New Zealand has begun implementing updated procurement rules across sectors including defence that ban offsets but outline requirements for ‘broader outcomes’ such as economic benefits.

The rules state that each government procurement agency, including the Ministry of Defence and the NZ Defence Force “must consider and incorporate where appropriate, broader outcomes when purchasing goods, services or works” with procurement agencies requested to designate such broader outcomes in tenders.

These require those involved to consider not only the whole-of-life cost of the procurement but also the costs and benefits to society, the environment, and the economy.

The new ‘Government Procurement Rules, 4th Edition’ were activated in October to replace the ‘Government Rules of Sourcing’ which were first published in 2013.

The principle of public value does not mean selecting the lower price but rather the best possible outcome

Contractors are requested in large procurements to structure contracts into separate subcategories to better enable small local businesses to compete for parts of the procurement.

Under Public Value Rule 4, the principle of public value does not mean selecting the lower price but rather the best possible outcome for the total cost of ownership; selecting the most appropriate procurement value that is proportionate to the value, risk and complexity of the procurement will help achieve public value.

The new procurement rules state that offsets, including offsets in defence procurement, will continue to be banned as discriminatory, stating “an agency must not ask for, take account of, or impose any offset at any stage in a procurement process.”

The NZ Defence Industry Association (NZDIA) said the new requirements present both challenges and opportunities to industry from outside and within NZ.

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For NZ, Australian or international companies interested in supplying government agencies, shorter and simpler tender documents could be expected as could more proportionate pre-conditions and mandatory requirements, with the responsibility for managing risk being placed with the party best able to do so.

Such companies could expect more explicit requested from agencies for information of how they were encouraging the development of NZ supply chains, the NZDIA said.

More scrutiny could also be expected of the terms imposed on sub-contractors, and obligations imposed for them to be paid in 30 days or less.