Cabinet recently approved the 4th Edition of the Government Procurement Rules, which came into effect on the 1st October 2019. This is the most significant change in NZ procurement since the Rules of Sourcing came into effect in October 2013.
In line with the current government’s ideology, the amended rules are aimed to create leverage through procurement, to improve wellbeing for New Zealand communities. Importantly, they give clarity and good news on a number of areas that have challenged government procurement staff for years.
Rule 1: Principles and the Government Charter
Key changes that apply to your Agency
Many public sector agencies don’t recognise that Rule 1 applies to them, even though the rest of the Rules are not binding. All government agencies must follow the five Principles of Government Procurement (which have now been tweaked), as well as the Government Procurement Charter (which is new).
It’s important that your procurement staff get to grips with how these changes will affect their procurement environment.
Your procurement policies, manuals and strategy documents may need to be updated and aligned so that they incorporate the Government Procurement Charter and reflect the emphasis on public value across all aspects of your procurement processes.
It’s official: agencies can favour local suppliers.
Under the Government Procurement Charter, agencies should actively attract an increasingly diverse and localised supplier mix to their tendering processes.
This means that if a business creates social, economic, environmental or cultural benefits to your local community, you can (and should) place a value on that contribution, within your tendering processes.
How does the Government Procurement Charter affect us?
The Government Procurement Charter has been developed to improve the public value that procurement delivers, and to support delivery of better public services across NZ.
The eight directives are specific, relevant and clear. They encourage you to use New Zealand businesses, including local businesses, SMEs, Maori and Pasifika businesses, and social enterprises.
Procurement should encourage innovation and good employment practices, support minority groups, and reward environmentally responsible suppliers.
Robust risk assessment and fair allocation is critical, along with effective collaboration with like-minded organisations to find common solutions.
The overall focus is one of benefitting NZ communities – not defaulting to the cheapest solution at the cost of social, environmental, economic or cultural outcomes.
Although only Rule 1 is mandatory for Public Service and some State Service agencies, the rest of the Rules of Procurement should guide your procurement processes. They’re designed to make public sector procurement fair, effective and attractive to all suppliers.
The rest of the Rules - relevant or not?
A few areas that are particularly relevant are:
- Robust procurement planning - Rule 15
- Closed Contests (or invited tenders) - Rule 14
- Reasons for excluding suppliers - Rule 44
- Minimum timeframes - Rules 29 - 33
- Non-Price Attribute weightings - Rule 38
- Due diligence - Rule 46
- Debriefs - Rule 49
However, the new Rules 16 - 20 on Broader Outcomes have the greatest implications. Put simply, they charge you with achieving more from public sector procurement than the obvious traditional outcomes.
Broader Outcomes – Why …and how?
For most government agencies, delivering public value has always been a balancing act. The cheapest price today must be weighed up against long-term durability, quality and sustainability.
From now on, we also must consider how to generate secondary benefits from the way a good or service is produced or delivered. These can be social, environmental, economic or cultural. The new rules provide helpful guidance, both at a strategic and an operational level, on how to achieve this leverage.
Four priority outcomes have been identified by Cabinet – namely to increase NZ businesses access to government procurement; to increase the size and skill of the construction workforce; to improve and future-proof conditions for NZ workers and businesses; to transition to zero emissions and reduce waste.
While Price and Quality will always be important, your tenders now must consider how the public sector funds you spend can generate additional benefits. Every project will be different – and it will be incumbent on you and your procurement people to put effort into analysing your markets and planning your procurements to build in these factors.
Should you re-consider your procurement team?
Traditionally, for many government agencies, procurement has been the prime territory of engineers or engineering consultants.
With old-style tendering, the prime tasks were to design and scope the works, put together specifications and drawings, and then go to the market – usually for the cheapest complying solution.
The new rules say that procurement planning needs to consider areas such as community wellbeing, environmental sustainability, economic and social outcomes in procurement – not just the engineering aspects.
Technical inputs will always be important, but they’re no longer the only inputs you need to good procurement decisions.
You may need to bring skilled and trained procurement professionals into your procurement team, to work alongside your engineers.
New Construction Rules
Construction is undoubtedly the largest player in public sector procurement. Whether you’re building a library or repairing a bridge; upgrading a water treatment plant or expanding your facilities, you’ll be aware that shortages in both the number and the skills of workers are limiting development and ultimately affecting community wellbeing.
The new Rule 18 focuses on rewarding companies who actively engage in skills development in the construction industry, both for their own staff and for their subcontractors (where applicable).
This means, for example, that you should consider scoring bidders higher if they offer apprenticeships, engage with work transition programmes, have strong focus on health and wellbeing programmes, or support development of a more diverse workforce.
These new Rules are welcome news for government agencies. They will be key to promoting regional development and recognising community wellbeing through public expenditure. So, this is a great time to embrace them – and drive them deep into your procurement practices.
You have just a few months until the new Rules come into effect – during which time you need to review your procurement tools and processes, and upskill everyone who takes responsibility for procurement.
Caroline Boot is a senior consultant for Clever Buying, a company dedicated to working with government organisations to support, train and implement best practice procurement. For more information, see www.procurement.govt.nz or contact email@example.com on 0800 225 005.