Why the Public Sector Needs Commercial Acumen

Beyond Compliance: Building the Commercial Capability That Public Trust Demands

Wednesday, 26 August 2026

Introduction: The Compliance Discipline Is Not Enough

Public sector procurement across Australia is governed by a comprehensive framework of rules. The Commonwealth Procurement Rules, the state procurement policies and frameworks, various laws governing the public sector expenditure, probity guidance issued by the audit offices and anti-corruption commissions. There are also global standards set by the Organisation for Economic Co-operation and Development (OECD) collectively establish what officials must do, must not do, and must document when spending public money. These rules exist for sound reasons. They are fundamental to monitoring and restoring public trust, addressing corruption, and seeking fair treatment of suppliers. They are not, however, sufficient.

Across twenty years of developing capabilities of procurement and contract management professionals in Australia and internationally, and teaching at universities and leading professional associations, the most consistent observation about Australian public sector procurement is that compliance discipline has been confused with commercial discipline. Officials who have followed the rules correctly often believe they have done the work. They have not. They have completed the procedural foundation on which the actual commercial work needs to be built. Without that commercial work, the procurement may be defensible against audit, but it will not deliver value for money, will not extract performance from suppliers, and will not produce the outcomes the public is entitled to expect.

This paper sets out why the Australian public sector at both Commonwealth and State levels now urgently needs to develop commercial acumen alongside its established compliance discipline. It examines the cost of the compliance-only mindset documented in successive audit and parliamentary reviews, defines what commercial acumen actually means in the public sector context, examines the strategic procurement mandate that demands more than compliance, addresses the often-misunderstood relationship between probity and commercial judgement, and sets out what organisations need to do to build commercial capability across their workforce. It is written for senior public sector leaders, procurement and contract management practitioners, and the policy makers responsible for capability frameworks across Australian governments.

1. The Cost of the Compliance-Only Mindset

The cost of treating public sector procurement as a compliance discipline rather than a commercial one has now been documented in extensive detail by Australian oversight institutions. The Australian National Audit Office (ANAO) reported that of 36 performance audits of procurement and contract management activities conducted over the five years to 2023 to 2024, just over half were assessed as either partly effective or not effective. The ANAO identified the consistent themes across that body of work as the use of appropriate expertise, transparency in decision making, demonstration of value for money, ethical conduct, and good record keeping. Three of those five themes, expertise, value for money-, and decision-making transparency, are commercial themes. They cannot be addressed by stronger compliance alone. They require commercial capability that the audited entities did not consistently possess.

The Joint Committee of Public Accounts and Audit reinforced the diagnosis in its March 2025 report on Commonwealth contract management frameworks. The Committee identified deficiencies including insufficient record keeping, poor documentation of value for money in contract variations, the need for entities to maintain an appropriate arm’s length relationship with suppliers, and the need to establish and monitor effective and measurable key performance indicators. Each of these is a commercial discipline failure, not a compliance failure. The compliance rules required value for money to be assessed. The commercial capability required to assess it rigorously was missing.

The cost of these failures is not merely procedural. It is paid in inflated contract values, in supplier underperformance that goes unaddressed, in contract variations that erode budget contingencies, and in projects that do not deliver the public benefit they were procured to deliver. ANAO audits have, in specific cases, documented projects delivered years late and at significant percentages above their initial budget. The compliance framework permitted these outcomes. The commercial capability that would have prevented them was absent.

2. What Commercial Acumen Means in the Public Sector

Commercial acumen, in the public sector context, is not a synonym for hard-edged including “sharp” corporate negotiation tactics. Nor is it a relaxation of probity discipline. It is the disciplined application of a defined set of capabilities that allow officials to make sound commercial decisions within and informed by the probity framework that governs public spending.

These capabilities include market understanding, the ability to read the supplier market, identify capable participants, anticipate pricing dynamics, and recognise when market conditions favour or disadvantage the public buyer. They include value analysis, the ability to assess offers against whole-of-life cost, not just headline price, and to weigh financial against non-financial factors in a balanced and defensible way. They include risk allocation, the ability to determine which party is best placed to manage which risk and to design contractual mechanisms that allocate risk accordingly. They include supplier management, the ability to extract performance through structured monitoring, constructive relationship management, and disciplined enforcement of contract terms. And they include negotiation, the ability to arrive at outcomes that deliver the public interest while maintaining the supplier relationships needed for ongoing delivery.

None of these capabilities is inconsistent with public sector probity. Each is the application of commercial judgement within the probity framework. The contemporary challenge is that compliance has been intensively developed and commercial acumen has not. The result is public sector staff and executives who can demonstrate procedural correctness but cannot necessarily demonstrate that the procedures produced commercial value.

3. The Strategic Procurement Mandate

The case for commercial acumen has become more pressing as the strategic role of public procurement has expanded. The Australasian Procurement and Construction Council (APCC) Public Sector Procurement Capability Framework explicitly recognises that procurement is sometimes perceived primarily as a compliance function focused on adhering to regulations and probity, but emphasises that procurement can and should play a strategic role in achieving broader organisational objectives. The OECD has been more direct, noting that public procurement is increasingly used strategically through deliberate choices about how to spend taxpayers’ money to achieve policy objectives, including supporting innovation, mitigating climate change, and advancing social and economic policy.

The Australian context reflects this shift. Public sector procurement is now expected to deliver outcomes well beyond the lowest-priced tender. It must support Indigenous business participation under various Aboriginal and Indigenous Procurement Policy, advance modern slavery prevention obligations, support small and medium enterprise participation, deliver against environmental and sustainability commitments, and increasingly contribute to sovereign capability and supply chain resilience priorities. Each of these strategic objectives sits on top of, not in place of, the requirement to deliver value for money.

Delivering against this expanded mandate requires commercial acumen that compliance organisational learning alone does not develop. Officials need to be able to design market approaches that identify capable suppliers across diverse categories, evaluate offers against multiple weighted criteria including non-financial factors, structure contracts that incentivise the strategic outcomes the procurement is designed to deliver, and monitor delivery against commitments that go beyond the financial. None of this is achievable without commercial capability built deliberately and supported by structured development.

4. Where Commercial Acumen Most Often Fails

Across audit findings, parliamentary inquiries, and integrity body investigations, the same commercial acumen failures recur. Five patterns are particularly persistent.

Conflation of price and value

Officials default to the lowest tendered price as the safest evaluation choice, treating it as defensible against audit. The result is suppliers who tender low and recover through claims and variations, or suppliers selected on price who cannot deliver against the broader requirements. The defensible procurement decision becomes the indefensible contract outcome.

Failure to understand the supplier market

Procurement is conducted without genuine market intelligence, with officials approaching the market without understanding the dynamics, the capable participants, the pricing environment, or the strategic alternatives. The supplier holds the informational advantage from the moment the request for tender is issued.

Weak risk allocation

Standard form contracts are applied without sufficient assessment of the specific risk profile of the procurement, with the result that risk is allocated by default rather than by analysis. Suppliers price the risk they cannot control and recover through claims when it materialises.

Absence of meaningful performance measurement

Key performance indicators that do not link to evaluation criteria, that are not actively monitored, and that carry no consequence for non-performance, are decoration rather than measures. The ANAO has been clear that ensuring contract KPIs relate to the evaluation criteria used during procurement is a sensible starting point for performance measurement, and that ensuring KPIs are effective and measurable is a recurring weakness across the Commonwealth. Without meaningful measures, performance management is impossible.

Misreading of the probity-commercial relationship

Officials treat probity as a barrier to commercial judgement rather than as the framework within which commercial judgement is exercised. They escalate decisions that could be made commercially, refuse to negotiate variations that could be settled commercially, and revert to formal contractual mechanisms when commercial judgement would resolve issues more efficiently. The New South Wales Independent Commission Against Corruption has been clear in its guidance that probity is the framework within which sound commercial decisions are made, not a substitute for those decisions. This message has not yet been consistently absorbed.

5. The Probity-Commercial Balance

Resolving the probity-commercial relationship is central to building public sector commercial acumen. The two are not in opposition. Probity is the precondition for commercial decisions in the public sector, providing the framework of fairness, transparency, and integrity within which commercial judgement is exercised. Commercial acumen is the capability to make sound decisions within that framework.

The risk in resolving this relationship is the temptation to treat probity as the soft option. Recent ICAC investigations across New South Wales, including Operation Hector at Transport for NSW and the Inner West Council, the ongoing investigation into former School Infrastructure NSW executive conduct, and the public inquiry into the Transport for NSW procurement specialist accused of soliciting eleven and a half million dollars in bribes, are stark reminders that probity discipline is not optional. The cost of probity failure in public sector procurement is borne by the public, the integrity of government, and the careers of those involved.

The resolution is not to relax probity, but rather, to upskill officials in both disciplines, to make clear where probity rules apply absolutely and where commercial judgement is permitted within them, and to ensure that probity advisers and commercial practitioners operate as collaborative partners rather than as opposing forces. Where the line between the two is clear and the capability to operate on both sides of it is well developed, probity supports commercial outcomes rather than constraining them.

6. Building Commercial Acumen Across the Workforce

Building commercial acumen in the public sector requires a coordinated effort across capability development, governance, and organisational culture. Several elements are essential:

• Structured commercial organisational learning that goes beyond procurement compliance to cover market analysis, value analysis, risk allocation, supplier management, and negotiation, delivered through qualifications recognised by the APCC Public Sector Procurement Capability Framework and CIPS Global Standard.
• Cross-functional capability development that recognises commercial acumen is required not only by procurement specialists but by the policy officers, technical experts, project managers, and senior executives who shape and approve procurement decisions.
• Integrated probity and commercial organisational learning so that officials understand the framework within which they operate and the judgement they are permitted to exercise within it, rather than treating the two as separate and conflicting disciplines.
• Governance that holds officials accountable for commercial outcomes, not just compliance, with executive oversight of value for money outcomes and supplier performance across the contract portfolio.
• Career pathways that allow practitioners to develop genuine commercial expertise over time, with mobility between procurement, contract management, and broader commercial roles, supported by recognised qualifications at each career stage.

None of these elements is novel. They are well established in the APCC framework, the APS Procurement and Contract Management Profession Strategy, the JCPAA’s contract management inquiry recommendations, and the international guidance issued by the OECD. What is required is the deliberate organisational commitment to building commercial acumen as a core public sector capability, not an optional adjunct to compliance organisational learning.

Conclusion

The Australian public sector cannot meet the expectations placed on its procurement function with compliance discipline alone. The volume of public spending, the strategic objectives that procurement is now expected to advance, the complexity of contemporary supplier markets, and the documented cost of compliance-only practice across successive ANAO audits and JCPAA inquiries together make the case for commercial acumen unanswerable. Public sector procurement does not need less probity. It needs more commercial capability operating within the probity framework, and it needs that capability developed deliberately across the workforce. Investing in practical, accredited qualifications, such as the CIPFA Diploma in Commercial Skills, offers a structured pathway to equip officials with these vital capabilities. Such programs bridge the gap between compliance and commercial reality, ensuring public sector teams possess the tools to drive genuine value for money.

Twenty years of developing capabilities of and advising procurement and contract management professionals across multiple jurisdictions has reinforced a single conviction. Organisations that build commercial acumen across their workforce, that develop the capabilities of officials in market analysis, value assessment, risk allocation, supplier management, and negotiation alongside the probity framework that governs them, consistently deliver better procurement outcomes than those that rely on compliance organisational learning alone. The investment is modest in the context of the contract values being managed. The return is the difference between procurement that survives audit and procurement that delivers public value.

To learn more about the author’s background and practice, view Paul Vorbach‘s profile on the AcademyGlobal website or connect with Paul on LinkedIn. 

About the Author

Paul Vorbach is the Managing Director of AcademyGlobal, a Sydney-based capability development firm established in 2004 and the CIPS Centre of Excellence for ANZ. Since 2005, Paul has trained contract management, procurement and supply chain professionals across over twenty centuries in five continents. He is Vice President of the Institute of Strategic Risk Management (ISRM) ANZ, Treasurer of the Society of Risk Analysis (SRA) ANZ, and Adjunct Faculty at the Australian Graduate School of Management (AGSM) at the University of New South Wales.

AcademyGlobal partners with public sector, private sector, and not-for-profit organisations to build the capability that underpins sustainable delivery performance, and is the Chartered Institute of Procurement and Supply (CIPS) Centre of Excellence for Australia, New Zealand and Asia.