The 4th edition of the Government Procurement Rules (Rules) were published this month. They are the good practice standards for government procurement, and were last substantially revised in March 2015.

The Rules apply to all public service departments, police, defence force and state services agencies, with a number of other central and local government agencies expected or encouraged to have regard to the Rules.

Government agencies spend approximately $41 billion dollars (around 18 percent of New Zealand’s GDP) annually on goods and services from external suppliers. The Rules are key to the Government’s effort to deliver better public value and public services.

Government agencies have until 1 October this year to prepare for the new Rules, although they are able to adopt the Rules immediately. Material changes include:

  • A wider range of factors to be taken into account during the process of sourcing.
  • Changes to construction procurement.
  • Increased reporting obligations.

In this FYI, we highlight some of the key changes.

Using procurement to achieve broader social and economic outcomes

The 3rd edition of the Rules broadly referenced the need for agencies to make balanced decisions which considered the social, environmental and economic effects of deals made.

The new Rules are more prescriptive, expressly encouraging and in some cases requiring agencies to consider secondary benefits, including environmental, social, economic and cultural outcomes when making sourcing decisions.

Implementing Priority Outcomes

The Rules identify four Priority Outcomes, that few would dispute:

  • Increase New Zealand businesses’ access to government procurement.
  • Increase the size and skill level of the domestic construction sector workforce.
  • Improve conditions for workers and future-proof the ability of New Zealand businesses to trade.
  • Support the transition to a net zero emissions economy and assist the Government to meet its goal of significant reduction in waste by 2020 and beyond.

The priority outcomes are not mandatory for all agencies. The Government will designate particular contracts or sectors where one or more of these priority outcomes must be implemented.

Increasing access for New Zealand businesses

When procuring construction contracts, agencies must consider how they can create opportunities for New Zealand businesses. This recognises that domestic firms may have lower work capacity and are less able to utilise economies of scale than international competitors. Following sourcing, agencies are required to monitor the commitments made by contracted parties relating to increasing access for NZ businesses.

Examples include structuring procurement into separate parts and publishing as a tender with separate subcategories, allowing smaller New Zealand firms to compete. Where such division is not possible, agencies are encouraged to engage with contracted parties to consider how New Zealand businesses could be included in the supply chain.

This requirement must be read against rule 3, which requires agencies to “treat suppliers from another country no less favourably than New Zealand suppliers”, which in turn reflects obligations in many FTAs.

Construction skills and training, improving conditions for workers (rules 18 and 19)

Agencies must include questions about the skills development and training practices of the supplier and their subcontractors when procuring construction works over $9 million. This reflects the Government’s stated priority of growing the capability and capacity of the construction workforce.

The Rules also require that all designated contracts set out expectations as to supplier compliance with safety standards and associated MBIE guidance. Agencies cannot simply assume that contractors will comply and are required to monitor them.

Move towards zero emissions and designing waste out of the system (rule 20)

Agencies entering into designated contracts are required to support procurement of low-emissions and low-waste goods, services and works, and encourage innovation to significantly reduce emission and waste impacts from goods and services.

All agencies are encouraged to support these goals, although it is not mandatory.

The rules specifically note the All of Government motor vehicle contract (a designated contract) and the guidance that MBIE has produced relating to low-emissions fleet options.

Construction procurement (rules 18, 64, 69)

The Rules will apply to a greater number of new construction works, with the relevant value threshold lowered from $10 million to $9 million (with provision for an annual review).

A rule referring to Private Public Partnerships procurement and the requirement to consult with the Treasury PPP team has been removed. There is a new requirement that all procurements of infrastructure with a total ownership cost of $50 million must consult with Treasury’s Interim Infrastructure Transactions Unit, established in November 2018 and soon to shift to the new NZ Infrastructure Commission/Te Waihanga.

“Where appropriate”, agencies are required to apply the good practices set out in the Construction Procurement guides when procuring construction works. There are four Guides published by MBIE website, including “matching capability to complexity” and “risk and value management”. Where the guides are not used, agencies must be able to produce documented evidence of the rationale for doing so.


Cases for exceptions can be made. In the same week as the Rules came out, the Minister of Defence announced a decision to spend over $1bn on SuperHercules aircraft to be acquired through a non-competitive process; and gave credible reasons why that was done.

Additional reporting obligations (rules 53, 70 and 71)

Greater reporting obligations have been implemented in the new Rules. Agencies are required to:

  • Provide data and information to the Chief Executive of MBIE on procurement activity including the Broader Outcomes discussed above.
  • Submit a completed Procurement Capability Index (PCI) self-assessment to MBIE annually as part of reviewing their own capability;
  • Maintain a Significant Service Contracts Framework (SSCF) report, and update it every six months. This framework records contracts that are critically important to the business and pose a significant risk and / or impact in the event of supplier failure.
Uncertainty regarding permissible considerations and weighting

An issue our local authority clients often encounter is whether or not a local authority can favour local suppliers ahead of those outside the district or region in making procurement decisions. This issue can also arise for central Government agencies wanting to prefer local providers.

While the Rules forbid discrimination against international firms, they do not expressly address how a “local verses national” assessment should be approached, nor whether it is even a permissible consideration.

Different industries have different considerations in this area:

  • The 2019 Defence Capability Plan contains a chapter on “Working with Industry” with a clear focus on favouring local suppliers and the bold statement “value for money is enhanced when New Zealand based suppliers are engaged in the supply and support of military capacity”. This is laudable, and not uncommon in defence procurement (the Australian submarine purchase programme appeared to have a significant focus where they should be built).  However, in the CPTPPA environment foreign suppliers will no doubt watch our procurement processes carefully.
  • Local authority approved activities funded by NZTA, and those provided by NZTA itself (such as State highways) must be procured using a procurement procedure approved by NZTA. NZTA has a 250 page manual of procurement procedures designed to meet the statutory objective of “best value for money”.

Being a statutory requirement, the NZTA Procurement Manual will prevail if there is inconsistency with the MBIE Rules.

The NZTA Procurement Manual unambiguously states (in a 2017 amendment) “Purchasers need to be careful not to favour a ‘local’ supplier over one from another district, region or county [sic “country”?] on the basis of a factor that is not relevant to delivery of the required outputs or outcome”.

If you would like legal advice on the application of these news rules or on updating your procurement practices, please get in touch with the authors below.


Michael Weatherall, Partner
Lisa Curran, Special Advisor

Construction Disputes – Are they on the rise?

A survey of construction industry members by Russell McVeagh has revealed that almost 61 percent of respondents are predicting an increase in the number of disputes. Some causes of a rise are within parties’ control, such as relationships, risk allocation and contract...

BuildLaw Issue 40

In this issue we look at the basis on which interest can be claimed in construction contract disputes and we discuss the changes announced by the government in April to stimulate the construction and infrastructure sectors post COVID-19. We feature an insightful...

Bought a house – got problems – no one wants to know?

Author: Hannah Stanley, Building Disputes Tribunal Registrar As a homeowner, discovering structural defects in your home is the last thing you want and most wonder where to go from there in terms of their rights and how to remedy the situation. The Courts are often a...

Assessing sums payable in the absence of a contract: Electrix Limited v The Fletcher Construction Company Limited [2020] NZHC 918

Authored by Michael Taylor, Joanna Trezise (Russell McVeagh), and Belinda Green (NZDRC) In a decision released on 6 May 2020, the High Court ordered The Fletcher Construction Company Limited to pay its subcontractor Electrix Limited about $7.5 million, plus GST and...

BuildLaw Issue 39

In this issue we look at the government guidelines for NZS3910:2013 contracts affected by Covid-19 Alert level 4 restrictions. We discuss adjudication injunctions caused by the virus and how they may help to provide some clarity to a rather cloudy area of law. We look...

BuildLaw Issue 38

December 2019 In this issue we look at a dispute over a home renovation contract that travelled all the way to the South Australian Supreme Court, highlighting the risks of not dealing with disputes promptly. We examine the ‘Emerald Book’ released earlier this year by...

Adjudication: calculating time over the Christmas period 2019-2020

What are the non-working days over the Christmas period this year?

The builder’s right to fix

Introduction When a dispute over defective building work turns ugly, the owner is sometimes tempted to refuse the builder the opportunity of returning to rectify the defects.  There are risks in this course.  This update considers a recent NSW Supreme Court decision...

The ‘collaborative’ future of construction and infrastructure procurement

Framework Contracting, that is well planned from the outset, can be an effective tool to deliver an entire programme of infrastructure with benefits for all sides. While it is simply one way to address resource constraints and the need for fair apportionment of risk...

Case In-Brief: Hybrid contracts and the payment provisions of the Construction Act

The Housing Grants, Construction and Regeneration Act 1998 (the Act) applies to “construction operations”. Where a contract relates to both “construction operations” and non-construction operations, the question arises of how payment mechanisms apply to construction...

BuildLaw Issue 37

October 2019 In this issue, we look at a NSW Supreme Court decision in White Constructions Pty Ltd v PBS Holdings Pty Ltd [2019] which found that the claimant, despite using an expert programmer, failed to sufficiently prove that a delay by the respondent caused delay...

The Supreme Court reinstatement is not a right that can be assigned

The Supreme Court has had the final say on the status of 'on sold' earthquake damaged properties insured by IAG at the time of the Canterbury earthquakes. In a judgment released yesterday, the Supreme Court by 3:2 majority, decided that owners of on sold properties...

Contractual appendices: ignore at your peril

Recently, a subcontractor in the UK was relieved of adverse ground conditions risk, despite contract amendments that sought to allocate that risk to the subcontractor- and it all hinged on an analysis of appendices to the contract. Appending documents to a contract...

New Government Procurement Rules Announced (4th Edition)

The 4th edition of the Government Procurement Rules (Rules) were published this month. They are the good practice standards for government procurement, and were last substantially revised in March 2015. The Rules apply to all public service departments, police,...

Building Law reforms: Raising the bar across the sector

By the Minister for Building and Construction, Jenny Salesa I’m proud of our building and construction industry, and the hard-working individuals that fill the wide and varied roles that make up the sector. It’s our fifth-largest industry by GDP and fourth-largest...

BuildLaw Issue 36

July 2019 In this issue we feature an article by the honourable Minister for Building and Construction, Jenny Salesa, with an invaluable insight on the proposed Building Law Reform Programme. In Case in Brief, Jeremy Glover makes a commentary on two recent...

BuildLaw Issue 35

April 2019 In this issue, we feature an article on the warning apartment owners may take from the recent Court of Appeal decision in Body Corporate S73368 v Otway. This decision creates some financial uncertainty for owners who could now be liable for repair costs to...

When can you go to Adjudication?

Under section 25 of the Act, any party to a construction contract is entitled to refer a dispute arising under that construction contract to adjudication except where the parties have agreed to refer disputes between them to arbitration and the arbitration is an...

Alliancing: what does the new NEC4 Alliance Contract have to offer?

By Claire King Fenwick Elliott LLPIn June 2018 the NEC published its first Alliance Contract “designed for use on major projects or programmes of work where longer-term collaborative ways of working are to be created”.[1] In this Insight we examine what is meant by...

BuildLaw Issue 34

December 2018 In this issue we investigate how the new retentions regime stacked up  in its first court case, in the Wellington High Court. We look at the new NEC4 Alliance Contract, trends in Asian leisure and hospitality, liquidated damages and receivables projects,...

Neutral Evaluation Revisited

by Royden Hindle [1] Neutral evaluation is a relatively little-used tool in the dispute resolution toolbox. Certainly, it has potential drawbacks: a party who is disappointed by an evaluator’s assessment may be slow to accept the outcome, while a party who feels...

A brief introduction to Adjudication

What is adjudication? Adjudication is a unique fast track statutory dispute resolution process or resolving building and construction disputes under the Act. It is the most commonly used dispute resolution process for resolving such disputes. Adjudication is quick and...

Initiating Adjudication: The Notice of Adjudication

Initiating Adjudication: Back to Basics   Part One: The Notice of Adjudication The preparation of the Notice of Adjudication is arguably the most important step in the Adjudication process under the Construction Contracts Act (the Act). It is that document...

Dispute Review Boards: a brief overview

Dispute Review Boards are known by many names. They are often referred to as Dispute Boards, Dispute Avoidance Boards, Dispute Adjudication Boards and Dispute Resolution Boards. Whatever their name, they have become a standard dispute...

Initiating Adjudication: Service of the Notice of Adjudication

Initiating Adjudication: Back to Basics   Part Two: Service of the Notice of Adjudication You have your Notice of Adjudication prepared, but what steps do you need to take to serve it? This note sets out in brief the requirements for service under the...

Initiating Adjudication: Appointing an Adjudicator

Initiating Adjudication: Back to Basics Part Three: Appointing an Adjudicator Following on from Part Two of our three-part series on initiating adjudication, in this note we briefly look at how to appoint an adjudicator under the Construction Contracts Act (the Act)....

BuildLaw Issue 33

November 2018 In this issue we feature delay analysis. We also look at challenging an adjudication determination in various jurisdictions, the perennial chestnut - who are the parties to the contract? force majeure clauses and causation, current problems besetting the...

BuildLaw Issue 32

June 2018 In this issue we feature 'no oral variation clauses in light of the recent UK Supreme Court decision in Rock Advertising v MWB. We also look at the Grenfell Tower Report and the suspension by MBIE of six CodeMark Certificates relating to ACPs, the...

Retentions – maxed out

Common retentions provisions in subcontracts may be unenforceable. In Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5, the High Court of Australia recently held that on its proper construction, the retention provisions in a subcontract that made...

BuildLaw Issue 31

March 2018 In this issue we feature the approach to judicial review of adjudicator's determinations taken by the courts in NSW and New Zealand. We also look at on-demand v conditional bonds, pitfalls of drafting a subsequent agreement on an underlying contract, the...

BuildLaw Issue 30

Dec 2017 In this issue we feature the Singapore Mataban case where the court confirms an adjudicator's decision to disregard an invalid payment response. We also look at the issue of non-conforming cladding that became notorious with the Grenfell Tower fire. Rebecca...

BuildLaw Issue 29

September 2017 In this issue we feature some of the challenges that are the hallmark of oral construction contracts. We also look at whether a duty of good faith applies to granting extensions of time, how final and binding is an expert determination, how not to amend...

BuildLaw Issue 28

June 2017 In this issue we feature natural justice and adjudications. We also look at representative defect claims and exclusion clauses, further amendments to the Arbitration Act, and the recent New Zealand Court of Appeals decisions in Ebert Construction v Sansom...

BuildLaw Issue 27

March 2017 In this issue we feature new changes to the Construction Contracts Act - the new statutory trust model for retentions which came into force on 31 March 2017 including the late introduction of a 'complying instrument' option as a means of protecting...

BuildLaw Issue 26

December 2016 In this issue we feature recent and imminent changes to the Construction Contracts Act - consultants included as from 1 September 2016 and a new statutory trust model for retentions comes into force on 31 March 2017. We also look at the 'Cinderella of...

BuildLaw Issue 25

September 2016 In this issue we feature "The Penalties Doctrine in International Construction Contracting: Where to from here?" - a paper delivered by Professor Doug Jones AO to the Society of Construction Law New Zealand Inc. in August of this year. We also feature a...

BuildLaw Issue 24

June 2016 In this issue we feature 'Judicial Remedies for Construction Defects: Common Law, Equity or Statute', a paper prepared by Philip Britton and delivered by Philip to the Society of Construction Law New Zealand Inc in March of this year. We also present...

BuildLaw Issue 23

March 2016 In this issue we feature construction professionals with two articles highlighting the risks associated with providing professional services and the standards society expects, and the law demands, of professionals, and a further article highlighting the...