Canberra tech firms are quietly furious with what they see as a lack of action on the federal government's stated preference to buy local.
Despite initial signs the Albanese government was going to take a different approach from its Coalition predecessor, Canberra tech companies that work with the federal government are saying Labor is yet to walk the walk to match its talk.
The concerns have begun to surface after a Senate committee handed down a report that found "sovereignty" in technology was poorly defined and not well understood by the APS, and a series of procurement decisions and scandals have left the tight-knit Australian industry exasperated.
The Labor party took to the election its Buy Australia Plan, which promised to shift Commonwealth Procurement Rules to support Australian businesses and jobs, and since coming to office had begun to direct government money towards local high tech manufacturing in the National Reconstruction Fund and the Future Made In Australia policy.
Canberra-headquartered Vault Cloud CEO Rupert Taylor-Price said these policies were a "ray of light" to local software businesses.
"The ambition of these companies was dramatically increased by Anthony Albanese and the election commitments in 2022."
For Australian-based technology companies that provide software and systems to the Australian government, this change of tack was perhaps most clearly signalled when ACT Senator and Finance Minister Katy Gallagher scrapped the delayed and over-budget GovERP contract with German software giant SAP, instead allowing individual departments to go to market for their own systems.
But this year, local tech firms are losing hope that these statements from the top will shift the notoriously hard to change architecture of government procurement.
It follows the joint state-federal billion dollar outlay on US company's PsiQuantum's plans to build a quantum computer in Queensland, its full throated endorsement of a contract with Amazon Web Services to construct a high security data centre and the unfolding scandal around Salesforce's contracts with the NDIA which saw a $10 million contract explode to $210 million and included undeclared wining and dining of NDIA officials.
While some of these issues occurred under the previous Coalition government, that "ray of light" had dimmed, Mr Taylor-Price said.
"There is still hope there, but there's almost universal frustration."
A 'broken' system
Co-founder of Canberra based learning software company Acorn Blake Proberts said it was "near impossible" for Australian-based firms to compete for Commonwealth government contracts.
Mr Proberts' firm has been successful by carving out a space that is otherwise ignored by multinational tech companies and supported by more junior public servants who backed the technology, but said he would often field calls from other local tech companies that were unable to get a foot in the door.
"Often I have other technology focused businesses that will reach out to me and say, 'We're just not having any luck, how on earth do we get into that government space?'
"It's incredibly difficult to navigate if you've never done it before."
According to the Australian Information Industry Association, eight per cent of the federal government's ICT spend goes to Australian companies.
This is far below comparable countries such as Canada, Singapore and the UK, Mr Taylor-Price said.
"I don't think anyone knows what the natural market share would be, but I'd suggest it would be somewhere between 30 and 60 per cent in the [Australian] market."
Mr Taylor-Price said the market for Australian tech firms to supply to government was broken.
He put this down to a cultural aversion to buying local, procurement rules that favour incumbents, usually large multinationals, and then a structural bias against local companies, which pay tax in Australia, against multinationals who are able to reduce their taxable incomes in Australia.
Damian Kassabgi, CEO of the Tech Council of Australia - which represents large and small tech companies, said more needed to be done to break down barriers for SMEs.
"An increased focus is needed on removing barriers to more innovative tech companies, particularly SMEs, participating in government procurement," he said.
"This will help drive better outcomes for both government and our economy."
A spokesperson for the Department of Finance said the government's changes to the Commonwealth Procurement Rules would seek to ensure more Commonwealth dollars were spent locally.
"The Commonwealth Procurement Rules were updated, effective July 1, 2024 and include a number of initiatives that reinforce the government's commitment to sourcing from small and medium enterprises (SMEs)," the spokesperson said.
These include increasing the targets for purchases from SMEs and increasing the value of the contracts to which the targets apply.
"Both increases will require sustained effort by Commonwealth entities to meet those revised targets, resulting in more opportunities for SMEs," the spokesperson said.
Mr Kassabgi said growing the Business Research and Innovation Initiative would pay dividends.
"This is something we called for in our evidence to the inquiry."
Mr Taylor-Price said the industry was adopting a "wait and see" approach on the recent changes.
"It's yet to be seen if the tweaks to the system that have been made will result in a change, but in the short term we haven't seen that change."
What are we missing out on?
Despite being the 13th largest economy in the world, the Atlas of Economic Complexity ranks Australia at 93, ahead of Pakistan, but behind Uganda.
Over the past two decades, Australia's economic complexity has dropped, as the country's manufacturing base has hollowed out, and the nation's wealth has depended upon exports of unprocessed minerals.
This has created vulnerabilities for the country, most clearly exposed during COVID, when international supply chains broke down.
At the same time, the systems that a modern economy increasingly relies upon have become more complex, Australia has lagged behind, with AI adoption at the bottom of the pack of OECD countries, Productivity Commission chair Danielle Wood told a business summit in February.
Mr Proberts said addressing this by sourcing more tech locally and supporting the development of a more complex domestic industry would stop the brain drain of those with highly developed digital skills.
"In Canberra, if you want to work in tech, you leave."
The Department of Finance spokesperson said the government was committing to supporting more local SMEs.
"The Australian government is committed to supporting businesses, including SMEs, to improve their capability to compete for government contracts."
Mr Kassabgi acknowledged the work being done by the current government.
"We also welcome the work Minister Gallagher and Minister Husic have been progressing on procurement reform, and look forward to continuing to work with Government on these issues."
For Mr Taylor-Price, buying local meant supporting prosperity and security.
"If we don't have an industrial base here in Australia, we're left weak from a national security position, we're left weak from an economic position, and we're left in a dystopian world where in my mind citizens are reliant on foreign suppliers for everything they need in everyday life," he said.
"And I don't think any Australian wants that."
