- Widespread Exemptions Undermine Economic Goals
Recent findings from the Australian National Audit Office reveal that 63% of Commonwealth contracts have been exempted from the Mandatory Minimum Requirements (MMRs) under the Indigenous Procurement Policy (IPP) since 2016. This represents more than 1,475 contracts and around $69.3 billion in government expenditure.
- What is the Indigenous Procurement Policy?
Introduced in 2015, the IPP aims to support Indigenous entrepreneurship and economic development by creating greater opportunities for Indigenous Australians to engage in the national economy.
The IPP is designed around three core pillars:
- Contract Award Targets: Commonwealth agencies are set annual targets for both the number and total value of contracts awarded to Indigenous businesses.
- Preference in Remote and Mid-Range Contracts: Indigenous businesses must be given the first opportunity to quote for contracts valued between $80,000 and $200,000, and for contracts delivered in remote areas. This requirement is referred to as the Mandatory Set-Aside.
- Mandatory Minimum Requirements in Major Projects: For large contracts valued at $7.5 million or more in specified industries, contractors are required to meet minimum Indigenous participation benchmarks. These include commitments to Indigenous employment and the use of Indigenous suppliers, known as Mandatory Minimum Requirements (MMRs).
- What are the Mandatory Minimum Requirements for Indigenous Participation?
MMRs are participation benchmarks that apply to certain Commonwealth procurement contracts. These requirements aim to increase Indigenous employment and supplier engagement in major projects.
MMRs apply to Commonwealth contracts that:
- are entirely delivered within Australia;
- have a total value of $7.5 million or more (including GST); and
- involve spending more than 50% of the contract’s value in one or more of 19 designated industry sectors.
These sectors are now diverse and wide-ranging, covering areas such as construction, healthcare, education, cleaning services, and wildlife management.
In most cases, the baseline target is 4% Indigenous participation. However, this figure may be adjusted upwards for projects delivered in remote regions, in line with the local Indigenous population.
MMRs can be structured in two ways:
- Contract-level targets: Suppliers must ensure that either 4% of the full-time equivalent (FTE) workforce on the contract are Indigenous Australians, or that 4% of the contract’s value is subcontracted to Indigenous businesses. A combination of both approaches is also acceptable.
- Organisation-level targets: Suppliers may instead commit to having at least 3% of their overall workforce made up of Indigenous employees, or direct at least 3% of their total organisational spend to Indigenous businesses.
- Failures in Accountability and Transparency
The audit revealed that many contracts were exempted from the MMRs on vague or unjustified grounds. The Audit Office noted that exemptions were ‘often for reasons that [were] unclear’ and explicitly stated that the inappropriate use of exemptions undermines the intent of the IPP.
Notably, 34% of exempted contracts, totalling $30.2 billion in Commonwealth spending, were classified under the broad category of ‘other’. The National Indigenous Australians Agency (NIAA) informed the Audit Office that this label had sometimes been applied to contracts that, in effect, did not comply with the IPP. This practice conceals the extent of non-compliance and undermines accountability. Additionally, NIAA has not issued comprehensive guidance on when exemptions should be used, nor does it verify whether exemptions are being appropriately applied. It also has not considered how frequent or improper use of exemptions might jeopardise the broader strategic goals of the IPP.
Of the contracts to which the policy did apply, only 20% underwent formal compliance review, a concerningly low figure given the importance of these contracts in advancing Indigenous participation. Among those reviewed, over a quarter were found to be non-compliant, highlighting significant gaps in enforcement and oversight. This lack of rigorous monitoring not only undermines the effectiveness of the IPP but also risks perpetuating missed opportunities for meaningful Indigenous economic empowerment.
- The Talent and Capability Are There
These requirements are not onerous. Indigenous businesses throughout Australia consistently deliver high-quality work and are actively pursuing government contracting opportunities. Similarly, there is a skilled and motivated Indigenous workforce ready and eager to contribute. Supply Nation maintains a database of verified Indigenous businesses, providing straightforward access to trusted Indigenous suppliers.
- Economic Empowerment Must Be More Than a Promise
In his August 2024 address to the Garma Festival, the Prime Minister reaffirmed his government’s commitment to the economic empowerment of Aboriginal and Torres Strait Islander communities. However, this commitment will only be realised if policies like the IPP are applied consistently and with integrity. Routine exemptions perpetuate the harmful assumption that Indigenous inclusion is secondary to other procurement priorities.
The IPP’s MMRs play a crucial role by creating genuine opportunities for Indigenous employment and subcontracting. These requirements are a practical means to drive economic participation and community strength.
At Marrawah Law and Advisory, an Indigenous-owned law firm, we see the value of Indigenous economic participation every day. The IPP is not symbolic. It is a practical mechanism for driving opportunity, advancing self-determination and building strength in communities.
Exemptions should be rare and clearly justified. The Commonwealth must lift its standard of accountability and treat the IPP as a core part of its procurement framework. Indigenous businesses and workers are ready to deliver. It is time for government to demonstrate the same readiness and resolve.
For further details on the audit, see:
Targets for Minimum Indigenous Employment or Supply Use in Major Australian Government Procurements — Follow-up
Published by the Australian National Audit Office on Tuesday 3 June 2025.