The government should introduce procurement rules that mandate main parties involved in government tenders have a local business element in their bids, according to a report by the Innovation Review Steering Committee.
"While there is widespread acknowledgement that governments are legally prohibited from biasing procurement decisions towards local providers, a strong expectation remains that government contracts should provide a key source of revenue for innovating businesses," the report said.
The review participants had discussed a number of approaches to local businesses in government procurement including rapid prototyping, development and evaluation, which is used by the Australian Defence Force. The review participants decided that a change to government procurement practice would best foster local innovation.
"The overall aim of the amendment would be to support the conditions for innovative local enterprise to flourish at the SME [small- to medium-sized enterprise] level ... this could be achieved by requiring prime contractors (regardless of their nationality or size) to specify a 'local content inclusion' plan in their bids," the report suggested.
The content inclusion plan would explain how the prime contractor, if it was successful, would partner with local small- to medium-sized enterprise to deliver the needed service or product.
Making a condition of inclusion, but not "picking a winner", would help ease concerns about scale, according to the report.
The report was an effort by the Australian Industry Group, which represents a gamut of Australian businesses, to lay down suggestions on how Australian innovation could be fostered. It tasked the National Innovation Review Steering Committee on starting a conversation with business about innovation. This conversation involved over 400 Australian firms.
Apart from its procurement recommendations, the report also suggested that corporate venturing (where large firms invest in start-up enterprises or start joint ventures with the smaller firms in innovative projects) should be fostered by forming a "corporate venturing management team" and an associated investment fund that would ideally see strong returns on investment.
The committee recommended that interest in such an initiative be gauged, with an eye to running a pilot in 2011.
Other recommendations in the committee's report were that it should be easier to get an overview on what innovation funding the government makes available and that culture in Australia needs to be altered to kill "short-termism" and make innovation "business as usual".
Communications Minister Stephen Conroy pointed out yesterday that the report highlighted ubiquitous broadband which could bring great opportunities, as long as the government kept a lid on the costs.
"This is the latest in a range of reports which finds that ubiquitous, open-access broadband connectivity will deliver a step-change in the way business is carried out across the country," Conroy said in a statement.