Local Government Magazine

What new procurement rules mean for councils

In May 2019, Cabinet will accept the 4th Edition of the Government Rules of Procurement, which come into effect on October 1 this year. Caroline Boot spells out the implications for councils.

Principles and the Government Charter

1. Each agency should have policies in place that incorporate the five Principles of Government Procurement and the Government Procurement Charter. The Principles and the Charter apply to all procurements, even if the Rules do not apply.

2. Each agency should make sure that:
a. all staff engaged in procurement have been trained in the five Principles and the Charter;
b. its procurement practices reflect the five Principles and the Charter; and
c. it can show how it has used sound research to plan an appropriate approach-to-market strategy that is proportionate to the
nature, risk, value and complexity of each procurement.

It’s official: Councils can favour local suppliers

Under the Government Procurement Charter, councils 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 for your local community, you can (and should) place a value on that contribution within your tendering processes.

Should you re-consider your procurement team?

Traditionally, council procurement has been the prime territory of council’s 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 well-being, 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 make good procurement decisions.

You may need to bring skilled and trained procurement professionals into your procurement team to work alongside your engineers.

Government agencies are heading for the most significant change in procurement since the Rules of Sourcing came into effect in October 2013. In line with the current government’s ideology, the amended rules aim to create leverage through procurement to improve the wellbeing for New Zealand communities. Importantly, they give clarity and good news on a number of areas that have challenged council procurement staff for years.

Key changes

Many councils don’t recognise the five Principles of Government Procurement apply to them, 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.

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 the country.

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 New Zealand communities – not defaulting to the cheapest solution at the cost of social, environmental, economic or cultural outcomes.

The rest of the Rules

Although they are not mandatory for local government, 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.

A few areas that are particularly relevant to councils 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 for councils. Put simply, they encourage you to achieve more from public sector procurement than the obvious traditional outcomes.

Broader outcomes

In councils, delivering public value has always been a balancing act. The cheapest price today should be weighed up against long-term durability, quality and sustainability.

From now on, we also should 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 New Zealand businesses access to government procurement; to increase the size and skill of the construction workforce; to improve and future-proof conditions for Kiwi workers and businesses; and to transition to zero emissions and reduce waste.

While price and quality will always be important, your tenders now should consider how the public sector funds you spend can generate additional benefits. Every project will be different. 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.

New construction rules

Construction is undoubtedly the largest player in councils’ procurement. Whether you’re building a library or repairing a bridge, upgrading a water treatment plant or expanding your council 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 well-being programmes, or support development of a more diverse workforce.

What next?

These new Rules are welcome news for councils. They will be key to promoting regional development and recognising community well-being through public expenditure. So, this is a great time to embrace them – and drive them deep into your procurement practices.

You have just five months until the new Rules come into effect – during which time you should review your procurement tools and processes, and upskill everyone who takes responsibility for procurement.

• Caroline Boot is a senior consultant for Clever Buying. caroline.boot@cleverbuying.com or 0800 225 005.

Related posts

Horizons Regional Council – New simplified supplier panel model

Contrafed Publishing

Procurement governance guide

LG Magazine

Considering better project outcomes

LG Magazine