Part 1: Key elements of good procurement

Strengthening government procurement: Lessons from our recent work.

When public organisations procure goods and services, they are spending public money to provide infrastructure, facilities, and services for the public. It is important that New Zealanders can trust public organisations to get the best possible outcomes from this spending and to carry out procurement with competence and integrity.

Public sector procurement is supported by a framework of responsibilities, requirements, and guidance. Despite this, we regularly see weaknesses in some of the most fundamental elements of procurement. These weaknesses risk damaging trust and confidence in the public sector and can lead to poor outcomes from public spending.

In this Part, we discuss the key elements of good procurement and note examples from our multi-year work programme on procurement.

Principles for good procurement

The New Zealand Government procurement framework is made up of the Government Procurement Rules (the Rules),3 the Government Procurement Charter, a set of procurement principles, and a range of information and guidance.

The Rules are mandatory for government departments, the New Zealand Police, the New Zealand Defence Force, and most Crown entities. All other public organisations, including local government, are encouraged to follow the Rules and to comply with the principles. The Government Procurement Charter sets out the government's expectations for how organisations should carry out procurement to achieve value for money.

Individual chief executives and governing bodies are responsible for putting the Rules and other requirements and guidance into practice through their own organisation's procurement activities.

The Ministry of Business, Innovation and Employment, through its business unit New Zealand Government Procurement, is the system leader for government procurement. Its role is to help deliver better public value and wider cultural, economic, environmental, and social outcomes by lifting procurement capability and performance.

In July 2022, New Zealand Government Procurement released a national procurement strategy that focuses on delivering value for New Zealand through strengthening data and transparency, stronger accountability, collaboration, and leadership, and developing and maintaining capability.

The strategy's vision is for New Zealand's procurement system to be fair, transparent, inclusive, and efficient.

The Rules state:

Good practice isn't just mechanically applying the Rules, it's about developing a strong understanding of all the aspects of the procurement lifecycle and skilfully applying these to deliver the best results.4

Our own guidance on procurement also states that public organisations should carry out procurement in a principled way. In our view, accountability, fairness, and openness are three fundamental principles that public organisations need to focus on at all stages of procurement. We discuss these below.


Public organisations need to be accountable for their procurement decisions and be able to give complete and accurate accounts of how they have used public money. Keeping appropriate records to support key decisions in the procurement process is essential to both transparency and accountability.

Our work has highlighted the need for public organisations to have effective and appropriate governance arrangements throughout any procurement process. This is to ensure that responsibilities and accountabilities for decision-making are clear, including how they relate to the ultimate outcome being sought.

When a school establishment board contracted a trust to provide management services in 2018, we did not see reliable evidence from the time about how the board calculated fees, developed a scope of work, approved payments, or actively managed services. It was not clear whether the board understood exactly what it was paying for. In addition, the board could not give the public or other stakeholders confidence that the services it paid for were delivered and priced appropriately.5

In 2019, we concluded an inquiry into the former Waikato District Health Board's procurement of online information technology services. The Board was seeking an innovative way to deal with the challenge of providing health services to remote and rural communities, with projected costs of $16 million over two years that subsequently increased to $26 million.

Due to the significance of the project and concerns that the Board itself had raised about it, our view is that greater oversight was warranted.6 This could have been either at Board level or through some other form of governance structure.


Public organisations have an obligation to act fairly and reasonably. They must be, and be seen to be, impartial in their decision-making.

Being fair to all suppliers is one of the Government's procurement principles. All suppliers in a procurement process should have access to the same information at the same time and be given the same opportunities to seek additional information.

In our audit and assurance work, we saw a particularly problematic example where a supplier had been involved in drafting tender documentation and had also submitted their own tender for the work. This supplier gained an unfair advantage over other suppliers who had not had any input into the tender documentation.

In other work, our inquiry into Callaghan Innovation's procurement processes for its Start-up programme identified issues of fairness that undermined the procurement process. These involved the transparency of due diligence processes, and the sharing of due diligence reports without appropriate reason or process.7

Fairness is also important for New Zealand's international reputation. In 2018 and 2019, the Ministry of Transport considered two competing proposals to deliver the Auckland light rail project. Concerns were raised with us that this was not consistent with the Rules and could damage international market confidence in the Government's procurement practices. Our view was that while such an approach was possible, the value, risk, and complexity of this particular procurement required a well-considered procurement approach to provide trust and confidence that the process was being carried out appropriately.8


Public organisations should also act in a way that is, and is seen to be, transparent.

Openness supports accountability and helps support trust and confidence in the way that public organisations procure goods and services. Public concerns about procurement integrity can be reduced when organisations clearly set out and make available the details of the processes followed, the results of procurement decisions, and the reasons for making decisions.

Much of our work referenced in this report stems from public concerns raised about procurement processes where the facts of a situation have not been easily available. Most recently, we reported on services procured by the University of Waikato where we found the absence of an explanation of the need for the procurement, and the process followed made it difficult for the public to have assurance that $1.1 million of public money had been appropriately spent.9

Robust policies and practices give effect to the principles

As noted, good procurement is based on the principles of accountability, fairness, and openness. Public organisations should ensure that their procurement policies, practices, and procedures connect to these principles and provide clear guidance to staff on how to put them into practice.10 Policies should set out at a high level what staff should do and why they should do it, and provide appropriate guidance for them to follow.

Policies and practices should also be reviewed regularly to reflect changes in the organisation's operating environment and expectations of good practice.

As part of our annual audits in 2021/22, we assessed the procurement policies of a sample of public organisations that are required to follow the Rules. Of the public organisations assessed, we found that 19% had policies that were out of date and referred to outdated versions of the Rules. A further 68% of public organisations we assessed had policies that needed to be improved to be fully compliant with the Rules (based on changes to government policy since 2019).

Applying principles to emergency procurement

When responding to emergencies, such as a pandemic or natural disaster, public organisations might need to procure goods and services quickly for things that they were not able to plan for. We saw many examples of public organisations using the emergency procurement provision in the Rules in response to the Covid-19 pandemic.11

We do not expect perfect compliance during an emergency, but we do expect where compliance can't be done at the time that attention will be given to procurement requirements as soon as possible after the initial response. During emergencies, public organisations are still accountable to the public and to Parliament for the money they spend.

To help maintain accountability for emergency procurement, public organisations should continue to apply the principles of good procurement practice. This includes fully recording each procurement (including the rationale for the use of emergency provisions), the key decisions made, approvals, and transparency of the procurement outcome.

Given recent experience, there is also the opportunity for public organisations to anticipate the risk which might arise from future emergency procurement and prepare policies to address them. This might include detailing specific decision-making delegations for emergency procurement, establishing consistent record-keeping requirements for emergency procurement decisions, and establishing requirements to publicly report emergency procurements.

In emergencies some procurement risks can be heightened, such as fraud and conflicts of interest. It is important to assess and manage these risks. More observations and guidance are included in our 2023 articles on managing public funding in an emergency response or recovery.12

Managing conflicts of interest

Effectively managing conflicts of interest is critical for upholding the principles of accountability, fairness, and openness. If a real or perceived conflict exists and is poorly managed, the public's trust and confidence in the integrity of the process can be undermined.

Regardless of how a conflict arises, there is a risk of creating an unfair advantage or improperly influencing the decision-making process. Even if this does not happen, the perception that it could have can be damaging to an organisation's reputation. Managing perceptions is just as important as managing actual conflicts of interest.

We expect public organisations to have a well-structured approach to identifying and managing any risks from actual, potential, or perceived conflicts of interest for all stages of a procurement process. We expect to see a framework for managing conflicts of interest, which includes declarations from all those involved in the process, a register of declared interests, and actions that are to be taken to manage declared conflicts. This should apply to all staff or advisors involved in a procurement process. The conflicts of interest management process should be revisited when staff get involved partway through a process or if individual circumstances change.

We saw examples of good practice in managing conflicts of interest in our audit and assurance work. These included public organisations with structured, well-managed processes that apply to all staff and contractors. People were required to regularly update their conflicts of interest declarations, which were entered into a register, and specific mitigations were agreed to manage each conflict.

Some of the best examples were where public organisations had given dedicated attention to conflicts of interest through their procurement planning and the way conflicts were identified and managed. In one instance, a public organisation had proactively sought information from tender respondents on the composition of their teams, including subcontractors and individual staff. In this way, the organisation's staff and contractors were fully informed when considering possible sources of conflict.

However, we also see public organisations not doing enough to manage conflicts. This includes not documenting conflicts of interest and mitigation strategies or not adequately considering risks arising from the conflict. For some, there is no evidence that mitigations have been reviewed, agreed, or acknowledged, or mitigations are considered too late in the process or are inadequate.

In our 2021 inquiry into management fees paid by a school establishment board, a conflict arose because the board contracted a trust to carry out management services where the trust and the board had the same members. The board had not taken steps to manage this conflict and was unable to provide assurance that its decision to engage the trust, and the management fees paid, were not influenced by the personal interests of the members.13

In another inquiry in 2019, a councillor at Westland District Council had a conflict of interest because people close to them stood to gain financially from work procured by the Council. Although the councillor had declared a conflict of interest, it was not adequately managed. The councillor's close involvement in the procurement process was of particular concern because they negotiated and entered into contracts with people they had a conflict of interest with. As a result, there was concern within the community about the fairness of the Council's contracting processes and whether the contracts were awarded based on personal connections rather than merit.

The role of elected members is to govern, not to manage or take on operational roles. Elected members need to understand the difference and when they are crossing a line. In this case, Council staff should have managed the procurement process without the councillor's involvement.14

The Ministry of Health risked a perception of bias, and ultimately a loss of trust and confidence, due to the way it managed conflicts of interest for the people involved in selecting a provider for Covid-19 saliva testing services. In 2021, the organisation's guidelines for managing conflicts of interest in procurement were brief and provided minimal practical guidance on how to manage conflicts of interest. Four of the five people on the selection panel declared a conflict, but the plans for managing each conflict were too generic. There was also no consideration of the significant number of conflicts across the selection panel, which together risked undermining confidence in the procurement process as a whole.15

Our guide Getting it right: Managing conflicts of interest in procurement provides common scenarios from a range of sectors and suggests ways to help avoid, mitigate, and manage conflicts.16

Strengthening procurement capability

We continue to see a need for public organisations to strengthen procurement capability.

New Zealand Government Procurement and public organisations both have a role in building procurement capability across the public sector. In aid of this, New Zealand Government Procurement provides online training for government procurement and property professionals.

Public organisations have told us that they want New Zealand Government Procurement to be a centre of excellence for procurement. They would like to see New Zealand Government Procurement employing staff with senior experience and expertise to provide effective procurement guidance and leadership.17

One area where we saw a need for public organisations to improve their capability is in assessing and managing risks associated with strategic suppliers. Strategic suppliers provide goods and services that are critical to the delivery of public services and are not easily replaced.

We found in 2021 that public organisations have different levels of experience and capability with strategic supplier risk management, and need to ensure that senior leaders and governing bodies have the information they need to manage risks. Similarly, we did not see how the government was identifying and mitigating the risks from strategic suppliers who provide services to multiple public organisations.18

Procurement capability in local government

Procurement capability can be a particular challenge in local government. Although councils undertake significant procurement, they often have few staff dedicated to it. Smaller councils tell us that they often struggle to maintain the capability needed to carry out their procurement activities.

Some councils bring in specialist procurement staff when required – for example, to support a large one-off procurement. Councils also collaborate and share insights on procurement through formal structures (such as through shared services across multiple councils), regional working groups and forums (such as the Local Government Strategic Procurement Group), and less formally when required.19 We encourage all councils to look for opportunities to collaborate and share knowledge about procurement.

In their 2021-31 long-term plans, councils were proposing a combined capital expenditure programme of $77.2 billion over the next 10 years.20 With councils planning significant infrastructure investment, having appropriate procurement strategies and following effective procurement practices will be critical.

We have already seen some councils taking innovative approaches to help achieve their capital expenditure programmes. This includes steps to improve their procurement policies and practices, as well as their business case processes, to enable better project prioritisation and delivery. This should help councils deliver their long-term plans.

Independent assurance

For major, complex, or high-risk projects, public organisations should consider appointing an independent probity auditor at the beginning of the procurement process. Opening a procurement process to scrutiny by an independent specialist can give confidence to governors and market participants that procurement processes have been carried out fairly and to good practice standards.

In 2019 we saw that the Department of Corrections demonstrated good probity management when it needed to rapidly build more prison accommodation. For the initial contract, the Department followed good practice, including advertising the contract on the Government Electronic Tender Service,21 applying the Rules to the procurement process, and engaging an independent probity auditor to be present at key stages during the process and to provide real-time assurance.

When the Department needed more accommodation to be built, it did not readvertise the work but extended the contract it already had. The Department had made sure that this approach was still consistent with the Rules and took steps to show that appropriate judgements and risk assessments had been applied to the decision to extend the contract.

The Department also supported the principle of accountability by documenting the results of this work and the judgements that were applied in deciding to extend the contract. This document was authorised by the person who held the delegated authority.22

In contrast, when the Ministry of Health was procuring Covid-19 saliva testing services in 2021 it did not prepare a procurement plan nor formally engage an independent probity auditor. Although the Ministry did seek some probity advice, it was informal and took place after the evaluation panel had been formed and had evaluated the tenders. Appointing an independent probity advisor at the start might have helped the Ministry to ensure that sufficient planning had been done to better manage potential conflicts of interest in a way that aligned with best practice.23

Over a number of inquiries we have carried out on procurement matters, there is a recurring theme of not getting advice at the right time to support good procurement practice and good procurement outcomes.

3: See

4: New Zealand Government (2019), Government Procurement Rules (4th ed.), page 10.

5: Controller and Auditor-General (2021), Inquiry into management fees paid by South Auckland Middle School and Middle School West Auckland in 2018, at

6: Controller and Auditor-General (2019), Inquiry into Waikato District Health Board's procurement of services from HealthTap, at

7: Controller and Auditor-General (2023), Inquiry into Callaghan Innovation's procurement process, at

8: Controller and Auditor-General (2020), Auckland light rail City Centre to Māngere project, at

9: Controller and Auditor-General (2024), Procurement of services by the University of Waikato, at

10: For example, Controller and Auditor-General (2022), Putting integrity at the core of how public organisations operate, at

11: Controller and Auditor-General (2020), Ministry of Health: Management of personal protective equipment in response to Covid-19 and Controller and Auditor-General (2023), Managing public funding in an emergency response or recovery, at

12: Controller and Auditor-General (2023), Managing public funding in an emergency response or recovery and Getting it right: Supporting integrity in emergency procurement, at

13: Controller and Auditor-General (2021), Inquiry into management fees paid by South Auckland Middle School and Middle School West Auckland in 2018, at

14: Controller and Auditor-General (2019), Inquiry into procurement of work by Westland District Council at Franz Josef, at

15: Controller and Auditor-General (2021), Response to concerns about the Ministry of Health's procurement for Covid-19 saliva testing services, at

16: Controller and Auditor-General (2022), Getting it right: Managing conflicts of interest in procurement, at

17: Controller and Auditor-General (2019), Using "functional leadership" to improve government procurement, at

18: Controller and Auditor-General (2021), Strategic suppliers: Understanding and managing the risks of service disruption, paragraph 3.34, at

19: Controller and Auditor-General (2020), Local government procurement, at

20: Controller and Auditor-General (2022), Matters arising from our audits of the 2021-31 long-term plans, at

21: The Government Electronic Tender Service is a free online service designed to promote open and fair competition for New Zealand Government contract opportunities. The Government Procurement Rules require public organisations to list contract opportunities on the Government Electronic Tender Service.

22: Controller and Auditor-General (2019), Department of Corrections' procurement of rapid deployment of prison accommodation, at

23: Controller and Auditor-General (2021), Response to concerns about the Ministry of Health's procurement for Covid-19 saliva testing services, at