21 May 2025
3 min read
#Victorian Government, #Local Government
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Our team recently acted for a group of local governments who secured long-term agreements for essential services, and investment in critical infrastructure. These outcomes would have been unlikely without a collaborative approach to procurement.
In collaborative procurement, parties with shared interests and needs engage with the market jointly, pooling resources and capacity to scale their value proposition to relevant markets through their tendering processes.
It is recognised as one of the procurement objectives for local government in Victoria in section 109 of the Local Government Act 2020.
It is important to recognise that collaborative procurement is not necessarily the same as collaborative contracting. Collaborative procurement under the Local Government Act 2020 refers to a single tender process which results in local governments contracting individually under a similar set of conditions.
In collaborative contracting, entities with a joint interest, or who need to be able to demonstrate a sufficient degree of financial depth, commonly contract on a joint basis to formalise their shared interests and help manage associated liability. However, restrictions on accepting liability and expending funds unrelated to their relevant municipality make this difficult for local governments.
In particular, local governments face significant limitations in accepting liability in relation to other local government entities. While terms may be negotiated collaboratively by local governments, respondents to a request for tender must be prepared to enter into separate agreements with each participating local government.
While local governments may be reluctant to contract collaboratively , risks can still be managed across various individual contracts. For example, where a group of local governments have collaboratively negotiated contracts to supply feedstock and entered into separate contracts: if one local government fails to meet volume requirements under its contract, its liability for that shortfall may be offset by another local government’s supply of feedstock in excess of the obligations under its contract.
Collaborative procurement can offer significant cost savings to local government, including:
A clear example is where collaborating parties request a long-term service offering which requires the construction of new infrastructure by the market. Collaborating local governments could offer significant aggregated supply. This enables respondents to create business cases for the construction of new infrastructure that may not otherwise have been possible had the same offering been made to local governments individually.
In our recent matter, our clients could collaboratively offer to purchase significant services on the market. This helped attract several genuinely innovative offers. Several of these offers were able to demonstrate economies of scale which would not otherwise have been achievable.
Local governments shared a common interest, allowing for tendering and negotiation to be conducted collectively. This created efficiencies and significantly reduced costs for each participant.
Collaborative procurement facilitated a transparent and cooperative approach throughout complex and sometimes protracted negotiations. The final offering involved the construction of a project-financed facility to service each participating local government. This outcome would have been far less likely had each local government gone to market individually.
If you have questions about this or other procurement models, or our recent experiences in waste processing and related industries, contact a member of our team below.
Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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