The 2025–26 Federal Budget, unveiled by Treasurer Jim Chalmers on March 25, 2025, signals a transformative shift in Australia’s procurement landscape. With a focus on inclusivity, sustainability, and economic resilience, the budget introduces several key initiatives that procurement professionals must navigate.
Elevating Indigenous Procurement Targets
The Indigenous Procurement Policy (IPP) has long been a tool for economic empowerment, but the 2025–26 Budget takes it to a new level. From 1 July 2025, the Commonwealth’s procurement target from Indigenous businesses will increase to 3%, with a 0.25% annual rise to reach 4% by 2030 (NIAA, 2025).
But it’s not just about quotas. In response to concerns about “black cladding” (where non-Indigenous entities falsely claim Indigenous status to win contracts), the budget introduces a critical integrity measure: from 1 July 2026, businesses must be at least 51% Indigenous-owned and controlled to qualify under the IPP (Selling to Government, 2025).
The government is also backing this up with funding:
- $23.9 million over five years to strengthen the IPP’s implementation.
- $3.4 million over three years for business mentoring for First Nations women (Budget Paper No. 2).
What this means for you:
Government buyers must now take active steps to verify supplier eligibility and design procurement strategies that create real pathways for Indigenous businesses. This includes better market engagement, fostering genuine partnerships, and avoiding tokenistic procurement practices.
Expanding Environmentally Sustainable Procurement
Sustainability in procurement is no longer a “nice to have” — it’s a mandated policy direction.
From 1 July 2025, the Environmentally Sustainable Procurement (ESP) Policy will apply to procurements over $1 million in new categories, including:
- Furniture
- ICT goods
- Textiles
This adds an estimated $4.5 billion in procurement spend to ESP compliance (DCCEEW, 2025). The move aligns with the Net Zero in Government Operations Strategy, reflecting Australia’s broader decarbonisation goals.
Sustainable procurement under the ESP Policy means considering:
- Environmental impacts over the full product lifecycle
- Recycled content and reuse
- Emissions from transport and logistics
- Supplier environmental credentials and certifications
What this means for you:
Procurement professionals will need to be fluent in sustainability evaluation criteria. This includes integrating ESG risk assessments into tender evaluations and collaborating with suppliers to improve environmental outcomes — not just box-ticking on checklists. Expect more scrutiny on compliance and reporting as this becomes standard practice.
If you’re looking to build skills, explore our Procurement and Contract Management courses, especially those covering environmental and ESG assessments.
Emphasizing Broader Economic Benefits
Value for money in procurement is evolving. No longer just about price, the revised Commonwealth Procurement Rules (CPRs) now explicitly require consideration of broader economic benefits (Finance.gov.au, 2025).
This includes:
- Local industry participation
- Workforce development
- Supply chain resilience
- Regional and remote economic uplift
By embedding these factors into evaluation criteria, government buyers are being asked to think strategically — not just transactionally.
What this means for you:
You’ll need to understand how your procurement choices can stimulate the local economy, support skill development, and promote inclusive growth. This may require market engagement before tendering, revised evaluation scoring systems, and cross-agency collaboration.
Supporting Small and Medium Enterprises (SMEs)
Despite ongoing reform efforts, small and medium-sized enterprises (SMEs) still encounter challenges when accessing government procurement opportunities. While progress has been made, SMEs accounted for just 24.9% of the total value of Commonwealth contracts in 2022–23—equivalent to $21.3 billion of $85.6 billion in contracts awarded (Department of Finance, 2024).
The Federal Budget signals continued reform to improve SME participation, including:
- Simplified tendering processes
- Reduced compliance and administrative burdens
- Targeted programs to help SMEs become “contract ready”
These initiatives reflect a broader commitment to levelling the playing field—recognising that local businesses bring agility, innovation, and long-term value to public sector projects.
What this means for you:
Now is the time to revisit your procurement templates, thresholds, and assessment approaches. Remove unnecessary barriers and consider pre-procurement engagement strategies, like market-sounding, to help SMEs prepare to bid. Also, expect potential new guidance on thresholds for direct sourcing from SMEs. Consider training in market sounding and SME engagement, or take our Advanced Diploma of Procurement and Contracting to deepen your strategy capabilities.
Implications for Procurement Professionals
Procurement teams are no longer silent back-office functions — they are increasingly seen as strategic enablers of government policy. With this budget, professionals are expected to:
- Lead on sustainability and social outcomes
- Understand complex policy drivers and their implications
- Engage meaningfully with diverse suppliers
- Monitor and report on procurement impact
This requires new competencies, including environmental assessment, social procurement design, and market development.
What this means for you:
You’ll need to upskill and adapt. Consider CPD in areas like social procurement, ESG in supply chains, and inclusive contracting. Build closer ties with policy and program areas to understand the “why” behind what you’re buying.
Explore our full suite of procurement qualifications, including micro-credentials in ESG and social procurement.
If you’re managing a team, revisit your training and development plans — the budget’s reforms will change what “capability” in procurement looks like.
Conclusion
The 2025–26 Federal Budget marks a paradigm shift in how government sees the role of procurement. It’s no longer just about compliance or administration. It’s about economic policy delivery, climate action, and equity.
If you’re a procurement or contracting professional, this is your moment to step up and lead.
By understanding and aligning with the budget’s priorities, you can:
- Build stronger, more diverse supplier markets
- Deliver long-term value to your community
- Champion sustainable and inclusive growth
And if you’re considering a career in procurement? There has never been a better time.
Take the next steps:
- Book a consultation to assess your team’s training needs