Part 2: Overriding considerations

Procurement guidance for public entities.

2.1
In this Part, we outline the broad government procurement policy context and the obligations and considerations that provide the framework for good procurement practice by public entities.

2.2
This guidance is principles-based. While we draw attention to government policy requirements that may apply, we do not tell public entities what procurement decisions to make or what policies and procedures they should follow in any particular case.

Good practice principles, government policies, and rules

Basic principles that govern all public spending

2.3
There are some basic principles that govern the use of all public funds. They should be considered when considering any funding arrangement with an external party. This includes procuring goods or services. The international literature on this area includes many different versions of the principles that need to be considered. They cover similar ground. We summarise the basic principles as:

  • Accountability – Public entities should be accountable for their performance and be able to give complete and accurate accounts of the use they have put public funds to, including funds passed on to others for particular purposes. They should also have suitable governance and management arrangements in place to oversee funding arrangements.
  • Openness – Public entities should be transparent in their administration of funds, both to support accountability and to promote clarity and shared understanding of respective roles and obligations between entities and any external parties entering into funding arrangements.
  • 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, and its contribution to the outcomes the entity is trying to achieve. In addition, the principle of value for money for procuring goods or services 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 act within the law, and meet their legal obligations.
  • Fairness – Public entities have a general public law obligation to act fairly and reasonably. Public entities must be, and must be seen to be, impartial in their decision-making. Public entities may also at times need to consider the imbalance of power in some funding arrangements, and whether it is significant enough to require a different approach to the way they conduct the relationship.
  • Integrity – Anyone who is managing public resources must do so with the utmost integrity. The standards applying to public servants and other public employees are clear, and public entities need to make clear when funding other organisations that they expect similar standards from them.

2.4
By applying these principles sensibly, public entities can demonstrate that they are spending public money wisely, and properly managing the process for spending it.

Practical considerations

2.5
When deciding how to give effect to the principles set out in paragraph 2.3, public entities should consider a number of things.1 These are:

  • The goal – It is important for the public entity to focus on what it is trying to achieve. The process should not dominate at the expense of the outcome.
  • Simplicity and proportionality – The requirements put in place for the funding arrangement should be as simple and practical as possible, considering the amounts involved, the complexity, and the level of risk. It is appropriate to consider compliance costs for both parties, and seek to reduce them where possible.
  • The context – The arrangements need to fit with the overall context of the funding arrangement, including any more general relationship that the external party has with the entity or with other relevant government organisations. For example, a funding arrangement between a department and a non-government organisation may need to take account of any general government policy on relationships with the community and voluntary sector.
  • The risk – Public entities need to identify risks in or around the funding arrangement and to consider how to manage those risks. This should not be seen as encouragement to be overly risk averse. The key is to get the right balance between risk and expected benefit, and to do so consciously.
  • The nature of the parties – The needs and standards of public entities – for example, for accountability or transparency – may be quite different from those that the external party usually encounters. Equally, the external party's needs may be quite different from those of the public entity. For example, a non-government organisation may have unique obligations to constituent groups or members. Relationships are likely to proceed more constructively and effectively if each party understands the needs of the other and the consequences of those needs for them.

Government policies

Please note: Since this report was published, the Ministry of Economic Development has become part of the Ministry of Business, Innovation and Employment. Updated procurement guidance for public entities is available on the Ministry’s website at www.business.govt.nz/procurement.

2.6
The Government expects its departments to conduct all their procurement within the framework of the policy principles set out in Government Procurement in New Zealand: Policy Guide for Purchasers – August 2007, issued by the Ministry of Economic Development. To these must now be added sustainability, so that the complete framework of government policy principles comprises:

  • best value for money over whole-of-life;
  • open and effective competition;
  • full and fair opportunity for all eligible suppliers;
  • improving business capability, including e-commerce capability;
  • recognition of New Zealand's international trade obligations and interests; and
  • requiring sustainably produced goods or services whenever possible, having regard to economic, environmental, and social impacts over their life cycle.

2.7
Government policies are generally binding on government departments. A public entity that is not a government department will be bound to the extent that the relevant legislation requires it to comply with, or take account of, such policies. It is appropriate, however, that those public entities not bound by government policies consider policies that are relevant to them and treat the requirements as sound guidance.

2.8
The Auditor-General expects a public entity to:

  • be aware of current government policies on procurement; and
  • comply with such policies if they are applicable to the entity.

2.9
The Ministry of Economic Development's Government Procurement Development Group holds up-to-date details of current government policies concerning procurement in the public sector, and the effects of international agreements on procurement. More information on these policies can be found under the procurement section of the Ministry of Economic Development's website (www.procurement.govt.nz).

2.10
In addition, the Department of Labour provides guidance on government policies and legislation relating to employment, including contracts for the procurement of services in the public sector. This includes guidance on relevant legislation and policy on occupational health and safety, being a "good employer", and pay and employment equity. See www.dol.govt.nz for more information.

Government mandatory rules

2.11
The Government has also endorsed Mandatory Rules for Procurement by Departments,2 which implement obligations on New Zealand under several international trade agreements. These rules set out mandatory standards and procedural requirements for procurement by government departments (defined as the “public service departments” listed in Schedule 1 of the State Sector Act 1988, as well as the New Zealand Defence Force and New Zealand Police) and contain some limited exceptions and exclusions. Other agencies are encouraged to follow the practices set out in the rules, as appropriate.

2.12
Although these rules provide policy advice and mandatory procedural rules, individual government departments and agencies are responsible and accountable for their own procurement decisions.

Financial delegations and other authorities

2.13
A public entity must comply with any applicable financial delegations when it procures goods or services.

2.14
For government departments, Cabinet circulars set out the limits of the authority of chief executives to commit to particular types of expenditure.

2.15
A public entity must also comply with any legislation that:

  • limits its procurement authority; or
  • governs its internal delegation practices.

2.16
For local authorities, council policies and delegations may limit the authority of chief executives and other staff to commit to particular types of expenditure.

2.17
A public entity should cross-reference its procurement policies and procedures to the up-to-date list of financial delegations, and ensure that all relevant staff are aware of them.

2.18
Once the total cost of procurement has been approved, financial delegations for payments to suppliers within the approved amount should be set at a level that does not place undue restrictions and administrative burden on the contract manager. In deciding on the levels of financial delegations in a contract, entities may wish to consider:

  • the value and complexity of the contract;
  • the function that the individual is responsible for performing in the project; and
  • the fiscal risk to the entity.

General approach to procurement

Procurement policies and procedures

2.19
A public entity should develop its own procurement policies and procedures that are tailored to its working environment and that take into account the basic principles in paragraph 2.3, the practical considerations in paragraph 2.5, any relevant government policy on procurement, the Mandatory Rules for Procurement by Departments (where appropriate), and other applicable statements of good practice and guidelines.

2.20
Publishing an unambiguous procurement policy and following that policy reduces the risk of challenges to the decision-making process and may reduce the cost of procuring. It also helps retain credibility with suppliers. Clear processes can help ensure that the procurement policy is consistently followed.

2.21
A public entity should be aware of the risk of developing an overly rigid or prescriptive procurement policy that effectively fetters its discretion. When developing procurement policies and specific tender or proposal documentation, entities need to be aware of the risks of limiting their ability to exercise discretion. The risks may be greater when the public entity is performing a statutory function in procuring goods or services.

2.22
Organisational policies and procedures are more effective when they are up to date and easily available to all staff who need to access them. For these reasons, a public entity's procurement policies and procedures should include:

  • a process for regularly reviewing the policies and procedures, and assigning responsibility for updating them;
  • version control to identify the most recent version;
  • a process for educating staff, including any agent that the public entity uses to procure on its behalf, about the policies and procedures; and
  • the need to retain a copy of updated policies and procedures so that a copy of the policies and procedures that applied at the time of the procurement is available if the procurement is subsequently challenged.

Using discretion in selecting the method of procurement

2.23
A public entity may have considerable discretion in how it procures goods or services. However, each public entity is responsible for managing its resources in an effective and efficient manner.

2.24
It is important for public entities to think about the appropriate type of funding arrangement when they enter into individual transactions and arrangements. Our overarching guide Public sector purchases, grants, and gifts: Managing funding arrangements with external parties covers how to choose the appropriate approach. Essentially, this guide advises public entities to:

  • Focus on the goal – What is the public entity trying to achieve in this particular context?
  • Establish the relationship background – Is there a general sectoral relationship or strategic context that it needs to consider? What type of organisation is to receive the funding? Are the funding arrangements long or short term? Are there many potential providers of the goods or services? What are the needs of the end users?
  • Identify potential risks and consider how to manage them – What level of control does the public entity want over the detail of what is done and the outcome? What happens if the external party does not do what is intended? Is the intention to create legally enforceable obligations? What level of risk is the public entity prepared to tolerate? What level of risk does the particular activity carry?
  • Consider the monetary value of the funding arrangement – High value contracts should attract more attention, at every stage of their life cycle, than contracts for small amounts. At this broad level, high value is an initial indicator of risk. The definition of high and low value will differ between public entities, depending on the nature of their activities and budgets. However, a public entity's policies and procedures should support an approach that tailors the level of planning, documentation, and monitoring to the financial significance of the arrangement for the entity.

2.25
The overarching guide identifies four categories of procurement according to the type of contract, the available market, and the value of the purchase. We discuss these categories in paragraphs 1.14-1.15.

Using consultants or procurement agents

2.26
If a public entity engages a consultant or an agent to assist in the procurement process, the contract of engagement should require the consultant or agent to observe the same ethical standards, principles, and behaviour that apply to the public entity's employees.

2.27
This includes the consultant or agent complying with the public entity's own procurement policies and procedures, and the public entity appropriately managing any conflicts of interest on the part of the consultant or agent.

Competent people

2.28
A public entity should ensure that each employee or agent involved in a procurement process has the required skills for the type and level of procurement.

2.29
When engaging an agent, the public entity also needs to ensure that an experienced employee with the necessary delegated authority works with the agent.

Keeping records

2.30
A public entity should keep adequate records of procurement decisions. The Public Records Act 2005 requires public entities to maintain full and accurate records in keeping with normal, prudent business practice.

2.31
The value and risk of the procurement will determine the nature and amount of documentation that is desirable. However, a public entity should keep adequate records to:

  • show that it followed due process and observed the basic principles set out in paragraph 2.3;
  • establish that it identified and appropriately managed potential conflict of interest issues;
  • respond to queries from unsuccessful suppliers;
  • record the outcome of meetings during the procurement process;
  • provide evidence for accountability and audit purposes; and
  • plan any subsequent procurement.

2.32
A public entity should keep records in a manner that facilitates audit and other normal processes of accountability. This includes ensuring that records of all decisions and supporting documentation are available for audit.

Legal and ethical considerations

2.33
Although these guidelines are not a comprehensive guide to an entity's legal obligations, we outline below some of the legal risks that a public entity needs to consider when procuring. An entity should get legal advice, when necessary, to assess and manage these (and any other) risks.

2.34
Legal advice should be sought early in the process. If a public entity has an in-house legal adviser, it should involve that legal adviser in developing templates for documents to be used in procurement processes and in developing a business case for a particular procurement. For complex procurements, the public entity will often need legal advice or professional expertise on technical or probity matters, particularly when developing or reviewing procurement documentation.

2.35
A public entity should be ethical and act with integrity when procuring goods or services. A public entity should:

  • act, and be seen to be acting, in a fair, open, and unbiased manner; and
  • observe ethical standards, principles, and behaviour throughout the procurement process.

Complying with legislation

2.36
A public entity should be aware of, and comply with, all applicable legislation when it procures goods or services.

2.37
Examples of applicable legislation are:

  • the entity's enabling legislation;
  • the Official Information Act 1982;
  • the Local Government Official Information and Meetings Act 1987;
  • the Commerce Act 1986;
  • the Fair Trading Act 1986;
  • the Dumping and Countervailing Duties Act 1988;
  • the Public Records Act 2005;
  • the Local Government Act 2002;
  • the Crown Entities Act 2004;
  • the Local Authorities (Members' Interests) Act 1968;
  • the Public Finance Act 1989;
  • the Electronic Transactions Act 2002; and
  • the Land Transport Management Act 2003.

2.38
Sometimes a public entity's governing legislation will include requirements to consult on significant issues – for example, with the community or with stakeholders. Examples include the Local Government Act 2002, the New Zealand Public Health and Disability Act 2000, and the Land Transport Management Act 2003.

2.39
A procurement process may result in significant changes to the content or form of the services that a public entity delivers or a change of approach to the way it funds some services. If a public entity has statutory consultation obligations, it may need to consider the relationship between the procurement process and these obligations. A public entity should seek legal advice on consultation obligations when considering significant changes of this kind.

Public law considerations

2.40
A public entity will have public law obligations that could apply to aspects of a procurement process.

2.41
A public entity's fundamental public law obligation is always to act fairly and reasonably, and in keeping with the law. This imposes a higher standard of conduct than that which may apply in the private sector.

2.42
A public entity should always take account of the risk that its procurement actions and decisions could be subject to judicial review, or a complaint to the Government Procurement Development Group of the Ministry of Economic Development, an Ombudsman, or the Auditor-General.

2.43
The extent to which a public entity's procurement actions or decisions are subject to judicial review depends on several factors, including the nature of the public entity and the decision-making framework it operates under. The courts have shown a willingness to intervene in commercial relationships in a wide range of situations to ensure that a public entity acts fairly and in keeping with its public law obligations.

2.44
A public entity also needs to be aware of public law obligations when it receives unsolicited proposals from potential suppliers. When approached, a public entity needs to be clear with the suppliers that, if it proceeds with considering the proposal, it may choose a competitive tender or proposal process, depending on the type and value of the procurement and any statutory obligations it may have. Being approached by a potential supplier does not in itself justify a direct or selective procurement process.

Contractual considerations

2.45
A public entity should be aware of, and comply with, the relevant law on the formation and performance of contracts.

2.46
Particular legal risks may exist when procuring with a competitive tender or proposal process. At times, it may be appropriate for a public entity to create a contractual situation during the procurement process itself (a “process” contract). However, a public entity needs to be careful that it deliberately and not inadvertently creates any legal obligations.

2.47
In general, an invitation to submit a tender or proposal, or a request for tender or proposal, is an “invitation”, not an “offer” to purchase goods or services. However, a preliminary contract may sometimes exist for the tender or proposal process itself.

2.48
For example, if a public entity specifically defines the process in the procurement documentation that it issues to participants, that definition could be construed as an offer to proceed in that manner, which a participant accepts by submitting to the procurement process. That may be enough to create a binding contract for the process. If a process contract is created, it will contain express and implied terms.The express terms will be those in the procurement documentation, and the implied terms will include a requirement to treat all participants fairly and equally.

2.49
If the public entity then follows a different process, it may risk legal action for breach of contract. A public entity may seek to minimise this risk by excluding or limiting its liability in the procurement documentation for any breach by the public entity during the procurement process. Where participants participate on that basis, a court may be likely to recognise such an exclusion or limitation provision as being contractually effective.

2.50
Legal advice can help address these risks.

Intellectual property risks

2.51
A public entity should consider the risks associated with developing intellectual property during the procurement.

2.52
Under the Copyright Act 1994, the Crown owns the copyright of new works created for Ministers, government departments, or Offices of Parliament by a contractor unless otherwise provided for in the contract.

2.53
All public entities should consider the value of any intellectual property rights, and whether it would be more beneficial for them to be held by the supplier or the entity. Relevant factors may include the effect on the price of the contract and the ongoing ability of the parties to develop innovations. In any case, a public entity should:

  • identify all intellectual property likely to be developed or created during a procurement;
  • seek legal advice on how to secure its continuing right to use intellectual property as required – including if the public entity procures the goods or services from a different supplier in future;
  • be clear about the difference between what is intellectual property and what is said commercially in confidence;3 and
  • determine who should own any intellectual property.

2.54
For information and communication technology contracts, the Government has issued guidelines on its approach to ownership and commercialisation of intellectual property rights.4 The guidelines set a default position that the supplier owns new intellectual property, with licences granted to the entity and other state agencies.

2.55
Public entities should also satisfy themselves that claims of intellectual property by suppliers are valid.

Liability

2.56
When contracting for goods or services, a supplier or purchaser may wish to exclude or limit its liability under the contract. It is not uncommon for suppliers to:

  • propose excluding their liability for any losses that are not the direct result of their acts or omissions (for example, for indirect loss, consequential loss, loss of profits); and/or
  • limit their liability to an amount that is a specified multiple of the value of the contract.

2.57
Public entities need to understand that accepting a limitation on liability is different from giving a supplier an indemnity. In accepting a limitation on liability, a public entity agrees to limit the liability of a supplier to an amount specified in the contract. If the public entity suffers loss through the supplier's actions or omissions in performing the contract, the public entity will not seek to recover more than the agreed amount and will bear any loss above that amount.

2.58
An indemnity, however, involves a public entity agreeing to accept the risk of loss or damage that the supplier may suffer, and to meet any costs to the supplier for that loss or damage. Public entities need to be aware of statutory restrictions on giving indemnities – for example, in the Public Finance Act 1989 and the Crown Entities Act 2004.

2.59
Limiting a supplier's liability in a contract has the effect of exposing the public entity to liability above the limit in the contract, which is therefore exposure to unrecoverable loss. This may have both direct and indirect costs to the entity. Some public entities may have a policy of not accepting any exclusion or limitation on liability. However, in some areas, insisting on unlimited supplier liability may be a barrier for suppliers to participate, particularly smaller firms. It may also reduce market competition and/or increase the price.

2.60
A public entity should take a risk-based approach to considering whether to agree to an exclusion or limitation on liability by a supplier (this is an important aspect of achieving value for money). If the entity accepts an exclusion or limitation, the contract needs to be very clear about its scope and extent. Where there is an exclusion or limitation on a supplier's liability, the public entity should take associated costs into account when considering that supplier's goods or services. Without a limitation in the contract, the supplier's liability will be determined by the general law.

2.61
Equally, a public entity may decide that it is appropriate for it to limit its own liability or to seek an indemnity.

2.62
Legal advice can help address these issues and assist a public entity with negotiating exclusions and limitations of liability and assessing risks.

Managing conflicts of interest

2.63
As part of the general obligation to act fairly, public entities must take care that their decision-making processes cannot be challenged on the basis of actual or potential bias and/or conflicts of interest. These legal obligations will often be mirrored in the ethical standards that govern public sector conduct.

2.64
Sometimes a public entity's governing legislation will include requirements for disclosing and managing conflicts of interest. The Crown Entities Act 2004 and the New Zealand Public Health and Disability Act 2000 both contain detailed requirements. For the local government sector, specific rules are set out in the Local Authorities (Members' Interests) Act 1968.

2.65
Complying with any relevant statutory requirements will not necessarily be enough to ensure that decision-making processes meet the more general public law requirement of fairness. Public entities must also take steps to ensure that no other aspect of the process could be tainted by a conflict of interest arising outside of those processes regulated by statute. For example, the statutory requirements tend to be confined to the declaration and management of conflicts of interest by members of a governing board or council. But conflict problems might also arise as a result of the interests or associations of officials, staff members, or other participants in the procurement process.

2.66
In June 2007, we produced two guides on conflict of interest issues to assist public entities:

2.67
Public entity staff should be aware of the potential for conflicts of interest for every staff member and adviser who is directly or indirectly involved in any aspect of the process. This includes governance, management, operational staff, and the approving authority. All staff involved in the procurement process should be required to declare any personal interest that may affect, or could be perceived to affect, their impartiality. The public entity will then need to decide what steps are necessary to manage the conflict, having regard to any relevant statutory requirements. It should maintain a register of declarations of conflicts of interest that records any conflicts of interest and how they will be managed.

2.68
Conflicts of interest can have both legal and ethical dimensions. Under no circumstances should a procurement process allow a public entity's staff to receive preferential treatment.

2.69
Gifts, hospitality, or other incentives from suppliers should be subject to the public entity's code of conduct, which should comply with the Standards of Integrity and Conduct published by the State Services Commission. A copy of this code is on the State Services Commission's website (www.ssc.govt.nz). We also provide more detailed guidance on gifts and hospitality in our good practice guide Controlling sensitive expenditure: Guidelines for public entities. A copy of this guide is on our website (www.oag.govt.nz).

2.70
Concerns may arise, for example, if a person who is managing a current contract has received gifts or hospitality from the supplier, and then participates in the selection process for a new contract.

Confidentiality

2.71
Confidentiality is a common characteristic of any competitive procurement process. A public entity should take particular care when handling commercially sensitive information. Entities should note that confidentiality obligations apply throughout the entire procurement process and also after the contract has terminated or expired.

2.72
A public entity may face particular risks in its handling of confidential information when it procures goods or services in a statutory context. A public entity may, for example, have a statutory obligation to consult third parties in the course of procuring goods or services. This may require the entity to disclose some information that it has received from potential suppliers. A public entity should seek legal advice on how to reconcile duties of this nature with its contractual or common law obligations to maintain commercial confidentiality.

2.73
Public entities will also need to consider their obligations under either the Official Information Act 1982 or the Local Government Official Information and Meetings Act 1987. These Acts mean that public entities are not able to give comprehensive assurances about the protection of sensitive information. There are relevant grounds for withholding information under those Acts, such as unreasonable prejudice to the commercial position of a potential supplier, but these can be overridden if there is a greater public interest in disclosing the information.

Accuracy and use of information

2.74
A public entity should require its staff to:

  • respect the confidentiality of information received in the course of their work;
  • not use this information for personal gain; and
  • always communicate information accurately, impartially, and in a manner not designed to mislead, to all interested participants.

2.75
A public entity should respect the sensitivity of information provided by participants during the procurement process. A public entity should not use confidential information to influence or advantage other participants.

Contact with participants during the procurement process

2.76
A public entity should set a clear and preferably single point of contact in its organisation for participants to use during a procurement process. This may entail the staff member who is the point of contact arranging for others in the organisation to deal with technical queries. This will reduce the risk of any potential supplier extracting an advantage by playing off one member of the entity's procurement team against another.

2.77
A public entity should include a requirement in the procurement documentation that during the procurement process participants may not contact any member, director, employee, or adviser of the public entity about the procurement other than the person nominated.

2.78
Informal communication between evaluation personnel and participants could prejudice the integrity of the evaluation. A public entity should ensure that all communication is formal.

2.79
When contracts come up for renewal, current suppliers may be perceived to have an advantage in their knowledge of the public entity and its requirements. The public entity should therefore put in place a formal process to govern contact with any current supplier when tendering or proposing for a future contract. This process should include a requirement that the current supplier must not discuss the requirements and contents of the new tender or proposal with public entity staff or members of the evaluation panel, unless the discussion is part of the formal procurement process.

Fraud and impropriety

2.80
Public entities should consider developing a specific fraud policy.

2.81
Conducting procurement in a fair and transparent manner should reduce the risk of fraud or impropriety. Following appropriate procurement policies and procedures, and having appropriate internal controls in place, should assist this.

2.82
Procuring from a single source or selective procurement may increase the risk of fraud or impropriety. A public entity's policies and procedures will need to address this.

2.83
In an international context, the Organisation for Economic Co-operation and Development has recognised that public procurement is an area that is vulnerable to corruption and bribery.

2.84
If public sector managers find instances of fraud, bribery, or corruption, they have an obligation to refer them to the Police and/or the Serious Fraud Office.

Sustainability

2.85
It is becoming increasingly important for public entities to work and think in ways that take account of long-term sustainability. Sustainability involves thinking broadly about objectives, considering long-term as well as short-term effects; assessing indirect as well as direct effects; considering economic, social, and environmental aspects; and taking extra care when procurement causes changes that might be irreversible or uncertain (the precautionary principle).

2.86
Sustainability is a statutory or strategic requirement for many public entities. For example, the Local Government Act 2002 requires local authorities to take a sustainable development approach, by taking into account the social, economic, environmental, and cultural well-being of people and communities, the need to maintain and enhance the quality of the environment, and the needs of future generations. In other parts of the public sector, a sustainable development approach can be a means of planning and reporting on the achievement of outcomes and statutory requirements.

2.87
The New Zealand government is collaborating with the Australian Commonwealth, State, and territory governments on, and has entered into, a joint Framework for Sustainable Procurement. It provides a set of guiding principles and best practice examples for public sector organisations. The four principles used to guide public entities to develop sustainable procurement strategies, policies, guidance material, training, and tools are:

  • adopting strategies to avoid unnecessary consumption and manage demand;
  • in the context of whole-of-life value for money, selecting products and services that have lower environmental impacts throughout their life cycle compared with competing products and services;
  • fostering a viable Australian and New Zealand market for sustainable products and services by supporting businesses and industry groups that demonstrate innovation in sustainability; and
  • supporting suppliers to government who are socially responsible and adopt ethical practices.

2.88
In addition, core government departments have mandatory standards and targets for the sustainable procurement and use of some goods or services. A copy of the framework and details of the mandatory standards and targets can be found under the government procurement section of the Ministry of Economic Development's website (www.procurement.govt.nz).

2.89
Given the growing strategic importance of sustainability in public entities, considerations of sustainability may occur throughout the entire procurement process. For simplicity, we have not included references to sustainability throughout all stages of the procurement process described in these guidelines. Examples5 of the types of activities that might be carried out, as part of procurement, to assist sustainability include:

  • specifying products and services considered to be sustainable;
  • verifying suppliers' sustainable management standards;
  • including a sustainability clause in contracts;
  • rating supplier performance against sustainability criteria;
  • insisting on sustainability improvement targets for suppliers;
  • assisting suppliers to improve their sustainability performance; and
  • encouraging sustainable innovation in the supply of goods or services.

1: United Kingdom National Audit Office, Financial Relationships With Third Sector Organisations – a Decision Support Tool for Public Bodies in England.

2: See www.procurement.govt.nz for the current version.

3: A public entity may need to seek legal advice on this distinction, and on the interplay between intellectual property rights and confidentiality obligations.

4: State Services Commission (2008), Guidelines for the Treatment of Intellectual Property Rights in ICT Contracts, available at www.ssc.govt.nz.

5: These have been modified from those identified by the Chartered Institute of Purchasing and Supply Australia (2003), Environmental Purchasing and Supply Management – CIPS Positions on Practice, page 7.

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