Government Procurement Rules 4th edition released – coming into force 1 October 2019
After consulting with government agencies, suppliers and interested members of the public, the Government has now officially released the Government Procurement Rules 4th edition (the Rules) for sustainable and inclusive procurement (view released Rules here).
The Rules were endorsed by Cabinet on 13 May 2019 and will apply from 1 October 2019. Once in force, the Rules will replace the Government Rules of Sourcing 3rd edition. See the Ministry of Business, Innovation and Employment’s announcement on the release of the Rules here.
Summary of changes
We have identified four key themes to the changes made by the Rules:
- taking a wider view of what represents “public value”, including through achieving Broader Outcomes;
- a focus on ethical and sustainable procurement behaviour throughout the supply chain;
- a greater focus on promoting inclusive economic development with New Zealand businesses; and
- continued emphasis on comprehensive procurement planning and processes.
The released Rules also confirm a decrease of the construction value threshold from $10 million to $9 million, with value thresholds to be reviewed annually.
Our previous Alert on the Rules gave a comprehensive summary of the changes and is available here.
Key observations and suggestions
Now that the Rules have been finalised, government agencies and suppliers should actively consider how to comply with the Rules before the Rules come into force.
We suggest that government agencies and suppliers take steps to adapt to the following changes / focus areas we see coming out of the Rules:
- Achieving public value
Government agencies will need to assess how each procurement can implement the Government Procurement Charter, and achieve public value and the Broader Outcomes. That assessment should flow through to their procurement planning processes and evaluation criteria.
Suppliers should expect to see evaluation criteria in procurement opportunities focusing on secondary benefits (e.g. Broader Outcomes). This means suppliers will need to demonstrate their approach to a ‘whole of procurement lifecycle’ approach, including in the areas of working conditions and sustainability, which have been identified as priority outcomes for Government, and construction skills and training, in particular.
It would be prudent for suppliers to start turning their mind to not only the extent to which they can achieve public value for an agency but also how they can demonstrate they can and will do so.
2. Code of Conduct and Procurement Charter
Suppliers should also expect to be evaluated and monitored against the newly developed Supplier Code of Conduct, which outlines Government’s minimum expectations of the suppliers it engages. While the Government has emphasised that the Code reflects what should sensibly already be in place, it is useful for suppliers to take this opportunity to review their current internal policies and practices against the Code, and update where applicable to ensure compliance with the Code. The Government has published a Q&A document which provides useful information about the Code, how it should apply, and what are the potentially significant risks of non-compliance, which can be found here.
As a companion piece to the Code, the new Government Procurement Charter sets out the government’s expectations of government agencies when conducting their procurement. There is a notable emphasis on seeking opportunities to include New Zealand suppliers, particularly local businesses and SMEs, to promote economic development within New Zealand.
The Rules require each agency to have policies in place that incorporate the Five Principles of Government Procurement and the Charter. We suggest agencies review their procurement policies and processes to ensure they are up to date with the Rules and Charter and plan their procurements to incorporate the Broader Outcomes.
3. Subcontracting and prompt payment
The government has signalled a clear intent to pay attention to the relationship of prime contractors and their supply chain. Payment terms are a key area of focus. Under Rule 51 agencies are required to pay supplier invoices promptly and to encourage their suppliers to pay supplier sub-contractors promptly. Again, suppliers should consider their current contracting arrangements with sub-contractors and their payments processes to ensure the good payment practices are in place.
Ethical sourcing provisions should be included in their contracts between agencies and their suppliers, and suppliers and their subcontractors.
4. Planning and compliance
An inevitable function of regulation is that government agencies will need to allocate resources to plan, deliver and monitor compliance with the Rules. There are a number of prescriptive requirements and questions that government agencies need to include in their procurement documentation.
Similarly, suppliers to the public sector can expect to be monitored more and to report on activities through their supply chain, during both the procurement phase and project delivery. By reviewing the Rules now, suppliers wanting to participate in public sector procurement can anticipate the questions they will be asked and be better placed to respond and comply with obligations that government agencies will impose on them pursuant to the Rules.