How Procurement Must Fight Black Cladding

Supply Nation defines black cladding as the practice of a non-Indigenous business entity or individual taking unfair advantage of an Indigenous business entity or individual for the purpose of gaining access to otherwise inaccessible Indigenous procurement policies or contracts.

In other words, they’re gaming the system. Law firm Corrs Chambers Westgarth further explains that, beyond ownership percentages, black cladding might involve figurehead ownership arrangements, Indigenous owners excluded from decision-making, receiving unfair financial returns, questionable sub-contracting arrangements, or low rates of Indigenous employment.

Ahead of GovProcure 2026, Quest Events spoke with Kate Russell, Chief Executive Officer at Supply Nation, Michelle Robinson, Manager Procurement and Contract Services Finance at City of Ryde, and Heike Rietzschel, Coordinator Procurement & Contract Performance, Council Sustainability at Scenic Rim Regional Council about how procurement can fight black cladding. 

How can we effectively identify signs of 'black cladding' in supplier arrangements, and what best practices can we implement to safeguard against it?

“Black cladding is another word for fraud,” says Russell. “It specifically refers to a practice where non-Indigenous people or businesses try to pass themselves off as Indigenous to fraudulently win contracts. The first layer of protection is to ensure suppliers you engage are certified or registered with Supply Nation.”

Supply Nation has strict verification processes and regular audits of businesses to ensure they are legitimate. The organisation investigates complaints of black cladding and removes verification of businesses that don’t comply.

Russell notes that there is no unified definition of black cladding, which can cause confusion. “Therefore, we recommend that procuring organisations also undertake their own due diligence as they would with any contract. Everyone has a role to play in preventing black cladding. Anyone who suspects a company of black cladding can confidentially report it using this form on the Supply Nation website.

“Black cladding is an inherently difficult practice to guard against,” notes Robinson, “but clues such as unusual subcontracting chains and digital footprint gaps give you a sense that the bid isn’t genuine. It’s important to meet with the suppliers and understand how the ownership structure is involved, while being sure to use independent registers and cross-checks. More importantly, having after-contract checks including contract clauses mandating genuine participation and right to audit is vital, along with performance reporting and supplier relationship management that includes ESG governance.”

Rietzschel adds that procurement should be alert for red flags such as unclear ownership, Indigenous owners not really involved, or profits flowing somewhere unexpected. “If something feels off, it probably is,” she says. “To protect your organisation, ask for clear ownership documents, check ASIC/ORIC, request simple governance info, and include consequences in contracts for false claims. Regular spot checks also help keep things honest.”

Can you share an example where you’ve become aware of black cladding?

During a routine due diligence check on a supplier claiming Aboriginal ownership, Robinson conducted a standard governance validation, including interviews with the listed Director. In that conversation, the individual openly stated that they had ‘nothing to do with the company’s operations,’ had never been involved in service delivery, and wasn’t aware of the commercial arrangements being put forward in the bid. “That admission immediately signalled a disconnect between the ownership on paper and the operational control; a classic indicator of black cladding,” she continues. “It suggested a potential front arrangement where another non-eligible party was the real beneficiary. We took the appropriate actions, but it showcases the need to actively validate.”

Supply Nation recently became aware via a call from the media of a company using the Supply Nation certified logo without having been verified. They investigated immediately and found the company had commenced the verification process with Supply Nation, but did not finalise it.

“We don’t know whether this company was not genuinely Indigenous owned, or using the logo was just an oversight,” says Russell. “But because they were unable to prove Indigenous ownership according to our verification process, they were required to remove our logo from their branding.

“When Supply Nation receives a complaint that a business may be ‘black clad,’ we undertake an audit,” she continues. “If the business is found to be ‘black clad,’ we will take action against the business. In the case of serious fraud or criminality, Supply Nation has the ability to consider legal proceedings and referrals to police and other enforcement agencies.”

What impact will the recent Indigenous Procurement Policy changes have for procurement teams? What practical steps need to be taken between now and July 2026?

“The new rules mean procurement teams need to be more careful about confirming genuine Indigenous ownership,” says Rietzschel. “It’s no longer enough to take things at face value. Between now and July 2026, teams should update policies, evaluation criteria, templates, contract clauses, and supplier onboarding processes. It’s also important to brief staff, communicate changes to suppliers, and start verifying current Indigenous suppliers.”

Supply Nation has consistently advocated for there to be an agreed definition of an Indigenous business, recommending that the definition be agreed as majority Indigenous owned (at least 51%) with Indigenous management and control, encompassing demonstrated Indigenous involvement in, and authority for, the decision making and operational practices of the business. 

The eligibility criteria for the IPP will be strengthened to require that Indigenous businesses must be 51 per cent or more Indigenous owned and controlled to access the IPP. This will ensure business owners accessing the IPP are empowered to run their businesses and exercise their rights as majority owners.

“We understand the transition to the new criteria will begin from 1 July 2026, with further details of the transitional arrangements to be determined over the coming months,” says Russell, recommending that procurement professionals stay up to date on the transitional arrangements.

She explains: “Indigenous majority controlled allows for business expansion and growth through shareholding investment, skilled personnel hiring, capacity partnering and builds intergenerational skills and knowledge in business operations and entrepreneurship. Supply Nation welcomes the current reforms and will work closely with the appropriate Commonwealth Government Departments and agencies to ensure a smooth transition for business, our verified suppliers and members.” 

Russell notes that establishing more robust requirements around business ownership, management and decision-making will increase procurement professionals’ confidence that they are dealing with Indigenous businesses. It will also strengthen criteria to ensure Commonwealth procurement contracts are awarded to legitimate Indigenous businesses.  

What guidance can procurement teams provide to Indigenous businesses to help them meet the new 51% ownership requirement?

“Any reform or change brings uncertainty,” says Russell. “As far as possible, maintaining business continuity will be important in the initial transition stage. Many of Supply Nation’s registered businesses will be able to fulfil the new requirement, but some will choose to maintain their current ownership or structures at 50% for business or personal reasons.”

Where capacity and resources allow, Russell recommends establishing strong, sustainable partnerships built on shared values will create win-win and result in upskilling and opportunity for both businesses to grow. “Identifying your existing suppliers that will be impacted and having proactive conversations to understand their intent and desire to transition, or not, is the first step. Smaller suppliers may require significant capital and capability to successfully navigate restructuring their business to meet the new definition. Those that choose not to, may require support diversifying their client base as they become ineligible for IPP contracts.”

Robinson believes procurement teams can support Indigenous businesses by clearly explaining what the 51% ownership and control requirement means in practice, including genuine decision-making authority, financial control, and operational involvement. “We can provide transparent guidance on the types of documents typically reviewed and the indicators of genuine capability. Procurement can also outline common risk areas that may unintentionally undermine eligibility, such as management contracts that remove real control. We can connect suppliers with capability-building programs, certification bodies, and tender-readiness support. Early engagement through briefings and pipeline visibility also helps Indigenous businesses prepare confidently. Overall, the goal is to provide clarity and access, without giving any one supplier an unfair advantage,” she adds.

Rietzschel agrees that procurement can help clarify what “real” ownership means: voting rights, control, and profit share, rather than just names on a register. “Offer guidance on what documents they’ll need, and point them to support networks like Supply Nation or Indigenous business groups. Encourage them to review their structure early so they have time to make changes before the rules fully kick in,” she recommends.

What specific verification methods do you recommend that procurement departments adopt to ensure accurate representation of Indigenous ownership?

Rietzschel recommends using basic checks like ASIC/ORIC searches, share registers, constitutions, and a simple statement outlining who actually controls decisions and profits. Cross-check with accredited registers like Supply Nation where you can. For higher-risk purchases, ask for statutory declarations or do a quick audit. Reconfirm ownership each year so nothing slips through the cracks. Ensure you have procurement reporting dashboards to assist with quick review opportunities.

The Supply Nation managed directory – Indigenous Business Direct – is a national directory now listing over 6000 verified Indigenous-owned businesses across every sector of the Australian economy.

“Procurement teams should first consult the directory to identify suitable businesses that may be able to meet their needs,” urges Russell. “Other organisations such as Indigenous Chambers of Commerce can also be consulted when assessing the bona fides of a particular business. Information on business ownership, registration and other key company information can be found through the Australian Securities & Investments Commission (ASIC).”

Robinson urges procurement teams to verify Indigenous ownership by cross-checking ASIC and ABN records to confirm legal shareholding and recent ownership changes. She recommends:

• Requesting governance documents that demonstrate who holds real decision-making authority, including delegations and organisational charts.
• Interviewing listed Indigenous directors to confirm their active involvement in operations.
• Site visits to help validate who is physically delivering the work and whether capability aligns with the proposal.
• Reviewing subcontracting disclosures to ensure the Indigenous business is not acting as a pass-through entity.
• Reviewing certifications from recognised bodies such as Supply Nation that provide an additional, independent layer of assurance.

Learn more about combatting black cladding at GovProcure 2026

Don’t miss out on presentations and panel sessions featuring Kate Russell, Michelle Robinson, and Heike Rietzchel at GovProcure 2026, 10^th to 12^th March in Sydney.