Introduction

1.1 Reducing the disparity between Aboriginal and Torres Strait Islander¹ and non-Indigenous economic outcomes has been a longstanding goal of Australian governments. In March 2008 the Council of Australian Governments (COAG) set a target to halve the gap in employment outcomes by 2018. However, as noted in the Prime Minister’s Closing the Gap Report 2020, the COAG employment target was ‘not met’ (see Figure 1.1).²

Figure 1.1: Progress towards halving the gap in employment outcomes by 2018^a

Note a: Data sources used to assess progress against this target include the Australian Bureau of Statistics’ National Aboriginal and Torres Strait Islander Health Survey and Social Survey, which are not conducted annually. Employment data for 2008 and 2012 included participants in Community Development Employment Projects.

Source: National Indigenous Australians Agency (NIAA) internal documentation.

1.2 Reasons for this disparity, identified through research into the determinants of lower Aboriginal and Torres Strait Islander employment rates, include: ‘lower levels of education, training and skill levels (human capital), poorer health, living in areas with fewer labour market opportunities, higher levels of arrest and interactions with the criminal justice system, discrimination, and lower levels of job retention’.³

1.3 Since 2009 the Australian Government has sought to generate economic opportunities for Aboriginal and Torres Strait Islander people through intergovernmental agreements with state and territory governments. Primarily this has occurred through national partnership agreements (NPAs) and project agreements negotiated under the 2009 Intergovernmental Agreement on Federal Financial Relations⁴, or through initiatives delivered under such agreements.

2009 National Partnership on Indigenous Economic Participation

1.4 In 2009, to contribute to COAG’s target of halving the gap in employment outcomes by 2018, Australian governments committed to the Indigenous Economic Participation NPA. The NPA, which expired in June 2013, included four key elements:

• creating sustainable employment in areas of government service delivery that had previously relied on the Community Development Employment Projects program⁵;
• strengthening government procurement policies across all jurisdictions to maximise Aboriginal and Torres Strait Islander employment;
• incorporating Aboriginal and Torres Strait Islander workforce strategies into all new major COAG reforms contributing to the Closing the Gap targets; and
• reviewing all public sector Aboriginal and Torres Strait Islander employment and career development strategies to increase employment to reflect population share by 2015.⁶

Current intergovernmental initiatives with Aboriginal and Torres Strait Islander participation targets

1.5 Since the expiry of the NPA in 2013, a common approach to generating economic opportunities through intergovernmental agreements has been to incorporate minimum targets for Aboriginal and Torres Strait Islander participation. Such targets usually involve direct employment targets, targets for the use of Aboriginal and Torres Strait Islander businesses as suppliers, or a combination of both.⁷ Current intergovernmental initiatives with participation target requirements include:

• the Northern Australia Roads and Beef Roads Programs, City and Regional Deals, and the 2019 Land Transport Infrastructure Projects NPA, which are managed by the Department of Infrastructure, Transport, Regional Development and Communications (Infrastructure); and
• the 2019 Northern Territory Remote Housing NPA, which is managed by the National Indigenous Australians Agency (NIAA).⁸

Northern Australia Roads and Beef Roads Programs

1.6 The Australian Government’s 2015 Our North, Our Future: White Paper on Developing Northern Australia stated that it would ‘require Indigenous procurement targets for all road projects funded through this White Paper to drive Indigenous employment and supplier use’.⁹

1.7 The White Paper committed to two new roads programs:

• the Northern Australia Roads Program with $600 million in funding over four years from 2016–17 to 2019–20 for priority projects in Northern Australia, including on the Great Northern Highway, Flinders Highway and Barkly Highway; and
• the Northern Australia Beef Roads Program with $100 million in funding over four years from 2016–17 to 2019–20 to improve cattle supply chains in Northern Australia.

1.8 Under these programs, 37 projects are being funded across Queensland, Northern Territory and Western Australia. The 2018 Implementation Report for the White Paper noted: ‘Through the inclusion of Indigenous employment and business use targets these projects are providing Indigenous Australians with greater opportunities to access employment opportunities or to start or expand businesses’.¹⁰

City and Regional Deals

1.9 As a component of the 2016 Smart Cities Plan, the Australian Government committed to negotiating City Deals with state, territory and local governments to ‘deliver better outcomes through coordinated investment in cities of all sizes’.¹¹ In 2018 the government expanded the model to include Regional Deals for locations in regional and remote Australia.

1.10 As at February 2020, nine City and Regional Deals had been signed (the Townsville, Launceston, Western Sydney, Darwin, Hobart, Geelong and Adelaide City Deals and Barkly and Hinkler Regional Deals) and intentions to negotiate a further three deals have been announced (the Perth and South East Queensland City Deals and Albury-Wodonga Regional Deal). The nine deals signed to date have included Aboriginal and Torres Strait Islander participation target commitments.

2019 Land Transport Infrastructure Projects NPA

1.11 In July 2019 Australian governments entered into a new Land Transport Infrastructure Projects NPA, replacing the previous agreement that had been in place from 2014–2019. The agreement governs land transport infrastructure projects to which the Australian Government makes a contribution under the Infrastructure Investment Program.

1.12 The NPA includes the Indigenous Employment and Supplier-Use Infrastructure Framework, which applies to projects receiving $7.5 million or more in Australian Government contributions (and some projects below $7.5 million with strong potential to support participation outcomes). For projects subject to the framework, states and territories are required to develop Indigenous Participation Plans that include participation targets set to reflect the local Aboriginal and/or Torres Strait Islander working-age population.

2019 Northern Territory Remote Housing NPA

1.13 From 2008 to 2018 the Australian Government provided $5.4 billion to state and territory governments under successive NPAs to provide remote housing for Aboriginal and Torres Strait Islander peoples. NIAA has reported that this contribution ‘delivered significant housing outcomes, including the construction of 4,000 new houses and another 7,500 existing houses refurbished across 300 remote Indigenous communities’.¹² Under these NPAs, the Australian Government provided over $60 million in milestone payments to the Northern Territory, Queensland, South Australian and Western Australian governments for achievement of Aboriginal and Torres Strait Islander employment and supplier-use targets.

1.14 Following the expiry of the 2016–18 NPA, the Australian and Northern Territory governments entered into the 2019 Northern Territory Remote Housing NPA. The NPA provides $1.1 billion in funding over 5 years from 2018–19 ($550 million from each government) to improve housing outcomes for Aboriginal people living in remote communities. Works carried out under the NPA are, ‘to the maximum extent possible’, expected to be delivered by ‘local Aboriginal Territorians and their businesses’, with an initial minimum employment target of 40 per cent in 2019–20, rising to 46 per cent by 2022–23.¹³

2017 Senate Inquiry into the Community Development Program

1.15 In 2017 the Senate Finance and Public Administration References Committee (the committee) held an inquiry into the appropriateness and effectiveness of the objectives, design, implementation and evaluation of the Community Development Program. The Community Development Program is an employment program administered by NIAA that requires job seekers in remote areas to engage in ‘work-like activities that benefit their community’.¹⁴ The majority (around 84 per cent) of participants are Aboriginal and/or Torres Strait Islander people, often living in areas with few labour market opportunities.

1.16 Noting the importance of using Aboriginal and Torres Strait Islander employment targets in government procurement contracts as a tool for increasing economic activity in remote areas, the committee made two recommendations relating to this issue:

Recommendation 17: The committee recommends that the Australian National Audit Office conduct an audit of Australian Government contracts that relate to service delivery in remote locations. This audit should have a specific focus on the use of, and compliance with, Indigenous Employment Targets. As part of this audit, the committee recommends that the Australian National Audit Office include state and territory contracts where the Australian Government has made a funding contribution for a particular purpose. The audit should also report on how these contracts impact on Closing the Gap employment targets.

Recommendation 18: The committee recommends that the Australian Government review the guidelines for Indigenous employment and work closely with Council of Australian Governments in order to establish a uniform approach to the application of Indigenous Employment Targets to state, territory and Commonwealth contracts in remote locations. Such an approach should include a mandatory target that forms the basis of a key performance indicator which is then used to assess the performance of a contractor for a current contract and used to assess suitability for subsequent tenders.¹⁵

Rationale for undertaking the audit

1.17 Aboriginal and Torres Strait Islander participation targets are increasingly being applied to major projects funded by the Australian Government through intergovernmental agreements. To achieve the government’s policy objectives, effective frameworks are needed to coordinate the use of such targets, and entities implementing targets need to ensure they are set and monitored appropriately. It was timely to undertake an audit of the administration of participation targets as the number and geographical breadth of projects with target requirements are expected to grow in coming years due to the inclusion of target requirements in the 2019 Land Transport Infrastructure Projects NPA. The audit also included a focus on application of targets in remote areas, to address the Senate Finance and Public Administration References Committee’s recommendation that the ANAO conduct an audit of the use of, and compliance with, employment targets in remote contracts.

Audit approach

Audit objective, criteria and scope

1.18 The audit objective was to assess the effectiveness of the administration of Aboriginal and Torres Strait Islander participation targets in intergovernmental funding agreements in achieving policy objectives.

1.19 To form a conclusion against the audit objective, the ANAO adopted the following high level audit criteria:

• Are participation target requirements for intergovernmental agreements being coordinated effectively? (Chapter 2)
• Are participation targets being effectively implemented in intergovernmental agreements? (Chapter 3)

1.20 The audit focused on Infrastructure and NIAA’s application of participation targets in four current intergovernmental initiatives: the Northern Australia Roads and Beef Roads Programs; City and Regional Deals; the 2019 Land Transport Infrastructure Projects NPA; and the 2019 Northern Territory Remote Housing NPA.

1.21 The ANAO also conducted a related performance audit examining the use of Aboriginal and Torres Strait Islander participation targets in major Australian Government procurements, which was tabled in February 2020.¹⁶ The related audit focused on the design, implementation and management of the mandatory minimum requirements for Aboriginal and Torres Strait Islander participation under the Commonwealth Indigenous Procurement Policy. These requirements apply to contracts with a value of $7.5 million or above in specified industry categories.

Audit methodology

1.22 The audit methodology included:

• examining entity documentation;
• analysing relevant data, including documentation for projects being delivered under current intergovernmental agreements with participation target requirements; and
• interviewing officials, in Infrastructure, NIAA and relevant state and territory government entities, and other stakeholders, including contractors subject to participation target requirements.

1.23 The audit was conducted in accordance with ANAO Auditing Standards at a cost to the ANAO of approximately $283,000.

1.24 The team members for this audit were Daniel Whyte, Lynette Tyrrell, Iain Gately, James Woodward and Deborah Jackson.

2.1 To assess whether Infrastructure and NIAA are effectively coordinating Aboriginal and Torres Strait Islander participation target requirements for intergovernmental agreements, the ANAO examined whether:

• appropriate opportunities for including participation targets in intergovernmental agreements are being identified;
• adequate frameworks have been established for including participation targets in intergovernmental agreements; and
• jurisdictions have implemented the Council of Australian Governments’ (COAG’s) commitments regarding participation target policies.

Are opportunities being identified for including participation targets in intergovernmental agreements?

2.2 In February 2009 all Australian governments signed the Indigenous Economic Participation NPA, which included a commitment to incorporate Aboriginal and Torres Strait Islander workforce strategies into all new major COAG reforms contributing to Closing the Gap targets. Following the expiry of the NPA in June 2013, the Australian Government ‘identified infrastructure as an area that can help with Indigenous economic participation, due to the scale of opportunities to enhance employment and business capability in both urban and regional Australia’.¹⁷

2.3 The ANAO examined whether appropriate opportunities are being identified for including participation targets in intergovernmental agreements, focussing on: workforce strategies developed under the 2009 Indigenous Economic Participation NPA; and participation targets included in infrastructure initiatives since 2014.

Workforce strategies under 2009 Indigenous Economic Participation NPA

2.4 The 2009 Indigenous Economic Participation NPA stated:

The Commonwealth and the States and Territories are investing significantly in capital development, procurement and service delivery through the full range of COAG reforms. Incorporating Indigenous workforce strategies into all new major COAG reforms emerging from the reform agenda, including in infrastructure construction projects agreed through the COAG Infrastructure Working Group, will leverage this investment to drive employment outcomes.¹⁸

2.5 At that time the Department of Education, Employment and Workplace Relations (DEEWR) was responsible for Aboriginal and Torres Strait Islander employment policy and managed the implementation of the NPA.¹⁹ DEEWR issued a COAG Indigenous Reform Circular in 2010 to relevant Australian, state and territory government entities outlining how the workforce strategy principle should be applied. The circular stated that the ‘Indigenous workforce strategy principle is to be applied broadly across all National Partnership Agreements and is not limited to only those agreements that directly relate to Indigenous Australians’.²⁰

2.6 A July 2010 progress assessment for the Indigenous Economic Participation NPA noted that ‘jurisdictions cited the delay in the release of the Commonwealth guidelines on Indigenous workforce strategies’ as contributing to delays in fully implementing workforce strategies.²¹ DEEWR responded to the progress assessment in December 2011, stating that the principle had now been embedded in NPA templates and processes and it had published a guide to incorporating workforce strategies in NPAs.²²

2.7 Nevertheless, few NPAs or project agreements signed between February 2009 and July 2013 (the period covered by the Indigenous Economic Participation NPA) explicitly included Aboriginal and Torres Strait Islander workforce strategies or participation targets. As outlined in Table 2.1, nine out of 179 agreements included workforce strategies, of which two included participation targets. The NPAs that included participation targets are outlined in Box 1.

Table 2.1: NPAs and project agreements with Aboriginal and Torres Strait Islander workforce strategies or participation targets, February 2009 to July 2014

Source: ANAO analysis of agreements published on the COAG Council on Federal Financial Relations’ website (http://federalfinancialrelations.gov.au/content/npa/default.aspx).

Participation targets in infrastructure initiatives since 2014

2.8 Responsibility for Aboriginal and Torres Strait Islander policy, programs and service delivery (including employment policy) transferred to the Department of the Prime Minister and Cabinet (PM&C) through a machinery of government change that occurred in September 2013. From 2014 PM&C sought opportunities to include Aboriginal and Torres Strait Islander participation targets in infrastructure initiatives being delivered through intergovernmental agreements. Initial opportunities identified were: the Cape York Region Package; Northern Australia Roads and Beef Roads Programs (Northern Australia Roads Programs); and City and Regional Deals.

Cape York Region Package

2.9 In 2014–15 the Australian Government committed $208.4 million to the $260.5 million Cape York Region Package, which was primarily focussed on improving the Peninsula Developmental Road to increase the accessibility of Cape York in Far North Queensland. In late 2014 PM&C started engaging with Infrastructure and relevant Queensland Government entities to ensure the package included minimum Aboriginal and Torres Strait Islander participation requirements and to support the involvement of Aboriginal and Torres Strait Islander businesses. Starting from 2015–16 (its second year) the package included ‘key result areas’ relating to Aboriginal and Torres Strait Islander employment, supplier use and training, with targets adjusted annually based on experience in the prior year.

Northern Australia Roads Programs

2.10 In May 2015 the government introduced the Commonwealth Indigenous Procurement Policy, which included mandatory minimum Aboriginal and Torres Strait Islander participation requirements for high value contracts in certain industry categories.²³ In June 2015 the government released Our North, Our Future: White Paper on Developing Northern Australia, which included a number of initiatives to support Aboriginal and Torres Strait Islander economic development.²⁴

2.11 At a late stage of the policy development process, PM&C gained agreement to mandate Aboriginal and Torres Strait Islander participation targets for road projects funded through the White Paper, building on the Indigenous Procurement Policy approach. This commitment applied to two roads programs delivered in remote areas: the $600 million Northern Australia Roads Program; and $100 million Northern Australia Beef Roads Program. The White Paper stated that employment and supplier use targets would be agreed with jurisdictions and reflect local Aboriginal and Torres Strait Islander populations.

2.12 From 2016 to 2017 Infrastructure and PM&C developed a framework to support the application of participation targets to projects under the Northern Australian Roads Programs. The framework was agreed by participating jurisdictions in September 2017.

City and Regional Deals

2.13 The 2016 Smart Cities Plan, which initiated the Australian Government’s program of City and Regional Deals with local, state and territory governments, did not include a commitment to applying Aboriginal and Torres Strait Islander participation targets. The plan noted that deals would be ‘structured around nationally and locally informed objectives, with a focus on economic growth, jobs creation, housing affordability, and environmental outcomes’.²⁵

2.14 In 2016 and 2017 PM&C led the negotiation of early City Deals. Building on the Northern Australia Roads Programs and Indigenous Procurement Policy approaches, it started working to ensure deals included participation targets based on the local Aboriginal and/or Torres Strait Islander population. The Townsville City Deal, signed in December 2016, was the first deal and included a 6.6 per cent employment and supplier-use target (based on the local working-age population) for its primary infrastructure project: construction of North Queensland Stadium.²⁶

2.15 From December 2017 responsibility for City Deals transferred from PM&C to Infrastructure. Infrastructure continued to work with PM&C (subsequently NIAA from July 2019) and other entities to include participation targets in City and Regional Deal projects. The Western Sydney Deal, signed in March 2018, was the first deal to commit to broader Aboriginal and Torres Strait Islander employment and supplier-use targets for all construction projects funded under the deal.

2.16 As at February 2020 nine City and Regional Deals had been signed and intentions to negotiate a further three deals announced. Table 2.2 outlines Aboriginal and Torres Strait Islander participation target commitments for these deals.

Table 2.2: City and Regional Deals Aboriginal and Torres Strait Islander participation commitments, as at February 2020

Source: ANAO analysis of published City and Regional Deal information.

2019 Land Transport Infrastructure Projects NPA

2.17 In mid-2016 PM&C identified encouraging other portfolios to achieve Aboriginal and Torres Strait Islander outcomes and working more effectively with states and territories as key priorities. A key component of this was encouraging Infrastructure to include Aboriginal and Torres Strait Islander employment and supply-chain targets through its primary funding mechanism, the Infrastructure Investment Program, which was to have a renewed approach from 2019–20 with the renegotiation of the Land Transport Infrastructure Projects NPA.

2.18 In 2016 the government agreed to develop an Indigenous Employment and Supplier-Use Infrastructure Framework for the new NPA, and from 2016 to 2018 Infrastructure led the development of the framework in close consultation with PM&C. The framework, which was finalised in February 2019, applies to most projects with over $7.5 million in Australian Government funding delivered under the 2019 Land Transport Infrastructure Projects NPA.²⁷

2.19 Funding delivered under the NPA is estimated to rise from $6.8 billion in 2019–20 to $9.5 billion in 2022–23, and represents around 60 per cent of Australian Government payments to states and territories under NPAs over this period (see Figure 2.1). As a result, since 2019 the introduction of the new Indigenous Employment and Supplier-Use Infrastructure Framework has significantly extended the scope of application of Aboriginal and Torres Strait Islander participation targets in intergovernmental agreements.

Figure 2.1: Total Australian Government NPA payments to states and territories by category, 2018–19 to 2022–23

Source: Australian Government, Budget Paper No. 3, Federal Financial Relations 2019-20, May 2019, Table 2.2, p. 16; and Mid-Year Economic and Fiscal Outlook 2019-20, December 2019, Annex A.

2.20 There are a few smaller-scale existing NPAs that could include Aboriginal and Torres Strait Islander participation targets but do not. These NPAs pre-date the government’s decision to expand the application of targets in intergovernmental agreements.

Have frameworks been established for including participation targets in intergovernmental agreements?

2.21 The guidance on developing NPAs and project agreements states:

… establishing linkages between policy initiatives and agreements is an important consideration in developing new agreements, to ensure that a whole-of-government approach is maintained and that related agreements work together in a consistent and complementary manner towards a shared objective.²⁸

2.22 Over the past five years, to achieve the shared objective of improving Aboriginal and Torres Strait Islander employment and business outcomes, participation targets have been increasingly included in intergovernmental agreements. To ensure there are consistent and complementary approaches to applying targets in specific contexts, good practice would be to establish frameworks to govern the application of participation targets. Such frameworks could be principles-based and provide flexibility about whether and how targets are to be applied.

2.23 The ANAO examined a draft National Indigenous Participation Framework developed by COAG in 2016 and whether frameworks for including participation targets have been developed for existing intergovernmental agreements.

National Indigenous Participation Framework

2.24 In December 2015 COAG agreed to develop a strategic framework for Aboriginal and Torres Strait Islander economic participation. At its next meeting in April 2016 COAG agreed in principle to a draft high-level framework developed by the Northern Territory (see the draft National Indigenous Participation Framework at Appendix 2), noting that jurisdictions would undertake further consultation on the framework with Aboriginal and Torres Strait Islander leaders and communities. However, this work did not progress and the framework was not finalised.

Northern Australia Roads Programs

2.25 As noted at paragraph 2.12, in 2016 and 2017 Infrastructure and PM&C developed a framework to support the application of Aboriginal and Torres Strait Islander participation targets to road infrastructure projects funded under the Northern Australia Roads Programs. Following agreement from the Northern Territory, Queensland and Western Australia governments, the Framework to maximise Indigenous employment and business opportunities in Northern Australia was finalised in September 2017.

2.26 PM&C briefed the Minister for Indigenous Affairs on the framework in September 2017, seeking his final agreement. However, in October 2017 the Minister indicated he did not agree to the framework, commenting that:

… I will not agree to the Framework in its current form, due to concerns about the enforceability of the targets. A stronger accountability framework is needed to ensure that States/Northern Territory and contractors understand that Indigenous employment/supplier use is a standard that must be met.

The Minister’s concerns related to the framework’s approach to public reporting, which required jurisdictions to publicly report only at an aggregate level and lacked reputational or financial consequences for contractors that did not meet targets.

2.27 Infrastructure did not make any further changes and continued to use it as a ‘non-binding guiding framework’ for assessing and approving Aboriginal and Torres Strait Islander participation targets for Northern Australia Roads Programs projects. In briefing its Minister, Infrastructure noted that the framework represented a compromise reached after months of negotiation with jurisdictions.

2.28 Under the ‘guiding framework’, targets proposed by jurisdictions for specific roads projects were to be agreed by both the Infrastructure Department and the Minister for Indigenous Affairs. In March 2018, after the Minister for Indigenous Affairs had rejected targets for six Northern Territory projects, the Minister for Infrastructure agreed to approve participation targets going forward to avoid significant delays to the delivery of roads projects.

2019 Land Transport Infrastructure Projects NPA

2.29 Between 2016 and 2018, while developing the guiding framework for the Northern Australia Roads Programs, Infrastructure and PM&C also developed an Indigenous Employment and Supplier-Use Infrastructure Framework for the 2019 Land Transport Infrastructure Projects NPA. The framework was finalised in February 2019 and published on Infrastructure’s website in July 2019.

2.30 The 2019 framework built on the earlier Northern Australia Roads Programs framework. Table 2.3 shows key elements of both frameworks, including elements that remained the same across both (principally, the calculation of targets and ‘local first’ principle). Two key areas of difference, addressing issues experienced with the Northern Australia Roads Programs, were:

• Public reporting — The Northern Australia Roads Programs framework requires jurisdictions to publicly report on Aboriginal and Torres Strait Islander participation target outcomes at an aggregate level. The new framework requires public reporting on a project-by-project basis as projects are completed.
• Approval of targets — Under the new framework participation targets are approved by the minister responsible for transport infrastructure, rather than the Minister for Indigenous Australians. The framework states that Infrastructure may seek advice from relevant entities in developing its advice for the Minister on the approval of targets.

Table 2.3: Comparison of frameworks for applying Aboriginal and Torres Strait Islander participation targets to intergovernmental infrastructure projects

Source: Infrastructure & PM&C, Northern Australia Roads programs – Framework to maximise Indigenous employment and business opportunities in Northern Australia, 2017; and Infrastructure, Indigenous Employment and Supplier-Use Infrastructure Framework, February 2019.

2.31 The Indigenous Employment and Supplier-Use Infrastructure Framework includes an appropriate level of information to support effective implementation of Aboriginal and Torres Strait Islander participation targets for NPA projects.

City and Regional Deals

2.32 Infrastructure has not developed an overarching framework or strategic plan to inform its approach to negotiating City and Regional Deals with state, territory and local governments. Infrastructure informed the ANAO that each deal is a bespoke product designed to reflect the priorities of a particular area. As shown in Table 2.2 above, this flexible approach to developing deals has extended to the application of Aboriginal and Torres Strait Islander participation targets.

2.33 Where deals have committed to participation targets, insufficient consideration has been given to administrative arrangements to support their implementation (such as arrangements for reporting, supply-side supports, compliance and assurance, and/or review). In September 2019, responding to an invitation from the Minister for Population, Cities and Urban Infrastructure to collaborate on upcoming City Deals, the Minister for Indigenous Australians wrote:

I understand that collaboration between officers from our respective agencies has begun and that good working relationships are being established. Building on this I would be interested in exploring with you and the Minister for Employment, Skills Small and Family Business, Senator the Hon Michaelia Cash, the development of a framework to coordinate action between our agencies. This would aim to ensure a consistent and yet tailored approach to the planning of priorities that we would apply to these and future city and regional deals.

2.34 Infrastructure and NIAA informed the ANAO that they have commenced work on the development of a framework. Infrastructure expects the framework to be finalised in the second quarter of 2020. Establishing an appropriate framework has the potential to support effective implementation of Aboriginal and Torres Strait Islander participation targets in City and Regional Deals by establishing key principles up front and helping to coordinate the actions of relevant entities. Infrastructure could use the Indigenous Employment and Supplier-Use Infrastructure Framework for the 2019 Land Transport Infrastructure Projects NPA as a model when developing the framework.

2019 Northern Territory Remote Housing NPA

2.37 At the conclusion of the 2016–2018 Remote Housing NPA in June 2018, the Australian Government’s position was that states were responsible for housing in remote communities. In 2018–19 the government made final remote housing payments to Western Australia ($121 million) and South Australia ($37.5 million). In addition, in May 2019 the government committed $105 million for remote housing in Queensland. These payments have not involved commitments from states to Aboriginal and Torres Strait Islander participation targets.

2.38 The 2019 Northern Territory Remote Housing NPA is the only remaining long-term Australian Government funding commitment for housing in remote Aboriginal and Torres Strait Islander communities. The NPA was signed in March 2019 and involves Australian Government funding of $550 million over five years, matched by the Northern Territory Government to create a $1.1 billion joint investment. As noted at paragraph 1.14, the NPA specifies an Aboriginal employment target of 40 per cent in 2019–20, rising to 46 per cent by 2022–23.

2.39 The NPA commits the Northern Territory to delivering three outputs:

• construction of a minimum of 1950 bedrooms providing an equivalent of 650 three bedroom houses;
• implementation of an agreed employment and procurement framework to maximise local Aboriginal jobs and business outcomes; and
• implementation of an agreed reporting framework for all investments and outcomes.²⁹

2.40 At its first meeting in August 2019 the NPA’s Joint Steering Committee³⁰ endorsed the Northern Territory Government’s 2019–20 Capital Works Plan. On the basis of this endorsement, in September 2019 the Minister for Indigenous Australians agreed to make an initial milestone payment under the NPA of $38.7 million to the Northern Territory Government.

2.41 At its August 2019 meeting the Joint Steering Committee also endorsed:

• an Aboriginal employment and business enterprise development framework — which outlines three key result areas and strategies for achieving them³¹; and
• a procurement framework — which provides an overview of the Northern Territory’s procurement rules and policies and how procurement for the NPA will be managed to achieve Aboriginal employment and business outcomes.

2.42 At its second meeting in November 2019 the Joint Steering Committee noted a draft reporting framework. The draft framework indicates that progress against the NPA’s Aboriginal employment targets will be reported monthly through an online public dashboard, along with information on the proportion and value of contracts awarded to Aboriginal businesses.

2.43 The Northern Territory Department of Local Government, Housing and Community Development informed the ANAO that the reporting framework could also outline assurance arrangements. A working group has been established to finalise the framework, which is expected to be presented to the Joint Steering Committee by June 2020.

Have jurisdictions implemented the Council of Australian Governments’ commitments regarding participation target policies?

2.44 The 2009 Indigenous Economic Participation NPA included commitments from the Australian, state and territory governments to strengthen procurement policies with a focus on including ‘Indigenous training, employment and supplier strategies’ in contracts for major construction, maintenance, cleaning and infrastructure projects.³² In December 2016 COAG agreed to ‘consider establishing state-specific whole-of-government Indigenous procurement policies, Indigenous employment and indigenous business targets and reporting mechanisms, and making policies easier to find and understand’.³³ In February 2018 COAG agreed to ‘publish jurisdiction specific procurement policies, and Indigenous employment and business outcomes annually’.³⁴

2.45 The ANAO examined whether jurisdictions have implemented COAG’s commitments regarding: establishing jurisdictional Aboriginal and Torres Strait Islander procurement policies; and annually reporting on outcomes.

Jurisdictional Aboriginal and Torres Strait Islander procurement policies

2.46 As shown in Table 2.4, most jurisdictions have implemented procurement policies to encourage entities to procure goods and services from Aboriginal and Torres Strait Islander businesses. Many jurisdictions have also implemented policies to promote Aboriginal and Torres Strait Islander participation in major projects, such as large infrastructure or construction projects. Appendix 3 provides more detail on jurisdictional policies.

Table 2.4: Aboriginal and Torres Strait Islander procurement policies by jurisdiction

Note a: The Northern Territory and Tasmania have committed to developing policies, which as at February 2020 were under development.

Note b: South Australia’s policy requires 15 per cent of labour force hours on construction contracts valued above $50 million to be performed by nominated groups, including Aboriginal jobseekers.

Source: ANAO analysis.

2.47 As outlined at paragraphs 1.15 and 1.16, in 2017 the Senate Finance and Public Administration References Committee (the committee) recommended that the government:

… review the guidelines for Indigenous employment and work closely with Council of Australian Governments in order to establish a uniform approach to the application of Indigenous Employment Targets to state, territory and Commonwealth contracts in remote locations.³⁵

2.48 The government noted the committee’s recommendation. In responding to the recommendation the government commented that the Minister for Indigenous Affairs had encouraged states and territories to take up policies similar to the Commonwealth Indigenous Procurement Policy and most jurisdictions had implemented policies ‘albeit with varying degrees of stretch targets and requirements’.³⁶ It also commented that COAG’s current focus was ‘improving reporting and delivery on Indigenous procurement and employment policies’.³⁷

Annual reporting on jurisdictional procurement policy outcomes

2.49 The 2018 regulation impact statement for the Indigenous Employment and Supplier-Use Infrastructure Framework outlined the following concerns, which were raised through stakeholder consultation, with jurisdictional Aboriginal and Torres Strait Islander participation policies:

• a lack of transparency – policies are difficult to find
• a lack of accountability for results – results are published on an ad hoc basis
• an inconsistency of approaches and reporting requirements across jurisdictions, meaning that companies operating across state boundaries need to adjust their practices for projects operating across different jurisdictional policies.³⁸

2.50 At its February 2018 meeting COAG agreed to:

• devise a framework for reporting to COAG annually on jurisdictional-specific performance against Aboriginal and Torres Strait Islander employment, procurement and supplier-use targets; and
• publish a jurisdictional-specific performance table annually on the COAG website.

2.51 In late 2018 PM&C prepared a draft jurisdictional-specific performance table, but it was not provided to COAG or published on the COAG website. In January 2020 NIAA informed the ANAO that it intends to update the table and publish it in early 2020.

2.52 Implementation of COAG’s annual reporting commitments may help to address some of the issues identified in the 2018 regulation impact statement. As performance data relating to jurisdictional procurement policies and intergovernmental agreements with participation targets may be published more frequently on entity websites, NIAA should consider linking to these sources from the jurisdictional-specific performance table to allow stakeholders to access up-to-date information.

3.1 At the time of this audit, Aboriginal and Torres Strait Islander participation targets are being applied to projects under: the Northern Australia Roads and Beef Roads Programs (Northern Australia Roads Programs); certain City and Regional Deals; the 2019 Land Transport Infrastructure Projects NPA; and the 2019 Northern Territory Remote Housing NPA. To assess whether Infrastructure and NIAA are effectively implementing participation targets in these agreements, the ANAO examined whether:

• appropriate participation targets are being negotiated for projects;
• supply-side strategies have been implemented to support the achievement of targets;
• appropriate reporting arrangements have been established; and
• entities are gaining appropriate assurance that participation targets are being met.

Are appropriate participation targets being negotiated for projects under intergovernmental agreements?

3.2 The intended outcomes of including participation targets in intergovernmental agreements are to ensure Aboriginal and Torres Strait Islander people gain employment and business opportunities from major government-funded projects. Research suggests that setting arbitrary or overly ambitious targets that are not grounded in evidence of local capacity can undermine the achievement of intended outcomes and strengthen opposition to social procurement efforts.³⁹

3.3 For current intergovernmental agreements with Aboriginal and Torres Strait Islander participation target requirements, the ANAO examined whether appropriate targets are being negotiated that account for local conditions and barriers to achieving outcomes.

Northern Australia Roads Programs

3.4 The ‘non-binding guiding framework’ for applying participation targets under the Northern Australia Roads Programs (discussed at paragraphs 2.25 to 2.28) outlined a methodology for determining targets for specific roads projects. The framework stated that targets needed to include a combination of employment and supplier-use targets that added to an agreed baseline target (see Figure 3.1). For example, if the baseline target was 21 per cent, the project could adopt an employment target of 18 per cent and a supplier-use target of 3 per cent (which add to 21 per cent).

Figure 3.1: Methodology for calculating participation targets for Northern Australia Roads Programs projects

Source: Infrastructure & Department of the Prime Minister and Cabinet (PM&C), Northern Australia Roads programs – Framework to maximise Indigenous employment and business opportunities in Northern Australia, 2017, p. 2.

3.5 To maximise economic participation outcomes, the default baseline target was determined based on the Aboriginal and/or Torres Strait Islander working-age population in project areas (as a proportion of the total working-age population). Northern jurisdictions (Queensland, Northern Territory and Western Australia) could request adjusted baseline targets by providing clear justification to the Australian Government.⁴⁰ Under the framework, any reductions to baseline targets required approval from the Minister for Indigenous Affairs. As noted at paragraph 2.28, the approval requirements were changed in March 2018 after the Minister rejected targets for six Northern Territory projects.

3.6 The ANAO analysed participation targets for 48 work packages approved for funding under the Northern Australia Roads Programs between 2017 and 2019.⁴¹ As shown in Table 3.1, 52 per cent of work packages adopted targets higher than the default baseline (based on the local working-age population) and 48 per cent adopted lower targets. For work packages approved after the guiding framework was finalised, jurisdictions provided justification for all but two approved work packages with targets lower than the default baseline.

Table 3.1: Participation targets for Northern Australia Roads Programs, 2017–2019

Source: ANAO analysis.

2019 Land Transport Infrastructure Projects NPA

3.7 Using the same approach as the Northern Australia Roads Programs, the Indigenous Employment and Supplier-Use Infrastructure Framework for the 2019 Land Transport Infrastructure Projects NPA requires participation targets to be set based on the local Aboriginal and/or Torres Strait Islander working-age population (the baseline). Jurisdictions can propose adjustments up or down from the baseline by providing appropriate justification in the Indigenous Participation Plan that they submit to Infrastructure. Factors considered by Infrastructure in adjusting targets are:

• the scale, value and location of the project, skills and capabilities required for delivery, and capacity of the local employment market and suppliers;
• availability of supply-side support to build the capacity of Aboriginal and Torres Strait Islander businesses and job-seekers; and
• existing jurisdictional policies.

3.8 As at February 2020 28 projects had been approved under the new framework. As shown in Table 3.2, the majority (82 per cent) of approved projects had adopted participation targets equal to or higher than the baseline (see Appendix 4 for a list of these projects and associated participation targets). In the five cases where lower targets were approved, jurisdictions provided a rationale in the submitted Indigenous Participation Plan. For the one project with a significantly lower participation target, Infrastructure consulted with NIAA, which confirmed that the target was appropriate due to the location of the works and project delivery by an Aboriginal and Torres Strait Islander joint venture. It is expected that jurisdictions will submit around 60 to 80 proposals each year that trigger the participation target requirement.

Table 3.2: Participation targets for projects approved under the 2019 Land Transport Infrastructure Projects NPA, as at February 2020

Source: ANAO analysis.

City and Regional Deals

3.9 Where City and Regional Deals have included specific participation targets, target setting has generally followed a consistent approach:

• employment targets have been set to reflect the Aboriginal and/or Torres Strait Islander working-age population (as a proportion of the total working-age population) in the local government areas covered by the deals; and
• supplier-use targets have generally been set to align with the three per cent procurement target under the Commonwealth Indigenous Procurement Policy.⁴²

3.10 The application of employment targets based on working-age population and separate supplier-use targets has meant targets for some City Deals are higher than would be required under the Land Transport Infrastructure Projects NPA (for example, the Adelaide City Deal targets represent a combined target of 4.4 per cent, which is significantly higher than the working-age population of 1.2 per cent).

Table 3.3: City Deal employment targets and local Aboriginal and/or Torres Strait Islander working-age population proportions

Note a: For Townsville City Deal projects with participation target requirements, the working-age population target can be met through a combination of employment and supplier-use targets.

Note b: Participation targets apply to the Geelong Convention Centre Precinct and Shipwreck Coast Master Plan.

Source: Australian Bureau of Statistics, Estimates of Aboriginal and Torres Strait Islander Australians, June 2016, cat. no. 3238.0.55.001, Australian Government, Canberra, 2018.

2019 Northern Territory Remote Housing NPA

3.11 As noted in Box 1 in Chapter 2, various approaches to negotiating participation targets have been employed for successive Remote Housing NPAs. The 2016–18 Remote Housing NPA established a minimum Aboriginal and Torres Strait Islander employment target of 30 per cent by the end of the agreement, with jurisdictions committing to more detailed targets in their implementation plans. Rather than reflecting local conditions, targets were chosen to build on targets from the previous NPA. Under the 2016–18 Remote Housing NPA, the Northern Territory Government committed to Aboriginal employment targets of 30 per cent from July 2016 to March 2017 and 35 per cent from April 2017 to July 2018. It reported that it exceeded these targets, achieving 55 per cent from July 2016 to March 2017 and 51 per cent from April 2017 to July 2018.

3.12 For the 2019 Northern Territory Remote Housing NPA, the Australian and Northern Territory governments agreed to Aboriginal employment targets of 40 per cent in 2019–2020, increasing by two per cent each year for the duration of the NPA (see Table 3.4). While the NPA encourages the engagement of Aboriginal businesses ‘to the maximum extent possible’, it does not include a supplier-use target.⁴³ The Australian Government agreed to make milestone payments of $7.5 million each year to the Northern Territory Government if it meets the employment targets under the NPA.

Table 3.4: Aboriginal employment targets under the 2019 Northern Territory Remote Housing NPA

Source: Commonwealth of Australia and the Northern Territory, National Partnership for Remote Housing Northern Territory [Internet], 2019, p. 20, available from: http://federalfinancialrelations.gov.au/content/npa/housing/ national-partnership/NPA_remote_housing_NT.pdf [accessed 2 January 2020].

3.13 Working-age population did not form the basis for negotiating the 2019 Northern Territory Remote Housing NPA employment targets. Nevertheless, the final target of 46 per cent is close to the proportion of working-age Aboriginal people in remote areas of the Northern Territory (outside of greater Darwin), which was 50 per cent in June 2016.

Have supply-side strategies been implemented to support the achievement of targets?

3.14 The application of participation targets in intergovernmental agreements is a demand-side strategy that aims to increase demand for Aboriginal and Torres Strait Islander employees and suppliers from businesses delivering major government-funded projects. Research suggests such procurement initiatives are more effective when they are complemented with supply-side strategies designed to increase the capacity of local job seekers and suppliers.⁴⁴

3.15 For current intergovernmental agreements with Aboriginal and Torres Strait Islander participation target requirements, the ANAO examined whether supply-side strategies have been implemented to support the achievement of targets.

Northern Australia Roads Programs

3.16 The Framework to maximise Indigenous employment and business opportunities in Northern Australia for the Northern Australia Roads Programs included a section on supply-side strategies. It noted that the Australian Government would invest in coordination and support, and outlined existing programs such as the Community Development Program, Vocational Training and Employment Centres and the Indigenous Entrepreneurs Fund (see Box 2). The framework also stated that jurisdictions would work with the Australian Government as early as is practicable ‘to provide information relevant to effective planning such as project skill profiles, staffing numbers and potential supplier use opportunities to service providers and Australian Government officers’.⁴⁵

3.17 While there was no requirement under the Northern Australia Roads Programs framework for jurisdictions to outline supply-side strategies in project proposals, the Queensland Department of Main Roads and Transport developed a template that included a section for this. Twenty-six of the forty-eight project proposals reviewed by the ANAO outlined supply-side strategies, of which for twenty-one this only involved consulting NIAA’s Regional Network or relevant jurisdictional entities to identify Aboriginal and Torres Strait Islander businesses.

3.18 Based on interviews with contractors engaged on Northern Australia Roads Programs projects, common supply-side issues encountered on remote road projects include:

• identifying local Aboriginal and Torres Strait Islander suppliers — contractors reported that Aboriginal and Torres Strait Islander business registers (such as Supply Nation and jurisdictional registers) do not have comprehensive listings of local suppliers in remote areas and they often need to rely on contacts and word of mouth to identify suppliers;
• Aboriginal and Torres Strait Islander business capacity — some contractors noted challenges finding local businesses that were appropriately certified or had capacity to deliver the services required; and
• work readiness of Aboriginal and Torres Strait Islander employees — contractors reported issues with employees failing compulsory drug and alcohol tests, not returning to work after rostered days off, or lacking requisite skills despite being certified.

3.19 Feedback to the ANAO from contractors and jurisdictions indicates that there have been challenges, but there have also been examples of positive engagement with Infrastructure and NIAA on supply-side issues, such as visiting project sites to gain an understanding of challenges and referring contractors to local Community Development Program providers.

2019 Land Transport Infrastructure Projects NPA

3.20 The Indigenous Employment and Supplier-Use Infrastructure Framework for the 2019 Land Transport Infrastructure Projects NPA refers to the importance of supply-side support to achieving participation targets, and canvasses the range of Australian Government support available. Further, as noted in Table 2.3 above, the framework states that jurisdictions should engage early with relevant Australian Government entities⁴⁷ on the development of their Indigenous Participation Plans to identify appropriate supports and allow supply-side gaps to be identified.⁴⁸

3.21 Infrastructure developed a template for Indigenous Participation Plans that includes a section for jurisdictions to outline the supply-side supports needed for the project. The template states that the Australian Government will consider partnering with jurisdictions to establish employment or business project hubs in strategic locations, and provides contact details for the NIAA Regional Network for help in tailoring a supply-side strategy.

3.22 The ANAO examined jurisdictions’ responses to the supply-side support section for the 28 Indigenous Participation Plans approved under the framework as at February 2020 and found:

• 19 plans referred to the use of Aboriginal and Torres Strait Islander business registers;
• six referred to using Tailored Assistance Employment Grants (discussed in Box 2 above);
• seven referred to community consultation as a supply-side support; and
• six did not outline any proposed supply-side strategies.⁴⁹

3.23 Five of the 28 participation plans indicated that engagement with relevant Australian Government entities had taken place. A further 14 plans stated that the jurisdiction would seek to engage with NIAA to source potential Aboriginal and Torres Strait Islander suppliers or develop an Aboriginal and Torres Strait Islander engagement strategy.

3.24 As at February 2020 Infrastructure had held three workshops, in Brisbane, Hobart and Darwin, to facilitate engagement with relevant Australian Government entities. NIAA and the Department of Education, Skills and Employment delivered presentations at the workshops to inform jurisdictions of the support available from the Regional Network, and provide advice on building supply.

City and Regional Deals

3.25 As noted at paragraphs 2.33 and 2.34, work has only recently commenced on developing a strategic framework to coordinate the actions of relevant entities in implementing Aboriginal and Torres Strait Islander participation targets for City and Regional Deals. Nevertheless, there have been examples of Infrastructure and NIAA working together to develop supply-side supports for certain City Deals.

• For the Townsville City Deal, the NIAA Regional Network assisted the primary contractor for the North Queensland Stadium to access a Tailored Assistance Employment Grant. The grant was to deliver a mentoring program for Aboriginal and Torres Strait Islander staff, with the aim of improving employee retention rates for the project.
• For the Launceston City Deal, NIAA and the Department of Education, Skills and Employment are working with the Tasmanian Government to connect businesses, apprentices and job seekers with opportunities created through the deal.
• The Barkly Regional Deal commits to initiatives focussing on supply-side issues, including a regional workforce strategy, an economic growth strategy, and improvements to the delivery of the Community Development Program within the region.
• The NIAA has also been working to establish Indigenous Business and Employment Hubs in City Deal locations. In June 2018 the Minister for Indigenous Affairs approved an Indigenous Advancement Strategy grant of $12.5 million over four years to establish a hub in Western Sydney. In February 2019 a grant of $3 million over three years was approved for an additional hub in Adelaide.

3.26 Developing an appropriate framework that establishes key principles and coordinates the actions of relevant entities, in line with Recommendation no.1, should help to facilitate a more strategic approach to supply-side supports.

2019 Northern Territory Remote Housing NPA

3.27 An Aboriginal employment and business enterprise development framework for the 2019 Northern Territory Remote Housing NPA was endorsed by the Joint Steering Committee at its August 2019 meeting. The framework outlines three supply-side strategies for the NPA:

• working with local communities to identify opportunities for Aboriginal businesses to train and employ Aboriginal people (preferably local) and referring businesses to relevant entities for information, support and funding;
• building the capacity and capability of local Aboriginal business to deliver housing works and services by undertaking initial capacity assessments, providing ongoing information, tools and support, and building capability through five-year agreements; and
• collaborating with other Northern Territory and Australian government entities and non-government organisations to support a coordinated approach to building Aboriginal employment and business opportunities in remote communities.

3.28 NIAA advised the ANAO that the coordination and implementation of supply-side supports under the 2019 Northern Territory Remote Housing NPA will be the responsibility of the Northern Territory Department of Local Government, Housing and Community Development. NIAA also noted that it would contribute to the provision of supply-side supports through its Regional Network and programs such as the Community Development Program.

Have appropriate reporting arrangements been established?

3.29 A key objective for intergovernmental agreements negotiated under the Federal Financial Relations framework is ‘enhanced accountability of governments to the public through performance reporting on outcomes’.⁵⁰ Accordingly, all NPAs are required to ‘include a performance reporting framework that specifies how progress towards objectives and outcomes or the achievement of project milestones will be measured’.⁵¹ The ANAO’s 2018 performance audit of the effectiveness of NPA monitoring found ‘more consistent, centralised public reporting of achievement of outcomes and outputs under all NPAs is required to meet the transparency and accountability objectives’.⁵²

3.30 The ANAO examined whether appropriate reporting arrangements have been established for current intergovernmental agreements with participation target requirements.

Northern Australia Roads Programs

3.31 Reporting for Northern Australia Roads Programs work packages occurs quarterly through a template. The reports provided to the Australian Government outline progress against project milestones, and the levels of Aboriginal and Torres Strait Islander employment and supplier-use.

3.32 As at December 2019, 30 work packages had been completed. As outlined in Table 3.5, performance against targets has been mixed, with jurisdictions reporting that less than a quarter of work packages had met both employment and supplier-use targets. For five of Queensland’s completed packages no performance data was reported. See Appendix 5 for a list of completed packages and reported performance against participation targets.⁵³

Table 3.5: Number of completed Northern Australia Roads Programs work packages that met Aboriginal and Torres Strait Islander participation targets

Note a: Four of the Northern Territory work packages had no target for supplier-use.

Source: ANAO analysis.

3.33 Meeting participation targets is not linked to any milestone payments for Northern Australia Roads Programs projects. The only consequences of underperformance are reputational, through public reporting of outcomes. The Framework to maximise Indigenous employment and business opportunities in Northern Australia states that jurisdictions will publicly report on Aboriginal and Torres Strait Islander participation targets outcomes ‘at an aggregate level (either by district, region or state program level)’.⁵⁴ As at February 2020 no public reporting had occurred.

2019 Land Transport Infrastructure Projects NPA

3.34 Under the Indigenous Employment and Supplier-Use Infrastructure Framework for the 2019 Land Transport Infrastructure Projects NPA, jurisdictions are required to provide monthly progress reports for funded projects, including performance reporting against Aboriginal and Torres Strait Islander participation requirements where relevant. Milestone payments for projects funded under the NPA are not linked to performance against participation targets.⁵⁵ Infrastructure advised the ANAO that jurisdictions are only required to report for NPA projects when progress has occurred and, as at February 2020, jurisdictions had not had to report on participation targets for any NPA projects.

3.35 In addition to business-as-usual reporting requirements, the Indigenous Employment and Supplier-Use Infrastructure Framework commits jurisdictions to ‘report publicly on Indigenous participation on a project-by-project basis, including performance against targets for all projects’.⁵⁶ The framework sets out the following requirements and guidelines for public reporting:

• performance against targets must be reported at the completion of a project at a minimum (jurisdictions can report more frequently at their discretion);
• reporting should state the target, indicate whether or not it was met, and include information about factors that contributed to the outcome;
• to be respectful, jurisdictions should undertake appropriate consultation with Aboriginal and Torres Strait Islander stakeholders and contractors prior to reporting; and
• while jurisdictions can decide the most appropriate channel to publicly report information, they must confirm public reporting has occurred in post-completion reports.⁵⁷

3.36 As at February 2020 no projects funded under the new NPA had been completed, and therefore no public reporting against participation targets had occurred.

3.37 While the requirements in the new Land Transport Infrastructure Projects NPA framework provide greater transparency than the aggregated reporting arrangements for the Northern Australia Roads Programs, jurisdictions using different channels has the potential to make the information less accessible to stakeholders. To mitigate this risk, Infrastructure should also establish a mechanism to compile outcomes reported by jurisdictions and feed the information into COAG’s annual reporting of Aboriginal and Torres Strait Islander employment and business outcomes from jurisdictional participation targets (see Recommendation no.2, paragraph 2.53).

City and Regional Deals

3.38 As discussed at paragraph 2.33, insufficient consideration has been given to reporting arrangements for Aboriginal and Torres Strait Islander participation targets under City and Regional Deals. For deals that have committed to targets, in most cases key technical details (such as whether employment targets are based on the number of employees or hours worked, or supplier-use targets are based on the number or value of contracts) are still to be determined. No milestone payments have been attached to meeting participation targets for City and Regional Deals.

3.39 Currently, the primary form of reporting that occurs for City and Regional Deals is through annual progress reports, which are published on Infrastructure’s website. As at February 2020 the Townsville City Deal was the only deal to have publicly reported on participation target outcomes. While its 2019 Annual Progress Report did not include reporting against the target, its 2018 Annual Progress Report stated:

The North Queensland Stadium continues to deliver jobs and opportunities for local businesses and industry with over 99 percent of construction hours completed by local subcontractors. In addition, 42 of the 52 trade packages released so far have been let to locals and the total number of Aboriginal and Torres Strait Islander construction employees represents 15.9 percent of the total workforce, exceeding the target of 6.6 percent that was set for the project.⁵⁸

3.40 Performance reporting for the North Queensland Stadium was managed by Queensland Department of Housing and Public Works, which reported cumulative progress against the employment target on its project website (the update from November 2019 stated that the percentage of the construction workforce identifying as Aboriginal and Torres Strait Islander was 12.2 per cent).⁵⁹ The Department of Housing and Public Works also reported more detailed information for the target on an internet portal accessible only to Queensland Government officials.

3.41 The Western Sydney City Deal has released one progress report, which noted that ongoing work would be undertaken to embed participation targets in major infrastructure projects. As at February 2020 reporting arrangements for Western Sydney City Deal projects had not been finalised, although the New South Wales Government indicated it plans to utilise the NIAA’s Indigenous Procurement Policy Reporting Solution for reporting against participation targets. Other City Deals with participation targets are yet to release an annual progress report.

3.42 Infrastructure has established an internet-based National Cities Performance Framework Dashboard⁶⁰ to support cities policy development and programs such as City Deals. The dashboard reports levels of Aboriginal and Torres Strait Islander unemployment in cities with City Deals in place, but does not contain reporting against City Deal participation targets. There is currently no combined national performance reporting for City and Regional Deal commitments.

3.43 In developing a strategic framework for City and Regional Deals, in line with Recommendation no.1 (paragraph 2.35), Infrastructure should establish key principles, roles and responsibilities for reporting against Aboriginal and Torres Strait Islander participation targets. Infrastructure should also consider how City and Regional Deals reporting will feed into COAG’s annual reporting of Aboriginal and Torres Strait Islander employment and business outcomes from jurisdictional participation targets (see Recommendation no.2, paragraph 2.53).

2019 Northern Territory Remote Housing NPA

3.44 Under the previous 2016–2018 Remote Housing NPA jurisdictions reported on progress against Aboriginal and Torres Strait Islander employment targets to receive milestone payments. All jurisdictions reported their overall results as a percentage, but different methods were used to determine the percentage (with some jurisdictions using number of employees and others using hours worked). This issue was raised in a 2017 review of the NPA, which noted it was difficult ‘to make direct comparisons or adequately assess performance against the benchmark’.⁶¹

3.45 The 2019 Northern Territory Remote Housing NPA states that reporting requirements will be outlined in a reporting framework developed by the Northern Territory Government and approved by the Joint Steering Committee. The Committee noted a draft reporting framework at its second meeting in November 2019. The framework indicates that progress against the NPA’s Aboriginal employment targets will be reported monthly through an online public dashboard, along with information on the proportion and value of contracts awarded to Aboriginal businesses. As at February 2020 the reporting framework had not been finalised and no performance information had been reported publicly.

3.46 The Australian Government has committed to providing milestone payments of $7.5 million each year to the Northern Territory Government if it achieves the NPA’s employment targets. As at February 2020 no milestone payments had been made under the NPA for achievement of employment targets.

3.47 As with other intergovernmental agreements with participation targets, NIAA should ensure reporting against the target feeds into COAG’s annual reporting of Aboriginal and Torres Strait Islander employment and business outcomes from jurisdictional participation targets (see Recommendation no.2, paragraph 2.53).

Have entities established arrangements to gain appropriate assurance that participation targets are being met?

3.48 Performance against Aboriginal and Torres Strait Islander participation targets is now a common criterion assessed in tender evaluations for major government procurements.⁶² This creates a positive incentive for contractors to increase levels of Aboriginal and Torres Strait Islander participation on projects. At the same time, it introduces a risk that participation levels are misreported. To mitigate this risk, entities managing projects with participation targets should establish appropriate controls and assurance activities to ensure reporting against targets is accurate and policy outcomes are achieved. Entities responsible for participation target policies should also provide clear advice on appropriate controls and assurance activities, and undertake reviews to check that these arrangements have been implemented. The potential consequences of this risk being realised are that a well-intentioned policy may be discredited and outcomes for Aboriginal and Torres Strait Islander peoples not achieved. Box 3 below provides an example of when this risk was realised for a jurisdictional policy.

3.49 To assess whether these risks are being managed for current intergovernmental agreements with participation target requirements, the ANAO examined whether entities have established arrangements to gain appropriate assurance.

Northern Australia Roads Programs

3.50 As noted in Table 2.3, the Framework to maximise Indigenous employment and business opportunities in Northern Australia does not include any compliance and assurance requirements. Infrastructure informed the ANAO that jurisdictions are responsible for gaining assurance over reported levels of Aboriginal and Torres Strait Islander participation.

3.51 The ANAO examined the Northern Territory and Queensland governments’ assurance arrangements for Northern Australia Roads Programs projects.

• The Northern Territory Department of Infrastructure, Planning and Logistics has a dedicated compliance team that undertakes assurance checks on all infrastructure projects valued over $5 million with Indigenous Development Plans in place. The team conducts site visits and examines whether contractors have adequate records to support reported participation target results.
• The Queensland Department of Main Roads and Transport informed the ANAO that it does not undertake assurance checks on the numbers reported against participation targets for Northern Australia Roads Programs projects (stating that it felt project managers would be able to identify if figures were falsified).

3.52 Infrastructure has not sought any information from jurisdictions on their levels of assurance over reported results. Further, Infrastructure’s 2018–19 assurance and compliance program for the Northern Australia Roads Programs did not review controls or assurance arrangements for participation target reporting.

2019 Land Transport Infrastructure Projects NPA

3.53 Through consultation undertaken in 2017 and 2018 to inform the development of the Indigenous Employment and Supplier-Use Infrastructure Framework for the 2019 Land Transport Infrastructure Projects NPA, several stakeholder groups raised the need for regular audits to verify reported levels of Aboriginal and Torres Strait Islander participation. In particular, Aboriginal and Torres Strait Islander construction firms claimed that fraudulent activity was taking place on larger scale projects. Accordingly, Infrastructure outlined relevant measures within the new framework.

• The framework outlines processes for verifying the indigeneity of individuals and businesses. It allows jurisdictions to exercise discretion about approaches used, but suggests that individuals provide a statutory declaration or a confirmation of indigeneity and that businesses should be registered with Supply Nation or the Office of the Registrar of Indigenous Corporations or be able to provide other satisfactory evidence.⁶⁵
• Jurisdictions are also required under the framework ‘to keep effective records on the performance of contractors against their Indigenous participation requirements’.⁶⁶

3.54 Infrastructure has also established an Infrastructure Investment Risk and Assurance Program for the Land Transport Infrastructure Projects NPA, which includes conducting site visits and documentation reviews for a sample of funded projects. Infrastructure informed the ANAO that Aboriginal and Torres Strait Islander participation target requirements would be incorporated into this program as a key risk from the 2020–21 assessment cycle.

3.55 In addition, the Indigenous Employment and Supplier-Use Infrastructure Framework outlines that Infrastructure will undertake two reviews of its operation: an interim review after 2 years; and a substantive review after 3-4 years to inform the next NPA. Infrastructure should ensure that these reviews examine whether jurisdictions have implemented required controls and are undertaking appropriate assurance activities.

City and Regional Deals

3.56 The only deal for which reporting against a participation target has occurred is the Townsville City Deal. Stakeholders in the North Queensland Stadium project interviewed by the ANAO raised concerns about the robustness of reported levels of Aboriginal and Torres Strait Islander employment. Infrastructure informed the ANAO that the Queensland Government receives regular reporting from the contractor on employment levels and has access rights to audit this reporting but has not had cause to do so to date.

3.57 For other City and Regional Deals, assurance arrangements have not been established. Infrastructure informed the ANAO that it would consider assurance arrangements in developing the framework for City and Regional Deal participation targets (see Recommendation no.1, paragraph 2.35).

2019 Northern Territory Remote Housing NPA

3.58 Under the 2016–2018 Remote Housing NPA, the Australian Government made milestone payments to jurisdictions when they met agreed Aboriginal and Torres Strait Islander employment targets. The ANAO’s 2018 audit of the effectiveness of monitoring and payment arrangements for NPAs found there was no evidence that PM&C (which managed the NPA at that time) validated reported results for employment targets before authorising milestone payments.⁶⁷

3.59 As noted at paragraph 2.43, the Northern Territory Department of Local Government, Housing and Community Development informed the ANAO that the reporting framework for the NPA could also outline assurance arrangements. In addition, the NPA notes that a monitoring role will be established for Northern Territory Aboriginal Land Councils, which could include reporting on compliance and assurance matters.

Risk-based assurance arrangements

3.60 In addition to stakeholder concerns about levels of assurance over reported participation, the consultation undertaken in 2017 and 2018 to inform the development of the Indigenous Employment and Supplier-Use Infrastructure Framework also revealed that most jurisdictions felt they do not have capacity to conduct assurance audits to verify reported information.

3.61 Given the risk outlined at paragraph 3.48, Infrastructure and NIAA need to assess whether appropriate risk-based assurance arrangements are in place for current intergovernmental agreements with participation target requirements. Such arrangements should involve: providing clear advice to jurisdictions on what constitutes appropriate controls and assurance activities; and conducting periodic reviews that check that jurisdictions have implemented these assurance arrangements.

Appendix 1 Entity responses

Appendix 2 Draft Indigenous Participation Framework

Figure A.1: Draft framework agreed in principle by COAG in April 2016

Appendix 3 Jurisdictional Aboriginal and Torres Strait Islander procurement policies

Appendix 4 2019 Land Transport Infrastructure Projects NPA projects and participation targets

Table A.2: Approved 2019 Land Transport Infrastructure Projects NPA projects, as at February 2020

Key:  
    Combined targets greater than or equal to working-age population 
    Combined targets less than working-age population

Note a: Proportion of the working-age population identifying as Aboriginal and/or Torres Strait Islander calculated by the Australian Bureau of Statistics under memorandum-of-understanding with the Department of Infrastructure, Transport, Cities and Regional Development.

Note b: Project adopted the NSW Government’s Aboriginal Participation in Construction policy requirements, which can be achieved by a targeted project spend directed towards Aboriginal employment, engagement of Aboriginal owned business, education and training, and engagement or consultation with Aboriginal organisations.

Note c: Projects adopted the Western Australia Government’s Aboriginal Procurement Policy targets, which are based on a proportion of the number of awarded contracts rather than a proportion of the total supplier contract value.

Source: ANAO analysis.

Appendix 5 Northern Australia Roads Programs participation outcomes

Table A.3: Participation outcomes for completed Northern Australia Roads Program work packages, as at December 2019

Key:  
    Combined targets greater than or equal to working-age population Actual result equal to or exceeded participation target
    Combined targets less than working-age population Actual result less than participation target

Note a: Individual work packages are not identified in this table. Infrastructure informed the ANAO that identifying individual work packages would be detrimental to its relationships with jurisdictions because the Framework to maximise Indigenous employment and business opportunities in Northern Australia did not commit to public reporting at this level. In contrast, the Indigenous Employment and Supplier-Use Infrastructure Framework for the 2019 Land Transport Infrastructure Projects NPA commits to project-by-project reporting.

Note b: Proportion of the working-age population identifying as Aboriginal and/or Torres Strait Islander calculated by the ANAO, based on Australian Bureau of Statistics 2016 Census data for the region(s) in which the work package was implemented.

Source: ANAO analysis.