Competitive tendering is the primary means of achieving value for money for Government. Competitive bidding by proponents establishes a transparent market for the project, without which it is difficult to ascertain the actual value of the project. It is the best means of ensuring that risk is priced efficiently.
Agencies should assume that all new proposals will be subject to a competitive bidding process, in accordance with Treasurer's Instruction Number 8 Expenditure for Goods, Services and Works. The circumstances under which the Government may entertain direct negotiation or some other form of exclusivity are where:
■ a high degree of innovation is evident;
■ considerable resources have been expended in developing the initial proposal and other potential tenderers are unlikely to offer a proposal of equivalent standard within a required time frame; and
■ the project has considerable community benefit, which in other circumstances is unlikely to be achieved.
Formal tendering may be undertaken either under open competition or by invitation to proponents that have responded to a call by the agency for expressions of interest in the project. The decision as to the scope of the formal tender will depend upon the agency's assessment of the likelihood of achieving a better outcome from an open or restricted tender. This will depend upon a number of factors, including, for example:
■ whether the project was initiated by the private or public sector;
■ the market is restricted due to the highly specialised nature of the required services; or
■ the range of prospective proponents was adequately identified in market testing, usually by calling for expression of interest.
The overriding principle in regard to tendering is that the process must be able to demonstrate fairness amongst competitors while retaining competition throughout the tender process to maximise value for money.