenous business sector: a dearth of opportunity and unreasonably high expectations. When Indigenous businesses are unable to grow, they subsequently cannot deliver significant positive economic and social impact to their mob.

Supply Nation Members are part of a small club of corporations and government departments or agencies that are leading the way to invigorate the Indigenous business sector by working with Certified Suppliers, and awarding them significant and ongoing contracts. However, the trend more broadly has not been so consistently positive.

Procurement policies from both government and corporations are a shifting landscape. Although supply chains are generally becoming increasingly rationalised, ethically focused, and  globalised, this upheaval of the procurement process has created a somewhat confused and understandably cautious space.

In government, procurement policies that promote purchasing from Indigenous suppliers are gradual in their evolution and enforcement. In the corporate sphere, procurement policies are immediately affected by global economic fortunes, changing leadership, and corporate structural changes.

The ‘two steps forward, one step back’ nature of procurement today has created an environment that is heading in the right direction, but, by many accounts, isn’t reaching goals fast enough. This position has parallels to the Alaskan Inuit business journey. 15 years ago socially conscious resource companies began purchasing in earnest from Inuit owned business. This was followed by the US federal government – who began using procurement policies (similar to the Indigenous Opportunities Policy and Exemption 17) to dramatically increase spend with Inuit businesses. Today, 8 of the top 10 businesses in Alaska are native owned.

Stan Fleming, Senior Vice President of Inuit owned and multi billion dollar NANA Development Corporation, said, ‘When dealing with a cautious and often, [at] times, confused procurement environment, every contract helps, and slowly cracks open the dam.’ As more and more significant contracts are signed with Indigenous business, it is creating a crescendo of activity that will soon make procurement in Australia fundamentally changed for the better. Once this tipping point is reached, we will see the amount of contracts signed with Indigenous businesses rise exponentially.

Lack of opportunity

Although our member companies, both government and corporate, have made significant efforts to employ Certified Suppliers, there is still a notable lack of opportunity for Indigenous business. The Australian government recognises that they can do more and have flagged their intention to do so ‘We’ve got an Indigenous Opportunities Policy, but for some reason we don’t seem to monitor or enforce it,’ said The Honourable Alan Tudge, Parliamentary Secretary to the Prime Minister, in an address to Supply Nation Member CEOs and CPOs in February. ‘Out of the $39B spent in Australian Government procurement in 2013/14, only $6M of that was given to Indigenous businesses. That’s about 0.2 percent,’ he remarked.

The Australian Federal Government is working towards significantly boosting that number, with the final goal being the closing of the gap. In the meantime, it is  Supply Nation’s dedicated and ethically minded Members that are committed to supplier diversity who are chipping away at the dam. But until more companies, departments, and agencies commit to signing more multi million dollar contracts, we will not see any significant or widespread improvement in the capacity of Indigenous business.

Opportunity accelerates capacity

Corporations cannot stand back and wait until Indigenous suppliers have the capacity to compete on significant contracts. Any business, Indigenous or otherwise, will never grow and build its capacity if buyers are not willing to take a chance on their product in the first place.

When a Member ‘takes a chance’ on a Certified Supplier and signs a significant contract with them, they are essentially telling the Certified Supplier to step up to the plate. The subsequent injection of funds, and the legal obligation that comes with it, will allow that Certified Supplier to grow their business, employ more staff, and improve their own living standards. The opportunity leads to the building of capacity, which leads to economic and social outcomes for Indigenous people. ‘There’s a loop that’s created,’ said Mr. Fleming. ‘It starts with opportunity, then execution, then capacity building, then economic impact. The more aggressive the acceleration of this loop, the more impact occurs.’

Equality of standards

Another barrier to this loop being started is the tendency for some procurement professionals in particularly conservative procurement environments to hold Indigenous business to a standard of perfection that is either unattainable or unreasonable.

Generally, any contract signed by procurement will allow some wriggle room to allow for unforeseen challenges, changes, or circumstances. This protects both the supplier and the buyer. However, occasionally, this same room is not given to Indigenous suppliers. Contracts are sometimes awarded as a test and then they are assessed at the end. If the contract is not executed perfectly, then that Indigenous supplier may not get another opportunity.

This trend is the unwanted byproduct of the tension, anxiety, and scrutiny of the Indigenous business sector. A lot rides on the success of the sector, so it is somewhat understandable. However, in order for it to flourish, procurement officials must resist the temptation to micromanage the Indigenous businesses they are working with, as this can contribute to those uniquely high expectations. Overwhelmingly, Supply Nation Members understand this and have awarded ongoing contracts to Certified Suppliers. However, this is not necessarily the case outside the Supply Nation context .

A lack of opportunity and an inequality of standards are holding back growth of the Indigenous business sector. However, Supply Nation Members are working with Certified Suppliers to chip away at the dam and are getting ready for the walls to break and for growth to skyrocket. All it will take is a shift in the way procurement professionals think about Indigenous business and a tweak in procurement policies.

15/03/2015