Government procurement thresholds for goods and services

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Government procurement thresholds govern the different ways departments and agencies are required to approach the market for goods and services to balance risk and efficiency – and they vary greatly from state to state.

Governments have strict procurement rules that govern how they must release quotes and tenders to the market. The mode of approach often comes down to what are known as government procurement thresholds.

government procurement thresholds

Although there is a pervading myth that governments act in a closed environment, where they only spend money on incumbents or businesses with the right connections or government relationships, they are bound by probity laws to ensure they provide a fair and equitable process. It’s in our best interest for governments to release tenders publicly – not least for the purpose of driving industry development and, increasingly, social benefits.

At Mia, we do believe that relationships are critical in generating long term government business, but we also believe that focused government engagement is key; starting with understanding government’s procurement rules that govern their approaches to market.

Government procurement thresholds (or equivalent) are a key element of most government procurement policies. These ‘thresholds’, which may or may not relate directly to the contract value, govern when tenders are required to be released publicly and when government departments and agencies can simply seek quotes from a small number of suppliers (from a pre-qualification register, for example).

Since government procurement thresholds differ from state to state and federally across Australia, we’ve scoured procurement policies across the country to provide a summary.

Procurement thresholds by complexity/risk: Victoria and Queensland

Procurement policies try to balance efficient and effective procurement (for government), while maximising opportunities for industry. We have often written about the conflict that can arise from these two policy objectives.

To address this so-called conflict, governments are starting to shift towards defining procurement of goods or services by complexity and market and Agency (buyer) capability, rather than contract value. The Victorian and Queensland Governments have adopted this policy position.

This approach helps to identify the market and government risk of the procurement, which often doesn’t equate to value alone, and manage that procurement risk using the most appropriate market approach.

For example, a government department may purchase stationery annually that costs $1m. Under a procurement value threshold lens: the value of the spend ($1m) would usually put it in a higher-risk category requiring the government to release the tender publicly to market. Additionally, the market would probably be required to respond annually, creating a potentially unnecessary burden on businesses.

Most would agree that, given stationery is a regular and uncomplicated purchase with stable pricing, procurement for these goods can be done in a limited way. Most government departments handle the purchase of stationery via a pre-qualification panel or whole-of-government arrangement to mitigate any potential risk, with the market tested periodically (i.e. every five years).

The Victoria and Queensland Governments both define four procurement complexity-based categories, summarised in the tables below.

Note, however, that value thresholds do apply for Victorian Government construction projects and related services. (Refer to our post on the rules around public construction.)

Victoria

Queensland

Procurement thresholds by value

The federal government, local governments and other state governments still use value/pricing thresholds, varying widely nationally.

These value-based government procurement thresholds determine when government departments and agencies must release tenders publicly, and when they can use other market sourcing options – such as seeking quotes in a limited environment (i.e. three suppliers) or using a selective offer based on pre-qualification (i.e. panel arrangement).

Summary of Government Procurement Thresholds (incl. GST)

These thresholds have likely been developed by analysing the spend of government departments in particular areas over time.

Local governments (i.e. councils) also have varying thresholds for when tenders are released publicly, ranging from $80k to $150K, with regional and rural-based councils often electing to use the lower value thresholds. Again, tenders for construction or related works can have a higher threshold, such as $200K. The best advice for a business working with local councils is to identify the councils you want to work with and visit their websites understand their tendering thresholds.

Local Government Victoria sets broad regulations and best practices for councils.

Government Tenders Websites

Here are the government websites where tenders are released:

Governments usually post advanced tender notices, so the above sites are useful places to check to allow resource planning for upcoming tenders. Also, most government departments publish their forward plans for the year (usually financial year), which can assist with long-term planning for your business.

We wish you luck on your government tender journey!

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