This chapter presents the case study of procurement preference and offsets policy. It notes first the power of the public purchasing market. It considers next the operation of the principle of preference for local content in the supply of goods and services, and notes the use of several more collaborative efforts to place local firms in a position to win contracts. It looks also at two important sectoral industry development programs. The chapter subsequently explores the shift in the strategic use of the procurement power to the eliciting of offsets from the large foreign suppliers. It plots the movement from direct offsets arrangements to the partnerships for development program.

In Australia, it is fair to say that a major role in the implementation of innovation policy could be assigned to the purchasing and procurement powers of government. It has been estimated that the federal government spends around $8 billion a year in purchases (Commonwealth of Australia. Bureau of Industry Economics, 1988a). In the year 1985–1986, $3.6 billion was spent on high technology, but about half of that technology was sourced overseas (DITC, 1987a). The major objects of this expenditure were information technology, industrial electronics and telecommunications equipment. Within this expenditure, individual purchases are so big as to be strategically significant in their own right. For example, in 1987, the Australian Taxation Office was planning to spend $700 million on the purchase of new information technology and the Defence Department $300 million in the same area.