NSW has been making moves to boost procurement of local businesses, including a proposed bill to establish the Local Jobs First Commission.
But a vague definition of what constitutes a local business means there's room for overseas companies to exploit regulations, a senior government minister conceded on Monday.
Greens MP Abigail Boyd pointed out OpenAI is presenting its new Australian office as a NSW-based start-up on government procurement site buyNSW.
The creator of ChatGPT sold shares last year at a US$500 billion valuation and is based in San Francisco.
In December, it was announced as the anchor tenant in a $7 billion data centre at Eastern Creek in outer western Sydney.
Other mammoth companies identifying themselves as NSW-based include Amazon and Lenovo, while SAP Computing is also listed as based in the state as a small or medium-sized enterprise, meaning it has fewer than 200 full-time employees.
NSW Finance Minister Courtney Houssos conceded Ms Boyd's examples were "good", but said businesses simply needed to have a presence in NSW to qualify rather than be owned in the state.
"I accept that is a somewhat controversial decision, but the real focus of our procurement policy is supporting local jobs and local businesses," she told a budget estimates hearing.
"That may mean perhaps companies from interstate or overseas, who come here and who do build local businesses that support local jobs."
Liberal MP Jacqui Munro said the draft Local Jobs First Bill treated interstate and New Zealand-based suppliers the same as NSW businesses.
"Calling it a local jobs bill is really a misnomer, isn't it?" she said.
"It's not local jobs first, it's New Zealand jobs and Queensland and Victoria jobs at the same level as NSW."
NSW Treasury deputy secretary Michael Gadiel said the business must primarily operate from NSW and that its "employment footprint" was the most obvious test of that.
Ms Boyd noted a multinational could establish a small NSW-based arm of the business and then outsource work offshore.
"That would be something we'd consider as part of the procurement process," Mr Gadiel said.
"If there was another firm employing substantial people within NSW, we would look at giving that stronger weighting.
"But both would probably count as local businesses if it had set up a local entity and it did employ people locally."
OpenAI has been contacted for comment.
NSW policy dictates a government agency must look for a local business when tendering a contract worth more than $7.5 million.
