This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
The fourth edition of New Zealand’s Government Procurement Rules came into effect on October 1, 2019. The new edition carries forward content from the prior editions, integrating The Five Principles of Government Procurement, while also introducing a new Government Procurement Charter that focuses on sustainable procurement and the promotion of local and small- and medium-sized businesses. This discussion provides an overview of the updated New Zealand Government Procurement Rules, which are divided into six main sections, and also surveys other key guideline documents promulgated by New Zealand as part of its procurement governance modernization efforts.
“Section 1 – Getting Started” identifies the specific government agencies that must follow the rules to comply with New Zealand’s commitments under the World Trade Organization’s Agreement on Government Procurement. These rules also require that all public organizations establish policies, procedures, and staff training on The Five Principles of Government Procurement and on the Government Procurement Charter.
The Five Principles of Government Procurement recognizes the need to: (i) conduct proper planning and ensure that procurement teams have the right mix of skill and experience, while remaining open to new ideas and solutions, and choosing a procurement process that is proportional to the size, complexity, and risks involved in the specific project; (ii) be fair to all suppliers and treat all suppliers equally without discrimination; (iii) select the right supplier who can deliver at a fair price and on time; (iv) get the best public value while avoiding being too prescriptive; and (v) play by the rules and be accountable, transparent, and reasonable, while ensuring that everyone involved in the process acts responsibly, lawfully, and with integrity, properly manages conflicts of interest, and protects commercially sensitive supplier information.
Furthermore, the Government Procurement Charter encourages public institutions to be mindful of creating opportunities for local and small- and medium-sized enterprises, while ensuring sustainable procurement practices that reduce waste, carbon emissions, and pollution, and requiring government contractors to operate with integrity, transparency, and accountability in relation to human and labour rights and workplace health and safety requirements.
This section also prohibits discriminating against suppliers based on country of origin, while establishing rules around the calculation of contract values for identifying public posting requirements, along with the protocols around public tendering notice procedures.
“Section 2 – Planning Your Procurement” requires that government agencies conduct appropriate planning based on the size, risk, and complexity of each procurement and that procurement plans include, among other things, a clear business objective, a scoping statement, the sourcing approach to market, sufficient timelines, the evaluation methodology and criteria, and the contractual arrangements. This part also requires public agencies to prepare and publish their annual institutional procurement plans to facilitate proactive planning, while also giving suppliers advance notice of upcoming opportunities.
Additionally, this section requires public agencies to submit plans for major projects (defined as having an estimated total value of $5 million or more, or otherwise involving complexity risks or cross-governmental impacts) for central government review. It also contains restrictions against downstream conflicts of interest to avoid prejudicing fair competition, and prohibits agencies from obtaining procurement advice from suppliers having a commercial interest in the contract opportunity. This section further mandates the use of neutral specifications and the prohibition of technical specifications that create unnecessary obstacles for suppliers.
Finally, this section limits pre-conditions of award to the specific areas of legal capacity, financial capacity, commercial and operational capacity, and appropriate skills, expertise, and experience, and prohibits an agency from making prior work performed for New Zealand agencies a pre-condition for the award of future contracts. This section also mandates that agencies provide suppliers enough time to respond to contracting opportunities and establishes protocols for identifying minimum posting times based on the complexity of the procurement and the type of tendering format used.
“Section 3 – Approaching the Market” prescribes the specific content requirements for solicitation notices and mandates that those notices contain the information needed by suppliers to prepare and submit meaningful responses. The prescribed information includes: (i) an identification of the type of tendering format being used; (ii) contact information; (iii) a description of the requirements, including quantities, estimated delivery times, and service levels; (iv) any preconditions of award and all evaluation criteria; (v) bid response deadlines and protocols and any other relevant terms and conditions relating to the procurement process. These rules also allow for the supplementary disclosure of evaluation criteria and process rules in multi-staged procurement processes. This section also specifies rules around the evaluation of supplier submissions, grounds for the debarment of suppliers, and rules for using electronic auctions.
“Section 4 – Awarding the Contract” mandates that a contract be awarded to the bidder that demonstrates the best value unless there is a legitimate reason for cancelling the process. This section further establishes rules around notifying unsuccessful bidders, publicly disclosing contract award decisions, providing bidder debriefings, and managing supplier complaints. This section also mandates the prompt payment of suppliers, the duty to maintain procurement records, and procurement-related reporting and audit compliance requirements.
“Section 5 – Types of Supplier Lists” establishes rules for regulating the use of prequalified supplier lists and supplier panels, with the former allowing for the pre-screening of suppliers to avoid duplication of effort, and the latter enhancing that process by having pre-screened suppliers enter into framework agreements to pre-establish the terms of future supply. These pre-screening methods require transparency in the second-stage selection process for the award of contract opportunities.
“Section 6 – Other Rules You Need to Know” contains a broad range of other procurement-related topics, including the use of central government contracts and collaborative contracts, as well as protocols relating to intellectual property and infrastructure management. Furthermore, this section requires agencies to use centrally mandated tendering and contracting templates and mandates that agencies conduct an annual procurement capability indexing review exercise to benchmark their institutional procurement practices against pre-established governance standards.
New Zealand has also promulgated the following secondary guidelines and policies related to the procurement process:
- The Chief Executive Gifts, Benefits and Expenses standards establish rules around the conduct of chief executives, recognizing that “it is critical to maintaining public confidence that the integrity and motivations of chief executives are not called into question” and that “networking” is not a sufficient reason to accept gifts, such as tickets to sports matches or concerts, unrelated to the core role of the chief executive. These rules require the public disclosure of gifts, benefits, and hospitality to promote transparency “about exactly what we are accepting from who[m].”
- New Zealand’s Conflicts of Interest standards outline the minimum expectations to support effective reporting and management of conflicts of interest. These standards mandate training and awareness programs to ensure that staff “regularly review their own interests and fully disclose any conflicts as early as possible.”
- The Fraud and Corruption Policy Framework establishes standards to assist public and private sector organisations in developing and improving their fraud and corruption policies and procedures. The framework recognizes that corruption is a global problem that is bad for businesses since it introduces uncertainty and risk into the market, and that it is also bad for the public sector since it destroys trust in democratic institutions and undermines the rule of law. The framework warns that corruption can take various forms, including secret commissions, kickbacks, bribes, and other forms of unlawful payments, and encompasses a number of offences such as abuse of power and money laundering.
- New Zealand’s Constructive Market Engagement: A guide to engaging effectively with suppliers provides guidelines on how to properly engage in supplier consultations. The guide aims to “destroy the ‘cone of silence’ myth: that government can’t be seen to be talking to suppliers” and recognizes that government agencies “can engage with the market at any time, from the early pre-procurement phase, during a tender and at any other time during a procurement process” as long as they are fair, open, and transparent, record their discussions, and take steps to ensure procedural integrity by giving the same information and equal access to all suppliers.
- The Guide to supplier feedback and complaints, which was designed to “to help suppliers better engage with government and support good procurement practice”, provides guidance to suppliers on how to raise concerns with a procuring agency and how to file formal complaints, while also outlining the availability of mediation procedures, court complaint processes, and independent review channels, including the Auditor General, the Ombudsman, and the States Services Commission.
As this overview illustrates, New Zealand has decreed an evolving ecosystem of procurement rules, guidelines, and implementation tools to help supports its public agencies with their procurement functions. In addition to providing guidance to New Zealand government agencies, these rules and guidelines offer useful benchmarks for public institutions in other jurisdictions for assessing their own jurisdictional and institutional procurement governance practices, and for updating those governance practices.
