The Ministry of Business, Innovation and Employment ("MBIE") has recently released a draft consultation version of the revised New Zealand Government Procurement Rules (the "New Rules"), expected to be introduced during the course of next year.

Once finalised and endorsed by Cabinet, the New Rules will replace the existing Mandatory Rules for Procurement by Departments (in place since 2006) that have been in need of a refresh for some time.

Who do they apply to?

It appears that the New Rules will continue to apply to the same agencies – being mandatory for government departments, the New Zealand Police and the New Zealand Defence Force, good practice for other state services agencies and encouraged for application by state sector and public sector agencies.

Content of the New Rules

Much of the content of the New Rules will be familiar to those who are used to working with the current rules on a regular basis (which makes sense given the rules need to reflect New Zealand's international commitments).

However, the New Rules seek to introduce plain English language, are presentationally much easier to follow and will also be a 'one-stop-shop' for everything you need to know about identifying, applying and complying with the myriad of government procurement guidance documents that have been introduced over the past few years. The New Rules will incorporate some of these other guidance documents as rules (for example, the Public Private Partnership guidance), although this content is still under development.

The New Rules also introduce new procurement rules which are not currently found in the existing rules and expand on existing content by providing a more detailed framework than the existing rules do.

As with the existing rules, the New Rules provide that they are to be read alongside the Auditor-General's Procurement Guidance for Public Entities and MBIE's own procurement guide, Mastering Procurement (March 2011) which, although not mandatory, contain much more detailed guidance on content covered in the New Rules and are complementary to the New Rules.

Key changes to be aware of

The following are the key proposed changes that we think agencies should be aware of (and should give some consideration to) in relation to the New Rules:

  1. Strategic Procurement Outlook

    The New Rules will require agencies to prepare a Strategic Procurement Outlook which must be submitted to MBIE. The Strategic Procurement Outlook will give suppliers a high level summary of an agency's purpose and goals and how these relate to its procurement activities. This document must be reviewed annually and any changes published at the start of each financial year.

  2. 'Sufficient Time'for suppliers to respond:

    The minimum 10 working day period for suppliers to respond to a tender opportunity will no longer apply across the board as the default position. Instead, agencies must give suppliers 'Sufficient Time' to respond.

    'Sufficient Time' will depend on the complexity of the procurement, the amount of information sought, anticipated use of subcontractors and level of risk (to name a few of the factors).

    The New Rules also prescribe new 'Minimum Time Periods' for responses depending on the type of response sought (e.g. quote, proposal, competitive dialogue), whether the opportunity has previously been signalled in an Annual Procurement Plan and whether responses are requested or can be submitted using electronic means instead of hard copy. These timeframes differ considerably, ranging from 8 to 50 clear Business Days.

    Agencies will therefore need to be alert to these differing timeframes when planning their procurement activities to ensure they are not squeezed for time when running a procurement process.

  3. Content of a procurement document

    The New Rules are much more prescriptive than the existing rules about the information that must be included in a Notice of Procurement (presumably the request for quote or tender document although this term has not yet been defined).

    Rule 33 of the New Rules contains a list of 17 items that must be addressed in the Notice of Procurement. Examples include a complete description of the goods and services being procured, pre-conditions to participation, limits on the number of proposals to be shortlisted, evaluation criteria (including the ranking of each), proposed contract conditions and information about participating in an e-auction (if relevant).

    Similarly, Rule 53 of the New Rules also contains a more prescriptive list of requirements for establishing a panel contract and for awarding a contract to a panel member when a contract opportunity arises.

  4. E-auctions

    The New Rules expressly provide for an agency to conduct an e-auction after its initial evaluation of proposals. The Ministry of Economic Development ran an e-auction last year as part of its All-of-Government Procurement of Legal Services.

    An e-auction (as its name suggests) is conducted online at a scheduled time whereby suppliers bid against each other on certain criteria (such as price or quality).

    The New Rules will require agencies to notify suppliers in the Notice of Procurement of their intention to run an e-auction and must include the rules that will apply to the e-auction and the specific criteria that will be used in the e-auction.

    It will be interesting to see how the 'formal' introduction of e-auctions will impact on potential supplier behaviour when submitting an initial response and what impact this may have on supplier participation and on agencies achieving value for money.

  5. Contract administration and reporting

    The New Rules will require agencies to keep thorough records documenting the procurement process, including all decisions, recommendations and reports for audit purposes.

    Agencies will also be required to collect and report procurement statistics to MBIE.

Key messages

Some of the key messages to agencies that we have identified as permeating the New Rules include:

  • conducting strategic procurement;

  • planning ahead;

  • undertaking sound market research before commencing a procurement process;

  • giving potential suppliers full information to ensure full and relevant information is received upon which to assess proposals;

  • being fair and reasonable to potential suppliers; and

  • a focus on encouraging procurement through electronic means.

The New Rules also set out five principles of procurement which apply to agencies when procuring (which are expanded on in much more detail in the New Rules) under the following headings:

  1. plan and manage for great results;

  2. be fair to all suppliers;

  3. get the right supplier;

  4. get the best deal for everyone; and

  5. play by the rules.

These key messages and principles should not come as a surprise to agencies as a number of these are the same messages that are addressed in the Auditor-General's Procurement Guidance for Public Entities.

Submissions

MBIE has called for feedback on the New Rules by 12 October 2012 and has set up online surveys to enable both agencies and suppliers to submit feedback on the New Rules.

The New Rules (in all their 60 pages) are worth a look. The current consultation phase may be the main opportunity that agencies and suppliers have to ensure that those tricky issues you routinely face are addressed to make government procurement easier for all involved – agencies and suppliers alike.