Government Procurement should be Aussie Made

It could also be used to stamp out the dumping of cheap and substandard material – such as steel, cement, glass and aluminium – by foreign suppliers, all at the expense of Australian jobs – at a time when Australia’s sovereign capability has never been more critical.

The AWU’s submission to the Inquiry into Procurement Practices for Government-Funded Infrastructure by the House of Representatives Standing Committee on Infrastructure, Transport and Cities, points out governments at all levels are a major actor in the economy and the single largest consumer of goods and services.

Last year the Federal Government alone spent $54 billion through tenders on goods and services, with building construction, support, maintenance and repair services accounting for more than 10 per cent of this.

Dan Walton, AWU National Secretary, says government purchasing decisions play a critical role in maintaining Australia’s sovereign capability.

But for decades Australian governments of various levels have looked purely to the bottom line, and in doing so have devastated local businesses and jobs.

“The AWU has long warned about the impact of offshoring our critical sovereign capabilities in manufacturing,” Mr Walton says.

“Australia continues to fall in the rankings of our ability to develop and sell new products, based on a lack of local economic complexity. We’ve already seen what happens when we can’t make things here, and governments have a new opportunity to build our local supply chains.”

Mr Walton says the AWU’s members play a crucial role in building Australia’s infrastructure, not just on construction sites of infrastructure projects across the country as traffic controllers, tunnellers and tradespeople, but also in making the steel, aluminium, glass and heavy industrial materials like concrete and quarried stone that these projects use.

“Australia’s manufacturing industry underpin national security and is the vital cog in the broader industrial wheel, so it must be supported. Supporting the industries that make inputs to the construction industry supports thousands of jobs.”

“Contrary to the ‘penny-pinching’ approach currently taken, government procurement, particularly in steel, generates significant national economic benefits.

“Along the entire supply chain, Australian steel creates $29 billion of economic benefits and employs more than 100,000 people.”

Around $1 million in increased or retained business output in steel produces six direct and 10 indirect jobs, around $1.8 million in gross value added, and significant benefits for government balance sheets by cutting welfare expenditure and creating tax revenue.

And BIS Shrapnel estimates that for every $1 spent on buying domestic steel, $2.30 of sales is generated by domestic industries – in manufacturing, iron ore and other mining, professional services, transport and utilities. The same issues come up with procurement of other construction inputs – any costs of buying local are more than made up for by the domestic economic benefit of supporting local businesses and workers.

Existing government procurement methods also green-light the dumping of subsidised and substandard products and materials – often from China.

“We don’t even use Aussie materials on our iconic landmarks, instead going for the cheap, foreign option,” Mr Walton says.

“Last year the NSW Government undertook millions of dollars of maintenance and repairs to the Sydney Harbour Bridge, yet chose to procure $4 million of steel from northern Italy, $470,000 of concrete from Malaysia, $1.2 million of bolts and weldable bonds from the US and $380,000 in other construction material from China.

“This is a far cry from when the bridge was built – the legislation to build the bridge clearly required the tender to use as many materials made in NSW as possible.

“Regrettably, Australia’s industry policy no longer views nation-building projects as a priority for local procurement.”

The AWU submission says big changes are essential now, as many big civil infrastructure projects put on hold last year are ramping up again, and that all Australian governments should immediately set a goal of “if not, why not” when considering domestic procurement.

Governments should also consider the whole-of-life costs in purchasing materials, particularly steel, partly by mandating that steel products and services comply with relevant Australian Standards, are independently certified by the Australian Certification Authority for Reinforcing and Structural Steels, and that fabrication work be subject to certification under the relevant Construction Category through Steelwork Compliance Australia.

Procurement policies should also consider:

  • The unfair economic advantage to overseas competitors by allowing them to dump products into the Australian economy.
  • The short-term nature of current global oversupply, and the fact that once domestic industry closes it closes forever.
  • The huge economic impact of such closures versus costs to government budgets in providing access for domestic producers to public projects,
  • The hidden impact of substandard imported steel on budgets.

The submission says governments should also look to fully use exemptions in our trade obligations to support our sovereign capabilities, and that the Australian Jobs Act 2013 should be given new life, by lowering its thresholds for major projects in order to give local industry a fair chance to participate.

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