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Rule 12:
Opt-out procurements

Explains the circumstances under which an agency may opt-out of applying all the Rules to a procurement activity.

  1. In certain circumstances, when a procurement is covered by the Rules (meets the requirements of Rule 5 and Rule 6 or Rule 5 and Rule 7), an agency can opt-out of applying all Rules to that procurement, except those listed in Rule 12.4 and 12.5. These circumstances are listed in Rule 12.3 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 public value over the life of the contract, which may include the outcomes in the Government Procurement Charter.
  3. The following is the list of valid opt-out procurements:
    1. Between government agencies: Any of the following agencies can purchase goods, services or works from each other:
      1. Public Service departments
      2. New Zealand Police
      3. New Zealand Defence Force
      4. agencies covered by the Whole of Government Direction (Rule 5.1)
      5. Crown Research Institutes.

      However, if the purchasing agency chooses to use an open competitive process it must apply the Rules.

    2. Overseas: Goods, services or works purchased outside New Zealand for use outside New Zealand.
    3. Offices overseas: Any procurement relating to constructing, refurbishing or furnishing New Zealand government offices overseas.
    4. Non-contractual arrangement: Any non-contractual arrangement (eg a Memorandum of Understanding between two government departments) or any form of assistance including cooperative agreements (eg diplomatic assistance to another government).
    5. Land and buildings: Purchasing or renting land or existing buildings or other immovable property. This does not include refurbishment works or new construction works which are covered by Rule 6 and Rule 7.
    6. Conditional grant: Any form of conditional grant. However, an agency must not design or structure a procurement as a form of conditional grant to avoid applying the Rules.
    7. International development assistance: Providing international development assistance through multilateral or bilateral assistance, including aid in the form of conditional grants, budget support or any form of contribution or diplomatic assistance.
    8. International funding: Any procurement funded by an international grant, loan or other assistance or that must comply with an international organisation’s procedure where that procedure is inconsistent with the Rules.
    9. International organisation: Any procurement conducted under a procedure required by an international organisation or funded by an international grant, loan or other assistance that is inconsistent with the Rules.
    10. International agreements between countries: Agreements between countries for the joint implementation of a project.
    11. Public services: The provision of certain types of health services, education services and welfare services. See Definitions for more information.
    12. Government's central financial control functions: Central banking control functions on behalf of government such as those carried out by the Reserve Bank, and Crown debt management functions such as those carried out by Treasury. See Definitions for more information.
    13. Military and essential security interests: Measures necessary for the protection of essential security interests, procurement indispensable for national security or for national defence, the maintenance or restoration of international peace or security, or to protect human health, including:
      1. procurement of arms, ammunition or war materials
      2. stationing military or implementing a joint military project under an international agreement (eg a peace-keeping deployment)
      3. a measure to protect: public morals, order or safety; human, animal or plant life or health; intellectual property; or relating to goods, services or works of persons with disabilities, philanthropic or not-for-profit institutions, and prison labour.
  4. The following Rules apply to all opt-out procurements:
    1. Rule 4 Protection of suppliers' information
    2. Rule 16 Broader outcomes
    3. Rule 50 Supplier complaints
    4. Rule 51 Prompt payment
    5. Rule 52 Maintaining records
    6. Rule 54 Audit
  5. The following Rules apply to opt-out procurements when relevant:
    1. Rule 22 Significant procurement plans
    2. Rule 49 Debriefing suppliers (if the agency has used a competitive process)
    3. Rule 58 All-of-Government contracts
    4. Rule 59 Syndicated contracts
    5. Rule 60 Common Capability contracts
    6. Rule 63 Intellectual Property
    7. Rule 64 Infrastructure
    8. Rule 65 Business cases and investment decisions
    9. Rule 66 Investment reviews
    10. Rule 67 Timber and wood products
    11. Rule 68 Employee transfer costs

Procurement between government agencies

Rule 12.3.a does not mean you can purchase goods, services or works under a contract that another listed agency has awarded to a third party supplier.

Opt-out decisions

The opt-out rule allows the government flexibility in the way it sources goods services or works in certain situations. You should always consider your options and use good judgement to decide whether or not opting out of the Rules is the best way to meet your needs.

You should always keep a record of your opt-out decision and the reasons for it.

Conditional grants

For information about conditional grants, read the Auditor-General's guide Public sector purchases, grants, and gifts: Managing funding arrangements with external parties, on the Office of the Auditor-General website.(external link)

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