The third edition of the Government Rules of Sourcing, aka the “Rules”, replaces previous editions on 1st July 2015. Main change in the 3rd edition is that 103 additional agencies are to apply the new Rules.
The extension means that Crown Agents such as District Health Boards and independent Crown entities are now mandated to apply the Rules. It is also interesting to note that State Sector Agencies such as SOE’s and Public Sector Agencies such as Regional Council and Territorial Authorities are specially listed as being ‘encouraged’ to apply the Rules.
For the metals based industry sector delivering products and services to those government and public sector agencies, it is more important than ever to follow good procurement practice.
As the better we respond to the Rules the more likely it is that we win business. Business not only in the local but also export markets and specifically within the WTO countries who like New Zealand have signed up as members of the Government Procurement Agreement (GPA).
As a reminder the “Rules” focus mainly on the process of sourcing. Sourcing is only part of the procurement lifecycle. It covers planning, market research, approaching the market, evaluating responses, and negotiating and awarding the contract.
The Rules must be read together with the five Principles of Government Procurement which advice procurers to follow under principle 4 “Get the Best Deal for Everyone” of the most significant value propositions for our industry. For example:
- Get best value for money – account for all costs and benefits over the lifetime of the goods or services.
- Make balanced decisions – consider the social, environmental and economic effects of the deal.
- Encourage and be receptive to new ideas and ways of doing things – don’t be too prescriptive.
- Take calculated risks and reward new ideas.
- Have clear performance measures – monitor and manage to make sure you get great results.
- Work together with suppliers to make ongoing savings and improvements.
- It’s more than just agreeing the deal – be accountable for the results.
Amongst other things the Rules are to strengthen accountability of how agencies spend taxpayers’ money by providing a framework that promotes responsible spending when purchasing goods, services, and works.
They are to promote our New Zealand values of being committed to open, transparent and competitive government procurement that delivers best value for money (which isn’t always the cheapest price) and does not discriminate against suppliers (whether domestic or international), and meets agreed international standards.
The principle of value for money is about getting the best possible outcome over the whole-of-life of the goods, services or works. Selecting the most appropriate procurement process that is proportionate to the value, risk and complexity of the procurement will help achieve value for money. Good procurement is about being risk aware, not necessarily risk averse.
The HERA position on the introduction of the new Government Rules of Sourcing remains unchanged. With the new Rules Government has provided to the public sector procurers best international procurement practice and following it makes not only sense for the public sector but also for private sector procurement.
The biggest challenge for the government officials is now the Rules implementation. As it requires getting largely away from the traditional lowest cost procurement decision making and being risk averse, this is not business as usual a requires a step change.
Our industry must take advantage of new business opportunities coming from the application of the new Rules and is encouraged assisting the NZ public sector procurers in its application.
This can be done by providing tenders – even on a voluntary basis – which respond particularly to the value for money proposition over the whole product life cycle and give account of the balance decision making criteria on how your manufacturing process considers the social, environmental and economic effects of your New Zealand made offering.
Just as a reminder, HERA has developed practical tools which assist procurers and tenders alike in meeting the balanced decision making criteria through the development of a decision making tool by BERL.