Last updated: October 2026
NSW small businesses are getting smaller. Is government procurement keeping up?
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NSW's small business sector is changing shape. New research from the NSW Small Business Commission, released on 1 October to launch Small Business Month, found 63 per cent of the state's small businesses now have fewer than four employees. That group is growing at twice the rate of businesses overall.
According to the Commission's A Story of Diversity and Dynamism insights paper, 57 per cent of small businesses serve customers beyond their local area, including 21 per cent nationally. Almost half (47 per cent) already use AI tools to lift productivity.
The result is a sector that is smaller, more specialised and better connected than ever. On paper, that's exactly the kind of supplier government says it wants. The question is whether the way government buys has kept pace.
What NSW has changed
There has been real progress. Small and medium businesses won $8.3 billion of the NSW Government's $40 billion procurement spend in 2024-25, more than one dollar in every five.
Some of that reflects deliberate reform. Agencies can now buy directly from small and medium businesses for contracts up to $250,000, up from $150,000. Since that change, the SME share of goods and services contracts between $150,000 and $250,000 has risen from 47 per cent in 2022-23 to 50 per cent in 2024-25. Small businesses also no longer need to provide insurance details when they tender, only if they win. It's a small change, but it matters to a three-person firm deciding whether a bid is worth the effort.
The gains are spreading, too. Between 2022-23 and 2024-25, the share of SME spend going to regional businesses rose from 16 to 18 per cent. The share going to Aboriginal businesses rose from 2.2 to 3.3 per cent.
Where the process still lags
Rules that make it easier to win work only help if small businesses can realistically compete for it.
For most micro-businesses, the most natural entry point is local government rather than a state agency. Councils issued 12,478 tenders in FY2025-26, or 44.7 per cent of all tenders recorded by Australian Tenders, according to its latest Procurement Market Insights report. That's more than double the volume issued by state governments and almost four times the federal total. Much of that work is maintenance, landscaping, community services and local works, the scale of job a small business is built for.
But there are fewer Buyers to reach. The number of organisations publishing tenders has fallen from 2,668 in FY2021-22 to 2,065 in FY2025-26, even as overall tender volumes have started to recover.
Timelines are also tightening. The average tender response window fell to around 31 days in FY2025-26. The average time from publication to award dropped to 91 days, the fastest in five years. For a business without a bid team, four weeks isn't long to find an opportunity, decide whether to bid, pull together references and write a competitive response.
What comes next
The NSW Government has flagged the next round of reform. The Local Jobs First Bill, introduced in May, would bring in a minimum 30 per cent tender weighting for local content, job creation, small business participation and ethical supply chains. It would also create a Local Jobs First Commissioner to monitor small business participation across government buying. A replacement for the Business Connect advisory program is also on the way.
Those measures could tilt evaluation towards smaller local suppliers. But weightings only reward businesses that bid. They do little for those that never see an opportunity in time, or that don't have the capacity to respond within four weeks.
The Commission's research shows a sector driven by independence and, in the regions, by a strong sense of community. Those are the businesses governments say they want in their supply chains. Whether they get there will depend less on headline targets and more on whether the process works for a business with three people and no bid team.
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Further reading
- NSW Government, 1 October 2026
- NSW Small Business Commission, A Story of Diversity and Dynamism
- NSW Government, 26 March 2026
- NSW Government, Local Jobs First, 28 May 2026
- Australian Tenders, Procurement Market Insights report
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Australian Tenders monitors procurement opportunities from government agencies across Australia, including federal, state and territory departments, authorities and government-owned organisations. By bringing opportunities together in one place, we help businesses navigate the procurement landscape, identify relevant tenders and stay informed about the policies and spending priorities shaping future contract opportunities.