COMMENTARY--Can a newly formed working party help to make Australia's small-to medium-sized enterprises more competitive?

Communication is the very essence of our business; if there was no need for it, there would be no need for ICT. Yet it's so often the first casualty in the way data is defined, gathered, and managed.

For Australia's thousands of small ICT companies trying to do business with their largest potential customer, the Federal Government, the task is so daunting that few attempt it.

Others who did try retired battered and nearly broke after struggling to scale the bureaucratic obstacles in their path. They invested in crippling professional indemnity and other insurance imposts, only to have bids fail against competition from multinational players.

While the Coalition insists that it recognises the importance of small to medium enterprises (SMEs) to the Australian economy, few among our 23,000 local ICT companies could point to real evidence to support this claim. According to the latest Australian Bureau of Statistics report, 95 percent of these companies have fewer than 20 employees; most have fewer than five.

At the other end of the spectrum, significantly less than 1 percent of these businesses (187 in fact) employed more than 100 people yet they accounted for 77 percent of the total US$4.3 billion operating profit in the year to June 30, 2001.

How much of this profit came from government business, and its distribution across local industry, is surprisingly difficult to figure out given the overall lack of reporting transparency in public sector spending on ICT. It is patently obvious however, that the lion's share goes to a few big foreign-owned operators, while our smaller shops struggle to achieve sufficient critical mass to grow their business and work towards redressing Australia's deplorable $16 billion technology trade imbalance.

So lopsided is the way federal government business is divvied up that politicians have finally yielded to industry pressure. A joint working party representing local SMEs and the three government departments and agencies responsible for the bulk of outsourced government ICT business has been set up to review the whole purchasing system.

Private sector interests are represented by established SME operators nominated by the Australian Computer Society (ACS) and the Australian Information Industry Association (AIIA).

The ACS applauds this government initiative but it remains to be seen whether the recommendations made by the working party will see the light of day.

While the working party will not present its recommendations to government for another month or so, a couple of particular concerns have flavoured the discussions between business and bureaucrats.

One is a bureaucratic predilection for rolling up a number of not always logically connected tasks into a single cumbersome contract, putting them beyond the reach of many SMEs with the commitment and skills to do at least specific parts of the jobâ€"and keep the proceeds in Australia.

Until recently, government regulations ensured that SMEs should be offered a share of any contract over $5 million, but this has been recently revised upwards to $20 million. While it calls for SMEs to be given 10 percent of the contract value of hardware and 20 percent of services, prime contractors have an option for -flexibility" in how, or if, they apply the rule.

And because as subcontractors to bloated contracts they are the last to get paid even when things go as they should, the risk of not getting paid at all is significant if relations between the prime contractor and the government agency sour for even trivial reasons.

Worse, they can get dragged into litigation given bureaucratic fondness for seeking legal redress rather than trying to negotiate practical outcomes.

The other obstacle is the cost and complexity of satisfying the government's Endorsed Supplier Arrangement. While essentially a supplier credential like those in the private sector, ESA demands a welter of technical, financial, and executive data as an annual return, but meeting its professional indemnity, public liability, and product liability insurance requirements can simply force SMEs out of the game.

Even so, SMEs should still strive to apply their skills to niche business and be prepared to learn how to navigate Canberra's purchasing procedures labyrinth.

Richard Hogg is National president of the Australian Computer Society (ACS). The ACS is the recognised association for Information Technology (IT) professionals, attracting a membership (over 16,000) from all levels of the IT industry and providing a wide range of services. A member of the Australian Council of Professions, the ACS is the guardian of professional ethics and standards in the IT industry, with a commitment to the wider community to ensure the beneficial use of IT.

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