The first thing that comes to mind when people hear the word ‘probity’ is government procurement. You’ll hear it at conferences, see it in tender documents, and assume it is something that only applies to people spending public money. It really doesn’t; it applies everywhere.

Probity is the process of identifying and managing bias out of processes.¹ It means the decisions a business makes when buying goods and services are consistent, transparent, and based on merit rather than relationships, convenience, or an employee's personal benefit. Government agencies are required to demonstrate probity in their procurement practices as part of the legislative obligations they have. Private firms are not as strictly governed, which is precisely why private firms so often get it wrong without realising they have.

What Probity Actually Means

Translated for a small medium business context: probity is what allows a business owner to look any supplier, employee, or investor in the eye and explain how a purchasing decision was made and why it was the best decision at the time.

A procurement process with probity has four characteristics:²

• Fairness: all suppliers who should have been considered were considered on the same criteria.

• Transparency: the basis for the decision is documented and defensible.

• Consistency: the same process applies every time, not just when it is convenient.

• Accountability: someone is responsible for the decision and can be held to it.

A procurement process without probity is one where outcomes are shaped by who knows who, who had dinner with whom after that conference last month, or whose proposal landed in an inbox first. The purchase may work out, they also might not. Either way, the business owner has no basis for demanding accountability if something goes wrong.

Key Takeaway: Probity is not a government concept. It is the standard any business should hold its team to when making procurement decisions.

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The Mistakes Private Firms Make

The assumed absence of a legal obligation to demonstrate probity in private sector procurement does not mean the risks disappear. It only means they accumulate quietly until something suddenly goes wrong or you're left wondering why your costs have gotten out of control.³

Awarding contracts to suppliers with undisclosed personal connections

A business owner who selects a supplier because they are a friend, a relative, or a former colleague is not necessarily making a bad decision. The challenge is making that decision without acknowledging the connection and without testing whether a better option existed.⁴ Where this can be an immediate problem is when business owners rely on their staff to source for the business and those staff trade off balancing their roles by leaning on supplier or personal relationships.

Conflicts of interest are not wrong in themselves; but hiding them is.⁵ The best response to a personal connection is to declare it, have someone else assess the possible options, and document why a supplier was selected. This protects the business from internal disputes, from investor scrutiny, and from the supplier themselves if the relationship sours.

Using a single supplier without market testing

Sole-source procurement are sometimes legitimate: the supplier has a proprietary capability, the contract is below a threshold that justifies market testing, or the timeline does not permit a competitive process. These are valid reasons; habit and pre-existing relationships aren’t.⁶

When a business consistently returns to the same suppliers without testing the market, it accumulates cost and risk. Cost, because the supplier has no competitive pressure to maintain competitive pricing. Risk, because the business has no visibility over whether the supplier remains the best available option.

Evaluating suppliers on criteria that were not established in advance

Changing the goal post after proposals have been received is a probity failure in government procurement. In private sector procurement, it happens frequently and is rarely identified as a problem. For example, a business receives some quotes, decides retrospectively that payment terms matter more than price, and awards to the supplier with the longest payment terms. The decision may be commercially sound enough to get sign off, but the process is not.⁷

Evaluation criteria (your goal posts) should be established before proposals are sought. This protects the business from accusations of favouritism and ensures the decision can be explained consistently to anyone who asks. It's also a great way to cover yourself against cost claims from unsuccessful suppliers that have spent money putting a bid together for your business to consider.

Accepting gifts or hospitality from suppliers without a policy

Gifts, hospitality, and entertainment from suppliers are not inherently problematic. They become problematic when they are accepted without disclosure, when they create an obligation the recipient feels, consciously or not, or when the pattern of acceptance favours certain suppliers at a negative cost to the business.⁸ Think those yearly F1 tickets and corporate boxes at the footy that your project manager gets given by the same supplier that gets awarded a contract almost 100% of the time.

A simple gifts and hospitality policy does not need to be elaborate. It needs to establish what can be accepted, what needs to be disclosed, and what cannot be accepted at all. Without one, your business’ reputation in the market becomes one that suppliers become weary of, meaning every quote you get comes with a risk premium.

Keeping no record of your procurement process

There is a reason why the saying ‘the devil is in the detail’ is best demonstrated when dealing with a missing paper trail. The absence of documentation is not a probity failure in itself. It becomes a problem, when a decision is challenged, a supplier complains, or an internal dispute arises and there is no record of how the decision was made. Documentation is what turns a decision into a defensible one.⁹

Key Takeaway: Most private sector probity failures are not deliberate. They are the product of informal processes that work until they do not. The fix is documentation and consistency, not bureaucracy.

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Why This Is Becoming More Relevant for Private Firms

Three forces are pushing probity expectations into the private sector in ways that did not exist five years ago.

ESG obligations and supplier due diligence

Environmental, social, and governance requirements increasingly extend to procurement. Businesses that supply larger organisations, including listed companies, government contractors, and multinationals, are being asked to demonstrate that their own supplier selection processes are ethical and transparent.¹⁰ A business without documented procurement processes are increasingly disadvantaged in these supply chains. What this means for your business is that when your proposal gets evaluated, you're hurting your chances of being picked for contract award.  

Modern slavery reporting

The Modern Slavery Act 2018 (Cth) requires certain Australian businesses to report on the steps they have taken to address modern slavery risks in their operations and supply chains. The threshold is annual consolidated revenue of $100 million, which does not capture most SMBs directly. The businesses that supply to entities above the threshold, however, are subject to scrutiny through those entities' reporting obligations.

Supplying to government

As an example, changes to the Commonwealth Procurement Rules in November 2025 placed an explicit renewed focus on ethical conduct as a component of value for money.¹¹ Businesses that want to supply government need to demonstrate that their own internal processes meet a standard that government buyers can point to. An undocumented, informal procurement process in a potential supplier is a credibility risk for the government entity that engages them.

KEY TAKEAWAY: Probity is no longer only a government obligation. ESG requirements, supply chain scrutiny, and government procurement expectations are pushing it into the private sector. Build the capability before it is demanded of you.

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What Good Probity Looks Like in a Small-Medium Business

Implementing probity in a small medium business doesn’t need a dedicated function or a complex framework that feels like death by paperwork. It needs four elements:

• A documented procurement policy: a short document that sets out who can approve purchases at different values, what triggers a competitive process, and how supplier decisions are recorded.

• A conflict of interest register: a simple declaration process for any purchasing decision where a personal relationship exists between the people who got the quotes, who approved the decision, and the supplier.

• Pre-defined evaluation criteria: for any procurement where more than one option will be considered, the criteria for selection should be written down before proposals are received. You should also tell your supplier what the criteria are, otherwise their trying to hit a moving target they can’t see, from another room.

• A record of the decision: a brief note of who was considered, on what basis, and why the selected supplier was chosen. This does not need to be death by paperwork, but it still needs to exist.

These four elements won't prevent every procurement failure. They will prevent failures that are entirely avoidable: the ones that arise from poor process rather than bad luck.

Private firms that build procurement probity now are not just protecting themselves from the specific risks above. They are building a capability that makes them a more credible partner to customers, investors, and government buyers. That is a competitive advantage packaged and delivered through good governance.

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If you want to build a basic probity framework for your business's procurement processes, or you want to assess where your current approach is exposed, book a discovery call with D1 Advisory. No 47-slide deck. Just a straight conversation about what your business needs and how to protect it. You can reach us at www.d1advisory.business/book-a-call.