ICN’s key role in SME capability and major projects – Roy Green

On Wednesday the Industry Capability Network released a study by University of Sydney’s Phillip Toner and UTS Emeritus Professor Roy Green which recommended it should be mandatory for project proponents to work with the service which connects businesses to opportunities. Here @AuManufacturing talked to Professor Roy Green.

@AuManufacturing: The ICN has been in operation for 40 years connecting SMEs to big infrastructure and other project opportunities, why do we need an ICN?

Roy Green: It is about information asymmetries. The market doesn’t deliver the information that companies need so we need intermediaries which can maximise opportunities for locals.

If we have a model whereby big projects can just outsource to anyone and do so, what we have seen over the years is that the adopt a very narrow value for month approach which has no spin off effects for the local economy, and which diminishes the opportunity for technology development and the development of our own SMEs which could scale and become more integrated with global markets.

Even worse, large projects especially mining companies have set up systems which discriminate and exclude local firms by imposing their own specification requirements. Large mining and resource projects are the main thing where this goes on. Then of course you have the public procurement side of things with its false economy of value for money often leading to the adoption of designs and engineering projects that don’t deliver the goods for the local economy.

@AuManufacturing: Has ICN been successful, has it been doing the job?

Roy Green: Yes, if we look at 40 years it has been remarkably successful. We estimate it has added over $50 billion in value to SMEs which have taken part in the programme and it is on an increasing trajectory. It has been successful in ensuring that a lot of projects that would have otherwise gone to companies outside this country have gone to local companies, with massive spin offs to companies and regions. But it could have been more successful if it had the resources and the mandatory regulatory structure to ensure that all applicable public and private projects were subject to a process of engaging ICN.

We have missed a lot of opportunities. It is the longest lasting industrial policy in the country, but it has operated below the radar, and it has suffered from inconsistencies in funding – it has never really had significant funding at the national level. It has however managed to developed its Gateway software programme which is a database of 100,000 suppliers. It has used this to link up companies with local projects. But it has done this on a shoestring.

@AuManufacturing: So all projects, of any size should be mandated to engage with ICN?

Roy Green: We should lower the threshold significantly so smaller projects were opened to SMEs. Public and private projects, all of them should be required to consult with ICN and set out the opportunities for engaging with ICN.

@AuManufacturing: You say in your report that project proponents should be reporting back more openly about the progress they are making, and at the end of the project the progress they have made in fulfilling their obligations?

Roy Green: That is part of the compliance issue for companies. They can commit to opening up the projects to local suppliers but then they don’t proceed with that. There needs to be a feedback loop so ICN can monitor their progress. That is missing.

Also there is a need for a funding mechanism that would help those large companies to work with ICN and the SMEs to fulfil those obligations. That was provided through an interesting programme that ran previously, the supplier access to major programmes, the SAMP programme. That lasted 17 years and provided national resources to enable the process (of working with SMEs) to work smoothly (and help) large companies open up their supply chains. It is quite resource intensive to get all the information out there and while ICN has a pretty smart database, some extra resources from government would be of assistance.

@AuManufacturing: So we need to take a fresh look at ICN and how it can work better?

Roy Green: Yes, in the context of a Future Made in Australia strategy we should reassess ICN’s value and integrate it more closely with national industry policy so it plays a key part in providing opportunities for SMEs to participate in large and not so large projects, and also builds the capability to do so. A lot of SMEs don’t know how to access these projects. So for ICN and other federal and state programmes to contribute to capability building for SMEs would also be a highly beneficial as an outcome of this reappraisal.

Further reading:
ICN links suppliers to projects, needs more resources – study

Picture: Roy Green