Part 7: Conducting a tender or proposal process

Procurement guidance for public entities.

Choosing the appropriate procurement method

7.1
Procurement methods are governed by legislation in some circumstances. For example, the Land Transport Management Act 2003 requires certain procedures to be used for approved activities relating to transport.

7.2
If there is no statutory requirement to use a particular method, public entities need to decide the method they will use to interact with the potential suppliers of goods or services (the “procurement method”).

Expectations

7.3
To ensure that the benefits of the method outweigh the costs, we expect a public entity, when selecting the procurement method, to consider:

  • the need, wherever possible, to promote open and effective competition throughout the procurement process; and
  • the value of, and risk associated with, the procurement.

7.4
The public entity should decide on the monetary levels, the level of risk, and the types of goods or services that will and will not be subjected to a competitive procurement process and the type of process (for example, seeking quotations or using a tender or proposal process).

7.5
Government departments should be aware of the requirements in the Mandatory Rules for Procurement by Departments on the monetary limits and the procurement method to be used.1 It should be noted that those monetary limits are a minimum requirement. They should not preclude government departments from using a competitive tender if applying good practice means that it is the most appropriate method.

7.6
Open tender or proposal processes are used to promote transparency and value for money. In our view, open tender or proposal processes are most appropriate for middle to high value procurements where there are a number of potential suppliers in the market.

7.7
Although closed tender or proposal processes may be appropriate in some circumstances, our preference is for public entities to make limited use of this procurement method. This is because using a closed tender or proposal method does not allow equal access to all suppliers in the market, which means that a better source of supply may be missed. When a public entity uses a closed tender or proposal process, it should document its reason for doing so. It should also properly justify using the closed tender or proposal method.

7.8
The closed tender or proposal method should not be used to limit the number of potential tenders or proposals. If a public entity wishes to limit the number of tenders or proposals for procurement, it should use the multi-stage method.

7.9
We expect a public entity, in deciding whether to use a multi-stage open tender or proposal process, to consider:

  • the value and risk associated with the procurement;
  • the degree to which the entity is able to specify the requirement;
  • whether the entity is looking for innovative solutions; and
  • the cost and resources required of both the entity and the potential suppliers.

7.10
We expect a public entity to consider using a multi-stage open tender or proposal process only where there are multiple potential suppliers or the public entity is unsure about the size of the market and the likely number of interested suppliers. In other situations, a public entity should carefully consider whether a single-stage open tender or proposal process is more appropriate.

Guidance

7.11
A public entity should ensure that its relevant policies and procedures outline when a closed tender or proposal may be used – for example, when:

  • appropriate market research has identified that the goods or services are only available from a few suppliers;
  • the public entity can demonstrate that it is not practical or cost-effective to conduct an open tender or proposal; or
  • there is genuine limited time for the procurement process and it is not limited because of poor contract management.

7.12
A public entity’s relevant policies and procedures should also outline how to identify potential suppliers – for example:

  • canvassing the market using a variety of sources of information; and
  • making use of any past experience with any particular supplier.

7.13
When compiling a list of potential suppliers, a public entity should:

  • take account of any applicable government policies (for example, fair opportunity for regional, national, or overseas suppliers);
  • document the method used, and keep adequate records to show that it has followed the method; and
  • ensure that it has addressed any risks under the Commerce Act 1986 and other applicable legislation.

7.14
A public entity should include guidance on the multi-stage tender or proposal method in its relevant policies and procedures. This should include guidance on the circumstances when a multi-stage tender or proposal should be used.

7.15
The guidance should also set out the information the public entity should seek during the first stage – for example:

  • the potential supplier’s contact details;
  • the potential supplier’s qualifications and experience;
  • in the case of services, the potential supplier’s capacity to meet the public entity’s specified requirements; and
  • in the case of goods, what the potential supplier is able to provide.

7.16
The guidance should also specify how the evaluation panel (or tender evaluation team) will be appointed. The guidance should also set out the process the panel will use to evaluate the tenders or proposals.

7.17
To ensure that it asks the right questions, a public entity should develop and approve the evaluation criteria before it invites potential suppliers to participate. The evaluation criteria should normally consist of:

  • compliance check or mandatory criteria (scored as a pass/fail or yes/no); and
  • non-mandatory criteria (which are normally scored on a 0-5 or 0-10 scale) that compliant tenders or proposals are fully evaluated against.

7.18
Compliance checks or mandatory criteria should, as a matter of good practice, be highlighted as part of the first stage specification to ensure that potential suppliers who are not able to meet these requirements do not waste their time submitting a response.

7.19
A public entity should draw up a shortlist by scoring each response against the criteria. It should also record enough information to keep a full record of the pre-qualification process, and to demonstrate that each response received due consideration.

7.20
The guidance should also set out the process for advising shortlisted suppliers that they have been shortlisted and for notifying unsuccessful suppliers that they have not been shortlisted. Unsuccessful suppliers should be offered an opportunity to be debriefed on the reasons they were not shortlisted. The offer of a debriefing should set out the scope and likely format, and should make it clear that the process will not be used to change the selection decision or reopen the process. For other relevant guidance on debriefings, see paragraphs 7.144-7.149.

Selecting an evaluation model

7.21
The main objective of the procurement process is to achieve a good outcome for the public entity – that is, selecting a supplier that has the capability to deliver the goods or services and provides the best value for money. Tender or proposal evaluation models help the evaluation panel decide which potential supplier this is.

7.22
Evaluation models are not a science but rather tools to support the evaluation panel in making their decision. Ultimately, the evaluation team is responsible for deciding which option provides the best value for money. However, the chosen tender or proposal evaluation model should provide a rationale to support the evaluation team’s decision.

Expectations

7.23
We expect a public entity to decide at the procurement planning stage how it will evaluate the tender or proposal. Depending on the value and risk associated with the procurement, it may require an evaluation plan. In any case, a public entity should select and document an evaluation model at the procurement planning stage, and also document the reason why it chose that particular model.

7.24
The evaluation model should be set out in the procurement documents so that suppliers know how the tender or proposal will be evaluated. The evaluation criteria should be detailed enough to enable the public entity to assess the relative strengths and weaknesses of each respondent.

Guidance

7.25
A public entity should include guidance in its relevant policies and procedures on the types of procurement that will require an evaluation plan.

7.26
A public entity should also provide guidance on the types of evaluation models that are available, and when each may be used. For example, the three most commonly used models are the lowest-price conforming model, the weighted-attribute model, and the target-price model. The Brooks’ Law model is also used in evaluating proposals for professional services for building and roading contracts.

7.27
The lowest-price conforming model is the most basic model, and has the strongest emphasis on price. With this model, the lowest-priced tender or proposal is selected once a prerequisite level of quality is met. It is applicable where additional quality over and above a minimum threshold is not important (that is, it does not offer greater value for money).

7.28
The weighted-attribute model is the most common model used in public sector procurement. This model seeks to balance the trade-off between price and quality, and it can be used for goods or services. Under this model, the criteria are weighted to reflect their relative importance. Each criterion in the tender or proposal is scored, and each is multiplied by the relevant weighting to give a weighted score. The weighted scores for each tender or proposal are added up to find the highest scoring tender or proposal. Some weighted-attribute models weight all the evaluation criteria, including price, while others only weight the non-price criteria. If weighting price, it is important to carry out some level of sensitivity analysis as part of the weighting process to ensure that the price weighting is appropriate. For example, if the price weighting is too high, the evaluation effectively becomes a lowest-price conforming model.

7.29
The target-price model2 is useful when it is difficult to define the scope of the work in the tender documentation or in situations where the budget that is available is the main constraint. In such instances, the public entity would be likely to receive a range of tenders or proposals and prices that are not easily compared, and that may exceed the available budget. The solution is for the public entity to make the potential suppliers aware of the available budget (the “target price”) as a guide for defining the scope of the services desired, and then inviting potential suppliers to specify what they can do for that price. The focus of the evaluation is then on the quality and quantity of the services to be provided rather than price.

7.30
The Brooks’ Law model assesses proposals on the basis of technical merit. The highest ranked supplier is invited to discuss the proposal, contract, terms, and fees. The terms of reference and the contractual and legal requirements are reviewed to ensure a mutual understanding. When agreement on fees is reached, the supplier is appointed. If no agreement on fees is reached, the second ranked potential supplier is invited to negotiate. The process continues until a satisfactory agreement is negotiated. A supplier, once rejected, should not be recalled for further negotiations.

Inviting and receiving tenders and proposals

7.31
The procurement plan should identify the method the public entity will use to approach the market for a particular good or service. This method will determine how an invitation will be issued and the extent of the invitation process.

Preparing the tender or proposal package

Expectations

7.32
We expect a public entity to determine the structure and content of a tender or proposal package according to the value and risk associated with the goods or services being procured.

7.33
We expect a public entity to follow the rules, procedures, and criteria it has specified in the tender or proposal documents and distributed in the tender or proposal package.

7.34
We expect a public entity to treat all participants in a fair and equitable manner. This includes:

  • ensuring that information given to one participant that could significantly affect its understanding of the procurement is also conveyed to all other participants (unless the information is commercial in confidence); and
  • advising all participants if some unforeseen and exceptional circumstance changes the rules, procedures, or criteria during the tender or proposal process. Such a change should not benefit one participant over another.

Guidance

7.35 A public entity’s relevant policies and procedures should include guidance on the content of the tender or proposal package. The contents should include:

  • the specification;
  • the evaluation model that will be used, including the evaluation criteria (see paragraphs 7.21-7.30);
  • the rules and procedures governing the tender or proposal (see paragraph 7.37);
  • the information required from the participant, which should enable a public entity to measure each participant’s performance against the evaluation criteria, and support an assessment of the best value for money;
  • the type of contract envisaged, the main conditions that are contemplated, and any business terms that summarise a public entity’s important commercial and legal positions;
  • any rights that a public entity wishes to reserve; and
  • a declaration that participants do not have conflicts of interest.

7.36
If the procurement has a limited budget and the public entity will not consider participants with goods or services over the budget, the public entity should advise the budget as part of the documentation and invite responses from suppliers who can provide goods or services within the budget.

7.37
The rules and procedures governing the tender or proposal should cover:

  • how the tender or proposal process will be conducted (see paragraph 7.38);
  • participant briefings (see paragraphs 7.48-7.55);
  • managing requests for additional information (see paragraphs 7.56-7.59);
  • receipt of tenders or proposals (see paragraphs 7.60-7.61);
  • alternative tenders or proposals (see paragraphs 7.62-7.65);
  • treatment of late tenders or proposals (see paragraphs 7.66-7.68);
  • extending the tender or proposal period (see paragraphs 7.69-7.72);
  • suspending a tender or proposal process (see paragraphs 7.73-7.75);
  • cancelling a tender or proposal process (see paragraphs 7.76-7.78);
  • content of tenders or proposals;
  • participant presentations (see paragraphs 7.108-7.116); and
  • clarification during the evaluation process (see paragraphs 7.117-7.120).

7.38
The process for conducting the tender or proposal should include:

  • identifying a single contact for participants to request additional information or to clarify conflicts (see paragraphs 2.76-2.79);
  • due diligence (see paragraphs 7.121-7.127), including:
    • any requirements for references;
    • the right to inspect premises or facilities;
    • the provision of samples; and
    • confidentiality of information obtained by participants during due diligence, and limitations on future use of the information; and
  • post-evaluation negotiations (see paragraphs 7.128-7.136).

7.39
The rights the public entity may want to reserve include:

  • a statement that it will not necessarily accept the lowest or any tender or proposal;
  • a statement that it may accept alternative tenders or proposals;
  • the right to extend the date of the tender or proposal period; and
  • the right to suspend or cancel the tender or proposal process.

Advertising

Expectations

7.40
The type and extent of advertising should be in keeping with the value and risk associated with the goods or services.

7.41
We expect government departments to take account of the Mandatory Rules for Procurement by Departments on the time and method of advertising, including advertising on GETS.

Guidance

7.42
A public entity’s relevant policies and procedures should ensure that any tender or proposal-related advertising is appropriate for the target market. The cost of the advertising should not outweigh the expected benefits of the advertising.

7.43
Guidance should require the contents of the advertisement to include:

  • a description of the nature and scope of the proposed procurement;
  • any conditions that suppliers must fulfil to participate in the tender or proposal;
  • the time limits for submitting tenders or proposals; and
  • contact details for obtaining all relevant documents (including the tender or proposal package) and for asking questions.

7.44
The tender or proposal should be advertised for long enough to allow interested suppliers to prepare and submit a tender or proposal.

Distribution of the tender or proposal package

Expectation

7.45
We expect a public entity to choose a distribution method that ensures that:

  • no participant gets an undue time advantage or disadvantage;
  • a record is kept of all participants who request a copy of the tender or proposal package; and
  • each participant confirms that they have received the package.

Guidance

7.46
A public entity’s relevant policies and procedures should provide guidance on:

  • keeping a register of all suppliers who request a copy of the tender or proposal packages, so that the public entity can send them any amendments to the documents in the package;
  • ensuring that responses to any queries are provided to all participants on an equal basis (providing they are not commercial in confidence); and
  • asking participants to confirm that they have received the package and each amendment (usually as part of the tender proposal).

7.47
If tender or proposal documents are available from the public entity’s website, the public entity should ensure that it can identify suppliers that have downloaded the documents so that it can send any subsequent amendments to them.

Participant briefings

Expectations

7.48
We expect a public entity to consider holding briefings for participants for procurements:

  • that are complex, unusual, or sensitive;
  • that are strategic to the public entity’s core business; or
  • where relationships will be an important component and the public entity needs to explain its own culture, strategic direction, and imperatives.

7.49
The public entity must notify all participants of the briefing. As the briefing is a formal part of the procurement process, the public entity must supply the same information to all participants.

7.50
The tender or proposal package would normally include how the participants will be advised of the briefing.

Guidance

7.51
A public entity’s relevant policies and procedures should include guidance on:

  • the timing of the briefings;
  • the need to keep a register of those who attend; and
  • the process to ensure that the public entity provides all participants with:
    • a record of the questions asked and answers given; and
    • any amendments to, or clarification of, the tender or proposal documents, by way of a formal written addendum.

7.52
The briefings could occur:

  • as part of the release of the tender or proposal package;
  • after the release of the tender or proposal package; or
  • as individual participant briefings.

7.53
When the briefing is held at the same time as the release of the tender or proposal package, public entities should consider the need to advertise the briefing. As this process does not allow participants time to familiarise themselves with the public entity’s requirements before attending the briefing, it should be used only when the procurement has straightforward and easily defined requirements.

7.54
Briefings held after the release of the tender or proposal package provide participants time to read the documentation and arrange for appropriate people to attend the briefing. This is useful when the procurement has more complex requirements.

7.55
Individual participant briefings after the release of the package have the advantages that participants can tailor their questions and ensure that they have a clear understanding of the requirements. However, it can be an onerous process to ensure that each participant receives the same information on an equal basis, that no participant receives an unfair advantage, and that the public entity is able to demonstrate that this was the case. This approach should be used only when the requirements for the procurement are complex. Participants have to be given enough time before the briefing to familiarise themselves with the procurement. Afterwards, they need time to consider any issues raised at the briefing and address the issues in their response.

Managing requests for additional information

Expectations

7.56
We expect public entities to have:

  • a clear point of contact for participants seeking additional information during the tender or proposal process; and
  • a policy on how requests for additional information will be handled.

7.57
The process must be fair to all participants, and any information given to one participant must be given to all other participants (unless the question is considered commercial in confidence to the participant who has made a request for information).

Guidance

7.58
A public entity should include guidance in its relevant policies and procedures on how to handle requests for information during the tender or proposal stage. These policies and procedures should ensure that the public entity:

  • gives consistent answers to questions;
  • distributes all questions and answers to all participants, subject to any confidentiality obligations; and
  • treats all participants fairly and equally.

7.59
The guidance should set out what is commercial in confidence, and what action should be taken if the participant asks a question that they consider to be commercial in confidence but the public entity does not. In these cases, it is appropriate to advise the participant accordingly and provide them with the opportunity either to withdraw the question or to have it answered with the knowledge that the public entity will circulate the question and answer to all participants.

Receipt of tenders or proposals

Expectation

7.60
We expect a public entity to have policies and procedures that cover the receipt and secure storage of tenders or proposals until they are opened and throughout the remainder of the tender or proposal process.

Guidance

7.61
A public entity should include guidance in its relevant policies and procedures on:

  • the methods by which a tender or proposal can be submitted (for example, electronic or hard copy);
  • where and how tenders or proposals will be stored until the time of opening, and arrangements to safeguard their security and confidentiality until they are opened and registered; and
  • the procedures to be followed in opening tenders or proposals, which should include recording the date and time of their receipt and where these details will be recorded.

Alternative tenders or proposals

Expectations

7.62
We expect that, in some instances, a public entity may wish to encourage participants to generate innovative ideas that depart from its own basic contract specification. If this is the case, the public entity should take care to explain in the tender or proposal documents the approach it intends to take to evaluating these alternative tenders or proposals.

7.63
The crucial point is that, when the public entity evaluates the tender or proposal, it will need to do so against consistent and equitable criteria.

Guidance

7.64
A public entity should provide guidance on when it will seek alternative tenders or proposals. The guidance should specify how this requirement should be worded in the tender or proposal documents.

7.65
The guidance should also set out how alternative tenders or proposals will be evaluated. Alternative tenders or proposals cannot be compared on a like-for-like basis with those that do meet the requirements. The tender or proposal documents could therefore require that, as a minimum, all participants should submit conforming tenders or proposals to provide a basis for comparative evaluation, and that alternative tenders or proposals may be submitted as optional extras.

Late tenders or proposals

Expectations

7.66
We expect a public entity to accept a late tender or proposal only in exceptional circumstances. The tender or proposal documents should clearly state whether the public entity will receive late tenders or proposals.

7.67
As a general rule, a public entity should accept late tenders or proposals only if:

  • it can be certain that there is no possibility of unfair advantage;
  • the late participant has no knowledge of other tenders or proposals; and
  • the late tender or proposal conforms in all other respects to the criteria set out in the tender or proposal documents.

Guidance

7.68
A public entity should include guidance in its relevant policies and procedures on:

  • the circumstances in which late tenders or proposals may be received;
  • advising the participant that the tender or proposal was received late and the action that the public entity intends to take about it; and
  • the procedures for dealing with late tenders or proposals, which may include:
    • labelling an accepted tender or proposal as “late”, with the time and date stamped on it;
    • keeping a late tender or proposal that does not meet the criteria on file with the accompanying envelope, so that it is not considered further; or
    • returning the late tender or proposal unopened to the participant.

Extending the tender or proposal period

Expectations

7.69
A public entity should exercise caution when extending the tender or proposal period, especially if an extension has been requested by only one participant.

7.70
A public entity must have specifically reserved the right to extend the date in the tender or proposal documentation and must grant the time extension to all participants.

7.71
When extending a tender or proposal period, a public entity must ensure that no participant gains an unfair advantage, and that there is no actual or perceived bias toward a participant.

Guidance

7.72
A public entity should include guidance in its relevant policies and procedures on:

  • when extensions may be given; and
  • the procedures to be used when an extension is given – for example, the extension should be advised by means of a notice being sent to all participants with enough time to enable all to benefit.

Suspending a tender or proposal process

Expectations

7.73
We expect a public entity to be prudent when considering suspending a tender or proposal process.

7.74
A public entity should be alert to the possibility that suspension will be appropriate in some circumstances and should make participants aware of that possibility.

Guidance

7.75
It is not possible to develop clear rules for when a tender or proposal process should be suspended, because it will depend on the nature of the entity and the procurement. However, a public entity should include guidance in its relevant policy and procedures on:

  • the need to alert participants that the public entity may need to suspend a tender or proposal if a material change or significant issue emerges during the process, and that further consultation with interested parties and stakeholders may occur during the period of the suspension; and
  • whether consultation is required or appropriate. This will depend on the nature of the procurement, the nature of the entity, and any statutory requirements.

Cancelling a tender or proposal process

Expectation

7.76
We expect a public entity to cancel a tender or proposal only in exceptional circumstances and after seeking legal advice about the risks and its options in such situations.

Guidance

7.77
A public entity should include guidance in its relevant policies and procedures on the circumstances that may lead to cancellation of a tender or proposal. Examples include:

  • All of the tenders or proposals received are non-compliant.
  • The tenders or proposals received cannot be adequately or fairly compared.3
  • There is evidence of collusion between participants.
  • A significant probity concern arises during the process that creates a risk of legal action.
  • There has been a significant change to the goods or services being sought.

7.78
The guidance should set out the procedures to be followed when considering cancellation, including the need to seek legal advice and to formally advise all participants of the cancellation and the reasons for the decision.

Evaluation

7.79
Evaluation is a process that enables selection of the most appropriate tender or proposal. This involves considering the nature, value, and significance of the goods or services.

7.80
Evaluation allows the selection of the offer that achieves the best value for the money being spent. A good evaluation will result in the objectives of the procurement being achieved.

The evaluation process

Expectations

7.81
We expect a public entity to have documented the evaluation process in the procurement plan, or in the evaluation plan if one has been prepared.

7.82
The process should require the public entity to:

  • carefully consider each tender or proposal, on an equal basis, against the evaluation criteria; and
  • assure itself that the preferred participant has the capacity and capability to meet the requirements of the proposed contract.

7.83
Where necessary, a public entity should seek independent verification of a participant’s capacity and capability. If a public entity requires verification from referees, this should be provided for in the tender or proposal documentation.

7.84
A public entity should keep a record of the evaluation process, at least a summary of the scores awarded to each participant, and the reasons for the scores. These should be kept as a matter of good practice and as evidence if the result is challenged.

7.85
If a public entity is required to use particular decision-making criteria when awarding a contract, the staff involved in designing the evaluation process need to be aware of those criteria. Aligning evaluation criteria and decision-making criteria reduces the risk of a decision-making body rejecting a recommendation made under evaluation criteria that are inconsistent or do not align with the decision-making body’s criteria.

Guidance

7.86
A public entity should include guidance in its relevant policies and procedures on the contents of an evaluation plan and the process to be used for the evaluation.

7.87
Depending on whether a single or multi-stage procurement method is being used, the process should generally follow the steps in paragraphs 7.88-7.93.

7.88
The evaluation team members and any advisers complete conflict of interest declarations. Any actions necessary to manage any conflicts of interest are agreed and implemented (see our guidance Managing conflicts of interest: Guidance for public entities on our website www.oag.govt.nz).

7.89
The evaluation team members and any advisers are briefed on the evaluation process and receive training if necessary.

7.90
Copies of the tenders or proposals, scoring scale, and evaluation forms are distributed to each evaluation team member. If a two-envelope method is being used (that is, the price has been requested in a separately sealed envelope), only the non-price parts of the tenders or proposals are distributed to the evaluation team members, with the price envelopes remaining unopened and securely stored. The two-envelope method may be used where a public entity wants to ensure that price does not influence the evaluation of the non-price (or technical) criteria of a request for tender or proposal. This method would normally be considered for high value and/or high risk procurement activities.

7.91
The evaluation team members complete individual assessments of the tenders or proposals. This ensures that each team member has adequately reviewed the tenders or proposals before the team evaluation meeting. It also ensures that no single team member is able to exert inappropriate influence on the outcome by being better prepared. In some simple evaluations, it may not be necessary for the evaluation team members to complete individual evaluations. In these cases, the evaluation team should meet and complete a team evaluation.

7.92
Team scores may be reached by a number of methods. Discussing the scores and reaching a team consensus is preferable to averaging the scores, because it allows a score to be agreed based on consideration of all the evaluation team members’ opinions and observations. The averaging method may not prevent a persuasive or dominant individual from being able to exercise undue influence. However, it does mean any individual scores that would have been higher or lower, based on re-consideration of the tender or proposal in the light of other team member’s comments, still form part of the calculation for a final score.

7.93
If the price has been requested in a separately sealed envelope, these envelopes are opened after the team has scored the non-price criteria. An overall score and ranking is then determined. The ranking method will be determined by the evaluation model used. A comparison of technical worth and price in keeping with the evaluation model being used will determine which tender or proposal represents the best value for money.

7.94
It may be necessary to make changes to the tenders or proposals to allow each tender or proposal to be evaluated on a like-for-like basis. Such changes must be made for the purpose of the evaluation only. For example, adjustments may be needed for:

  • firm and variable pricing;
  • inclusion or exclusion of extras (for example, maintenance and training);
  • settlement discounts; or
  • differing warranty periods.

7.95
A public entity needs to ensure that these adjustments do not produce significant changes in the individual tenders or proposals.

7.96
Financial comparisons for competitive tendering and bidding usually entail additional consideration of issues such as:

  • capital-related costs;
  • whole-of-life costs;
  • financing;
  • costs of contracting out; and
  • transition costs.

7.97
A public entity should scrutinise any tender or proposal that is priced very low compared to others, to determine:

  • the technical merits of the tender or proposal, and whether it involves particularly high risks or levels of uncertainty;
  • whether the participant has included all costs associated with providing the goods or services;
  • whether the tender or proposal price is sustainable;
  • whether the participant has proposed a new or innovative way of meeting the requirement that would enable a reduction in cost; and
  • whether the tender or proposal may involve dumped or subsidised imports that would compete unfairly with domestic products, and that could be subject to an application for trade remedies under the Dumping and Countervailing Duties Act 1988.

7.98
If a public entity is concerned about the price, the participant should be asked to confirm the tender price. The participant should not be allowed to adjust the price.

Evaluation team

Expectations

7.99
We expect a public entity to consider the composition of the evaluation team (alternatively referred to as the evaluation panel) at the planning stage of the procurement.

7.100
The size and membership of the evaluation team will depend on the value, complexity, and risk of the procurement.

7.101
The evaluation team should have adequate skills and experience to appropriately evaluate the tender or proposal.

7.102
Terms of reference could be prepared to govern how the evaluation team will operate and the process that will be followed.

Guidance

7.103
A public entity should include guidance in its relevant policies and procedures on the composition and size of the evaluation team. In general, all members should be able to assess and evaluate the tender or proposal against the evaluation criteria. Where that is not the case, the team may need to seek expert advice.

7.104
As a general rule, the evaluation team should include:

  • a procurement specialist, who ensures that the evaluation process is managed in a fair, robust, and defensible manner, and who understands the rules of the evaluation and ensures that they are followed;
  • a person with commercial or financial expertise; and
  • a person with appropriate technical expertise.

7.105
A chairperson should be appointed from within the team.

7.106
For high value or complex procurements, a person with legal expertise should be on the evaluation team or at least involved as an adviser to the team. This will usually be the in-house legal counsel.

7.107
If specific technical advice is required during the evaluation, the evaluation team should seek a report from an appropriately qualified person.

Participant presentations

7.108
A public entity may, as part of the evaluation process, invite some or all participants to make a presentation to expand on and clarify their tenders or proposals, depending on the process set out in the tender or proposal documentation.

Expectations

7.109
We expect a public entity to inform participants in the tender or proposal documents whether presentations will be invited, and the way the evaluation scoring will take the presentations into account.

7.110
As a presentation is part of the evaluation of a participant’s capability to carry out the procurement, each participant should be asked to involve those personnel who:

  • have contributed to the preparation of the tender or proposal; and
  • will be involved in providing the goods or services if the tender or proposal is successful.

7.111
A public entity should treat each participant fairly and equally about its presentation.

Guidance

7.112
A public entity should include guidance in its relevant policies and procedures on when presentations from participants should be required, how those presentations should be conducted, and the areas of particular focus to be covered in the presentation.

7.113
As the presentations are part of the evaluation process, it is important to continue to treat participants equally. This means, for example, providing the same period of notice for participants to prepare for the presentation and providing the same length of time for presentation.

7.114
The public entity should also provide guidance on how to assess the presentations. The evaluation team should keep a record of both the pre-and post-presentation scores, and the reasons for any differences. After the presentations, the evaluation team should review the participants’ scores and agree the final ranking.

7.115
Presentations should not be used to compare tenders or proposals openly.

7.116
The members and roles of the audience for the presentation should be made known to the participants.

Clarification during the evaluation process

Expectation

7.117
During the evaluation, it may be necessary for a public entity to clarify aspects of the tenders or proposals that are unclear or may contain errors (for example, comparatively low or high prices). Clarification may be required from participants about:

  • quality and performance or particular terms and conditions of the contract;
  • uncertainty as to the meaning of the content of the tender or proposal; and
  • the effect of “tags” or qualifications contained in the tender or proposal.

7.118
We expect a public entity to take care to ensure that this process does not provide a participant with the opportunity to improve their offer and so gain an unfair advantage over another participant.

7.119
A public entity should record all communications that seek clarification with a participant, including any clarifications presented by the participant, so that an audit trail is maintained.

Guidance

7.120
A public entity should include guidance on when clarification may be required, and the process to be used. For example:

  • Questions should be kept to “clarification” – that is, clarifying aspects of the tender or proposal to help the evaluation and not to provide a participant with the opportunity to improve its tender or proposal and so gain an unfair advantage over any other participant.
  • When the evaluation team needs to ask questions of a participant, one person should co-ordinate the sending of all questions to participants. This ensures that a consistent process is followed and that participants continue to be treated equally throughout the process.
  • All questions and answers should be in writing.

Due diligence

Expectations

7.121
We expect a public entity to carry out due diligence4 of the preferred participants for high value, high risk, or complex procurements to ensure that the participant has the capacity and stability to fulfil all of the requirements of the contract.

7.122
Due diligence should be done only where the expected benefits outweigh the costs.

Guidance

7.123
A public entity should include guidance in its relevant policies and procedures on when to carry out due diligence. Due diligence checks are generally necessary only where the procurement is high value, high risk, or complex. It also helps to eliminate the risk of fraud and corruption. Formal due diligence is usually unnecessary for simple, routine procurements.

7.124
Advising participants of the due diligence process should be done in the tender or proposal documents, which should:

  • say whether due diligence will be carried out;
  • set out the anticipated timing of the process (which is normally done only for the preferred participant); and
  • the contact details of the person responsible for managing it.

7.125
The due diligence process should, as a minimum, confirm the financial ability,5 technical ability, and capacity of the participant and any subcontractors to deliver the required goods or services. These activities often require professional legal and financial input and advice.

7.126
The issues that need to be addressed, or the actions to be carried out, by the public entity during the due diligence process include:

  • assessment of the participant’s ability to deliver the goods or services for the price tendered or proposed;6
  • credit and reference checks;
  • site visits to check the adequacy and condition of infrastructure, equipment, and resources that will be used;
  • examination of work or product samples; and
  • consideration that there is no fraud and corruption involved.

7.127
A public entity should keep a record of the due diligence it has carried out, and the results.

Awarding the contract

Post-evaluation negotiations

7.128
Post-evaluation negotiation is an effective risk management tool. From the public entity’s perspective, the primary objective of the negotiations should be to:

  • test the understandings and underlying assumptions that have influenced a participant in preparing the costs; and
  • achieve a reduction in costs, where appropriate.

Expectations

7.129
We expect that, during post-evaluation negotiations, a public entity will ensure that:

  • it conducts all negotiations ethically, and does not use its position in a manner that might be considered unfair;
  • it does not focus solely on reducing bottom-line costs;
  • it does not potentially disadvantage other participants by negotiating an agreement that is materially different in scope from what was described in the tender or proposal documents; and
  • the negotiated agreement is sustainable and does not inappropriately compromise quality.

7.130
As a general rule, a public entity will negotiate first with the highest ranked participant. If the outcome is unsatisfactory, it will then negotiate with the next highest ranked participant, and so on down the list until a satisfactory outcome is achieved.

7.131
Concurrent negotiations may be required in limited circumstances. Concurrent negotiations must be approached with care to ensure that they remain fair. Playing one participant off against another (that is, a “Dutch auction”) should be avoided. The public entity should:

  • prepare a negotiation plan for each negotiation;
  • advise the participants that concurrent negotiations are being carried out; and
  • hold separate negotiations with the preferred participants.

7.132
The final outcome of the negotiations should be recorded in writing, and included in the contract.

Guidance

7.133
A public entity should include guidance in its relevant policies and procedures on the circumstances where post-evaluation negotiations should be conducted.

7.134
If negotiations are to be conducted, the public entity should prepare a negotiation plan. The tender or proposal documents should advise participants of the possibility of post-evaluation negotiations and may identify the parts of the tender or proposal that may be negotiated.

7.135
The guidance should include advice on selecting the negotiation team and assigning roles and tasks (for example, a leader to drive the negotiation and make the proposals and an analyst to record the agreements and track the numbers). The skills and expertise of the negotiation team should be in line with the value, risk, and complexity of the procurement. The contract manager (providing any conflicts of interest are appropriately managed) should be a member of the team, as negotiations could raise issues that will remain relevant during the life of the contract.

7.136
By the end of negotiations, each party should have the same expectations about its obligations and how the contract will operate. The parties should agree on all substantive issues that might have an effect on price and monitoring of the successful participant’s performance, before the contract is signed.

Approving the preferred participant and awarding the contract

Expectations

7.137
We expect a public entity to provide a clear recommendation on who the preferred participant is to the authority approving the award of the contract. It should provide enough information to allow the approving authority to understand the evaluation process and the rationale for the recommendation.

7.138
The recommendation of the preferred participant should reflect the outcome of the evaluation process.

7.139
If the approving authority rejects the recommendation, they should:

  • clearly document the reason for not accepting the recommendation; and
  • ensure that the reason is legitimate (this would usually be the result of an unforeseen event that was not identifiable earlier in the process).

7.140
The successful participant will be formally notified and the contract signed.

Guidance

7.141
A public entity’s policies and procedures should clearly set out who is responsible for approving different types and levels of procurement.

7.142
Responsibilities may be allocated in a variety of ways – for example, by budget area, delegation, the value or strategic importance of the procurement, Cabinet circulars, or a combination of these.

7.143
The amount of detail given to the approving authority should be in line with the value and risk associated with the procurement. The approving authority should be able to make an informed judgement on the adequacy of the tender or proposal process and the validity of the tender or proposal selection.

Notifying and debriefing unsuccessful participants

Expectations

7.144
We expect a public entity to formally notify the unsuccessful participants in writing of the outcome and offer them a debriefing.

7.145
A public entity may also offer a debriefing to the successful participant.

7.146
We expect government departments, who are subject to the Mandatory Rules for Procurement by Departments, to be aware of the requirements to report contract award details on GETS.

Guidance

7.147
A public entity should include guidance in its relevant policies and procedures on the form and content of the debriefings. Care should be taken during the debriefing process not to disclose commercially sensitive information that relates to other tenders or proposals.

7.148
The offer of a debriefing should set out its scope and likely format and should make it clear that the process will not be used to change the decision or reopen the process. Participants should be informed that only their own tender or proposal will be discussed. The sensitivity of any information likely to be communicated (for example, the identity of the selected participants) needs to be carefully assessed before the meeting.

7.149
A debriefing should be delegated only to staff who have the necessary experience and sensitivity to carry it out successfully. The debriefing should include a balanced view of the strengths and weaknesses of the tender or proposal against the evaluation criteria and how the participant can improve, rather than being just a comparison of the participant’s strengths or weaknesses relative to the other participants.

1: The Rules will prevail in the event of a conflict between the Rules and these guidelines.

2: This should not be confused with the term “target cost”, which is used in alliance contracts.

3: This is usually the result of a poorly defined specification.

4: “With the process of due diligence, a purchaser … is protected by being given full access to the records and assets of the vendor, and thus proof of accuracy of the vendor’s representations regarding them” (Laws of New Zealand: Sale of Business, paragraph 29).

5: The public entity may need to seek guarantees if the participant has limited assets or cash flows.

6: This is particularly important where a participant submits a comparatively low price.

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