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Planning Construction Procurement

An overview to the guides

Version date October 2015

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

date October 2015 ISBN/ISSN: 978-0-908335-96-1 (Online) New Zealand Government Procurement PO Box 1473 Wellington

New Zealand Government Procurement

PO Box 1473 Wellington 6140 New Zealand

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.

and Employment on behalf of the Crown, or its licensors. Except where otherwise noted, this work

Except where otherwise noted, this work is licensed under the Creative Commons Attribution 4.0 New Zealand licence. In essence, you are free to copy, distribute and adapt the work, as long as you attribute the work to the Crown and abide by the other licence terms. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/. Please note that no departmental or governmental emblem, logo or Coat of Arms may be used in any way which infringes any provision of the Flags, Emblems, and Names Protection Act 1981. Attribution to the Crown should be in written form and not by reproduction of any such emblem, logo or Coat of Arms.

Permission to re-use referenced third party copyright material cannot be given by the Ministry of Business, Innovation and Employment.

Foreword As Functional Leader for Government Procurement I am pleased to introduce this suite of

Foreword

As Functional Leader for Government Procurement I am pleased to introduce this suite of Construction Procurement Guidance. These guides represent the government’s standards of good practice for the development of a government agency’s 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. Government’s 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.

to a safe and secure built environment for New Zealanders. David Smol Chief Executive Ministry of

David Smol Chief Executive Ministry of Business, Innovation and Employment

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GUIDANCE FOR THE CONSTRUCTION PROCUREMENT LIFECYCLE 8. Review 1. Initiate project 7. Manage contract and

GUIDANCE FOR

THE CONSTRUCTION

PROCUREMENT LIFECYCLE

8. Review 1. Initiate project 7. Manage contract and 2. Identify needs and relationship analyse
8.
Review
1. Initiate
project
7.
Manage
contract and
2.
Identify needs and
relationship
analyse the market
6.
Negotiate and
3.
Specify requirements
award contract
5.
Approach
4 . Plan
market and
approach to
select suppliers
market and
evaluation
PLAN

PLAN

SOURCE

MANAGE

GUIDANCE MBIE MASTERING PROCUREMENTTREASURYSUPPORTING

    TRADITIONAL AREA OF SUPPLIER CONTINUOUS
 
    TRADITIONAL AREA OF SUPPLIER CONTINUOUS
 
    TRADITIONAL AREA OF SUPPLIER CONTINUOUS

TRADITIONAL AREA OF

    TRADITIONAL AREA OF SUPPLIER CONTINUOUS

SUPPLIER

    TRADITIONAL AREA OF SUPPLIER CONTINUOUS

CONTINUOUS

    TRADITIONAL AREA OF SUPPLIER CONTINUOUS
   

PROCUREMENT FOCUS

MANAGEMENT

IMPROVEMENT

VALUE

Detailed business case                        
Detailed business case                        
Detailed business case                        
Detailed business case                        

Detailed business case

   
   
   
   
   
                         
 
 
 
Detailed business case                          

WHERE THE GUIDES CAN HELP YOUR THINKING

BETTER

BUSINESS CASE

PROCESS

MATCHING

       

COMPLEXITY

COMPLEXITY
COMPLEXITY
COMPLEXITY
COMPLEXITY

TO CAPABILITY

DEVELOPING

YOUR

YOUR
YOUR
YOUR
YOUR

PROCUREMENT

STRATEGY

RISK

 
RISK  
RISK  
RISK  

HEALTH AND

HEALTH AND
HEALTH AND
HEALTH AND

SAFETY

BUILDING

INFORMATION

INFORMATION
INFORMATION
INFORMATION

MODELLING

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About this document Purpose This guide is part of a suite of guidance documents developed

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 Government’s 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 Treasury’s 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

Primary users

Description

An overview to the guides

Agencies and industry organisations involved or interested in public sector projects

This document; provides a high level overview of the suite of guidance documents

A

guide to matching capability to

Agencies responsible for

Provides a structured approach for matching the capabilities of key stakeholders to the complexity of the project environment

complexity

delivering major capital projects or programmes of work

guide to developing your procurement strategy

A

Agencies or industry organisations involved in delivering public sector projects

Provides guidance on:

assessing delivery options and identifying a delivery model that accommodates a project’s characteristics, risks and circumstances

   

good practices of tendering and contracting

Achieving construction productivity gains by adopting BIM

All agencies

Provides a general overview of Building Information Modelling (BIM), its advantages, and when it is appropriate to use

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Title Primary users Description A guide to risk and value management Agencies or industry organisations

Title

Primary users

Description

A guide to risk and value management

Agencies or industry organisations involved in delivering public sector projects

Provides a structured approach for:

identifying and managing project values, to best meet business needs

 

capturing and managing the risks associated with a project’s solution, to offer the best whole-of-life value

A guide to health and safety and employment standards at work

All agencies, particularly governance and management teams

Provides a summary of legislative obligations relevant to construction, and guidance on 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
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 MBIE’s website:

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Relevant Government policy To ensure that your project delivers value for money and is aligned

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 Government’s 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 Zealand’s 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.

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Cabinet Office Circular 15/5 Cabinet Office Circular 15/5 sets out the Government’s investment management expectations

Cabinet Office Circular 15/5

Cabinet Office Circular 15/5 sets out the Government’s investment management expectations, which certain public sector agencies 1 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

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.

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