Back to basics: understanding Local Government strategic contracting

This article serves as an extension of
Back to basics: understanding local government procurement regulations
(Article published in Local Buy News | November 2024 issue)

By Joshua Brown, General Counsel & Compliance Manager

Procurement in local government is a core and critical function that ensures that public funds are spent efficiently, ethically and in the public interest.

It is imperative that local government procurement professionals understand the nuances of applicable local government regulations to achieve compliance and best practice.

This article serves as an extension of our first “Back to Basics” article, which summarised the default contracting procedures. In this article, we explore the strategic contracting principles under the Local Government Act 2009 (Qld), providing a high-level summary for procurement professionals navigating local government procurement in Queensland.

Legislative Framework

The procurement process in Queensland local government is primarily governed by the Local Government Regulations 2012 (Qld) (the Regulations). While default contracting procedures are the standard approach (and summarised in our previous ‘Back to Basics articles), councils may adopt strategic contracting procedures as an alternative model.

Below is a summary of key sections procurement professionals should be familiar with when considering strategic contracting principles:

• Five sound contracting principles:
• Local Government Act 2009 (Qld), Section 104(3).
• Strategic contracting procedures (including contracting plans, significant contracting plans, and contracting manuals): Regulations Sections 217 - 222

Strategic Contracting Procedures

The Regulations allow councils to opt-in to taking a “strategic approach” to its contracting by adhering to the requirements set out in section 218 of the Regulations. “Strategic approach” is broadly defined as an approach that identifies potential positive opportunities for local government, whilst managing adverse risks.

Key action/requirements for a local government adopting the of strategic contracting principles include:

• Creating a contracting plan,
• Development of a robust delegations policy,
• Conducting a market assessment,
• identifying significant contracts,
• Adopting a significant contract plan,
• Implement a contract manual.

These principles have been elaborated on below.

Contracting Plans (section 220 of the Regulations)

 Local governments must develop a contracting plan outlining the types of contracts they intend to enter into for the financial year, their principles and strategies, and market assessments. A contracting plan is a document that states:

• The types of contracts that local governments propose to make in the financial year.

• The principles and strategies for performing the contracts.

• A policy about proposed delegations for the contracts (refer below).

• A market assessment for each type of contract (refer below).The contracts that the local government considers to be a ‘significant contract’, having regard to the aforementioned market assessment (refer below).

• A policy around the development of a significant contract plan.

Delegations Policy

Councils must define the delegation of procurement authority within the organisation to ensure efficiency and accountability. Ordinarily, a delegations policy would already be in place within a council’s governance regime.

Market Assessment

Each contract type should be evaluated based on market conditions, ensuring informed decision-making and best-value outcomes.

Significant Contracts

Councils must identify prospective contracts that are deemed 'significant' and undertake additional planning and analysis for these contracts.

Significant Contract Plan (section 221 of the Regulations)

For each significant contract, councils must develop a plan that details risk assessments, procurement strategies, and evaluation methodologies. The significant contract document should contain:

• the objectives of the significant contract; and

• how the objectives are to be achieved; and

• how the objectives are to be measured; and

• alternative ways in which the objectives could have been achieved, and why these alternate ways were not adopted; and

• proposed contractual arrangements for the activity; and

• risk analysis of the market in which the contract is to happen.

Adopting Strategic Contracting Principles

To implement strategic contracting, a council must pass a resolution to adopt Part 2 of the Regulations, replacing default contracting procedures. Before doing so, councils must consider the advantages and challenges of strategic contracting and notify the public of their intention.

Benefits in local government choosing a strategic approach

Strategic Contracting Procedures provide local governments with a structured approach to procurement that enhances flexibility, efficiency, and long-term planning. This framework allows councils to proactively manage procurement risks, achieve better value-for-money outcomes, and consider broader factors beyond just price when selecting suppliers. By adopting a strategic approach, local governments can align procurement with their long-term objectives, improve market responsiveness, and ensure more sustainable and innovative procurement practices.

Some specific benefit may include (but are not limited to):

1. Flexibility and Customisation – strategic contracting allows councils to tailor procurement processes to their specific operational needs, rather than adhering to the default rules, as outlined in Part 3 of the Regulations (Default Contracting Procedures).
2. Efficiency and Streamlined Decision-Making – by adopting a contracting plan and delegations policy, councils can streamline approvals, reduce administrative burdens, and speed up procurement timelines.
3. Market Responsiveness – Councils can assess market conditions and structure contracts in a way that ensures best value for money, fostering innovation and competition.
4. Better risk management – The requirement to develop significant contract plans ensures that high-value or complex contracts undergo thorough risk assessment and planning, reducing the likelihood of procurement failures.
5. Long-term planning and strategic alignment – A contracting plan enables councils to align procurement with broader strategic objectives, such as sustainability, local economic development, or major infrastructure investments.

Local Buy supports councils in strategic procurement by providing pre-qualified supplier panels, reducing the need for lengthy tender processes while ensuring compliance. By leveraging Local Buy’s pre-qualified suppliers, councils can mitigate risks and ensure financial stability, capability, and regulatory adherence. Additionally, Local Buy offers market insights and benchmarking data to help councils make informed procurement decisions. With access to procurement expertise, councils can navigate complex procurement challenges efficiently, reducing administrative burdens and achieving better value-for-money outcomes. By integrating Local Buy’s solutions, councils can enhance efficiency, drive innovation, and align procurement decisions with long-term strategic goals.

Conclusion

Strategic contracting procedures offer Queensland local governments an alternative to default procurement rules, allowing for greater flexibility while maintaining compliance with legislative requirements. By understanding and implementing these principles, procurement professionals can enhance efficiency, achieve better value-for-money outcomes, and support transparent and ethical procurement practices.

This article builds on our previous discussion of default contracting rules, providing additional insight into the strategic procurement approach available to local governments.

If you have any questions or would like to discuss this further, please do not hesitate to Joshua Brown at jbrown@localbuy.net.au.