RESTRICTED
WORLD TRADE S/WPGR/W/11/Add.4
30September 1996
ORGANIZATION
(96-4048)
Working Party onGATS Rules Original: English
COMMUNICATION FROM NEW ZEALAND
Response totheQuestionnaire onGovernment Procurement ofServices
Thefollowing communication isbeing circulated attherequest ofthedelegation ofNewZealand
toMembers oftheWorking Party onGATS Rules.
_____________
I. EXISTING PROCUREMENT REGIMES
Where aMember 'sprocurement regime isdifferent forcentral government entities, sub-central
government entities, andother entities, suchaspublic undertakings (e.g.public utilities), itwould be
useful ifthese differences were specified under eachoftheheadings indicated below.
Definition
1. What isthedefinition ofgovernment procurement employed incompleting this
questionnaire?
There isnolegislative orregulatory definition ofgovernment procurement inNewZealand.
Forthepurpose ofthissurvey wehaveconsidered government purchasing toencompass all
statesector procurement. TheMinistry ofCommerce hasissued abooklet "Government
Purchasing inNewZealand: Policy Guide forPurchasers". These arerecommended guidelines
forusebygovernment departments, statutory authorities, localauthorities andother publicly-
funded institutions andState-Owned Enterprises.
Administrative structure
2. Howaregovernment procurement activities administered? Towhatextent areprocurement
activities centralized? Please specify theidentity ofanycentral procurement agencies and
theirrespective responsibilities.
There isnocentral control ofgovernment procurement activities. Within theparameters of
theGovernment 'spurchasing policy (seeparagraph 3below), individual government
organisations areresponsible fortheirownpurchasing andpurchasing procedures which have
alsooften beendevolved toregions ordelegated down theadministrative line.
State-OwnedEnterprises(SOEs)arerequiredbytheState-OwnedEnterprisesAct1986tooperate
asprofitable andefficient businesses. They aresubject tothesame legaldisciplines asprivateS/WPGR/W/11/Add.4
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sector companies, andnottodirect Ministerial control. Accordingly, likeanycompany, they
candetermine theirownpurchasing policies andprocedures.
Government departments andother publicly-funded agencies andinstitutions andSOEs are
under noobligation toarrange purchases from, orthrough, anyother government agency or
fromanyparticular private company. Statesector purchasers havefreedom ofchoice inwhat
theybuy,howtheybuyandfrom where theybuy.
Laws andregulations inforce
3.(a) Please specify thelaws, regulations, rules, guidelines, decrees, decisions andother measures
governing government procurement. What isthescope oftheirapplication? Inparticular,
please describe anyexemptions thatexist. Please provide abrief summary ofthecontent
ofeachofthese measures.
There arenolawsorregulations relating specifically togovernment procurement butthe
Government 'spurchasing policy andNewZealand 'smembership oftheAustralian Government
Procurement Agreement dosettheparameters fordepartmental purchasing decisions.
Reforms under theStateSector Act1988andthePublic Finance Act1989, while notincluding
provisionsfordepartmentalpurchasing,havebroughtaboutgreaterautonomyandaccountability
indepartments'andagencies'financialmanagement.Theyaredesignedtoimprovetheefficiency
andaccountability ofthepublic sector. TheGovernment 'sdecentralised purchasing policy,
described below, operates inthiscontext.
NewZealand 'sGovernment purchasing policy isbased ontheprinciple ofbestvalue formoney
through open andeffective competition, including fullandfairopportunity fordomestic
suppliers. Government purchasing decisions areseenasessentially nodifferent fromanyother
corporate orprivate purchasing decision taking place inanopenderegulated andcompetitive
marketplace.Likeoperatorsintheprivatesectordecentralisedgovernmentpurchasingdecisions
aresubject toindividual corporate system guidelines andaudittoensure thatdecisions arebased
onvalue formoney.
Thepurchasing guidelines donotprescribe ormandate auniform procedure tobefollowed
bypurchasing agencies. Theonlyspecific requirement isthatgovernment departments are
instructed (other purchasing agencies arerequested) torequire origin andlocal content
information onalloffers tosupply goods andtoobtain suchinformation from anybrokers
before buying goods under contracts arranged bythem. Thisrequirement enables purchasing
agencies togauge whether theyaregiving fullandfairopportunity todomestic producers and
thusnotoverlooking any"value formoney" advantages forthepurchaser. There isnogeneral
benchmark level oflocal content required norapolicy ofapplying preferences thatfavour
domesticindustryanddiscriminateagainstforeignsuppliers.Noristhereanypolicyoffostering
andprotecting specific industries through government purchasing.
(b) Does theprocurement regime distinguish between theprocurement ofgoods andservices?
Ifso,thenhowistheapplication ofrulesdetermined incases ofjointprocurement involving
bothgoods andservices?
TheGovernment 'spurchasing policy applies tobothgoods andservices.S/WPGR/W/11/Add.4
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Procurement procedures applied
4.(a) What procedures arefollowed intheprocurement process?
(b) Under whatcircumstances aredifferent procedures used? Forinstance, ifthemethod used
depends onthevalue oftheprocurement, thethresholds should begiven.
(c) What arethetimelimits forsubmission ofbids?
Theindividual purchasing agency decides foritselftheprocurement procedures tobeapplied.
Asnoted, government agencies arefreetofollow theirownpurchasing procedures within the
parameters oftheGovernment 'spurchasing policy andtoapply theprinciples andprocedures
oftheGovernment 'spurchasing guidelines withcommon sense andjudgement, consistent with
sound andethical purchasing practice, assetoutinTreasury 'spublication "AGuide tothe
Management ofDepartmental Purchasing".
Generally theissuing ofanopenandcompetitive tender isusedparticularly forlargepurchases.
Insome circumstances, where thisisnotpracticable (such asanemergency purchasing), a
selective purchase ismade.
While much purchasing isdonedirectly bydepartments, State-Owned Enterprises andother
government agencies, several private sector supply brokerage companies (including Supplycorp
which wasformerly theGovernment Stores Board) specialise inservicing public sector
purchasers, including local bodies, through consolidated period supply contracts which are
established through competitive tendering. Useofthese contracts bypublic sector purchasers
isonavoluntary basis. TheNational Health Supply Service, aunitofCapital Coast Health
Ltd,actsasagent forCrown Health Enterprises participating, onavoluntary basis, incollective
purchase ofarange ofvarious supplies.
Thresholdlevelsorpriceguidelinesusedforspecificprocurementchannelsormethods,including
open tendering, selective tendering andsingle tendering, aredetermined bytheindividual
agenciesforthemselves.ThresholdsusedbytheMinistryofCommerceforspecificprocurement
channels arecontained inparagraph 8.6.3.2.4, page14,oftheattached Appendix Aandare
provided asanexample ofindividual departmental practice only.
Publicity forinviting tenders
5.(a) How areintended procurements publicised? Areinvitations totender published? Ifso,
where, andinwhat languages?
There arenocentral laws, regulations, orrules forpublication ofnotices.
(c) What details oftheintended procurement arenormally published? Isthere aminimum set
ofinformation thatisrequired tobepublished? Ifso,please specify.
Relating tonotification ofopportunities andqualification ofsuppliers.S/WPGR/W/11/Add.4
Page4
Themainpublications usedfortheadvertising ofprocurement opportunities arethemajor daily
newspapers, specialist magazines orpublications suchasthe"Tenders Gazette", "New Zealand
Government andLocal Body Tender", "Australian Defence News" andtheAustralian andNew
Zealand annual jointdefence equipment publication "The Yellow Book".
(d) Arethere anycharges forobtaining thefullsetoftender documents? Ifso,please specify
anddescribe howthese charges areset?
Charges, where applied, forobtaining thefullsetoftender documents aresetbytheindividual
organisations themselves. TheGovernment 'spurchasing guidelines statethatthepricecharged
ordeposit required, ifany,fortender orrelated documents should notbesohighasto
discourage bona fidecompetent contractors orproducers from participating inthetendering
proceedings.
(e) Areelectronic means usedtoadvertise procurement opportunities? What isthenature of
systems thatareinplace? Aredifferent tendering provisions applied tocontracts advertised
inthismanner? Ifso,please describe.
Wearenotaware ofanyusebyNewZealand government agencies ofelectronic media to
publicise theirprocurement requirements although itisopentothem todoso,asamatter of
commercial decision. Atpresent, however, some NewZealand callsfortender areappearing
ontheInternet viatheAustralian Commonwealth 'spilotGovernment Electronic Marketplace
Service (GEMS). These arefedintoGEMS bytheNewZealand Industrial Supplies Office
from information which isprovided voluntarily bythepurchasing agencies. (New Zealand
hasnocomprehensive centralised system forthecollection anddissemination ofgovernment
procurement opportunities).
Requirements laiddown forpossible suppliers
6.(a) Arethere registration, residence orother requirements forpotential suppliers?
(b) What isthenature ofanyconditions forparticipation required from suppliers -such as
financial guarantees, commercial standing andtechnical qualifications? Dotheconditions
ofparticipation varyaccording tothenature ofthetender process and/or thevalue ofthe
intended procurement?
There arenogovernment requirements on(a)and(b)above laiddown forpossible suppliers.
Individualagenciesdeterminesuchrelevantrequirementsforthemselves.Inpractice,multi-stage
procurement procedures areoftenadopted forlargeandcomplex procurement projects including
e.g.requests forproposals orcallsforregistration ofprocurement interest (asabasisforpre-
qualification ofpotential suppliers).
(c) Dothere existlistsofapproved suppliers? Ifso,what aretheprocedures forchecking the
capability offirms applying forinclusion ontenderers 'mailing lists? Arelistsofapproved
suppliers, ifany,regularly reviewed/updated?
Treasury'sbooklet"AGuidetotheManagementofDepartmentalPurchasing"advisesasfollows:
Organisations which purchase items specifically designed andmanufactured tomeet their
requirements should consider developing alistof"approved suppliers". Thisprocess involves
potential suppliers being evaluated under appropriate criteria; forexample, their financialS/WPGR/W/11/Add.4
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stability, theirability toproduce required items toappropriate quality standards atcompetitive
prices, andwhether theycanmeetrequired delivery schedules.
Building upan"approved supplier" network canbeexpensive, butthere canbelong-term
benefits inconsolidating effective relationships withreliable suppliers.
However, sothattherequirements offairness andequatability aremet,organisations should
becarefultoavoidexclusivity,andensurethatlistsarecontinuallyreviewed,andastheybecome
known, other potential "approved suppliers" areevaluated.
Criteria forassessing bidsandawarding contracts
7.(a) What criteria aretaken intoaccount intheaward oftenders? Arecriteria foraward of
contracts made available inadvance topotential suppliers?
NewZealand 'sGovernment procurement policy isbased ontheordinary commercial principle
ofbestvalue formoney through openandeffective competition. Thisincludes fullandfair
opportunity fordomestic (New Zealand andAustralian) suppliers tocompete onano-preference
basis. Thevalue formoney criterion istaken toinclude considerations suchasquality, price,
delivery andservice support, using life-cycle orsimilar costing techniques where appropriate.
Criteria forassessing bidsandawarding contracts, usedbytheMinistry ofCommerce, are
attached asAppendix Basanexample ofindividual departmental practice only.
(b) Isprocurement subject toanyoffset provisions, suchaslocal content, technology transfer
orcountertrade requirements?
Thereisnomandatoryrequirementforoffsetsorcounter-purchasesingovernmentprocurement.
Aninformal voluntary offsets policy iseffectively inoperative outside defence purchasing.
(c) Ispreference given toanyparticular enterprises orgroup ofenterprises? Ifso,please specify.
Under theGovernment 'spurchasing policy there isnopolicy ofgiving preference toany
particular enterprises orgroup ofenterprises.
(d) Dotheprocurement criteria differ according tosector orregion oftheeconomy?
TheGovernment 'spurchasing policy isneutral asbetween sectors orregions oftheeconomy.S/WPGR/W/11/Add.4
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(e) What isthemargin ofchoice ordiscretion allowed tothepurchasing authority? What does
theextent, ifany,ofdiscretion allowed depend upon?
Fordepartments, therearefinancial delegations byCabinet toMinisters andChief Executives
(seebelow).
Chief
ExecutivesResponsible
MinistersCabinet or
Cabinet
Committees
A. CURRENT EXPENDITURE
Publicity expenditure 100,000 Nil N/A
Special Payments
(i) Compensation or
damages insettlement,
orclaims which are
endorsed bytheCrown
LawOffice or
judgements oftheCourt
(claims under $50,000
neednotbereferred to
theCrown LawOffice if
adepartmental solicitor
certifies thatsuchclaims
areinorder)100,000 500,000 N/L
ExGratia payments 20,000 50,000 N/L
B. CAPITAL EXPENDITURE
Capital purchases orprojects
(Total costofproject)5,000,000 10,000,000 N/L
Disclosure ofbidsreceived andcontracts awarded
8.(a) How aretenders received, registered andopened?
Theindividual purchasing agency determines itsownprocedures forreceiving, opening and
registering tenders andinaccordance withbestpractice.
Treasury'sbooklet"AGuidetotheManagementofDepartmentalPurchasing"advises:"Tenders
should betimeanddatestamped when opened andthose responsible foropening themshould
initial thedatestamp. Thetenders should benumbered andentered ontoaregister which
should alsobeinitialled, sothatasubsequent tender cannot beadded without explanation.
Suchinternal control procedures ensure thattheorganisation isabletodemonstrate thatithas
acted inafairandequitable manner. (Forthisreason, itisrecommended thattwopeople should
beinvolved inopening andregistering tender documents.)"S/WPGR/W/11/Add.4
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(b) Areentities required topublish details ofthecontracts awarded and/or notify unsuccessful
tenderers?
Entities arenotrequired topublish details ofthecontracts awarded ornotify unsuccessful
tenderers. Communication tounsuccessful tenderers ofreasons fornotbeing selected is
encouraged under theGovernment 'spurchasing guidelines where tenderers request this.
(c) Areentities required topublish, orprovide tounsuccessful bidders, pertinent reasons why
theirbidwasrejected?
Seeanswer in8(b)above.
Treatment granted todomestic andforeign services and/or suppliers
9.What laws, regulations, procedures orpractices accord domestic services and/or suppliers
treatment more favourable thanthataccorded toforeign services and/or suppliers, oraccord
services and/or suppliers ofaMember morefavourable treatment thanthose ofanother Member?
Please specify how, ifatall,more favourable treatment isaccorded. Please alsospecify the
working definition of"domestic" inrelation todomestic services andsuppliers.
There arenopreferential treatment laws, regulations orprocedures inNewZealand Government
purchasing. Asstated intheGovernment 'spurchasing guidelines, itisnottheintention ofthe
policy toencourage discrimination against foreign suppliers. "Having given domestic industry
fullandfairopportunity, agencies should buyfromthebestsource available, according totheir
ownassessment ofallcosts andbenefits."
AnIndustrial Supplies Office hasbeenestablished tofacilitate efficient information flows about
domestic (New Zealand andAustralian) industry capabilities tomeet government purchasing
requirements.
"Domestic" inrelation todomestic services andsuppliers means those services which arewholly
orpartly produced inNewZealand and/or Australia.
Procedures forhearing andreviewing complaints/appeals
10.What, ifany,aretheprocedures available forparties, domestic andforeign, tolodge complaints
against theaward ofacontract? Please provide details.
Suppliers withgrievances maycontact anumber oforganisations including, inthefirstinstance,
thepurchasing agency involved (and/or Minister responsible fortheagency). TheMinistry of
Commerce (Tariff Policy 2)which hasresponsibility fortheGovernment 'spurchasing policy may
alsoinvestigate complaints ofunfair treatment ordenial ofopportunity. Anorganisation may
berequired toprovide information about itspurchasing decisions (possibly under theOfficial
Information Act1982) andtheOmbudsman maybeinvolved. TheController andAuditor-General
haspowers toconduct aninquiry assetoutinthePublic Finance Act1977. Complaints concerning
bribery andcorruption maybedealtwithunder theCrimes Act1961.S/WPGR/W/11/Add.4
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II.MEMBERSHIP OFPLURILATERAL, REGIONAL AND/OR BILATERAL AGREEMENTS
11.IstheMember party toanyplurilateral, regional and/or bilateral agreements withprovisions
ongovernment procurement? Ifso,please describe therelevant provisions.
Infurtherance oftheobjectives ofArticle 11(Government Purchasing) ofANZCERTA, New
Zealand in1989 signed theAustralian National Preference Agreement, nowknown asthe
Government Procurement Agreement (GPA). Under theGPA, theNewZealand Government
undertakes toensure thatdepartments, statutory authorities andother bodies controlled byittreat
Australian products, services andsuppliers equally withNewZealand products andservices and
suppliers inallaspects ofthegovernment purchasing regime. Similar obligations areundertaken
inrespect ofNewZealand products, services andsuppliers bytheAustralian Commonwealth,
State andTerritory Governments. NewZealand alsoundertakes tocontinue itscurrent policy
ofnotapplying apreference margin toanypurchases.
State-Owned Enterprises (SOEs) arenotincluded intheGPAdefinition ofgovernment procurement
forNewZealand. However, theNewZealand Government hasformally communicated tothe
SOEs itsexpectation thattheywillgiveallprospective Australian tenderers anequal opportunity
along withanyNew Zealand tenderers tocompete withthird country suppliers forcontracts;
thattheywillbenon-discriminatory intheirpurchasing; andthattheywillcooperate inany
investigation under theGPAofcomplaints oralleged discrimination intheawarding ofcontracts.
III.ECONOMIC IMPORTANCE OFSERVICES PROCUREMENT
12.(a) Please provide statistics (ifavailable) onthenumber andvalue ofservices procurements
-onbothanaggregate andsectoral basis;
-byorigin ofservices andsuppliers.
(b) Please provide statistics (ifavailable) onthe
-share ofservices procurement intotalprocurement;
-share ofprocurement ofeachservice intotaldomestic output oftheservice;
-share ofprocurement ofeachservice intotaldomestic consumption oftheservice.
Procurement statistics aregenerally notavailable. Government agencies arenotrequired to(and
generally donot)collect figures onpurchasing. Itisestimated, however, thattheNewZealand
Government through itsgovernment departments buysgoods andservices fromtheprivate sector
toatotalvalue ofaround $3billion ayear. Other central government agencies spend significant
additional amounts. Thenumber andvalue ofservices procurements isnotknown.S/WPGR/W/11/Add.4
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APPENDIX A
NB: Thisisanextract from theMinistry ofCommerce 'spurchasing manual andisprovided
asanexample ofindividual departmental practice only.
8.6.3.2 Procurement Channels andPrice Guidelines
8.6.3.2.1 WhyPurchase?
Indeciding tobuyagood orservice, theMinistry mustidentify anunmet need, and
consider thebestwaytomeet it.Ideally, thisprocess should takeplace during the
annual planning andbudgeting process.
Ifthepurchase ofagoodorservice isanoption tomeetanidentified need, thepurchase
process canbegin.
8.6.3.2.2 ThePurchasing Process
Thisflowchart indicates theprocess ofpurchasing.
Identify aneed
Confirm budgetary provision
Financial approval
Market assessment
Purchase decision
Order/requisition
Delivery
Receipting/accounting forgoods/services received
Payment
Accounting System
8.6.3.2.2.1 Defining aNeed andRequisitioning
Defining aneedaccurately, andcommunicating thisneedtothemarket clearly, are
essential parts ofthepurchasing process.S/WPGR/W/11/Add.4
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There isatendency tooversimplify oroverlook therequisition stage, butitprovides
amechanism bywhich thepurchasing officer cangainanaccurate description ofthe
goods orservice required. Theusermayknow whattheyneed, butmaynothavethe
technical expertise todescribe itcorrectly.
EndUser: "Iwantahammer"
Supplier: "Certainly, sir.Claw orball-pein? What weight? Wooden orsteel
shaft? Redorblue?"
8.6.3.2.2.2. Financial Approval
Allpurchases aresubject tobudget availability, andthedecision tocommit expenditure
must bemade within anapproved financial delegation limit.
8.6.3.2.2.3 Market Assessment
Once thepurchasing officer receives anapproved requisition, acheck should bemade
toensure thattheitemisnotalready instock. Amarket assessment should thenbe
made, considering thefollowing questions:
- What aretherelevant price guidelines? (seebelow, p13)
- Isthere acompetitive market fortheitem?
- Isthevolume/valueofgoodsrequiredsufficienttowarrantcallingforquotations
andtenders; andifso,should prices andother details beobtained bytelephone
orinwriting?
- Ifthere isnocompetitive market, should thesolesupplier begiven an
immediate order, orcanalower price benegotiated?
- Isitappropriate tocallfor"Registrations ofInterest" priortoinviting formal
tenders?
- Aresuitable existing contracts available?
- Isthere alistof"approved suppliers" fortheitem, oristheestablishment of
an"approved suppliers" listwarranted?
- Could there bescope forabulkpurchase?
8.6.3.2.3 Procurement Channels
There aremany ways ofmaking apurchase; theprincipal onesaresetoutinthe
following paragraphs.
8.6.3.2.3.1 Period Supply Contracts
A"period contract" isacontract tosupply goods overaspecified period oftime, which
canbeshort (sixmonths orless)orrelatively long. When there isasteady demand
foranitemoracommodity group (forexample stationery, hardware, timber), thebest
option maybetopurchase byperiod contract.
Thetime-period ofacontract isnormally decided byfactors suchas:
- thecostofestablishment (setting upacontract forthefirsttimecanbevery
time-consuming)
- thevolume andtime-frame ofusageS/WPGR/W/11/Add.4
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- thevalue ofthecontract (itshould besufficient toencourage competition
amongst suppliers)
- theriskofobsolescence (forexample, model changes)
- price volatility (thecontract should include clauses covering normal price
rises/falls).
Aperiod contract hasmany advantages. Forexample:
- itcanbeestablished bycompetitive tender, withacompetitive priceandagreed
terms andconditions ofsupply;
- purchases covered bythecontract canbemade asandwhen required -with
immediate oragreed timeandnowarehousing orstockholding costs;
- ordering issimplified -anyone canwrite anorder, since priceandterms have
already beenestablished;
- ithelpstheorganisation tostandardise where thisisdesirable (which canreduce
training andmaintenance costs).
TheMinistryofCommercehasongoingsupplycontractswithanumberoforganisations,
including:
- National period supply contracts withSupplycorp;
- Local purchase contracts withSERCO;
- Ministry-specific anddivisional contracts forservices suchasfireprotection,
cleaning, andpostage.
ContractdocumentsareheldbytheAdministrationService,CorporateServicesSection,
Head Office, aswellastheOperating Divisions andRegional Offices.
Existing contracts should nothaveprecedence overother sources ofsupply; rather,
theyshould beconsidered alongside other options within theprinciples ofvalue-for-
money, opportunities forlocalindustry, andethical purchasing behaviour.
8.6.3.2.3.2 Competitive Purchasing
MostoftheMinistry'sday-to-dayneedsareacquiredthroughperiodcontract.However,
there arealways going tobeoccasions when individual purchases needtobemade,
ornewcontracts established.
Inthesecircumstances,wewantsupplierstocompetewitheachotherfortheopportunity
toprovide theproducts orservices werequire. There aretwomethods ofgenerating
thiscompetition.
Competitive Tenders
A"tender" isanoffer byasupplier todeliver ("totender") goods and/or services.
Ingeneral, tenders arecalled formajor procurement where price isonlyoneofthe
keyfactors inthedecision topurchase.
When weinvite tenders, weinvite suppliers tomake usaformal, structured offer,
ontheunderstanding thatalloffers willbecompared andassessed. Indetail byimpartial
expert staff.S/WPGR/W/11/Add.4
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Anopencallfortenders isthepreferred method inmajor purchases, asitaffords all
potential suppliers fairandequal opportunity tocompete.
Competitive Quotes
A"quote" (properly, a"quotation") isanoffertoprovide goods orservices atafixed
price. Quotes arelessformal thantenders, butarelegally binding onthesupplier.
Quotes aregenerally requested (from threeormore suppliers) forproducts orservices
where price isthemain determining factor inthepurchasing decision.
8.6.3.2.3.3 Selective Purchase
There areafewcircumstances inwhich competitive purchasing isnotpracticable, and
itisappropriate tomake aselective purchase. A"selective purchase" ismade without
calling forcompeting quotes ortenders. Anindividual supplier issimply invited to
provide goods andservices.
Selective purchasing istheexception, notthenorm. Theselective purchase method
should onlybeusedinthefollowing circumstances:
- forone-off purchases ofgoods orservices ofminor value (threshold $5,000
plusGST)wherecompetitivepurchasingprocedureswouldnotbecost-effective,
andwhere aperiod supply contract (asdescribed in8.6.3.2.3.1 above) isnot
appropriate
- when stores orservices areonlyavailable from aspecific source ofsupply
(such asproprietary brands where thereisnotechnically acceptable equivalent)
- when asupplier hasunique expertise orknowledge. (Selective purchase on
thisbasis mayonlybeauthorised byaGeneral Manager, Chief Advisers, or
specified delegates)
- where compatibility/standardisation with existing equipment (oroffice
furniture/fittings) isrequired
- when acquiring spare parts oraccessories forexisting equipment
- fordevelopment orprototype work
- when atender forother stores orservices hasrecently beenaccepted from a
supplier
- when making purchases from apublic auction orfrom another government
department, agency, orSOE.
Selective purchase mayalsobeappropriate ifasuccessful tenderer failstosupply.
Inthese circumstances, itcanbeappropriate toapproach oneoftheunsuccessful
tenderers onaselective-purchase basis.S/WPGR/W/11/Add.4
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8.6.3.2.4 Price Guidelines forSpecific Procurement Channels
Allpurchases aresubject tobudget availability, andthedecision tocommit expenditure
must bemade within approved financial delegation limits.
8.6.3.2.4.1 Purchases below $20,000
Atthislevel, itwillgenerally notbecost-effective toissue aformal callfortenders.
Wherever practicable, staffshould seekatleastthree quotes. Otherwise, aselective
purchase maybemade within theguidelines setoutin8.6.1.3.3.3 above.
8.6.3.2.4.2 Purchases between $20,000 and$100,000
Where anopencallfortenders isnotpracticable orcost-effective, authorised officers
maycallforcompetitive quotes (forgoods orservices commonly available) uptoa
value of$100,000 plusGST.
Staffmustseekatleastthreequotes. Suppliers should beasked toprovide price, terms,
anddescriptions ofthegoods orservices inwriting.
Theonlyexceptions willbethose purchases made under existing period contracts, or
incircumstances specified intheabove section onSelective Purchases (8.6.1.3.3.3).
8.6.3.2.4.3 Purchases above $100,000
Ingeneral, anopencallforcompetitive tenders should beissued forallpurchases of
goods andservices exceeding $100,000 plusGST. Theonlyexceptions willbethose
purchases made under existing period contracts, orpurchases made incircumstances
specified intheabove section onSelective Purchases (8.6.3.2.3.3).
8.6.3.2.5 Choosing Suppliers
Having completed themarket assessment anddetermined themethod ofpurchase, the
purchasing officer thendecides onthesupplier orsuppliers. Thisdecision must be
well-documented, notonlyforaudit purposes, butalsoincasethere isasubsequent
complaint orarequest under theOfficial Information Act.
8.6.3.2.6 Ordering andDelivery
AGovernment Stores work order oranapproved order form must beusedwhen
procuring goods orservices. Asanorder form islikeablank cheque, itshould be
subject tothesame controls andaccountability ascheques. (Order forms areavailable
from theFinance Section).
Allorders should clearly statetheterms ofdelivery. Ifthedelivery terms andcosts
arethesupplier 'sresponsibility, thefreight should beona"freight paid" basis.S/WPGR/W/11/Add.4
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APPENDIX B
NB: Thisisanextract from theMinistry ofCommerce 'spurchasing manual andis
provided asanexample ofindividual departmental-Practice only.
8.6.3.4 Evaluation Tenders: Policy andProcedures
8.6-3.4.1 Policy
Where tenders meetthecriteria ofcommercial competitiveness, technical acceptability,
andconformity withtherequirements setoutinthetender document, thefinalselection
willbebasedonvalue-for-money,takingintoaccountthedomesticcontentintheoffered
goods/services. andanyadvantage associated withsourcing fromdomestic production
which could belooked upon favourably.
8.6.3.4.2 Practical Guidelines: Assessing Value-for-money
Value-for-money isthekeycriterion forchoosing aspecific product orservice. It
takes precedence above allother factors.
"Value" (asopposed to"cost") isadifficult thing toassess. Thecomponents ofvalue
maybeoutlined asfollows:
8.6.3.4.2.1 Quality
The"quality" ofgoods andservices represents theirability tomeetor,exceed theneeds
ofthepurchaser. Quality maybetangible ("How many pages-per-minute willthis
printer produce?") orintangible (Ministry satisfaction thatwehave given New
Zealand/Australian industry afaircrack ofthewhip).
8.6.3.4.2.2 Through-life costs
The"through-life-costs" ofaproduct arethecosts thatitgenerates between purchase
andwriting-off.Classicthrough-lifecostsareconsumablesforphotocopiers,orsecurity
guards fortheTreaty ofWaitangi. Maintenance costs forunreliable equipment are
also"through-life" costs, asarethehours ofproductivity lostwhen acomputer system
crashes.
8.6.3.4.2.3 After-sales service/guarantees
Inassessing these items, it'sprudent toconsider thestability andreputability ofthe
supplier. Alltheglossy guarantees intheworld areworth nothing ifthesupplier goes
bankrupt aweek afterapurchase, oriftheirafter-sales service isconducted byclumsy,
unqualified staff.S/WPGR/W/11/Add.4
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8.6.3.4.2.4 Easeofcommunication withthesupplier
Communication factors include:
- thesupplier 'savailability fordiscussions andnegotiations;
- thesupplier 'sability todeliver thegoods/services required when theyare
required;
- thesupplier 'sability toprovide after-sales support promptly.
8.6.3.4.2.5 Other factors influencing value-for-money
Related factors tobeconsidered inassessing value include:
- therelative benefits ofleaseversus purchase. (Formore detail onthisissue,
refertotheMinistry ofCommerce 'sFixed Asset Management manual);
- versatility, life-span, upgradability, easeofrepair.
8.6.3.4.3 Procedure forEvaluating Tenders
8.6.3.4.3.1 Overview
Thetendering process should betransparent; thatis,itshould beseentohavebeen
handled inafairandequitable manner. Ifthetendering process hasbeenfollowed
correctly, theMinistry should beabletodisclose theevaluation report which ledto
aspecific purchase.
8.6.3.4.3.2 Evaluation
Theinvitation totender mustinclude thecriteria bywhich theresponse willbeevaluated.
Thisisparticularly important forcomplex tenders (such asthose related tocomputer
systems). Thecriteria forevaluation provide prospective tenderers withaninsight into
therequirements thatthepurchasers holdtobemost important
Inpreparing theevaluation criteria, itisuseful toconsider:
- Who isgoing toevaluate thetenders.
Itisimportant thatthetender evaluators havetheappropriate skills andcanmake awell-
balanced decision. Anevaluation teamshould contain anappropriate balance oftechnical,
business,andmanagementexpertise,withanoverallteam-leadertoco-ordinateandmanage
theevaluation process. Each team member should beformally advised:
- their role;
- their specific tasks andresponsibilities;
- thetime-commitment involved.
Itisimportant tostress theimportance ofcommercial confidentiality.S/WPGR/W/11/Add.4
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- whowillreceive theevaluation team'srecommendations, andwhowillmake
thefinaldecision;
- whether there'saneedforexternal consultants toassist andadvise onthepurchase
recommendation;
- what sortofweightings willbeusedforthevarious selection criteria during the
decision-making process.
Insome circumstances, atwo-stage evaluation maybenecessary. Thefirststage could
evaluate selected major criteria toidentify ashortlist, which willthengoforward toa
detailedevaluationinstagetwo.Ifformalpresentations/demonstrationsaretobepermitted
aspartoftheprocess, generally onlythose suppliers making theshortlist would beinvited
todoso.
- whether tenderers willbeinvited tomake presentations, and,ifso,howthe
presentation willbeconducted. Isitappropriate/necessary tovisittenderers '
premises orusersites?
Once anysuppliers have been "knocked out"oftheprocess, theyshould beadvised as
soonaspossible. (This enables themtoreallocate anyresources theymayhavecommitted
tothesupport oftheproposal.)
8.6.3.4.3.3 Documenting thedecision-making process
Tender evaluations must bewell-documented, andcaremust betaken toensure thatall
tenderers havebeengiven thesame opportunities, andthattherequirements offairness
andequability havenotbeencompromised. Itmust beremembered thattheMinistry is
accountable foritsdecision, andmayberequired (possibly under theOfficial Information
Act)toprovide information about thedecision-making process.
8.6.3.4.3.4 Post-tender negotiations
Itcanoften beuseful tonegotiate withtenderers after thetender documents have been
received andassessed. Negotiations cancover issues suchas:
- terms andconditions ofsupply;
- delivery;
- terms ofpayment;
- warranties;
- on-going maintenance.
However, itisimportant thatthisprocess behandled delicately andprofessionally. As
Treasury putsit,"playing onetenderer offagainst another ina"Dutch Auction" isnot
aprofessional tender negotiation". Suppliers havelittlepatience withthisapproach, and
arelikely toproduce cagey, tentative, andultimately useless tender documents infuture.
Negotiations should bewell-documented, andtheparties should formally agree tothe
results ofthenegotiations. Before thetender islet,thenegotiation process should be
reviewed toensure thatalltenderers have been given thesame opportunities, andthat
therequirements offairness andequitableness have notbeen compromised.S/WPGR/W/11/Add.4
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8.6.3.4.4 Awarding Contracts
Many transactions willbecompleted byissuing anofficial purchase order, butcontract
documentation willbenecessary forsome purchases. Thiscontract material mayconsist
ofafairly simple exchange ofletters, ormayinvolve thedrafting ofcomplex legal
documents. Ingeneral, ifaprocurement warrants theissue ofaformal RFP, andthe
expense ofaformal evaluation process, itwillalsorequire thepreparation ofproper
contracts.
Keycontract documents willbetheRFP andthepreferred supplier 'sproposal, which
should always become attachments totheagreements. Anyother major documents that
supersede theRFP orproposal should alsobeattached.
Acontract should address thefollowing issues:
- thecontract deliverables;
- thespecification fordeliverables;
- theimplementation plan;
- performance andservice standards;
- thepurchasers responsibilities;
- purchaser andsupplier project-management roles;
- acceptance procedures forgoods/deliverables;
- thecommercial terms, conditions, andschedule;
- issues ofconfidentiality, intellectual property, andliabilities;
- theconsequences andremedies forbothparties ofdefault bytheother.
Letters-of-intent
Developing contract documents canbequite time-consuming, anditmaybeappropriate
tosendthechosen supplier a"letter-of-intent". Such aletter states thatthetender has
beensuccessful, butthataconfirmed order maydepend onnegotiation ofasatisfactory
contract. Theadvantage ofaletter-of-intent isthatitallows thesupplier tobesufficiently
sureofsecuring thebusiness tobeabletobegin substantive work onthecontract.
It'simportant toseeklegal advice onthewording ofletters-of-intent toensure thatthey
donotmake abinding commitment which could prejudice negotiation ofthefinalcontract.
8.6.3.4.5 Debriefing Unsuccessful Tenders
Suppliers whowincontracts generally know what theyaredoing right. Tenderers who
missoutoften value theopportunity todiscover what theyaredoing wrong; ifnothing
else, debriefing canhelpNew Zealand firms enhance their ability tocompete athome
andabroad.
TheMinistry ishappy to"debrief" unsuccessful tenderers. Thistaskshould falltothe
leader oftheevaluation team. Wherever possible, staffshould trytokeep theprocess
open, withfrank andhonest exchange ofinformation. However, itisimportant totake
intoaccount therequirements ofcommercial confidentiality andthemaintenance offair
competition between suppliers. Toprotect commercial confidentiality ofallparties, staff
should only advise suppliers oftherelative strengths andweaknesses oftheir own
proposals, without comparing them totheproposals ofothers.S/WPGR/W/11/Add.4
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Thetiming ofdebriefing isimportant, and(incaseachosen supplier drops outandthe
evaluation hastobere-opened) itshould notprecede theformal conclusion ofnegotiations
andthecompletion ofacontract.
8.6.3.4.6 Maintaining Good Post-Contact Relationships
Itsimportant tomaintain communication withthesuccessful tenderer throughout thelife
ofthecontract; providing suppliers withfeedback helps build aproductive relationship.
Ifitisappropriate suggest ways inwhich theperformance ofasupplier, oritsproducts,
canbeimproved.
Staff should dealwithsuppliers inanethical andbusinesslike fashion -andshould see
thatsuppliers 'accounts arepaidontime!