EXPLANATORY STATEMENT
Issued by the authority of the Minister for Industry, Energy and Emissions Reduction
Industry Research and Development Act 1986
Industry Research and Development (Supply Chain Resilience Initiative Program) Instrument 2021
Purpose and Operation
Section 33 of the Industry Research and Development Act 1986 (the IR&D Act) provides a mechanism for the Minister to prescribe programs, by disallowable legislative instrument, in relation to industry, innovation, science or research, including in relation to the expenditure of Commonwealth money under such programs.
The statutory framework provided by section 33 of the IR&D Act enables a level of flexibility to provide authority for Commonwealth spending activities in relation to industry, innovation, science and research programs. This allows the Government to respond quickly and appropriately to the need to implement innovative ideas and pilot programs on an ongoing basis and as opportunities arise. Prescribing programs in legislative instruments provides transparency and parliamentary oversight of Government programs and spending activities, whilst reducing administrative burden on the Commonwealth.
Once a program is prescribed by the Minister under section 33, subsection 34(1) allows the Commonwealth to make, vary or administer arrangements in relation to activities under the prescribed program. Arrangements may include contracts, funding agreements or other arrangements, and may provide for money to be payable by the Commonwealth to one or more third parties. The power conferred on the Commonwealth by subsection 34(1) may be exercised on behalf of the Commonwealth by a Minister or an accountable authority of a non‑corporate Commonwealth entity, or by their delegate (under section 36).
The purpose of the Industry Research and Development (Supply Chain Resilience Initiative Program) Instrument 2021 (the Legislative Instrument) is to prescribe the Supply Chain Resilience Initiative (the Program). The funding for the Program has been secured through the Department of Industry, Science, Energy and Resources (the Department) 2020-2021 Budget. The Program provides $107.2 million over four financial years from 2020-21 to 2023-24 as part of the Australian Government’s commitment to the Modern Manufacturing Strategy, including the $100 million Supply Chain Resilience Initiative grants program to incentivise Australian businesses to financially invest in the development and implementation of long term sustainable solutions to address vulnerabilities that are critical to the resilience of Australian supply chains.
The purpose of the Program is to incentivise business to invest in capabilities to address vulnerabilities in supply chains for critical products.
The Program aims to achieve its purpose by incentivising Australian businesses to financially invest in the development and implementation of long term sustainable solutions that address vulnerabilities in supply chains for critical products or inputs identified in the Government’s Sovereign Manufacturing Capability Plans (SMCP). Ad hoc grants may be considered to address vulnerabilities for critical products or inputs where the shortage is due to an immediate crisis.
The Program will be delivered by the Department. Funding will be provided through grants on a co-investment basis. Successful businesses will undertake eligible projects that diversify or expand Australia’s supply chain resilience through investment in manufacturing related capabilities, new technologies, equipment, skills or processes.
Funding authorised by this Legislative Instrument comes from Program Portfolio Budget Statements (PBS) program, Outcome 1, as set out in the Portfolio Budget Statements 2020-21, Budget Related Paper No. 1.9, Industry, Science, Energy and Resources Portfolio (https://www.industry.gov.au/sites/default/files/2020-10/2020-21-department-of-industry-science-enery-and-resources-pbs.pdf) at page 36.
The Program will be a combination of open competitive and ad hoc grant processes. The Program is administered by the Department in accordance with the Commonwealth Grant Rules and Guidelines 2017 (https://www.finance.gov.au/sites/default/files/2019-11/commonwealth-grants-rules-and-guidelines.pdf|.
Spending decisions will be made by the Minister for Industry, Energy and Emissions Reduction taking into account the recommendations of an independent assessment committee.
The Program involves the allocation of finite resources between competing applicants, or ad hoc grants to grantees specifically selected for their unique ability to deliver program objectives. In addition, there is a robust and extensive assessment process, an enquiry and feedback process, and an existing complaints mechanism for affected applicants. Therefore, external merits review does not apply to decisions about the provision of grants under the Program.
For the open competitive selection process, applications will be assessed against the eligibility criteria and assessment criteria set out in the grant opportunity guidelines in two stages. At first instance, applications will be assessed by the Department against the eligibility criteria. An independent assessment committee will then consider eligible applications against the assessment criteria. The committee may comprise representatives from the Australian Government, or external experts including representatives from industry with technical and/or sectoral knowledge. The independent assessment committee may seek input from independent experts to inform their assessments.
Applications must address the eligibility and assessment criteria, and provide relevant supporting information. The amount of detail and supporting evidence should be relative to the project size, complexity and funding amount requested. Larger and more complex projects should include more detailed evidence. To be competitive, applications must score highly against each merit criterion. Eligibility and assessment criteria are outlined in the Program guidelines, and published on business.gov.au/scri and GrantConnect.
After considering the applications, the independent assessment committee will make recommendations to the Minister for Industry, Energy and Emissions Reduction regarding those applications suitable for funding. The Minister for Industry, Energy and Emissions Reduction will make the final decision about which grants to approve, taking into consideration the independent assessment committee’s recommendations, and the availability of grant funds. The decision maker will not approve funding if there are insufficient Program funds available across relevant financial years for the Program.
The Minister for Industry, Energy and Emissions Reduction may consider ad hoc grants. For the ad hoc grant processes, applications will be considered by the Department on a case by case basis. A separate set of ad hoc grant guidelines will be developed which will operate outside of the open competitive process, grants outside of the competitive rounds could be available if required to address critical needs in the context of an immediate crisis. It will specify whether or not a proposal is required to address supply chain critical product categories outlined in the Government’s SMCP. The Department will seek a proposal from the prospective recipient of the ad hoc grant and assess it based on details of the proposed activity, how it will further advance the objectives of the Program, and the budget for the grant. Following assessment, the Department will provide a recommendation to the Minister for Industry, Energy and Emissions Reduction who will make the final decision to approve each ad hoc grant, taking into account how the activity will advance the Government’s policy priorities and the availability of grant funds.
Both successful and unsuccessful applicants will be informed in writing. Unsuccessful applicants have an opportunity to discuss the outcome with the Department, and can submit a new application for the same or similar project in future funding rounds if the same critical products are identified in the SMCP. Where this occurs, applicants should include new or more information to address the weaknesses identified in their previous application.
Persons who are otherwise affected by decisions or who have complaints about the Program will also have recourse to the Department. The Department investigates any complaints about the Program in accordance with its complaints policy and procedures. If a person is not satisfied with the way the Department handles the complaint, they may lodge a complaint with the Commonwealth Ombudsman.
The Legislative Instrument specifies that the legislative power in respect of which the Instrument is made is the following:
Corporations power
Section 51(xx) of the Constitution empowers the Parliament to make laws with respect to ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth’ (together, constitutional corporations).
In Williams v Commonwealth (2014) 252 CLR 416 (Williams No 2), the High Court, considering section 32B of the Financial Management and Accountability Act 1997 (the FMA Act), held (at [50]) that:
A law which gives the Commonwealth the authority to make an agreement or payment of that kind is not a law with respect to trading or financial corporations. The law makes no provision regulating or permitting any act by or on behalf of any corporation.
However, the relevant provisions of the IR&D Act are substantially different to the provisions considered by the High Court in Williams No 2. Section 34 of the IR&D Act corresponds to section 32B of the FMA Act considered by the High Court in Williams No 2. However, the FMA Act contained no provision in terms equivalent to those of section 35 of the IR&D Act.
Subsection 35(2) of the IR&D Act limits the arrangements made under section 34 so that, where a party to an arrangement made under section 34 is a constitutional corporation, the arrangement must be subject to a written agreement containing terms and conditions under which money is payable by the Commonwealth. The corporation must comply with the terms and conditions. The activities of the corporation are therefore regulated through the terms and conditions made under each agreement pursuant to subsection 35(2).
Further, subsection 35(3) provides that the agreement must provide for circumstances in which the corporation must repay amounts to the Commonwealth.
Only constitutional corporations will be eligible to receive benefits under the Program prescribed by the Legislative Instrument. The benefits conferred by the Program will be directed to assisting those corporations in the conduct of their ordinary activities to maintain, establish, scale up, or on/reshore capabilities to address critical supply chain vulnerabilities in Australia.
The Program will impose terms and conditions on those corporations under a grant agreement in accordance with section 35 of the IR&D Act, in relation to receipt of benefits under the Program. The terms and conditions will set out what the funding may be used for, and the circumstances in which it must be repaid.
Background
The Australian Government committed $107.2 million to the Supply Chain Resilience Initiative (SCRI) as part of the $1.5 billion Modern Manufacturing Strategy, announced in the 2020-21 Budget.
The SCRI will strengthen Australia’s ability to access critical necessities, part of positioning Australia to respond to future supply chain disruptions and making Australia stronger and more resilient. It will build on government and industry efforts to rapidly address critical supply issues revealed during supply chain disruptions due to COVID-19.
SCRI complements other parts of the Modern Manufacturing Strategy designed to drive scale and competitiveness in National Manufacturing Priorities supporting our resilience in the longer-term.
It also complements activity focused on addressing the current source of supply chain disruption during COVID-19, such as vaccine manufacturing and procurement.
Authority
Section 33 of the IR&D Act provides authority for the Legislative Instrument.
Consultation
In accordance with section 17 of the Legislation Act 2003, the Attorney-General’s Department has been consulted on this Legislative Instrument.
The Government also undertook broad consultation to inform the development of the SCRI and the SMCP’s that underpin the Program and the grant opportunity guidelines.
Initial consultation included Australian industry, independent technical experts and a national public survey with responses from over 200 stakeholders from a wide variety of sectors and locations.
To inform indepth analysis of supply chain critical product categories, consultations with businesses of all sizes, peak bodies and other expert industry stakeholders including from academia are undertaken.
Regulatory Impact
It is estimated that the regulatory burden is likely to be minor (OBPR reference number 44035).
Details of the Industry Research and Development (Supply Chain Resilience Initiative Program) Instrument 2021
Section 1 – Name of Instrument
This section specifies the name of the Legislative Instrument as the Industry Research and Development (Supply Chain Resilience Initiative Program) Instrument 2021.
Section 2 – Commencement
This section provides that the Legislative Instrument commences on the day after registration on the Federal Register of Legislation.
Section 3 – Authority
This section specifies the provision of the Industry, Research and Development Act 1986 (the IR&D Act) under which the Legislative Instrument is made.
Section 4 – Definitions
This item provides for definitions of terms used in the Legislative Instrument.
Section 5 – Prescribed Program
This section prescribes the Supply Chain Resilience Initiative Program (the Program) for the purposes of section 33 of the IR&D Act.
The Program provides funding to Australian businesses that are constitutional corporations for the purposes of incentiving those businesses to invest in capabilities to address vulnerabilities in supply chains for critical products..
The Program aims to achieve its purpose by incentivising Australian businesses to financially invest in the development and implementation of long term sustainable solutions that address vulnerabilities in supply chains for critical products or inputs identified in the Government’s Sovereign Manufacturing Capability Plans. Ad hoc grants may be considered to addresses vulnerabilities for critical products or inputs where the shortage is due to an immediate crisis.
Section 6 – Specified Legislative Power
This section specifies that the legislative power in respect of which the Legislative Instrument is made is the power of the Parliament to make laws with respect to foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth (paragraph 51(xx) of the Constitution).
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Industry Research and Development (Supply Chain Resilience Initiative Program) Instrument 2021
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The purpose of the Industry Research and Development (Supply Chain Resilience Initiative Program) Instrument is to prescribe the Supply Chain Resilience Initiative Program (the Program).
The purpose of the Program is to incentivise business to invest in capabilities to address vulnerabilities in supply chains for critical products. The Program aims to achieve its purpose by incentivising Australian businesses to financially invest in the development and implementation of long term sustainable solutions that address vulnerabilities in supply chains for critical products or inputs identified in the Government’s Sovereign Manufacturing Capability Plans. Ad hoc grants may be considered to address vulnerabilities for critical products or inputs where the shortage is due to an immediate crisis.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
The Hon Angus Taylor MP
Minister for Industry, Energy and Emissions Reduction