In a push to bolster Indigenous economic participation, the Australian federal government has announced plans to increase its procurement spending with Aboriginal and Torres Strait Islander-owned businesses, while intensifying efforts to combat fraudulent practices known as Black cladding. Under the updated National Indigenous Procurement Policy, the government aims to raise its target from 2.5% to 3% of total contracts by the 2025-26 financial year, with further increases to 4% by 2030. This comes as new research highlights ongoing vulnerabilities in the system, with millions of dollars allegedly diverted from genuine Indigenous enterprises due to misrepresentation by non-Indigenous firms.
The Indigenous Procurement Policy, first introduced in 2015 by the Abbott government, was designed to address historical under-investment in First Nations businesses. Since its inception, it has facilitated more than A$12 billion in contracts, supporting thousands of legitimate Indigenous-owned companies across Australia. However, concerns have persisted about Black cladding, a term describing how non-Indigenous businesses falsely inflate or fabricate Indigenous involvement to qualify for these lucrative opportunities. Indigenous business leaders have long voiced fears that such fraud undermines community development and erodes trust in the procurement process.
Recent reforms, set to take effect from July 1 this year, include stricter eligibility rules. By July 1, 2026, businesses will need to be at least 51% owned and controlled by Indigenous individuals—up from the current 50% threshold—or registered with the federal Office of the Registrar of Indigenous Corporations. The National Indigenous Australians Agency is also working to streamline reporting mechanisms for suspected fraud, promising a "zero tolerance" approach to Black cladding. Prime Minister Anthony Albanese's Labor government has emphasized these changes as a commitment to fairness, building on acknowledgments from previous Coalition administrations that the issue has plagued the policy since its early days.
Despite these steps, a new study published in the inaugural edition of the International Journal of Indigenous Business argues that the reforms fall short of addressing systemic flaws. The research, conducted by an expert in Indigenous economic policy, reveals that from 2015 to mid-2023, just 18 firms captured 50% of federal Indigenous procurement spending, totaling A$7 billion. Notably, a significant portion of these funds flowed to businesses based in Canberra, raising questions about geographic equity and the concentration of opportunities. "Research published in November revealed that from 2015 to mid-2023, just 18 firms won 50% of federal Indigenous procurement spending, worth A$7 billion," the study notes, highlighting how this imbalance has persisted despite repeated warnings from Indigenous advocates.
The author of the research, who has examined the policy's decade-long track record, points to a lack of robust oversight as a core problem. "My new research... finds the Indigenous Procurement Policy needs additional reforms. All of them come down to better oversight and public accountability," the expert writes. Current mechanisms, they argue, rely too heavily on centralized compliance checks, sidelining community knowledge and cultural verification. Without independent investigations, fraudulent claims often go unchallenged until exposed by grassroots efforts, leaving genuine Indigenous operators at a disadvantage.
Indigenous business owners have reported personal and professional risks in calling out suspected Black cladding, deterring many from speaking up. The study calls for stronger whistleblower protections and enforceable penalties, such as contract clauses that impose financial repercussions for misrepresentation. "At the moment, calling out Black cladding can come with personal or professional risk," it states. "Many Indigenous business owners stay silent because there’s no safe way to report misconduct." In comparison, sectors like corporate reporting and taxation benefit from rigorous external audits, a standard the researcher believes should extend to Indigenous procurement to prevent fraud from flourishing.
Proposals in the research include establishing an investigative body equipped with both cultural and commercial expertise to probe suspicious ownership structures. This arm would provide secure reporting channels and ensure claims of Indigeneity are cross-checked against community-controlled authorities. "There is no independent system to properly investigate fraudulent claims of Indigeneity or business structures designed to look Indigenous, but in fact are not," the study observes. Such measures, the expert suggests, would transform the policy from a compliance-focused framework into one rooted in genuine partnership with Indigenous communities.
The broader context of these issues traces back to the policy's origins amid efforts to rectify colonial-era disparities in economic opportunities for First Nations peoples. Over the past nine years, while the A$12 billion in contracts has undeniably boosted sectors like construction, consulting, and training, the specter of fraud has loomed large. A November report, referenced in the new research, mapped procurement flows and underscored how urban centers like Canberra have disproportionately benefited, potentially sidelining regional and remote Indigenous enterprises that align more closely with community needs.
Government officials have defended the ongoing reforms as comprehensive, with the National Indigenous Australians Agency actively consulting stakeholders on implementation details. Yet, Indigenous leaders continue to push for more. "The current federal government has pledged ‘zero tolerance for black cladding’. However, my new research published today has found its reforms – underway now and into 2026 – don’t go far enough," the researcher asserts, emphasizing the need for collaboration to preserve the cultural essence of Indigenous business models.
Beyond financial losses, Black cladding is seen as a threat to the unique values embedded in many Indigenous enterprises. Unlike purely profit-driven Western models, these businesses often prioritize community welfare, such as youth training programs or reinvestments in cultural initiatives and land custodianship. "Many Indigenous enterprises don’t exist solely to maximise profit. They work to meet community needs and aspirations, guided by culture, shared responsibility and custodianship of Country," the study explains. When fraud diverts resources, it not only siphons funds but also diminishes the social and cultural impacts that define Indigenous economic success.
For instance, some Indigenous firms forgo short-term gains to focus on long-term community building, like developing infrastructure in remote areas or preserving traditional knowledge through business activities. The concentration of contracts among a handful of firms, as detailed in the research, may favor those adopting aggressive commercial strategies over culturally attuned approaches, further marginalizing diverse Indigenous voices.
Looking ahead, the federal government's five-year plan signals a sustained commitment, with procurement spending projected to grow substantially under the elevated targets. However, the effectiveness of these changes will depend on addressing the gaps identified in the new study. As details for the 2026 eligibility updates are finalized, calls for an investigative infrastructure and community-led verification processes are gaining traction among Indigenous organizations.
In the coming months, the National Indigenous Australians Agency plans public consultations to refine reporting tools for Black cladding suspicions, potentially incorporating digital platforms for anonymous tips. Meanwhile, advocacy groups are mobilizing to ensure that reforms honor the policy's original intent: empowering First Nations businesses to thrive on their own terms. The stakes are high, as unresolved fraud risks perpetuating inequities in a system meant to foster equity.
Emily Chen, The Appleton Times