Reasons to exclude a supplier
Sets out the reasons an agency may exclude a supplier from participating in a contract opportunity.
- An agency may exclude a supplier from participating in a contract opportunity if there is a good reason for exclusion. Reasons for exclusion include:
- bankruptcy, receivership or liquidation
- making a false declaration
- a serious performance issue in a previous contract
- a conviction for a serious crime or offence
- professional misconduct
- an act or omission that adversely reflects on the commercial integrity of the supplier or offends against the Supplier Code of Conduct
- failing to pay taxes, duties or other levies
- a threat to national security or the confidentiality of sensitive government information
- the supplier is a person or organisation designated as terrorists by New Zealand Police
- human rights violations by the supplier or in the supplier’s supply chain
- any matter that materially diminishes an agency’s trust and confidence in the supplier.
- An agency must not exclude a supplier before it has evidence supporting the reason for the exclusion.
- An agency should notify a supplier of its exclusion and the reasons for it.
- Agencies must apply the good practices set out in the guidance when planning the procurement to ensure that any threats to national security or the confidentiality of sensitive government information are appropriately managed during the procurement.
Managing national security risks in procurement
This guidance supports agencies to identify and manage national security risks in procurement.
It will help you to identify where a material risk to national security might be and what you should do to mitigate or manage it. If there isn't a material risk to national security, agencies are not required to use this guidance.
Will the contract give the supplier access to, or control of:
Sensitive premises, for example,
- facilities used to hold, or access classified information
- control rooms
- laboratories or other research facilities
- areas where individuals are working on matters related to New Zealand’s domestic, foreign, security, or defence policy
Bulk or sensitive data holdings, for example,
- information on a large number of New Zealanders
- information classified as "restricted" or above
- information on a group of sensitive category individuals
- research or other kinds of valuable intellectual property
- government priorities where the information could be exploited to the detriment of New Zealand or New Zealanders
- sensitive networks, for example, government or university IT networks
Critical services, for example,
- services provided by lifeline utilities (essential infrastructure services such as water, transport, energy etc)
- government services such as tax collection, welfare provision or health and emergency services
Proximate access (line of sight over, or into) to sensitive Government sites, such as defence installations or facilities used to hold or access classified information.
If the answer is ‘no’, this contract is unlikely to raise material national security risks, regardless of the supplier.
If the answer is ‘yes’ to any of these, move on to question 2.
Is it NOT possible to adequately avoid or mitigate the security risks associated with this control or access?
- You cannot put physical or digital barriers in place that limit access to the sensitive material, premises, or networks?
- You cannot limit the individuals that have access to the sensitive material to named and known individuals, or require a Police or other security check before giving access?
If the answer is ‘no’, this contract is unlikely to raise material national security risks – irrespective of the supplier.
If the answer is ‘yes’, you should consider the response to question 3.
Is the supplier (A) potentially going to act in a way that is contrary to New Zealand’s national security interests?
Consider, is A owned or controlled by a foreign state? Meaning, does a foreign state (including through sovereign wealth funds) have:
- More than 25% of any class of A’s securities?
- The power to control the composition of more than 25% of A’s governing body (for example, Board)?
- The right to exercise or control the exercise of more than 25% of the voting power at a meeting of A?
- The legal right to direct A to undertake activities consistent with the relevant foreign state’s strategic security objectives?
If the answer is ‘yes’, this increases the risk of this supplier.
If national ownership is through a wealth (or other type of investment) fund, does the relevant foreign state exercise control over the entity? Or are there appropriate limitations to ensure that no foreign state or government can influence individual investment decisions, or the management of individual investments, other than on commercial terms?
If there are limitations on control and influence, this reduces the risk of this supplier.
If there are connections to a foreign state, is this state likely to pose a national security risk to New Zealand?
Are the suppliers in the supplier’s supply chain (B) likely to act in a way contrary to New Zealand’s national security interests?
- Does B have access to or control over A’s physical or digital assets?
- If so, can this be used to gain access to or control over your assets?
- If so, is B owned or controlled or influenced by a foreign state (determined with reference to the matters discussed in question 3(a))?
Can B’s access to you be limited contractually? For example, requirements for A to use an alternative supplier as a condition of the contract, or for B to not have access to information on the services provided to the procurer?
If the answer to question 3(a) and 3(b) is ‘no’, this contract is unlikely to raise material national security risks.
If, the answer is ‘yes’ and there are not appropriate mitigations in place or available, this supplier could pose a risk to New Zealand’s national security.Read the guidance.
Serious performance issue
If serious issues with past performance are identified and there is supporting evidence, you should consider excluding the supplier from participating in the contract opportunity. See the guidance note on Rule 46 Awarding the contract.
If you discover that the same errors appear in responses from different suppliers (eg misspelled words or the same mathematical mistakes), this may indicate that these suppliers have shared information (eg cut and pasted content from each other’s responses) and may be acting anti-competitively.
For more examples and guidance on detecting and preventing bid rigging, see the Commerce Commission's fact sheets How to recognise and deter bid rigging(external link).
A conviction for a serious crime or offence includes a conviction for foreign bribery (getting an advantage in an international transaction by offering bribes to foreign officials). For more information, read the Organisation for Economic Cooperation and Development's Foreign bribery fact sheet [PDF, 440 KB](external link). For information about New Zealand law relating to bribery see the Serious Fraud Office website(external link).