The Australian government wants to make sure its contracts – worth almost A$75 billion annually – don’t just deliver taxpayers value for money, but also promote gender equity.

Under proposed procurement policy changes announced earlier this month, large companies that wish to bid for government contracts will first have to meet some gender equality conditions.

How exactly will these measures work across Australia’s huge private sector, and what kind of an impact could they have?

Not a new idea

Federal tender processes – the way we try to award government contracts to the best possible providers – currently follow a set of Commonwealth procurement rules.

They must provide value for money, encourage competition and ensure that public funds are used in an “efficient, effective, economical and ethical” way.

Using tenders as a lever to achieve gender equality isn’t a new idea. It’s been recommended around the world, including by the OECD, the Asian Development Bank, and the World Bank Group.

The idea is for the government to use its “purchasing power” to incentivise – and in effect pressure – companies to take bolder steps toward achieving gender equality.

It’s a way to make sure the government’s direct efforts to promote gender equality aren’t being contradicted or undone elsewhere in the ways taxpayers’ money gets spent.

Existing requirements for Australian companies

In Australia, companies with at least 100 staff are already required to report to the Workplace Gender Equality Agency (WGEA) on six gender equality indicators. These indicators cover:

• workforce composition
• board composition
• the gender pay gap
• the availability of flexible working arrangements
• employee consultation processes
• policies on sexual harassment.

Bidding for some government contracts also requires companies to prove their compliance with the WGEA’s reporting processes. This involves downloading a certificate from the agency’s website.

Under the proposed changes, large companies with more than 500 employees will have to go beyond just reporting their numbers. If they want to remain in the running for government contracts, they will need to set and achieve measurable targets for their organisation across at least three indicators.

As Senator Katy Gallagher, the minister for finance, women and public service, explained while announcing the measures:

We in the government believe that shining a light on what’s actually happening in workplaces will put pressure on employers to rethink how they hire, promote and remunerate their staff.

Concerns about implementation

There are concerns around the practicality, market effects and reach of such a large-scale procurement policy. But there’s reason for us to be optimistic that Australia’s proposed design goes some way to mitigate these concerns.

1. Companies might not know how to conduct this analysis

Some might say there’s a risk these new requirements will be overly burdensome for companies not already conducting this kind of analysis. Such companies may lack the resources and technical knowledge to undertake extra steps.

It’s a fair concern. OECD research shows that a lack of clarity around “what to do” is the main challenge with gender equality procurement practices globally.

But a key strength of Australia’s proposal is that it leverages existing data collection processes that companies have already invested in, not adding burdensome extra demands.

There’s evidence for the effectiveness of this approach at a state level. In a 2022 pilot, the Western Australian government introduced a new requirement that bidders for its contracts prove their compliance with WGEA’s existing reporting procedures. An evaluation of the program found the new criteria made a big difference in sharpening businesses’ awareness and understanding of gender equality.

To further mitigate this risk, the Australian government can invest in providing informational guidance to businesses on what will be required of them. Victoria’s Commission for Gender Equality in the Public Sector has already done this for state government tenders.

2. Less competition for tenders?

If an extra layer of requirements squeezes out potential contenders in the business community, there’s a risk it could lessen competition for government contracts.

Economists have good reason to worry that weaker competition could push up the price of the products and services on offer, a loss for taxpayer value.

But Victoria’s social procurement framework helps us navigate this concern, prompting us to consider the ways “value for money” can mean more than just getting the cheapest price.

A broader definition of “value” would include progress toward social goals that provide significant benefit to the community – such as women’s equality.

Gender equity practices themselves are an often overlooked source of extra value, through the broader ideas, innovation and skill sets that diversity brings. These measures mean that a new pool of businesses can join the competitive mix.

3. Limited reach

For companies that don’t have to vie for government contracts, there’s a good chance these new measures won’t carry much weight. However, the government has other ways to put pressure on them.

Already, the WGEA has the power to publicly “name and shame” companies that don’t comply with legal requirements to submit their gender equality data.

Following the public spotlighting of companies with the biggest gender pay gaps, the “non-compliance” list calls out companies that aren’t even submitting their data at all.

Read more: QANTAS pays women 37% less, Telstra and BHP 20%. Fifty years after equal pay laws, we still have a long way to go

There are some widely known names on the latest list: General Motors, Manly Warringah Sea Eagles Club, Sofitel Sydney Wentworth, and several Melbourne-based McDonald’s stores.

It’s unclear just how much being named on this list – or being deemed ineligible for government contracts – matters to these companies, or to their customers and clients.

It’s these companies – slipping through the cracks and outside of the scope of government contracts – that we will still need to focus on.

Procurement is just one lever in a multi-pronged strategy to achieve gender equality. Evaluations suggest some procurement strategies are unlikely to boost women’s bidding success unless the other deeper barriers that limit women’s involvement are also broken down. However, Australia’s existing investment in data collection means they could still be a powerful tool.