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The latest audits confirm that the government’s Indigenous procurements and jobs programs are not meeting core commitments of its economic empowerment plan. By Ben Abbatangelo.

First Nations businesses miss out due to ‘black cladding’

Senator Lidia Thorpe.

Credit: AAP Image / James Ross

Depending on who you talk to, the federal government’s “economic empowerment” agenda for Indigenous affairs is described as a “pivot”, a “total capitulation”, a “betrayal” or “business as usual”. For Labor, it’s the preferred path forward since the Voice referendum, bringing the party back into ideological alignment with the Coalition on Indigenous policymaking.

The two major policies underpinning this “economic empowerment” agenda are the Indigenous Procurement Policy (IPP) and the recently reformed Remote Jobs and Economic Development (RJED) program, formerly known as the Community Development Program, a punitive regime of mutual obligations and work for the dole that was rolled out concurrently with robodebt.

The integrity and efficacy of these programs – and by extension, Labor’s post-referendum agenda – have been the subject of successive audits led by the Australian National Audit Office (ANAO).

First was the auditor-general’s report into the Remote Jobs and Economic Development program, handed down last year. Critically, it found that the program was not clearly informed by evidence; that the government’s $707 million investment was made before a program logic or evaluation framework was in place; that the National Indigenous Australians Agency (NIAA) process to develop advice for the new program was not consistent with the Australian government’s expectations for best practice policy advice; and that the data collection, performance measurement and evaluation approach did not produce a clear understanding of what contributed best to “creating real jobs”.

The ANAO’s second and most recent audit was on the Indigenous Procurement Policy, a decades-old program designed to stimulate economic participation and the Indigenous economy. Remarkably the audit office found that between July 2016 and September 2024, 63 per cent of all contracts, valued at $69.3 billion, were exempted from the mandatory reporting requirements (MRRs) by the NIAA. For context, researchers at Melbourne University’s Dilin Duwa Centre estimate the entire Indigenous economy amounts to about $16.1 billion a year.

“It’s Indigenous Procurement Policy minus the Indigenous procurement,” says Senator Lidia Thorpe, a Gunnai, Gunditjmara and Djab Wurrung woman.

The MMRs are one of three core elements of the IPP. They set a target for Australian government contracts above $7.5 million that at least 3 per cent of the workforce be Indigenous and 3 per cent of components be procured from Indigenous-owned businesses.

The auditors found that the proportion of contracts exempted from the MMRs was increasing. While some exemptions were legitimate, 34 per cent of contracts – valued at $30.2 billion – were exempted under the category “other”.

The report says the NIAA does not provide complete guidance on the use of exemptions, or assurance over the legitimacy of the exemptions. It also said the NIAA had not considered the strategic implications of issuing such widescale exemptions.

“Our businesses and people have missed out on almost 1500 contracts worth $69.3 billion, and once again others are cashing in on Blak money,” Thorpe says.

“Meanwhile, the government gets to pretend that it supports Blak businesses and employment for our people, while deliberately creating loopholes to ensure a lot of that money doesn’t reach us.”

The ANAO recommended the NIAA “implement a risk-based assurance process to ensure that reported exemptions or exclusions are legitimate”. The agency rejected the recommendation, however, saying “the NIAA does not believe it is appropriate for it to be assuring the implementation of elements of the devolved Commonwealth procurement framework by Commonwealth entities”.

It continued: “The National Indigenous Australians Agency maintains that it is the responsibility of each Commonwealth entity to ensure it meets its own obligations under Government legislation and guidance, including the Commonwealth procurement framework.”

In response to questions from The Saturday Paper, an NIAA spokesperson said that “as the recommendations are implemented over the coming months, alongside the recently announced changes to the IPP, the NIAA will look to further strengthen its administration of the Indigenous Procurement Policy by updating existing guidance, conducting additional training, exploring ICT enhancements, and developing stronger processes for Government agencies and Indigenous businesses looking to tender for procurement contracts. These improvements will drive better outcomes for First Nations businesses.”

In the ANAO’s first audit of the IPP, handed down in 2020, it was recommended that the NIAA implement an evaluation strategy for the mandatory minimum requirements that outlines an approach to measuring the impact of the policy on Aboriginal and Torres Strait Islander employment and business outcomes. Although an evaluation strategy for the MMRs was finalised, it was not implemented. The NIAA told the ANAO it was “set aside” due to reforms of the IPP.

Another major problem that resurfaced in the audit is the scourge of “black cladding”.

“Let’s be clear, black cladding occurs when non-Indigenous firms engage non-contributing Indigenous partners to front a commercial entity with the aim of winning contracts paid by the taxpayer that they would not necessarily win through a merit-based process,” says Michael Dillon, a former Commonwealth public servant and visiting fellow at the Australian National University.

“It’s dishonest conduct designed to gain access to taxpayer funded contracts.”

Although black cladding is perceived to be ubiquitous, there is no quantitative data available to determine its extent. It is both everywhere and nowhere, aided by insufficient definitions of what constitutes an Indigenous business, minimal evaluation and poor oversight and limited consequences for businesses that engage in the practice.

A 2024 freedom of information request provides a rare glimpse into the lack of oversight the NIAA has over the Indigenous business sector, with documents showing the ownership structure for 64 per cent of businesses identifying as Indigenous-owned is “unknown”.

Dr Christian Eva, a research fellow at the Centre for Social Policy Research at the ANU, has been analysing the available data and distribution of contracts across the Indigenous business sector between 2015 and 2023, using contract data provided under freedom of information law.

He says only a quarter of total contract flows can be attributed to businesses with greater than 51 per cent Indigenous ownership.

More than half of the contracts valued above $10,000 have been awarded to just 11 businesses, with contract flows concentrated to major cities, primarily Canberra.

“I think when people are imagining the IPP, they’re not imagining this level of concentration,” Eva says.

“So when the NIAA says, you know, we’ve awarded over 3900 Indigenous businesses with procurement contracts, it’s pretty rich.”

Eva, along with many others, believes in the merits and potential of a strong Indigenous Procurement Policy, but concedes that the concentration of contracts being distributed doesn’t help with the criticism of the IPP as a version of “trickle-down Black economics”.

Similar to the shortfalls found in the Remote Jobs and Economic Development audit, the NIAA did not meet its requirements to review the effectiveness of the IPP or conduct any substantive performance monitoring.

Despite this, Minister for Indigenous Australians Malarndirri McCarthy hailed the Indigenous Procurement Policy a “success” in a February media release, announcing that the Commonwealth’s Indigenous procurement targets will lift from 2.5 per cent of total value of contracts to 3 per cent from next week.

To address black cladding, McCarthy also announced that the eligibility criteria for the IPP will be strengthened. Under the new criteria, which will be effective from July next year, Indigenous businesses must be 51 per cent or more First Nations-owned and controlled to access Commonwealth procurement contracts.

Minister McCarthy didn’t respond directly to detailed questions from The Saturday Paper.

A spokesperson instead said: “the Indigenous Procurement Policy (IPP) is an important part of First Nations economic empowerment, awarding over 80,000 contracts since 2015, with a total value of over $11.4 billion (up from the $10 billion announced in October).

“This year, the Albanese Government announced reforms to the IPP to strengthen its eligibility criteria, increase its ambition and drive better outcomes for First Nations businesses. These reforms ensure that businesses can’t claim to be First Nations-owned for the purpose of the IPP unless they are majority First Nations-owned and controlled.

“In February, we also announced that the National Indigenous Australians Agency will work with other regulators to tackle ‘black cladding’ – building options to target and report unacceptable practices, and to better support genuine First Nations businesses operating in the sector.

“In implementing recommendations from the recent ANAO report and in conjunction with announced IPP reforms, the NIAA is working to develop stronger processes for Government agencies and Indigenous businesses looking to tender for procurement contracts.”

Asked about the state of the IPP and the minister’s response to addressing black cladding, Michael Dillon doesn’t mince words.

“I find the lack of performance and the lack of accountability for the poor performance to be astounding,” he says.

“What’s required is for there to be regulatory oversight of this program by the NIAA. They are the owner of the program. A media release that says that we’re going to work with First Nations communities to make it easier for them to complain is not good enough.

“People are making billions of dollars out of this program – it’s extraordinary – and so it needs to be treated seriously. And I just don’t see it being treated seriously.”

Dillon remains dumbfounded that after a decade, the government is none the wiser on whether the IPP is successfully achieving its stated aims.

“Unfortunately, I think we’ve reached a point where governments have essentially decided that the best way to manage this is to, in effect, make a promise about a policy change or policy implementation, do as little as possible to actually implement it, and then manage the PR criticisms that follow.

“They don’t lose any votes by not delivering the IPP effectively or not delivering Closing the Gap effectively. It is so far down the list of people’s concerns that they can get away with it. Governments have learnt that this is what they can do … and so they do.”

In light of these audit findings, the federal government’s “economic empowerment” agenda is neither a “pivot”, a “total capitulation”, a “betrayal” nor “business as usual”. It’s all the above.

This article was first published in the print edition of The Saturday Paper on June 28, 2025 as "Black cladding".

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