The announcement by the NT government late on Friday afternoon that it would immediately shut down the Indigenous Employment Provisional Sum (IEPS) program because of ‘potential widespread fraud’ was unsurprising and long overdue.

Information is sketchy at present but, NT Deputy Chief Minister Nicole Manison’s media release, soon followed by another from the NT Department of Infrastructure—responsible for administration of the IEPS program—give us brief glimpses of the latest on a growing list of scandals emerging from the Country Liberal Party’s administration of the NT from 2012 to August 2016.

The Northern Myth understands that there are now parallel investigations by both the NT Auditor-General and the NT Police. Allegations include that companies using the scheme were claiming payments for non-indigenous employees in order to meet the qualifications for NT government tenders and contracts and that one case of alleged fraud of the scheme had been referred to NT Police as long ago as March this year. The NT News reported on Saturday that $42.5 million had been paid out through the program from late 2014 to end of June 2017.

Why is this important? Firstly it lifts a scab on a program that has been the subject of concern—particularly among the CLP’s own conservative business base in Alice Springs in particular—for some time, and secondly because the Auditor-General and police inquiries may lead to criminal charges being laid for fraudulent activities from two industry sectors—aboriginal employment and the construction sector—that are key elements of the NT economy. A third factor is less clear at present but for mine, these inquiries may provide references for the coming NT Independent Commission Against Corruption, the legislation for which will be introduced into the NT Legislative Assembly in the August sittings and which will be operational by mid-2018.

“Black-cladding”—a term apparently coined by Warren Mundine in 2015 with reference to a similarly controversial Commonwealth scheme—was described by Stephen Easton at The Mandarin as little more than a scam where joint ventures are:

… designed to put a veneer of indigenous ownership on a large established business that gets most of the financial benefit and has few indigenous employees.

Easton reports Mundine as saying he was aware of larger companies forming partnerships ‘with a couple of elders or a smaller indigenous group’ just so they could list Indigenous names as directors and that he was fearful that this was happening because the policy has created a skewed demand for suppliers that fit the policy rather than promoting indigenous employment.

The IEPS was rolled out in October 2014 but hit its straps in August 2015, around the time that a complementary program, the Remote Contracting Policy (RCP) was introduced. Speaking at the Garma Festival in 2015, then NT Chief Minister Adam Giles trumpeted the merits of the IEPS and other employment policies developed and implemented by the CLP, saying that his government’s policies could see:

A doubling [of] public sector Indigenous employment from 1800 to 3600 employees by 2020; requiring each contractor to achieve 30% Aboriginal employment for all Government infrastructure contracts above $500,000; a new remote contracting policy aimed at ensuring 70% of small contracts for construction, repairs and maintenance in remote Aboriginal communities go to local Aboriginal businesses by 2017; and ensuring a minimum of five civil and construction contracts per year valued at over $5 million are awarded to joint venture proposals with Aboriginal businesses.

According to the skimpy—four pages long—policy document produced by the NT Department of Infrastructure released in August 2015, indigenous participation in NT construction projects would be a mandatory requirement for all tenders for government construction projects over $500,000. The compliance requirements could be described as modest at best:

Reporting
The Contractor is to provide monthly Indigenous Employment Reports to support progress for payment against the Indigenous Employment Provisional Sum.
Audit
The Representative of the Principal may conduct audits on compliance of tender and contract.
Contractor Performance
The Contractor will be required to provide a report on compliance (achievements against the contract requirements) with the Indigenous Development Plan within thirty (30) days of the completion of the Contract. Contract performance outcomes may be taken into consideration for future construction project tender evaluations.

It didn’t take long for locals with skin in the construction game to react to the new policy, with the strongest resistance coming from a group of builders and contractors in Alice Springs. In early February 2016 the online Alice Springs News—which covered this issue better than more well-resourced print and electronic media outlets— ran the comments of an anonymous local builder, who said that Adam Giles’ policy made assumptions about an Aboriginal construction industry that ‘didn’t exist’ and that had:

… a skill base that is still largely absent; there will be a blow-out in pay for the few Indigenous people who do have skills and that will in turn escalate what non-Indigenous people will charge.

The source identified other practical and legal concerns that appear prescient eighteen months later, including possible misrepresentations or fraudulent conduct, concerns about the employment status of long-term non-Aboriginal staff and that employers were required to employ on the basis of race rather than merit. Local anger wasn’t assuaged by an Adam Giles media release on these issues and on 20 February 2016 a group of sixteen local builders and contractors met in Alice Springs. The meeting was convened by electrical contractor Steve Brown, who—uncomfortably for Adam Giles and the Country Liberal Party—was the pre-selected CLP candidate for the Alice Springs suburban seat of Araluen.

The Alice Springs News published parts of the exchange between attendees at the meeting and the unfortunate advisor to Chief Minister Giles, who called into the meeting by phone. One comment foreshadowed local concerns about what would soon become known as “black-cladding”:

You can get a shelf company, put on an Indigenous person as a director for $500 a week, and you have a local indigenous company? The advisor countered, along the lines, ‘we know what companies are doing.’

Three weeks later local concerns with the procurement policies had crystallised ahead of a face-to-face meeting between builders and government officers. The Alice Springs News listed the issues identified by an anonymous source, the most serious of which included:

  • The scheme is tantamount to an open invitation to defraud the taxpayer because there will be no test of whether a participant is Aboriginal.
  • A $2 Pty Ltd company, easy to set up, if at least 50% Indigenous owned would qualify as an Indigenous Business Enterprise. It could partner in a joint venture with any construction firm which then could gain a bonus of hundreds of thousands of dollars from the NT Government.
  • Builders and contractors may need to sack tried and proven workers to employ Indigenous persons who may be less qualified.
  • There is a shortage of skilled Indigenous construction workers in the NT, making it necessary to bring some in from interstate a great cost.
  • Instead of improving race relations the policy will exacerbate tensions.

The meeting the next day was attended by at least one hundred people, many in high-vis gear and working boots. As the Alice Springs News noted, many of these small businessmen and contractors were solid CLP supporters. Later that month CLP candidate Steve Brown described the indigenous employment and procurement polices as ‘ill-considered’ and ‘blatantly racist.’ Brown didn’t elaborate on what aspects of his party’s policies he considered ‘racist’ but it may be that he considered the policies unfairly favoured Aboriginal workers. Or discriminated against non-Aboriginal businesses or workers. Or both.

The following day another conservative politician spoke up about similar procurement policies developed by the Federal government. In an opinion piece in The Australian, Warren Mundine noted that he’d seen companies ‘scrambling to set up joint ventures with indigenous people’ and warned that black-cladding:

… doesn’t help indigenous people move into the real economy. Companies will hinder the policy if they tolerate or participate in black cladding.

Over the next few months concerns about black-cladding at both the Federal and Territory levels slipped off the radar. It is unclear what, if any, changes were made by the CLP government but in early April 2016 Deputy Chief Minister Peter Styles announced the issue of a tender to evaluate both the IEPS and the RCP, noting that while the policies had achieved some ‘promising results,’ Chief Minister Adam Giles had ‘listened to the concerns of businesses and the community’ and asked Styles to initiate a review. This was an easy ask readily met, because the August 2015 IEPS policy document notes that the IEPS would be reviewed six months after implementation and annually thereafter.

What else the NT government did—if anything— to assuage the concerns of Alice Springs-based businesses in particular is unclear but a week before the August 2016 election Adam Giles was touting the IEPS as the top indigenous policy priority for the CLP in the (highly unlikely) event that it were to be re-elected.

KPMG commenced their review into both the IEPS and the RCP in May 2016 and handed the report to the new NT Labor government in December 2016.

The KPMG report acknowledges that both the IEPS and the RCP make some valuable contributions and that “both government and industry have a role to play in increasing Indigenous economic activity and workforce participation” but goes on to note that this is:

 … somewhat tempered by the perceived onerous compliance framework and perception that policy loopholes are being exploited.

The size and nature of those policy loopholes is unclear, but judging by the referrals in march and last week to the NT Police and the Auditor-General and the reference to ‘potential widespread fraud’ in the IEPS they may well have been loopholes big enough to fit a fair-sized tipper truck through.

Or at least a tradies ute.