Australian government and industry could learn from US procurement research

Recent research into US government procurement practices (Most Negotiated Terms 2024: A focus on US government procurement and contracting), conducted jointly by the National Contract Management Association and World Commerce and Contracting, reveals systemic inefficiencies and valuable opportunities for improvement. These findings are particularly relevant for Australian government agencies and industry partners engaged in the procurement and delivery of major infrastructure projects. While the contexts differ, the lessons drawn from the US research highlight the need for more collaborative procurement practices in Australia to address shared challenges and improve project outcomes.

Shifting towards collaborative procurement practices

In the US, government procurement remains highly process-driven, with a rigid focus on cost reduction and compliance. This adversarial approach often sidelines broader, outcome-oriented objectives. The research highlights that 70% of government buyers and suppliers agree on the need for greater negotiation flexibility—the benefits including better relationships with suppliers, more creativity and innovation, and increased value for money—yet entrenched regulatory frameworks create barriers to collaboration.

Australia faces similar challenges. Adopting relationship-driven procurement strategies that prioritise shared objectives over transactional contracts can unlock efficiencies and improve project outcomes. Collaborative frameworks such as Early Contractor Involvement (ECI) and alliance contracts have already gained traction locally, but their adoption must expand alongside efforts to build trust and transparency between buyers and suppliers.

Addressing the cost of bureaucratic rigidity

US suppliers estimate that streamlined procurement processes and increased flexibility could reduce transaction costs by 13.3%, translating to annual savings of approximately US$100 billion. For Australia, with its substantial infrastructure investment pipeline, the potential for cost savings is similarly significant. Simplifying approval processes and removing unnecessary regulatory hurdles could accelerate project timelines while delivering value-for-money outcomes.

Balancing risk and innovation

One of the report’s key findings is the tension between US buyers’ risk-averse behaviours and suppliers’ focus on intellectual property protection and equitable risk allocation. This imbalance often leads to costly disputes and project delays. In Australia, projects delivered under integrated delivery models, such as public-private partnerships (PPPs) and alliances, can benefit from balanced risk-sharing frameworks. By fostering environments that encourage innovation and collaboration, Australian stakeholders can achieve better project outcomes while mitigating disputes.

Bridging the gap between oversight and flexibility

In the US, regulatory frameworks like the Federal Acquisition Regulation (FAR) are criticised for their inflexibility, which stifles innovation. Similarly, Australia’s Commonwealth Procurement Rules (CPRs) and state-specific guidelines often lean towards strict compliance at the expense of project-specific flexibility. Striking a balance between oversight and adaptability will allow Australian agencies to meet compliance requirements while tailoring procurement approaches to the unique demands of individual projects.

Practical steps for Australian stakeholders

To address these challenges, Australian governments should modernise procurement frameworks, enabling faster and more efficient engagement with industry. Streamlining contracting processes, prioritising collaboration, and embracing data-driven decision-making will be key. By investing in analytics capabilities, governments can better assess procurement performance, identify inefficiencies, and continuously improve practices.

Industry suppliers also have a role to play. Proactively adopting flexible, outcome-driven solutions and engaging in open, transparent discussions with government buyers will position them as trusted partners. By focusing on value creation rather than cost minimisation, suppliers can contribute to the delivery of projects that better meet public needs.

Collaborative procurement powers modern infrastructure delivery

The US experience highlights the transformative potential of modernising procurement practices. By adopting collaborative procurement approaches and reducing bureaucratic burdens, Australian government and industry stakeholders can unlock cost savings, mitigate risks, and drive innovation. These lessons, when applied effectively, will enhance procurement outcomes and strengthen public trust in delivering critical infrastructure projects.