Exemption 17: SME Exemption up to $500,000
Exemption 17, in Appendix A of the Commonwealth Procurement Rules (CPRs) allows entities to directly engage a small and medium enterprise (SME) for procurements valued up to $500,000 (including GST), providing value for money can be demonstrated.
The exemption can only be used after meeting the requirements under the Indigenous Procurement Policy (IPP), the procurement-connected policy led by the National Indigenous Australians Agency (NIAA). Entities applying exemption 17 must first satisfy the Mandatory Set Aside requirements under the IPP, meaning that an Indigenous business will have been given the opportunity to bid for the goods and services before the entity can directly engage a non‑Indigenous owned SME.
Small and Medium Enterprises (SMEs) are defined in the CPRs and include Australian and New Zealand firms with fewer than 200 full-time equivalent employees. When assessing the number of employees a firm has, employees of any associated entities (as defined in s 50AAA of the Corporations Act 2001) to the firm are included. Associated entities to a firm include a firm’s parent company, a firm’s subsidiaries, and any related bodies corporate to the firm. SMEs may include, but are not limited to:
- Local businesses, including manufacturers;
- Social enterprises;
- Veteran owned businesses; and
- Australian Disability Enterprises (ADEs)*.
The SME status of a potential supplier should be confirmed at the time of, or prior to, approaching the market using this exemption 17.
- An entity should seek written clarification from a potential supplier ascertaining their SME status, each time an entity applies this exemption 17. An optional SME Declaration form is available for this purpose.
- Self-declaration from a potential supplier does not preclude an entity from doing their own due diligence and making reasonable enquiries. This might include, for example, checking a business’s structure on their website.
- As evidence supporting the use of exemption 17, entities should keep a record of the potential suppliers’ SME status.
- An entity is not required to confirm the status of a supplier throughout the term of an existing contract, including where an existing contract is varied or an extension option has been exercised.
The exemption may only be applied to procurements with an estimated value (refer CPR paragraphs 9.2 – 9.6) between $80,000 and $500,000. When reporting contracts on AusTender, the exemption number will need to be reported as the justification for undertaking a limited tender above the procurement threshold (refer CPR paragraph 9.11).
The exemption may only be applied after first satisfying the Mandatory Set Aside requirements under the IPP.
- The Mandatory Set Aside applies to procurements to be delivered in remote Australia and for all other procurements wholly delivered in Australia valued between $80,000 and $200,000 (GST inclusive).
- Indigenous businesses must be given an opportunity to demonstrate value for money before conducting an approach to market or using this exemption 17. Should an Indigenous SME not represent value for money, an entity may then approach a non-Indigenous owned SME or SMEs directly using this exemption 17.
- Entities must document the outcome of their approach to an Indigenous business or businesses to support their justification for using this exemption 17.
- Refer to the IPP on NIAA’s website for further information on meeting the MSA requirements.
The exemption aligns with existing initiatives to support SMEs, such as:
- shortening of payment times as outlined in the Government’s Supplier Pay On-Time or Pay Interest Policy (Resource Management Guide No.417);
- use of the Commonwealth Contracting Suite – mandated for procurements valued under $200,000 with the exception of those circumstances outlined in Resource Management Guide No.420 – Mandatory use of the Commonwealth Contracting Suite for procurement under $200,000; and
- the Government’s commitment to procuring 25 per cent of all procurement contracts by value from SMEs for contracts with a value of up to $1 billion, and 40 per cent by value of contracts up to $20 million (refer CPR paragraphs 5.6 – 5.7).
Finance publishes annual aggregate statistics on achievements against the SME commitments on the Statistics on Australian Government Procurement Contracts webpage.
*Note - Exemption 15 can only be utilised for the procurement of goods and services from a business that primarily exists to provide the services of persons with a disability. For all other goods and services procured from an ADE, entities could consider utilising this exemption where appropriate. The BuyAbility website provides information on ADEs.
