Credit: Marcus Reubenstein via Unsplash.
Agencies pitching for government work must prove they meet a strict definition of an "Australian business" under new federal procurement rules taking effect from November 17, AdNews can reveal.
The updated Commonwealth Procurement Rules require non-corporate Commonwealth entities to invite only Australian businesses to tender for direct contracts valued between $10,000 and $125,000, an increase from $80,000, the first rise in more than two decades.
The changes are designed both to prioritise smaller Australian suppliers for lower-value work and to ensure only genuinely Australian-owned businesses qualify for that work.
It also supports the government’s target for at least 25% of contracts by value to go to SMEs for projects worth up to $1 billion, and 40% for contracts up to $20 million.
For the first time, the rules set a formal definition of what constitutes an Australian business for government procurement.
To qualify, a company must be at least 50% Australian-owned, including ownership by individuals, local businesses or superannuation funds, or be principally traded on an Australian equities market.
It must also be an Australian resident for tax purposes and have its main place of business in Australia.
The definition applies to both the business itself and any parent entity in its corporate structure.
Finance minister Katy Gallagher said the reforms were designed to channel more government spending to Australian agencies and support local jobs.
"This is about making sure more of the Commonwealth's purchasing power flows directly to Australian businesses, creating local jobs and supporting our economy," Gallagher said.
While these contracts represent a small portion of total government advertising spend, the reforms tilt smaller direct-award opportunities toward independent Australian agencies and away from global holding-company subsidiaries.
For agencies tied to international parent companies, the ownership clause could prove challenging.
The rules assess the entire corporate structure, meaning a locally run agency owned by a global parent may not meet the 50 per cent Australian-ownership test.
None of the six major global holding companies, WPP (UK), Omnicom Group (USA), Publicis Groupe (France), Havas Group (France), Interpublic Group (USA) and Dentsu Group (Japan), are majority Australian-owned.
Their local subsidiaries, such as WPP AUNZ or Omnicom Media Group Australia, are wholly owned by offshore parents and would not qualify under the new definition.
The rules apply to direct procurements only, not those through existing panels such as the Management Advisory Services Panel or the Digital Transformation Agency's standing offers.
Under the new process, agencies must first seek quotes from Australian SMEs for direct procurements.
Larger businesses, including those with 200 or more employees, may only be approached if the SME process does not yield a suitable option or represent value for money.
Officials may determine that inviting only Australian businesses is not appropriate for a particular procurement, but they must document their reasoning.
The Indigenous Procurement Policy retains priority, with agencies required to satisfy its conditions before applying the Australian-business preference.
New Zealand agencies also remain eligible under the trans-Tasman Government Procurement Agreement.
A new Supplier Portal, due in October 2025, will allow suppliers to self-declare their Australian business status.
A director or authorised officer must make the declaration, which will apply to selected whole-of-government panels before extending to all AusTender suppliers.
Industry minister Ed Husic said the rules ensure "genuine Australian businesses" benefit from the government's Buy Australian Plan and Future Made in Australia agenda.
The government has also released updated guidance on considering broader economic benefits in procurement, including advice for the ICT sector, which accounts for about 15 per cent of Commonwealth spending.
The changes follow a 2023 Australian National Audit Office report recommending greater transparency, fairness and accountability in procurement handling.
They also tighten ethical and sustainability requirements, with agencies required to consider ethical conduct and broader societal impact as part of value-for-money assessments.
The previous CPRs, dated July 1, 2024, will be repealed when the new rules take effect.
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