Rule 8 for an infrastructure programme

A government agency is procuring services (establishing a provider panel) for a water asset renewals programme. The programme duration is 5 years and the allocated budget is $15 million or approximately $3 million each year. The renewals programme will likely ramp up in the following three years to approximately $4 million each year, due to assets reaching end-of-life.

The assets are located in small towns across the district, and there are a mix of local and national suppliers that could deliver the design and construct the services required.

The agency’s procurement policy states that an open procurement process must be used.

Deciding how to apply Rule 8

As the procurement is above $100,000:

• the agency “must seek economic benefits to New Zealand (…) to be evaluated as part of the assessment of public value.”
• the procurement must include a minimum 10% weighting on economic benefits for evaluation purposes.

How this agency integrates economic benefits in an infrastructure programme

Identifying the procurement strategy

The programme is significant in scale for the district in which it is located. Its duration also makes it suitable for a seeking a range of economic benefits.

There’s an opportunity for this contract to deliver specific economic benefits to workers, businesses, and the community.

Identifying economic benefits

The construction sector has clearly defined challenges and opportunities relating to workforce development, technology transition and emissions.

The context of the district where the project is located also allows for a focus on creating employment pathways and growing local industry capability (for future needs and responding to emergencies).

The agency identifies several economic benefits to seek in this contract.

• Creating employment opportunities and supporting skilled trades – including a programme target of three new apprenticeship positions, with demonstrated progression, over the lifetime of the project.
• Supporting the participation of local businesses and workers to promote investment in plant and to grow economic activity (for example, seeking use of locally-based suppliers). Exceptions will be allowed where the work is highly specialised and there’s no regional market capability.
• Environmental and community benefits through innovation, including the electrification of plant, minimising disturbance through new construction techniques and digitisation.

Confirming the approach to market

The agency in this scenario uses a single-stage Request for Proposal (RFP) approach for the project. They use this to form two panels – a design panel (3 members) and a construction panel (3 members).

The procurement process includes early market engagement and guidance for respondents.

The programme of work allows for both larger and smaller packages of work to encourage SME participation. The agency provides respondents with a breakdown of the proposed programme by contract value, as well as a model contract to assess benefits.

The agency clearly defines the core economic benefits of employment and local business and worker participation for this project.

The agency decides that opportunities for innovation with environmental and community benefits will be market-led and part of the evaluated supplier response.

Economic benefits are given a 15% weighting, alongside other attributes such as experience, track record and rates.

Example responses to the infrastructure programme RFP

Economic benefits expectations are clearly identified in the GETS pre-tender with specific questions included in the RFP.

Suppliers (for the delivery of works) are asked in their response to:

• Describe how their proposal will support the creation of apprenticeships in the sector as well as estimating the number of apprenticeships that could be created on a ‘work volume’ basis. Responses must also outline their current arrangements for apprenticeships and partnerships in place to deliver these, as well as any particular target groups for employment based on regional needs.
• Outline in their proposal how regional businesses and a local workforce will be used to deliver services, by outlining direct delivery and subcontracting arrangements as an estimated proportion of work on the model project provided in the tender documents. A respondent could also outline proposed new investment to deliver the contract.
• Describe innovation opportunities that may lead to environmental and economic benefits. This includes describing methodology and anticipated outcomes.
• Describe any specific impact on the schedule of rates for delivering the above benefits.

Suppliers for the design panel were given similar questions, but response requirements were scaled back due to the limited value of their work in the overall programme (estimated at 5-10% of total value).

Suppliers who responded: 

Supplier A has an established partnership with the nearby polytechnic, providing structured short-course training and work placements for students, and commit to taking on at least two apprentices as part of this contract, potentially three if appropriate work packages are secured through the panel.

• Their submission quantifies that over 50% of the contract value will be delivered by local firms, including specific subcontracting arrangements with two regional SMEs they connected with as part of the tender response.
• To promote innovation and sustainability, Supplier A proposes introducing electric plant wherever feasible, and investing in new digital construction technologies, anticipating a reduction in on-site emissions and disruption.
• They provide clear, measurable targets and report on both economic impact and environmental benefits in their response.

Supplier B is a multinational firm with a New Zealand branch. Their proposal commits to hiring a new graduate in their Auckland office for the project and highlights their existing graduate training programme.

• While they indicate willingness to work with local suppliers, they do not specify the percentage of work to be delivered by regional businesses or outline concrete arrangements with SMEs. Their response references prior government projects and their global expertise, but details on economic benefits for the local region are limited.
• They mention exploring options for using electric plant (or avoiding traditional fuel burning plant and equipment where feasible), but do not provide quantifiable targets or a clear innovation plan.

Supplier C’s submission is vague and lacking in detail. They state that “economic benefits will be achieved as per RFP requirements” but do not explain how these will be delivered or provide any examples of local job creation, SME involvement, or innovation.

No references are made to apprenticeships, local partnerships, or environmental initiatives. Their approach does not demonstrate an understanding of, or commitment to, the specific economic and community outcomes sought by the project.

Evaluating the responses

The agency’s evaluation focusses on the supplier’s proposed benefits and the credibility of their proposed approach.

The evaluation team scores each supplier out of 10, ranging from 10 (high trust in supplier delivering proposed benefits) to 0 (no response). Guidance was provided to evaluation team.

• Supplier A was scored a 10.
• Supplier B was scored a 4.
• Supplier C was scored a 0.

The agency appoints Supplier A and Supplier B to the panel, after completing the evaluation of all criteria.

Awarding and managing the contract

The agency collects baseline data at the start of the project to enable meaningful comparison over time.  

They define clear, measurable key performance indicators (KPIs) aligned with the main project goals, including:

• local employment and supplier engagement
• apprenticeship uptake
• sustainability metrics.

As part of regular contract meetings, the agency discusses intended outcomes. An example is the intended use of local contractor/sub-contractors before the work package is delivered, and a measurement of actual use during and after the delivery.

The agency incorporates economic benefits as a formal workstream under their programme management. They share learnings and whole-panel initiatives such as work experience placements and low-emission alternative uptake.

The agency and the supplier manage allocation of work packages to meet the performance objectives, while identifying opportunities to directly award packages to sub-contractors to develop industry capability.

At project milestones (middle and wrap-up) the agency produces a summary of what has been delivered and the benefits realisation.

At the end of the project the agency outlines what interventions were made, and lessons learned.