ICT/Digital SME procurement commitments

1. Background

Following the ICT/Digital Sovereign Procurement Taskforce, NSW Government has committed to a range of measures to support growth of small to medium enterprises (SMEs) in the technology sector through its procurement opportunities.

This includes Aboriginal businesses, start-ups and Australian disability enterprises (ADEs).

The below measures are effective from 1 April 2021.

2. Summary of NSW Government commitments

• Permission: Up to $250,000, agencies may buy ICT direct from an SME regardless if on whole-of-government contract (exemptions apply, see section 5 purchasing permissions).
• Target: Over $3 million, ICT contracts with NSW Government must have a minimum addressable spend target of 25% to be directed to SMEs via subcontracting or supply chain spend.
• Target: 30% of NSW Government’s total addressable direct ICT spend to be with SMEs.

3. Direct spend target

3.1 Target for NSW Government (all direct spend)

NSW Government has committed a target of 30% of total addressable ICT spend to be directly spent with SMEs.

This will be captured through existing quarterly invoice data.

3.2 Addressable spend definition

For the purpose of setting a NSW Government direct spend target, addressable spend has been defined as:

a category of spend where there are sufficient opportunities for agencies to engage with SMEs

3.3 Non-addressable spend

Non-addressable spend is a category of ICT spend where there are very limited opportunities for agencies to engage SMEs. It includes:

• categories where there are limited SMEs to supply to government
• spend with other government entities
• spend subject to mandated whole-of-government panel arrangements where there are no SMEs.

3.4 NSW Government results

Please note that historical reports for ICT/Digital SME spend cannot be replicated after publication. This is because:

• The SME marker is dynamic – companies with fewer than 200 full-time equivalent (FTE) employees in 2021 that grew beyond 200 FTE employees in 2022 will no longer appear as SMEs in the reporting tool
• Machinery-of-government changes (for example, creation of a new cluster from agencies previously spread in several clusters) mean that spend can be allocated to one cluster before the change, and another after the change.

ICT SME spend for 2020–21 financial year

The NSW whole-of-government ICT/Digital SME spend in the 2020–21 financial year was 27% of addressable spend.

This figure provides a benchmark to track progress against the whole-of-government target. It isn’t broken down by cluster because the target came into effect in April 2021.

ICT SME spend for 2021–22 financial year

Data sourced from a central whole-of-government spend aggregation system, excluding around 5% of transactions impacted by poor data quality during transfer from cluster finance systems.

*Enterprise, Investment and Trade cluster was established in April 2022, following machinery-of-government changes.

** Stronger Communities SME spend result is “low confidence”, as spend has a large proportion of transactions excluded due to poor data quality.

4. Indirect addressable spend target for contracts over $3 million

4.1 Target for ICT contracts over $3 million (indirect addressable spend)

For ICT contracts over $3 million with NSW Government, a minimum target of 25% of the contracts addressable spend should be spent with SMEs, demonstrated through subcontracting or supply chain spend.

We encourage agencies to request more than the minimum 25% addressable spend target where possible.

Each agency’s chief procurement officer, or assigned delegate, may approve a contract to not apply this requirement at their own discretion, where it cannot reasonably be applied.

If there is SME spend on an exempt contract, this should be captured through existing reporting requirements under the SME and Regional Procurement Policy.

4.2 Supplier requirements for indirect addressable spend

Suppliers with NSW Government applicable ICT contracts over $3 million must:

• have a target to direct at least 25% of contracts addressable spend to SMEs through their subcontracting or supply chain spend
• report on their SME subcontracting, or supply chain spend to date, at the end of each financial year quarter.

4.3 Agency requirements for indirect addressable spend

Agencies with ICT procurements over $3 million must:

• make suppliers aware of the SME indirect addressable spend target at time of tender
• include SME indirect targets in the contract, of at least 25% of the total contract value of addressable spend
• monitor suppliers are submitting quarterly reporting against their progress to achieve their SME contract target commitments.

4.4 Calculating indirect addressable spend on contracts over $3 million

Agencies should consider appropriate exclusions from the contract value in calculating their 25% indirect addressable spend target.

Exclusions are determined by agencies and may include explanations consistent with 3.3. Non-addressable spend.

The application of any exclusion must be approved by an agency’s chief procurement officer or appropriate delegate.

4.5 Exemption to apply the indirect spend target

Each agency’s chief procurement officer, or assigned delegate, may approve a contract to not apply the SME indirect requirement at its own discretion.

Justification should be provided in the procurement strategy for when the target cannot be applied.

If there is some SME spend on an exempt contract, agencies must continue to report this through existing reporting requirements under the SME and Regional Procurement Policy.

4.6  Indirect target result

A new social procurement reporting portal has been created for use by NSW Government agencies in 2021–22 financial year.

reporting.buy.nsw tracks social procurement initiatives including Aboriginal, SME, and diversity and inclusion spend targets. The 2022–23 financial year indirect SME target result will be calculated using data collected through this portal.

5. Purchasing permissions

Up to $150,000 (excluding GST), agencies may buy directly from an regional business (regardless if on the ICT Services Scheme or a mandated ICT contract). This is permitted by the SME and Regional Procurement Policy.

Up to $250,000 (excluding GST), agencies may buy directly from an SME (regardless if on the ICT Services Scheme or a mandated ICT contract, except the Telecommunication Purchasing Arrangements). This is allowed by PBD-2023-03.

Regardless of these sourcing approaches, when buying ICT consultancy services agencies must comply with the ICT Consultancy Framework.

Agencies must use the relevant mandated contract under the ICT Purchasing Framework based on:

• the value and risk of the engagement
• the type of ICT or digital solution being purchased.

Agencies must complete a technical assessment when buying, to ensure solutions are compatible with their ICT systems and infrastructure.

6. Other information

A number of other planned initiatives are underway to help support growth of SMEs in the ICT and digital sector. These initiatives are focused around 4 areas:

• policy measures
• education activities for suppliers and NSW Government buyers
• improving access for SMEs to government procurement opportunities
• reporting requirements to track implementation impact.

For enquiries on these commitments, please email ictservices@customerservice.nsw.gov.au

Related resources

• ICT/Digital Sovereign Procurement Taskforce

Frequently asked questions