Australian aid contracting

There is no policy position that promotes the use of domestic industry - Australia has untied its aid program consistent with improved efficiency, effectiveness and value for money. Australian firms must compete with international companies and those from the countries where Australia provides aid.

Domestic industry access to the aid program is in fact very limited and well short of the 80 per cent figure often cited as 'Boomerang Aid' (aid that stays in the pockets of Australian for profit firms).

Up to 45 per cent of the aid program would be available for tender to private companies if the entire amount of AusAID's bilateral program was to be delivered by private contractors.

The actual amount available for public tender in any one year however is likely to be far lower as bilateral programs are also delivered in partnership with multilaterals and non-government organisations which significantly reduces the amount delivered by private contractors.

In 2006 - 07, AusAID entered into new contracts with a total value of approximately $500 million. Estimated official development assistance (ODA) for 2006 - 07 is $2.2 billion. Therefore the amount of newly contracted aid is only about 23 per cent of total aid for 2006-07.

Untying will increase the already substantial benefits that flow to local businesses and industry in partner countries through sub-contracting opportunities under main contracts. For example, the $20 million Papua New Guinea National Roads and Bridge Maintenance Program contracts over 95 per cent of activity funds through local firms. Over 80 per cent of personnel employed directly by the aid program in PNG are PNG citizens.

Australia is also part of a broader international effort in the OECD - Development Assistance Committee considering ways to promote greater use of developing country procurement systems and procuring more goods and services locally.

Australian aid is about quality and effectiveness. AusAID uses numerous means to deliver aid and Australian firms are one of many avenues.

June 2007