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Methods of government procurement
Winning government contracts can bring great rewards for your business, but securing these contracts means first taking some time to understand government procurement.
The government uses several methods to procure goods and services, including:
Ad hoc purchasing
Usually used for low-value, low-risk, one-off purchases below a pre-determined dollar threshold, government agencies can simply approach suppliers they know for a quote. Both the purchasing agency and the contract's value will usually determine the number of quotes needed and whether these are written or verbal.
Open tenders, which 'invite offers' or put out 'requests for offer', are open to all businesses in the marketplace.
If there are a large number of qualified businesses in the marketplace, an 'expression of interest' or 'request for information' may be issued as a strategy to gauge the level of interest in a particular purchase, and as the first stage of a selective tendering process.
Government agencies can use selective tendering processes where they have determined that only suppliers who have met certain pre-established criteria may submit a bid. This may require you to hold certain prequalification or accreditation.
Government agencies may make direct approaches to a supplier(s) of their choice, inviting them to submit an offer. Limited tenders usually only occur in very specific circumstances, such as under extreme urgency or if goods and services can only be provided by one supplier (e.g. a commissioned work of art).
Lists of preferred suppliers
Preferred supplier lists are common in most government agencies. Government agencies maintain a list of preferred suppliers who have met the necessary conditions/requirements for the supply of certain goods and/or services. The list may be used as the basis for determining which suppliers are invited to tender for certain goods/services (i.e. a selective tender).
Local, state and federal government agencies will usually either:
- periodically review their preferred supplier lists and advertise for, interview and select providers according to their specified needs
- allow suppliers (on an ongoing basis) to submit applications to join the list.
Standing offer arrangements (SOAs)
An SOA is usually set up to obtain frequently used products or services. SOAs set out the terms and conditions, including price, under which a business agrees to supply an undefined volume of goods and/or services for a defined period of time.
Using SOAs saves time and money for both the supplier and government agency. An SOA means suppliers do not have to repeatedly respond to tender requests, while most government buyers are allowed to purchase directly from these arrangements.
- Last reviewed: 20 May 2020
- Last updated: 12 May 2016