Modern Slavery and Supply Chain Compliance: The Tender Questions No One Explained

Somewhere in the schedules of a state government tender, between the insurance certificates and the referee details, is a page about modern slavery. It asks whether you have a policy, how you assess your suppliers, and whether you will comply with the agency’s supplier code of conduct. A civil contractor with forty people, buying aggregate from a local quarry and pipe from a local supplier, reads it and reasonably concludes it was written for somebody else.

It was — and it still applies to you. The obligation reaching a civil SME through a tender is almost never a statutory one. It is a contractual obligation, imposed because your client has a statutory obligation and can only discharge it through its suppliers. Once that is clear, the questions stop being mysterious and the right answer becomes a manageable piece of work rather than a compliance program.

The obligation reaching you is contractual

The Australian modern slavery framework requires large entities above a revenue threshold to report annually on the risks of modern slavery in their operations and supply chains, and on what they are doing about them. Government agencies and large contractors are squarely inside it. A civil SME almost never is.

But a reporting entity cannot describe its supply chain risk without knowing something about its suppliers, and it cannot claim to be addressing that risk without doing something about them. So it asks. The chain looks like this:

• The agency or head contractor must report on its supply chain.
• You are in its supply chain.
• It therefore asks you what you know about yours, and requires you to agree to certain standards.
• Your answer, and your agreement, become contractual commitments — enforceable against you regardless of your revenue.

That reframing matters for three reasons. It tells you the right question is “can I answer this truthfully and meet what I sign up to”, not “am I regulated”. It tells you the answer should be proportionate to your business, because the client knows what size you are. And it tells you the consequence of a false answer is a contractual one — which, in government procurement, tends to be more serious in practice than a regulatory one, because it reaches your ability to win work.

The regimes, and which one applies to you

Regime	Who it binds directly	How it reaches a civil SME
Commonwealth modern slavery reporting	Entities above a consolidated revenue threshold, plus the Commonwealth itself	Through client questionnaires, contract clauses and supplier codes. Voluntary reporting is available but rarely warranted for an SME
New South Wales anti-slavery arrangements	NSW government agencies and their procurement, overseen by a dedicated commissioner	Through NSW agency and council procurement requirements — see our guide to Buy NSW
Commonwealth supplier code of conduct	Suppliers to Commonwealth entities	Directly, as a condition of Commonwealth contracts — see AusTender and the Commonwealth Procurement Rules
State supplier codes and ethical procurement policies	Suppliers to that state’s agencies	Directly, through the state’s procurement framework
Labour hire licensing	Labour hire providers — and, in several states, the businesses that use them	Directly and by statute. This is the one with real legal consequences for a civil SME
Workplace relations law	All employers	Directly — sham contracting, underpayment and record-keeping obligations
Payment times reporting	Large businesses reporting on how quickly they pay small suppliers	Indirectly, and mostly to your benefit

Reading down that table, the practical hierarchy for a civil SME is clear. Labour hire licensing and workplace relations obligations are the ones that bind you at law and carry direct penalties. Everything else reaches you through your contracts. Most contractors have this backwards, worrying about modern slavery statements they do not have to lodge while using labour hire providers whose licence status they have never checked.

Government supplier codes of conduct

Supplier codes of conduct have become the standard mechanism for pushing these expectations down the chain. The Commonwealth and most states now operate one, and they are broadly similar in shape.

A typical code requires suppliers to comply with the law, treat workers fairly and pay them correctly, provide a safe workplace, avoid modern slavery in operations and supply chains, act ethically and avoid conflicts and corruption, protect information, meet environmental obligations, and — importantly — take reasonable steps to ensure their own subcontractors and suppliers do the same. Codes commonly also require the supplier to report breaches, cooperate with investigations, and accept that non-compliance can affect current and future contracts.

Three things about codes that catch contractors out:

• They usually apply by reference. The contract says you will comply with the code, and the code sits on a website. Not having read it is not a defence, and codes are updated.
• They extend past your own conduct. The obligation to take reasonable steps with your own suppliers is the operative one for a contractor whose direct conduct is unremarkable.
• They are enforced through procurement, not through courts. The consequence of a breach is typically an investigation, a remediation requirement, and an effect on your eligibility for further work — which for a business dependent on government work is more consequential than a fine.

Where the risk actually sits in a civil supply chain

This is the most useful section of the guide, because it converts an unbounded question into a short list.

A civil contractor’s spend divides into categories with very different risk profiles. Locally quarried aggregate extracted by a licensed operator with an enterprise agreement is low risk and easy to say so. Other categories are not.

Category	Risk	Why
Local quarry products, concrete, asphalt	Low	Extracted and produced domestically by licensed operators under Australian workplace law
Imported steel products	Elevated	Reinforcement, fabricated items, fencing, guardrail and fixings frequently originate in higher-risk jurisdictions, several tiers back
Imported stone, pavers, kerbing and tiles	Elevated	Quarrying and stone processing is a well-documented high-risk sector in several source countries
Personal protective equipment and workwear	Elevated	Gloves, boots, hi-vis and hard hats are almost entirely imported from textile and rubber manufacturing sectors with documented risk
Electronics, solar and lighting components	Elevated	Complex multi-tier supply chains with documented risks in raw material extraction and component manufacture
Timber products	Moderate	Formwork, hoarding and landscaping timber where the source is not certified
Labour hire	Elevated and immediate	The category where exploitation of workers in Australia actually occurs, and the one with its own licensing law
Cleaning, security, catering and camp services	Elevated and immediate	Consistently identified as high-risk sectors within Australia. Relevant on camp-based and remote projects
Subcontracted trades	Variable	Depends on their own labour practices, particularly where they engage labour hire or use contractor arrangements

Two conclusions follow, and both are worth stating plainly in a tender response because they demonstrate genuine understanding rather than boilerplate.

First, most of a civil contractor’s spend by value is low risk, and the risk is concentrated in a small number of identifiable categories. That is a defensible, honest and specific position — far better than a generic assurance that you take the issue seriously.

Second, the categories where exploitation is most likely to be occurring in Australia, now, are labour hire and site services — not imported goods several tiers away. That is where a contractor’s attention delivers actual effect rather than paperwork, and it happens to be the area where you have the most control and the clearest legal obligation.

Labour hire licensing — the one that catches civil contractors

Several Australian states and territories operate labour hire licensing schemes, introduced after inquiries found systematic exploitation of workers supplied through labour hire arrangements. The schemes differ in detail but share a structure, and one feature of that structure is routinely missed.

In the jurisdictions that have them, it is generally an offence both to provide labour hire services without a licence and to enter into an arrangement with an unlicensed provider. The host business commits its own offence. A civil contractor who hires operators or labourers through an unlicensed provider is not merely dealing with somebody else’s compliance problem — it is exposed in its own right, and the penalties are substantial.

What a contractor should do:

• Know whether your state operates a scheme, and whether the state you are working in does — the obligation follows the work, not your head office.
• Check the public register before engaging any labour hire provider, and check it again at renewal. These registers are searchable and free.
• Record the check. A dated note of the licence number and the date checked is the evidence.
• Understand what counts as labour hire. The definitions are broader than “a labour hire agency” and can capture arrangements contractors think of as subcontracting, particularly where workers are supplied to work under your direction rather than to perform a defined scope. Where the characterisation is unclear, take advice.
• Put it in your procurement process, not in someone’s memory — the same discipline applied to insurance certificates and licences.

This is the single highest-value action in this entire guide, and it takes a few minutes per provider.

Sham contracting and wage compliance

Two related exposures that sit under the same heading in most supplier codes and in most client questionnaires.

Sham contracting — engaging someone as an independent contractor when the relationship is in substance employment — is prohibited under workplace relations law. Civil construction has a long history of arrangements that sit close to the line: an operator with an ABN who works only for you, uses your plant, works hours you set and takes direction like an employee. The characterisation does not depend on what the paperwork says. The consequences include back-payment of entitlements, penalties, and exposure under superannuation, workers compensation and payroll tax regimes — which is why this shows up in more than one place at once.

Wage compliance has moved from an industrial matter to a headline compliance risk, with underpayment attracting significantly increased penalties and, for deliberate conduct, criminal consequences under recent reforms. For a civil contractor the practical risk areas are the ordinary ones: correct classification under the applicable award or agreement, allowances, overtime and penalty rates, travel and living away entitlements, apprentice and trainee rates, and record-keeping. The instruments themselves are covered in our guide to awards, enterprise agreements and labour rates.

The tendering angle is that both now appear in prequalification and in supplier codes, and both are matters a client can and does ask about. A contractor that can point to a recent review of its classifications and rates is answering a question competitors are hoping is not asked.

Payment times, and the side of this you benefit from

One part of this framework works in your favour, and few civil SMEs use it.

Australia operates a payment times reporting scheme under which large businesses must report publicly on how quickly they pay their small business suppliers. The reports are public. That means you can look up a prospective head contractor or client and see their reported payment performance to small suppliers before you decide whether to bid.

For a business whose main constraint is working capital rather than work, that is genuinely useful intelligence — a slow payer with attractive volume is a cash flow risk, and the modelling in our guide to cash flow in civil construction contracts shows how quickly that becomes the binding constraint. Government policies also commonly commit agencies to paying small businesses within short timeframes, and to requiring their head contractors to pass equivalent terms down. It is worth knowing whether such a commitment applies to your contract, and worth raising if the subcontract terms you are offered do not reflect it. The statutory backstop remains the payment regime described in our guide to security of payment in Australia.

What the tender question looks like

The questions cluster into a predictable set, which makes them worth answering once properly and keeping in the answer library described in our guide to building a tender content library.

Question	What a good SME answer contains
Are you a reporting entity?	A straight no, with your position stated. Do not imply otherwise
Do you have a modern slavery policy?	A short, real policy — a page or two — that says what you do, not what a large corporate does
How do you assess supply chain risk?	Your spend categories, which you have assessed as elevated risk, and why. The category analysis above is the substance of this answer
What do you require of suppliers?	Your supplier terms, your questionnaire for elevated-risk categories, and your labour hire licence check
How do you handle a concern?	Who it is reported to, how it is investigated, and that your response is remediation before termination
Will you comply with our supplier code?	Yes — after you have read it and confirmed you can
Do you use labour hire, and are your providers licensed?	Yes or no, and the check you perform. This one is verifiable, so it must be true
Do you have grievance or whistleblower arrangements?	How a worker or a subcontractor’s worker can raise something, including anonymously

The general drafting principles in our guide to addressing selection criteria apply, with one specific warning: do not claim supply chain visibility you do not have. A statement that you have mapped your supply chain to the raw material stage is not credible from a forty-person civil contractor, and an evaluator who has read a hundred of these will recognise it. An honest description of a limited but real process scores better and survives an audit.

Building a proportionate position

What a civil SME actually needs, in order of value, is short:

• 1. A labour hire licence check in your procurement process. Legally required in several jurisdictions, verifiable, and quick.
• 2. A spend analysis by category. Take your last twelve months of supplier spend, group it, and mark the elevated-risk categories. Half a day of work, and it is the evidence base for every answer you give.
• 3. Supplier terms that include the obligations. A short clause in your purchase orders and subcontracts requiring compliance with law, prohibiting forced and child labour, and requiring the same of their suppliers.
• 4. A questionnaire for elevated-risk suppliers only. Half a page, asked of the suppliers in your elevated categories, not of the local quarry.
• 5. A short policy. Written for your business, sized to your business.
• 6. A reporting route. A named person and an alternative if that person is the problem.
• 7. A note of what you have done and when. The evidence that the process is real.

That is a few days of work in total and it answers every question in the previous section truthfully. It is also, deliberately, the same shape as the proportionate approach recommended in our guide to cyber and information security in civil tenders — a small number of real controls, honestly described, rather than a policy suite that describes a business you are not.

Contract clauses to read

Clause	What to check
Compliance with supplier code	Which version, where it is published, and whether it can change during the contract
Modern slavery obligations	Whether you must conduct due diligence, to what standard, and whether you must provide evidence on request
Flow-down	Whether you must impose equivalent obligations on subcontractors — and note that you then have to verify them
Audit and information rights	Whether the client may audit you or your suppliers, on what notice, at whose cost
Notification	Whether you must notify the client of a suspected instance, and how quickly
Termination	Whether breach is a termination event, and whether there is a remediation period first. Push for remediation — immediate termination rights are common and rarely in anyone’s interest
Labour hire warranties	Warranties that all labour hire is licensed. Check before you warrant it
Workplace relations warranties	Warranties about award compliance and payment of entitlements, sometimes with audit rights

The flow-down clause is the one that generates real work. Requiring your subcontractors to comply is a paragraph; being able to show you took reasonable steps to check is a process. On larger subcontracts, expect the head contractor’s version of all of this to be materially heavier — see our guide to subcontracting to Tier 1 civil contractors.

What to do if you find something

This is the part that separates a real position from a paper one, and it is counterintuitive.

The expected response to finding exploitation in your supply chain is not to terminate immediately. Cutting a supplier off removes the workers’ income without improving their situation, and both government policy and international practice treat remediation as the preferred first response. What is expected is that you act promptly, that you prioritise the affected workers, that you engage with the supplier to fix it where fixing it is possible, that you escalate or exit if it is not, and that you notify your client where the contract requires it.

Practically, for an SME, the sequence is: take it seriously immediately; get advice, because there may be criminal conduct involved and the situation may require a regulator or the police; do not investigate in a way that puts a worker at risk; check your contractual notification obligations and their deadlines; and record what you did. Saying this in a tender response — that your response is remediation-first rather than termination-first — demonstrates that you have understood the policy rather than skimmed it.

Checklist

• Do you know whether you are a reporting entity? (Almost certainly not — but say so accurately.)
• Have you read the supplier code that applies to your current contracts?
• Does your state, or the state you are working in, operate a labour hire licensing scheme?
• Do you check the public register before engaging any labour hire provider?
• Do you record that check with the licence number and date?
• Have you considered whether any arrangement you call subcontracting is in substance labour hire?
• Have you analysed your supplier spend by category and identified the elevated-risk ones?
• Do your purchase orders and subcontracts contain a compliance clause?
• Do you ask a short questionnaire of elevated-risk suppliers?
• Do you have a short modern slavery policy written for your business?
• Is there a named route for a worker to raise a concern, including anonymously?
• Have your contractor arrangements been reviewed against sham contracting risk?
• Have your award and agreement classifications and rates been reviewed recently?
• Does any contract require you to warrant that your labour hire is licensed?
• Do you know your contractual notification deadline if you find something?
• Is your response remediation-first rather than termination-first, and does your answer say so?
• Have you checked the payment times performance of head contractors you are considering working for?

The short version

• You are almost certainly not a reporting entity. The obligation reaching you is contractual, because your client is one and can only discharge its obligation through you.
• The right question is not “am I regulated” but “can I answer this truthfully and meet what I sign”.
• Labour hire licensing and workplace relations law are the regimes that bind you directly. Everything else arrives through contracts.
• In several jurisdictions it is an offence to use an unlicensed labour hire provider, not just to be one. Check the register and record the check.
• Most civil spend by value is low risk. The elevated categories are imported steel and stone, PPE and workwear, electronics, timber, labour hire and site services.
• The exploitation most likely to be happening in Australia now is in labour hire and site services — where you have the most control.
• Supplier codes apply by reference, extend to your own suppliers, and are enforced through procurement rather than the courts.
• Do not claim supply chain visibility you do not have. An honest limited process scores better and survives an audit.
• A proportionate position is a licence check, a spend analysis, a supplier clause, a questionnaire for elevated-risk suppliers, a short policy and a reporting route.
• The expected response to finding exploitation is remediation first, not termination. Saying so demonstrates you understood the policy.
• Payment times reporting works in your favour — look up a head contractor’s payment performance before you bid.

Sources and further reading

This guide is general information for Australian civil construction businesses and is not legal, workplace relations or compliance advice. Modern slavery reporting obligations, supplier codes of conduct, labour hire licensing schemes, workplace relations obligations and payment times reporting requirements are set by separate Commonwealth, state and territory laws and policies, differ between jurisdictions, and are amended — including the revenue thresholds that determine who is covered. Whether a particular arrangement constitutes labour hire, employment or subcontracting depends on its substance and requires advice on the facts. Nothing here states a threshold, a penalty or a licensing requirement applying to any particular business. Always work from the current legislation and policy for your jurisdiction, the actual supplier code incorporated into your contract, the executed contract, and current advice from an employment lawyer or workplace relations specialist.

• Australian modern slavery reporting legislation, under which entities above a consolidated revenue threshold must report annually on modern slavery risks in their operations and supply chains and on the actions taken to address them, together with the New South Wales anti-slavery arrangements applying to that state’s public procurement. Referenced in §01 and §02 as the source of the contractual obligations that reach smaller suppliers. Thresholds, reporting requirements and the framework itself have been subject to review.
• The Commonwealth supplier code of conduct and the equivalent state supplier codes and ethical procurement policies referenced in §03, which apply to suppliers as a condition of government contracts and typically extend to the supplier’s own subcontractors and suppliers. Codes apply as published and are updated from time to time. The procurement frameworks they sit within are sourced in full in our guides to the Commonwealth Procurement Rules, Buy NSW, Buying for Victoria and the Queensland Procurement Policy.
• State and territory labour hire licensing legislation referenced in §05, under which providing labour hire services without a licence and entering into arrangements with an unlicensed provider are both generally offences, and which maintain public registers of licensed providers. The schemes operate in some jurisdictions and not others, and their definitions of labour hire differ — the characterisation question raised in §05 is a matter for advice on the particular arrangement.
• Australian workplace relations legislation governing sham contracting, wage and entitlement compliance and employment records, referenced in §06, including the substantially increased penalties and criminal consequences introduced for deliberate underpayment. The industrial instruments that determine correct rates are sourced in full in our guide to awards, enterprise agreements and labour rates.
• The Australian payment times reporting scheme referenced in §07, under which large businesses report publicly on their payment performance to small business suppliers, and the government policies committing agencies and their head contractors to defined payment terms for small business. The statutory payment backstop is sourced in full in our guide to security of payment in Australia.
• Related TenderBuilt guides carrying the primary-source detail referenced above: social and Indigenous procurement policies, local content and skills training, materials supply agreements and quarry supply, sustainability and infrastructure ratings, cash flow in civil construction contracts, subcontracting to Tier 1 contractors, addressing selection criteria and building a tender content library.