Commercial Arrangements Guideline

A commercial arrangement exists where a State agency engages a provider to deliver services, and the provider earns revenue partly or wholly from third parties. 

These arrangements may also include the lease or licence for the use of an agency-owned premises or a licence for to use agency-owned equipment.

The following examples would usually be considered commercial arrangements: 

• Ticketing services at a State‑owned venue
• Hospital patient entertainment systems 
• Cafeteria within agency premises
• Vending machines in an agency venue

Is the transaction a procurement of services?

The substance of the transaction is what is most important. The Western Australian Procurement Rules (Procurement Rules) apply to commercial arrangements where the transaction is, in substance, a procurement of services.

Indicators that the transaction is a procurement of services include:

• the provider will be required to undertake activities that support the agency’s operational, policy, or stakeholder objectives:
• the agency specifies how the provider must deliver those activities (e.g. standards, pricing, staffing, availability);
• the agency retains ongoing control or oversight over the provider’s activities.

Indicators that the transaction is not a procurement of services include:

• the transaction only involves a transfer of rights (e.g. leasing out vacant agency space; granting access to agency premises or property; granting naming rights to a venue) with no associated services to the agency;
• the agency’s only benefit from the arrangement is revenue (i.e. rent or licence fees);
• the business engaged by the agency will operate independently with minimal agency control.

Common misconception - 'but the public receives and pays for the service'

Even where services are delivered to the public (e.g. café offerings, entertainment systems), they still count as a service to the agency, if the agency requires those facilities to be available to meet its own operational or stakeholder needs. 

The source of the provider’s revenue does not determine whether the Procurement Rules apply; what matters is whether the agency is procuring services.

If in doubt

If an arrangement falls in a ‘grey area’ and the indicators are mixed, default to treating it as a procurement of services, if doing so does not create adverse consequences. This means the transparency and accountability benefits of the Procurement Rules will apply to the transaction.

Calculating contract value

If you determine the arrangement is a services procurement and the Procurement Rules apply, you must apply the Rules that correspond to the estimated contract value. For example, if the estimated value is $5 million, the procurement plan must be submitted to the relevant review committee.

To determine the estimated contract value of a commercial arrangement for Procurement Rules purposes, include all revenue the supplier will receive, not just payments from the State.

If the Procurement Rules do not apply

Even if you conclude the Procurement Rules do not apply, it is still good practice to apply their core principles to your transaction (i.e. achieving value for money, transparency and acting ethically). Doing so promotes fair and consistent treatment of businesses and supports better long‑term outcomes for government.

Choose a contract that fits the nature of the transaction.

If using the Request Conditions and General Conditions of Contract (GCOC), consider whether amendments or a bespoke form is needed, based on an assessment of the procurement type, value, risk and/or complexity.

Seek legal advice if you intend to alter the GCOC or not use it.

For Tenders WA reporting, do not include payments to the supplier from third parties in the contract award value.

• If all supplier revenue comes from third parties (not funded by State agencies), record a nominal $1 award value.
• If the arrangement includes both State payments and third‑party revenue, record only the State payments as the award value.

In the comments field, record the total figure, including third‑party revenue, with a brief explanatory note.

Case Study 1: Cafeteria services at State-owned venue

A State agency requires a cafeteria service at a venue it owns to support patrons using the facility. The provider will lease the café space to run the service, and the patrons will buy the food and beverages. The agency specifies menu, pricing and staffing requirements.

Considerations: Services are central to the arrangement, they support the agency’s operational needs, and the agency exercises a high level of control over how the provider delivers them. The inclusion of a lease is incidental.

Determination: Treat as a services procurement and apply the Procurement Rules.

Case Study 2: Naming rights to a State-owned venue

A State agency advertises naming rights for a venue. It is seeking expressions of interest from businesses that wish to purchase exclusive naming rights for promotional or branding purposes over a set term.

Considerations: The arrangement does not involve any services being delivered to the agency, the business will operate independently with little to no agency oversight, and the agency’s only benefit is the revenue returned from granting the rights.

Determination: This is a grant of rights only and the Procurement Rules do not apply.

Case Study 3: Ticketing services at a State-owned venue

A State agency requires ticketing services, including platform operation, scanning, service levels, reporting and dispute handling. The provider recovers costs from booking fees paid by event goers.

Considerations: Services are central to the arrangement, they support the agency’s operational needs, and the agency exercises a high level of control over how the provider delivers them. 

Determination: Treat as a services procurement and apply the Procurement Rules.

Policy advice: Procurement Capability and Policy - email ProcurementAdvice@dtf.wa.gov.au

Agency support: Contact your Department of Housing and Works representative - refer to the Buildings and Contracts Contact List.