A good procurement is one where you get the goods or services you need at a price you can afford. You will be able to show that your procurement process was contestable and transparent.
What is procurement?
Procurement covers all business processes associated with purchasing goods or services. It can be as simple as getting three quotes for a small plumbing job, or it can be a lengthy and complex process.
Because of the potential complexity, public entities like the Ministry and schools must be clear about their procurement process’ overall objective and select a procurement method that gives value for money.
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Ministry procurement methods
Use the Ministry’s procurement process options flowchart to choose the appropriate procurement method.
Procurement process - options
There are four possible procurement options.
The order of the procurement process is:
- document your needs
- identify potential suppliers
- choose the correct procurement method
- call for tenders
- evaluate tenders
- award contracts.
Boards must follow Ministry procurement processes when:
- engaging a project manager
- engaging other consultants separately engaged for the project
- engaging contractors for construction and maintenance work
- purchasing goods and other services.
Use an expert for your procurement
The procurement process can be complicated and should be managed by your project manager. These guidelines won’t teach you how to become a procurement expert.
If you need to procure a project manager, we recommend you use a procurement specialist or a preferred supplier project manager.
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Public spending principles
A public entity’s fundamental public obligation is always to act fairly and reasonably and within the law. This means a higher standard of conduct than what may apply in the private sector.
The essential procurement principles for Crown agencies – including schools – are contestability and transparency.
Contestability - means ensuring there is open and effective competition throughout the procurement process.
Transparency - means an open and properly documented process is followed.
Audit New Zealand summarises basic procurement principles as:
- Accountability. Public entities must be able to give complete and accurate accounts when using public funds. They should also have suitable governance and management arrangements to oversee funding arrangements.
- Openness. Public entities should be transparent in administering funds – to support accountability and promote clarity.
- Value for money. Public entities should use resources effectively, economically and without waste, with due regard for the total costs and benefits of an arrangement. This does not necessarily mean selecting the lowest price but rather the best possible outcome for the total cost of ownership (or whole-of-life cost).
- Lawfulness. Public entities must remain within the law and meet their legal obligations.
- Fairness. Public entities have a general public law obligation to act fairly and reasonably. They must be, and be seen to be, impartial in their decision-making.
- Integrity. Anyone who is managing public resources must do so with the utmost integrity.
Why these principles exist
These principles are intended to:
- protect you and the Ministry when you spend public money
- demonstrate that no undue influence or unfair advantage was gained by successful tenderers
- meet the financial management and performance requirements and standards of integrity and conduct set out in the Public Finance Act 1989
- include procuring the services of project managers, consultants and contractors as well as purchasing goods.
A public entity must always consider the risk of complaint or judicial review of its procurement actions or decisions.
What to avoid
If you cannot demonstrate that your procurement process is or was transparent and contestable, you may have to do it again. The Ministry will withhold your project funding if you cannot demonstrate that your procurement process was contestable and transparent.
The following table gives examples of non-contestable or non-transparent processes and remedies.
||The remedy is to...|
|Three quotations are required but only one quotation is sought.
||re-advertise the tender or seek further quotes. |
|The product specification or service schedule defines a good or service that can only be supplied by one company.
||rewrite the specification to provide effective competition eg, not 'such-and-such a boiler from Company X' but 'a boiler with x heat output for a school of size y'. |
|You opt to use the preferred supplier process to choose a project manager but also include a project manager who is not on the preferred supplier list.
||to retender using a full tender process or re-do the preferred supplier process using suppliers on the list. |
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Good practice principles for boards
All procurement decisions must be reviewed and if agreed signed off by the board. Therefore, boards engaged in any procurement process must have proof the:
- correct process and procedures are followed and documented before board sign-off
- recommended tenderer is the tenderer who best meets the tender evaluation criteria, as demonstrated in the documentation.
When working through a procurement process, boards must ensure:
- the lines and levels of authority and control are clear – who is authorised to do what
- work is limited to what is necessary
- the procurement process demands high standards of contestability and transparency
- they learn from the experience and make changes for future tendering.
Confidentiality is a common characteristic of any competitive procurement process.
- take particular care when handling commercially sensitive information
- note that confidentiality obligations apply throughout the entire procurement process and after the contract has terminated or expired.
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Contact with people involved in the procurement process
- nominate a contact person for tenderers to contact during a procurement process
- require that tenderers only contact the nominated person
- ensure all communication between tenderers and evaluation panel are formal – informal communications may prejudice the procurement’s integrity.
This reduces the risk of potential suppliers playing off one procurement team member against another.
Police vetting of consultants, contractors and their staff
Changes have been made to Police vetting requirements. For more information about the changes, go to Circular 2010/09 – Changes to Police vetting requirements.
All consultants, contractors and their staff who will be at the school for a reasonable period of time need to be vetted by the NZ Police before the contract starts. Vetting isn’t necessary for tradespeople who work at the school occasionally or irregularly during the year.
Construction workers on school grounds must be vetted to ensure school students’ safety during school hours. The legislation requires the school board to send completed vetting forms to the New Zealand Police Licensing and Vetting Centre. The contracting company cannot request it directly.
Police vetting can take up to six weeks, so submit the application well before on-site construction starts to allow processing time. The New Zealand Police website has more information about the police vetting process.