Welcome to the second instalment in our Strategic Procurement in Western Australian Local Government Article Series. In our last article we observed that councils must balance compliance with strategic thinking to enable them to move from reactive, transactional purchasing to proactive, planned procurement that drives community and financial benefits. In this article we discuss how councils can adopt the strategic approach necessary to actively drive economic, social, environmental and governance outcomes, while still meeting all compliance obligations under the Local Government Act 1995 and Local Government (Functions and General) Regulations 1996.

Procurement is one of the most powerful levers available to local government, yet too often it is treated as a transactional or compliance obligation rather than a strategic function. In Western Australia,  forward-thinking councils are now shifting away from reactive purchasing and adopting a strategic procurement approach.

What Does a Strategic Approach to Procurement Look Like?

Instead of focusing on “How do we buy this?” strategic councils ask “How do we use procurement to create broader value for our community?”

Strategic procurement is built on five core pillars:

1. Policy Alignment, Not Just Process Compliance

A strategic procurement framework explicitly aligns purchasing decisions to council’s corporate plan, long-term financial sustainability strategy, environmental, social and governance (ESG) targets, economic development goals and Reconciliation Action Plan. It positions procurement as a strategic governance instrument, not an administrative workflow.

2. Proactive Planning, Not Reactive Buying

Leading councils plan their procurement pipeline 12–36 months ahead, engage with the market early, and use procurement to shape project outcomes before scopes are locked in. This avoids rushed tendering and enables market engagement, innovation and competitive value creation.

3. Smarter Contracting Models

Strategic procurement goes beyond issuing one-off tenders. It leverages tools such as standing offer contracts, pre-qualified supplier panels, regional procurement, category management, and outcomes-based contracting to unlock long-term value. The result is a more resilient supply base, improved risk management, and greater overall value for money over the contract lifecycle.

4. Procurement as a Driver of Social, Local and Sustainable Impact

Rather than treating social value as an add-on, strategic councils embed it within it into weighted evaluation criteria,  including local employment, Aboriginal business engagement, sustainability, circular economy and social enterprise participation.

5. Governance, Capability and Accountability

Strategic councils invest in clear role definition, probity discipline and procurement training for both officers and elected members. They implement contract performance frameworks, ensuring delivery, not just award, and measure success in terms of impact and value.

The Opportunity Ahead

For councils, strategic procurement represents a significant shift: from admin to governance, from cost focus to value creation, from reactive transactions to proactive policy enablement. Those who make this shift unlock procurement as a strategic enabler of community, economic and sustainability outcomes.

How Muscat Tanzer Supports Councils to Adopt a Strategic Procurement Model

Muscat Tanzer can help local governments transition from transactional procurement to a strategic, value-creating model by providing:

1. Strategic Procurement Framework & Policy Design

• Drafting / modernising procurement policies to embed strategic objectives, economic development, ESG, Aboriginal participation, circular economy, long-term financial sustainability;
• Designing aligned evaluation frameworks that go beyond price to weighted value outcomes; and
• Ensuring full compliance with laws and regulations in Western Australia including the Local Government Act 1995 and Local Government (Functions & General) Regulations 1996, while enabling flexibility.

2. Procurement Planning & Category Strategy

• Advising on forward procurement planning and market engagement strategies (shifting away from reactive tendering);
• Structuring panel arrangements, standing offers, and category management models; and
• Advising on collaborative / regional procurement and shared services strategies.

3. Smart Contracting Structures

• Designing outcomes-based contracts, performance-linked mechanisms and innovation-encouraging terms;
• Drafting scalable, future-proof panel agreements and master services contracts; and
• Advising on risk allocation, probity, value protection and contract optimisation.

4. Training, Governance & Probity Assurance

• Training executives, procurement staff and elected members on strategic procurement principles and legal obligations;
• Acting as independent probity adviser for high-risk projects; and
• Providing contract performance, benefit tracking and post-award governance frameworks.

Councils seeking to shift from compliance-driven purchasing to strategic procurement can benefit from early legal insight. Engaging advisors early supports compliant, innovative contracting approaches that maximise community outcomes and long-term value. Contact our team to discuss how we can support your council’s strategic procurement journey.

Introduction

Welcome to the third article in our series on council-owned corporations. This article provides practical guidance for councils on funding strategies, compliance considerations, dividend management, and transparency when establishing or managing a council-owned corporation.

Council-owned corporations allow councils to deliver commercial projects, infrastructure, and services with greater flexibility than traditional council structures. A key factor in their success is ensuring they are appropriately funded and capitalised. Without clear financial structures and governance frameworks, even well-managed companies can struggle to achieve operational sustainability and deliver value to both the council and the community.

1. Options for Funding and Capitalisation

Council-owned corporations can be funded through a combination of equity and debt, depending on the company’s purpose, risk profile, and strategic objectives.

Equity Funding

Councils often provide initial equity to reflect ownership and maintain control. Equity contributions may include:

• Cash injections
• Transfers of council-owned assets
• Assignment of service agreements

Documenting the value of these contributions is critical for financial management and reporting. Councils should consider a Funding Deed, a legally binding agreement detailing:

• Conditions for the use of funds
• Reporting requirements
• Performance indicators
• Security arrangements
• Repayment obligations if the funding is a loan rather than a grant

Debt Funding

Debt is commonly used for larger projects or ongoing operations. Options include:

• Bank loans or commercial debt facilities secured against the corporation’s assets or revenue
• Government grants or infrastructure funding, such as Queensland’s Local Government Grants and Subsidies Program (LGGSP) or debt financing via Queensland Treasury Corporation (QTC)

Before finalising funding, councils should conduct a comprehensive funding needs assessment to balance short-term operational needs with long-term strategic goals. It is also important to distinguish between funding intended for commercial purposes and funding for community service delivery, as this may affect compliance and reporting obligations.

Councils should also consider aligning funding arrangements with policies such as:

• Financial Management & Reporting Policy
• Treasury & Investment Policy
• Procurement & Contracting Policy

2. Compliance with Local Government Borrowing Rules

Council-owned corporations operate under the Corporations Act 2001 and the relevant local government legislation in each state and territory. Councils must ensure any loans to a council-owned corporation comply with statutory borrowing limits and approvals, which may include:

• Council resolutions
• internal authorisations
• Treasurer or regulatory consent

Loans may constitute financial accommodation and trigger additional approval requirements. Embedding borrowing limits in the corporation’s constitution or funding deeds helps prevent the corporation’s board from incurring debt outside approved parameters.

Queensland example: Under the Local Government Act 2009 and associated regulation, councils must maintain a Debt Policy outlining borrowing plans, debt servicing strategies, and compliance measures. Borrowings via QTC require approval from the Queensland Treasurer.

Policy Alignment: The council’s Treasury & Investment Policy, Audit & Assurance Policy, and Financial Management & Reporting Policy provide governance frameworks to support compliance, risk management, and internal audit oversight of borrowing and funding arrangements.

3. Managing Dividends and Returns to Council

Council-owned corporations may generate profits or surpluses that can be returned to the council when they are financially self-sufficient. Managing these returns effectively is critical to balancing commercial sustainability with community value. Councils should develop a clear policy on whether profits will be reinvested in the company or distributed as dividends. Dividend payments typically require a recommendation from the board and approval by the council as shareholder.

It is important to consider:

• whether dividend distributions align with the council’s budgeting and long-term financial planning;
• potential tax implications for both the company and the council when dividends are paid;
• a portion of the potential dividend must be set aside to cover potential future shortfalls, to ensure the business’s long-term stability; and
• whether to reinvest profits in strategic projects, such as local infrastructure or economic development initiatives, where the council’s financial return may be indirect but still delivers community benefit.

Establishing a formal dividend policy in the company’s constitution or shareholder agreement ensures consistency and prevents ad hoc or politically influenced decisions. This approach promotes transparency and supports the sustainable operation of the company.

4. Structuring for Transparency and Accountability

Transparency is essential when a council is the shareholder of a commercial entity. Funding and capital arrangements should be structured to enable clear oversight and reporting. Councils must maintain separate accounts and financial systems for the company to distinguish commercial activity from council operations.

Regular reporting protocols should be established to ensure the corporation’s board provides timely and comprehensive updates to the council. Reports should cover financial performance, debt servicing, dividend payments, and key operational metrics. All funding agreements, loan terms, and shareholder resolutions should be documented and retained to support accountability and audit requirements.

By embedding transparency into the financial structure from the outset, councils can maintain public confidence while allowing the company to operate with commercial flexibility. Clear documentation and reporting also help the council demonstrate compliance with both the Corporations Act and local government legislation.

Conclusion

Proper funding and capitalisation are essential to the success of council-owned corporations. Councils must carefully consider how the company will be financed, how debt will be managed, how returns will flow back to the council, and how transparency will be ensured.

A thoughtful approach balances commercial independence with public accountability, enabling the company to operate efficiently while protecting council and community interests. Planning funding structures, complying with statutory borrowing requirements, and establishing clear dividend policies and reporting frameworks ensures that council-owned corporations can achieve both operational success and long-term sustainability.

Our firm regularly advises councils on funding, capitalisation, and financial governance for council-owned corporations, including structuring loans and equity contributions, ensuring compliance with local government legislation, and implementing transparent reporting and dividend arrangements. Councils considering the establishment of a new company, or reviewing an existing entity’s financial arrangements, can benefit from early legal guidance to ensure both compliance and operational success.

Local governments in Western Australia are responsible for delivering an extensive range of services and infrastructure for their communities. To do this efficiently, they must procure goods and services in compliance with a strict legislative framework designed to ensure transparency, fairness and value for money.

This framework is set out primarily in the Local Government Act 1995 (WA) and the Local Government (Functions and General) Regulations 1996 (WA). Councils must also take into account relevant State Government policies such as the Buy Local Policy, Aboriginal Procurement Policy and Western Australian Social Procurement Framework.

A strategic and compliant approach to procurement is essential not only to meet statutory obligations but also to achieve best value outcomes for ratepayers.

The Legislative Framework

1. The Local Government Act 1995 (WA)

The Act provides the overarching requirement that councils must use sound contracting and financial management practices, ensuring openness and accountability in their operations.

Section 3.57 of the Act states:
“A local government is required to invite tenders before it enters into a contract of a prescribed kind under which another person is to supply goods or services.”

This provision forms the foundation of the procurement framework and is expanded upon in the Regulations.

2. The Local Government (Functions and General) Regulations 1996 (WA)

Part 4 of the Regulations prescribes the rules for tendering and procurement.

• Regulation 11(1): Tenders must be publicly invited where the expected value of the contract is $250,000 or more, unless an exemption applies.
• Regulation 11(2): Several exemptions to Regulation 11(1) are provided, including for purchases under a WALGA Preferred Supplier Panel, emergency procurements, or where goods and services are obtained through another government entity.
• Regulations 12–19: Set out the detailed procedural requirements for inviting tenders, keeping a tenders register, opening and assessing tenders, and notifying tenderers.
• Regulation 20: Allows Council to make minor variations to the procurement prior to the successful tenderer entering into a contract. However, if the tenderer is unable to enter the varied contract or cannot agree with Council on the variation the tenderer will cease to be the chosen tenderer.
• Regulation 21A: A local government may only vary a contract for the supply of goods and services with a successful tenderer if the variation is necessary to deliver the goods or services and does not change the contract’s scope, or the variation is a renewal or extension of the contract’s term as allowed under regulation 11(2)(j).
• Division 3: Sets out the circumstances that allow for pre-qualified supplier panels, where established in accordance with prescribed criteria and procedures.

Compliance Process – Step by Step

Below is a practical checklist for ensuring compliance with WA’s legislative procurement framework:

Key Principles

Beyond procedural compliance, councils must observe core procurement principles that underpin the legislation:

• Value for Money – assess cost and non-cost factors, including quality, risk, sustainability and local economic benefits.
• Openness and Transparency – ensure public confidence through clear processes and accessible records.
• Fairness and Equity – provide all suppliers with equal opportunity to compete.
• Accountability – maintain clear audit trails and decision-making justifications.
• Sustainability and Local Benefit – align procurement with social and economic development objectives.

Strategic Procurement – Beyond Compliance

Compliance with the Act and Regulations is mandatory, leading councils adopt a strategic approach to procurement. This involves developing procurement policies and frameworks that integrate legislative compliance with broader organisational goals such as:

• supporting local and regional businesses;
• delivering environmentally sustainable outcomes;
• facilitating innovation and partnership in service delivery; and
• ensuring whole-of-life value and risk optimisation in major projects.

A strategic approach enables councils to move from reactive, transactional purchasing to proactive, planned procurement that drives community and financial benefits.

How Muscat Tanzer Can Assist

We have extensive experience assisting local governments across Australia with:

• procurement policies and tender documentation;
• tender exemptions and compliance advice;
• pre-qualified panels;
• probity and evaluation support; and
• contract formation, variations and disputes.

Muscat Tanzer helps councils design procurement frameworks that are legally compliant, transparent and strategically aligned with their community goals.

If your council is thinking about refreshing its procurement framework and documentation or if you have any questions regarding procurement generally, do not hesitate to contact us. 

Welcome to the third article in our Council-Owned Corporations series. Today’s article explores how a council-owned corporation can be a powerful vehicle for local governments to deliver strategic, commercial and community outcomes. A well-structured council-owned corporation can give councils the flexibility to operate commercially while maintaining strong public accountability. The article outlines key steps for success – from choosing the right structure and governance model to ensuring compliance under both the Corporations Act and local government legislation.

Getting it right from the start means clear governance, robust risk management, and a balance between autonomy and oversight. We help councils across Australia establish and manage council-owned corporations with sound legal, governance and compliance foundations.

If your council is considering establishing a council-owned corporation or reviewing an existing one, please don’t hesitate to contact us.

Welcome to the sixth instalment of our Sustainability in Procurement Article Series, a seven-week exploration of how sustainability principles can be embedded throughout every stage of the procurement process.

In last week’s article, we examined the evaluation phase of the procurement process, where we provided practical guidance on establishing sustainability criteria and navigating common challenges throughout the procurement process.

This week, we explore the role of contract management in the procurement process. We provide instruction on establishing clear metrics and reporting frameworks, leveraging subject matter expertise and technology, and addressing non-compliance and underperformance with contractors. 

We also provide guidance on promoting circularity and resource efficiency, and end-of-life solutions.

Next week, we will focus on sustainable procurement policy.

In the meantime, if you are seeking support to strengthen your evaluation frameworks and sustainability assessment methods, or with the role and use of contract management to monitor, measure and improve sustainability outcomes, please don’t hesitate to get in touch with our team.

Today’s article is the second article of our Council-Owned Corporations series that explores the roles, powers and obligations of Directors and shareholders involved in council-owned corporations.

Council-owned corporations offer councils a powerful way to deliver services and pursue commercial opportunities, but they also bring complex governance challenges. Directors of council-owned corporations must act in the best interests of the company, exercising care, diligence and independence, even when appointed by the council. Meanwhile, the council, as shareholder, must focus on strategic oversight rather than day-to-day management. Maintaining this separation is essential to avoid blurred lines, shadow director risks, and conflicts between corporate and public objectives.

We outline practical steps for managing conflicts of interest, including appointing independent directors, defining clear governance boundaries, formalising conflict management processes, and conducting regular governance reviews. Strong governance and role clarity helps council-owned corporations to operate effectively, uphold transparency, and protect public trust, ensuring they can achieve both commercial success and community benefit.

Our team has extensive experience supporting councils across Australia with governance frameworks, director training and conflict management strategies. Please don’t hesitate to contact us if you have any questions relating to Director Duties, Conflicts of Interest and company and council policy in relation to Council Owed Corporations.

Many local governments have adopted relationship contracting (also called relational contracting, partnering, alliancing or collaborative contracting) for the delivery of complex public services and infrastructure to ensure alignment of incentives and outcomes and collaborative procurement objectives. This article demonstrates how relationship contracting prioritises ongoing cooperation, joint problem-solving and shared objectives over short-term price competition or tightly prescriptive specifications. It also shows that unlike rigid transactional deals, relationship contracting assists in better risk allocation, innovation and improved supplier relationships and capacity building.

The team at Muscat Tanzer have considerable experience in relationship contracting and the development of procurement and contract models and documents to assist with the delivery of complex infrastructure and services.

Please don’t hesitate to contact us if you have any questions or need assistance with your next relationship contracting project.

Queensland local governments are under increasing pressure to deliver services efficiently, manage growth, and respond to community expectations while maintaining financial sustainability. One structural option available is the creation of a council-owned corporation. This model allows councils to separate commercial functions from core regulatory and community service roles, while retaining public ownership and oversight.

This article explores the benefits, risks, and practical considerations of establishing council-owned corporations.

1. What is a council-owned corporation?

A council-owned corporation is a legally distinct entity, usually a company under the Corporations Act 2001 (Cth), established and wholly owned by a Queensland local government. Councils may set up such corporations to:

• Deliver commercial services (e.g. utilities, waste management, property development, tourism assets).
• Manage significant infrastructure or development projects.
• Operate in a competitive market while preserving public ownership of assets.

Although corporatised, these entities remain accountable to their parent council through sole shareholding arrangements and reporting requirements.

2. Benefits of creating a council-owned corporation

Commercial efficiency

Operating under corporate governance frameworks allows entities to adopt private-sector practices in procurement, staffing, and financial management. This often results in greater flexibility, quicker decision-making, and improved operational efficiency when compared to the bureaucratic processes of local government. Corporatised entities can trial innovative solutions, adopt emerging technologies, and respond to market opportunities more quickly than traditional council structures.

Financial sustainability

Corporatised entities can generate new revenue streams, return dividends to the council, and reinvest profits into community services or infrastructure. They can also attract external financing and partnerships more readily than council departments.

Strategic asset management

Assets such as airports, ports, industrial estates, or renewable energy facilities can be better managed in a corporate structure that focuses on long-term sustainability, risk management, and market competitiveness.

Governance and accountability

A separate board of directors provides independent oversight and specialised professional expertise. Clear reporting lines to the council as sole shareholder, combined with statutory governance obligations, enhance accountability and transparency. This provides a clear separation between operational management and shareholder oversight, reducing potential conflicts of interest, and ensuring that the council-owned corporation remains aligned with community priorities while fulfilling its commercial objectives.

Community and regional benefits

By operating commercially, council-owned corporations can:

• Stimulate local economic development.
• Create jobs and training opportunities.
• Support regional industries and supply chains.
• Ensure critical services remain under public control rather than being privatised.

3. Risks and challenges

While attractive, the corporatisation model also requires careful consideration:

• Governance complexity: Councillors must distinguish between their role as policy-makers and as shareholders. This requires clear boundaries, structured reporting, and an understanding of both public-sector obligations and corporate governance principles to avoid conflicts of interest.
• Political sensitivities: Commercial decision-making may involve pricing, investment, or partnerships that can be controversial.
• Regulatory compliance: Corporations must comply with both local government legislation and the Corporations Act.
• Transparency: Balancing commercial confidentiality with public accountability can be challenging. For example, sensitive commercial information may need to be protected to safeguard competitive advantage, yet councils must also ensure that the public can access sufficient information to maintain trust and oversight.
• Financial risk: Like any business, council-owned corporations can face market fluctuations and investment risks. Poor financial management or unforeseen economic changes can impact both the corporation and, indirectly, the council’s budget.

4. Establishment process in Queensland

• Strategic assessment: Identify why a corporation is needed, what services or assets it will manage, and assess the alternatives.
• Business case: Prepare a comprehensive business case, including financial modelling, risk analysis, and community benefit assessment.
• Legal and governance design: Decide on company structure, shareholding arrangements, board composition, and reporting mechanisms.
• Regulatory compliance: Ensure compliance with the Local Government Act 2009 (Qld), Corporations Act 2001 (Cth), and any relevant guidelines from the Queensland Government or Local Government Association of Queensland (LGAQ).
• Implementation and transition: Transfer assets, establish staffing arrangements, and develop governance documents (constitution, service level and loan agreements, policies, etc).
• Ongoing oversight: Maintain regular reporting to council as shareholder, annual general meetings, and performance reviews.

5. Examples of application

In Queensland and other Australian jurisdictions, council-owned corporations are often used to manage:

• Utilities — water, waste and energy services.
• Infrastructure — airports, ports, and transport hubs.
• Property development — joint ventures or development corporations.
• Tourism and events — destination marketing organisations or venue management entities.

These corporations enable councils to remain agile and competitive in markets while securing public benefit.

Conclusion

Creating a council-owned corporation can deliver significant benefits to Queensland local governments: improved efficiency, stronger financial sustainability, better asset management, independent and specialised directors who bring professional expertise and enhanced community outcomes. However, the model requires a clear strategic purpose, robust governance, and careful management of risks. Councils that use corporatisation thoughtfully can unlock new opportunities to serve their communities while safeguarding public ownership and accountability.

The Muscat Tanzer team has assisted several local governments to establish council owned corporations and provides legal services to those corporations in the delivery of their projects and services. Drawing on our experience, we aim to guide councils through governance structures, helping them make informed decisions and maximise the potential of this model. If you need assistance with the establishment of a council owned corporation or in the delivery of a corporation’s project and services, please contact one of our team.

Our Sustainability in Procurement Series has examined how sustainability can be embedded across every stage of the procurement process, from integrating sustainability into the procurement process, using market research to identify opportunities, to incorporating sustainability into procurement plans, and approaching the market in ways that draw out innovative, sustainable solutions.

This article turns to evaluation – a key stage in the procurement process where sustainability objectives are put to the test. At this stage, the concepts, targets and commitments developed during planning and specification are measured against the reality of what suppliers put forward. When done well, evaluation is much more than a compliance exercise. It is the point at which environmental, social and circular economy objectives are quantified, verified, and translated into enforceable contractual obligations. A rigorous evaluation process also ensures that poor or non-compliant offers are filtered out early, allowing resources to be focused on genuine contenders capable of delivering the intended outcomes.

Overview

As sustainable development moves from being an ambition to a requirement, organisations face a growing responsibility. Sustainability must not only be included as a consideration in purchasing decisions, but it must also be measurable, enforceable and deliver clear outcomes. In practice, this means that sustainability criteria, requirements and outcomes must be carefully defined, applied and evaluated throughout every stage of the procurement process, and in contract management.

This article examines how sustainability can be evaluated in procurement. It outlines how sustainability criteria are established, how requirements are embedded into procurement processes, and how outcomes can be measured and verified during and after delivery. This approach reflects recent developments in Australian procurement policy, including the revised Commonwealth Procurement Rules and the new Environmentally Sustainable Procurement Policy, both of which now mandate stricter reporting and clearer integration of environmental, social and governance outcomes.

Understanding the role of evaluation in sustainable procurement

Evaluation is the decision-making core of sustainable procurement, the stage where theory meets practice and the credibility of the process is most visible. A well-structured evaluation process:

1. protects integrity by ensuring that only compliant and genuinely sustainable offers proceed;
2. supports decision-makers with clear, documented evidence that sustainability has been properly considered; and
3. drives better market performance by rewarding suppliers who exceed the minimum requirements.

At its heart, evaluation is how organisations test whether sustainability commitments made on paper translate into genuine impact. This involves three interrelated components:

1. sustainability criteria, which establish the basis for comparison, identifying which environmental or social features are being prioritised;
2. sustainability requirements, which set out how those criteria must be met by suppliers; and
3. sustainability outcomes, which are the tangible environmental and social benefits that result from embedding these commitments into procurement decisions.

A procurement process that evaluates all three of these components creates a more accountable and effective system. Without evaluation, sustainability becomes aspirational rather than operational. Evaluation provides the feedback needed to ensure that a procurement achieves its intended environmental and social objectives.

Establishing clear sustainability criteria

Sustainability criteria are the foundation of any evaluation. These criteria must be clearly defined, relevant to the goods or services being procured, and capable of being assessed in an objective and consistent manner. Common criteria include energy consumption, greenhouse gas emissions, water use, waste generation, packaging impact, recyclability and ethical sourcing. Depending on the procurement category, social factors such as supplier diversity, community benefits or modern slavery risk may also be relevant.

Criteria should adopt a lifecycle approach. Rather than focusing only on the environmental impact at the point of purchase, procurement should assess the entire lifespan of a product or service, from design and manufacture through to use, maintenance and disposal. This encourages better decisions, for example selecting goods with longer durability or reusable packaging.

Where sustainability is expected to be a major driver of value for money, such as in large infrastructure or high-emissions sectors, sustainability criteria should be given meaningful weighting in the overall evaluation score. Some agencies also apply a minimum sustainability threshold, requiring suppliers to achieve a base score in sustainability before other aspects of their bid are considered.

Incorporating third-party certifications and recognised ecolabels can also improve the reliability of criteria. These may include ISO environmental standards, Green Building Council certifications, or sustainability ratings from the Infrastructure Sustainability Council. However, procurement teams must ensure that criteria are not overly restrictive or exclusionary, particularly where the supplier market is still developing sustainable alternatives.

Embedding requirements into procurement documentation

Once sustainability criteria are established, they must be translated into specific procurement requirements. These requirements should be clearly stated in procurement planning documents, tender materials and ultimately the contract. This ensures that suppliers understand what is expected of them, and that agencies have a basis for measuring compliance.

Requirements may take different forms depending on the procurement. For example, a tender may require suppliers to use a minimum percentage of recycled content, provide evidence of emissions reporting, or demonstrate ethical labour practices in their supply chain. Requirements may also set expectations for innovation or continuous improvement over the life of the contract.

At this stage, requirements should be distinguished as either mandatory or preferred. Mandatory requirements are non-negotiable and disqualify bids that fail to meet them, while preferred requirements encourage more sustainable options without excluding offers. Mandatory criteria should only be set where the market has demonstrated capacity to meet them, while preferred criteria can be useful in encouraging innovation where capability is still developing.

Performance-based specifications often work better than rigid technical specifications. For example, instead of stating “must use virgin paper”, a requirement could focus on print quality or durability standards, which allows recycled-content paper to compete. Similarly, requirements should be checked for hidden barriers such as unnecessary colour specifications, unrealistic delivery timeframes, or all-or-nothing ordering that can disadvantage suppliers of more sustainable alternatives.

Requirements must be enforceable, and vague commitments to sustainability are insufficient. Instead, procurement documents should specify exactly what will be delivered, when, and how performance will be measured. Wherever possible, requirements should include reporting obligations and specify the consequences for non-compliance.

Evaluating supplier responses

Evaluating supplier submissions against sustainability criteria is one of the most critical points in the process. It is here that stated policy intentions become procurement decisions. To be effective, evaluation must be evidence-based and consistent.

Procurement officers should review how each submission meets the stated sustainability requirements. This includes verifying documentation such as environmental certifications, emissions calculations, ethical sourcing records or materials specifications. It is essential to avoid accepting sustainability claims at face value. Claims must be supported by data, independent verification or demonstrated prior performance.

In some cases, particularly in high-value or technically complex procurements, subject matter experts may be needed to assist with evaluation. Experts can provide insight into lifecycle assessments, emissions modelling or the credibility of certifications. Evaluation should also consider the total cost of ownership, rather than simply the upfront price. A product or service with a slightly higher purchase cost may result in greater long term environmental or financial savings, if it uses less energy, lasts longer or generates less waste.

Where multiple tenders meet the minimum sustainability requirements, scoring criteria should assess the degree to which each bid exceeds the baseline or offers additional value in terms of innovation, circularity or social outcomes. This encourages suppliers to move beyond compliance and deliver genuine impact.

Monitoring and measuring sustainability outcomes

Evaluation does not end with contract award. To ensure that sustainability objectives are achieved, procurement teams must monitor outcomes over the life of the contract. This requires active contract management, including regular review of key performance indicators, engagement with suppliers, and verification of sustainability data.

Performance monitoring may involve reviewing waste logs, emissions tracking, packaging reports or supply chain documentation. Where KPIs have been set, agencies should assess whether these have been met and, where necessary, take corrective action. For long term contracts, regular performance reviews can identify opportunities to update sustainability goals in line with new technologies or improved industry practices.

Organisations should be alerted to risks that may undermine sustainability performance, including supply chain disruptions, cost pressures or lack of supplier expertise. Open communication with suppliers is essential to identifying issues early and working collaboratively towards solutions.

At contract completion, agencies should assess whether goods or materials can be reused, refurbished or recycled in line with circular economy principles. This ensures that sustainability is considered even after procurement has technically concluded.

Addressing common evaluation challenges

Despite best intentions, there are practical challenges to evaluating sustainability in procurement. Some categories may have limited availability of sustainable alternatives. Suppliers may lack capacity to provide detailed environmental data. Organisations may not have sufficient training in sustainability or access to technical expertise.

One common issue is inconsistent application of sustainability criteria across different tenders. This can lead to uncertainty for suppliers, missed opportunities for improvement and even challenges to the process. Developing internal guidelines and standardised templates can help ensure consistency.

Another challenge is balancing sustainability with other procurement objectives such as cost, delivery time or commercial risk. While sustainability is an important goal, it must be balanced against overall value for money. Procurement planning should include early discussion of these trade-offs, to avoid sustainability being sidelined later in the process.

Procurement teams must also be conscious to avoid greenwashing. This refers to the use of misleading marketing or vague claims to create the impression of environmental responsibility. Organisations should require suppliers to substantiate claims with evidence and should not rely solely on branding or unsupported statements.

Continuous improvement and knowledge sharing

Evaluating sustainability is not just about holding suppliers accountable. It is also an opportunity to learn and improve. Organisations should conduct post-procurement reviews to assess what worked well, and what could be improved in the sustainability evaluation process. Feedback should be documented and used to inform future tenders.

Internal knowledge sharing can also help build a culture of sustainability. Sharing case studies, templates, or lessons learned across departments can improve evaluation practices and raise the overall standard of sustainable procurement.

Providing constructive feedback to unsuccessful suppliers, particularly on their sustainability performance, can also support broader market capability. This helps improve future tenders and highlights that sustainability is being taken seriously.

Conclusion

Sustainability is a core requirement of procurement that must be clearly defined, rigorously evaluated and continuously monitored. This shift reflects not only policy developments but also growing public and stakeholder expectations, that government and business operate responsibly.

By establishing clear sustainability criteria, embedding them into enforceable procurement requirements, and measuring outcomes throughout the contract lifecycle, organisations can ensure their purchasing decisions contribute meaningfully to environmental and social goals.

Evaluation provides the accountability that turns sustainability commitments into real-world impact. When done well, it supports better decision-making, delivers long term value and helps your community and Australia move towards a more sustainable, equitable and resource-efficient future.

Stay tuned for the next instalment in our Sustainability in Procurement Article Series, where we’ll turn our attention to contract management and explore how sustainability commitments can be embedded, monitored, and enforced throughout the life of a contract. In the meantime, if you would like tailored support with any aspect of sustainable procurement, whether that’s developing policies, drafting documentation, or building processes that reflect your organisation’s sustainability goals, please don’t hesitate to reach out.

This is the fourth article in our Sustainable in Procurement Article Series, focusing on the critical step of approaching the market. In this article we provide guidance on the preparation of tender documents, including evaluation criteria, conditions of tender and contract clauses that require tenderers to address and report on sustainability.

At Muscat Tanzer Lawyers, we regularly assist clients in structuring their procurement process to ensure compliance with the Environmentally Sustainable Procurement Policy (ESP Policy). Whether or not compliance with the ESP Policy is a requirement for your agency, delivering projects that are socially and environmentally responsible is now an expectation and sustainable procurement considerations are now a fundamental part of how projects and services are designed, delivered, and ultimately judged.

The ESP Policy provides a well-considered approach to sustainability in procurement. In particular, the ESP Policy embeds climate, environmental, and circularity principles into four high-impact procurement categories. It applies to construction services valued at $7.5 million or more, as well as product procurements valued at $1 million or more in the categories of furniture, fittings and equipment, information and communication technology goods, and textiles.

The ESP Policy requirements commence at the Approach to Market (ATM) stage. Where the ESP Policy applies, procuring officials must require tenderers to submit a Supplier Environmentally Sustainability Plan (SESP). This plan sets out how the tenderer will meet environmental standards and manage sustainability risks.

What is an Approach to Market

Under the Commonwealth Procurement Rules (CPRs), ATM is any notice inviting potential suppliers to participate in a procurement process. This may take the form of a request for tender, request for quote, request for expression of interest, request for information, or request for proposal.

Where environmentally sustainable requirements have been identified, these should be introduced to potential suppliers through ATM documentation and at a supplier briefing. They should also be supported by relevant Key Performance Indicators (KPIs) and evaluation criteria.

In the sections that follow, we discuss how to present ATM documentation in a way that clearly communicates sustainability requirements to suppliers. This includes aligning documentation with procurement objectives, embedding sustainability KPIs and evaluation criteria, and providing practical guidance to help suppliers demonstrate how they will meet and comply with these obligations throughout the procurement process.

Specifying Sustainability Requirements

It is important for tender documents to be clear and unambiguous. Asking for “lower environmental impact” or “eco-friendly solutions” is too vague and open to greenwashing. Sustainability requirements should be specific, measurable and enforceable.

Here are 4 examples you can use when drafting requirements:

• Physical requirements: tangible characteristics of goods or services.

Example: Packaging must contain at least 50% recycled content.

• Functional requirements: the role the goods or services needs to fulfil.

Example: Catering packaging must be durable and compostable.

• Performance requirements: measurable sustainability standards.

Example: 90% of waste generated must be diverted from landfill.

• Management requirements: supplier processes for managing sustainability risks.

Example: Supplier must monitor and report on sourcing of recyclable materials.

By setting minimum standards and desirable outcomes, and linking requirements to established benchmarks (such as the Australian Packaging Covenant targets or ISO certifications), you not only strengthen your tender but also make it easier for suppliers to understand and respond to the requirements.

Using Certifications, Ecolabels and Stewardship Schemes

Tender documentation should make use of certifications, standards and product stewardship schemes:

• certifications and standards like ISO 14001 (environmental management) or NABERS (built environment rating) provide tested, verifiable benchmarks;

• ecolabels (like Green Tag, Fairtrade, EPEAT) or equivalent are useful; and

• product stewardship schemes (like Mobile Muster or Tyre Stewardship Australia) show suppliers are practicing whole-of-life responsibility, not just production.

Setting KPIs and Evaluation Criteria

KPIs should be clear, measurable, and tied into your contract management. For example:

• recycled content: chairs supplied must contain a minimum of 60% recycled content;
• circularity: products must be designed for dismantling and repair, with parts returned to supplier for recycling; and
• emissions: suppliers must report CO₂ reductions achieved each year under contract.

Evaluation criteria should be weighted and transparent, so tenderers know sustainability isn’t an afterthought. Criteria can be:

• qualifying (must-haves): e.g. Australian Packaging Covenant Origination compliance;
• rated (weighted for comparison): e.g. % recycled content;
• quantifiable: e.g. emissions per tonne of product manufactured; and/or
• fit for purpose: ensuring the goods or services aren’t wasteful or inefficient.

Case Study: Building Green from the Ground Up

Picture this: A local government is going to market for the construction of a new community hub. Traditionally, the focus might have been on low-cost concrete, steel, and finishes, with little thought given to the project’s environmental footprint.

This time, the procurement team embedded sustainability directly into the ATM:

• physical requirement: concrete mix must include a minimum of 20% supplementary cementitious material (such as fly ash or slag) to reduce embodied carbon;
• performance requirement: at least 80% of construction and demolition waste must be recycled or diverted from landfill;
• certification requirement: timber used must carry Forest Stewardship Council Certification, or equivalent, to verify responsible sourcing; and
• KPI: achieve a minimum 5-Star Green Star rating for the completed building.

One contractor’s submission stood out. They proposed low-carbon concrete, recycled steel reinforcement, and modular prefabricated components that cut down on site waste. They also offered a detailed waste management plan with monthly reporting against landfill diversion targets.

The outcome? The government agency and supplier were able to demonstrate leadership in sustainable construction in accordance with the ESP Policy.

Checklist for Procurement Officers

Ask yourself:

• have you clearly defined sustainability requirements (physical, functional, performance, management);
• have you avoided vague, non-measurable terms;
• have you included KPIs and reporting requirements in contract clauses;
• have you embedded qualifying, rated, and quantifiable evaluation criteria;
• have you accounted for whole-of-life costs, not just upfront price;
• have you considered accredited ecolabels, certifications, or product stewardship schemes; and/or
• have you drafted clauses to prevent greenwashing.

Conclusion – Why This Matters

Approaching the market with a clear sustainability lens is still a relatively new exercise and drafting these strategic requirements and embedding them into legally sound, and enforceable tender and contract documents isn’t simple.

If you would like to explore more opportunities and methods for incorporating sustainable procurement practices into your procurements, or require assistance with the preparation of tender documents, including evaluation criteria, conditions of tender and contract clauses that require tenderers to address and report on sustainability, please be in contact with Paul Muscat or one of his team.

Over the coming weeks we will cover the remaining topics in this Sustainability in Procurement Article Serries, including Evaluating Sustainability Criteria, requirements and outcomes; Contract Management; and the development of a Sustainable Procurement Policy.