VICTORIAN INDUSTRY PARTICIPATION POLICY...

VICTORIAN INDUSTRY PARTICIPATION POLICY 2013-14

REPORT PREPARED UNDER SECTION 10 OF THE VICTORIAN INDUSTRY PARTICIPATION POLICY ACT 2003

Victorian Industry Participation Policy 2013-14 Annual Report page 2

ContentsIntroduction.................................................................................................................2

Victorian Industry Participation Policy Act 2003..........................................................3

Strategic Projects declared under the Victorian Industry Participation Policy.............3

Contestability assessment..........................................................................................4

VIPP commitments from contestable new contracts in 2013-14.................................5

Table 1: VIPP commitments from contestable new contracts in 2013-14................6

VIPP outcomes for contracts completed in 2013-14...................................................7

Table 2: VIPP outcomes from contracts completed in 2013-14...............................8

Interaction Reference Numbers generated in 2013-14.............................................10

Compliance with the VIPP.........................................................................................10

Role of the Industry Capability Network (Victoria) Ltd (ICN).....................................12

Conclusion................................................................................................................13


IntroductionThe Victorian Government is committed to providing a full and fair opportunity for local businesses to compete for government contracts. The Victorian Industry Participation Policy (VIPP) is implemented by Victorian government agencies to raise awareness of local capabilities and to encourage participation by local small and medium enterprises (SMEs) in public sector purchasing. The VIPP delivers the Government’s commitment to achieving value for money and operates within a clear policy framework in order to meet Victoria’s obligations under Free Trade Agreements.

The VIPP applies to Victorian Government procurement activities of $3 million or greater in metropolitan Melbourne or for State-wide purchases, and $1 million or greater in regional Victoria. For applicable projects, Victorian public sector bodies are required to undertake a contestability assessment to determine if a VIPP Plan is needed as part of a bidders’ tender documentation. If required, VIPP Plans are considered as an evaluation criterion in the procurement process. The information contained in a VIPP Plan includes:

local content (defined in accordance with the Australia New Zealand Government Procurement Agreement to include all products and services produced by Australian and New Zealand companies)

the number of new jobs created and existing jobs retained the introduction of new technology, opportunities for skills transfer and training

for employees the number of new apprentices/trainees engaged and existing

apprentices/trainees retained.

The Industry Capability Network (Victoria) Ltd (ICN) supports the Department of State Development, Business and Innovation (DSDBI) with implementation of the VIPP and assists both Victorian public sector bodies and bidders to comply with VIPP.

DSDBI is responsible for administering VIPP and directing the ICN in its implementation.


Victorian Industry Participation Policy Act 2003The Victorian Industry Participation Policy Act 2003 (the VIPP Act) requires all Victorian public sector bodies as defined by the Financial Management Act 1994 to report on their implementation of the VIPP in two ways:

a consolidated report on VIPP implementation as part of agencies’ normal Annual Reporting arrangements

a detailed report to the responsible Minister(s) to enable the Minister(s) to report annually to Parliament on VIPP outcomes across Government.

The 2013-14 VIPP Annual Report reflects the data received from Departments and agencies across Government on procurements, projects and grants that either commenced or were completed during the financial year, as required by the Act.

Strategic Projects declared under the Victorian Industry Participation PolicyUnder the VIPP guidelines, the Victorian Government is able to declare certain large projects with a whole-of-life value of $250 million or more, or a capital cost of at least $100 million as having strategic significance to the Victorian economy. The Strategic Project declaration enables the Victorian Government to set minimum local content requirements and other conditions relating to delivery of outcomes for local industry.

During 2013-14 there were eight projects declared as strategic under the VIPP across Victoria, totalling over $11 billion. These projects are:

East West Link Eastern Section Ravenhall Prison Monash Children’s Hospital Bendigo Hospital Victorian Comprehensive Cancer Centre Regional Rail Link Melbourne Trams Procurement Melbourne Park Redevelopment Stage One.

These eight projects have committed to an average local content of more than 84 per cent, representing over $9 billion in orders expected for local industry by 2020.

The results facilitated by ICN will be recorded in future years when outcomes are reported at project completion.


Contestability assessmentOn 1 January 2013, the Victorian Government introduced a ‘contestability’ assessment to be considered in the application of the VIPP process. The contestability model enables the VIPP to be targeted to procurement where there is a genuine opportunity to support competitive local suppliers without compromising value for money.

Under the contestability model, procurement activities may be classified in one of three ways:

Nil or limited contestability procurements – procurement activities that meet or exceed the VIPP thresholds but where there are no competitive international suppliers or no competitive local suppliers. VIPP Plans are not required for nil to limited contestability procurements but there must be a commitment by the agency to fulfil the objectives of VIPP. Agencies must also record an estimated level of local content to be provided by the short listed suppliers.

Contestable procurements – procurement activities that meet or exceed the relevant VIPP thresholds and where there are both competitive local and international suppliers. The standard VIPP process applies for contestable procurements and an ICN-certified VIPP Plan will be required from shortlisted suppliers.

Strategic projects and procurements – projects that meet or exceed the special criteria for declaration by the Victorian Government as Strategic Projects. The Strategic Projects framework applies to these procurement activities.

If a procurement activity is considered contestable, ICN will provide a list of potential ‘contestable items’ to include in the request for tender. This will alert suppliers to the possibility of these goods and services being supplied by local businesses.

In 2013-14, 399 contracts underwent a contestability assessment, with an aggregate value of over $5 billion. Of these, 216 contracts, with a total value over $2.5 billion, were found to be contestable and required shortlisted bidders to prepare VIPP Plans. The remaining 183 contracts were found to have nil to limited contestability, and consequently were not required to prepare VIPP Plans. Of these contracts, 85 per cent were found to be local by nature, as the products or services being tendered were only available in the local market with low competition from international suppliers. The remaining 15 per cent were found to be international by nature, due to the products or services not being available in the local market.

The introduction of the contestability assessment process has reduced the regulatory burden on businesses by almost halving the number of contracts requiring VIPP Plans where there is no or limited contestable content. Reducing red tape for businesses aligns with the Victorian Government’s commitment to regulatory reform and to cut red tape by 25 per cent by July 2014.


VIPP commitments from contestable new contracts in 2013-14Of the 216 contracts that were assessed as contestable, requiring VIPP Plans to be prepared, 163 contracts worth a total of $1.68 billion were reported as having commenced in 2013-14. The other 53 contracts were either cancelled or not commenced in 2013-14, and 16 were contracts that were not fully compliant with the VIPP process.

The successful bidders for contracts commenced in 2013-14 have committed to using 84.1 per cent local content on average, representing $1.41 billion in orders for local industry, creating 1,282 new local jobs and retaining a further 5,103 existing jobs. The contracts are also expected to create 214 new, and retain 606 existing, apprenticeships/traineeships across Victoria. Details are below at Table 1.

The contracts covered a range of activities, including infrastructure works, purchase of medical equipment, construction of schools and supply of information technology equipment.

In 2013-14, there were 324 small to medium sized businesses reported to have prepared a VIPP plan in the course of bidding for government contracts.

The commitments to the Victorian economy in terms of skills and technology transfer outcomes were diverse, and included skills development in the areas of information and communications technology, printing technology, logistics, construction techniques, traffic management and dangerous goods management.


Table 1: VIPP commitments from contestable new contracts in 2013-14

REGION Number of Contracts Commenced

Total Contract Value (million)

New Job Creation

Retention of Existing Jobs

New Apprenticeship/ Traineeship Creation

Retention of Existing Apprenticeships/ Traineeships

Average % of Local Content Committed

Metropolitan 49 $678 551 1,665 91 341 84.0%

State-wide 5 $101 64 380 15 6 48.8%

Regional 109 $901 667 3,058 108 259 88.2%

TOTAL 163 $1,679 1,282 5,103 214 606 84.1%


VIPP outcomes for contracts completed in 2013-14During 2013-14, 128 contracts were reported as completed, valued at a total of $948 million. Most contractors reported achieving or exceeding the local content commitments made prior to the awarding of the contract. The average local content commitment made at the commencement of contracts was 90.2 per cent, and contractors reported an aggregated local content outcome of 90.8 per cent. Details are below in Table 2.

A total of 1,111 new jobs were created across Victoria as a result of these completed contracts.

The benefits to the Victorian economy in terms of retention of skills from the completed contracts included occupational health and safety training, construction techniques, first aid training, the operation of construction vehicles and machinery, and traffic management.


Table 2: VIPP outcomes from contracts completed in 2013-14

REGION Number of Contracts Completed

Value of Contracts Completed (million)

Average % of Local Content Committed

Average % of Local Content Achieved

New Jobs Created

Existing Jobs Retained

New Apprenticeships/ Traineeships Created

Existing Apprenticeships/ Traineeships Retained

Metropolitan 26 $408 90.2% 91.6% 639 1,941 79 92

State-wide 6 $55 90.9% 85.4% 23 77 0 0

Regional 96 $485 90.2% 90.7% 449 2,309 103 200

TOTAL 128 $948 90.2% 90.8% 1,111 4,327 182 292


Interaction Reference Numbers generated in 2013-14The Interaction Reference Number (IRN) process was introduced on 1 January 2013, simplifying the VIPP process for grant recipients and design contractors. It applies to grant funding and design tenders where the relevant VIPP monetary thresholds are met or exceeded. The IRN is issued by ICN and must be submitted by the grant recipient or design contractor to the agency in order to demonstrate that they have actively sought ICN’s interaction to assist in increasing opportunities for local SMEs.

There were 41 IRNs issued in 2013-14, 23 were for grants and 18 for design contracts. Of these, 63 per cent had contestable products or services that presented opportunities to utilise local content. The remaining 37 per cent were either local or international by nature and had no contestable items, or were already aware of the capability of local suppliers and had not designed local suppliers out of the projects.

Compliance with the VIPPGovernment agencies recorded a high level of compliance with the VIPP for new contracts during 2013-14. Sixteen contracts reported by agencies did not fully adhere to the VIPP process, representing 3.37 per cent of total contract value.

Some agencies were unable to report against the new reporting requirement the number of SME bidders that prepared a VIPP plan in 2013-14 due to the data not being collected/ provided. Training and database modifications will be undertaken to ensure compliance with this requirement in 2014-15 annual reporting.


Role of the Industry Capability Network (Victoria) Ltd (ICN)The ICN facilitates the VIPP on behalf of the Victorian Government, by certifying VIPP Plans prepared by short-listed bidders for all contracts to which the VIPP is applied. The ICN also provides assistance to short-listed bidders to prepare their VIPP Plans, under strict probity arrangements which have been independently tested by a probity expert.

In 2013-14, ICN secured $22 million in orders for local industry under the VIPP. ICN provides dedicated resources to support major projects under the VIPP, working closely with the bidders and successful contractors. In 2013-14, ICN provided that dedicated support to the following major projects under VIPP:

Ravenhall Prison Project East West Link (Stage One) Regional Rail Link Victorian Comprehensive Cancer Centre Rail/Road Grade Separations at Springvale and Mitcham Monash Children’s Hospital City West Police Complex Tram Procurement New Bendigo Hospital Cranbourne Pakenham Rail Corridor Project.

Over 2013-14, ICN’s VIPP team processed 829 VIPP Plan certifications and conducted contestability assessments on 399 contracts across Victorian public sector bodies, 216 of which were contestable.

ICN also assisted 716 short-listed bidders to complete VIPP Plans and to explore opportunities to replace imported goods and services with products from local suppliers during 2013-14.


ConclusionVIPP Plans were prepared for 163 contracts worth $1.68 billion, which commenced in 2013-14. These projects have committed to using 84.1 per cent of local content, representing $1.41 billion in orders for local industry.

The introduction of the contestability assessment process has reduced the regulatory burden on businesses by almost halving the number of contracts requiring VIPP Plans where there is no or limited contestable content. Additionally, the introduction of the Interaction Reference Number (IRN) process has simplified the VIPP process for 23 grant recipients, whilst still ensuring opportunities for local industry are maximised where possible. The application of the IRN process has enabled ICN to become involved in the procurement process at the design phase to ensure local content is not inadvertently designed out.

Victorian Government public sector bodies have demonstrated their commitment to delivering outcomes for local industry in 2013-14.

This report was prepared by the Trade, Manufacturing, Aviation and Employment Division within DSDBI.

DSDBI wishes to acknowledge the support and cooperation of all of the VIPP administrators and procurement officers across the Victorian Government public sector bodies, ICN and government suppliers in applying the Victorian Industry Participation Policy and providing information for this report.


This report was prepared by the Trade, Manufacturing, Aviation and Employment Division within the Department of State Development, Business and Innovation. The Department wishes to acknowledge the support and cooperation of all the Victorian Government Departments and Agencies, the Industry Capability Network and Government suppliers in providing information for this report.

© Copyright State of Victoria 2014. This publication is copyright.

No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968.

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Postal Address: PO Box 4509, Melbourne VIC 3001

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