Australian government’s 2025 procurement reforms prioritise local businesses and ethics

The Australian Government is set to overhaul its procurement rules from November 2025, focusing on supporting local businesses, enhancing ethical standards, and fostering inclusive opportunities for SMEs through significant regulatory changes.

The Australian Government is set to implement significant reforms to the Commonwealth Procurement Rules (CPRs) from 17 November 2025. These updated rules will reshape how Commonwealth entities procure goods and services, with a st...

rong emphasis on prioritising ethical standards, boosting opportunities for Australian businesses, and supporting small and medium enterprises (SMEs).

One of the most notable changes introduced by the 2025 CPRs is the requirement for non-corporate Commonwealth entities (NCEs) to prioritise procurement from Australian businesses. This marks a departure from previous rules that upheld a ‘non-discrimination’ principle without preferential treatment for local suppliers. Under the new framework, NCEs must invite only Australian businesses to tender for procurements valued between AU$10,000 and AU$125,000, except where exemptions are specifically documented. The procurement threshold has been raised from AU$80,000 to AU$125,000, expanding the scope of procurements where these preferential rules apply.

Clearer definitions have been introduced for what constitutes an ‘Australian business.’ For a business to qualify, it must have at least 50% Australian ownership or be primarily traded on an Australian equities market, be an Australian resident for tax purposes, and maintain its principal place of business in Australia. This clarity addresses previously ambiguous eligibility requirements, ensuring that preferential procurement truly benefits local enterprises.

In tandem with supporting Australian businesses, the 2025 CPRs enhance opportunities for SMEs. Certain Commonwealth procurement panels are now mandated to invite only SMEs to submit tenders for procurements under AU$125,000, following the fulfilment of Indigenous Procurement Policy priorities. The definition of SME has also been refined to consider employment relationships with associated entities, focusing on the practical realities of employment arrangements.

While achieving value for money remains the core objective of government procurement, the 2025 CPRs underscore that price alone is not the sole criteria. Procurement officials are now required to consider non-financial factors such as a supplier’s past performance and ethical conduct. This shift is partly in response to a recent performance audit on procurement complaints handling, leading officials to undertake comprehensive enquiries into tenderers’ compliance with labour laws, workplace health and safety regulations, environmental impact goals, and supply chain standards outlined in the Modern Slavery Act 2018.

Ethical procurement is strongly emphasised throughout the new rules. Suppliers must adhere to the Commonwealth Supplier Code of Conduct, which enshrines principles of honesty, integrity, probity, diligence, and fairness. This Code, effective since 1 July 2024 and supported by government contracting frameworks, imposes a proactive duty on suppliers to prevent breaches and maintain ethical standards, with potential impacts on contract continuation should violations occur.

Despite these changes, several key provisions remain stable to preserve consistent and reliable procurement practices. These include maintaining the requirements for timely payment terms, subcontractor disclosures, verification and compliance processes, contract end date specifications, and conditions for limited tenders. The fundamental ethical and probity standards guiding Commonwealth procurement activities also stay firmly in place to safeguard the integrity of government dealings.

To assist with these new requirements, the government has launched a Supplier Portal, which helps agencies identify and verify Indigenous businesses, SMEs, Australian businesses, and women-owned businesses. This tool aims to streamline compliance and improve inclusivity in the procurement process.

For Australian businesses aiming to benefit from these reforms, compliance with enhanced ethical standards and regulatory obligations is paramount. The updated CPRs create a procurement environment that not only bolsters local business participation but also demands a robust commitment to ethical, social, and environmental responsibilities. Government guidance materials and assistance are available to help businesses navigate this evolving procurement landscape.

In sum, the revised Commonwealth Procurement Rules represent a strategic effort by the Australian Government to prioritise local expertise, support SMEs, and embed ethical considerations firmly into public procurement, ensuring that government spending aligns with broader national values and objectives.

Source: Noah Wire Services