Budget delivery reveals changes to government procurement rules

By Melissa Coade

March 31, 2022

Finance minister Simon Birmingham
Finance minister Simon Birmingham. (AAP Image/Mick Tsikas)

An update to commonwealth procurement rules will see significant initiatives, as announced by the government in this week’s federal budget.

Small and medium businesses will benefit from the changes, which will make government procurement more accessible to SMEs. They include a requirement for public servants managing government projects to consider splitting projects into smaller contract opportunities, where unbundling would allow greater competition and is appropriate to the type of work on offer.

Finance minister Simon Birmingham said the government wanted to encourage a trend of strong participation from SMEs in the highly competitive government procurement market.

“This is all about enhancing the commercial opportunities for SMEs and allowing more suppliers to offer their services for the benefit of taxpayers,” Birmingham said. 

“We are also determined to give Australian contractors the maximum opportunity to win significant work by unbundling major projects in ways that maximise efficiency for taxpayers, local job opportunities and the potential growth of Aussie businesses.”

Other changes to the procurement rules involve reducing the value of insurance costs for suppliers to a ‘reasonable level’, and the provision of faster cash flow through supply chains, which will guarantee eInvoices will be paid by government customers within five days.

According to Stuart Robert, minister for employment, workforce, skills, small and family business, more SMEs participating in procurement would mean the government could tap into even more dynamic and innovative businesses.

“Our measures [will] make sure SMEs get paid in full and on time or ensuring government buys from Australian SMEs,” Robert said. 

On budget night senator Birmingham also announced new changes to defence procurement, freeing up the option of directly engaging SMEs or Defence contracts using tenders limited to SMEs for procurements of up to $500,000.

Defence is the largest federal procurer of goods and services, reporting contracts with a combined value of approximately $37.4 billion in 2020-21.

The point of the measures was to allow SMEs to grow operations and create more jobs, the finance minister said.

“We have already seen small and medium business participation in defence projects reach record levels through other changes to procurement rules that have cut red tape and reduced costs for small businesses within the market,” he said. 

Defence industry minister Melissa Price said the changes would support a competitive defence industry and more value for taxpayer money. 

“Defence will continue to engage with industry to ensure these businesses are able to maximise their participation in Defence procurements,” Price said. 

The changes come after the completion of a 2021 review into Australian Standard for Defence Contracting and Defence Procurement.


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