DEI and Social Procurement in Victoria

Peter Angelico
Peter is the successful founder of an Australian manufacturing company, and he wants government to get out of the way! Peter was the 2023 Greater Dandenong Corporate Citizen of the Year.

Over the past decade, the Victorian Government has increasingly used public procurement as a lever to pursue broader social objectives. Through diversity, equity and inclusion (DEI) requirements, social procurement frameworks, and workforce participation policies, government purchasing decisions have expanded well beyond their traditional purpose of acquiring goods and services at best value for taxpayers.

While these policies are presented as advancing fairness, inclusion, and opportunity, their practical effect has been to embed non-commercial criteria directly into procurement decisions. For Victoria’s suppliers and manufacturers – particularly small and medium enterprises – this shift has created significant unintended consequences.

I believe current DEI and social procurement settings are structurally detrimental to local industry, and that procurement grounded in the libertarian principles of neutrality, merit, and voluntary exchange would better serve Victorian businesses, workers, and the public interest.

Public procurement has historically rested on a clear foundation: competition, probity, and value for money. Governments specified what they needed, suppliers competed on price, quality, and delivery, and taxpayers benefitted from efficiency and accountability.

In recent years, that clarity has eroded. DEI and social procurement requirements now routinely require bidders to demonstrate workforce composition targets, gender participation plans, social enterprise engagement, and other policy outcomes that are unrelated to the technical performance of the goods or services being purchased. These requirements are often weighted in tender evaluations or embedded as mandatory eligibility criteria.

For Victorian manufacturers, this represents a fundamental change in risk and cost. Businesses are no longer competing solely on capability and efficiency. They are required to absorb administrative, reporting, and compliance burdens that function as indirect regulation, even where those obligations have no bearing on product quality or project delivery.

Markets function best when participants are rewarded for efficiency, innovation, reliability, and quality.

A Victorian manufacturer bidding for government-linked work is typically required to demonstrate compliance with workplace relations codes, social procurement plans, diversity reporting, and project-specific participation requirements. These obligations carry real costs – consultants, documentation, audits, internal systems, and management time – all of which must be priced into bids.

By contrast, imported fabricated goods enter the Victorian supply chain without those social costs embedded at the point of manufacture. Offshore producers are not subject to Victorian employment law, DEI reporting, or social procurement frameworks. Their products arrive as finished items, stripped of the regulatory burden imposed on local firms.

This creates an uneven competitive field:

• Local manufacturers face higher bid costs and reduced price-competitiveness
• Offshore supply chains benefit from regulatory arbitrage
• Head contractors are incentivised to source fabrication offshore while meeting “social value” obligations elsewhere

The result is that Victorian suppliers increasingly lose work not due to lack of capability, but because policy settings penalise onshore production.

Proponents of social procurement often argue that compliance requirements are reasonable and proportionate. That is not the case. Furthermore, they are not neutral.

Large multinational contractors can amortise compliance costs across vast portfolios. Small and mid-sized Victorian manufacturers cannot. For a firm employing 20–50 people, the marginal cost of DEI documentation, reporting, and tender compliance can determine whether bidding is viable at all.

This produces three predictable outcomes:

1. Market concentration, favouring large incumbents
2. Reduced competition, driving higher prices and lower innovation
3. Increased import substitution, as offshore supply avoids local compliance costs

Ironically, policies intended to promote inclusion and fairness end up hollowing out local manufacturing capacity, reducing employment opportunities in the very communities they are meant to support.

Anyone who has spent time researching manufactured products online will recognise a familiar – and increasingly uncomfortable – phenomenon: the endless stream of YouTube videos showing goods being made offshore.

What often begins as curiosity quickly becomes confronting. Video after video reveals workers operating without guards or personal protective equipment, manual handling performed inches from live machinery, sparks flying near exposed wiring, and production lines where quality control appears minimal or non-existent. Measuring instruments are rare. Traceability is absent. Documentation is unheard of.

Comment sections frequently fill the gap left by the footage, with viewers openly questioning whether the products could comply with Australian requirements set by bodies such as Standards Australia, or whether they would pass even a basic site inspection in Victoria. Many remark that such conditions would shut a local workshop down within hours.

And yet, these are often the same products that arrive on Australian docks, are incorporated into government-funded projects, and compete directly with goods manufactured locally under strict safety, environmental, and quality regimes.

This is not an argument against trade, nor a claim that all offshore manufacturing is substandard. It is a simple observation: the expectations placed on Victorian suppliers are demonstrably not mirrored across many imported supply chains, despite the rhetoric of fairness and responsibility.

The consequences of this imbalance are no longer abstract. Structural failures occur. Signs detach and fall onto vehicles on major transport corridors such as CityLink. Asbestos is discovered in imported wind-tower components. Battery energy storage facilities ignite and burn. Combustible cladding catches fire and spreads rapidly.

Each incident prompts inquiries, reports, and expressions of concern. Yet the underlying procurement settings remain largely unchanged. Victorian manufacturers are held to exacting standards of safety, quality assurance, traceability, and compliance, while imported products that bypass equivalent scrutiny continue to enter critical infrastructure and public assets.

The policy question is not whether these incidents are unfortunate. It is why risks that would be unacceptable for local suppliers are tolerated when the same goods are sourced offshore.

Markets function best when participants are rewarded for efficiency, innovation, reliability, and quality. DEI procurement frameworks dilute these signals by elevating group-based outcome targets over operational performance.

The result is that Victorian suppliers increasingly lose work not due to lack of capability.

For manufacturers, this distorts incentives:

• Hiring and subcontracting decisions are influenced by tender scoring rather than operational need
• Management focus shifts from productivity to compliance
• Risk aversion increases, discouraging investment and innovation

Over time, this weakens competitiveness – not only against imports, but against international peers operating under more neutral procurement regimes.

A libertarian approach to procurement does not reject fairness or opportunity. It rejects coercion and distortion. Under a neutral procurement model:

• Government purchases goods and services based on price, quality, safety, and delivery
• Social objectives are pursued through separate, transparent policy mechanisms
• Businesses retain freedom over workforce and supply-chain decisions
• Competition – not compliance – drives innovation and inclusion

If governments wish to support training, apprenticeships, or disadvantaged groups, those goals should be funded openly through budgets and debated transparently – not embedded indirectly through procurement penalties.

Re-anchoring procurement in libertarian principles would deliver tangible benefits:

1. Restored competitiveness for local manufacturers
2. Greater SME participation and stronger competition
3. Improved value for taxpayers through lower costs and innovation
4. Stronger sovereign capability driven by merit, not mandate
5. Clear accountability, separating economic purchasing from social policy

Growth-driven employment creates more genuine opportunity than quota-driven procurement ever can.

Victoria’s DEI and social procurement policies might be well-intentioned, but good intentions do not override economic reality. When procurement frameworks penalise local production, distort competition, and incentivise offshoring, the long-term cost is borne by Victorian manufacturers, workers, and communities.

A libertarian procurement framework offers a credible alternative: let procurement buy value, let markets allocate work, and let social policy be pursued openly and honestly.

For Victorian suppliers and manufacturers, neutrality is not ideology. It is survival.

This article was originally published by Liberty Itch.