A new procurement environment

Print version: Brochure (PDF, 128 KB)

Getting better value for money from procurement

The NZ Transport Agency (NZTA) recently revised its policies and processes for procurement, and is working with others to create a new procurement environment that will help the sector obtain added value for money from long-term strategic thinking in regard to procurement.

The NZTA has developed a new Procurement manual that provides guidance on the new procurement processes. It also contains step-by-step guidance for approved organisations to develop procurement strategies, which in turn will help to create a new procurement environment. The NZ Transport Agency (NZTA) has recently introduced a new procurement environment and a new Procurement manual. This followed a comprehensive procurement review that started in 2006.

All approved organisations are expected to have an NZTA endorsed procurement strategy, have transitioned to the new procurement environment (and be using the new Procurement manual) by 1 October 2010. The Competitive pricing procedures manuals (CPPs) will be withdrawn at that point.

Why a new procurement environment?

The new procurement environment has come about in response to the government’s new direction for the land transport sector, a change in legislative requirements, the need to update procurement guidance in line with ‘best practice’, and through a desire to reduce the bureaucratic demands of the process.

Since the early 1990s, the Competitive Pricing Procedures manuals (CPPs) have guided the procurement process for physical works, professional services and public transport activities. Unintentionally, over time there has been an increasing focus on obtaining the lowest initial or up-front price, which does not always deliver best value for money over time. Also, there has been an increasing need for approved organisations to seek approval to depart from the standard procurement rules.

The Land Transport Management Act 2003 (LTMA) requires the NZTA to approve procurement procedures that are designed to obtain the best value for money spent. The LTMA does not define ‘value for money’, but there is an understanding globally that it means the best price over the life of the asset or service for the desired outcomes . It does not necessarily mean accepting the lowest priced proposal.

So what is new?

The new procurement environment promotes and supports upfront, long term strategic thinking around procurement activities. The Procurement manual provides a step by step guide to achieve this.
Approved organisations can use the more flexible procurement procedures contained in the new Procurement manual once they have developed a strategy which has been endorsed by the NZTA.
Some rules have been relaxed or removed.
The Procurement manual provides a lot more guidance on the whole end-to-end procurement process.

Benefits of the new procurement environment

The new procurement environment is principle based, and the pilot users have signalled that the manual is a practical, easy to use tool.

The new procurement environment gives approved organisations more flexibility to respond to the current economic situation and it provides transparency for their thinking.

The procurement procedures in the Procurement manual will help approved organisations to get better value from the money spent on transport.

Other benefits of the new approach are:

Flexibility – allowing organisations to fine tune procurement procedures to their own circumstances
Certainty and value for money – for suppliers aiming to meet organisation needs, and for internal planning
Competitive and efficient markets – managing issues of demand and supply in advance
Collaboration – with other purchasers to achieve efficiencies and with suppliers to deliver innovative solutions
Efficiency and reduced compliance costs – various approvals (such as to vary rules or use advanced components) are handled in the context of a procurement strategy, rather than on an ad hoc, reactive or case-by-case basis.

What is a procurement strategy?

A procurement strategy documents an approved organisation’s long-term integrated approach to the procurement of all transport activities funded through the National Land Transport Programme.

NZTA funding is available to approved organisations for the development of these strategies.

Characteristics of a value adding procurement strategy

Procurement strategies should:

be ‘living documents’ that guide procurement decision making and respond to change
be proportional and relevant – organisations with routine low-risk procurement are likely to have a relatively simple strategy. Conversely, complex, high risk procurement programmes will require a more complex strategy
have a minimum three year horizon
be regularly reviewed, at least once every three years
have corporate ownership and commitment within the organisation
be reviewed and endorsed by the NZTA.

Procurement manual

The purpose of the Procurement manual

The Procurement manual, to be used for activities funded through the National Land Transport Programme, is the tool that will help to create the new procurement environment by promoting and supporting long-term strategic thinking and obtaining value for money. It contains guidance to help obtain value for money and a step-by-step guide to developing a procurement strategy.

Strategic link with the National Land Transport Programme

Given the current economic climate there is an awareness that the 2009-12 National Land Transport Programme (NLTP) is under substantial fiscal pressure. By embracing the new procurement environment as early as possible, approved organisations* and the Highways and Network Operations Group of the NZTA can - through prudent procurement management - add value to their regional land transport programmes.

The new procurement environment promotes and supports long-term strategic thinking around procurement activities. Strategic thinking upfront is the key to success, and the Procurement manual provides a step-by-step guide to achieve that.

* Territorial authorities, regional councils, unitary authorities, Department of Conservation and Waitangi Trust

What should approved organisations do?

Approved organisations can use the Procurement manual now to start developing procurement strategies.

The NZTA is engaging with each approved organisation that does not have an NZTA endorsed strategy to agree a timeframe for developing a procurement strategy.

After having their procurement strategies endorsed by the NZTA, approved organisations can use the approved procurement procedures in the manual. (The new procedures are already being used by approved organisations who have been participating in the pilot.)

Approved organisations can be given approval to use the new procedures before they have an endorsed strategy in place during the transition period to 1 October 2010, providing they:

document the strategic, value for money context of each procurement activity; and
make a written commitment to the NZTA to produce a procurement strategy by 1 October 2010.

Approved organisations that would like to use the new procurement procedures, before their procurement strategy has been endorsed, should contact their local NZTA office.

It is envisaged that all approved organisations will have their strategies endorsed by October 2010, when the CPPs will be withdrawn.

NZTA support

The NZTA’s regional offices are available to help approved organisations develop their procurement strategies.

Approved organisations wishing to start procurement strategy preparation can use the guidelines in the Procurement manual.

Procurement manuals and support guides

Additional information

Frequently asked questions about the NZTA's procurement environment - July 2009

Procurement workshops - material for participants

The regional NZTA procurement workshops held from 17-27 August 2009 produced several items which may be of interest to participants. These include the PowerPoint presentation (PPT, 1.8 MB) and the technical update (Word, 181 KB).

Background information

See the background page for information about the procurement review consultation and feedback process, reference group and pilot of the interim version of the Procurement manual.

Contact us

If you would like to receive email messages alerting you to the latest NZTA procurement news or related communications, please email procurement@nzta.govt.nz.

Page updated: 13 October 2009