Procurement principles

Good procurement is where you get best total value for the goods or services over the life of the goods or service. You will be able to show that your procurement process was open, transparent and accountable. So when we buy, our five principles are:

  1. plan and manage for great results
  2. be fair  to all suppliers
  3. get the right suppliers
  4. get the best deal for everyone
  5. play by the rules.

These principles are further explained on the Ministry of Business Innovation and Employment website.

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 for a procurement of higher value or risk, it can be a more rigorous process.

Because of the potential complexity of school buildings, and use of public funds to build them, the Ministry and schools must select a procurement method that will give best value over the life of the goods or services.

Regardless of the estimated value of the procurement, you must comply with the five principles. These principles are further explained on the Ministry of Business Innovation and Employment website.

Boards must follow Ministry procurement processes when:

  • engaging a planning consultant
  • engaging a project manager
  • engaging other consultants separately engaged for the project
  • engaging contractors for construction and maintenance work
  • purchasing goods and other services.

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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.

If your procurement is...Then go to...
EmergencyEmergency procurement
Sole SourceSole Source procurement
QuotationRequest for Quotation
CompetitiveCompetitive procurement

Procurement process

The order of the procurement process is:

  1. document your needs
  2. choose the correct procurement method
  3. call for tenders
  4. evaluate tenders
  5. award contracts.

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.

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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.

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, and the Ministry will withhold your project funding The following table gives examples of non-contestable or non-transparent processes and remedies.

Flawed processThe 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'.

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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

Confidentiality is a common characteristic of any competitive procurement process.

You must:

  • 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

You must:

  • nominate a contact person for tenderers to contact during a procurement process
  • require that tenderers only contact the nominated person
  • ensure all communications 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.



Content last updated: 22 July 2014