What is ‘government procurement’?
‘Procurement’ is a term used to describe the process of acquiring goods and services. There are many different departments and agencies that make up the Australian government, each with their own supply, service and processing needs.
Through the procurement process, these government departments and agencies are able to advertise interest, select appropriate suppliers, and enter contracts of supply to satisfy their identified procurement needs.
Government procurement is a multistage process, controlled primarily by the Commonwealth Procurement Rules (CPR). Companies interested in suppling goods and services to government departments and agencies can browse procurement opportunities online at the government’s online procurement platform, AusTender. AusTender is how companies engage in the government procurement process, allowing them to identify procurement needs, gather information, and make tenders and submissions.
How is procurement relevant to me?
Space is an exciting and expanding industry, with many opportunities to develop and apply unique technology or service solutions. The recent decision to establish an Australian Space Agency demonstrates the government’s commitment to widening Australia’s space capability, including by facilitating the growth of the private space sector.
Ranging from telecommunications and infrastructure management, to national security activities and defence, the government is also engaged in a wide array of processes that depend on space-based hardware and services. This means that companies of any size, developing innovative or unique space systems or technology applications, can look to the government as a potential customer or ‘launch pad’ to kickstart and expand their business models.
It is therefore important that companies understand the procurement process, so that they can position themselves to be selected to help the government meet its needs for space technologies and services.
Stages of procurement
Procurement is a multistage process, and requires an ongoing commitment from potential and selected suppliers to ensure success. While procurement may seem complicated and intimidating, understanding the language and stages of procurement can assist you in navigating the process efficiently.
It is important to keep in mind, however, that the stages detailed below reflect only a general framework of procurement. Different departments and agencies may exercise their own particular procurement practices, and it is rare for two procurement endeavours to ever be exactly the same. The list below provides a general guide to help you understand the general progression of procurement.
When a department or agency realises it requires a particular good or service that it currently does not have access to. The procurement process is initiated.
Following identification of a procurement need, internal discussion will take place within the department or agency to ascertain whether or not to act on the deficiency. The decision stage is tied closely to stage 3 (Risk Assessment). An affirmative decision will formally progress the procurement process, usually resulting in the posting of an ATM on the AusTender platform calling for submissions from potential suppliers.
Inter-related and often occurring simultaneously with stage 2 (Decision). The department or agency will tally up the potential risks that might arising in the course of procuring the required good or service. Whether or not a decision is made to progress the procurement process will depend partly on whether the identified risks are outweighed by the department or agency’s level of need.
Following the submission period set by the department or agency’s ATM, discussions will take place to identify and select the most appropriate supplier in relation to the established procurement need. A contract will be formed for the delivery or performance of the good(s) or service(s).
The selected supplier delivers the procured goods, or performs the procured services, in accordance with its established contractual obligations, in return for agreed upon remuneration.
It’s likely the procurement agreement between the department or agency and the selected supplier will require some management over its lifetime to ensure contractual guarantees are on target.
After all deliveries are made, or performance is complete, the department or agency will undertake the work necessary to bring the procurement arrangement and process to an end.
Potential suppliers of goods and services to government are entitled, by way of the Commonwealth Procurement Rules (CPR), to be treated in accordance with several underlying procurement principles designed primarily to secure fair and equitable business practise. The CPR generally state that, despite your size, location or financial capacity as a business, you will be afforded the same chance and consideration as other competing suppliers.
Procurement can be competitive, and the government’s primary obligations remain with the public. The approach taken is one that seeks to balance the cultivation of business opportunities without irresponsibly depleting public resources. It is therefore important that potential suppliers concentrate on preparing procurement submissions that can be delivered confidently, efficiently, on time and on budget.
Understanding these broad procurement principles will allow you as an entrepreneur to better appreciate your entitlements across the procurement process and enable you to prepare submissions that more closely accommodate the government’s policy objectives:
The first and primary consideration in procurement is whether goods and services supplied represent the best possible value relative to price. Answering this question requires more than an assessment of what option will cost the least. A department or agency must ensure the procure goods or services in a manner which is:
- Efficient, economical and ethical;
- Designed to encourage competition;
- Mindful of potential risks; and
- Proportionate to its identified procurement need or business requirement(s).
In order to achieve these objectives, departments or agencies will apply a range of value-based factors in the process of making procurement determinations, including:
- A supplier’s experience, flexibility and performance history;
- The relative quality of products delivered, or services performed;
- Whether goods and services are fit for purpose;
- Environmental sustainability; and
- Whole-of-life costs over the procurement period, including maintenance and licensing fees, de-scope options and costs of disposal.
For the procurement of goods or services valued above $4 million, a department or agency must take into account the potential benefits or impacts entering the arrangement may have on the broader economy.
While the procurement process aims to be non-discriminatory, a supplier’s size and location may have some influence on its relative legal, technical or financial capacity, and may therefore be important value-for-money considerations.
Procurement must proceed in a manner which conserves public resources without sacrificing the integrity, diligence, fairness and consistency of the process.
On this basis, departments and agencies seek services or products that would meet their procurement needs in the most efficient, effective, economical and ethical manner possible.
Selected goods and/or services must be:
- Within scope of the identified procurement need, such that they can be utilised to their maximum value without excess or wastage;
- Capable of actually achieving the intended outcome or meeting the identified need of the procurement process;
- Consistent with the objective of minimising costs and avoiding waste; and
- Obtained honestly in a way that does not jeopardise or call into question the integrity of the procurement process.
Procurement officials must be mindful of potential conflicts of interest throughout the process and seek appropriate internal or external advice in the event that a perceived conflict does arise.
Procurement remains an ethical process by departments and agencies striving to exercise their powers with total impartiality.
The procurement process is intended to be competitive in order to promote innovative thinking and encourage suppliers to constantly improve their business propositions or products.
The Rules seek to strike a balance between instilling competition in procurement without excluding or discouraging particular business sectors or suppliers.
Departments and agencies are required to treat suppliers equitably regardless of their size, commercial, legal, technical or financial capacity, or their degree of foreign ownership and affiliation.
Selection of potential suppliers will always come down to a question of suitability, experience and value for money. If a small company is capable of reliably and affordably providing a necessary good or service to government, the CPR demand it be provided serious consideration in the selection process.
The government has also made commitments to ensure a proportion of its annual procurement budget is invested in supply by small and medium sized enterprises (SMEs). Non-corporate Commonwealth entities target sourcing at least 10% of procurement by value from SMEs; and 35% of contracts by value (up to a value of $20 million) from SMEs.
Fairness in procurement is intended to be guaranteed by transparency and accountability measures implemented throughout the process.
While undertaking procurement activities, officials of departments and agencies are expected to act with impartiality, to keep comprehensive records, and to exercise effective communication with potential suppliers.
Officials must notify potential suppliers of awards and rejections in a reasonable timeframe and provide reasons for their decisions if requested.
Responses and submissions to procurement requests on the AusTender platform are, however, kept confidential – in order to protect the business interests and technology solutions of potential suppliers.
Processes of procurement are generally the same across all industry sectors.
A company interested in supplying goods or services relating to space activities will be able to rely on the provisions of the Commonwealth Procurement Rules (CPR), and guides prepared by the Department of Finance, to assist them in the procurement process.
Suppliers should be mindful that procurement proficiency does differ across different government departments and agencies, which may affect the procurement experience.
IMPORTANT TO KNOW
Special processes in procurement do exist and are generally designed to target and assist specific industry sectors or suppliers.
One important special sub-process is the Indigenous Procurement Policy (IPP), which exists alongside the CPR to facilitate growth and success in the Indigenous business sector.
If you are an Indigenous business owner, it is likely you qualify for support under the IPP. It is recommended that you review the IPP. If you are in need of further information, it is advised that you contact the National Indigenous Australians Agency (NIAA).
‘Approach to Market’
‘Approach to Market’ (ATM) is the term commonly used to describe a procurement method and is generally the starting point in any procurement undertaking by a government department or agency.
ATMs generally contain certain minimum and/or common content, including:
- A procurement description/statement of work – outlining the details of the department or agency’s request, expected outcomes, general technical and performance expectations, and timeframes;
- Conditions of procurement – outlining minimum mandatory requirements for selection. Conditions may include security clearances, licences requirements, safety standards, and minimum insurance cover;
- Evaluation criteria – outlining the factors and processes that will be employed to select suppliers. Criteria may include fitness for purpose, capacity to manage risk, price, and compliance with contractual pre-conditions;
- Minimum content and form requirements – outlining in what form submissions are expected to be submitted, and minimum standards for accompanying documents;
- Process rules – outlining how the procurement process will occur and progress;
- Draft contract – outlining minimum contractual expectations and requirements;
- Response template – providing the basic format for a response and detailing what material a supplier must cover and prepare. ATMs may not always contain a response template.
ATMs are generally published by government departments and agencies on their AusTender profiles. Additionally, departments and agencies publish annual procurement plans which can be accessed publicly, providing suppliers time to gather information and properly prepare their AusTender submissions.
IMPORTANT TO KNOW
Persons have the option to register on the AusTender platform and create their own personal business profile. By reviewing listed areas of business interest, the platform is able to automatically provide email notifications on opportunities relevant to a person’s or company’s particular expertise or product.
Registered members also have the option to add departments or agencies to their ‘watch list’, so that they remain up to date with their specific procurement needs.
The tender process
Once a procurement need is established via an ATM, the procurement process will advance by either one of two tender methods:
- Where the ATM is published publicly on the department or agency’s AusTender profile, and a general invitation is extended for potential suppliers to respond with a procurement submission.
- Where the ATM is provided to only a limited number of potential suppliers, selected by the department or agency for their particular expertise or technical capabilities.
The tender method chosen is largely determined by the value of the department or agency’s procurement need. For procurements valued above $80,000.00, the limited tender method can only be employed by a department or agency if there is an applicable exemption under the CPR.
Responding to ATMs
Potential suppliers are entitled to seek and request further information relating to any aspect of an ATM before submitting a response. The ATM will provide direction on how to request further information. To maintain the equitability of the process, responses will be provided to all other suppliers who have submitted, or are in the process of submitting, a response.
Where possible, responses should comply with the format and minimum content established by a Response Template contained in the ATM. If a Response Template has not been provided, suppliers should focus on:
- Addressing all requirements listed in the ATM;
- Satisfying any mandatory preliminary steps – such as completing certain documentation, or obtaining any necessary licences;
- Generally responding to/meeting each aspect of listed evaluation criteria;
- Providing as much information as possible, while remaining clear, understandable and succinct;
- Complying with any listed formatting or minimum content requirements.
Procurement methods employed by Defence agencies are generally consistent with those for civil purposes. The process continues to be governed by the CPR, and Defence ATMs still appear on the AusTender platform.
Methods of Defence procurement are augmented by a variety of additional policies and guiding documents, intended to ensure procurement processes conform to established national security needs and areas of focus. They include:
- The Defence Integrated Investment Program;
- The Defence Procurement Policy Manual;
- The Defence Industry Capability Plan.
Australian Standard for Defence Contracting (ASDEFCON)
Defence departments and agencies have access to a series of standard form contracts and procurement documents – collectively known of as the Australian Standard for Defence Contracting (ASDEFCON) Suite of Tendering and Contracting Templates.
The ASDEFCON templates enable Defence officials to manage complex procurement processes, select the most appropriate methods to acquire goods and services, and tailor requests to specific industry sectors.
Pro forma documents and contract templates represent the starting point for Defence procurement. Defence officials generally have the capacity to modify the documents’ scope to match procurement occurring at different scales, and certain Defence officials have the discretion to modify the documents’ content to more appropriately adapt it to specific procurement needs.
If you are interested in supplying space-related goods and services to a Defence agency, it is recommended you familiarise yourself with the ASDEFCON templates.
IMPORTANT TO KNOW
Contracting with Defence might seem complicated and intimidating.
Small and medium sized enterprises developing products or services with a specific defence application have the option to apply to the Centre of Defence Industry Capability (CDIC) to receive targeted advisory and business facilitation services. The services are designed to assist with skills development, extending networks and making the most of Defence industry business opportunities.
The services also include broader training aimed at equipping small and medium sized enterprises with all the skills needed to maintain successful relationships with Defence customers, including ongoing mentoring, supply chain guidance and information on how to navigate export controls.
For more information, visit the CDIC website.
Defence Innovation Hub
The Defence Innovation Hub (DIH) forms part of the government’s Defence Innovation Gateway, and is tasked with attracting innovative solutions to strengthen national security and defence capability requirements identified in the Defence Integrated Investment Program capability streams, as well as in the DIH priorities that are published each financial year.
The DIH procurement process differs from the usual model adopted by agencies, who publish ATMs identifying specific procurement needs. Instead, the Department of Defence maintains an ongoing, open invitation on the AusTender platform, requesting submissions from suppliers that address Defence priorities in an innovative and cost-effective way.
DIH proposals are not submitted through the AusTender platform. The AusTender ATM merely exists to notify potential suppliers of innovation and funding opportunities available through the DIH.
The DIH seeks to promote true innovation in service delivery and product design. If you are developing a unique product or application with potential defence functionality, you may be eligible to receive a DIH investment grant. Certain intellectual property considerations may also apply.
DIH proposals are not submitted through the AusTender platform. The AusTender ATM merely acts as a notification, advertising to potential suppliers innovation opportunities available through the DIH.
All proposals are submitting through the CDIC Defence Innovation Portal. For more information, on the submission process, visit the CDIC submission information page.
IMPORTANT TO KNOW
Space activities and technologies are most likely to relate to the ‘Intelligence, Surveillance, Reconnaissance, Electronic Warfare, Space and Cyber’ capability stream of the Defence Integrated Investment Program.
The stream is focused on improving strategic decision-making superiority. A primary area of interest is developing technologies and infrastructure to fortify Australia’s level of Space Situational Awareness (SSA).
Visit the Department of Finance website for more information on the procurement process, and to view the Commonwealth Procurement Rules:
Visit the Department of Defence website for more information relating to Defence industry procurement:
Visit the National Indigenous Australians Agency website for more information relating to the Indigenous Procurement Policy:
Visit the AusTender website to view procurement opportunities:
Visit the Centre of Defence Industry Capability website for more information relating the Defence Innovation Hub opportunities:
Frequently Asked Questions (FAQ)
Any business or person is entitled to respond to department and agency Approaches to Market through the AusTender platform. Obtaining an ABN is not necessary (although it is strongly encouraged) and respondents do not need to be Australian.
Some contracts may involve sensitive matters of national security, and foreign affiliation may be a deciding factor in selecting a supplier.
Suppliers proposing innovative solutions, or engaging in high risk activities, may be required to demonstrate compliance with certain insurance thresholds to satisfy the department or agency’s risk assessment process. For space activities, it will likely mean showing a capacity to meet the insurance requirements established under the Space Activities (Launches and Returns) Act 2018 (AUS).
Suppling goods and services that involve outer space or space activities is really no different from selling any other kind of good or service to government.
Something to remember is that space activities are themselves separately regulated under Australian law. This means that, when responding to space related ATMs, or when making space related submissions to institutions like the DIH, you will have to be aware of your licence, insurance and liability obligations to demonstrate you are a fit and proper candidate for selection.
Commercial activity in outer space is also still a relatively recent phenomenon, and procurement for space-based goods or services may involve a higher degree of scrutiny during the risk assessment stage to assess the risks of expensive and potentially dangerous consequences.
A number of government departments and agencies offer assistance to businesses interested in supplying goods and services to government.
For an overview and explanation of the procurement process, visit the Department of Finance ‘Selling to Government’ website.
To understand how you can apply for and receive assistance relating directly to Defence industry procurement, visit the Centre of Defence Industry Capability website.
If you are an Indigenous business owner interested in supplying goods or services to government, visit the National Indigenous Australians Agency (NIAA) webpage on the Indigenous Procurement Policy (IPP).
What to do next?
1. Visit the AusTender online procurement platform and begin browsing for potential procurement opportunities:
- Registration is free, and profiles can be tailored to a business’ specific area of expertise or technical knowledge.
- You may receive email notifications of procurement opportunities best suited to your business’ products or services.
2. Prepare your response:
- Download relevant ATM documentation and begin preparing your procurement proposal.
- Pay attention to any mandatory processes, like completing confidentiality agreements, agreeing to terms of draft contracts, and specific cut-off dates or time limits.
- If you have any questions relating to a specific procurement opportunity, look for any information identifying a Contact Officer and direct your enquiries to them.
3. If necessary, seek assistance:
- Procurement can be complicated and may involve navigating complex legislative licensing and insurance requirements.
- If you are unsure of how to ensure your business legally complies with the requirements of a particular procurement opportunity, seek legal advice.