Strategy management review and update records:

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2 Strategy management - framework: Responsibility Group Manager Corporate (implementation) Strategic Policy Manager (update & development) Affected Managers (use and ownership) First adopted September 2010 (report no ) Historic revision dates New Next review date September 2013 Review frequency Three years (maximum) Approval authority Full Council resolution 10/276 Consultation required Council, affected staff, legal staff Electronic document DocSet ID number Associated documents Procurement Policy DocSet ID Procurement Rules DocSet ID Procurement Procedures (Process) DocSet ID Strategy management review and update records: Procurement Strategy Cindy Kent Strategic Policy Manager, September 2010 Thank you to the New Zealand Transport Agency (NZTA) for reviewing the draft strategy, and to the following Councils for sharing their Procurement Strategies with us: Matamata Piako District Council Gisborne District Council Central Otago District Council North Shore District Council Rotorua District Council

3 CONTENTS 1. Executive summary Page Introduction 1.2 Approach 1.3 Recommendation 2. Context Page Activity strategic objectives and outcomes 2.2 Objectives and outcomes for the Procurement Strategy 2.3 Assessing the usefulness of this strategy 3. Roading procurement Page Roading procurement programme 3.2 Roading procurement environment 3.3 The Transport Agency s procurement requirements 3.4 Approach to delivering the work programme 4. Implementation Page Capability and capacity 4.2 Internal procurement processes 4.3 Performance measurement and monitoring 4.4 Communication plan 4.5 Corporate ownership and internal endorsement Schedule 1 Page 19 Table 2: Roading supplier table Tables of contracts

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5 1. EXECUTIVE SUMMARY 1.1 Introduction Procurement includes all the business processes associated with purchasing. The Procurement Strategy deals with how Council will manage procurement in a sensible, prudent, efficient and transparent manner. The strategy focuses on contracts valued at $100k or more, and on multi-year contracts, although over time it is Council s intention to extend this approach to all procurement contracts. The strategy is the highest level document in Council s suite of procurement planning documents, and is implemented through the Procurement Policy and Procedures Manual and supporting rules, checklists and templates. Together, the documents provide a system to deal with the supplier markets to ensure that best value for money is achieved, fair competition is supported and competitive markets are encouraged to emerge. The strategy refers to the outcomes, principles, policies and rules guiding procurement decision making, and other documentation that must be considered when purchasing goods or services. The policies, rules and procurement decision making guidance material, are all included in the Procurement Policy and Procedures Manual. The manual also outlines the preferred supplier selection s and the delivery models (how Council will engage with the market and choose the successful tender). All documents are easily accessed through the Strategies, Plans & Policies section of the intranet. The strategy will be updated at least every three years in fulfilment of Council s continuous improvement ethos, whilst also ensuring that both taxpayers and ratepayers obtain value for money from each dollar spent within the district. Council is required by the New Zealand Transport Agency (NZTA) to produce a Procurement Strategy covering all projects funded through the National Land Transport Programme (NLTP). For the sake of consistency, Council has decided to extend the scope of this requirement to cover all Council funded activities. 1.2 Approach A collaborative ology was used to write the strategy, and is to be used for all three yearly reviews of the strategy, policy, rules and procedures: 1. The affected managers own the sections of the strategy dealing with their activities. 2. The Strategic Policy Manager is responsible for the long term development and maintenance of the strategy, which will be reviewed every three years. 3. The Group Manager Corporate is responsible for ensuring that the process and resultant procurement system is effectively and consistently implemented throughout all departments of Council. 4. Council s elected members are responsible for approval of the final strategy and for the periodic adoption of strategy reviews. In addition, the Council s Leadership Team has an ongoing review role, along with the NZTA, to ensure that the strategy meets (and continues to meet) both the Council s and the NZTA s success criteria. September South Waikato District Council Procurement Strategy P a g e 1

6 The approach to procurement is governed by a system of principles, policies and rules designed to deliver best value for money. In summary, where possible and appropriate, the strategy encourages staff to: 1. Write a procurement plan to ensure that all pertinent issues are addressed and the procurement parameters are approved before initiating a contractual arrangement. 2. Follow the principles, policies, rules and procedures when carrying out procurement, but balance these with being sensible, flexible and pragmatic in approach. 3. Seek advice when unsure (engineering, financial and legal) and use peer review when appropriate. 4. Approach the contract with an integrated, whole of life, sustainable development view. 1.3 Recommendation That the NZTA: 1. Endorse the Procurement Strategy (in particular, the roading section) and 2. Approve the use of in-house professional services. September South Waikato District Council Procurement Strategy P a g e 2

7 2. CONTEXT 2.1 Activity strategic objectives and outcomes Contracted services contribute to meeting Council s activity objectives, which are monitored and measured through activity levels of service. The levels of service are identified through consultation with the district community, and are recorded in Council s activity management plans and the 10 Year Plan (our long term plan). The activity objectives are set by Council as the best way for Council to contribute to meeting the community outcomes (also identified through consultation with the district community), which in turn achieves community sustainability and wellbeing. How we do this is recorded in the 10 Year Plan, and is also supported by Council strategies and policies: The aim: district sustainability and wellbeing Community Outcomes set by the community, reported in the 10 Year Plan Activity objectives, measured through levels of service to the community and key performance indicators in the 10 Year Plan, activity strategies, policies and asset management plans Basic building blocks: Council s day to day services, activities and projects; including the contribution of contracted services, works or products: these form the base of Council s work towards achieving district wide sustainability and wellbeing The activities of Council that have a large contract component are roading, water reticulation, wastewater treatment, stormwater management, landfills, refuse and recycling collection, parks and property management, swimming pool management, the provision of i-sites (information centres) and some corporate needs such as corporate information systems. Please refer to the 10 Year Plan (our Long Term Plan), activity strategies and Council s asset management plans for a detailed account of what each activity seeks to achieve, and how each activity is funded, monitored and measured. 2.2 Objectives and outcomes for the Procurement Strategy Strategic Objective The strategic objective of the Procurement Strategy is to set in place a system that effectively, consistently and efficiently supports Council staff in procuring the right contracted services needed to achieve best value for money, sustainable development and wellbeing of the district and the community. September South Waikato District Council Procurement Strategy P a g e 3

8 It also explicitly links the community outcomes, key performance indicators and levels of service to the procurement of services resulting in a seamless delivery of activity from individual contracts to community outcome. The strategy creates a level of certainty and predictability for Council, for potential suppliers and for other purchasers in the market, including other organisations that Council may co-operate with in the future. Finally, a clear strategy (together with our 10 Year Plan) provides transparency for the public regarding Council s long term procurement intentions Statement of success The strategy is successful when it: 1. Is applied consistently to all contracts of $100k or more (for multi-year contracts the total multiyear contract value should be used), and for all contracts that extend over five years or more. 2. Delivers contracts that contribute well to our community outcomes and the expected level of service for activities as defined in our 10 Year Plan. 3. Adds best value to the district for the money spent. 4. Becomes (over time) a continually improving and sustainable system, eliminating resource and time waste to become continually better, faster and more economical. Staff are encouraged to use the rules, procedures and templates as a guide when carrying out any procurement valued less than $100k. Staff are required to use the rules, procedures and templates for work valued at $100k or more (multi-year total value of the contract), or spanning timeframes of 5 years or more the documents are available to all staff under the main drop down menu strategies, plans and policies on our intranet. Departures from the procurement principles, policies and rules are to be authorised by the Chief Executive or a Group Manager and, for National Land Transport Programme funded activity, approved by New Zealand Transport Agency Principles The Auditor General has identified the following principles to be considered when procuring goods or services 1 : Accountability Council should be able to give a complete and accurate account of the use they have put public funds to. Openness Council should be transparent in the administration of funds. Value for money Council should use resources effectively, economically and without waste, with due regard for the total costs and benefits of an arrangement, and its contribution to the outcomes. Lawfulness Council must act within the law, and meet its legal obligations. Fairness Council has an obligation to act fairly and reasonably it must be impartial in its decision making. Integrity All Council staff must manage public resources with utmost integrity. 1 The Controller & Auditor-General, 2008: Procurement guidance for public entities Good practice guide. September South Waikato District Council Procurement Strategy P a g e 4

9 Council s corporate values, mission and vision (as reflected in the 10 Year Plan) form the base of our procurement principles. These are: 1. External funding and government subsidies are maximised wherever possible. 2. The focus is on providing the required level of service (quality) at the best price (cost) whilst considering the potential risk to Council. 3. Long term relationships and performance histories of providers are considered during procurement decision making. 4. Implementation of the Procurement Strategy is flexible, allowing for discretion and adaptation to rapidly changing political and economic factors. 5. Existing contracts are to be retained until they expire or are terminated; new contracts are to be drawn up in accordance with the Procurement Strategy. 6. All purchasing decisions consider health and safety compliance, have a whole of life outlook 2, and prioritise spending. 7. If all things are equal, Council takes a local approach where possible to procuring activities, so that integration and efficiencies are achieved. 8. If all things are equal, Council purchases more energy efficient, sustainable solutions considering issues such as asset efficiency, waste minimisation, resource maximisation and the use of renewable resources. 9. All procurement decision making is carried out in accordance with the Delegations Manual. 10. Adequate records are kept of all procurement decisions and variations, and records are to be kept in a manner that facilitates audit Policies Council s procurement policies and rules are contained in the Procurement Policy and Procedures Manual. A summary of the policies are as follows: 1. Adhere to Council s values as reflected in the 10 Year Plan. 2. Pursue best value for money the right combination of quality, quantity and price at the right place and time. 3. Maximise leverage gain economies of scale where possible. 4. Promote full and fair opportunity encourage open and effective competition. 5. Meet national sustainability, energy efficiency and environmental standards. 6. Establish formal commercial contracts that are sound and robust. The rules, procedures and templates that support the policies take Council staff step by step through the tendering process, whilst providing the templates required for every stage. 2 A whole of life approach is used when making procurement decisions not only on the acquisition cost but also on the costs of using and maintaining the product eg infrastructure support services (e.g. power, drainage etc), maintenance, consumables, servicing, spares, refurbishment, decommissioning and disposal. September South Waikato District Council Procurement Strategy P a g e 5

10 2.2.5 Procurement Rules The procurement rules are reflected in full in the Procurement Policy and Procedures Manual. In summary, the rules address the following issues: 1. Procurement documents are consistent with national, regional and local legislation, regulations and policy guidance documents. 2. Procurement documents are consistent with delegations. 3. Procurement rules and procedures are followed when preparing procurement documentation. 4. The supplier and contracts database is used and updated. 5. Procurement insurance standards are met. 6. Procurement risk is identified and managed. 7. The procurement delivery is consciously selected. Approved s currently include: 7.1. Staged (Council to retain involvement and control) 7.2. Design and Build (supplier to design and build) 7.3. Design and Implement (supplier to design, build & operate) 7.4. Shared Risk (public-private partnership to deliver the service) 7.5. Supplier Panel (a group of suppliers delivers a bundle of outputs for a group of activities) 7.6. Collaborative Alliance (collaborating with other councils, roading authorities or with the private sector) 8. The procurement supplier is selected with guidance from the supplier table - see Table 1 below. Approved s currently include: 8.1. Price Quality (balancing price and quality through the use of an assessment formula) 8.2. Lowest Price Conforming (lowest price that meets all Request for Tender specs.) 8.3. Direct Appointment (selection of supplier and negotiation of terms) 8.4. Quotation (appropriate supplier/s provide a price to do the work) 9. Procurement rules and procedures are followed when evaluating tenders and in relation to NZTA National Land Transport Programme subsidised contracts, the NZTA procedures and evaluation s are strictly followed. 10. All directly and indirectly involved staff and external advisers declare conflicts of interest, and staff do not accept gifts from suppliers during procurement. 11. Staff or consultants managing the procurement process are aware of contractual considerations and obligations. 12. Commercially sensitive information and intellectual property rights are recognised and managed. 13. Staff or consultants managing the procurement process are aware of liability issues, and routinely check indemnity and insurance sections of tender documents for amendments by tenderers. 14. Any external advisers are held to the same ethical standards, principles and behaviour that apply to Council staff. 15. Departures from the procurement system are authorised by the Chief Executive or a Group Manager and, for National Land Transport Programme funded activity, approved by NZTA. 16. Each contract is to include a termination clause. September South Waikato District Council Procurement Strategy P a g e 6

11 TABLE 1: SUPPLIER METHOD TABLE Cells coloured blue are the preferred s for that expenditure band. Programme Contract expenditure Approval by* Price quality Lowest price conforming Direct appointment Quotation All Council projects $0 $4,999 Budget holder $5,000 $24,999 $25,000 $49,999 $50,000 - $99,999 Budget holder Group Manager or Chief Executive Group Manager or Chief Executive Preferred supplier Preferred supplier 3 # 3 # Preferred supplier 3 # 3 # Preferred supplier $100,000 + Chief Executive 3 # Preferred supplier * All Budget holders and Group Managers need to refer to the Delegations Manual to ensure that they do not exceed their delegations. If delegations are exceeded, then the approval is to be escalated to the appropriate staff member. # The numbers in the blue coloured cells indicate the minimum number of bids Council would expect to receive. If the number of bids falls below this level, staff will continue with the process, but need to address the low level of response in the next process. Preferred suppliers will only be used for contracts with a value exceeding $50,000 if they are for bulk materials for asset replacement and improvement or if the contract is for the in-house delivery of water, wastewater or roading services. 2 # 2 # 2 # 2 # 2.3 Assessing the usefulness of this Strategy The effectiveness of this strategy will be monitored through the annual report which ensures that the 10 year plan key performance indicators set by Council are met. This includes activity levels of service, financial performance, quality of service to the community, adherence to health and safety guidelines and customer satisfaction. Any changes to the levels of service required by the community will be carried over to the procurement process and result in changes to contract specifications. Performance indicator monitoring is reported regularly so that any under performance of contractors will be quickly identified. Any adjustments or improvements to the procurement principles, policies, rules and procedures will be addressed during the 3 year review cycle or sooner depending on the seriousness of the issue. September South Waikato District Council Procurement Strategy P a g e 7

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13 3 ROADING PROCUREMENT 3.1 Roading Procurement Programme Introduction Much of the information in this section is based on the 10 Year Plan which presents Council s planned expenditure levels and expected trends for the current 10 year period. It also summarises the role of the New Zealand Transport Agency (NZTA) in subsidising works that meet NZTA funding criteria, discusses the levels of service expected, and identifies the key performance indicators that are used to monitor the progress in achieving the expected levels of service. Council s proposed expenditure for the Land Transport Programme is compliant with relevant sections of the 2003 Land Transport Management Act. Prior to adoption (into the 10 year plan) each programme is reviewed by the NZTA for compliance with legislation and its funding criteria. A programme of maintenance and improvements is submitted for approval to the NZTA annually. Council s share of funding is provided for in its annual plan, 10 year plan and financial forecast. The Council enters into an annual agreement with NZTA called a Land Transport Programme Relationship Protocol. One of the advantages of the staged model for roading construction (as used by Council) is that road controlling authorities can very easily combine contracts (should they choose to) if neighbouring authorities have similar delivery and selection s to achieve best value for money Strategic considerations and risk South Waikato District Council is a small rural council with a relatively small roading budget our key to successfully attracting tender applications is to have our programmes phased to attract sufficient contractors who may be more focussed on larger contracts from other councils. As such, Council has to be well organised and time the issuing of tender documents to maximise the number of tenders received. With some exceptions, much of the roading program is predictable, as it relates to expected wear and tear on the road surface. Council operates a 12 year renewal cycle over the entire network. Some surfaces will fail before that time and on occasion Council may inherit a road from a private organisation (for example, forestry roads). Provision is made for these exceptions. The 10 year plan shows a table of roading risks and the operation to address them. Council has also carried out a detailed risk assessment of its roading activities as part of the roading activity management plan, mainly dealing with the operational and delivery aspects of roading. Council supports the potential to co-ordinate tenders with neighbouring councils and to amalgamate state highway and maintenance contracts. Bundling projects like this can improve value if the parties have the same rules of engagement and similar contract procedures. The NZTA highway managers have regular liaison meetings with local authorities. These meetings are vital, not only for information sharing but for discussing upcoming maintenance and construction contracts. For example, early liaison ensures that tenders do not enter the market simultaneously. September South Waikato District Council Procurement Strategy P a g e 9

14 An organisational risk for council is the loss of senior roading engineers. This risk is being managed by: ensuring an open environment where ideas are shared ensuring professional training is available to all members to develop their skill sets Growing our own engineers from cadet level up Ensuring that succession planning occurs. Lastly, there is a political risk of changes in philosophy at both the national and local levels (this means that the government or Council may change its mind about how transport contracts are let, or how funding is allocated). These more unpredictable risks will be addressed as they arise Specialised skills Council has found that the securing of in-house road transport specialists is necessary to achieve reliable access to expertise (because our rural location and small size is a disadvantage, and results in a great expense if we attract these skills through a time-limited contractual arrangement). This approach has ensured that there are currently no shortages of the specialised skills Council requires for the delivery of roading and transport services Pending high-risk or unusual procurement activities There are no pending high-risk or unusual procurement roading activities planned. 3.2 Roading procurement environment Much of the information in this section is based on the 10 year plan, but also includes reference to the other guiding documents listed in the procurement rules. Council manages its roading expenditure through a three year Land Transport Programme, which it prepares in conjunction with other agencies such as the NZTA, Environment Waikato, and neighbouring district councils. Contracts for the operation, maintenance and protection of Council s land transport system have been let through the NZTA s approved tendering process. Most roading asset maintenance is carried out under a three year competitively tendered contract with allowance for +1+1 rollover (depending on contractor performance). Sign maintenance, road marking and lighting maintenance are carried out by specialist contractors. After Council, the NZTA is the second main provider of funds for roading activities. The Council currently obtains 49% financial assistance from the NZTA for road maintenance and Council s objective is to maximise the use of these funds to provide roads that meet the expectations of the community and land transport users. September South Waikato District Council Procurement Strategy P a g e 10

15 3.3 The Transport Agency s procurement requirements For transport related contracts, the Transport Agency has a specific set of requirements that is to be met through this Procurement Strategy. As such, contractors for roading activities will be explicitly procured on the basis of: Best value for money The Land Transport Management Act s25 requires that procurement procedures used by approved organisations be designed to obtain best value for money spent. In the context of land transport procurement in New Zealand, obtaining best value for money spent means (in addition to meeting our value for money policy) purchasing a good or service that delivers the output approved for funding under s20 in the most efficient and economic manner. Efficiency and economy have both financial and non-financial (social, cultural, environmental) attributes. Roading managers are required to refer to section 3 of the NZTA s Procurement Manual to ensure that procurement agreements minimise whole of life costs, give value to positive economic, environmental and social outcomes, produce higher quality services and work towards improved community outcomes. Value for money means using resources effectively and efficiently with due regard for the total costs and benefits of an arrangement and with due regard to the contribution made to the community outcomes and wellbeing. In addition, the principle of best value for money when procuring goods or services does not necessarily mean selecting the lowest price but rather choosing the best possible outcome for the total cost of ownership including minimising whole-of-life costs Competitive and efficient markets Council encourages the development and ongoing sustainability of competitive and efficient markets. This is achieved through the roading financials in the 10 year plan which provide a statement to the community of what will be done, how much will be spent and when Council intends to purchase roading infrastructure and services. This statement provides certainty to the market that, if all goes according to plan, the expenditure as set out in the 10 year plan will be spent over the next 10 years. In addition, schedule 1 of this strategy provides the public with information regarding how Council will select tenders and also outlines the proposed and current schedules of work Fair competition among suppliers Council encourages fair competition among suppliers by packaging and bundling the work to make it more attractive to suppliers and to give all suitable players a fair chance to win business. Where possible, local contractors are used. The NZTA guidance, in the form of procedures and evaluation s, are strictly followed. In summary, the procurement strategy ensures that our community outcomes are met and fulfilled through the competitive process. September South Waikato District Council Procurement Strategy P a g e 11

16 3.3.4 Analysis of the supplier market Council s primary concern is to provide the best services it can for its road users and ratepayers, as encapsulated in the community outcomes and supporting levels of service. Council s intent is therefore to improve existing relationships with current suppliers, and to develop new relationships where possible. Council also reduces set up costs by using local contractors wherever possible. There are two national roading maintenance contractors based in the South Waikato and there are a number of regional contractors. All of the companies either have the resources (or could procure specialist subcontractors) to physically undertake the work required. Council will not risk the delivery model by entering into a contract with a supplier who does not show the demonstrable commitment and evidence that they could deliver roading services in partnership with Council s roading business unit. Our remoteness from supplier markets does not affect large contracts, but it does affect small parcels of work and the provision of specialist services. National companies use small local construction subcontractors to assist them in the provision of small pieces of work. Many local firms do not have the resources to compete for a maintenance contract in their own right, but are willing to work under the umbrella of a major roading company. There are also many contractors who have specialised skills sets which are vital for the continuation of the roading network, for instance, road marking. To survive, many have to branch out into other districts to obtain enough work. There is a concern in the market that the trend towards longer term relationships set by roading contracts may impact on competition and the skill sets of new entrants. Given the large number of network maintenance contracts in New Zealand, any decision by this Council will not overly influence this market issue Professional services Council procures specialist work by direct appointment (up to $100k) if the in-house professional services team cannot provide the required work. In these cases, external providers provide value for money through specialised skill sets and additional resourcing. Professional services are available from six national firms. Professional services purchased externally include: soil samples and investigations geotechnical investigations and land drainage issues bridge inspection and design testing and quality assurance processing regional resource consents and purchasing land providing specialised services such as street lighting design or strategy assistance. Where opportunities at project level arise, Council works collaboratively with other councils. In addition, Council may consider, in the future, bundling non-subsidised activities such as utilities (water and sewer) and other activities such as reserve maintenance, river control and land drainage with roading as this will allow for greater economies of scale. Each section of Council involved would be invoiced separately to ensure compliance with NZTA procurement policies. September South Waikato District Council Procurement Strategy P a g e 12

17 3.3.6 Analysis of the current procurement spend and profile Roading professional services, including network management, investigation, design, documentation and supervision, are generally carried out by Council s Southtech Business Unit. All other activities are contracted out. Please refer to the tables in Schedule 1 which outline the details of the existing contracts - including a description of the service, current contract expiry dates, values, durations, numbers of bids received for Requests for Tender, delivery models used and supplier selection s used. CURRENT SCHEDULE OF WORK GENERAL PROJECT SPECIFICATIONS There are working examples within New Zealand of combined maintenance contracts between councils and the NZTA. To date only informal discussions with the NZTA have taken place. Any combined contract will not take place until the current contracts end which is at least 2 years away. Council does not procure public transport services as this is a regional function. Tendering out the work (as recorded in Schedule 1) is in the best interest of the ratepayer as: 1. There is a sufficient number of contractors in the current market to ensure competitive tendering (contracts are coming in under estimate). 2. The cost of re-establishing a physical works unit, maintaining and depreciating construction plant, depot and staff would mean that the costs would outweigh the benefits. 3. Roading companies are taking a long-term approach and accepting lower profit margins to ride out the recession. Council uses district-wide contracts because better economies of scale can be achieved and value for money is gained by decreasing the administration costs. Some councils include their renewal programmes within their maintenance contracts. The Council is willing to consider the NZTA s opinion on the benefits and disadvantages of either process, or any other process which the NZTA considers may offer better value for money. In some cases Council has included some of our bridge maintenance work with the annual NZTA bridge maintenance contract. However, this depends on whether any state highway work is programmed within the South Waikato district for that year Analysis of the impact on Council of the procurement programmes of other councils and other entities The South Waikato District Council considers that bundling Council and NZTA work could create positive effects. These include the following effects: 1. The value of the contracts would entice competition from across the North Island. 2. Contractors would gain better bitumen and aggregate prices due to larger quantities of material required. 3. All contractors would have to submit competitive prices as there are no other Council or NZTA rehabilitation contracts to fall back on. 4. Local contractors may tender as a consortium. 5. Risks include the possible inability to complete the work if one contractor wins the combined contract. 6. While both road controlling authorities may receive short term gains, the biggest risk is the closure of roading firms or reduction in construction capability based in South Waikato. Further discussion with the NZTA is required, but Council wants to ensure its procurement strategy is flexible enough to leverage off other road controlling authorities where possible. September South Waikato District Council Procurement Strategy P a g e 13

18 3.4 Approach to delivering the work programme Confirmation of specific strategic objectives The organisational long term objectives are aligned as discussed in section 2.1. Value for money and sustainable competition are addressed as part of Council s principles and policies. From a strategic perspective, Council intends to pursue two issues: The first is the option to allow for contracts to be extended by up to 2 further years beyond 5 years: a. To align with year end b. To allow for the completion of delayed projects c. When significant problems are experienced in the appointment of new contractors. The second option is to explore the possibility of using selected supplier panels or collaborative alliance approaches (with other roading authorities or with the private sector) for the delivery of roading contracts The procurement approach Council has a corporate risk register, based on our asset management plans, which identifies and manages risk according to consequence and likelihood. Council would consider a collaborative approach with tenderers with the aim of sharing risk. All roading contracts are currently based on NZS:3910 Conditions of Contract. Council s intentions are to encourage a collaborative approach with more Council/contractor interaction using alliance principles. Council will continue to rely on NZTA audits to ensure that Council is meeting the NZTA s performance criteria. Annual programmes are monitored to ensure that all work is completed within budget and to the agreed timeframe. Required reporting through the annual plan is undertaken to ensure that the 10 year plan performance measures set by Council are met. This includes level of service, financial performance, quality, health and safety, and customer satisfaction. September South Waikato District Council Procurement Strategy P a g e 14

19 4 IMPLEMENTATION 4.1 Capability and capacity Council employs experienced and qualified staff in each department to manage its procurement programme. Staff are guided by an up-to-date Delegations Manual that outlines who can make which decisions. In addition, Council has detailed and easily available procedural information with supporting templates for staff to use for documentation. Internal engineering and legal advice is available to staff as required. Where there is a need, Council supports calling in additional specialist expertise to help finalise especially complex or unusual tender and contract documents. 4.2 Internal procurement processes The procurement process is outlined in Council s Procurement Policy and Procedures Manual, which (in addition to general rules of procurement) has a section of about 50 pages that explains each step of the tendering process for contracts with a total value of $100k or more. Templates of each letter, document or report required are available to staff on our intranet and electronic document records management system. These procurement procedures follow best practice for contract arrangements with suppliers, contractors or consultants. They enable staff to use standardised procedures and documents when: Evaluating procurement options Preparing contract documents Carrying out the quote or tender creation process for all types of contracts Processing contract variations. The advantages of using standard contract procedures, forms and templates are that they: 1. Reduce or limit Council s exposure to risk and liability 2. Cover specific Council policies such as Health and Safety etc 3. Are user friendly, using everyday language minimizing the need for legal consultation 4. Assist Council to remain focused on the targeted outcomes 5. Ensure a greater consistency of contractual terms, minimizing the need to re-invent contracts or engage expensive lawyers 6. Reflect Council s philosophy of closer long term relationships with suppliers and a greater focus on levels of service 7. Enable Council to reduce its contract development costs. All Council s contracts for physical works, not just roading, are based on the latest Standards New Zealand contract forms. This provides certainty to the supplier market both locally and nationally. The Council also has a Delegations Manual which defines individual Council officers and committee spending authority. This sound contract management helps to ensure that all parties to the contract continue to understand, and observe, their respective obligations and benefits and value gained early in the procurement process are sustained throughout the life of the contract. As such, the process is efficient & transparent. September South Waikato District Council Procurement Strategy P a g e 15

20 The procurement procedures are not comprehensive and do not take into account all contractual nuances and therefore should not be solely relied upon. Staff are advised to seek advice whenever they are uncomfortable with the process or the documents. As stated in the opening sentence of this strategy, decision making is to be sensible and prudent. In summary, the relevant manager prepares a tender plan, draws up the documents, gets them peer reviewed for correctness and then obtains Group Manager approval. The chosen of contract management reflects the contract environment and the risks associated with the project. If desired, the documents are also checked by an external consultant and/or lawyer. The tender is then advertised (including display on national websites such as Tenderlink and/or GETS if appropriate) and managers may in addition contact capable (local and previously used) firms on our database to provide them with the advert for the project. Once the bids have been received, the Tenders Panel assesses the tenders and scores the non-price attributes. The price may or may not be provided in a separate envelope (depending on the supplier selection used). The analysis and preferred tender is then submitted to the Tenders Board (Council s Leadership Team) who recommend the successful tender (based on the criteria outlined in the tender documents) to the Chief Executive, who then makes the final decision. The Tenders Board may also decide to receive advice from external sources at this stage. All tenderers are then informed of the outcome. To the maximum extent possible and reasonable, Council s standard forms of contract are used as templates upon which the more specific requirements relating to a particular project or type of work are specified. Legal advice may be sought when contracts are negotiated, or when they are non-standard, or when the circumstances are unusual, or when the risks associated with the relationship are high. The contractual framework for future work partnerships, as indicated earlier in the strategy, may shift to include alliances and may use the appropriate Standards New Zealand Contract model or Heads of Agreements (with suitable protection clauses) or another form of contract suitable for purpose. 4.3 Performance measurement and monitoring The Council has a well developed performance monitoring system for internal performance and external reporting. These include: 1. The NZTA mandatory KPIs these include road infrastructure safety assessments, technical reviews and financial audits. 2. Road safety action plans these plans use a combined regional approach to engineering, education and enforcement to reduce road trauma. 3. The 10 year plan (LTCCP) requires the following information in regard to all activities: Levels of service statements Performance measurements Targets Mechanisms to achieve the targets. Staff must keep adequate records of key procurement decisions. The complexity of the procurement will determine the nature and amount of documentation which is required, along with the obligations of the Public Records Act 2005 i.e. to maintain full and accurate records in accordance with normal prudent business practice. September South Waikato District Council Procurement Strategy P a g e 16

21 In particular, Council is to keep sufficient records to show that due process was followed, with staff: 1. Giving due consideration to each offer 2. Observing the overall principles and policies 3. Responding to queries from unsuccessful suppliers 4. Recording the outcome of meetings or correspondence during the procurement process 5. Providing evidence for audit purposes 6. Planning any subsequent re-tendering. 4.4 Communication plan The following channels are used for communicating the strategy, and will be used for communicating any future reviews of the strategy: 1. The intranet (internal stakeholders) 2. Shared document filing records (access to templates) 3. The internet (public) 4. The New Zealand Contractor s Federation 5. Roading New Zealand. In addition, copies are shared with neighbouring councils and the NZTA. Schedule 1 to this strategy is made available by Council managers to firms that show an interest in tendering for work. This enables Council s asset managers to provide potential tenderers with an update of our forward works programme, and helps in providing a consistent answer to any questions that potential tenderers may have. In addition, regular activity management and progress reports on current contracts are provided to the elected members via reports to the committees of Council. The Council will ensure that any information required by the NZTA is given to them in a timely and accurate manner. Consultation is generally undertaken via the formal 10 year plan (Council s long term plan) and annual plan processes. Notwithstanding that, Council operates an open door policy which encourages suppliers to discuss future procurement options with Council staff. 4.5 Corporate ownership and internal endorsement This document is owned by the Group Manager Corporate, endorsed by the Leadership Team and approved by Council. Reference documents are available on request. September South Waikato District Council Procurement Strategy P a g e 17

22 September South Waikato District Council Procurement Strategy P a g e 18

23 SCHEDULE 1: TABLE 2: ROADING SUPPLIER METHOD TABLE Cells coloured blue are the preferred s for that row of activity. Transport agency funding Approval by* Price quality Lowest price conforming Direct appointment Quotation Maintenance and Chief Executive operation 3 # Renewal of local Chief Executive roads 3 # Surfacing Chief Executive renewals 3 # Street lighting Chief Executive 3 # Traffic signs Chief Executive 3 # Road marking Chief Executive 3 # Minor improvements Community programme Professional services Chief Executive 3 # Budget holder Preferred supplier 3 # Group Manager/Chief Executive 3 # 3 # Preferred supplier 3 # * All Budget holders and Group Managers need to refer to the Delegations Manual to ensure that they do not exceed their delegations. If delegations are exceeded, then the approval is to be escalated to the appropriate staff member. # The numbers in the blue coloured cells indicate the minimum number of bids Council would expect to receive. If the number of bids fall below this level, staff will continue with the process, but need to address the low level of response in the next process. September South Waikato District Council Procurement Strategy P a g e 19

24 TABLES OF CONTRACTS These tables are updated every three years as part of the strategy review process Included in the tables are all contracts valued at $100k or more (multi-year total value of the contract), or contracts spanning timeframes of 5 years or more. In addition, some smaller contracts have been included where managers wish to use the procurement system to guide their contract management decision making. 1. Roading PROPOSED SCHEDULE OF WORK The table below shows the proposed schedule of works for the next three years: Description of service to be provided Maintenance and operation of local roads Street lights Start and expiry dates July 2014-June 2017 (+1+1) July 2015-June 2018 (+1+1) RFT release date Delivery model Supplier selection April 2014 Staged Price quality April 2015 Staged Price quality Renewal of local roads Surfacing renewals Traffic signs and road marking Minor improvements Community programmes Professional services (inhouse business unit) July 2014-June 2017 (+1+1) July 2014-June 2017 (+1+1) July 2014 June 2017 (+1+1) July 2014-June 2017 (+1+1) July 2011-June 2011 July 2012-June 2013 April 2014 Staged Price quality April 2014 Staged Price quality April 2014 Staged Price quality April 2014 Staged Price quality August 2011 Staged Direct appointment May 2012 Staged In-house Professional services (various) When required When required Staged Direct appointment In terms of NZTA requirements the strategy will be applied to the roading activity for the first time in September South Waikato District Council Procurement Strategy P a g e 20

25 CURRENT SCHEDULE OF WORK Name of contract Contract 640/367 Roading Maintenance Contract 640/378 Street Lighting Maintenance Contract 640/367 Roading Maintenance Description of service provided Maintenance and operation of local roads Street lighting maintenance and renewals Renewal of local roads Contractor Expiry date Downer EDI 30 June 2012 (+1+1) Northpower Ltd 30 June 2013 (+1+1) Downer EDI 30 June 2012 (+1+1) Contract 640/372 Resurfacing Surfacing renewals Heb 30 June 2012 (+1+1) Contract 640/368 Traffic Services Signs Maintenance Traffic signs maintenance Directions Ltd 30 June 2012 (+1+1) Contract 640/366 Road Marking Contract 640/367 Roading Maintenance Road marking Roadrunners Markers Ltd 30 June 2012 (+1+1) Minor improvements Downer EDI 30 June 2012 (+1+1) Various contracts Community programmes Direct negotiation Annually Service Agreement SWDC and Southtech (in-house business unit) Professional services Southtech Business Unit Annually Various Network and asset management Various consultantscondition rating etc. Annually September South Waikato District Council Procurement Strategy P a g e 21

26 CURRENT SCHEDULE OF WORK CONTINUED Name of contract Contract 640/367 Roading Maintenance * Contract 640/378 Street lighting Maintenance Contract 640/367 Roading Maintenance * RFT number of bids received Duration of project Delivery model Supplier selection One July 2009-June 2012 Staged Price quality Two July 2010-June 2013 Staged Price quality One July 2009-June 2012 Staged Price quality Contract 640/372 Resurfacing Six July 2009 June 2012 Staged Weighted attribute Contract 640/368 Traffic Services Signs Maintenance Contract 640/366 Road Marking Contract 640/367 Roading Maintenance * One July 2009-June 2012 Staged Price quality Three July 2009-June 2012 Staged Weighted attribute One July 2009-June 2012 Staged Price quality Various contracts Six Annually Staged Weighted attribute Service Agreement SWDC and Southtech (in-house business unit) One Annually Staged Direct negotiation Various One Annually Staged In-house * Maintenance, renewals, pavement renewals and minor improvements are currently all part of the same contract though bundled, they are tender received. September South Waikato District Council Procurement Strategy P a g e 22

27 2. Community PROPOSED SCHEDULE OF WORK Description of service to be provided Start and expiry dates Requests for tender release date Delivery model Supplier selection Northern property maintenance May April 15 (+1+1) March-April 2012 Staged Price quality Southern property maintenance July June 15 (+1+1) March-April 2012 Staged Price quality Security services Jan (+1+1) Aug-Sept 2011 Staged Price quality Cleaning services July 2008 June 2011 March-April 2011 Staged Price quality New public toilets Unknown Not yet defined Not yet defined New Events Centre Unknown Unknown Not yet defined Not yet defined New grandstand at Glenshea Park Planned for Unknown Not yet defined Not yet defined Memorial Park Unknown Unknown Not yet defined Not yet defined Arapuni Village Green development Unknown Unknown Not yet defined Not yet defined Strathmore Park Unknown Unknown Not yet defined Not yet defined September South Waikato District Council Procurement Strategy P a g e 23

28 CURRENT SCHEDULE OF WORK GENERAL PROJECT SPECIFICATIONS Name of contract Contract 640/371 Open Spaces Maintenance Northern Contract 640/370 Open Spaces Maintenance Southern Description of service provided Northern property maintenance Southern property maintenance Contractor Expiry date RYH Contracting Ltd April 2012 RYH Contracting Ltd June 2012 Contract 640/376 Security Security services First Security Guard Services Limited Dec 2012 Contract 640/362 Cleaning Contract Cleaning services ISS Facility Services Ltd June 2011 South Waikato Arts Trust Management of the Plaza Theatre in Putaruru South Waikato Arts Trust June 2011 Pride in Putaruru Promotion of Putaruru CBD Pride in Putaruru June 2011 Putaruru Information Centre Tirau and Tokoroa i- Sites Tourist information and booking services Tourist information and booking services Putaruru Information Centre June 2011 Tirau and Tokoroa i-sites June 2011 Putaruru Timber Museum Public museum Putaruru Timber Museum June 2011 Waikato River Trails Trust Building and management of Waikato River trails Waikato River Trails Trust June 2013 Sport Waikato Education Trust To foster participation and success in sport Sport Waikato Education Trust June 2012 Safer Community Council Crime prevention services Safer Community Council June 2012 September South Waikato District Council Procurement Strategy P a g e 24