Published 11 June 2026 · Syndie Bobeechun, Founder · Doreva Articles

What is Exemption 17? Direct government contracts for small business, in plain English

Exemption 17 is a rule in the Commonwealth Procurement Rules that lets an Australian Government agency engage a small or medium enterprise directly, without running an open tender, for procurements valued between $80,000 and $500,000 including GST. The agency must still demonstrate value for money, and it must apply the Indigenous Procurement Policy set-aside first. For a small business, it means a meaningful share of government buying does not happen through tenders you can see. It happens through an official choosing a supplier they already know about.

Here is how it works, what it is not, and how to become the business that gets the call.

The rule, without the legalese

The Commonwealth Procurement Rules normally require agencies to run a competitive process for procurements at or above the relevant threshold. Appendix A of the rules lists exemptions from that requirement, and number 17 is the one that matters to small business.

The conditions, in plain terms:

The supplier must be an SME. Under the rules that means an Australian or New Zealand firm with fewer than 200 full-time equivalent employees. Almost every business reading this qualifies.

The value must sit between $80,000 and $500,000 including GST. Below $80,000, agencies already have simpler options. Above $500,000, the normal competitive rules apply.

Value for money still has to be demonstrated. Exemption 17 removes the open tender, not the judgement. The official still has to be able to show your engagement was a sound use of public money, which is why a sharp, evidenced quote matters even when there is no competition.

The Indigenous Procurement Policy comes first. Before directly engaging a non-Indigenous SME, the agency must apply the IPP's Mandatory Set Aside, which gives Indigenous businesses the first opportunity. If your business is a certified Indigenous business, your direct pathway is stronger again.

The Department of Finance publishes the full detail in its Exemption 17 guidance.

Why you may not have heard of it at $500,000

The threshold used to be $200,000. The Department of Defence was given a $500,000 limit in the rules that commenced on 1 July 2022, and the rules that commenced on 1 July 2024 extended the $500,000 threshold beyond Defence. Most of the advice written for small businesses predates that change, which is why so much of it still talks as if everything goes through AusTender.

The direction of policy is not subtle. Higher direct-engagement thresholds, SME contract-value targets of 25 per cent overall and 40 per cent for contracts under $20 million, and rules from November 2025 requiring officials to consider Australian businesses and SMEs. The Commonwealth is deliberately making it easier for its buyers to choose small suppliers.

What it looks like from your side of the table

There is no tender document. Typically there is an email or a phone call: the agency knows what it needs, has identified you as a likely supplier, and asks for a proposal or a quote. The contract still gets published on AusTender after award, like other contracts, but there was never an open approach to market for you to find.

That is the strategic point. You cannot bid for Exemption 17 work. You can only be findable, credible and easy to say yes to before the need arises. Which means:

• A current, specific capability statement an official can forward internally.
• Registration on AusTender with the right categories, so you appear when someone looks.
• Relationships with the agencies and councils that buy what you sell, built before you need them.
• A record of delivering well on smaller engagements and subcontracts, because the official choosing you directly is putting their name on that choice.

The broader playbook is in our guide to winning government contracts as a small business.

What Exemption 17 is not

It is not a loophole, and it is not a guarantee. The official must still demonstrate value for money, keep records, and report the contract. If your quote is vague, your evidence thin, or your price unexplainable, the safe move for the official is to run a competitive process instead, or call a different SME.

It is also Commonwealth-specific. State and territory governments have their own procurement frameworks with their own SME and local-supplier pathways, which differ by jurisdiction. The principle travels: governments at every level are building direct pathways to small suppliers, and the suppliers who win through them are the ones who were ready before they were asked.

When the call comes, the response still decides it

A direct approach is an invitation, not a contract. What follows is a proposal: your capability, your relevant projects, your people, your price, with enough evidence that the official can defend choosing you. The businesses that fumble this moment are the ones whose case studies live in old proposals and whose CVs are eighteen months stale.

That readiness problem is exactly what Doreva exists to fix. Your case studies, past proposals, CVs and pricing inputs live in one library, so when an agency asks for a proposal, you draft from your own evidence instead of hunting for it. Every claim traces to material you loaded, every export carries an AI Use Statement, and nothing goes out without your review.

Common questions

Does Exemption 17 apply to state government work? No. It is part of the Commonwealth Procurement Rules. States and territories have their own procurement frameworks with their own direct-purchase and SME pathways, with different thresholds.

Do you still have to provide a quote or proposal? Yes. The agency must demonstrate value for money, so expect to provide a priced proposal with evidence of capability. The competition is removed, the scrutiny is not.

Where do Indigenous businesses fit? Ahead of non-Indigenous SMEs, by design. The Indigenous Procurement Policy's Mandatory Set Aside applies before Exemption 17 can be used for a non-Indigenous SME, and certified Indigenous businesses have their own stronger direct-engagement pathway.