SME and Regional Procurement Policy - supplier guide

Updated: 20 Aug 2020
Guidance for suppliers on the SME and Regional Procurement Policy.

1. Policy context

1.1 Purpose and objectives

Government procurement provides significant opportunities to suppliers of all sizes to grow.

Given the importance of small and medium enterprises (SMEs) within the NSW economy, the NSW Government is committed to ensuring that SMEs have the necessary support to compete fairly to provide goods and services to the NSW Government.

The NSW Government is committed to supporting SMEs and regional businesses to participate in government procurement. The SME and Regional Procurement Policy is a component of the broader NSW Government Procurement Policy Framework.

This guide provides further information to suppliers about the SME and Regional Procurement Policy.

The NSW Government’s Small and Medium Enterprise and Regional Procurement Policy has 4 primary objectives:

  • supporting local businesses, start- ups and innovation and primary industries
  • building SME capability to supply to government
  • making supplying to government easy for SMEs
  • listening to local businesses and measuring participation.

1.2 Procurement principles

All procurement in NSW is to be consistent with the principle of value for money, as outlined in section 171 of the Public Works and Procurement Act 1912, and in a manner that is fair, ethical and transparent.

An assessment of value for money takes into consideration more than just the costs of purchasing a good or service. It takes into account the whole-of-life costs, benefits and risks of a purchase, including if the good or service is fit for purpose.

1.3 Application

This policy applies all procurement of goods and services (except construction) by NSW Government agencies, as defined in Part 11 of the Public Works and Procurement Act 1912.

Agencies that must apply this policy include:

  • government departments
  • executive agencies related to a department
  • statutory authorities and trusts established by legislation for a public purpose.

This policy does not apply to local councils and state-owned corporations.

1.4 Definition of a small and medium enterprise

For the purpose of this policy, an SME is an Australian or New Zealand based enterprise with fewer than 200 full-time equivalent (FTE) employees.

A local business has the same definition as an SME.

A small business is defined as an enterprise with 1-19 FTEs including sole traders and start-ups. A medium business is defined as an enterprise with 20-199 FTEs.

There is no associated revenue limit for an SME within this policy.

Ceasing to be a small and medium enterprise

Where an SME is engaged under this policy and ceases to become an SME through growth (either natural growth or by acquisition), the SME will no longer be able to take advantage of the initiatives outlined in this policy.

Regional NSW is all areas within NSW outside the greater Newcastle, Sydney and Wollongong metropolitan areas. A list of regional Local Government Areas is available on ProcurePoint and in Appendix 1 of this guide.

1.5 How to use this guide

This guide outlines how suppliers should apply the SME and Regional Procurement Policy throughout the procurement process to ensure that SMEs and regional businesses have the greatest opportunity to succeed in supplying to government.

A summary of the Policy initiatives is found in Appendix 2 -Summary of requirements and permissions.

For more information and assistance contact

2. Supplier frequently asked questions

2.1 How are SMEs encouraged to supply to government?

The policy has a number of initiatives aimed at encouraging increased participation for SMEs in government procurement.

It ensures that SMEs are given the best opportunity to supply to government in both low-value and low-risk engagements, as well as in larger opportunities.

All purchases within the policy must be made consistent with the underlying principle of value for money.

2.1.1 SME or Regional First

To encourage agencies to purchase from SMEs and regional suppliers, in the provision of lower value and lower risk goods and services, the government has introduced the SME or Regional First initiative.

Where a government agency is permitted to directly purchase goods and/or services from a supplier, or directly negotiate with a supplier to provide goods and/or services, the agency must first consider purchasing from a regional supplier for procurement in a regional area. If the procurement is not in a regional area, then the agency must first consider purchasing from an SME, up to a value of $250,000 (excluding GST).

Agencies must consider using the SME or Regional First requirement when selecting suppliers from prequalification schemes, panel contracts and standing offers where only one quote is required. If the agency determines there is no suitable SME to fulfil the contract, they may then consider other suppliers on the scheme or panel. This includes where a purchase can be made without a formal quote, such as an over the counter purchase.

2.1.2 SME and sustainability criteria

To encourage the participation of SMEs and local businesses in the supply of larger goods and services contracts, the NSW government has introduced the SME and sustainability criteria initiative.

For engagements that are expected to exceed more than $3 million over the life of the procurement arrangement, and where the supplier or suppliers are selected using a competitive process, agencies must assign a minimum 15% of the non-price evaluation criteria to consider how the government’s economic, ethical, environmental and social priorities will be supported through the contract. At least 10% must be allocated to SME participation.

If the procurement is covered by international procurement agreements (IPAs), the criteria must be consistent with IPA obligations or align with relevant exemptions.

2.1.3 SME commitments in evaluation criteria

When using evaluation criteria to assess the participation of SMEs, it may consider:

  • the value of goods and services that will directly support SMEs
  • number of SMEs expected to gain access to subcontracting opportunities by the tenderer
  • consortia bids from SMEs as a method to tackle large procurements

Larger suppliers who have made a commitment to include SMEs during a selection process, will be required to report monthly on SME and regional participation commitments through an online reporting portal. An interim reporting tool is being used in place of the online reporting portal which is being developed to simplify the supplier reporting process.

Buyers will monitor supplier commitments to ensure that policy objectives are being met.

2.1.4. Sustainability commitment in evaluation criteria

Sustainable procurement considers economic, social, environmental, and ethical factors in the procurement process in addition to traditional factors such as price, quality, and service. It considers whole-of-life costs, associated risks, impacts on society and the environment, and enables best value procurement.

Evaluation criteria could include considerations of:

  • using Aboriginal-owned businesses to support delivery of the contract, eg in the supply chain or via sub-contracting
  • using disability enterprises to support delivery of the contract, eg in the supply chain or via sub-contracting
  • how the supplier addresses risks of modern slavery in it supply chain
  • initiatives to ensure efficient use of resources and/or reduce waste.

2.1.5 International procurement agreements

NSW participates in the government procurement chapters of a number of Free Trade Agreements (FTAs), including the Australia-United States FTA (AUSFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) and the World Trade Organisation Government Procurement Agreement (WTO GPA).

The government procurement requirements apply to 41 NSW government agencies, including all the principal government departments, and cover goods and services procurement valued above $657,000 (ex GST).

IPA exemptions

Some categories of procurement are exempt from the international procurement agreements, such as health and welfare services, education services, and motor vehicles. A full list of exemptions is provided in Schedule 2 of the Enforceable Procurement Provisions.

All agreements exempt:

  • any form of preference to benefit small and medium enterprises.
  • measures to protect national treasures of artistic, historic, or archaeological value
  • measures for the health and welfare of Indigenous people
  • measures for the economic and social advancement of Indigenous people.

All of the agreements also exempt the following, subject to the measure not being applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between parties where the same conditions prevail, or a disguised restriction on international trade:

  • the protection of public morals, order or safety
  • the protection of human, animal or plant life or health
  • the protection of intellectual property
  • relating to the goods or services of handicapped persons, of philanthropic or not for profit institutions, or of prison labour.

For procurement covered by the FTAs, agencies must treat a supplier from the other country the same as a domestic supplier.

2.1.6 Small business exemption

The NSW Government has established whole-of-government arrangements for a range of goods and services, that are designed to ensure that the government receives the best price for these goods and services. Government agencies are required to purchase those goods and services from these whole-of-government arrangements.

However, if you are a small business (1 to 19 FTEs), the small business exemption allows agencies to directly purchase goods and services from you, up to a value of $50,000, even where those goods and services are available on a whole-of-government arrangement.

This gives agencies a simple way of directly engaging small businesses for low-value work and ensures that small businesses don’t miss out on opportunities that would generally only go to suppliers on whole-of-government contracts.

2.2 What do I need to supply to government?

NSW Government Procurement Policy Framework imposes a range of requirements on prospective and actual suppliers, depending on the goods and services being purchased.

Suppliers may, for example, be required to disclose historical financial statements, references or evidence of technical capability. Other procurements may require evidence of certain levels of public liability and professional indemnity insurance. In many cases, suppliers will need to enter into a written contract with the government.

The SME and Regional Procurement Policy requires agencies to minimise requirements placed on SMEs to supply to government, to ensure that the costs and barriers of supplying to government are as low as possible.

The policy encourages agencies to minimise the requirements that are placed on suppliers in every engagement by adopting a risk-based approach to purchasing. This could mean that low value and low risk purchases do not require suppliers to hold professional indemnity insurance.

2.3 What opportunities are available to supply to government?

Agencies that have been accredited by the Procurement Board to conduct their own procurements must publish their annual procurement plans (APP) on eTendering.

APPs outline upcoming procurement activity and provides as much advance notice of large contracts as possible. APPs allow suppliers to be aware of major opportunities that may be coming up, when they are expected to be released to market, and who to contact for further information. These can be found on the eTendering website.

Register on eTendering if you wish to:

  • be notified of current and proposed Requests for Tender (RFTs)
  • be notified of updates to Annual Procurement Plans (APPs)
  • add an APP to your watch list
  • respond to an advertised RFT
  • apply to be part of a prequalification scheme
  • respond to prequalification scheme invitations to quote.

No registration is required to view current or proposed RFTs, prequalification schemes or APPs.

You can also see current and closed offers, as well as details of awarded contracts over

$150,000 in value. Please note that not all NSW Government agencies post all business opportunities on the eTendering site. However, all open RFTs (ie RFTs that are open to any applicant) must be published on eTendering.

Engaging with the NSW Industry Capability Network (ICN) is also a helpful way to ensure that you are aware of upcoming opportunities.

The ICN helps Australian and New Zealand businesses grow by working with local suppliers and project managers throughout the procurement process, connecting suppliers with small and large government project opportunities.

2.4 What ways are there of supplying to government?

There are a number of ways you can supply to NSW Government. These include:

  • directly supplying through one of the exemptions available to agencies
  • supplying under a prequalification scheme or a standing offer arrangement
  • winning work through a competitive process outside a standing arrangement
  • subcontracting to a larger business.

NSW Government whole-of-government contracts

Agencies are required to purchase goods and services from available NSW Government whole-of-government contracts.

Whole-of-government contracts are standing offers made with suppliers to supply or dispose of specific goods and services for a specific price and for a specified period of time (usually 3 to 5 years).

Under some contracts there may be a panel of suppliers, and under others there may only be a single supplier. NSW Government whole of government contracts are established through open tender processes.

Prequalification schemes

Prequalification schemes help agencies find suppliers that are prequalified to provide specified goods or services to the government. Each scheme covers a different set of goods and services. Once registered on a scheme, government agencies may engage you under the terms and conditions of that scheme.

Being registered on a scheme does not guarantee that you will receive government work. However, if an agency identifies a need to purchase particular goods or services, registered suppliers are in a better position to be considered. You may still be required to provide relevant information and a quote to provide the specific goods and services being sought, or to allow an agency to select between multiple suppliers in a competitive process.

The NSW Government is currently working on aligning the requirements of the various schemes, making it easier for suppliers to register on multiple schemes.

Other arrangements

Where goods and services are not available through NSW Government Contracts or through prequalification schemes, agencies can undertake their own procurement using a variety of methods.

These are outlined in the approach the market guidance for buyers.

2.5 Accessing larger opportunities?

The policy strengthens the requirement for agencies to consider SMEs across a range of government procurement.

There are a range of ways that you could consider being a part of a larger contract for the delivery of goods and services including:

  • directly bidding to supply a part of the good or service
  • forming a partnership or consortium arrangement to deliver the goods and services
  • subcontracting through another supplier to deliver a good or service contract.

You should ensure that you are registered with eTendering to receive notifications of upcoming opportunities that are advertised by agencies.

Connecting with the ICN will also place you in a strong position to be considered for appropriate opportunities as they arise.

2.6 Supplying innovative goods and services to government?

The Procurement Innovation Stream allows for SMEs to be engaged directly for a proof of concept or outcomes-based trial on short term contracts of up to $1 million. This allows for the feasibility of innovative goods or services to be tested. If the trial is successful, the Procurement Innovation Stream allows for agencies to award SMEs an ongoing contract to further develop or deliver the innovative goods or services, subject to general procurement rules.

SMEs with innovative goods or services are able to make contact with relevant agencies directly and may also benefit from working with the ICN to identify potential projects or buyers.

2.7 What feedback is available?

The tender evaluation process is confidential. However, once a contract has been awarded, agencies are required to provide feedback to unsuccessful suppliers if this is reasonably requested.

Unsuccessful suppliers should take advantage of the agency feedback process to improve the quality of their future submissions and their chances of winning future government work.

2.8 How do I provide feedback?

Suppliers can provide feedback on government procurement using the survey on eTendering. This feedback will be used to improve government procurement processes.

The survey allows you to:

  • suggest general improvements and initiatives to achieve better outcomes for government in the purchasing process.
  • provide feedback on a specific experience with the government procurement process, identify areas within government that demonstrate best practice, and identify areas that may require further development.

Suppliers can provide anonymous feedback to government, regardless of being successful or unsuccessful in a tender.

2.9 What if I have a complaint?

Existing agency complaints handling processes will continue to be the first point of contact for suppliers to raise concerns about the conduct or outcome of a procurement activity.

The NSW Small Business Commissioner (NSWSBC) provides a dispute resolution service to small businesses, including for government contracting matters.

If you need assistance call 1300 795 534 or email

If agencies are contacted by NSWSBC on behalf of a small business they are required to provide information on the procurement process and participate in any dispute resolution processes recommended by NSWSBC.

2.10 Reporting obligations for suppliers in larger procurements?

For contracts with a value of more than $3 million in which SMEs are sub-contracted to a lead contractor:

  • Agencies are required to provide details through the interim reporting tool on the SME participation commitments and obligations made through the tendering and contracting process. The agency contract manager should then submit reports monthly to with the email subject heading: APP/SME Reporting - (month/year) - (contract name) - (agency name)
  • Lead contractors are required to provide actual SME participation details monthly through the interim reporting tool throughout the delivery of the engagement and submit their sheet to the agency contract manager at the end of each month.

An online reporting portal is being developed to replace theinterim reporting tool.

Where an agency has included these evaluation criteria, suppliers must demonstrate how they will support these priorities through the provision of the goods and services. If a supplier has made a commitment to support SMEs and regional employment, key metrics and targets will be included in the contract for reporting and monitoring.

For contracts with a value of less than $3 million in which SMEs are sub-contracted to a lead contractor, the agency and lead contractor are encouraged to comply with this requirement where possible. Agencies have the discretion to require reporting for contracts below the $3 million threshold.

2.11 Who can I contact to get more support?

Agencies are best placed to answer questions regarding their own procurement activities that are planned or underway.

The NSW Procurement Service Centre and buy.nsw can provide general procurement information.

Industry Capability Network

The ICN maintains a powerful online database and a network of consultants that give companies access to:

  • large and small government and privately managed projects;
  • partnership opportunities and supply chain development;
  • channels to promote company capabilities to their business network.

The NSW head office is in North Sydney and their phone number is 02 9927 3100. The ICN also services the regional areas of South East NSW, the Murray Riverina, Hunter / Northern NSW and the Central West NSW. Contact details for additional ICN offices across NSW are available on

Procurement Advisory Service

The NSW Department of Industry has implemented a specialist procurement advisory service for SMEs and Aboriginal businesses. A minimum of 50% of services will be dedicated to regional NSW.

Advisors will work with SMEs and host workshops to build capability, skills, provide advice on tenders and processes, introduce businesses to supplier lists and report back to the NSW Government on the SME experience.

Business Connect

The Business Connect program is funded by the NSW Government and provides business advisory services and business skills training.

Business Connect aims to support small businesses to start-up, create jobs through growth, help established SMEs become sustainable and increase business confidence across NSW.

Business Connect advisors are available across NSW and in specialist areas including finance, digital and innovation and creative industries.

The first 4 hours of business advice are free. All other services are highly subsidised by the NSW Government to make them affordable for business owners. Rates are further reduced for businesses in regional areas.

More information on Business Connect website or by calling 1300 134 359.

National Disability Services

National Disability Services has been engaged to promote procurement activities from eligible Australian Disability Enterprises.

NDS is also funded to help agencies to contact eligible disability employers who can meet their procurement needs.

2.12 Faster payment terms?

The NSW Government has committed to faster payments. Payments up to $10,000 will now be paid instantly by credit card.

NSW Government agencies must pay registered small businesses within 5 business days of receiving a correctly rendered invoice.

This improves support to small business and help ensure they are paid on time.

View more information on the Faster Payment Terms on the NSW Small Business Commissioner website.

3. Key definitions

Competitive market approach: An approach that includes all purchasing arrangements in which an agency seeks a quotation from more than one supplier, including where multiple suppliers are invited to quote from pre-qualification schemes and tenders that released publicly.

Direct source procurement: A direct source procurement refers to any procurement approach in which an agency is authorised to purchase goods or services from a single supplier. This includes any goods or services purchased from a Whole-of-Government Contract, from pre-qualified schemes or under one any of the direct source exemptions that are available to agencies.

Procurement: refers to a process that begins with the basic 'make or buy' decision and spans the 'whole life' of supplier/construction arrangements. It includes the definition of business needs, designing and implementing arrangements, monitoring and managing performance, and reviewing outcomes to assess the effectiveness of the arrangements.

Regional NSW: includes all areas within NSW outside the greater Newcastle, Sydney and Wollongong metropolitan areas.

Value for money: An assessment of the total benefits and total costs (both financial and non- financial) of a good or a service over its whole of life. A value for money decision is not driven by price factors alone and will not necessarily be the same as the lowest cost outcome.

4. Appendix 1 - Local Government Areas

Download the list of local government areas XLSX, 12.41 KB.

5. Appendix 2 - Summary of requirements and permissions

5.1 Summary of agency requirements and permissions

SME or Regional First

Agencies must first consider purchasing from a regional supplier for procurement in a regional area, whenever direct procurement is permitted, up to a value of $250,000. If the procurement is not in a regional area, then the agency must first consider purchasing from an SME.

SME and sustainability criteria

For procurements over $3 million over the life of the arrangement, including single supplier standing offers, agencies must include a minimum 15 per cent of the non-price evaluation criteria which considers how the government’s economic, ethical, environmental and social priorities will be supported, of which at least 10% (ie 2⁄3 of the 15% weighting) must be allocated to SME participation consistent with relevant exemptions in FTAs.

Procurements to establish prequalification schemes and panels are exempt, except for panels where spend with each supplier is estimated to exceed $3 million over the panel term. The criteria must be applied to any procurement using a scheme or panel that will exceed $3 million over the life of the contract.


Agencies must incorporate supplier SME and sustainability commitments into agreements, and monitor compliance as part of contract management activities. An online portal will be implemented to simplify the supplier reporting process.

Tendering and contract requirements

Agencies must, whenever feasible, limit the length of tender responses when seeking more than one quote, and minimise tender and contract requirements wherever possible (such as insurance levels or technical requirements).

Small business exemption

Agencies may purchase goods or services up to a value of $50,000 directly from a small business, even where these are available on a whole of government arrangement. Agencies are encouraged to purchase from local small businesses, including fresh produce.

General exemption

Agencies may purchase goods or services up to a value of $10,000 from any supplier, even where these are available on a whole of government arrangement.

Procurement Innovation Stream

Accredited agencies may directly engage an SME on a short-term contract valued up to $1 million to do proof-of-concept testing or outcomes-based trials. Agencies may use any

5.2 Summary of supplier requirements and permissions

SME and Sustainability Criteria

For procurements above $3 million, suppliers must demonstrate how they will support ethical, environmental and social factors, including SME participation. The tender documentation for each procurement will detail this requirement.


For contracts with a value greater than $3 million suppliers must report on commitments made to address the sustainability criteria, including monthly reporting on SMEs that have been engaged.

Supplier feedback

A new supplier feedback tool will give suppliers the opportunity to provide targeted feedback on government procurement activities.