Oct 23
/
Joanne Toon
New Zealand Government Procurement Rules changes - Economic Benefit to New Zealand
The New Zealand Government Procurement Rules are changing.
The fifth edition goes live on the 1st December. While a lot of the
changes are cosmetic – making the language less bureaucratic, merging rules
where they were repetitious, or moving information that was in the rules into
guidance, there are a few points which suppliers need to be aware of.
In this series of articles, I want to highlight some of the more significant changes for suppliers, and outline any actions which you should be doing to get ready.
The first change I'm going to explore is Rule 8. This requires agencies to consider the economic benefit to New Zealand which will be achieved through the procurement process and resulting contract.
In this series of articles, I want to highlight some of the more significant changes for suppliers, and outline any actions which you should be doing to get ready.
The first change I'm going to explore is Rule 8. This requires agencies to consider the economic benefit to New Zealand which will be achieved through the procurement process and resulting contract.
Rule 8: Economic benefit to New Zealand
Primary requirement
1. Agencies must seek economic benefits to New Zealand in procurements above the value thresholds of $100,000 for goods, services and refurbishment works and $9 million for new construction works, to be evaluated as part of the assessment of public value.
2. Unless there is good reason not to, agencies are expected to award procurements below the value thresholds of $100,000 for goods, services and refurbishment works and $9 million for new construction works to New Zealand businesses that are capable and have capacity to deliver the contract.
Application
3. Agencies must operate within the context of relevant national and international agreements and procurement policies to which New Zealand is a signatory, including free trade agreements and the Australia and New Zealand Government Procurement Agreement.
4. Regarding 8.1, agencies must consider opportunities to deliver economic benefit to New Zealand, such as:
a. making better use of New Zealand resources, such as increasing workforce participation, providing training or apprenticeships or using spare industrial capacity
b. using New Zealand businesses, including SMEs and regional businesses in delivering goods and services, either directly or as a subcontractor or in the supply chain
c. creating export opportunities, boosting a businesses’ domestic supply chain and/or international competitiveness
d. developing New Zealand industry capabilities or capacity
e. developing and adopting innovative products or practices that benefit New Zealand communities
f. considering the sustainability and or environmental benefit of the proposed solution
g. contributing to positive social and cultural outcomes in New Zealand communities.
5. Agencies must:
a. set clear expectations in their Notice of Procurement of the economic benefits they are seeking to be delivered in the procurement opportunity
b. ensure their expectations are proportionate to the size, risk, complexity and value of the procurement opportunity
c. include a minimum weighting of 10 percent for evaluation purposes for economic benefits in a procurement
d. include contract provisions for the delivering of the agreed economic benefits
e. conduct sufficient monitoring of economic benefits to ensure that commitments made in contracts are delivered and reported on.
Accordion Description
As there is a lot of detail to cover, this article is focusing on 8.1 specifically. I will cover 8.2 in the next one.
Why this change?
Government agencies in New Zealand spend over $50 billion a year on contracts with external suppliers. There have been long-standing requirements for procurers to consider wider benefits that can be gained from spending public money.
In the previous version of the rules, these were called “Broader Outcomes”, and focused on public value created through social, environmental, cultural or economic benefits. In this update, the language has shifted, with the economic elements taking a priority. However, the rules make it clear that economic benefit can still be expressed through environmental, social and cultural outcomes.
In the previous version of the rules, while Broader Outcomes needed to be considered, there was no mandate to include them as weighted criteria within the procurement process. This meant it was not uncommon to see questions to respond to on how suppliers would “meet or exceed the Broader Outcomes on the NZGP pages”, but the answers would make no difference to the end result of the contract.
There is also an obligation to incorporate economic benefits into the resulting contract. This contractual obligation does rectify one of the criticisms of Broader Outcomes, in that they formed part of the assessment of the responses to a procurement process, but were not always then part of the contractual commitments.
What does this mean for me?
This is a major change, which will impact on all open competitive processes from 1st December.
The mandatory weighting of a minimum of 10% for questions related to Economic Benefit is enough to make or break a response – I’ve been involved in many processes where the difference between first and second place has been less than 5%.
When responding to the Economic Benefit questions, you will need to be very clear and specific about the value you offer – talking in generalities is unlikely to get you decent marks. You also have to be able to deliver on your commitments. Don’t promise anything you would not want to see in the resulting contract!
What do I need to do now?
You should be looking now at the criteria which can be used to determine Economic Benefit, and starting to work out how you would answer questions on these. Agencies are free to select the most appropriate criteria for their process – do not expect to see all of them in every RFP / RFT.
You will need to make sure your response are specific for the contract; for example, it is unlikely to be sufficient to state your organisation has an ongoing training scheme. You would need to be explicit about the number of trainees who would be supported as a direct result of this contract, and be prepared to demonstrate how you have met this as part of your contract reporting.
Have a review of the guidance for agencies here: https://www.procurement.govt.nz/guides/integrating-economic-benefits-in-your-procurement/
This gives a good outline of the process agencies are expected to follow when considering and integrating economic benefits into their procurement processes and contracts. Of particular interest is the guidance on how to score the answers:
Additional commentary
I am curious to see how this rule will be implemented in practice. There's so many different ways agencies can ask the questions and evaluate the results! I am going to be keeping an eye out for the types of questions which get asked, and the guidance provided within the procurement documentation.
As agencies will be expected to report on the economic benefits in each contract award notice, I’m also going to be keeping an eye on GETS on the information provided publicly.
My big concern is that the ‘easy’ way to evaluate the answers to these questions is to take a purely financial lens – for example, higher marks for those suppliers who are large enough to sponsor multiple apprentices, or do deliver additional pro-bono work for the community. I hope agencies will ensure their evaluations take into account the size and scale of the individual suppliers, otherwise I’m worried this could risk ‘locking out’ the smaller businesses from contracts – which is the opposite of what is intended! Watch this space...
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