Council, 12 September 2012.

1. Introduction

The Christchurch City Council (the Council) is a territorial local authority with obligations to its ratepayers and the public as defined under the Local Government Act 2002. Procurement plays an important role in the delivery of Council outcomes, with a wide variety of goods, services and works being purchased from third party suppliers.

The Council recognises that it is a significant user of public money, and that the expenditure of this money has a significant impact on the local and domestic economy and the overall performance of the Council.

2. Purpose

This Procurement Policy states the procurement principles of the Council, and aims to:

  • Inform Council staff, and those acting on behalf of the Council, of the objectives, behaviours and
    principles appropriate when conducting procurement
  • Encourage a common understanding and consistent management practice across the Council
    organisation to realise procurement-related benefits
  • Promote transparency in how the Council manages its procurement
  • Ensure procurement practices are always consistent with legislation
  • Provide a framework for common understanding of Council procurement practices for potential

3. Definitions and scope

The Council requires the organisational procurement function to procure goods, services and works to deliver the levels of service and capital projects in the Long Term Plan.

Procurement and contract management is a significant activity of the Council. The Council procures a wide range of goods, services and works from an array of different markets. The requirements are diverse and complex, ranging from major and minor contracts with long term partnerships (e.g. roading, facilities management, recruitment and travel) to one off purchases.

This Procurement Policy will allow staff, whilst working within legislation, to also make well considered value and risk decisions by working to the Procurement Policy guidelines.

4. Alignment

The Procurement Policy is aligned to the following policies and legislation:

  • Christchurch City Council Code of Conduct
  • Christchurch City Council Supply Chain Sustainability Policy (2003)
  • Christchurch City Council Policy Tendering – sustainability consideration Timber from Tropical Rainforests (1991)
  • Christchurch City Council Corporate Environmental Policy statement (1997)
  • Christchurch City Council Sustainability Policy framework (2008)
  • Christchurch City Council Conflicts of Interest – Template (used in evaluation processes)
  • Christchurch City Council Purchasing Card Policy
  • Controller and Auditor-General’s Procurement Guidance for Public Entities, June 2008
  • Mandatory Rules for Procurement by Departments (Endorsed by Cabinet 18/04/06)
  • Policy Guide for Purchasers issued by the Ministry of Economic Development
  • Principles of Best Practice: Construction Procurement in New Zealand issued by the New Zealand
    Construction Industry Council
  • Any such other government policies on procurement which are applicable to local government
  • Applicable legislation, including the Local Government Act 2002, the Fair Trading Act 1986, the
    Official Information Act 1982, Local Government Official Information and Meetings Act 1987.

5. Procurement Policy parameters, objectives and application

The objectives of the Procurement Policy are to provide clear direction to management and staff in relation to the
procurement and purchasing function and establishes a decision framework that:

  • Ensures purchases are made in a transparent and accountable manner
  • Delivers best value through the most appropriate service provider
  • Ensures open and effective competition
  • Supports sustainability
  • Appropriately manages risk e.g. contractual, financial and sustainability
  • Promotes efficient purchasing practices and their continuous improvement
  • Encourages local suppliers and manufacturers
  • Ensures Council’s purchasing activities are in accordance with its legal responsibilities.

The Council expects all staff and business units to be guided in their procurement of goods, services and works
by the sensible application of the following principles and procurement policies.

5.1 Transparency and accountability

The Council is accountable for the use of public money through procurement, and must be able to give complete and accurate accounts of how public funds have been used and contracts awarded. This will be achieved by:

  • Following consistent processes and procedures that are in line with accepted good practice for public sector organisations and allow for transparency of decision-making
  • Maintaining appropriate records and minutes relating to procurement activities that allow for subsequent review of the decision making process
  • Conducting all procurement in a fair, consistent, accurate and unbiased manner, acting in good faith
  • Ensuring Council is only involved in the procurement of goods, works or services where budget provision has been made through the LTP / Annual Plan process, or by specific Council resolution
  • Ensuring that where Council is procuring goods, works or services which require non-budgeted expenditure the rationale is clearly documented and the expenditure is approved by the appropriate delegated authority
  • All procurement decisions and commitments being made in accordance with delegations recorded in the Delegations Register
  • Not accepting gifts or gratuities from prospective suppliers who are actively tendering or negotiating for Council contracts
  • Declaring all personal interests that may affect (or could be perceived to affect) their impartiality, consistent with the Conflict of Interest Policy and Procedure (a disclosure is used in evaluation processes).

5.2 Value for money

The Council has a responsibility to manage its resources in an effective and efficient manner. Council will seek the best possible outcome for the total cost of ownership (or whole of life cost). This will be achieved by:

  • Basing procurement decisions on whole-of-life costs (or total cost of ownership) rather than just consideration of the lowest price
  • Including an appropriate balance of financial and non-financial (eg. functional, technical, environmental, quality, performance, risk etc) selection criteria in procurement decision making
  • Subjecting proposals and tenders received by suppliers to robust evaluation processes, including benchmarking, and / or comparison of value between proposals or bids
  • Periodically reviewing and benchmarking Council’s supply arrangements, to ensure best value is being achieved
  • Selecting procurement methods and forms of contract that are appropriate to the scale (value risk and complexity) of the Council’s requirements
  • Ensuring that suppliers acknowledge and agree that any disbursements, surcharges or margins invoiced to Council must be an identifiable cost relating to the respective project and pre-approved by Council in writing.

5.3 Thinking strategically and acting as one organisation

When making procurement decisions the Council will consider long term benefits, economic impacts, consequences and implications to the whole organisation and wider community. Council business units are expected to act collaboratively, to leverage supply requirements and achieve best value. This will be supported by:

  • Forward planning procurement activities and contract expiries to ensure sufficient time is allowed and appropriate resources are available
  • Ensuring that staff with the responsibility for managing and overseeing procurement activities are suitably skilled and experienced, and external advice and capability is utilised when appropriate
  • Ensuring that suppliers enter into Council’s standard terms and conditions at all times. Any material terms and conditions proposed by suppliers and any material variations to Council’s standard terms and conditions shall be reviewed and approved by Legal Services before Council execution.
  • Ensuring that if Council engages a third party to procure goods, services or works on Council’s behalf, that third party adheres to this Procurement Policy.
  • Asking suppliers to apply innovative thinking and provide advice to Council to ensure continuous improvement of goods, services and works procured.

5.4 Effective market competition

The Council recognises that the development of competitive supply markets will ensure sustainable sources of supply, and where mature markets exist a competitive procurement process is likely to result in a better procurement outcome for Council. Therefore, all qualified suppliers must have a reasonable opportunity to participate in all Council procurements. This will be achieved by:

  • Ensuring that Council’s default position is to engage suppliers by way of an open tender unless there is good reason to do otherwise and such rationale is clearly recorded and authorised by staff with the appropriate delegated authority.
  • Ensuring that at the expiry of the contract term, the goods, services or works required by Council are retendered and the contract is not automatically rolled over unless there is good reason to do so and such rationale is clearly recorded and authorised by staff with the appropriate delegated authority.

5.5 Emergency Procurement

In an emergency, it may not be possible to satisfy the principle of open and effective competition throughout the procurement process. Parts of the procurement process may therefore be dispensed with to react quickly to genuinely unforeseen urgent circumstances. Relevant criteria are:

  • Life, property or equipment is immediately at risk; or
  • Standards of public health, welfare or safety need to be re-established without delay (such as disaster relief).

The Council must still act lawfully and with integrity, be prepared to account for all emergency procurements and act within delegated authority. The Council acknowledges that in emergency situations there can be a higher risk of fraud, bribery, corruption and inflated prices. Council will seek to take action to safeguard against these possibilities.

5.6 Local supply

The Council will be a fair, but demanding buyer who will purchase from competitive suppliers where they offer best value for money. The Council will seek to promote the Christchurch economy through providing full and fair opportunity to compete for Council business. This will be achieved by:

  • Ensuring local suppliers are included within invitations to tender and quote whenever practical
  • Publishing a schedule of planned procurement opportunities on the Council website, and publicly advertising tender opportunities when appropriate
  • Considering potential commercial and practical advantages in purchasing locally produced goods and services.
  • Considering local economic implications when planning major procurement activities and packaging work for contracts.
  • Ensuring an active preference within a small financial cost for local firms for the supply of goods and services, based on whole of life costs.
  • Ensuring that all future tender documents be worded in such a way as to enable a comparison between New Zealand and overseas produced goods, where relevant.

Having given local suppliers full and fair opportunity and assessed any commercial and practical value for money advantages associated with local supply, Council will buy from the best source available, according to its own judgement of all costs, benefits and overall value for money.

5.7 Sustainability

The Council will seek to use its procurement activity to promote sustainable and viable business practices that balance the delivery of economic, environmental, social and cultural outcomes. This will be achieved by:

  • Giving preference, where it is practicable and affordable and can be appropriately assessed, to suppliers or contractors who can show that they are actively working towards the preferences set out in the Council's Supply Chain Sustainability Policy.

5.8 The value of relationships

The Council recognises the value of effective and honest relationships with suppliers and other stakeholders involved in procurement activities. Developing long term and mutually beneficial relationships with key suppliers and commercial partners will support Council in achieving best value. Council will actively manage contracts and relationships, to sustain and increase supplier performance through the full contract term.

5.9 Fairness and lawfulness

As a public entity, the Council’s overriding and fundamental public law obligation is always to act fairly and reasonably. The Council must at all times comply with all relevant and applicable legislation.

The Council must not, except to the extent required by law (Official Information Act 1982 and Local Government Official Information and Meetings Act 1987), disclose confidential information that would prejudice legitimate commercial interests of a particular supplier or might prejudice fair competition between suppliers, without the written authorisation of the supplier that provided the information.

Staff should seek legal advice on how to reconcile duties of this nature with Council’s contractual or common law obligations to maintain commercial confidentiality.

5.10 Practical considerations

When deciding how to give effect to this Procurement Policy the Council will consider the following:

  • The procurement requirements and resulting contractual arrangements 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 contractual arrangements may need to fit with the overall context of a more general relationship the external party may have with the Council or other relevant local government and government organisations
  • The Council will identify the risks of the procurement process and contractual agreement and consider how to manage those risks. The key is to get the right balance between risk and expected benefit, and to do so consciously
  • Where a significant risk is identified or there are significant issues with respect to contractual terms, staff are required to obtain guidance and approval from Council’s Legal Services Unit before proceeding with procurement.

6. References

  • New Zealand Transport Agency’s Procurement Manual
  • Auckland Council Draft Procurement Policy July 2011
  • Wellington City Council Draft Procurement Policy March 2010
  • All policies and documents referred to in paragraph ‘4. Alignment’