Understanding government value for money requirements in your tender

When Australian Federal and state governments go through their procurement processes they aim to get “value for money” from suppliers. When you are responding to their tenders it is important to understand what this means.

Achieving value for money should not really just be about getting the best price. It should encompass a thorough evaluation of multiple factors to ensure that public resources are used efficiently and effectively. Primary of these should be ensuring that risk is taken into account. The Commonwealth Procurement Rules (CPRs) outline a structured approach to achieve this goal.

Achieving value for money

Central to the CPRs is the core principle that every procurement must achieve value for money. To meet this standard, officials must:

  • encourage competition—foster a competitive environment that promotes fairness and non-discrimination
  • efficient resource use—manage public resources efficiently, economically, and ethically
  • transparency—ensure accountable and transparent decision-making processes
  • risk management—appropriately engage with risks associated with the procurement.
  • fit-for-purpose—ensure that the procurement matches the scale and scope of the business requirement.

Understanding the goals

Government officials use should start their process by clearly defining the goals and purpose of the procurement. This foundation step aligns every subsequent procurement decision with the intended outcomes.

When officials are tasked with evaluating whether a procurement will deliver the best value for money the evaluation should involve:

  • stakeholder input—gathering insights from relevant stakeholders
  • scale and scope—understanding the extent and specifics of the business requirement
  • resource and budget—assessing the buying entity’s capacity and financial framework
  • policy and obligations—adhering to relevant commonwealth policies and other contractual obligations
  • market dynamics—gauging the market’s ability to competitively respond to the procurement

Beyond price—comprehensive evaluation

Price alone does not determine value for money. Officials must consider a range of financial and non-financial factors, such as:

  • quality and fitness—assessing the suitability and performance of goods and services
  • supplier experience—evaluating the supplier’s track record and relevant experience
  • flexibility and innovation—considering the proposal’s adaptability and innovation potential
  • environmental impact—addressing sustainability concerns, including energy efficiency and use of recycled materials
  • whole-of-life costs—accounting for all costs associated with the procurement lifecycle, from initial purchase to disposal

Broader economic benefits

For procurements exceeding specified thresholds, officials are additionally required to consider the broader economic benefits to the Australian economy. This includes evaluating the procurement’s impact within the context of national and international agreements and policies.

What value for money means for sellers

When governments look for value for money in procurement, they consider not only the price but also the quality, reliability, and sustainability of the goods or services. Sellers should be aware of the following factors that may influence how governments evaluate their bids:

  • Compliance with the specifications and requirements of the procurement, such as technical standards, delivery time, warranty, and maintenance
  • Ability to meet the current and future needs of the government, such as scalability, compatibility, and innovation
  • Contribution to the government’s policy objectives, such as environmental protection, social inclusion, and regional development
  • Potential risks and opportunities associated with the procurement, such as legal, financial, and operational aspects
  • Presenting their performance and reputation in the best way referencing previous projects, testimonials and customer feedback

Sellers must demonstrate how their offer provides value for money to the government by providing relevant evidence and examples.