Broader Outcomes: The latest updates on NZ Government Procurement Policy and Practice

Government procurement

Recent announcements of upcoming changes to the procurement rules and progress reporting on implementation of the 2019 changes, will be of interest to any business supplying Government, writes Jennie Vickers of Zeopard Consulting.

This article is part of our spotlight on New Zealand Government Procurement

Whether you are a New Zealand or overseas business, in procurement, contract management or supply chain, these updates are worth being aware of:

Maori identifiers

12 May 2021 was the go live date for the inclusion of Maori identifiers within the NZ Business Number Register. Head to www.nzbn.govt.nz to register or search for a business using the identifier. Worth noting that the definition of Maori business being used does not seem to be the same as the definition referred to under the Progressive Procurement Policy (see below). The press release says: 

“To ensure consistency with other agencies, such as Statistics NZ, businesses will be able to self-identify as a Māori business based on a number of factors, such as ownership and directorship, staff members, philosophy and tikanga, management practices, branding and marketing, tangible assets such as land or fishing rights, or intangible assets like kaupapa Māori or cultural property.”

This would seem to indicate that businesses which do not meet the five percent definition can still be recognised for example for Maori and Pasifika employee numbers or similar value systems. 

Speaking at the NZDIA Member Meeting in March 2021, the NZDF CPO noted that they needed their current suppliers to help them, by identifying themselves to DCS. If this is you, either via the new definition or the NZBN definition, you have nothing to lose.24 May 2021 saw the introduction of two new Rules for inclusion into the Procurement Rules 4th Edition (PR2019), effective 1 October 2021:

Government Procurement Rules

Rule 18A Quality Employment Outcomes

The cynic might say that this far more specific rule is the result of insufficient action in response to the first Broader Outcomes imperative around employment.  It is worth noting the full wording of the new Rule:  

Explains the circumstances where agencies must consider how they can create quality employment opportunities. When procuring goods, services or works, agencies must:

Consider how they can create quality employment opportunities, particularly for displaced workers and groups with traditionally high rates of unemployment or low labour force participation (specifically women, Māori, Pacific peoples, disabled people and youth).Have regard to guidance published by MBIE on how to create quality employment opportunities through government procurement activity.Conduct sufficient monitoring of government contracts to ensure that commitments relating to employment opportunities made in contracts are delivered and reported on.”

The word “must” is a critical element of this new Rule and hopefully will be given the attention this word requires. 

“With a new highly respected procurement leader, Laurence Pidcock, it will be interesting to see how this new rule might be used… maybe to mandate reporting of actual broader outcomes delivery, rather than just evidence that was considered and discounted in the procurement planning process! “

Jennie Vickers, Zeopard Consulting.

Rule 12A Procurement Response Measure

This new Rule enables the Procurement Functional Leader to declare appropriate procurement response measures. 

“From time to time, the Procurement Functional Leader may declare national or regional or sectoral procurement response measures consistent with New Zealand’s international commitments on government procurement, including measures in response to a social, economic or environmental crisis that follows an emergency period or that is not otherwise an emergency situation as defined under Rule 14.9.A.”  

With a new highly respected procurement leader, Laurence Pidcock, it will be interesting to see how this new rule might be used… maybe to mandate reporting of actual broader outcomes delivery, rather than just evidence that was considered and discounted in the procurement planning process!  

As always, if industry has concerns about the application of the Procurement Rules there is an avenue for expressing concerns confidentially to the Office of the Auditor-General via https://oag.parliament.nz 

Maori business procurement targe

A decision was reached by Cabinet in November 2020 to:

  • define a Maori business for Government purposes;
  • introduce a target (5% of contracts by number not value) for Maori business inclusion in Agency procurements;
  • establish an independent entity to drive a more co-ordinated approach. (Amotai has been designated); and
  • create a framework for target attainment reporting.

For more information about the November 2020 decision, read my Line of Defence Magazine article about it here.

The New Zealand Government Procurement Rules 2019 for those new to the NZ Government Procurement Environment

The key points for industry:

  • The NZ Government Procurement Rules 4th Edition PR2019 were published in June 2019 and took effect on 1 October 2019;
  • These Rules cover a substantial number of mandated agencies and are expected to be extended to cover more governmental and quasi-governmental agencies in the next 2 years;
  • Industry in NZ and overseas has a particular interest in PR2019 which require and mandate (not necessarily evidenced in practice) new procurement behaviours around:
    • Evaluation of pricing;
    • Involvement of NZ businesses and local employment;
    • Supporting Broader Outcomes for NZ Government spend;
  • As explained in PR2019:
    • “Broader outcomes are “the secondary benefits that are generated from the procurement activity. They can be environmental, social, economic or cultural benefits;
    • What are broader outcomes? Broader outcomes are the secondary benefits that are generated by the way a good, service or works is produced or delivered. These outcomes can be social, environmental, cultural or economic benefits, and will deliver long-term public value for New Zealand; 
    • Broader outcomes require you to consider not only the whole-of-life cost of the procurement, but also the costs and benefits to society, the environment and the economy;
    • The New Zealand government directs agencies to:
      • Seek opportunities to include New Zealand businesses. Openly work to create opportunities for local businesses and small-to-medium enterprises to participate in your procurement processes;
      • Priority outcomes. Cabinet has taken a targeted approach to leveraging broader outcomes and is placing greater requirements on agencies to leverage a priority set of broader outcomes. These areas are:
        • increase New Zealand businesses’ access to government procurement: increasing the number of New Zealand businesses contracting directly to government, and within the supply chain. This includes Māori businesses and Pasifika businesses;
        • increase the size and skill level of the domestic construction sector workforce: the government is leveraging procurement through construction to encourage businesses to increase the size and skills of their workforces;
    • improve conditions for workers and future-proof the ability of New Zealand businesses to trade: this priority protects workers from unfair and unsafe behaviour, and incentivises well-performing firms while ensuring they are not undercut by firms who have reduced costs through poor labour practices
    • support the transition to a net zero emissions economy and assist the Government to meet its goal of significant reduction in waste by 2020 and beyond.
  • Definition of Public value: “Public value means the best available result for New Zealand for the money spent. It includes using resources effectively, economically and responsibly, and taking into account:
    • the procurement’s contribution to the results you are trying to achieve, including any Broader Outcomes you are trying to achieve and
    • the total costs and benefits of a procurement (total cost of ownership).
  • The principle of public value when procuring goods, services or works does not mean selecting the lowest price but rather the best possible outcome for the total cost of ownership (over the whole-of-life of the goods, services or works). Selecting the most appropriate procurement process that is proportionate to the value, risk and complexity of the procurement will help achieve public value.
  • Rule 46: Awarding the contract, says: 
    • “An agency must, unless there is a legitimate reason to cancel the procurement, award the contract to the supplier/s that has both:
      • demonstrated that it fully understands and has the capability to deliver the requirements and meet the contract conditions, and
      • offered the best public value including broader outcomes, over the whole life of the goods, services or works.”

In October 2019, the New Zealand Defence Industry Association (NZDIA) published a “Guide to the new procurement environment covering Defence and other Agencies in New Zealand. See https://www.nzdia.co.nz/nzdia/ for a copy.