Approaching the supplier market

There are many ways to buy goods and services for NSW Government, but in all cases the overarching requirement is to achieve value for money.

Existing arrangements

If the goods or services are covered on an existing arrangement, you can buy from approved suppliers. These arrangements include whole-of-government contracts, agency contracts, prequalification schemes and other standing offer arrangements.

You must use whole-of-government contracts to buy the goods or services they cover, unless you are using a procurement exemption (see below).

Selecting a procurement method

If the goods or services are not covered by an existing arrangement, choosing an approach to market will depend on:

For detailed information see:

Issues to consider

When deciding how to approach the market, you should consider:

  • the nature of the goods or services you need
  • the risks arising from those goods or services, the procurement activity and the contract
  • minimising red tape throughout the procurement process and contract
  • ways to ensure maximum competition in the market, noting you must not exclude suppliers because they have no prior experience supplying to government
  • the contract period and timing requirements – when do you need the goods or services, and for how long
  • the capability of the market to supply the goods or services, and to respond to the market approach in the time provided
  • whether simple procurement methods can be used, including multi-stage processes to reduce the resourcing impact on suppliers
  • the capacity for innovative or alternative supply solutions
  • the capacity of small and medium enterprises to respond to the market approach, and supply the goods or services
  • market conditions, such as barriers to entry for new suppliers and the power balance between suppliers and buyers (including government)
  • your agency’s international procurement obligations
  • legal requirements or existing public sector requirements (such as Procurement Board Directions).

Common ways to approach the market

    Procurement exemptions

    You can purchase directly from certain types of suppliers, up to defined values, even if there is a whole of government contract in place.

    You must still ensure you achieve value for money when using the procurement exemptions, for example by confirming the price is similar to market rates.

    You must also check if your agency’s specific requirements or policies limit the use of these exemptions, due to safety, security or infrastructure considerations. As for any expenditure, you still need to seek internal approval and follow your agency’s delegations manual.

    Value Supplier type Process Reference
    <$10,000 Any You may purchase from any supplier. PBD-2019-04 Approved Procurement Arrangements
    <$50,000 Small business You may directly purchase from a small business  (a business with fewer than 20 full time equivalent employees, including sole traders and start-ups).

    SME and Regional Procurement Policy

    PBD-2019-03 Construction Procurement Opportunities for SMEs

    <$250,000 Aboriginal owned business You may directly purchase from an Aboriginal owned business (any business that is recognised as an Aboriginal owned business through an appropriate organisation).

    Aboriginal Procurement Policy

    Aboriginal Participation in Construction Policy

    <$1 million SMEs, for innovative trials If your agency is accredited, you may directly negotiate with an SME supplier to do proof-of-concept testing or outcomes-based trials.

    SME and Regional Procurement Policy

    PBD 2019-03 Construction Procurement Opportunities for SMEs

    No limit Disability employment organisation You may purchase goods and services from an approved disability employment organisation via a single written quote. Public Works and Procurement Regulation 2019

    Request for quotation (RFQ)

    You can use an RFQ to seek price quotes from suppliers on an existing contract or prequalification scheme. RFQs are also used where the goods or services are well defined and pricing is the main reason for selecting a supplier.

    You must use the approved standard contracts if you are issuing an RFQ under a whole of government contract or prequalification scheme. Otherwise, the contract should align with your agency’s standard terms and conditions.

    You can use NSW eQuote to issue and manage RFQs.

    Request for tender (RFT)

    An RFT involves issuing a written invitation to tender to the open market, or to pre-selected tenderers. Tenderers must demonstrate in their response how they satisfy the evaluation criteria and meet the specific RFT requirements.

    RFTs are an effective way of assuring best value for money as they increase competition and ensure all potential suppliers have a chance to complete for government business.

    An open tender is publicly advertised and is open to any interested supplier. This is the default sourcing method for procurements covered by international procurement agreements. NSW government agencies must advertise open RFTs on NSW eTendering.

    A selective tender involves selecting suppliers through a multi-stage process. The agency first issues a public invitation to participate in the procurement, eg via an Expression of interest (EOI) or Request for proposal (RFP). Then selected suppliers are invited to submit more detailed tenders based on selection criteria defined in the original public invitation.

    A limited tender is where an agency directly approaches one or more potential suppliers of its choice to submit a tender. See below for more information.

    Procurements covered by international procurement agreements

    Open RFTs are the default method for procurements covered by international procurement agreements (covered procurements). There are rules about the information you must provide and how you conduct an open RFT for covered procurements. 

    Selective and limited tenders may also be used for covered procurements, but there strict are rules on how and when they can be conducted.

    Refer to the IPA Guidelines for more information.

    Registration list

    A Registration List may be used for low risk, low value procurements for commonly used goods or services. The agency conducts a simple due diligence process on prospective suppliers, seeking basic commercial information and financial checks. The supplier agrees to standard terms and conditions when registering. Buyers then conduct further due diligence and a value for money assessment when engaging suppliers from the Registration List, eg via an RFQ.

    Prequalification scheme

    Prequalification schemes are similar to Registration Lists, but suppliers are asked for more information. This allows the agency to assess the supplier’s capability and capacity to supply the goods or services covered by the scheme.

    Prequalification schemes are suitable for low risk, high spend volume categories, and are useful for increasing access for small and medium enterprises (SMEs).

    Suppliers are added to the prequalification scheme based on defined criteria, and are then eligible for future procurements using the scheme. Agencies can add extra levels of qualification, with additional requirements, based on the respective risk of the procurement category, i.e. more risk = more requirements.

    Suppliers agree to follow the rules of the scheme when they apply, and agree to standard contract terms and conditions.

    Prequalification schemes can be ‘always open’, so new suppliers can join at any time, or else they are regularly reopened to new applicants (at least once per year).

    Buyers using the scheme still need to conduct further due diligence and a value for money assessment when engaging scheme suppliers, by seeking multiple quotations or issuing an RFQ as required by the rules of the scheme.

    Expression of interest (EOI)

    An EOI can help you seek information on potential products or services when the market is dynamic or not well understood. It is a way to find out if the goods or services you require are available, and which suppliers can provide them.

    You can use an EOI to shortlist suppliers and then invite the shortlisted suppliers to submit tenders. This is known as selective or multi-stage tendering. If you use the EOI as the first step in the selective tender, and the procurement is covered by an international procurement agreement, you must comply with the IPA Guidelines for selective tenders.

    Request for proposal (RFP)

    You can use an RFP when you know what the final product or service will be, but you are not sure on the best way to achieve the outcome. The RFP invites suppliers to propose ways to deliver the product or service. RFPs can be an effective way to seek innovative solutions from the market.

    Like EOIs, you can use RFPs to shortlist suppliers and then invite them to tender. If you use the RFP as the first step in a selective tender for a covered procurement, you must comply with the IPA Guidelines for selective tenders. 

    Request for information (RFI)

    RFIs differ from an EOI as they do not necessarily end with an assessed shortlist of supplier or a contractual arrangement. RFIs seek information from the market on what products or services are available to meet government’s needs, and to understand the scope or scale of markets for particular goods or services.

    Limited tender and direct negotiation

    A limited tender involves directly approaching one or more potential suppliers to submit a tender, rather than issuing an open RFT. If only one supplier is invited to submit a tender, this process is sometimes referred to as a direct negotiation.

    Limited tenders are generally used for specialist work or where only one or a limited number of suppliers are able to fulfil the contract, for example markets controlled by a monopoly or oligopoly. You may also use limited tenders in emergency situations, or if an open RFT has failed to find a supplier that meets your essential requirements.

    For procurements covered by international procurement agreements, you can only use limited tenders in restricted circumstances defined in the IPA Guidelines.

    Due to the reduced competition and transparency of limited tenders, there are increased risks around processes, probity and achieving value for money. The Independent Commission Against Corruption (ICAC) has guidelines for managing risks in direct negotiations.

    See complex market engagement methods for more information.

    Other ways to approach the market

    View the Market Approaches Guide (PDF, 603KB) for more ways to approach the market such as strategic commissioning and competitive dialogue.

    The guide also covers tendering periods, number of quotes, external involvement, disclosures and procurement principles.

    Complex approaches to market

    View complex market engagement methods for an overview of reverse auctions, direct negotiations and managed service contracts (MSCs).

    Related Links