Based on a study of three Belgian and Dutch government formations, this article examines the relationship between the formation of government coalition's and the formulation of public policy. The government formation process is disaggregated into three stages: the selection of participants in the bargaining process, the negotiation of the governmental agreement and the allocation of portfolios. These stages are then discussed in the context of a schema which focusses on the effects of contextual, relational and outcome components. By modifying assumptions made in traditional coalition studies, the government formation process is seen as involving the transferof issues from institutional arenas to a non-institutional arena in which bargaining processes are used to map and develop issue specific areas of consensus.