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• 4. Next Steps

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The following list details the steps needed to move the stock tender process forward. They are in approximate chronological order although some could be reversed if necessary. The key is the decision process shown in step 1 which may lead to changes in the following steps. The decisions will also impact on some of the elements of the RFP design although many requirements are generic.

We recommend that a number of these action items should be progressed in close consultation with the industry and that working groups should be convened as appropriate.

1. Work through the decisions listed in Section 3, particularly the stock ownership/risk decision. The decisions include:
   1. Stock ownership and pricing risk
   2. Release of stock in an emergency (pricing exposure)
   3. Separate stock versus flexibility
   4. Onshore/offshore and crude/product split
   5. Splitting tenders between tanks and stock or combined
   6. Length of tenders

   The outcome of each of these decisions may then require some further work streams.

2. Develop the policy for under what circumstances stock would be released. This includes:
   1. What category of event would trigger release (e.g. IEA event)?
   2. What is the process gone through?
   3. Who participates in the decision?
   4. Who makes the final release decision?
3. Develop proposal for how stock would be released in an emergency. This includes:
   1. How long before it needs to be available?
   2. How would the stock be released to market (sale process)?
   3. Who would manage the release (i.e. the sale process)?
   4. Which stock would be released first (priority)? Does this vary depending on event?
   5. Contractual arrangements for release (e.g. so much to each party in the market)
4. Define stock specifications requirements including:
   1. Crude requirements for New Zealand (including any categories for different type)
   2. Product requirements for New Zealand
   3. Crude requirements for offshore storage
   4. Product requirement for offshore storage
   5. Maintenance requirements for the crude or product (e.g. turnover)
5. Develop the payment proposal including where exchange rate risk will sit. The quality (standard) of bidders also needs to be defined.
   1. Frequency of payment
   2. Payment in advance
   3. Currency of payment
   4. Quality requirements
6. Develop forward expectation for stock requirement over next 10 years (with possible variation from demand and upstream production). Use this to plan bands for stock. Bands should be split so that each band has a quantity and a length (e.g. want to have 40% of the volume for 10 years).
7. Define the parameters for the each category for inclusion in RFP (tanks and/or various stock categories). This is to set the framework for how much flexibility tenderers have in their proposals. Define acceptable standards.
8. Develop draft assessment criteria. This will need to define:
   1. The cost element breakdown that will be required in the tender including ongoing costs during tender and any costs involved at start and finish of tender (identification of "whole of life" cost)
   2. How the total cost will be built up and converted into a cost/contribution to IEA inventory
   3. How different categories will be compared where applicable
   4. How any security (or other) benefit will be assessed if that is deemed relevant
   5. Meet the requirements of the Government's procurement guide¹⁴
9. Issue all the above (if relevant) for comment and discussion with industry/interested parties
10. Modify proposals based on feedback and then release as the basis for the Request for Proposals
11. Develop draft Request for Proposal. This will include the following:
    1. Background including its role in subsequent tender
    2. Requirement: What is being tendered for
    3. Timetable
    4. Detailed breakdown of requirements:
       1. Specifications required
       2. Rules for release
       3. Process for release of stock
       4. Parameters regarding location/stock separation
       5. Payment options/details
       6. Requirements for tank and operating standards
    5. Evaluation criteria
    6. Financial standing of bidders

¹⁴It is likely there will be discussion during the RFP process between the government and tenderers. This will need to be managed carefully to avoid conflict issues and meet good procurement practice.