Ethical procurement rules will benefit government, and community

From this month, Australian government agencies will be required to consider not only value for money and past performance in selecting suppliers, but, critically, the ethical conduct of bidders.

The new procurement guidance makes explicit that non-financial factors – including a supplier’s record and commitment to ethical behaviour – must form part of the decision-making process.

This is more than window-dressing: it marks a substantial shift in how government purchasing must be exercised.

Why it matters

In nearly three decades working in government, the community sector and social enterprise, I have seen the limits of purely transactional procurement. When governments contract for goods or services without adequately assessing the supplier’s values, behaviour or community alignment, several risks emerge: mission drift, reputational damage, inefficient outcomes and lost public trust.

Adding an “ethical conduct” requirement to the procurement rules means government is acknowledging that who you are as an organisation matters just as much as what you deliver. It recognises that taxpayers’ money is not just a commodity to be extracted, but a public asset to be deployed in the service of the Australian community.

The Australian government procures on average around $70 billion each year in goods and services, and to ignore ethics in that context is to compromise the integrity of public and community investment.

A game changer for values-driven Australian suppliers

For many years, smaller suppliers and social enterprises have argued – correctly – that big-ticket contracts tend to favour incumbent “big four” consultancies, large software firms and multinational vendors. The reforms are meant to counter that imbalance: for example, by prioritising Australian businesses for contracts under certain thresholds, and by obliging agencies to monitor the ethical behaviour of suppliers throughout the term of the contract.

Organisations with a deep understanding of local conditions, ethical business models, and a demonstrated commitment to community outcomes should be able to proceed further to the front of the queue.

This is a positive development, not just for businesses such as ours, but for all government agencies seeking to deliver better outcomes, using organisations that share more of their values and have the local knowledge capable of generating better results.

Why procurement ethics and grant management technology link up

When I reflect on the development of grantmaking systems and technology over the past two decades, including through our SmartyGrants business, many of the persistent problems we’ve encountered have been relational, not technical: mis-aligned incentives, lack of transparency, slow feedback loops, volunteer fatigue in community bodies, and weak alignment between grantmakers and grantees.

These issues are exactly the kinds of risks that ethical procurement rules aim to tackle. If government engages a supplier without paying due attention to its culture, values or track record, then the contract may deliver not only poor functionality but also frustrated and disengaged users, unfulfilled community outcomes, and costs to the taxpayer of more time, re-work and erosion of trust.

Government: set the standard, don’t just tick the box

Contracting agencies should not treat the new procurement requirements as just another checklist item. Ethical conduct demands that agencies:

• ask the right questions of bidders: not only “have you ever been sanctioned?” but “how do you embed ethical behaviours in your governance, your staff culture, your supplier relationships?”
• evaluate the performance and alignment of contracted suppliers not just at the point of award but over time.
• favour suppliers who are genuinely transparent and can provide evidence of long-term ethical practice in Australian contexts.

For organisations working closely with the community sector, ethical conduct is often baked into the business model, based on a combination of lived experience, building systems with and for community organisations, testing in live settings, refining work with community members, volunteers and boards, and embedding user-centric design and accountability. It’s about acting ethically, rather than simply churning out more and more box-ticking policies.

A call to action

To agencies preparing now for the procurement changes: don’t assume that ethical conduct means higher cost or slower delivery. When you partner with organisations operating on ethical foundations, you’ll see fewer surprises, better results and more stable partnerships.

To the supplier community: the competitive terrain is shifting. It is no longer sufficient to be technically excellent – you must also demonstrate integrity, local commitment, aligned values and community engagement. Those attributes won’t just satisfy the new CPRs, they will help you build enduring, trusted relationships with government and community alike.

For the community sector this procurement reform is a moment of opportunity. If governments shift a portion of their vast purchasing power towards Australian organisations built on community values, then the outcomes will ripple across civil society: stronger organisations, better grantmaking systems, more efficient funding flows – and ultimately communities that are more resilient and capable.

The procurement rules aren’t just about suppliers being “clean” or “ethical”, they are about governments being confident that money spent truly builds community value.

More information

How SmartyGrants is meeting the new procurement standards