Valuing procurement

It is important to estimate the value of the procurement as accurately as possible and in accordance with the valuation rules. This is because different rules may apply depending on the value of the procurement ie higher value procurements may be impacted by free trade agreement obligations or additional requirements relating to industry consultation or industry participation plans.

The rules relating to valuation of procurement are contained in Treasurer's Instructions 1104 and 1204 and reproduced below:

  • For the purposes of estimating the value of a procurement, the estimated value must include:
    • all forms of remuneration, including any premiums, fees, commissions, interest and other revenue streams that may be provided for in the proposed contract; and
    • the total maximum value of the goods or services being procured, including the value of any options to extend in the proposed contract.
  • Where the procurement is potentially impacted by a free trade agreement, the estimated value must also include any applicable taxes or charges including goods and services tax (GST).
  • Where procurement is by lease (including hire purchase) or rental or does not specify a total price, the basis for valuing the procurement is:
    • for a fixed-term contract where the term is 12 months or less, the total estimated contract value for the contract's duration;
    • for a fixed-term contract where the term exceeds 12 months, the total estimated contract value including the estimated residual value (payable at the end of the contract); or
    • for a contract for an indefinite period or where there is doubt as to whether the contract is to be fixed-term, the estimated monthly instalment multiplied by 48.
  • Where a procurement is to be conducted in multiple parts with contracts to be awarded at the same time or over a given period to one or more suppliers, the calculation of the estimated value must be based on the estimated total maximum value of all the contracts to be awarded over the entire duration of the procurement.
  • Where the total maximum value of a contract over its entire duration cannot be estimated, the procurement is deemed to be a procurement to which the provisions of free trade agreements apply. This may include panel contracts where it is not possible to estimate, with accuracy, the value of the combined procurements from the selected panel.
  • A procurement must not be divided into separate parts for the purpose of avoiding any procurement threshold.
  • An agency must not use a particular method for estimating the value of a procurement for the purposes of avoiding the application of any procurement threshold.