Planning Construction Procurement

An overview to the guides

Version date October 2015

ISBN/ISSN: 978-0-908335-96-1 (Online)

New Zealand Government Procurement

PO Box 1473
Wellington 6140
New Zealand

www.procurement.govt.nz
procurement@mbie.govt.nz

CROWN COPYRIGHT 2015

The Planning Construction Procurement suite of guidance is protected by copyright owned by the Ministry of Business, Innovation and
Employment on behalf of the Crown, or its licensors.

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Foreword

As Functional Leader for Government Procurement I am pleased to introduce this suite of Construction
Procurement Guidance. These guides represent the governments standards of good practice for the
development of a government agencys construction procurement strategy.
Over $7 billion is spent annually by government agencies on construction and infrastructure. While many
government agencies are experienced in delivering major construction projects, there has been a significant
increase in construction activity by agencies that do not routinely undertake this type of procurement. These
projects leave a lasting impact on the local communities that use the facilities and the New Zealand economy
as a whole; it is essential they are managed well and deliver value for money. Although there is no one size fits
all solution to the delivery of complex infrastructure in government, there are common good practices that
can be more consistently applied.
This guidance will support government agencies in their thinking when planning and delivering major capital
projects or programmes. The suite is not designed to replace professional advice but to support government
agencies to better understand some of the key issues to consider when developing their procurement
approach.
Included in this suite is specific guidance on how government agencies can take a lead role to improve
workplace safety when managing construction projects. Governments objective is to reduce the rate of
fatalities and serious injuries in the workplace by at least 25% by 2020. Government agencies have a collective
responsibility in ensuring we meet this target and this guidance supports us to do that. MBIE will build on this
work by developing a tool to help government agencies weight and evaluate health and safety considerations
in their wider procurement activity.
We are grateful to a number of construction industry organisations and government agencies that have helped
shape these guides with their feedback and advice. Since the Canterbury earthquakes many of these
organisations have been working in extraordinary situations. Valuable lessons have been learned and we are
grateful for the input of government agencies and industry members who found themselves managing massive
builds under difficult and urgent circumstances.
I am confident this guidance will help deliver value for money on our construction projects and significantly
contribute to a safe and secure built environment for New Zealanders.

David Smol
Chief Executive
Ministry of Business, Innovation and Employment

NEW ZEALAND GOVERNMENT PROCUREMENT 3 AN OVERVIEW TO THE GUIDES

 8. Review 1. Initiate
project

7. Manage
GUIDANCE FOR cont ract and
relationship
2. Ident ify needs and
analyse t he market

PLAN
THE CONSTRUCTION
PROCUREMENT LIFECYCLE 6. Negotiat e and
award contract
3. Specify requirement s

5. Approach 4. Plan
market and approach to
select suppliers market and
evaluat ion

PLAN SOURCE MANAGE

TRADITIONAL AREA OF SUPPLIER CONTINUOUS
PROCUREMENT FOCUS MANAGEMENT IMPROVEMENT
MBIE MASTERING PROCUREMENT

BEYOND THIS PHASE

VALUE OPPORTUNITY IS LIMITED

1. Initiate Project 2. Ident ify needs 3. Specify 4. Plan approach 5. Approach 6. Negotiat e and 7. Manage 8. Review
and analyse t he requirements t o market and market and award contract cont ract and
market evaluat ion select suppliers relationship
TREASURY

Programme
BETTER
Strategic business case Implement at ion
BUSINESS CASE Det ailed business case
assessment or indicat ive business case
PROCESS
business case

WHERE THE GUIDES CAN HELP YOUR THINKING

MATCHING
COMPLEXITY
TO CAPABILITY

DEVELOPING
SUPPORTING GUIDANCE

YOUR
PROCUREMENT
STRATEGY

RISK

HEALTH AND
SAFETY

BUILDING
INFORMATION
MODELLING

NEW ZEALAND GOVERNMENT PROCUREMENT 4 AN OVERVIEW TO THE GUIDES

About this document

Purpose
This guide is part of a suite of guidance documents developed by the New Zealand Ministry of Business,
Innovation and Employment (MBIE) for New Zealand public sector agencies (agencies). Each guide provides
standards of good practice on a specific aspect of the construction procurement process.
The purpose of providing the suite of guides is to:
modernise the Governments approach to construction procurement to align with good international
practice and provide better value for the New Zealand public
encourage agencies to take a strategic approach earlier in the planning of construction procurement
show how using these guides links to other government-directed requirements such as Treasurys Better
Business Case (BBC)
provide a plain English format that is easy for agencies and suppliers to use.

Components of suite
The set of Planning Construction Procurement guides to support the construction procurement process
comprises the following documents:
Title
An overview to the guides
A guide to matching capability to
complexity
A guide to developing your
procurement strategy
Achieving construction productivity
gains by adopting BIM
Primary users
Agencies and industry
organisations involved or
interested in public sector
projects
Agencies responsible for
delivering major capital
projects or programmes of
work
Agencies or industry
organisations involved in
delivering public sector
projects
All agencies
Description
This document; provides a high level overview of
the suite of guidance documents
Provides a structured approach for matching the
capabilities of key stakeholders to the complexity
of the project environment
Provides guidance on:
assessing delivery options and identifying a
delivery model that accommodates a
projects characteristics, risks and
circumstances
good practices of tendering and contracting
Provides a general overview of Building
Information Modelling (BIM), its advantages, and
when it is appropriate to use

NEW ZEALAND GOVERNMENT PROCUREMENT 5 AN OVERVIEW TO THE GUIDES

Title Primary users Description
A guide to risk and value Agencies or industry Provides a structured approach for:
management organisations involved in identifying and managing project values, to
delivering public sector best meet business needs
projects capturing and managing the risks associated
with a projects solution, to offer the best
whole-of-life value
A guide to health and safety and All agencies, particularly Provides a summary of legislative obligations
employment standards at work governance and relevant to construction, and guidance on
management teams ensuring these obligations are met
These guides are intended to supplement the MBIE Guide to Mastering Procurement, which provides guidance
around the eight stage procurement lifecycle. The diagram on page 4 illustrates how these guides relate to
each of these stages.
Each guide is intended to also be used in conjunction with the Government Rules of Sourcing, and with other
MBIE guides and references. Each guide lists the relevant references that support the activities it covers.

How this guide was developed

MBIE developed this guide, Planning Construction Procurement An overview to the guides, with feedback
from selected local industry and government agencies. It is available on the website
www.procurement.govt.nz

Using the guides

Throughout the guides in this suite you will see shaded boxes with more information, tips and tools and
templates. They can be used to assist with interpretation and to give you greater context.
ICONS
The following icons are used to show supplementary information.

Further Tips Quick Checklist Good Word Excel tool

information reference practice template

Definitions of some specific terms can vary between the guides, such as client or sponsor. Each guide
provides definitions that apply for the context covered in that specific guide.

For more information

You can read more about New Zealand Government Procurement policy and practice at MBIEs website:
www.procurement.govt.nz

NEW ZEALAND GOVERNMENT PROCUREMENT 6 AN OVERVIEW TO THE GUIDES

Relevant Government policy

To ensure that your project delivers value for money and is aligned with good practice, refer to the
Government Rules of Sourcing, Cabinet Office Circular 15/5 and the New Zealand Better Business Case
guidance notes. These frameworks set out Governments expectations for the management of procurement
and capital expenditure.
(Each guide in this suite may also list additional references that relate specifically to that guide.)

Government Rules of Sourcing

The Government Rules of Sourcing (the Rules) represent internationally recognised standards of good
procurement practice. They provide a flexible framework and a set of principles which supports agencies to
make good commercial procurement decisions. They include a focus on early market engagement and
planning and managing for great results.
No two projects are the same, but the same good practice principles always apply. A sound knowledge of the
Rules will help agencies meet their obligations and deliver value for money outcomes that benefit all New
Zealanders, across the varied projects they engage in.
The Rules outline a number of obligations including:
open tendering over relevant thresholds
providing sufficient time for tender responses
awarding the contract based on best value for money (which is not always the lowest price)
applying the five principles of Government Procurement.
All Crown entities (excluding school boards of trustees), Public Service Departments, the New Zealand Police
Force and the Defence Force must apply the Rules over certain thresholds. Other parts of the Public Service
are encouraged to follow the Rules.
Following the Rules helps ensure projects deliver value for money outcomes and are managed in a way that is
open, transparent and aligned with New Zealands international obligations.
These five principles of Government Procurement are a good place to start when applying the Rules:
1. Plan and manage for great results
2. Be fair to all suppliers
3. Get the right supplier
4. Get the best deal for everyone
5. Play by the Rules.
Using the guides in this suite will help agencies achieve these outcomes.

NEW ZEALAND GOVERNMENT PROCUREMENT 7 AN OVERVIEW TO THE GUIDES

Cabinet Office Circular 15/5
Cabinet Office Circular 15/5 sets out the Governments investment management expectations, which certain
public sector agencies1 must follow for high value and/or high risk projects. Depending on the nature of the
project, this may include completing the following processes:
Gateway reviews
Better Business Case (BBC) process, including reviews by the Corporate Centre
Major projects monitoring
MBIE significant procurement plan review.
If your project is covered by these processes, it is important to plan ahead and ensure that your approach
aligns with minimum standards and process requirements. Following this guide will support agencies in
meeting these requirements.

Better Business Case Guidance

The BBC process includes guidance on what should be considered, planned and analysed and how information
should be presented in each BBC submitted for review. The BBC guidance also contains information on risk
management, which will be expanded on in this guidance.

References and tools

Government Rules of Sourcing

Cabinet Office Circular 15/5

Better Business Case Guidance

www.procurement.govt.nz
Advice: procurement@mbie.govt.nz

MBIE Mastering Procurement Guide

We are grateful to the following organisations for providing feedback to the first edition of the Construction Procurement
Guidance:

Association of Consulting Engineers New Zealand

Building Industry Federation
Construction Strategy Group
Ministry of Foreign Affairs and Trade
Ministry of Education
New Zealand Institute of Quantity Surveyors
Plant & Food Research
The Treasury
University of Canterbury

1
Refer to CO (15) 5 for a comprehensive list of public sector agencies to which the circular applies.
NEW ZEALAND GOVERNMENT PROCUREMENT 8 AN OVERVIEW TO THE GUIDES