“There is definitely a role for government to stimulate the ecosystem and be the first customer for a start-up,” NSW chief scientist Professor Hugh Durrant-Whyte said.
“Rather than just going out to a big multinational, you can put tenders out in a way that is friendly to small companies. You might not do it on building WestConnex – but you might want to do it on embedding sensors in WestConnex, or for the software that might optimise its ramp meters.”
David Gonski: “You can use procurement to try to foster services being offered in a new way.” Christopher Pearce
Ms Upton’s advisory council is being chaired by David Gonski, also chairman of ANZ Bank, who says changing procurement policies “can have an enormous effect” on small business.
“The purchaser has the dollars and the power, and can bring not only revenue to new start-ups but start a way of thinking that can be followed by others,” Mr Gonski said. “This is not saying you shouldn’t use the big [vendors] but your mind should be open, and to use procurement to try to foster services being offered in a new way.”
David Shein, a partner at Our Innovation Fund, which invests in start-ups, says agencies shouldn’t be turning to a local small business just because they are Australian but because their products and services are often comparable, or better, than what is being offered from larger offshore players with scale to market their wares to government.
“Working with smaller companies has risks but lots of opportunity as well,” he said. “Government can influence the road-map for product development, while helping to grow revenues and create jobs in Australia while also making products better for the next company that buys it.”
If the NSW government does change the procurement rules, the Commonwealth could be prompted to do the same; the issue has been raised during hearings of the Senate select committee on financial technology, which is examining new policy to encourage start-ups.
Professor Hugh Durrant-Whyte said procurement polices can help to manage government’s risk expectations. “A procurement boundary says it is okay to go to a start-up, and smaller companies, when you look for tenders, and assuring them it won’t be a multi-year red tape process.”
He said the NSW Health medical devices fund, which he chairs, was a good example of government backing industry. It has invested around $50 million over the last five years in companies it thinks will have a positive impact on health outcomes in the state, and he said it had gone on to raise a further $600 million.
“It has ticked all the boxes and we are looking at how we replicate that or do something similar,” he said.
As well as Mr Gonski and Professor Durrant-Whyte, the high-powered advisory council formed by Ms Upton last October also includes directors Jillian Broadbent and Catherine Livingstone, investor Daniel Petre of AirTree Ventures, Business Council of Australia CEO Jennifer Westacott and former Australian of the Year and quantum scientist Michelle Simmons.
The NSW government is hoping to be seen as an innovation-friendly administration, and its policy levers in addition to procurement include creating precincts for start-up collaboration, like the new Atlassian-backed project planned for Central Station; better targeted trade and investment policy; and transferring research to the marketplace by funds to create minimum viable products.
Around $11 billion was invested in R&D in NSW in 2018, equivalent to 1.9 per cent of the gross state product, according to the NSW Innovation and Productivity Council’s scorecard for 2019.
