Government procurement rules




SINCE FEBRUARY THE Government’s Rules of Sourcing have been mandatory for a whole bunch more organisations than previously, which could change the tendering environment for both suppliers and clients, in some surprising and welcome ways.

C_March_2015_Pg63_1It’s nearly two years since the government introduced its Five Principles of Procurement – which every government organisation, from councils to ministries, is required to build into their procurement processes. While broad, these cover good procurement practice across the board, such as debriefing with unsuccessful suppliers, staying impartial, and making it clear how tenders will be evaluated.

It’s taking time for those principles to be known, let alone embraced, by many government organisations. Every time I run a course for tender evaluators operating in our public procurement environment, there are still seasoned tender evaluators who have never heard of those five principles. But time is running out for the unaware, as procurement requirements tighten up on projects that are funded from public organisations.

Although the Government’s Rules of Sourcing introduced in October 2013 are only mandatory for some government organisations, all government organisations are expected or encouraged to use them as a good practice guide.

However, the list of those organisations for whom the Rules are required has now grown significantly, to include Crown Agents, Autonomous and Independent Crown Entities, and publicly funded companies. In practical terms, this list (see now covers organisations as diverse as the Earthquake Commission, the Transport Agency, District Health Boards, NZ Trade and Enterprise, and scores of others.

What does this mean for tendering processes? The short answer is that the processes will be managed in a more transparent, consistent, and robust manner. Procurement trends will aim to encourage competitive, healthy markets; cost-efficient processes; and greater levels of accountability from government organisations in their supplier selection processes.

Not surprisingly, the Rules of Sourcing are far more prescriptive than the Five Principles. The rules specify well-defined standards for most aspects of procurement, including, for example:

  1. Allowing set minimum time periods for tender responses (mostly these are around 20 – 25 business days, with some deductions possible);
  2. Openly advertising opportunities on GETS;
  3. Preparing and using Annual Procurement Plans and Extended Procurement Forecasts, aimed at giving suppliers advance notice of possible contract opportunities;
  4. Avoiding applying technical specifications or conformance standards that would create obstacles for some suppliers;
  5. Including the evaluation criteria and an indication of the relative importance of each, in the RFT.

All of these requirements are well recognised in many government organisations who have well-developed procurement practices aimed to deliver best value for money. There will also be some organisations for whom these requirements will prompt a long (and potentially uncomfortable) look at their procurement processes, followed by some revisions and re-training for their seasoned procurement staff.

The reforms that Government is driving in procurement are welcomed by suppliers, as well as by well-informed client organisations. In fact, they are rapidly securing New Zealand’s place at, or very close to, the top end of global best practice in procurement. Our procurement environment is more process-driven, and less relationship-driven than in most other countries. It’s more about what you know than who you know!

International procurement trends are promoting more sustainable solutions; less focus on tender box price in favour of lower cost whole-of-life solutions; greater emphasis on social and environmental factors in purchasing decisions; and higher levels of transparency, accountability and defensibility for public spending. In all of these areas, the Government has well-developed principles – even if knowledge of, and adherence to those principles is taking time to achieve.

The move to extend the Government Rules of Sourcing to an increasing number of government organisations deserves a round of applause. It’s now up to our public sector procurement people to take on board their responsibilities under those very sensible rules.

As the ‘bite’ of the Government Rules of Sourcing firms up, it will be less and less acceptable for a council (for example) to ignore the rules or actively dismiss them. Even those organisations that are not legally required to follow the Government Rules are expected or encouraged to use them as a good practice guide, to apply them to their procurement policies and practices, and to train their staff to apply the Principles to their tendering processes.

It’s also the job of our supplier community to understand and (where necessary) to remind government clients of their responsibilities to drive effective practices through their tendering tools.

The Rules of Sourcing have not been put in place to make things difficult for procurement people. On the contrary, they’re aimed at providing a consistent, fair, fit-for-purpose and cost-efficient framework for procurement processes. One that encourages competition and innovation, that inspires suppliers to give their best to the contracts they bid for and win; and one that builds healthy, viable regional economies to support New Zealand Inc.

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