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Rule 7:
Estimating the monetary value of a procurement

Primary requirement

  1. Agencies must act in good faith and use good judgement to estimate the total monetary value of a procurement to determine whether it meets or exceeds the following value thresholds:
    1. $100,000 for goods, services, and refurbishment works
    2. $9 million for new construction works.

Application

  1. Agencies must:
    1. consider total value over the whole of life of all the contract/s (excluding GST) that result from the procurement, including costs associated with disposal of the goods
    2. include everything required for the full delivery of the goods, services or works including the value of:

      1. options to purchase additional goods, services or works
      2. options to extend the term of the contract
      3. related goods, such as health and safety equipment, materials
      4. services related to the goods and services, such as installation, maintenance, training or management consultancy
      5. services related to construction works, such as architecture, engineering, planning services or management consultancy
      6. subcontracted services
      7. paying any premiums, fees or commissions to the supplier or a broker
      8. any related revenue streams a supplier receives
      9. any other form of remuneration or payment due to the supplier or to a third party or any interest payable.
    3. include the estimated monetary value in their business case or procurement plan
    4. apply the Rules if it cannot estimate the maximum total estimated value of a procurement.

More information

Value thresholds

The value thresholds may be adjusted if there are significant changes in the value of the New Zealand dollar. This is to ensure alignment with obligations in the free trade agreements that include government procurement. As the Rules represent good practice, agencies can apply the Rules for procurements under this threshold.

Good practice regardless of monetary value

Agencies are expected to follow good procurement practice even if the monetary value of a procurement is less than the value threshold. This means applying the Principles, the Charter and good practice guidance. Rules 2 and 3 have more about good practice generally.

Rule 2: Integrity

Rule 3: Accountability and transparency

It's better to be cautious. If your estimated value is close to the value threshold (like services valued at $98,000), always consider using an open competitive process. After all, your calculation is only an estimate.

Calculating the value when dividing into lots

When planning a procurement you may decide to structure work into subcategories and award these to separate suppliers. Openly advertising smaller contracts helps smaller businesses that can’t supply all the components of a large project.

If you decide to structure work into subcategories:

  • each of the packages of work counts towards the maximum total estimated value of your procurement
  • you must openly advertise each of the packages of work. 

Example of revenue streams

An example of related revenue streams: a supplier receives tolls from a highway it has built.

Definition of GST

Goods and Services Tax (GST) is a tax on most goods and services produced in New Zealand, most imported goods, and certain imported services. GST is added to the price of taxable goods and services.

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