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1 - Getting Started

Up one level

What values underpin the Rules?

Rule 1 - Principles

Rule 2 - Integrity

Rule 3 - No offsets

Rule 4 - Non-discrimination

Rule 5 - Protection of suppliers' information

Who do the Rules apply to?

Rule 6 - Who the Rules apply to

Rule 7 - When the Rules apply - goods or services or refurbishment works

Rule 8 - When the Rules apply - new construction works

Rule 9 - Estimating value

Rule 10 - Non-avoidance

Rule 11 - Types of contract

When the Rules do not apply

Rule 12 - Non-procurement activities

Rule 13 - Opt-out procurements

Do I have to openly advertise?

Rule 14 - Requirement to openly advertise

Rule 15 - Exemption from open advertising

 

Rule 1

Principles

  1. Each agency must have policies in place that incorporate the five Principles of Government Procurement. The Principles apply to all procurements, even if the Rules do not apply.
  2. Each agency must make sure that:

a.  all staff engaged in procurement have been trained in the five Principles

b.  its procurement practices reflect the five Principles

c.  it is able to 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.

Rule 2

Integrity

  1. Each agency must have in place policies that safeguard the integrity of its procurement activities and processes. The policies must require that:
    a.  the agency and all staff involved in procurement can justify their procurement decisions
    b.  those involved in procurement decisions stay impartial
    c.  procurement processes are fair, transparent and reasonable
    d.  all staff involved in procurement act responsibly, lawfully and with integrity.
  2. Each agency must have policies in place that help all staff involved in procurement to identify, notify and manage conflicts of interest. Each agency must be able to show how it uses sound judgement to manage conflicts of interest.

 

Rule 3

No offsets

  1. An agency must not ask for, take account of, or impose any offset at any stage in a procurement process.

Rule 4

Non-discrimination

  1. All suppliers must be given an equal opportunity to bid for contracts. Agencies must treat suppliers from another country no less favourably than New Zealand suppliers.
  2. Procurement decisions must be based on the best value for money, which isn’t always the cheapest price, over the whole-of-life of the goods, services or works.
  3. Suppliers must not be discriminated against because of:

a.  the country the goods, services or works come from

b.  their degree of foreign ownership or foreign business affiliations.

Rule 5

Protection of suppliers' information

  1. Each agency must protect suppliers' confidential or commercially sensitive information. This includes information that could compromise fair competition between suppliers.
  2. An agency must not disclose confidential or commercially sensitive information unless:

a.  the supplier has already agreed to it in writing, or

b.  the disclosure is required by law (eg under the Official Information Act 1982), convention or Parliamentary or Cabinet Office practice, or

c.  it is a limited disclosure expressly notified in a Notice of Procurement to which suppliers have consented by participating in the process.

Rule 6

Who the Rules apply to

Required application

  1. The following agencies must apply the Rules:
    a.  all Public Service departments
    b.  New Zealand Police
    c.  New Zealand Defence Force
    d.  State Services agencies covered by the Whole of Government Direction. A list of these agencies is avaliable on the Public Sector Agencies page.
  2. Crown Research Institutes must have regard to the Rules.
  3. Certain agencies not listed in Rules 6.1 and 6.2 are bound to meet the requirements of the WTO Agreement on Government Procurement or other free trade agreements. For these agencies, only those Rules relevant to the commitments made, and procurement covered by, those agreements will apply. A list of these agencies is avaliable on the Public Sector Agencies page. 
  4. The agencies identified in Rules 6.1 and 6.2 may be audited for compliance with the Rules (eg by the Auditor-General under the Public Audit Act 2001).

    Good practice guidance only
  5. School Boards of Trustees, Public Finance Act Schedule 4 organisations, and the Reserve Bank of New Zealand are expected to have regard to the Rules as good practice guidance.
  6. Wider State Sector and Public Sector agencies are encouraged to have regard to the Rules as good practice guidance.
  7. In applying the Rules as good practice guidance, the agencies identified in Rules 6.5 and 6.6 are to interpret all 'must' Rules as 'should' Rules.

Rule 7

When the Rules apply - goods or services or refurbishment works

  1. The Rules apply:

    a.  to the procurement of goods or services or refurbishment works, or a combination of goods or services or refurbishment works, when
    b.  the maximum total estimated value (Rule 9) of the procurement meets or exceeds the value threshold of $100,000 (excluding GST).
  2. To estimate the maximum total estimated value (Rule 9) for goods or services or refurbishment works an agency must take into account:
    a.  all related services (eg installation, training, servicing, and management consultancy services)
    b.  all types of goods (eg operating consumables)
    c.  all subcontracted goods or services or works.

  3. This Rule does not apply to goods, services or refurbishment works that are purchased for commercial resale.

Rule 8

When the Rules apply - new construction works

  1. The Rules apply:
    a.  to the procurement of goods or services or works for new construction works, when
    b.  the maximum total estimated value (Rule 9) of the procurement meets or exceeds the value threshold of $10 million (excluding GST).

  2. To estimate the maximum total estimated value (Rule 9) for new construction works an agency must take into account all:
    a.  related services (eg design, architecture, engineering, quantity surveying, and management consultancy services)
    b.  types of goods (eg construction material, health and safety equipment)
    c.  phases of the construction through to completion
    d.  subcontracted goods, services and works.

Rule 9

Estimating value

  1. Each agency must estimate the total value of a procurement to determine whether it meets or exceeds the relevant value threshold (set out in Rules 7 and 8). Agencies must act in good faith and use good judgement to estimate the value of a procurement. Agencies must include the estimated value in their business case or procurement plan. This estimate is referred to as the maximum total estimated value.

  2. Each agency must consider the total value over the whole-of-life of the contract/s when estimating the procurement’s maximum total estimated value. The estimate must include the value of all of the contracts that may result from the procurement.

  3. The value is the total amount excluding GST.

  4. If an agency cannot estimate the maximum total estimated value of a procurement it must apply the Rules.

  5. When an agency calculates the maximum total estimated value of a procurement, it must include everything required for the full delivery of the goods, services or works. This includes the value of:
    a.  options to purchase additional goods, services or works
    b.  options to extend the term of the contract
    c.  paying any premiums, fees or commissions to the supplier or a broker
    d.  any revenue streams a supplier receives
    e.  any other form of remuneration or payment due to the supplier or to a third party or any interest payable.

Rule 10

Non-avoidance

  1. An agency must not intentionally avoid applying the Rules when planning for, valuing or undertaking a procurement.

  2. When calculating a procurement's maximum total estimated value (Rule 9), an agency must not intentionally avoid applying the Rules by either:
    a.  designing, structuring or dividing a procurement into separate parts
    b.  using a non-standard or alternative valuation method to lower the estimated value.

Rule 11

Types of contract

  1. The Rules apply to all contract types, including:
    a.  when purchasing outright
    b.  purchasing through hire-purchase
    c.  when renting or leasing
    d.  where there is an option to buy
    e.  Public Private Partnerships
    f.  contracts accessed through a third-party commercial supplier or broker.

Rule 12

Non-procurement activities

  1. For the purposes of the Rules the following activities are deemed not to be procurement activities:
    a.  employing staff (excluding the engagement of contractors and consultants)
    b.  disposals and sales by tender
    c.  investments, loans and guarantees
    d.  gifts, donations and any form of unconditional grants
    e.  statutory appointments
    f.  Ministerial appointments
    g.  Core Crown Legal Matters.

Rule 13

Opt-out procurements

  1. In certain circumstances, when a procurement is covered by the Rules (meets the requirements of Rules 6 and 7 or Rules 6 and 8), an agency can opt-out of applying all Rules to that procurement, except those listed in Rule 13.4 and 13.5. These circumstances are listed in Rule 13.3 and are called opt-out procurements.

  2. When doing an opt-out procurement, an agency should still conduct its procurement according to the Principles and other procurement good practice guidance. It should also achieve the best value for money over the life of the contract, which isn’t always the cheapest price.

  3. The following is the list of valid opt-out procurements:
    a.  Between government agencies: Any of the following agencies can purchase goods, services or works from each other:
           i.  Public Service departments
         ii.   New Zealand Police
         iii.  New Zealand Defence Force
         iv.  agencies covered by the Whole of Government Direction (Rule 6.1)
         v.   Crown Research Institutes.
    However, if the purchasing agency chooses to use an open competitive process it must apply the Rules.

      b.  Overseas:  Goods, services or works purchased outside of New Zealand for use outside of New Zealand.

  4. The following Rules apply to all opt-out procurements:
    a.  Rule 5 Protection of suppliers' information
    b.  Rule 47 Supplier complaints
    c.  Rule 48 Prompt payment
    d.  Rule 49 Maintaining records
    e.  Rule 50 Audit.

  5. The following Rules apply to opt-out procurements when relevant:
    a.  Rule 46 Debriefing suppliers (if the agency has used a competitive process)
    b.  Rule 55 All-of-Government Contracts
    c.  Rule 56 Syndicated Contracts
    d.  Rule 57 Common Capability Contracts
    e.  Rule 60 Geospatial information and services
    f.  Rule 61 Intellectual Property
    g.  Rule 62 Public Private Partnerships
    h.  Rule 63 Business Cases and Investment Decisions
    i.  Rule 64 Investment Reviews
    j.  Rule 65 Timber and wood products
    k.  Rule 66 Employee transfer costs.

Rule 14

Requirement to openly advertise

  1. Wherever possible an agency should use open competitive procurement processes to give all suppliers the opportunity to compete.

  2. An agency must openly advertise on the Government Electronic Tenders Service (GETS):
    a.  if the maximum total estimated value (Rule 9) of the procurement meets or exceeds the relevant value threshold (Rules 7 or 8), and
    there is no exemption from open advertising (Rule 15).

  3. b.  Agencies may advertise using other media, as well as GETS.

Rule 15

Exemption from open advertising

  1. An agency does not need to openly advertise a contract opportunity on GETS if an exemption from open advertising under Rule 15.9 applies.

  2. If the procurement is exempt from open advertising, an agency must use either a closed competitive process (with a limited number of known suppliers) or a direct source process (with a known supplier).

  3. An agency must not exempt a procurement from open advertising to:
    a.  avoid competition
    b.  protect domestic suppliers
    c.  discriminate against any domestic or international supplier.

    Document the rationale

  4. If an agency exempts a procurement from open advertising under Rule 15.9, it must:
    a.  obtain evidence of the facts and circumstances to verify the reason/s for the exemption before starting the procurement, and
    b.  document the rationale for the decision. This rationale may form part of the business case or procurement plan or may be a stand-alone document.

  5. The rationale document must include:
    a.  the name of the agency
    b.  a description of the goods, services or works
    c.  the maximum total estimated value (Rule 9) of the goods, services or works
    d.  the specific exemption/s, that applies (from the list in Rule 15.9)
    e.  details of the facts and circumstances which justify the exemption.

  6. A senior manager must endorse the rationale before the agency undertakes the procurement. The agency must retain the documented rationale for audit purposes.

  7. If MBIE asks for the documented rationale, the agency must promptly make it available.

    GETS Contract Award Notice
  8. Agencies must publish a Contract Award Notice (Rule 45) on GETS for any procurement that it has exempted from open advertising, except when doing secondary procurement (Rule 15.9.i).

  9. Valid exemptions from open advertising are:
    a.  Emergency: A genuine emergency as defined by MBIE’s Quick Guide to Emergency Procurement. Urgent situations that are created by an agency, such as lack of advance planning, do not constitute an emergency.
    b.  Following an open tender: An agency may use a closed competitive process or direct source process to procure goods, services and works if:
         i.    it has openly advertised the contract opportunity in the last 12 months, and
         ii.   it has not substantially changed the core procurement requirements, and
         iii.  the first time the opportunity was advertised it:
               (a)  did not receive any responses, or
               (b)  did not receive any responses that complied with the pre-conditions (Rule 25) or conformed with or met the requirements (including quantity), or
               (c)  received responses from suppliers who it has reasonable grounds to believe have colluded, and this can be verified, and no other responses complied with the pre-conditions (Rule 25) or conformed with or met the requirements.

    c. Only one supplier: If the goods, services or works can be supplied by only one supplier and there is no reasonable alternative or substitute because:
         i.    for technical reasons there is no real competition, or
         ii.   the procurement relates to the acquisition of intellectual property or rights to intellectual property (including patents or copyrights), or other exclusive rights, or
         iii.  the procurement is for a work of art.
    d.   Additional goods, services or works: Goods, services or works additional to the original requirements that are necessary for complete delivery. This Rule applies where all three of the following conditions are met:
          i.   the original contract was openly advertised, and
         ii.   a change of supplier cannot be made for economic or technical reasons, and
         iii.  a change of supplier would cause significant inconvenience or substantial duplication of costs for the agency.
    e.  Prototype: Purchasing a prototype for research, experiment, study or original development. Original development may include a limited production or supply if this is necessary to:
         i.  carry out field tests and incorporate the findings, or
         ii.  prove that the good or service or works can be produced or supplied in large numbers to an agreed quality standard.
    This exemption does not apply to quantity production or supply to establish commercial viability or to recover research and development costs.
    Once the contract for the prototype has been fulfilled, an agency must openly advertise any subsequent procurement of the same goods, services or works.
    f.  Commodity market: Goods purchased on a commodity market.
    g.  Exceptionally advantageous conditions: For purchases made in exceptionally advantageous conditions that only arise in the very short term. This exemption does not cover routine purchases from regular suppliers.
    h.  Design contest: Where a contract is awarded to the winner of a design contest. To meet this exemption:
         i.   the design contest must have been organised in a manner which is consistent with the Rules, and
         ii.   the contest must be judged by a panel whose members understand that the winner will be awarded a contract, and
         iii.  members of the panel do not have any conflict of interest in carrying out the judging of the contest.
    i.  Secondary procurement: Where an agency has established a Panel of Suppliers (in accordance with Rule 54) or is purchasing under an All-of-Government Contract (Rule 55), Syndicated Contract (Rule 56) or Common Capability Contract (Rule 57), it does not need to openly advertise individual contract opportunities that are awarded through that arrangement.
    j.  Unsolicited unique proposal: Where an agency receives an unsolicited proposal, as described in MBIE’s Guide to unsolicited unique proposals, and all of the following apply:
         i.    the proposal is unique
         ii.   the proposal aligns with government objectives
         iii.  the goods, services or works are not otherwise readily available in the market place
         iv.  the proposal represents value for money.
     

 

Last updated 5 May 2017