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Rule 29:
Awarding the contract

Primary requirement

  1. Agencies must, unless there is a legitimate reason to cancel the procurement, award the contract to the supplier/s that can demonstrate that it has the capability and capacity to deliver the requirements, meet the contract conditions, and offer the best public value.

Application

  1. If a supplier offers a price that is substantially lower than other responses (an abnormally low bid), an agency may seek to verify with the supplier that the supplier is capable of both:
    1. satisfying all of the conditions for participation, if any, and
    2. fully delivering all of the contract requirements (for example, quality, quantity, time and location), any other stated objectives, and meeting all of the contract conditions for the price quoted.
  2. Agencies must not cancel a procurement, use options, or modify or terminate an awarded contract to avoid applying the Rules.
  3. When a procurement has been cancelled, agencies must promptly publish a cancellation notice on GETS that sets out the reasons why the procurement has been cancelled. 

More information

Examples of reasons to cancel a procurement

A legitimate reason to cancel a procurement could include:

  • a change of policy
  • a change to an appropriation that affects funding for the initiative
  • no supplier has offered a satisfactory solution or an acceptable price, or one that represents public value
  • a Ministerial direction.

Abnormally low bids

Look out for abnormally low bids. A lower bid can sometimes genuinely reflect a more efficient supplier, or one that is willing to invest in the relationship by taking a lower margin on the contract. Such competitive responses should be encouraged. But an abnormally low bid could impact negatively on service delivery. It could even indicate that the supplier is involved in a cartel or taking advantage of its market power in breach of section 36 of the Commerce Act 1986. 

For more information, including on bid rigging, see: What is a cartel? – Commerce Commission New Zealand.

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